Case Studies – (Chapter -1)

Nature and Significance of Management

Q. 1. Dheerj is working as ‘Operations Manager’ in Tifco Ltd. Name the managerial level at
which he is working. State any four functions he will perform as ‘Operations Manager’ in this
company. (5 marks)

Q. 2. Volvo Ltd’s target is to produce 10000 shirts per month at a cost of Rs. 100/- per shirt. The
Production Manager achieved this target at a cost of Rs. 90/- per shirt. Do you think the
‘Production Manager’ is effective? Give one reason in support of your answer. (1 mark)

Q. 3. Yash Ltd. is facing a lot of problems these days. It manufactures electronic goods like
washing machines, microwave ovens, refrigeration and air-conditioners. The company’s
margins are under pressure and the profits and market marketing department blames
production department for producing goods, which are not of good quality to meet customers’
expectations. The finance department blames both production and marketing departments for
declining return on investment and bad marketing. 1. What quality of management do you think
the company is lacking? Justify your answer. 2. State the importance of the concept identified in
(a). (5 marks)

Q. 4. Aman, Ahmad and Ally are partners in a firm engaged in the distribution of dairy products
in Maharashtra state. Aman is a holder of Senior Secondary School Certificate from Central
Board of Secondary Education with Business Studies as one of his elective subjects. Ahmad
had done his post graduation in History and Ally in dairy farming. One day there was a serious
discussion between Ahmad and Ally regarding the nature of management. Ahmad argued that
management was a profession whereas Ally argued against it saying that the legal and medical
professions are the only professions because they fulfill all the conditions of profession. Aman
on the basis of his knowledge of business studies explained the nature of management as a
profession to Ahmad and Ally. Explain, how Aman would have satisfied both Ahmad and Ally. (6
marks)

Q. 5. To meet the objectives of the firm, the management of Bhavya Ltd. offers employment to
physically challenged persons. Identify the organizational objective it is trying to achieve. Give
reason in support of your answer. (1 mark)

Q. 6. B Ltd. wants to modify its existing product, CD players in the market due to decreasing
sales. What decisions/steps should each level of management take to give effort to this
decision? (6 marks)
Q. 7. Sonali is the manager of a large company manufacturing garments for kids. She plans her
winter collection in the month of August itself. Then, she ensures that there is adequate
workforce. She continuously monitors whether production is proceeding according to plans. She
asks the marketing department to prepare their promotional and advertising campaigns.
1. Identify and explain the concept of management explained in the above para.
2. What characteristic feature does the above para highlight? State. (5 marks)

Q. 8. H. Tech Ltd. is a company producing IT services. The company’s profits are enough for the
survival and growth. The management of the company believes that a satisfied employee
creates a satisfied customer, who in turn creates profits that leads to satisfied shareholders. So,
it pays competitive salaries and perks to its employees. All the employees are happy working in
the organization because of personal growth and development. The company has a strong
sense of social responsibility. It has set up an engineering college in which one-third of the
students are girls to whom the company gives 50% scholarship. Is the management of H. Tech
Ltd. fulfilling its objectives? Justify your answer by giving reasons. (6 marks)

Q. 9. Govinda Ltd. is a highly reputed company. Different functions are performed by different
individuals in this company, who are bound together in a hierarchy of relationships. Every
individual in the hierarchy is responsible for successful completion of a particular task. Mr.
Gauranga is responsible for the welfare and survival of the organization. He formulates overall
organizational goals and strategies for their achievement. MR. Nityanand ensures that the
quality of output is maintained, wastage of materials is minimized and safety standards are
maintained. Mr. Sanatan assigns necessary duties and responsibilities to the personnel and
motivates them to achieve desired objectives At what levels of management are MR. Gauranga,
Mr. Nityanand and Mr. Sanatan working in Govinda Ltd.? justify your answer. (3 marks)

Q. 10. The management of Vrinda Ltd. strongly believes that the members of an organization
should work towards fulfilling the common organizational goals. This requires teamwork and
integration of efforts of all individuals, departments and specialists. This is because all the
individuals and departments depend on each other for information and resources to perform
their respective activities. Managers need to reconcile differences in approach, timing, effort or
interest. At the same time it should enable all its members to grow and develop. Thus, there is a
need to harmonize individual goals and organizational goals. 1. Identify the concept of
management discussed above. 2. State any three features of the concept identified in (a). 3.
Identify and explain the characteristic of management which is reflected from the above para. (6
marks)

Q. 11. Sanjana is the branch manager of ABC Handicrafts Pvt. The company’s objective is to
promote the sales of Indian handloom and handicraft products. Its sells fabrics, furnishings,
ready-mades and household items are made out of traditional Indian fabrics. Sanjana decides
quantities, variety, colour and texture of all the above items and then allocates resources for
their purchase from different suppliers. She appoints a team of designers and craftspeople in
the company, who developed some prints for bed covers in bright colour on silk. Although they
looked very impressive, they were more expensive than they had planned to sell. Average
customer could not afford to buy it. Praising their effort, Sanjaja suggested that they should keep
the silk bed covers for special occasions like Diwali and Christmas and offer the cotton bed
covers on a regular basis to keep costs under control. Identify the functions of management
which Sanjaja performs by quoting the lines the above para. (5 marks)

Q. 12. XYZ Power Ltd. set up a factory for manufacturing solar lanterns in a remote village as
there was no reliable supply of electricity in rural areas. The revenue earned by the company
was sufficient to cover the costs and the risks. The demand of lanterns was increasing day by
day, so the company decided to increase production to generate higher sales. For this they
decided to employ people from the nearby villages as very few job opportunities were available
in that area. The company also decided to open schools and crèches for the children of its
employees. 1. Identify and explain the objectives of management discussed above. 2. The
company is fulfilling the organizational and social objectives of management. (4 marks)

Q. 13. Nishtha is the marketing manager of a company selling laptops. She plans the target sale
of 2000 laptops per month. She allocates necessary resources to carry out the plan. She has six
salesmen working under her. She works with them, guiding and motivating them to achieve the
target sales. At the end of the month, after comparison of actual sales with the target sales she
found that actual sales exceeded the target sales. She rewards the efficient employees to
motivate them. 1. How does Nishtha prove the importance of management? Explain. 2. Also
state any two values which she wants to communicate to the society by her behavior. (5 marks)

Q. 14. Sooraj works as a salesman in a company selling pet accessories and food. He has been
given a target of selling 1200 units of the food packets in a month by offering a maximum of
10% discount to his customers. In order to meet his monthly sales target, on the last two days of
the months, he offers a 15% discount to his customers. In the context of the above case: Is
Sooraj effective in his work? Explain by giving a suitable reason in support of your answer.

Q. 16. Anju and Manju are good friends. Considering the cast that the activities involved in
managing an enterprise are common to all organizations, after completing their masters in
business management, both of them take up a job at managerial level in different organizations
as per their individual areas of interest. Anju tales up a marketing job in a retail company and
strives to increase sales whereas Manju joins an NGO and works diligently to realize its
objective related to providing employment to specially abled persons. Both of them have to
perform a series of continuous, composite, but separate functions. On some days, Anju may
spend more time in planning a future display layout and on another day, she may spend time in
sorting out an employee’s problem. Both Anju and Manju make conscious efforts to build a
feeling of team spirit and coordination among diverse individuals with different needs who work
under them. The effect of their management is noticeable in their respective departments as the
targets are met according to plans, employees are happy and satisfied, and there is orderliness
in its functioning rather than chaos. In context of the above case: Identify the various features of
management highlighted in the above paragraph by quoting lines from it.

Q. 17. Real Alliance Ltd. is a well-known cement company in India. It is able to earn adequate
revenues to cover costs. Its capital base, number of employees and production turnover has
increased manifolds over the years. The rate of profitability of the business is also creditable.
The employees of the company are happy and satisfied with their remuneration, working
conditions, promotion policy etc. as a part of its moral obligation, the company has taken many
initiatives for providing employment to specially abled persons and promoting literacy in the
villages adopted by it. In the context of the above case: 1. Identify and explain the various types
of objectives of management being fulfilled by Real Alliance Ltd by quoting lines from the
paragraph. 2. List any two values that real Alliance Ltd. wants to communicate to the society.

Q. 18. Esha works as the cost and risk management head of a company in power sector. As a
result of her excellent managerial competence, the company is able to reduce costs and
increase productivity. The company belongs to infrastructure sector, where is regular
amendments are made in the government regulations and policies. She holds regular meetings
to ensure that people in her department are not only aware of the related changes but are also
able to adapt to these changes effectively. This helps the company to maintain its competitive
edge. She motivates and leads her team in such a manner that individual members are able to
achieve personal goals while contributing to the overall organizational objective. In the process
of fulfilling her duties for the growth of the organization, she helps in providing competitive
services, adopting new technology, creating more employment opportunities etc. for the greater
good of the people at large. In context of the above case: Identify the various reasons that have
made management so important by quoting lines from the paragraph.

Q. 19. Ramarjuna joins an IT from as a system analyst after completing his masters in
Computer Science. As the nature of his work demands he has to work in very close coordination
with all the departmental head in the firm, very soon Ramarjuna realizes that each departmental
head has own individual style of working. They differ greatly in their day-to-day approach to
work. They tend to deal with a given situation, an issue or a problem through a combination of
their own experience, creativity, imagination, initiative and innovation. In the context of the
above case: Identify and explain the nature of management highlighted in the above case.

Q. 20. Dharam is a well-known businessman in the field of publishing. He owes the success of
his business to his own education in business management and his team of certified
management consultants. Therefore, he decides to send both his children Danush and Damini
abroad to acquire a degree in business management in their individual area of expertise. He
feels that all over the world there is a marked growth in management s a discipline, but still it is
not considered to be a full-fledged profession for certain reasons. In the context of the above
case: 1. Explain the reasons because of which Dharam considers management as a discipline.
2. Critically examine the various reasons because of which management is not considered to be
a full-fledged profession.
Q. 21. Kartik joins a garment factory as a plant supervisor in Lucknow. He observes that the
output of some workers is very low as compared to the standards set for their performance. On
analyzing the reasons for the same, he finds out that a lot of time of the workers is wasted in
getting the requisite materials issued form the store. Whereas on asking, the store keeper
complains that there is no harmony in the working of the production department as a whole.
Every day the workers approach him at the least minute to procure different kinds of threads,
laces, mirrors, buttons etc. if it is not available in the store then he has to place an order with the
purchase officer. As a result, a lot of time of the workers is wasted. So, in order to integrate the
various production activities, henceforth, Kartik ensures that the store keeper is informed well
three days in advance about the requisite materials. Consequently, the store keeper is able to
keep the materials ready for the workers every morning in accordance with their requirements.
In context of the above case: 1. Identify and explain the quality of management that Kartik has
introduced in the working of the production department as a corrective measure to control the
output of the workers. 2. State briefly and two points highlighting the importance of quality of
management identified in part (a).

Q. 22. Sridhar’s father is working as a section in-charge in a government office. Identify the level
of management at which he is working? State any five functions that he has to perform at this
level.

Q. 23. Geetika is working in a private sector bank. One of her key functions relates to the
formulation of the overall organizational goals and strategies of the bank. Identify the level of
management at which she is working? State any three other functions that she has to perform at
this level.

Q. 24. Arundhati has been promoted to the post of Marketing Division Head of a soft drink
company. Identify the level of management at which she will be working henceforth. State any
four functions that she will have to perform at this level.

Q. 25. Bhuvan argues that management is required in all kinds of organizations where as
Piyush feels that management is not required in non-business organizations such as schools,
clubs, hospitals, etc. who is correct?

Q. 27. ‘Sonu Nigam’ the famous playback singer always spends time for practice and adds his
creativity in his singing. Like Sonu Nigam, Mr. Rajiv, manager of Headlines Ltd. uses his
creativity and practice management principles under different situations to manage the
business. The employees are happy and satisfied as he every day reward employees for their
punctuality and efficiency. 1. Identify the nature of management highlighted above. 2. Name two
other aspects of nature of management. 3. Identify the values followed by Mr. Rajiv.
Q. 28. Bhuvan Ltd., a garment manufacturing Company set the target production of 100
garments per month at the estimated cost of Rs. 200 per garment. Mohan, a worker worked a
double shift and manufactured around 150 garments but at the estimated cost of Rs. 230 per
garment. On the other hand, Ravi another worker focus on cost and handled resources very
carefully so the manufactured 90 garments but at the estimated cost of Rs. 190 per garment.
Third worker maintained the balance and achieved target of 100 garment at the estimated cost
of Rs. 200 per garment. 1. Identify the quality possessed by Ravi, Mohan and what they are
lacking. 2. What quality is possessed by third worker? 3. Which worker is preferred by
management?

Q. 29. Management of Alpha Ltd. has installed a special recycling plant to recycle the waste
instead of dumping the waste in the ground. It is also providing employment opportunities to
local residents. Company started a school nearby for the children of their employees. 1. Identify
the objectives company is fulfilling. 2. (ii) Quote the lines from above para which indicate those
objectives.

Q. 30. Directors of Bhuvan Ltd. assigned the task of implementing the plans and policies framed
by the board to all the departmental heads. Departmental head appointed supervisors,
superintendents, executives, etc. so that work can be assigned to workers as per the plan
supervisors kept a check on workers as per the plan. 1. Identify the feature of management
highlighted in above para. 2. Explain that feature.

Q. 31. Alpha Ltd. is a Company that manufacturers mobile phones and accessories. Its profits
are declining nowadays. The sales department blames production department for low quality,
the production department blames purchase department for not supplying good quality parts. 1.
What quality of management is lacking in the above case? 2. Explain the nature of the concept.

Q. 32. A group of people believes that management is a systematic body of knowledge that
explain certain general truth and is based on logical observation. ● Identify and explain the
nature of management discussed in above case.

Q. 33. Unique enterprises is able to achieve the target production of 5,000 units within the
prescribed time; however to achieve this target they hired extra workers on adhoc and spent
around is 40,000 extra to pay the ad hoc workers sot that target production can be achieved on
time. 1. Do you think unique enterprise is effective or efficient? 2. Was their decision to hire ad
hoc workers to achieve the target was correct? 3. Explain the concept of management
highlighted above.

Q. 34. In an organization sales department wants to increase sales by 20% so sales department
planned to offer extra discounts to customers. Finance department raised objection on it as they
sat it will result in loss of revenue and company may face liquidity problem. 1. Name the
importance of coordination referred here. 2. State two other importance of coordination.
Q. 35. Mr. Rajiv and Arun are responsible for the welfare of the whole organization. Their job is
very complex they have to develop long term objectives, policies and review the work of
different heads at different levels. Mr. John and Mr. Singh are responsible for the working of
department they are heading, they formulate short term departmental objectives in accordance
with organizational objectives. Mr. Philip, Mrs. Archana, Mrs. Kamlesh and Mrs. Kavita are in
direct contact with the workforce consisting of various employees and workers. They are
responsible for quality of work and providing good working conditions to workers. 1. State the
three levels of management. 2. Name the persons who are involved in different level from the
above para.

Q. 37. The management of Amaira Ltd. strongly believes that the members of the organization
should work toward fulfilling the common organizational goals. This requires teamwork and
integration of efforts of all individuals departments and specialists. This is because all the
individuals and departments depend on each other for information and resources to perform
their respective activities. Manager needs to reconcile differences in approach, timing, efforts
and interest. At the same time it should enable all its members to grow and develop. Thus, there
is a need to harmonize individual goals and organizational goals. 1. Stat the concept of
management discussed above. 2. State any three features of the concept identified in above
para. 3. State value referred in above para.

Q. 38. Mega Ltd. manufactured water-heaters. In the first year of its operations, the revenue
earned by the company was just sufficient to meet its cost. To increase revenue, the company
analysed the reasons behind the less revenues. After analysis, the company decided: ● To
reduce the labour cost by shifting the manufacturing unit to a backward area where labour was
available at a very low rate. ● To start manufacturing solar water-heaters and reduce the
production of electric water-heaters slowly. This will not only help in covering the risks but also
help in meeting other objectives. 1. Identify and explain the objectives of management
discussed above. 2. State any two values which the company wanted to communicate to
society.

Q.39. Ritu is the manager of the northern division of a large corporate house. At what level does
she work in the organization? What are the basic functions?

Q. 40. Mr. Nitin Singhania’s father has a good business of iron and steel. He wants to go to the
USA for his MBA but his father thinks that he should join the business. On the basis of emerging
trends, do you think that Mr. Singhania should send his son to the USA? Give any three reasons
in support of your answer.

Q. 41. Jayant is working as Head Relationship Manager in the wealth management division of a
private sector bank. He has created an internal environment which is conducive to an effective
and efficient performance of his team of ten relationship management executives. A typical day
at work in Jayant’s life consists of a series of interrelated and continuous functions. He decides
the targets for his department which are in line with the objectives of the organizaitonas a whole.
The future course of action for his team members is laid out well in advance. The various
resources required by the relationship managers like a Paid with GPS system, account opening
forms, brochures, details of account holders etc. are made readily available to them. The
executives are given sufficient authority to carry out the work assigned to them. Jayant works in
close coordination with the human Resource Manager in order to ensure that he is able to
create and maintain a satisfactory and satisfied workforce in his department. Through constant
guidance and motivation, Jayant inspires them to realize their full potential. He offers them
various types of incentives from time to time keeping in view their diverse individual needs.
Moreover, he keeps a close watch on their individual performances in order to ensure that they
are in accordance with the standards set and takes corrective actions whenever needed. In
context of the above case: 1. Identify the concept being referred to in the following line, “He
created an internal environment which is conducive to an effective and efficient performance of
his team of ten relationship management executives.” 2. Identify and describe the various
functions of the concept as identified in part (a) of the question by quoting lines from the
paragraph.

Q. 42. Ajay and Sanjay are childhood friends. Sanjay had lost his right hand in an accident in
childhood. They meet after a long time in a restaurant. On being asked, Sanjay tells Ajay that he
feels very discounted in managing his family business after the death of his father as it doesn’t
match with his areas of interest. Ajay knows that Sanjay possess extraordinary skills in
management although he hasn’t acquired any professional degree in management. Therefore,
he asks Sanjay to wind up his business in India and join him in his hotel business in Dubai as an
Assistant Manager in Sales and Marketing Division. In context of the above case: 1. Can Sanjay
be deployed at the post of Assistant Manager in Sales and Marketing Division though he hasn’t
acquired any professional degree in management? Explain by giving suitable justifications in
support of your answer. 2. List any two values that are reflected in this act of Ajay.
 CHAPTER-II

PRINCIPLES OF MANAGEMENT

Question 1:

Rajeev is a middle level manager. He keeps all his subordinates under a lot of discipline.
His employees however complain of wastage of time and efforts as they feel that
nothing is being assigned in a proper way and a proper place, also no proper schedule is
made for working. Which principle of management is violated here?

Question 2:

Rajesh wants to become an ideal manager. For this he reads many management books.
After reading various broad and general guidelines he prepares f to apply them and
make his work more meaningful. The necessary outcome will be his improved output.

Which concept of management has been highlighted here? 1

Question 3:

Pakka employment is a company which takes care of the fact that the confidence of the
employees should always be at its peak. For this reason they give surety to their
employees for employment for a minimum fixed tenure of time. Which principle of
management is followed here?

Question 4:

A floor manager of a Mall is very capable as he utilises all the functions of

management. He lays stress on developing mutual trust and spirit of cooperation
amongst the employees. Under his guidance the employees admit that they learn a lot
and are able to meet their targets. This has led to an increase in their salaries.

Identify the principle of Fayol followed by the floor manager in the above case.
Question 5:

The plant superintendent of a company is very sad. When he was on leave he was
expecting his subordinates to take the remaining work to the finish. However, he finds a
new way of dealing with this problem. He develops a system of suggestion building
from the side of workers. For this a suggestion/complaint box is to be kept where the
workers can drop their advice and hence take steps from their side.

Which principle of management has been implemented here off late by the plant
superintendent?

Question 6:

Suresh works in a bulb manufacturing company. Each bulb which is manufactured is of

standard size and quality. Further if there is any unrequited type of bulb manufactured
then its production is stopped. Last month when the company came to know that 10
watt bulbs were no more liked by customers, their production was stopped. He works in
the purchase department. His job is to purchase the filaments required to make bulbs.
This time when he purchases the filament he gets the instruction from the seller that
some special care needs to be taken in the first hour of fixing the filaments inside the
bulb. Suresh knows this information should be given immediately to the production
department before the assembling process starts. However, he finds that his company’s
policies only allow him to give the message to his immediate boss who will further pass
this message to his boss. The passing of this message will continue till it reaches the
desired person in the production department.

Which technique of management is followed here? Also name the principle of

management followed here by the company? Which option is now available to Suresh
since the company is not allowing him to interact with the concerned worker in the
production department? 4

Question 7:

Every year a meeting is organized in the lawns of the owner of a company. In this
meeting the owner of the company grants some funds for the benefit of the families of
the employees. The employees on the other hand never resist any change or put
excessive demands. The general environment in the company is very supportive of the
employees. The employee turnover ratio is very low.

Which concept of management is discussed here? Which principle of management will

be easily followed here?

Question 8:

Bhatkaav Enterprises is facing huge losses. The owner of the company is an MBA pass
out. Even then many things in the organisation are happening which are indicative of a
lack of proper management in the company. First of all, there is no specific sharing of
work and any time any employee is asked to do anything. This has lead to wastage of
efforts. Further due to negligence in proper work sharing there has been no
specialisation development in the nature of the jobs done by the employees.

There are no clear and fair agreements between the workers and the management. This
has led to a lot of frustration in the workers. Management has quite often been found to
be ignorant of not fulfilling promises done by it. There are also no strict rules and
regulations binding on the conduct of the workers.

The departmental heads who are the middle level managers in the company and hold
key positions always favour their relatives. They quite often don’t turn up for work on
time. They are always looking for special relaxations from the top management. This
has led to a feeling of resentment among the employees who are also demanding
special favours and threatening strike in the coming days.

Identify the three principles of Fayol violated in the above case.

Question 9:

Ramesh is the owner of a printing press. The size of his organisation has y/increased
during the recent past. There are many employees who work in his organisation. The
organisation is considered good and has earned a lot of reputation in the market.
However when it comes to making key decisions in the organisation related to many
things he never considers the opinions of his subordinates. Even though the size of the
organisation has increased yet he tries to take all the key decisions on his own.
Which principle of Fayol has been violated by him?

Question 10:

Mohan works on the floor of a mall as a manager. He is very hard working but is unable
to produce results for his organisation. His target for last month was a sale of 10 lakh
rupees from his floor. However by the end of the month the sale was only 8 lakh rupees.
He is very regular and takes all the necessary steps to complete the target. However his
staff is not as competent as he himself is. When he tries to take action against
disobedient employees the top management doesn’t allow him to do so. They haven’t
given him the power to fire employees or take any strict action against them.

Which principle of Fayol is violated here by the Organisation? 1

Question 11:

Enlightened Souls Pvt. Ltd. is a tube light manufacturing company. Before the start of
the year they had promised their employees for bonus for extra production. It was also
decided that those who will put extra time will be paid extra according to the number of
hours. However people in the HR department who worked very hard later complained
that they were not compensated for the extra number of hours that they used to stay in
the office.

Which principle of Fayol is violated here?

Question 12:

Rohan and Amit are working in the purchase department of a company. Rohan is the
brother-in-law of the managing director of the company whereas Amit has been
recruited from an external source. They both have been performing below average for
the last couple of months. Many people in the organisation talk about their lack of
responsibility. When the managing director of the company came to know about their
irresponsible behaviour he immediately suspended Amit but did not take any action
against Rohan.
Identify the principle of Fayol which has not been followed by the managing director in
the above case. 1

Question 13:

Aditi who is heading the campus recruitment program of the firm that she is working in,
gets an immediate order from the marketing head of the organisation. Mr. Rupesh asks
her to hire only those candidates who have two years experience in the field of
marketing and offer them a higher package. Moments later when she is about to enter
the campus she gets another call from the HR head who asks her to hire candidates
with zero experience. He gives her the logic that such candidates would be expecting
lower packages in comparison to the candidates having experience in the industry.

Which principle of Fayol stands violated here? What is the immediate outcome of the
violation of this principle? State the principle. 3

Question 14:

Aapka Apna Vehicles is a vehicle manufacturing company. The company has the same
unit producing both scooters and cars. This leads to confusion among the employees
regarding the reporting as well as differentiation of work.

Which principle of Fayol is violated here? Why? State the principle. Give an immediate
outcome of the violation of this principle. 4

Question 15:

Twenty new employees have started their career in XYZ Ltd. The employees are new to
the environment of the organisation and have no idea about the demanding jobs. The
management has decided to give them three months of time to show their results.

Which principle of Fayol is followed here? How does this principle help the organisation?

Question 16:
Enigma Coolers are the leading manufacturers in their area. They have decided to
increase the productivity of their workers. For this they have chalked out a plan. They
will be hiring operational managers who work at the lower level of management. They
have decided to keep eight managers over a single worker. Thus every worker will have
to report to all these eight managers.

Which technique of scientific management is followed here? What will be the benefit?
Also tell which principle of Fayol will be violated here?

Question 17:

ABCDEF Ltd. has decided to become the market leader in selling water bottles. The
company decides to take care of all the departments. The top management decides to
set standards for all the business activities right from the purchase of raw material to
manufacturing and packaging of the water bottles.

Which scientific technique of management is used here? Name three advantages of this
technique. 4

Question 18:

‘Work is Worship’ is a leading construction company. The organisation has grown from
strength to strength because of its innovative ideas and scientific approach of working.
Ten years back the organisation went through a revolution. All the operations and
activities were properly noticed and the standard time taken to perform them was
noted. This took a few months and now the company could find out the amount of
workers required and the number of days to be involved in the various manufacturing
processes. A year later they moved to another level by considering the stress involved in
the lives of the workers. The amount and frequency of rest intervals in finishing a
particular task were noted. This helped the company in optimizing the rest intervals for
the workers so that their outputs could be increased. After six more months the
company decided to reward the efficient workers. A different rate of wage payment was
decided for those workers who performed above the standard. The standard was
decided. This led to a revolutionary change in the perspective of the workers who now
started giving their full efforts in order to increase their wages.
Which concept of management has been discussed in the above case? Name the three
types of this management concept highlighted above. Also identify the lines where
these types have been indicated. 4

Question 19:

Sanchit, after completing his entrepreneurship course from Sweden returned to India
and started a coffee shop ‘Aroma Coffee Can’ in a famous mall in elhi. The speciality of
the coffee shop was the special aroma of coffee and a wide variety of flavours to
choose from. Somehow, the business was neither profitable nor popular. Sanchit was
keen to find out the reason. He appointed Sandhya, an MBA from a reputed college, as a
Manager to find out the causes for the same.

Sandhya took feedback from the clients and found out that though they loved the
special unique aroma of coffee but were not happy with the long waiting time being
taken to process the order. She analysed and found out that there were many
unnecessary obstructions in between which could be eliminated. She fixed a standard
time for processing the order.

She also realised that there were some flavours whose demand was not enough. So,
she also decided to stop the sale of such flavours. As a result within a short period
Sandhya was able to attract the customers.

Identify and explain any two techniques of scientific management used by Sandhya to
solve the problem.

Question 20:

A scientist working in a factory for the betterment of the operational aspects studied all
the steps involved in the manufacturing of the product. He very attentively noticed all
sorts of movements to arrive at a simpler way of doing all the activities possible. With
his hard work he was able to bring down the number of activities for the manufacturing
of the final product from 34 to 22. This work was able to bring down the labour charges
and decrease the total time of production. Thus he gave the organisation an added
advantage.
Which type of scientific technique is discussed here?

Question 21:

‘Kanpur Leather Ltd.’ is the manufacturer of leather products. It is producing on a large

scale and its organisational structure is functional. In the production department
various foremen have been employed. Each foreman has been made responsible for
production planning, implementation and control. This has led to a situation of
confusion and uncertainty. Suggest a technique of scientific management to Kanpur
Leather Ltd. which may help it to effectively organise planning and its execution.

Question 22:

ABCDEF is a world renowned retail chain store. The customers here are very much
pleased with the products and services provided in the stores. The customer
satisfaction and internal efficiency indicator of the organisation is rated best in the
industry. However there have been a few steps taken by the organisation which provides
the organisation this edge. The organisation has used a special type of software which
integrates all the stores and brings uniformity in its billing and working pattern.

Which principle of management is mentioned here?

Question 23:

Star Limited is a garment manufacturing company which has been performing quite
well. The company got a major order of 2000 shirts which it is supposed to manufacture
and supply within two weeks time. On an average the company manufactures around 50
to 60 shirts in a day. Therefore, it is a very challenging task for the organisation. The
management of the company asked its labour to put in extra hours without any
additional payment to achieve this objective. In return, management has promised the

workers that their wages will be increased on a permanent basis as soon as the project
is over. The labour agreed to the management’s proposal and completed the assigned
task within the allotted time frame. As per its promise the management increased the
wages of the workers and the project became a great success. Both management and
labour honoured their commitment.
Identify the principle of Henri Fayol which has been highlighted in the above case.

Question 24:

‘We are the Best’ Public School though is a disciplined organisation, It lacks well defined
rules and regulations. With passage of time the management of the finds out that if
there are proper rules and regulations for the students and the teachers the result of the
school improves.

Which nature of principles of management is highlighted here?

Question 25:

In a huge manufacturing company there was a constant training programme running for
the workers throughout the year. The workers were trained about the machines as the
management realised that management is all about the relationship among workers
and their proper handling of the machines. As the size of the organisation increased the
management decided to release their hold on day to day activities of the organisation. A
more decentralised approach was adopted where the workers could decide about the
machines and the amount of raw material required instead of the traditional centralized
approach as per the needs. The management knew that the external environment is
dynamic. In order to meet stiff competition they clarified to the workers that their
instructions should not be taken strictly and should be moulded as per the requirements
of the organisation at the level where actual action takes place.

Which nature of principles of management have been highlighted in the above case? 3

Question 26:

VLPS Hotels is a disciplined organisation. It has many branches. The organisation tries
to apply discipline in all its branches with equal effectiveness.

However it knows that the nature and location of different branches are different. They
work under the impact of different cultures and work environments. Even then discipline
as an important management principle is applied to all its branches —big or small,
within the country or at foreign locations. Recently it formed a special body of five
members to do research on cross functional expertise. The organisation has learnt
through the experience of the competitors that understanding among various functional
departments is important for increasing the productivity of the organisation. So broadly
it can be understood how such body is going to affect the organisation through others’
experience. When it comes to remuneration of employees the organisation adopts
payment of different salaries for the same post. The logic given by the organisation is
that remuneration is based on situations and depends upon the employee’s capacity
and the expenses involved in a particular city.

Which nature of principles of management have been highlighted in the above case?

Question 27:

Example Pvt. Ltd. is an organisation which is governed by people who are egoistic and
consider themselves as the most intelligent. All the suggestions made by the workers
are not even attended which has resulted in many strikes during the last couple of
months. The result is lack of productivity. However recent reports from the organisation
says that there is a training module going on for the employees so that their individual
development can take place to the maximum. Some training modules are thought of
being implemented. This may take the organisation out of its current bad performance.
This training module which is now to be followed at the main branch will be later given a
uniform format and will be applied to all branches of the organisation. .

Identify the principles of management which is violated initially and the principle of
scientific management which is followed later on. Which concept of scientific
management is discussed in the last part of the above case? 3

Question 28:

Enigma Footwear is a very innovative organisation. The company has the policy of
paying proper attention to the training of the managers. The organisation teaches
various management principles to the managers whenever required so that they can
apply them and understand the practical aspects of business through them. Year by
year the organisation is able to increase its revenue. This is because the managers are
able to economically use the funds of the organisation and increase the output of the
workers through various principles like discipline and science not rule of thumb. This
year the company will be opening its 14th branch in India. The firm has decided to start
the campaign for adopting poor children. This year the target is 500 poor children due to
be adopted. This will help the organisation put noticeable example in front of others
who can learn a lot from this initiative of the company.

Which points of importance of principles of management are highlighted in the above

case? Identify the lines.

Question 29:

Kona Kona construction is a well known firm. It has many employees. Its core
competence is in construction work but it has many other operations to tackle also.
These operations are connected to public relations, advertising, finance, etc. With
changing times the company has decided to outsource these services from the experts,
of these fields. Thus it has decided to save time and concentrate on its main business.
There is a team of civil engineers who form the main body of the decision group. This
group takes decision related to future construction projects after making thoughtful and
justifiable conclusions. The newspapers of the country have also appreciated the
efforts made by Kona Kona construction in giving better housing facilities to the people
in general. Company wants to walk shoulder to shoulder with other international firms in
the industry. For this it time and again prepares its employees through proper training
modules which educate them about the changing situations at the global level. The net
worth of the company is expected to touch ?20,000 crores this year which is going to be
a landmark achievement in the history of this firm. The company is also ranked high in
fulfilling Corporate Social Responsibility initiatives.

Which points of importance of principles of management have been highlighted in the

above case? Also identify the lines.

Question 30:

Wellness Water Purifier has seen a lot of ups and downs during the last five years as a
company. The most important learning the company has got is through its experiences.
First three years of its existence were full of high employee turnover. The blames quite
often put by the leaving employees was that of partial behavior whether it was
concerned with salary, management, duty assignment, leaves, and the list can go on.
Later the management after a brainstorming session realised that it was wrong in
committing partial behavior towards its employees. Next two years it adopted the
Fayol’s principle of ‘Equity’ in letter and spirit.

Which nature of principle of management has been highlighted in the above case?
 CHAPTER-III
BUSINESS ENVIRONMENT

Question 1:

‘The first masters’ is a leading advertising company in its industry. Recently they had a
meeting in which all the reasons which were outside the control of the organisation
were discussed. The organisation wanted to maintain its supremacy in the market. They
decided to break the meeting into two parts. In the first part, customers, competitors,
suppliers, etc. were discussed where as in the second part the political, economic,
social conditions in the country were discussed. It was concluded that company was
doing extremely well in the domestic market and the client base was expanding.
However when the company’s performance in foreign markets was evaluated, it was
found that conditions were different in different countries, so the strategies adopted
would have to be different. After the meeting the company was looking forward to
making new gains.

Which features of Business Environment have been highlighted in the above case? Also
identify the lines.

Question 2:

Bright Services is a taxi service provider. The company is targeting a revenue of 50 crore
rupees this year. However with the passage of time it has found entrance of new service
providers in the market which was not expected at one stage of time. It has a good
team of technicians, drivers, software providers, etc. The company has decided to make
it adaptable to such continuously changing circumstances. It knows that if it has to
expand in new countries, it will have to learn the basic differentiating factors like traffic
rules, technological aspects, etc. Thus it understands that conditions are different in
different countries.

Which features of Business Environment are discussed in the above case? Which force
is discussed above?
Question 3:

ABCDEF Ltd. decided to start its new venture in Delhi. For this they needed to
understand the Business Environment of the area. It was realised by the company that
the Business Environment of Delhi was very hard to understand unless and until it was
divided into different business dimensions like legal, political, economic, social and
technological conditions. After understanding the business situations the company
started to study the close links between different elements of the Business
Environment. They gave a proper shape to their research and the business got started
with full force. Later they realised that the products they were selling in Delhi were more
fit for the European culture and decided to start a new branch in Belgium where the
demand of their products was very high from the first day. The company came to be
recognized and in few years became a global brand. The reason for its success in
different countries was the adaptability’ it showed in meeting the changing environment.
The company kept track of all happenings and did a periodic survey of the choices of
the customers. It recognized that there was no surety in the nature of market and it was
very unpredictable. Which features of Business Environment have been highlighted in
the above case? Identify the lines which highlight these features.

Question 4:

A company is a component of market. It utilises various raw materials, labour force,

human resources, power, water, other sources, etc. When all these resources are utilized
output is produced. But before output is produced the input has to go through various
operations. These operations convert the raw materials into final products which are
then sold in the market.

In the above paragraph which importance of Business Environment is highlighted?

Question 5:

The market is flooded with better quality toys of foreign origin. The result is a fall in
revenue of the indigenous or local companies as their products are much interior and
are also costlier in less demand in the market.
Which dimension of Business Environment can be seen here affecting the local
companies’ revenue? 1

Question 6:

The sale of sarees increases in the months of the year when a large number of
marriages take place in India. The saree manufacturing companies make special plans
of sale for these months.

Which dimension of business environment comes into the picture here?

Question 7:

We can expect high sale of sarees in India but we can’t expect the same in Which
feature of business environment is discussed in the previous line?

Question 8:

Advertisements of a protein supplement must inform the potential buyer that the
product if taken beyond a given dose can be harmful to diabetics.

Which dimension of business environment is highlighted here?

Question 9:

Long Drive Manufacturers is a leading vehicle manufacturing company. It claims that it

can create a fuel in its laboratory which can run the newly designed car. The company is
ready to provide this fuel to its customers for free for one year provided they buy the car.

Which dimension of business environment is affected here by the company’s innovative

solution? 1

Question 10:

Identify the various dimensions of business environment:

 1. With the election of a new government the sensex drops by 748 points.
2. A particular channel refrains from showing the advertisement of a
particular product as it is banned by the government.
3. A software is in high demand among the industrial buyers as it can
connect all the branches of a company as a single integrated unit.
4. At the time of holi a large number of manufacturing firms get involved in
making colours which are used in the celebration of this colourful festival.
5. It is not advisable to open a luxury car showroom in the middle of an
economy where per capita income is very low.

Question 11:

A recent rate cut in the interest on loans announced by the Banks encouraged Amit, a
science student of Progressive School to take a loan from State Bank of India to
experiment and develop cars to be powered by fuel produced from garbage. He
developed such a car and exhibited it in the Science Fair organized by Directorate of
Education. He was awarded first prize for his invention.

Identify and explain the dimensions of business environment discussed in the above
case.

Question 12:

With change in the consumption habits of people, Neelesh, who was running a sweets
shop shifted to chocolate business. On the eve of Diwali he offered chocolates in
attractive packages at reasonable prices. He anticipated huge demand and created a
website chocolove.com for taking orders online. He got a lot of orders online and
earned huge profit by selling chocolates.

Identify and explain the dimensions of business environment discussed in the above
case.

Question 13:

“World Softwares” is a software giant. It has many branches throughout the world. The
company knows that it has great opportunities in its path. When it it was limited only to
its native country. With the passage of time within 20 years the economies of various
countries have integrated. This has come as a great advantage to this company which
has expanded. In many of the countries where it has its branches the control of
government in the public sector enterprises has diluted leading to more control in the
hands of the private sector. One of the major reasons for the success of the company
has been the role of the initiator the company has played as it was the first company of
its kind to enter the market.

Identify the two important concepts highlighted above. Which type of advantage has
been indicated in the last line of the above case?

Question 14:

Metlapp Networks and Technologies Ltd. is a leader in technology innovation in the

United States, creating products and solutions for connecting the world. It has a large
research and development team which invented the first smartwatch, named as W-7.
The watch besides showing the time, also monitors few health parameters like heart
beat, blood pressure etc.

While in search of markets abroad, the company found that in India, the reform process
was underway with the aim of accelerating the pace of economic growth. The company
decided to take advantage of simplified export procedure and removal of quantitative as
well as tariff restrictions in India.

It set up its office in Jamnagar with a view to capture the Indian market. In a short span
of time, the company emerged as a market leader. Success of the company attracted
many other players to enter the market. Competition resulted in reduction in prices,
thereby benefiting the customers.

1. In the above paragraph, two major concepts related to government policy

have been discussed. Identify and explain these concepts.
2. Also, explain briefly any three impacts of these concepts on Indian
business and industry.

Question 15:
The internet has taken the whole world by surprise. The government has also been
lenient in giving the online companies a chance to flourish in the changing business
scenario. Interneters Online is an entrepreneurial initiative by a group of young
engineers. The company has entered in the domain of providing products online. Many
new firms have also entered after seeing them enter this mode of business and many of
these firms are foreign in origin. The companies dealing in online business know that in
today’s world customer has many options. The customer is no more dependent on a
single company for the product he requires. This has empowered the customer who has
more choices and the result is a fragmented market. The firms selling with monopoly in
the market are the stories of the past. The products offered by the companies are going
through different types of technological changes. The companies are trying to give
variety of products which are technologically advanced. “Internetters Online” is a firm
which is right now selling 200 products online. Recently if tried to increase the number
of products to be sold by 15 but it realised that many of these products were not
allowed by the government to be sold in their territory.

Identify three impacts of government policy changes on Business and Industry

highlighted in the above case. Also identify the dimension of business environment
highlighted above.

Question 16:

The Indian companies after the year 1991 have especially paid attention to the need of
having a manpower which can adjust to the changing competitive environment. The
new market situations require employees with greater talent and higher level of
competence.

In the above paragraph which one important impact of Government policy change on
business is highlighted?

Question 17:

With the abolition of licensing requirements a company has decided to enter into a new
industry and the government’s support is making the movements of goods easier. The
company has lost its foothold in the previous industry in which it was once a leader. All
this happened because of the opposition of a project which the company had
undertaken in a village. The villagers started to gather and the incidence caught the
attention of the media. There were protests and the result was the closure of the plant.
The biggest competitor of the company wanted to ensure that they gain from this
situation. They started their vigorous efforts to increase their business output. This
company knows that all the inputs are the resources from the outside environment and
they have to be converted into successful products. Five years back the company used
to make products which used to suit its production requirements. Now it has decided to
manufacture products according to the requirements of the potential customers. The
product can only reach customers in the best possible manner only if the company
prepares itself. For this the company invests a lot in its employees so that they can
meet the best standards of providing services which suit the customers. The revenue of
the company can decline in the next few years. The reason for this could be the different
types of innovative practices involved by various competitors in producing goods with
the latest technology. For this the company will have to prepare itself.

Which economic reform is highlighted in the initial lines of the above case? Which
dimension of business is affected here in the initial lines of the passage? Which
importance of business environment is highlighted here? Name three different types of
impacts of government policy changes on business and industry you can find here.

Question 18:

It’s high time that the government should finalise the industrial and monetary policies.
The various economic indices like national income, per capita income, rate of savings
and investment, etc. should be taken care of while deciding any economic plans for the
future.

Which concept can be seen discussed in the above paragraph?

Question 19:

ABCDE Ltd. has opened a customized shoe business in 23 cities. The organisation has
done a lot of research on the nature of the business environment in which it is doing
business. The market has fragmented as there are many players, brand loyalties of the
customers keep on changing, customers are more demanding and there is intense
competition in the market. Every week on Saturday the board of directors sits for a
meeting and decides the future course of action. They rely on their surveys and past
performances of other companies to achieve policy making and deciding future course
of action. The company devotes its lot of time in understanding the external
environment. With all the research the company has realised that the business
environment does tend to have a lot of impact on the organisation so it is necessary to
continuously monitor it.

Name the various importance of management highlighted above?

Question 20:

A greeting card making company in USA is flourishing well. The company makes cards
for different occasions. During the time of Christmas and New Year, the production and
selling of cards reaches a new high. The company exists in an environment which is
democratic and there are rules for every business firm. Once you step out of the
company there are customers, competitors, government authority and almost
everything one can think of. The company appears to have a promising future. However
the firm will have to understand the close relationship between various elements of the
business environment around it. In the above case which dimension of business
environment is highlighted? Which features of business environment are highlighted in
the above case?

Question 21:

‘Raise the Bar’ is a sports equipment company. It has different branches in different
parts of the world. However, the requirements of the sports equipments are different in
different branches. This is due to the change in cultures and lifestyles of people in the
different countries. The market in which it is dealing is known for awareness of health.
The more awareness the more is the demand for such equipment. Company knows that
the demand for these products ic unpredictable as new designs keep on coming and the
industry keeps on changing frequently. There is a Research and Development
Department which keeps on updating the equipment in material and design. However
the outside business environment is characterized by changing customer preferences,
entry of new competitors making it change. A meeting was organized recently to
understand the external business environment. However, after the meeting it was
realised that business environment can’t be understood in totality it can only be
understood by breaking it into its dimensions. The result of a successful meeting could
be seen later in the performance of the company which created record sales in the
coming year.

Identify the features of business environment highlighted here.

Question 22:

GHJ Private Ltd. is concerned about the external environment of business. It is busy
analyzing various factors which are going to affect its business. However with a lot of
understanding it developed about the business it found two types of factors; one which
affected the firm directly and the other which affected all the firms in the business. With
the passage of time the challenges for the company have increased. The company finds
new competitors and technological challenges which are posing new changes for it.
The company at the end of the year decides to have a survey. This survey is about
knowing the business environment properly. Even after spending a lot of money on the
surveys the company comes to conclusion that it’s not easy to understand the business
environment and it is properly understood only in parts. The company is ready to seek
advice from experts and is eager to notice changes in the business environment. When
a multinational company enters the market the company is eager in taking preventive
measures like improving the product, aggressive advertising, etc. A special team of
experts have been created. The team observes the changes taking place like changing
branding loyalty, more demanding customers, etc. as it knows the pace of change is
more important than the change itself. The painstaking efforts of the company don’t go
unrewarded. The company by the end of the year makes huge profit and by
understanding the business environment is able to increase its revenue.

Which features of business environment have been highlighted in the above case? Also
identify the various importance of business environment highlighted above.

Question 23:

Identify the dimensions of business environment in the following cases:

1. Hand-woven carpets are banned in some European countries as they think

there can be involvement of child labour in the manufacturing of these
carpets. Products produced through the involvement of child labour are
banned in these countries.
 2. With the winning of a new party in a particular country an automobile
company has decided to take back its plan of opening 15 plants in that
country.
3. In the month of October a greeting card manufacturing company has
decided to increase its scale of production of New Year Greeting Cards.
4. A chocolate making company has decided to make more sweetened
chocolates for people living in a particular country.
5. A super bike producing company has decided to withdraw its earlier
proposal of opening 10 new plants in a country as it finds the per capita
income of that country too low to purchase its bikes in large numbers.
6. Advertising of a particular brand is taken back as it is expected to hurt the
sentiments of a particular section of society. The company takes this
decision on a conscientious level.

Question 24:

‘On Your Marks’ is a good shoe manufacturing company. The company is the first to
start a shoe having a unique technology giving it a long life. However the company
knows that it exists in an environment where everything around it counts; so everything
around it matters. Therefore, it is trying to observe every small aspect of the business
environment. There are various factors which are closely related to each other and can’t
be understood in isolation like change in lifestyle which can be linked to the improved
demand of technologically advanced shoes. However, the company can’t be self
satisfied. It will have to adjust to rapidly changing technology, fragmentation of market,
changing brand loyalties, etc. It has got good man power and a very well established
production department. It knows that various resources in the form of inputs have to be
transformed into the best products and sold for increasing its revenue. However, there
are various challenges which the company is facing. These are in the form of protests
done by labour unions throughout the country which sometimes assume the form of
strikes. The board of directors is keen to adapt to this difficult situation. Government is
playing a very positive role, like it did a few years back, and is freeing the business
environment from unnecessary restrictions and government controls. The company is
hopeful of emerging as a winner under such government support.

Which features of business environment are highlighted in the above case?

Identify the importance of business environment highlighted in the above case?

Which dimension of business environment is highlighted above?

Which economic reform is discussed in the last part of the case?

Question 25:

‘Runners Ahead’ is an emerging software consultancy company. A specific manner but

political, social and economic conditions affect it in a general way. The company has
decided to prepare an emergency plan to meet unpredictable challenges which change
the business in a very fast manner, particularly in the field of Information Technology.
The changes in the IT sector are very fast. So the chances of success are high; like in
the case of new software launched where the company has the advantage of entering
the market early. However, things are not so easy. Every time circumstances pose new
challenges. The organisation has decided to monitor the external business environment
so that it can adopt suitable measures to increase its client base. Recently the company
has been given a project by the government to study and analyse its new policy. The
policy of the government is to give a bigger role to the private sector by reducing its own
role in the Public Sector Undertakings. In order to meet new challenges the company
has to exploit various aspects of business. Recently it has invented a new type of
advanced software for social networking sites for the aged people catering to their
specific needs. The company is expecting a huge rise in its revenue through the help of
this project.

Which features of business environment is highlighted in the above case? 2

Identify the importance of business environment highlighted in the above case. 2

Which economic reform is highlighted in the above case in the second paragraph of the
above case? 1

Which dimension of business environment is highlighted in the above case? 1

Question 26:
‘Shaktishali Steel’ is a steel manufacturing company. The owner’s brother is a director in
a public sector undertaking. He advises his brother to make his company run properly
otherwise they can also face the same result which less performing PSU’s have faced.
The Public Sector Undertakings now have changed and are trying to generate high
revenues for their own functioning, as the government support has declined.

In the above case which impact of government policy changes on business has been
highlighted?

Question 27:

After the adoption of various economic reforms by the Indian government, the business
scenario in the country has changed. Earlier, the firms used to produce first and go to
the market for sale later. But now-a-days firms analyse the needs and wants of the
consumers first and then produce goods accordingly.

Identify the impact of government policy changes on business and industry in India,
mentioned in the above case.

Question 28:

Identify the dimensions of Business Environment in the following cases:

1. The demonetisation move of the government has resulted in the

accumulation of lakhs of crores of rupees in the banks. Now the banks will
give more loans to the people at a lower interest rate. General public can
now afford home loans more easily.
2. Small business will now move towards transaction of business affairs in
plastic money. This will lead to use of internet, new gadgets, etc. and
reduce dependence on cash. Report generation of these transactions will
be helpful in acting as proof for the betterment of future business.
 CHAPTER-IV

PLANNING

Question 1.

A shoe manufacturing company wants to become a market leader. For this a detailed
planning is required. The first step taken by the firm is to set targets for the three
months duration for selling maximum number of shoes in the market which they set as
2,50,000. The team doesn’t want to make any mistakes so they decide to do proper
planning. They decide to chalk out alternative plans so that they can arrive at the best
possible plan. However the team is surrounded with doubts. To remove doubts it goes
for judging the plans to get the most profitable one. The plan is taken to the whole
organisation and the concerned persons. Ultimately it is put into action. Without much
caring for the results the company starts working on the other projects simultaneously.

Identify the steps in the planning process which have been applied by the organisation
in the above case?

Question 2.

‘Indian Drugs and Pharmaceuticals Ltd.’ is engaged in the manufacturing and

distribution of medicines. The company has set-up an objective of increasing its sales
turnover by 20%. To achieve this objective the company has decided to diversify into
baby health care products. Since the company has already set its objectives and
developed the premises based on the same, it wants your help for the remaining steps
to be taken in this process. Explain briefly these steps. [2016 Comptt. D]

Question 3.

In the above case identify the steps of the planning process which are not indicated?

Question 4.

‘Serious Business’ is a balloon manufacturing firm. With the arrival of foreign firms it is
feeling the pressure of improving its business strategy. Because of the firm’s advance
planning it could not suddenly bring changes in its plans as the whole organisation had
started implementing the decided plan. But this year the organisation wants to ensure
success. However, the firm knows that the external environment is changeable and
continues to vary in a fast manner. The organisation wants to prepare in advance for a
better future. It has decided to allocate a portion of its budget specifically for proper
planning as it knows there are going to be expenses like Expert’s fee, survey charges,
etc.

Which limitations of planning have been identified in the above case?

Question 5.

‘Flows Technology’ deals in bulb manufacturing business. It plans for a successful year
of production and sale this year. It has in advance given targets to all its departments
and employees. The departments and employees are happy about this. They know that
now they won’t have to do unconcerned activities thus leading to more focused
approach resulting in saving of resources. The company is thinking of starting two new
plants in the southern portion of India. For this some concrete plan has to be made. The
main core team of the company has decided to weigh all the options and then choose
the best one. The road might be long but the company is geared to face all the
challenges.

In the above case identify importance of planning highlighted.

Question 6.

An established firm has fifty years of experience in the shipping industry. The company
time and again proves itself as one of the dominant figures in the market. The plan for
the whole year is given a lot of importance. According to the owner of the company their
plans are the basic structures upon which other important functions of management
rest. It is important that the plans are communicated to the employees. The top
management ensures that the plans are communicated and implemented at all levels
and in all departments. To learn from past mistakes is a habit of this successful
company. They prepare plans for short term as well as long term where it can be seen
that throughout the year the plans are prepared one after another. Shipping industry
needs such dedicated companies. The goals are specific and the activities to achieve
these specific goals are undertaken. The company has planned a growth of 20% in
revenue this year. Let’s see how much it’s possible for it to achieve it by the end of the
year.

In the above case identify the various features of planning highlighted.

Which type of plan is indicated in the above case?

Question 7.

Sukumar is an energetic middle level manager. He tries to make the best plans. For this
he involves foresight and intelligent imagination. Within three years, many of his
projects have been very successful. His high success rate is due to his good plans. He
always makes alternative plans and selects the best out of them after considering
relevant aspects. However, he knows it is not necessary that all his plans will be
successful. He knows that sometimes his concern for making very good plans eats a lot
of time and energy. His friend Jyoti suggests him to take suggestions from others when
he makes his plans and also consider plans made by others. Even after so much
painstaking Sukumar knows that his plans can yet fail in the uncertain business
environment. He has recently decided to plan carefully in the future.

Which features of Planning have been highlighted in the above case?

Which limitations of Planning have been highlighted in the above case?

Question 8.

Identify the types of plans:

1. Ramesh is a senior middle level manager. He is busy in allocating resources

to his staff, he has also finalised the objectives and decided on a course of
action to be followed. He is expecting energy in his staff for the whole
season but he will have to be cautious.
2. Suresh is giving a speech to the workers of his factory. He is the owner of a
toy manufacturing factory and has 123 workers. He tells them that this
year’s target of production is 7.5 lakh toys.
3. On the wall of ‘Health is Wealth’ hospital a board is hanging. On this board.
It is written ‘We care for the health of senior citizens as our topmost
 priority’. This hospital is known for treating people aged more than 60
years.
4. Rakesh calls his new subordinates for a meeting. He is a top level manager.
He arranges for a powerpoint presentation to train his subordinates who
are all middle level managers. He tells them the way of doing task of
treating suppliers through a new software system to be installed within the
next 30 days.
5. Dinesh takes a meeting and guides his employees in a type of plan which is
chronological in nature and is situation specific. It is a collection of various
methods in a stepwise sequence.
6. Amit has given a detailed statement of expected results in numerical terms.
This plan is conveyed to the subordinates by him in a special meeting.

Question 9.

Two years ago Madhu completed her degree in food technology. She worked for
sometime in a company manufacturing chutneys, pickles and murabbas. She was not
happy in the company and decided to have her own organic food processing unit for the
same. She set the objectives and the targets and formulated an action plan to achieve
the same. One of her objective was to earn 10% profit on the amount invested in the first
year. It was decided that raw materials like fruits, vegetables, spices, etc. will be
purchased on three months’ credit form farmers cultivating organic crops only. She also
decided to follow the steps required for marketing of the products through her own
outlets. She appointed Mohan as a production Manager who decides the exact manner
in which the production activities are to be carried out. Mohan also prepared a
statement showing the number of workers that will be required in the factory throughout
the year. Madhu informed Mohan about her sales target for different products, areawise
for the forthcoming quarter. While working on the production table a penalty of ?100 per
day for not wearing caps, gloves and apron was announced.

Quoting lines from the above para identify and explain the different types of plans
discussed.

Question 10.
In an annual general meeting a company sets its targets for the year. The manufacturing
department has decided to manufacture 2.5 million units of the product and has
decided to monitor the performance so as to control it accordingly. The survey done by
the company has shown a number of cities in the north which are showing increased
demand for the product. The company in its research during the last three months
generated various options and decided to follow the best one. The HR team is also
concerned about its output. The HR head revealed that there can be a shortage of MBA
pass outs which can reduce the quality of manpower in the near future so it has decided
to arrange HR workshops in different colleges to get the best candidates. The board
meeting ends on a positive note.

In the above case identify the importance of planning and the concerned lines.

Question 11.

‘Dhulai’ is a washing machine manufacturing company. The company decides to enter

into music system manufacturing industry. The company has a committed top
management. It knows that there are various challenges in the market where its
decisions regarding the new industry might fail. Still the top management doesn’t want
to waste a lot of resources on its plans. It knows that sometimes plans take more time
in making than getting implemented. However, the company wants to proceed with a
positive approach. It has decided to study all the aspects of its competitors, to set all its
objectives and to allocate the required resources. The company did well in its previous
business. At that time they took planning very seriously as they knew everything the
company would do had to be based on concrete plans. The company will start its
operations from next month.

Which function of management has been discussed in the above case? Which
limitations of planning have been highlighted in the above case? Which type of plan is
indicated in the above case? Which feature of planning is highlighted above?

Question 12.

Dheeraj is a very hard working manager. After working for the implementation of his well
chalked out plan he, from the start of July, decides to see in what ways and up to what
accuracy has his plan been implemented.
Which step of the planning process will be involved by Dheeraj from the starting of July?

Question 13.

Suraj is the CEO of a company. He in accordance with the other board members decides
to formulate a general statement which will be guiding the thinking of the employees.
He further goes on to formulate many such statements in the next six months. These
statements could be divided into two categories. Which type of plan is indicated above?
What are the two types of this plan? Also give one example of this plan.

Question 14.

A specific statement was given by an HR head. This statement had no scope for any
flexibility. It was the simplest type of plan. Identify the type of plan. Give one more
characteristic of this plan. Which plan is the widest type of plan?

Question 15.

Ramesh is a supervisor in a company. He works at the lower level of management. He

teaches ‘on the job training’ the ways in which a task is to be done by the workers at the
shop floor level. He meets his boss on ce a week day and gives him a numerical
statement quantifying the numbers needed in various activities at the shop floor for
next 6 months. The boss approves his requirements and gives him a job to set targets in
figures about the next plan he thinks is good for the manufacturing unit. Ramesh’s
dedication is noticed by all.

In the above case which types of plans have been highlighted? 2

Which step of planning process is highlighted in the above case?

Question 16.

Rajesh is at the real point of decision making in the course of his planning. He has
arrived at this point after identifying various alternative courses of action. After
identification he was thoroughly involved in the evaluation of each of these alternatives.
He later got involved into making several permutations and combinations of these
alternatives to arrive at this point.

Through which stage of the planning process is Rajesh going? Also give the next two
steps of planning process.

Question 17.

Naman is a very intelligent planner. He knows the market pretty well. For the last 15
years he has been leading several successful projects for his company. Company gives
him the responsibility to start a new project in S. America. With his experience he makes
assumptions about all the possible future scenarios.

Which step of the planning process is the above paragraph related to?

What is the other term used for assumptions in planning process?

What is the base material for developing premises?

Question 18.

‘High Voltage’ – a company which manufactures microwaves is known for its flawless
planning. However the top management of the company accepts that some of its plans
have failed in the past as the outside business environment is unpredictable and
dynamic. The company invests a huge portion of its revenue on planning related issues.
Recently in a newspaper the company was blamed for preventing its employees from
doing new things due to the plans which are decided by the top management. Rajesh a
middle level manager in the company in a seminar said that the planning aspect of a
company should be dealt cautiously. There should be specific goals and activities to
reach these goals should also be properly executed. Company has many serious
competitors in the market. Even they unanimously agree that without planning no other
function of management can exist and it’s the basic platform on which the whole
structure of management is laid. When it comes to follow up of plans it becomes very
important to know the standards. The success of a plan can only be checked when it is
known how much of the set target has been met because it is at the stage of planning
these targets are set. It’s not about the past. It’s for the coming time and challenges that
a company formulates a plan. Rajesh knows this well. He uses his intelligent
imagination and foresight while formulating the plans.
Which limitations of planning have been highlighted in the above case?

Which features of planning have been indicated in the above paragraph?

Which importance of planning do you find sighted in the above case?

Question 19.

It is deciding in advance what to do and how to do? It is one of the basic managerial
functions. It requires that before doing something, the manager must formulate an idea
of how to work on a particular task. This function is closely connected with creativity
and innovation. It seeks to bridge the gap between where we are and where we want to
go and is performed at all levels of management. In spite of this, the function of
management referred above has a number of limitations. Explain any two such
limitations.

CHAPTER-V
ORGANISING

Question 1.

‘Rats & Fleas’ is a pesticide producing company. The company identifies the various
types of activities to be done. For this it divides the work into various departments. The
company then gets involved in its business with a lot of zeal.After one year of
successful run the company decides to transfer the decision making authority to the
lowermost level of the employees. For this a major policy decision is taken.Identify the
function of management highlighted above and another concept also. Give the next two
steps of this function. Also give one importance of the other concept which you have
identified.

Question 2.

Alliance Ltd. is engaged in manufacturing plastic buckets. The objective of the company
is to manufacture 100 buckets a day. To achieve this, the efforts of all departments are
coordinated and interlinked and authority-responsibility relationship is established
among various job positions. There is clarity on who is to report to whom.

Name the function of management discussed above.

Question 3.

To make the annual function of the school successful the principal of the school
divided all the activities into task groups each dealing with a specific area like
rehearsals, decoration, stage management, refreshments etc. Each group was placed
under the overall supervision of a senior teacher. Identify the function of management
performed by the Principal in doing so.

Question 4.

To make the sports day of the school successful the Headmaster of the school
divided all the activities into task groups each dealing with a specific area like holding of
event, arrangement of medals, refreshments etc. Each group was placed under the
overall supervision of a senior teacher. The physical education teacher was made
responsible for holding different events, the home science teacher for refreshments and
the Maths teacher for medals.

Identify the function of management performed by the Headmaster in doing so.

Question 5.
 An Indian information technology company presently employing 10,000 people,
desires to expand its business in manufacturing, trading, etc. It wants to become a
global company. To achieve its objectives it has started shifting from a centralised to a
decentralised management system.

Identify the management function being performed by the company to become a

decentralised company.

Question 6.

Due to proper organizing and division of work, a company goes for systematic
assignment of jobs among the employees, wmch importance of organizing is
highlighted here? Give three more importance of organizing?

Question 7.

A school principal believes in proper organizing. He time and again tells his staff to be
organized as he believes that through proper organising they can move away from
present norms and accept new challenges with success. They will be able to add more
activities and projects in their yearly plan.

Which importance of organizing has been indicated in the above paragraph?

What is Organisation Structure? Which type of organisation is ‘School’?

Question 8.

‘Aasmaan Colours’ is a profit making colour producing company. The company deals in
making different types of colours used in painting. The organisation has always been
systematic in its approach and due to good organizing has seen a continuous increase
in its revenue. Workers are given their respective jobs clearly which leads to gaining of
experience since they do their respective jobs on a regular basis leading to high
productivity. The organisation has many challenges and it wants to improve. There is no
doubt in the lines of communication and everyone knows who has to report whom. With
passage of time, there is more need to connect with the employees. They are the most
important asset to the organisation. When managers delegate work to their
subordinates they set themselves free from routine jobs and this leads to great amount
of learning for the subordinates in practical situations.Which importance of organizing
has been highlighted in the above case?
How would a company adapt to changes with the help of organizing?

Question 9.

An organisation is working by clubbing similar related jobs under different departments.

The HR department is not in direct touch with the Marketing Department and this has
created problems. The HR head feels that he only knows about the HR department and
similar is the case with the Marketing department. However the truth is both of them
have limited and specific skills.Which type of organisation structure does this
organisation has? What will be the outcome of this mode of thinking in the near future
for the organisation? Name one more disadvantage of this type of organisation
structure?

Question 10.

Identify the following into formal and informal organisation:

1. Mountain cold storage has a well defined structure of authority

relationships. This structure is created after a lot of planning by the top
level management.
2. Tanuj Drinks is an organisation which helps quench the thirst of people
sitting on
roadside and parks on Sundays. This organisation has originated from
Mountain cold storage spontaneously.
3. An organisation holds its meeting according to the mood of the members.
It has no set pattern of behavior.
4. An organisation which is run in Central Delhi is known for its rigid nature.
5. Cricket Club is an organisation in which the authority of the members,
constituting it, is because of their positions in the management.
6. Translife is an organisation in which only the managers are leaders.

Question 11.

‘Steelo Ltd/ decided to set-up its steel manufacturing factory in the backward area of
Orissa where very less job opportunities were available. People of that area welcomed
this effort of ‘Steelo Ltd.’ To attract people to work in its factory it also decided to
provide many other facilities like school, hospital, market, etc. in the factory premises.

‘Steelo Ltd.’ started earning huge profits. Another competing company asked its
production manager ‘Aslam’ to investigate the reasons of earning huge profits by ‘Steelo
Ltd.’ Aslam found that in both the companies there was systematic coordination among
the various activities to achieve organizational goals. Every employee knew who was
responsible and accountable to whom. The only difference was that in his organization
communication takes place only through the scalar chain whereas ‘Steelo Ltd.’ was
allowing flow of communication in all directions as per the requirement which lead to
faster spread of information as well as quick feedback.

1. Identify the type of organization which permits ‘Steelo Ltd.’ the flow of
communication in all directions.
2. State another advantage of the type of organization identified in (a) above.
3. State any two values which ‘Steelo Ltd.’ wanted to communicate to the
society

Question 12.

In the above cases identify the ‘basis’ on which these organisations are categorized into
formal or informal.

Question 13.

Lalit has joined a manufacturing firm as a worker. He has recently started working on
the shop floor. The management is quite liberal and has allowed the workers to form a
hockey club. The workers assemble and play hockey in the evening after the completion
of their work. However the management is a little worried about the outcomes. The
management is trying to change the schedule of the workers but they are unsure about
the reaction of the workers. Though majority of the workers are sincere, like Lalit, yet the
management is concerned about their companions in the hockey club.

Which type of organisation is the hockey club? Name two disadvantages which you can
predict from the above case?

Question 14.
Identify the type of organisation structure in the following cases:

1. Apexa Glue is a manufacturing company based upon functions and has

important departments like HR, Marketing, Finance, etc.
2. Ravi runs a company in Hyderabad. The company is known for its product
specialisation and has a lot of reputation in the market.
3. Nitin is an owner of a reputed manufacturing company. However in his firm
it is difficult to fix responsibility on a particular department.
4. Archana is a dynamic CEO. In her organisation she allows for autonomy and
opportunity to perform multiple functions. This had led to managerial
development in her employees.
5. Rajiv Bulbs is a city based flourishing company. Recently it has won the
award for being the most economical company as the functions are not
duplicated in it.
6. Synchronisation of efforts is easy in Sigma Tubelights Ltd. as all the related
functions related to a particular product are integrated within one
department.

Question 15.

A company has been registered under the Companies Act with an authorized share
capital of Rs.20,000 crores. Its registered office is situated in Delhi and manufacturing
unit in a backward district of Rajasthan. Its marketing department is situated in Bhopal.
The company is manufacturing Fast Moving Consumer Goods (FMCG).

1. Suggest with the help of a diagram a suitable organisation structure for the
company.
2. State any three advantages of this organisation structure.

Question 16.

Ajanta Foods Ltd. is engaged in the trading of ‘Noodles’. It has its registered office in
Kolkata, manufacturing unit in Solan and marketing department at Delhi. Which type of
organisational structure the company should adopt to achieve its target?

Question 17.
In the above cases (in Question 9) identify the ‘basis’ on which the organisation
structures are categorized into functional or divisional.

Question 18.

A Company named Mahi Cycles has decided to start a new branch in the Middle East.
The company has recognised the amount of work to be done in a number of hours. The
company has found out that it would take 25000 hours of man work and has
subsequently divided the number of hours for different operations. The real challenges
of the company begin here. Very methodically responsibility of the recognized amount
of work has been given to different individuals according to their capabilities.

Which function of management is highlighted above? Identify the two steps of this
function indicated above.

Question 19.

Rolling Eagle is an organised firm. The firm has been considered as one of the major
producers of steel in the manufacturing industry. A group of people from foreign
countries have come to India to find out the reason for their success. They found that
there is proper utilisation of resources and this has led to a great control of
management over every aspect. The company has reached this place after a lot of
research and its application. Every person knows what he has to do and this has led to
the achievement of great skill development at ‘per employee level’. The company has a
monitoring cell which keeps track of all the major developments around. This has made
it possible for the company to change itself according to the requirements of the
outside environment.

In the above case which concept of management is highlighted? Discuss its three types
highlighted in the above case?

Question 20.

Kaamna is a bright young management trainee. After six months of testing by her
organisation she is given charge of her office as an assistant manager. She starts her
job with a lot of enthusiasm but realises that it won’t be possible for her to continue
without sharing her tasks. She keeps a secretary who takes orders from her. This has
reduced her burden of work and has helped her to focus on priority assignments.
Which concept of management is discussed in the above case? Name two importance
of this concept.

Question 21.

Aman Chadha started ‘Bulls Eye’ a company for providing cyber security solutions to
businesses. Its objective is to prevent, detect and respond to cyber attacks and protect
critical data. He was a hardworking software engineer and an expert in cyber security.
His reputation grew by leaps and bounds as he was not only a person of integrity but
also did his work with utmost honesty and sincerity.The business started growing day
by day. He was delighted when he was offered a big project by the Ministry of Defence.
While working on the project, he found that the volume of work made it impractical for
him to handle all the work by himself. He decided to expand the team. The company
maintained a close liaison with a local engineering college. During a campus placement,
Ishan and Vrinda were appointed to work for the new project. He found the new
employees capable, enthusiastic and trustworthy. Aman Chadha was thus able to focus
on objectives and with the help of Ishan and Vrinda, the project was completed on time.
Not only this Aman Chadha was also able to extend his area of operations. On the other
hand Ishan and Vrinda also got opportunities to develop and exercise initiative,

1. Identify and briefly explain the concept used by Aman Chadha in the above
case which helped him in focusing on objectives.
2. Also, state any four points of importance of the concept identified in (a)
above.

Question 22.

Alpha Tonics is a progressive company which has achieved new records in the field of
medicine. Recently the company decided to go for a major shift in policy decision by
handing over the decision making authority to the lowermost level of employees. For
this the company went for a thorough planning. Within four months the positive results
of this major policy decision was recognizable. The employees felt a lot of development
in their skill of taking first step to manage things on their own. Some major newspapers
also covered this development. The production of the company increased. The
company’s top management could now focus on new areas of innovation as the
employees became more reliable. One day it so happened that the company’s
manufacturing branch in south could not fulfill even half of its production target and the
operations manager was held answerable for the assigned target. He was called in the
office. When he was questioned it was found that his right to command the workers
was insufficient and it should have been more to create results. The management
decided to listen to him and he was given more power. When he went to the shop floor
he told the workers that the standard of behavior of the workers should come from the
official rules and procedures.

In the above case which concept of management has been related to in the first
paragraph of the case?

Which two advantages of this concept have been highlighted in the above case?

Which two elements of delegation have been highlighted in the second paragraph of the
case?

Which one feature of the informal organisation has been opposed by the operations
manager in the above case?

Question 23.

Arnav Electricals is a company which has in recent years adopted the decentralized
method of running the organisation. The company has grown dynamically and the
decisions taken by the lower level management are implemented which saves time as
people taking decisions are near the point of action. However, recently the chairman of
another manufacturing firm who is also a good friend of Arnav, chairman of Arnav
Electricals, met him and asked him how he could evaluate performance of employees in
case he goes for a decentralized approach. A few hours later Amav’s secretary calls him
and asks for a list of work to be done the next day. He narrates him all the important
tasks to be executed.

Which importance of decentralisation has been highlighted in the above case?

What advice do you think Arnav should give to have better control in a decentralized
organisation?

Which concept of organizing is taking place between Arnav and his secretary?
Which type of scope does this concept have?

Question 24.

‘Pappu Sweets Makers’ is a sweets making company which has turnover in crores. In
order to manage the work in the organisation the departments have been created on the
basis of functions. Examine the following situations of this organisation and give
answers accordingly:

Situation 1: It is expected that employees who are performing similar tasks work under
the same department. So the company now has HR, Marketing and Finance
departments. The division is based on specific functions.

Situation 2: There are similarities in the tasks performed within the same department.

Situation 3: The profit is increasing month by month due to the success of this structure
of the organisation.

Situation 4: There has been minimum duplication of effort as the same department is
taking care of single function.

1. Which type of organisation structure is discussed in the above case?

2. What type of specialisation exists in the above case in the organisation

according to Situation 1?

3. What will be the outcome of Situation 2?

4. Why do you think the profit is increasing as given in Situation 3?

5. What will be the result of Situation 4?

Question 25.

Mr. Atul is the owner of a garment manufacturing company. He finds the spreading of
message in his organisation a problem as a lot of time is taken. On many occasions he
tried to bring different equipments and software systems to increase the speed of
spreading of message. In the month of February this year a new type of machine was
installed in the production department. He wanted to have a candid opinion about the
utility of the machine from the employees but no one had the courage to tell him about
the flaws of the machine on his face. After three months when there were shortcomings
in the production of garments he realised his limitations. With passage of time he found
the motivation level of employees too low. Many of the employees and workers were
new and found the place unfamiliar and didn’t have friends which resulted in the
lowering of production.

1. What would you suggest to Mr. Atul in this scenario?

2. Identify the three problems in the above case and give the outcomes of
your solution given in the previous question on these problems.

Question 26.

Mr. Manuj is an efficient manager working in a multinational company. He is fond of

completing all his work by himself. As a human being he is very good and supportive
and due to this he doesn’t want to put the burden of work on others. Sometimes he is so
much involved in doing different types of work in the office that he even misses the
priorities areas. Which concept of management is seen violated here? What is going to
be another disadvantage of this violation? Also identify one disadvantage given in this
case.

Question 27.

‘Money Makers’ is a leading toy manufacturing company. With the help of proper
delegation it has enabled the existence of proper workforce to take up leading positions
in several challenging projects. The company has been in the news for good reasons
related with innovation. Due to proper delegation the relationships between superiors
and subordinates are properly defined at various levels leading to creation of a strong
management structure. Last year it was awarded for good administration. Due to proper
delegation there is no overlapping of duties and duplication of effort as there is clarity
of working relationships. The company is acting as a role model for other players in the
industry. The productivity of the organisation has improved as it is very organized.
Specific jobs are done only by specific workers resulting in increased efficiencies at
individual levels. The company is now thinking of going global and has recently opened
a branch in Europe. However the conditions are going to be different there. Keeping in
mind the strong organizing of the company it is expected that it will be able to modify its
organisational structure and prove its superiority there also.

Recently a meeting is held by the top management. It is decided that the organisation
will go for a major shift in policy decision and involve the lower level of management in
decision making. The size of the company is growing so it will require more
participation from the employees.

1. Identify the three advantages of delegation highlighted above.

2. Identify the two advantages of organizing highlighted above.
3. Find the concept given in the third paragraph of the above case.

Question 28.

Samir Gupta started a telecommunication company, ‘Donira Ltd.’ to manufacture

economical mobile phones for the Indian rural market with 15 employees. The company
did very well in its initial years. As the product was good and marketed well, the demand
of its products went up. To increase production the company decided to recruit
additional employees. Samir Gupta, who was earlier taking all decisions for the
company had to selectively disperse the authority. He believed that subordinates are
competent, capable and resourceful and can assume responsibility for effective
implementation of their decisions. This paid off and the company was not only able to
increase its production but also expanded its product range.

1. Identify the concept used by Samir Gupta through which he was able to
steer his company to greater heights.
2. Also explain any three points of importance of this concept.

Question 29.

In a progressive company the HR department decided to go for a unique way of

controlling the performance of the employees. They decided to give every employee a
balance score card through which their performance could be measured. The top brass
could leave the decision making on the employees. Due to this change in the approach
of the management the evaluation of employees and departments became easier. Since
the decisions were not to be taken now by the top management only, the speed at which
the decisions were taken got increased. The top management could now see the
changes in the organisation. It was quite obvious that they could now sit, relax and
focus on other areas. Since this organisation is a formal organisation. In a recent
assessment meeting by the top management, it was found that the company was
meeting the following criteria:

1. Mutual relationships among the employees were clearly defined.

 2. Duties of all the employees were clearly specified.
3. There was a definite framework and each employee knew his role.

In the above case identify the highlighted advantages of decentralisation.

In the second part of the case the advantages of formal structure of the organisation
are given. What are going to be the outcomes of each of these advantages?

Question 30.

Identify the category of ‘Organisation A’ in the following cases:

1. Organisation A originates from an organisation B which runs on rules and

procedures. It has originated due to personal interaction among employees
of organisation B.
2. Organisation A follows independent channels of communication.
3. Organisation A has a definite framework for the fulfillment of operational
tasks.
4. Organisation A emerges spontaneously and is not willingly created by the
management.
5. Organisation A helps in coordinating and streamlining the functioning of
different departments.
6. Organisation A gives more stress on targets to be completed than the
interpersonal relationships among the workers.
7. The behavior of members of Organisation A is not dependent on the rules
and procedures of the parent organisation B (from which it has emerged).
8. There is a lot of delay in decision making as the established chain of
command is followed in Organisation A.
9. Organisation A helps in fulfilling the social needs of the members as they
find like minded people.
10. Organisation A is deliberately created by the top management.
Question 31.

Gargi Chemicals has many branches throughout the country. The company has recently
adopted the decentralisation model. This has given the freedom to the lower level
managers to take decisions on their own and have faith in their own judgments. This
has really helped the organisation in taking the business to new heights. The employees
are handling the projects independently and the experience thus gained can help them
rise in the organisation earning them responsible positions in the management in the
future.

The organisation knows that there is no substitute to delegation. In the past when the
optional policy decision of decentralisation was not adopted even then the company
was doing good. The managers knew that through proper delegation they could leave
the routine work on subordinates and focus on priority areas. This was how the
company grew. It was due to delegation that superior-subordinate relationship got
established and there was clarity of reporting relationships.

The company works on product specialisation. We can see that in the future the
managers will have full scope to develop their managerial talents.

In the above case identify the advantages of decentralisation.

Delegation is a must for the organisation. What advantages of delegation are indicated
in the above case?

What type of organisation structure does the company have?

Why will managers be able to maximize their potential in the above organisation
structure?

Question 32.

Identify the type of organisation structure in the following cases:

1. A manager gains experience of all the related functions like HR, Marketing,
Finance, etc.
2. A particular division may try to increase its profit at the cost of others in an
organisation.

3. This type of structure is suitable for large business enterprises where

several products are there for sale. It is easy to add new departments as
new products are added.

4. The organisation believes in occupational specialisation and lays stress on

specific functions.

5. In this type of organisation less focus is given on overall enterprise targets.

6. The size of the organisation is large and there is a need for a higher degree
of specialisation.

7. There is a similarity of tasks within a department and more chances of

control and coordination.

8. Problems of improper coordination may result as message will flow

between functionally different departments.

9. There can be blame game as conflict of interests may arise between

functionally different departments.

10. There are chances of flexibility and initiative as the departments function
as autonomous units.

11. A manager supervises all the situations and functionalities related to a

particular department. Here the authority is more than the other type of
organisation structure.

12. The expansion and growth is easier as new units can be adjusted without
disturbing the ongoing operations.
13. The training of managers is easier as the limited sets of skills are targeted
for a particular employee.
 CHAPTER-10
FINANCIAL MANAGEMENT

Question 1.

Ramit is using ICR (Interest Coverage Ratio) as an indicator of the interest paying
capacity of his company. However one of his old school days’ friends Shobhit tells him
to use DSCR (Debt Service Coverage Ratio) as the indicator to judge it.

Do you agree with his friend?

Give reasons for your answer.

Question 2.

Identify in the following cases factor affecting the choice of capital:

1. Raj has an option of taking loan from his relatives. These people have assured
him to give loan at a low interest rate. So he decides to use debt as a source of
financing his project. Now he goes to different relatives and friends to see if he
can get a cheaper source of debt with even lower rate of interest.
1. Prerak Iron Ltd. is thinking of raising finance to further its projects
overseas. For this the company is observing the other companies’ raising of
finance. Their debt^equity ratios are being thoroughly studied by the
financial experts of the company.
2. A company is trying to raise funds after consulting the experts. The owner
of the company has decided to find out the banks which can grant loan
under norms. He will assure that all norms are followed by the company. He
has also decided to gain knowledge about the SEBI guidelines related to
public issues of shares and debentures.
3. The management of a company is very much concerned about the latest
happenings in the stock market. They always w’ant to know whether the
conditions in the stock market are bullish or bearish so that they may know
the feasible time to grow money by issue of shares.
4. A firm has decided not to issue equity this year. The reason they have given
is the involvement of costs like printing charges, brokerage, advertising
costs and underwriter’s commission. The company says all these costs will
add on to become substantial.
5. A company already has high fixed operating costs. If it takes loan its fixed
financial costs will increase leading to an overall increase in payments. Had
the situation been opposite it would have considered taking loan but now
the only option is to go for equity.
6. A company is thinking of taking debt to meet its finance requirements. It is
thinking so because interest is a tax deductible expense. Due to the new
budget by the government raising debt has become comparatively cheaper
and equity is losing its attractiveness.
7. Mr. Madan Sharma has a company having 10 branches throughout the
country. He is thinking of opening a new branch. For this he requires a good
amount of investment. He talks to his friends, banks and other sources to
raise debt as a source of finance. However he prevents himself from using
 all possible sources of finance so that he can maintain his borrowing
power.
8. A leading company decides to raise funds. It decides to go for debt as a
source of finance. The reason behind this choice is the possibility of losing
management’s holding in the company if equity is issued. The company
already has been using equity as a source of finance during the last couple
of years.
9. A company is no more interested in raising funds in the form of debt. The
amount of EBIT that the company has is decreasing in relation to the
amount of interest it has to pay on the debt it has borrowed. If it borrows
more debt than this ratio EBIT/ Interest will further go down.
10. Neelam has decided to consider debt as the source of raising finance. Her
decision has come after considering the strong buffer of funds she already
has. She has enough amount of funds to cover fixed cash payments. Her
business unit has no problem in running normal business operation and it
has low business risk. Further the financial risk is also low.
11. A company has decided to go for trading on equity as an option. This is
being done to increase the Earning per Share (EPS). Definitely the ability of
the company to use debt is greater.

Question 3.

In the previous question case study (b) of Prerak Iron Ltd. what caution do you think that
the company should take?

Question 4.

In Question No. 2 in case study (l) How Return on Investment would matter?

Question 5.

Future Business’ is in wholesale business. The manager in charge is taking care of all
the operations. The branch in Delhi is earning a lot of revenue these days. It requires
fixed capital investment for which it has to borrow money.What do you think is going to
be the size of the investment required?

Question 6.

Atul is thinking of opening a scissors manufacturing plant. He requires capital

investment. He discusses the project with his father. His father after listening to his
project tries to find out the fixed capital requirement for his plant.What do you think will
be the fixed capital requirement for the scissors manufacturing plant of Atul?

Question 7.

Vrinda is an MBA pass out from a very good MBA college. Her father has restaurant
business. Their company has 15 restaurants in Europe. As soon as Vrinda joins the
business she decides to take this number to 25 by opening 10 more restaurants in the
major cities of Europe.What do you think will be the fixed capital requirement here?
Why?

Question 8.

Ravi has started a pizza base manufacturing business. The early morning schedule is
very busy as the product is dispatched as soon as it is made to keep it fresh and is sent
to the various pizza making restaurants or hotels. Daily fresh pizza base has to be
delivered on the basis of estimated orders as there is no sure shot consumption pattern
in the city.What do you think is going to be the working capital requirements of this
business? Why?

Question 9.

‘Hot Winters’ is a premium sweater making company. The sweaters are worn in many
countries and they are of very high quality. For six months of the year the company is
almost without work but the remaining six months it is busy in preparing almost 10
million sweaters for its customers in different parts of the world.What do you think is
going to be the working capital requirements of this company? Why?

Question 10.
Dheeraj has opened a company. He has come from Australia to set up a business of his
father here in India. He decides to meet a person who owns huge chunks of property. He
decides to take a piece of land for his company on lease from him. What do you think is
going to be the fixed capital requirement of his company? Why?

Question 11.

An AC manufacturing company wants to open a plant in Delhi. The owner of the

company called a meeting to find the experts to fix the plant’s requirements. The
recruitment process of the potential employees who will be working in the plant will be
started soon.What do you think will be the working capital requirements of this
company? Why?

Question 12.

There are two brothers: Shobhit and Mohit. Shobhit starts a tourist and travel agency.
His idea is to take his business to great heights. Though he doesn’t have experience in
this business yet he wants to give this business a try. He feels that if he gives the best
quality services then his business will reach great heights.

Mohit starts a thermometer manufacturing business. He too like his brother wants to
take his business towards great success. He is new to this business and is busy getting
to know about the technical side of the business as much as possible. He wants to
make the best quality thermometers which are ultra sensitive to temperature changes
and can resist shocks.Despite all these good ambitions in mind a sudden shock takes
place for both the brothers. The economy shows signs of recession and within a few
months is totally engulfed by it.What will happen to the working capital requirements of
the two businesses described in the above case?Which of the two businesses do you
think will see greater impact of this change?

Question 13.

Bharat Express’ specialises in Courier Services. Its ‘wide range of express package and
parcel service’ help business firms to make sure that the goods are made le to the
customers at the right place and at the right time.State with reason, whether the
working capital requirements of ‘Bharat Express’ will be high or low.
Question 14.

‘Indian Logistics’ has its own warehousing arrangements at key locations across the
country. Its warehousing services help business firms to reduce their overheads,
increase efficiency and cut down distribution time.State with reason, whether the
working capital requirements of ‘Indian Logistics’ will be high or low.

Question 15.

KJ Ltd. is manufacturing trucks at its manufacturing unit in Kolkata. The demand of its
trucks is high as the economic growth is about 7% to 8%. The company has estimated a
20% increase in the demand of its trucks. It is planning to set up a new truck
manufacturing unit. For this the company will require approximately ?2,000 crores as
fixed capital and 50 crore as working capital. The company has already arranged for its
fixed capital. State any three factors that the finance manager of the company should
keep in mind while arranging its working capital.

Question 16.

Raghu has started a mobile manufacturing company. The company has decided to
meet the competitor’s market hold by giving liberal credit terms to their customers. They
have decided to check the creditworthiness of their customers before giving them this
facility. They will provide this facility to customers having credit cards.

1. Predict the fixed capital requirement of Raghu’s company.

2. What do you think will be the working capital requirements of his company?

Question 17.

Atul Oil Explorers is a high turnover oil extracting company. It has made a lot of
successful explorations of oil in the past. But recently the company has not been doing
so well in the business. The company is trying to diversify in the textile business. The
newspapers are flooded with this news. People are also considering this as a smart
move by the company.
What do you think will happen to the fixed capital requirement of the company because
of this move? Give reason.

Question 18.

MM Ltd. is manufacturing small cars at its manufacturing unit in Pune. The demand of
its cars is increasing at the rate of 20% annually. It is planning to set up a new car
manufacturing unit at Indore. For this the company will require approximately 1,500
crores as fixed capital and 400 crores as working capital. The company has already
arranged for its working capital. State any three factors that the finance manager should
keep in mind while arranging its fixed capital.

Question 19.

‘Hamara Bank’ has over 1.5 million satisfied customers. However, recently some of
them started leaving the clientele of bank. The reason behind this was that the services
of the bank were extremely good, people always complained about the lack of ATM
facility in the bank. To overcome this problem and stop the clients go away, the bank
decided to go for collaboration with ‘Tumhara Bank’. ‘Tumhara Bank’ is a new bank and
is no way near to the competency of Core services of ‘Hamara Bank’ but it has
exceptional ATM facilities.

What do you think is going to be the impact of this collaboration on the fixed capital
investment of ‘Hamara Bank’? Give reason.

Question 20.

Radhika and Vani who are young fashion designers left their job with a famous fashion
designer chain to set-up a company ‘Fashionate Pvt. Ltd.’ They decided to run a
boutique during the day and coaching classes for entrance examination of National
Institute of Fashion Designing in the evening. For the coaching centre they hired the first
floor of a nearby building. Their major expense was money spent on photocopying of
notes for their students. They thought of buying a photocopier knowing fully that their
scale of operations was not sufficient to make full use of the photocopier.

In the basement of the building of ‘Fashionate Pvt. Ltd.’ Praveen and Ramesh were
carrying on a printing and stationery business in the name of ‘Neo Prints Pvt. Ltd.’
Radhika approached Praveen with the proposal to buy a photocopier jointly which could
be used by both of them without making separate investment, Praveen agreed to this.

Identify the factor affecting fixed capital requirements of ‘Fashionate Pvt. Ltd.’

Question 21.

Rizul Bhattacharya after leaving his job wanted to start a Private Limited Company with
his son. His son was keen that the company may start manufacturing of mobile-phones
with some unique features. Rizul Bhattacharya felt that mobile phones are prone to
quick obsolescence and a heavy fixed capital investment would be required regularly in
this business. Therefore he convinced his son to start a furniture business.

Identify the factor affecting fixed capital requirements which made Rizul Bhattacharya
to choose furniture business over mobile phones

Question 22.

Ramesh is running a real estate construction company. He has to meet clients on a

regular basis in order to make deals. For every decision he makes he has to be really
cautious as he knows once he has made a decision he can’t go back which will mean
abandoning of the project. So he evaluates every decision before he makes it. That is
why he pays a lot of attention to what his clients are saying and figures out which
portion of the deal is in his capacity and favour. Recently his company pumped an
amount of Rs.50 crores in a project and he knows this project can affect the returns of
the firms in the long run both positively as well as negatively. All this is a part of the
business in which he has established himself. He knows that the funds invested are
only likely to give returns in the future and impact the future prospects of his business.
The chances of success in any business are more when one does a lot of research. He
has to involve a considerable portion of his funds and block them in long term projects.
A thorough research is required in order to grow funds at the lowest cost possible. He is
a very stable minded entrepreneur.

1. Which concept of management has been highlighted in the above case?

2. Identify its types highlighted in the above case.
Question 23.

Identify the type of decisions:

1. Ravi wants to open a restaurant and is looking for a proper place to open it.
He is also thinking of the amount of funds which will be required for some
of the set ups like food making and storing machineries.
2. Ravindra is running a toy manufacturing company. He thinks of expanding
his business. He meets his uncle and asks him for a sum of Rs. 2 crores.
His uncle asks for a high interest rate. He agrees to it and promises to pay
the money back within 2 years.
3. A leading marketing company has decided to raise money through the
stock market. It issued IPO in the market last year. The company knows
there are going to be sizeable floatation costs involved in it.
4. A company which has 10 branches in the city has decided to open its 11th
branch. The company has taken this branch on rent. In this way the
company has saved money which it would otherwise have invested in
purchasing it.
5. A company has decided to plough back the money in the form of retained
earnings. This decision will save the company at least ‘50 crores. These
funds can be used for the long term growth of the business.
6. ‘Rakesh Iron Works’ has been doing a great job in the area of manufacturing
iron. Within two years the company has reached among the top 3
performers of the industry. The company has made a lot of profit and
decided to distribute its profits to the shareholders who stood with it during
the hard times.
7. Raj and Powerlooms, a leading company in its industry has decided not to
issue equity shares this year as they want to keep the management control
in their own hands. The company’s management already has only 60%
shares in the company. So it would avoid any further dilution of its stake in
the company. Company would prefer taking loan.
8. A company has decided to issue debentures as it knows that it will not lead
to any additional costs. These debentures will be carrying a very low rate of
return for the debenture holders but will be a surety for them to get their
money back. Investors who want financial safety would like to go for this
option as there will be an assured definite return. ,
9. Shuddhi Steel Manufacturers has been a brand but due to some HR related
issues it came into limelight for bad reasons. The issue was related with
non-payment of salaries of the employees but now the company wants to
 sort this issue out. The company has decided to pay the salary of all the
employees which were not paid their emoluments since last six months.
The company has done so to avoid any image spoiling to take place.
10. A soft drink company has decided to run an advertisement campaign. It will
hire many famous Bollywood celebrities for this purpose. The
advertisement campaign could involve more than 150 crores. Every major
newspaper is mentioning about it.
11. Tarachand and Sons has decided to open a new branch in the middle of the
city in order to increase its business.

Question 24.

Bharat Steel Ltd., an Indian company producing 50 million tonnes of steel annually and
generating revenue of 38 billion US dollars has recently acquired the 5 second largest
steel producing company, ‘German Steels.’ After this acquisition Bharat Steels Ltd. will
become the World’s largest steel producer. For this acquisition Bharat Steels Ltd. had to
arrange about 50,000 crores of rupees through debt and equity. State the function
performed by the company for arranging the funds through debt and equity.

Question 25.

‘Trucks India Ltd.’ producing 1,00,000 trucks and generating revenue of Rs.1,000 crores
annually, has recently acquired the world’s second largest truck icturing company. After
this acquisition, ‘Trucks India Ltd.’ will become the world’s largest truck manufacturer.
For financing the acquisition the company had to arrange about Rs.41,000 crores
through debt and equity. State the function performed by the company for arranging the
funds through debt and equity.

Question 26.

Identify the factors involved in the following dividend decisions:

1. A company is growing by leaps and bounds. Every year it is opening new

branches in the major cities of the country. There are chances that in a few
years to come it will be the market leader in its industry. Newspapers
appreciate the steps taken by the management. However in the field of
 financial decisions the company takes a defensive stand. Every year it
declares less than expected dividend for the shareholders.
2. The new government in accordance with its new policy has decided to levy
more taxes on dividends. A company which pays good dividend every year
to its shareholders has decided to keep the retained earnings high this year.
This step will definitely bring the dividend down in comparison to the
expectations of the shareholders.
3. ‘Mitra, my neighbour’ is a real estate company. The company has always
done well on the stock market indices. Recently the company has shown
good profit but it is still short of cash. The company has decided to come
with a lower dividend than expected. (d) One of the leading companies of
the services sector has decided to keep the dividend portion of the EPS
stable. The decision has been taken keeping in view the fact that the
earning potential of the company has not gone up since last three years.
So, the company has decided not to change the dividend per share.
4. A lending company ‘A’ has decided to put some constraints on the company
‘B’ to which it has extended loan. The constraints are related to the
declaring of dividends by the company ‘B’. They have signed a contract
which puts restrictions on company ‘B’. So unless and until it pays back the
amount taken from company ‘A’ it can’t enjoy freedom in this regard.
5. A leading telecom giant always gives good dividend to its shareholders.
The company is a great performer on the stock exchange. The shareholders
are very confident of its good performance. It has the liberty to give high
dividends as it has less dependency on retained earnings.
6. A company takes care of the needs of its shareholders. Many of the
shareholders are such who need a constant and stable source of income.
Their dependence is met by the declaring of a stable and permanent
dividend. Unlike other companies which let the market decide the amount
of dividend to be paid and the payment of which is based on the company’s
performance the company wants to keep its shareholders satisfied majority
of whom are retired persons.
7. ‘Heartbeat Denim’ is the number one performing jeans manufacturing
company since last 30 years. The company has several branches at
different locations of the world. The revenue of the company has increased
over the years. This has made this company a very stable firm. It is on the
stock market since last 15 years. The shareholders of the company are
extremely satisfied with its dividend policy. They never feel insecure about
the dividends given as the company’s products always sell in the market
and have a great demand.
 8. A newly formed petrochemical company is performing absolutely great.
The firm has listed itself on the stock market. Due to the huge revenue
earned by the organisation it has been able to give high dividend to the
shareholders.
9. A company has decided to improve its image in the stock market and
wants the investors to pump more money in its shares. The highly
ambitious organisation has planned to increase the dividends on its shares
for the third successive year. The increase has also been substantial. The
idea is to send great news in the market regarding the performance of the
company in order to bolster its image.

Question 27.

Company ‘A’ has the debt-equity ratio of 3 :1. Another Company ‘B’ has the debt-equity
ratio of 2.5 : 1. Both companies are part of an industry where the operating costs are
high. Many of the companies in this industry are vulnerable to high business risk.

Which one of the two companies is going to have higher chances of financial risk?

Why do you think the financial risk in the above mentioned industry is going to be
dangerous for the companies?

Question 28.

In the Question No. 26(b) case where do you think taxes are charged on dividend? What
is its significance with respect to the shareholders?

Question 29.

An organisation is busy preparing its financial blueprint for its future operations. The
idea is to create a satisfactory amount of money which should be there in the reach of
the organisation at the right time.

1. Which concept of financial management has been highlighted in the above

case?
2. What are the financial plans made for a year known as?
 3. What are the twin objectives of financial planning?

Question 30.

A company was expecting a sales increase of 20% in comparison to last year. However,
due to poor support from the economic situations around the increase turned out to be
only 10%. The company however had prepared itself for this situation. It knew how to
change its expenses in financial case the sales increase goes down in comparison to
the expectations.

1. Identify the concept of financial management which is highlighted in the

above case.
2. What should have been the action taken by the company if the situation had
been different like increase in revenue by 30%.

Question 31.

A company ‘White White Sheets’ is a successful bed sheet selling company. It sells Rs.1
crore worth sheets to a corporate customer. The company gives a period of 2 months to
the client to pay for the sheets. The company send an invoice to the customer and the
inventory account gets reduced by Rs.1 crore. The account receivable is increased by
Rs.1 crore. When its corporate client pays within the period of 2 months the cash is
increased by Rs.1 crore and the account receivable is reduced by Rs.1 crore.

1. In the above financial transaction the essential ingredients of which

concept of ‘financial management’ have been highlighted?
2. What is the other term used for long term investment decision?
3. Which concept of financial management is related to selection of the best
financing or investment alternative?

Question 32.
In the following cases identify the type of financial decision. Also identify the factors
affecting the decisions:

1. A company has decided to issue equity but it is concerned about the

control management will lose. So after a lot of brainstorming the board of
directors decide to take a loan from a bank and debt from other sources.
2. Keeping the concern of raising funds alive a company decides to go for
debenture as the final choice. The people who will be purchasing the
debentures would be assured a definite return after a definite period of
time. The company’s credibility is good so they should not worry about the
A company issues equity shares but the expenses involved are quite a lot.
The organisation has to be aware about the printing charges, advertisement
related expenses, underwriter’s commission and brokerage asked by the
middle men.
3. ‘Dheeraj Plants’, a manufacturing company, thinks of starting a project in
South America. The company knows that the project will be a successful
venture in the years to come. It tries to figure out the revenue generated by
the project and the expenses which will be involved in it.
4. Suyash tries to evaluate two projects. The projects have equal level of risk.
According to this parameter he finds both projects at par. However, when it
comes to knowing the rate of return of the two projects he finds that
Project A will yield a rate of return of 10% and Project B will yield a rate of
return of 12%. So he decides to go ahead with the project B.
5. Shobhit wants to start a movie hall so he decides to evaluate the feasibility
of starting the project. He finds that at place A the movie hall will cost ?20
crore and at place B it will cost ?30 crore. He decides to go for the first
option—Project A.

Question 33.

‘Abhishek Ltd.’ is manufacturing cotton clothes. It has been consistently earning good
profits for many years. This year too, it has been able to generate ^ profits. There is
availability of enough cash in the company and good prospects for growth in the future.
It is a well managed organisation and believes in quality, equal employment
opportunities and good remuneration practices. It has many shareholders who prefer to
receive a regular income from their investments.
It has taken a loan of Rs.50 lakhs from I.C.I.C.I Bank and is bound by certain restrictions
on the payment of dividend according to the terms of the loan agreement.

The above discussion about the company leads to various factors which decide how
much of the profits should be retained and how much has to be distributed by the
company. Quoting the lines from the above discussion, identify and explain any four
such factors.

Question 34.

Raghav is trying to co-ordinate the functioning of various departments like sales and
production. He has been trying to do this with the help of a concept of financial
management. He quite often calls people of both departments and tells them to work
within means. He has even prescribed a budget for it. During the time, when he is doing
a lot of analysis he connects the decision of present with the outcomes of future. This
can especially he seen in two of the prominent decisions. One is the investment and the
other is the financing decision- so the interlinking of these two decisions is assumed by
him. When the year ends it is easy for him to take some strong decisions. This happens
because he is able to evaluate the performance of various departments in terms of
revenue generated and the expenses incurred. No business is risk proof. However, he
knows that at least business shocks which a business can suffer can be minimised thus
laying foundation for a better future. His involvement in the work is definitely
appreciable.

1. Which concept of financial management has been highlighted in the above

case?
2. Identify the types of this concept highlighted in the above case.

Question 35.

‘Yiyo Ltd.’ is a company manufacturing textile. It has a share capital of Rs.60 lakhs. The
earning per share in the previous year was Rs.0.50. For diversification, the company
requires additional capital of ?40 lakhs. The company raised funds by issuing 10%
debentures for the same. During the current year the company earned a profit of Rs.8
lakhs on capital employed. It paid tax @ 40%.

(a) State whether the shareholders gained or lost, in respect of earning per share on
diversification. Show your calculations clearly.
(b) Also, state any three factors that favour the issue of debentures by the company as
part of its capital structure.

Question 36.

‘Sarah Ltd.’ is a company manufacturing cotton yarn. It has been consistently earning
good profits for many years. This year too, it has been able to generate enough profits.
There is availability of enough cash in the company and good prospects for growth in
the future. It is a well managed organisation and believes in quality, equal employment
opportunities and good remuneration practices. It has many shareholders who prefer to
receive a regular income from their investments.It has taken loan of 40 lakhs from IDBI
and is bound by certain restrictions on the payment of dividend according to the terms
of loan agreement.

The above discussion about the company leads to various factors which decide how
much of the profits should be retained and how much has to be distributed by the
company. Quoting the lines from the above discussion identify and explain any four
such factors.

Question 37.

Somnath Ltd. is engaged in the business of export of garments. In the past, the
performance of the company had been upto the expectations. In line with the latest
technology, the company decided to upgrade its machinery. For this, the Finance
Manager, Dalmia estimated the amount of funds required and the timings. This will help
the company in linking the investment and financing decisions on a continuous basis.
Dalmia therefore, began with the preparation of a sales forecast for the next four years.
He also collected the relevant data about the profit estimates in the coming years. By
doing this, he wanted to be sure about the availability of funds from the internal sources
of the business. For the remaining funds he is trying to find out alternative sources from
outside.

Identify the financial concept discussed in the above para. Also state the objectives to
be achieved by the use of financial concept, so identified.
CHAPTER-