ANSWERS TO BUSINESS ADMINISTRATION

questions

Short questions

1) What is business?
The regular production or purchase and sale of goods undertaken with an
objective of earning profit and acquiring wealth through the satisfaction of
human wants.
2. What do you understand by entrepreneurship?
Entrepreneurship is the practice of starting a new business or reviving an
existing business, in order to capitalize on new found opportunities . It
involves being resourceful and finding ways to obtain the resources required
to achieve the set objectives.
3. Explain justice approach of business ethics?
The JUSTICE approach of business ethics stands for J for Justice, U for
Utilitarian, S for Spiritual Values, T for TV Rule, I for Influence, C for Core
Values, and E for Emergency. This approach teaches Favoritism gives
benefits to some people without a justifiable reason for singling them out;
discrimination imposes burdens on people who are no different from those
on whom burdens are not imposed. Both favoritism and di scrimination are
unjust and wrong.
4. What is meant by Equity shares?
An instrument that signifies an ownership position, or equity, in a
corporation, and represents a claim on its proportionate share in the
corporation's assets and profits.
5. What is single window scheme of Rajasthan Finance Corporation?
The single window scheme of Rajasthan Finance Corporation provides the
scheme especially for small borrowers to ensure adequate finance by
providing single window facility for availing of Term Loan for fixed assets
and working capital finance from one institution only.
6. What is meant by stocking exchange?
'Stock Exchange' can be defined as any body of individuals, whether
incorporated or not, constituted for the purpose of assisting, regulating or
controlling the business of buying, selling or dealing in securities . For
example NSE and BSE.
7. Define business combination?
Alliance of a company and one or more incorporated or unincorporated
businesses into a single accounting entity that then carries o n the activities of
separate entities.
8. State five disadvantages of economic liberalization?
The main disadvantages of economic liberalization are:
1. Income inequality
2. Brain drain
3. Adverse health effect on poor undeveloped countries
4. Financial interdependency
5. Adverse effect on ecosystem of the world due to indifference in the
economy among countries.
9. What is meant by industrial policy?
Industrial policy can be defined as the policy which can help the country to
maintain its economic growth , help in industrialization and better living
condition for the people along with the rise of GDP of the country.
Part 2 objective part (4 marks each)
10. What are the chief activities to be performed at the time of promotion of
an enterprise?
Marketing of an enterprise is considered to be the major activity during its
promotion. The promotional activities should be done in the following
manner as follows:
a. Advertising - Involves non-personal, mostly paid promotions often
using mass media outlets to deliver the marketers message.
b. Sales promotion- Involves the use of special short -term techniques,
often in the form of incentives, to encourage customers to respond or
undertake some activity.
c. Public relations- This type of promotion uses third-party sources, and
particularly the news media, to offer a favourable mention of the
marketers company or product .
d. Personal selling- This form of promotion involves personal contact between
company representatives and those who have a role in purchase decisio ns.

11. Business and environment affect each other. Explain
. A business an economic activity that results in transaction of units in
exchange of money always takes in an environment and how it affects the
environment by its activities are to be discussed. Business environment
encompasses all those factors that affect a company's operations, and includes
customers, competitors, stakeholders, suppliers, industry trends, regulations,
other government activities, social and economic factors and technological
developments. All these components of business environment can affect the
environment positively or negatively for exampl e a marketers product if
hazardous, then its effect on the ecosystem is hazardous manner or a business
product is working for the upliftment of the society then its favourable. In this
manner a business and environment affect each other.
12. What is the difference between primary and secondary market?
Primary market provides opportunity to issuers of securities; Government as
well as corporates, to raise resources to meet their requirements of investment
and/or discharge some obligation. They may issue t he securities at face value, or
at a discount/premium and these securities may take a variety of forms such as
equity, debt etc. They may issue the securities in domestic market and/or
international market. Whereas the Secondary market refers to a market where
securities are traded after being initially offered to the public in the primary
market and/or listed on the Stock Exchange. Majority of the trading is done in
the secondary market. Secondary market comprises of equity markets and the
debt markets. So these are the differences between the primary and secondary
market.
Or
In the primary market, securities are offered to public for subscription for the
purpose of raising capital or fund. Secondary market is an equity trading venue
in which already existing/pre-issued securities are traded among investors.
Secondary market could be either auction or dealer market. While stock
exchange is the part of an auction market, Over -the-Counter (OTC) is a part of
the dealer market.
13. What is the main objective of OTC exchange?
The phrase "over-the-counter" can be used to refer to stocks that trade via a
dealer network as opposed to on a centralized exchange. It also refers to debt
securities and other financial instruments such as derivatives, which are traded
through a dealer network. Instruments such as bonds do not trade on a formal
exchange and are, therefore, also considered OTC securities.
14. What are the main objectives of state assistance to industries?
The main objectives of state assistance to industries are:
(i) initiating steps for technological upgradation and modernisation of existing
units;
(ii) expanding the channels for marketing the prod ucts of the small scale sector
(iii) promotion of employment -oriented industries, especially in semi - urban
areas to create more employment opportunities and thereby checking migration
of population to urban areas.
DESCRIPTIVE PART II
1. Most of the ethical problems rise due to lack of individual dignity. Prove
and describe the main principles of business ethics.
One of the most important attributes for small business success , is the
distinguishing quality of practicing admirable business ethics. Business
ethics, practiced throughout the deepest layers of a company, become the
heart and soul of the company' s culture and can mean the difference between
success and failure."If you have integrity, nothing else matters. If you don't
have integrity, nothing else matters." This proves that business ethics
principles should be adhered and followed to provide digni ty to the entity as
well as the individuals working for that entity. These include provide
adequate wages according to the government laws, commitment for workers
health and safety, regard for labor policies , following transparent
compensation system and other policies for their benfit and also having due
regard and respect for labor unions. These will not only improve the dignity
of the workers working in that entity but also of the company . Moreover the
workers will help to improve the productivity of the company. Hence it
proves most of the ethical problems rise due to lack of individual dignity.
The main principles of business ethics are:
1. Be Trustful: Recognize customers want to do business with a company they
can trust; when trust is at the core of a company, it's easy to recognize. Trust
defined, is assured reliance on the character, ability, strength, and truth of a
business.
2. Keep An Open Mind: For continuous improvement of a company, the leader
of an organization must be open to new ideas. As k for opinions and feedback
from both customers and team members and your company will continue to
grow.
3. Meet Obligations: Regardless of the circumstances, do everything in your
power to gain the trust of past customer's and clients, particularly if something
has gone awry. Reclaim any lost business by honoring all commitments and
obligations.
4. Have Clear Documents: Re-evaluate all print materials including small
business advertising, brochures, and other business documents making sure they
are clear, precise and professional. Most important, make sure they do not
misrepresent or misinterpret.
5. Become Community Involved: Remain involved in community-related
issues and activities, thereby demonstrating that your business is a responsible
community contributor. In other words, stay involved.
6. Maintain Accounting Control: Take a hands-on approach to accounting and
record keeping, not only as a means of gaining a better feel for the progress of
your company, but as a resource for any "questionable " acti vities. Gaining
control of accounting and record keeping allows you to end any dubious
activities promptly.
7. Be Respectful: Treat others with the utmost of respect. Regardless of
differences, positions, titles, ages, or other types of distinctions, alway s treat
others with professional respect and courtesy.

2. Write an essay on district industrial centres.
The 'District Industries Centre' (DICs) programme was started by the
central government in 1978 with the objective of providing a focal point
for promoting small, tiny, cottage and village industries in a particular
area and to make available to them all necessary services and facilities at
one place. The finances for setting up DICs in a state are contributed
equally by the particular state government and the central government. To
facilitate the process of small enterprise development, DICs have been
entrusted with most of the administrative and financial powers. For
purpose of allotment of land, work sheds, raw materials etc., DICs
functions under the 'Directorate of Industries'. Each DIC is headed by a
General Manager who is assisted by four functional managers and three
project managers to look after the following activities :
Activities of District Industries Centre (DIC):
i. Economic Investigation
ii. Plant and Machinery
iii. Research, education and training
iv. Raw materials
v. Credit facilities
vi. Marketing assistance
vii. Cottage industries
3. Objectives of District Industries Centre (DIC):
The important objectives of DICs are as follow :
i. Accelerate the overall efforts for industrialisation of the district.
ii. Rural industrialisation and development of rural industries and
handicrafts.
iii. Attainment of economic equality in various regions of the district.
iv. Providing the benefit of the government schemes to the new
entrepreneurs.
v. Centralisation of procedures required to start a new industrial unit and
minimisation- of the efforts and time required to obtain various permissions,
licenses, registrations, subsidies etc.
4. Functions of District Industries Centre (DIC):
i. Acts as the focal point of the industrialisation of the district.
ii. Prepares the industrial profile of the district with respect to :
iii. Statistics and information about existing industrial units in the district
in the large, Medium, small as well as co-operative sectors.
iv. Opportunity guidance to entrepreneurs.
v. Compilation of information about local sources of raw materials and
their availability.
vi. Manpower assessment with respect to skilled, semi -skilled workers.
vii. Assessment of availability of infrastructure facilities like quality
testing, research and development, transport, prototype development,
warehouse etc.
viii. Organises entrepreneurship development training programs.
ix. Provides information about various government schemes, subsidies,
grants and assistance available from the other corporations set up for
promotion of industries.
x. Gives SSI registration.
xi. Prepares techno-economic feasibility report.
xii. Advices the entrepreneurs on investment s.
xiii. Acts as a link between the entrepreneurs and the lead bank of the
district.
xiv. Implements government sponsored schemes for educated
unemployed people like PMRY scheme, Jawahar Rojgar Yojana, etc.
xv. Helps entrepreneurs in obtaining licenses from the Electricity Board,
Water Supply Board, No Objection Certificates etc.
xvi. Assist the entrepreneur to procure imported machinery and raw
materials.
xvii. Organises marketing outlets in liaison with other government
agencies.
3. State main malpractices involved in stock exchange. Describe the role of
SEBI to protect the investors interest.
The main malpractices involved in stock exchange areas follows:
Failure to execute client orders- This situation could arise either as a result of
negligence on the part of the stock broker or investment bank, or as a result of
the nature of the instruction issued by the client. Failure to execute client orders
on time normally causes distress to the clientsince it could lead to financial loss
especially for a sale order when prices begin to fall or when the prices move
upwards in the case of a buy order.

Unauthorized transactions- This refers to a situation whereby the stockbroker
or investment banker executes a transaction in a clients account without the
authority of the client. This is a criminal act which impinges on the integrity of
the market if it is not checked. This is different from a situation where some
investors give discretionary power to the stockbroker over their accounts and
are thus enabling them to transact withoutnecessarily contacting them. This is
common with those investors who are not readily available when called upon
by the stockbroker for one reason or the other. Unauthori zed transaction is also
known as client front running.

Issuing of bounced cheques- This is an offence which can either be perpetrated
by the stockbroker/investment bank or the investor himself. Depending on the
relationship of the client and the stockbroker, a client may run his account with
a broker into debit. This is contrary to the provisions of the regulations which
require that a stockbroker should not execute a buy order for a client without
ensuring that there are adequate funds to cover the trans action.

Forgery- There are a number of documents that are used to transact business in
the capital markets which are liable to abuse by the participants in the industry.
The level of technological development in the capital markets industry will
determine the use of physical documents to facilitate transactions. These
documents include share certificates, transfer deeds, letters of indemnity, daily
transaction schedule, statements of accounts, order entry sheets, letters of
discretionary authority, and any other authorization document. Fraudsters
sometimes use these documents to perpetrate fraud. In the era of share
certificates there were instances where certificates were forged.

Shareholders complaint against listed company- Complaints against listed
companies which include; misleading, inaccurate, and/or insufficient disclosure
of information; failure to disclose material information in financial statements
or annual reports; actions or lack of actions detrimental to the interest of
shareholders; misconduct by the directors/ management/ share registrars of a
listed companies.


Churning- Among unscrupulous brokers, churning is one of the oldest tricks in
the books.The broker simply keeps buying and selling stocks to create hefty
commissionsfor himself.
The main duty of SEBI is to protect the investors in securities. The function of
SEBI in monitoring the stock exchange:
1. The business of Stock Exchange the regulated.

2. Prevents fraudulent and unfair trade practises in stock exchange.

3. Regulates the acquisition of shares and takeover of companies.

4. Undertakes the checking and inspection of stock exchanges.

5. Conducting enquires and inspection of stock exchange.

6. Protects the interest of the investors.


The various powers of stock exchange:
1. Power relating to insider trading.

2. Power relating to stock exchange and dealing in securities.

3. Power relating to violation of rules and regulation.

4. Power to regulate business of stock exchange and control it unfair trade.

5. Power under securities contract act.

5. Money spent on advertising is investment , it does not create the cost of
goods. Prove and explain the importance of advertising.
Advertising is communicating a sales message to potential customers. Advertising
is one segment of a well organized, continuous marketing plan. Effective
advertising is a cumulative process that maintains current customers, attracts new
customers and establishes a favorable position for the business with competitors.
Advertising will not cure slow business growth or low profits, nor will it create a
better business person or a well-organized business. Advertising offers specified
benefits to a specific or target audience. As part of a sound marketing plan,
advertising becomes an investment in the future of the business, instead of one
more expense. An effective advertisement is based on a careful analysis of the
situation before money is spent. Hence money spent on advertising is investment
and not an expense.
The importance of advertising can be classified into three heads:
1. The importance of advertising can be classified into three different heads:
2. Importance of Advertising to producers and Traders,
3. Importance of Advertising to customers,
4. Importance of Advertising to society,
Producers and Traders: Meeting competition: Advertising is an important
means for facing competition. By creating brand loyalty, it helps to maintain
sales and market share. It supplements personal selling and sales promotion.
The importance of Advertising lies in the fact that it creates preference for a
particular product opens doors for salesmen and reinforces point of purchase
display, thereby reducing the costs of creating and maintaining demand. Dealers
prefer to handle well advertised products.
Steady demand: Advertising creates regular demand by smoothening out
seasonal and other fluctuations. For instance, advertising is used to emphasize
hot and cold uses of coffee to maint ain regular sales both during summer and
winter. By suggesting new and more frequent uses of product, advertising helps
to maintain demand, throughout the year. Steady demand enables regular
production.
Higher sales volume: Advertising helps to increase demand, expand markets
and enhance sales of existing products. Through repeated advertising, a
producer can create new customers and enter new markets. It creates new wants
and increases sales. Advertising is an essential technique of mass selling.
Introduction of new product: Advertising is helpful in introducing new
products by creating awareness and gaining their acceptance. By informing
consumers about the new product, advertising stimulates their interest and
persuades them to buy it. Effective advertisi ng helps in overcoming consumers
resistance to new products.
Economies of scale: Advertising facilitates mass distribution of goods. It
reduces dependence on middlemen as dealers are more willing to stock and sell
well advertised goods. Direct distribution and rapid sales turnover help to
reduce costs of distribution. Mass distributi on and steady demand lead to large
scale and regular production. As a result, several economies of scale become
available and cost of production per unit is reduced. Investment in inventories
can be reduced.
Goodwill : Advertising helps in creating a good image of the firm and
reputation for its products. A favorable image increases the capacity of the firm
to survive competition and depression. It is through effective advertising that
Tatas, Birlas, etc., have become household names. It has rightly been ob served
that "doing business without advertising is like winking at a girl in the dark. We
know what we are doing but the targets do not know." By building goodwill
advertising enables business firms to obtain repeat orders.
Employee morale: By building reputation of the firm, advertising provides a
sense of security to employees and improves their morale. Salesmen feel happy
as their task becomes easier when the product and its producer are known to
customers. In a well reputed firm, executive have a feeli ng of pride and job
satisfaction which is necessary for better performance.
5. Globalisation is the necessity of the day. State the positive and negative
effects of globalisation.
Globalization refers to the increasing unification of the world's economic
order through reduction of such barriers to international trade as tariffs,
export fees, and import quotas. The goal is to increase material wealth,
goods, and services through an international division of labor by
efficiencies catalyzed by international relat ions, specialization and
competition. It describes the process by which regional economies,
societies, and cultures have become integrated through communication,
transportation, and trade.
The positive and negative effects of globalisation are as follows:
Positive Aspects of Globalization
y As more money is poured in to developing countries, there is a greater chance
for the people in those countries to economically succeed and increase their
standard of living.
y Global competition encourages creativity and in novation and keeps prices for
commodities/services in check.
y Developing countries are able to reap the benefits of current technology
without undergoing many of the growing pains associated with development
of these technologies.
y Governments are able to better work together towards common goals now
that there is an advantage in cooperation, an improved ability to interact and
coordinate, and a global awareness of issues.
y There is a greater access to foreign culture in the form of movies, music,
food, clothing, and more. In short, the world has more choices.
Negative Aspects of Globalization
y Outsourcing, while it provides jobs to a population in one country, takes
away those jobs from another country, leaving many without opportunities.
y Although different cultures from around the world are able to interact, they
begin to meld, and the contours and individuality of each begin to fade.
y There may be a greater chance of disease spreading worldwide, as well as
invasive species that could prove devastating in non -native ecosystems.
y There is little international regulation, an unfortunate fact that could have dire
consequences for the safety of people and the environment.
y Large Western-driven organizations such as the International Monetary Fund
and the World Bank make it easy for a developing country to obtain a loan.
However, a Western-focus is often applied to a non-Western situation,
resulting in failed progress.

6. Define participation in management? Describe the various methods of
participation.
Participation management can be defined as Type of management in
which employees at all levels are encouraged to contribute ideas towards
identifying and setting organizational -goals, problem solving, and other
decisions that may directly affect them. Also called consultative managment .
The different types of participative programs are:
1. Works committees: The Industrial Disputes Act of 1947 provides for
establishing works committees in every establishment employing
hundred or more workers. This legislation thus makes it compulsory for
the organisation to ensure employee participation. The work committees
consist of equal number of members of workers and employer. The main
function of the work committees is to promote measures for securing and
preserving amity and good relations between the employers and the
workers. Their task is to smooth away any friction that may occur
between the management and the workers.
Unions consider these committees as a threat to their existence as
employers prefer to talk to these committees rather than the union. There is
lack of interest among workers in works committees as they concentrate
only on minor issues and not major issues
2. Co-partnership: in this method employees are paid the share of profit in
the form of shares and not cash. Thus workers become shareholders in
the company in which they are employed. Being shareholders of the
company in which they are entitled to participate in management. They
also receive dividend on their shares. The problem with this method is
that employees are not interested in co-partnership and want their share
of profit in cash and refuse to accept shares of the company.

3. Employee Directors: under this method one or two representatives of the
worker are nominated on the board of directors of the company. They
enjoy the same privileges and have the same authority as other directors
have. The problem of this method of participation is that many worker
directors are ignorant about their role on the board and get in to conflic t
with other board members.

4. Joint Management Councils: under this system joint management
councils are constituted. These councils consist of equal number of
representatives of employer and workers. The councils discuss various
matters concerning the working of the company. The decision of these
councils is advisory in nature. The council generally discusses matters
relating to working conditions, prevention of accidents, indiscipline, and
training.

5. Suggestion schemes: as the name itself indicates suggest ion programs are
formal plans to invite individual employees to make suggestion for work
improvements. The suggestions are then sorted out as per their
applicability and cost -benefit ratio. Employees whose suggestions result
in cost saving for the organisation are given monetary rewards that are
proportionate to the companys savings.

PAPER -2
SHORT ANSWER QUESTIONS-
1. State the four main considerations that are considered while
selecting a business.
The four main considerations that are considered while selecting a
business are:
a. Ability to Raise Capital
b. Separation of Ownership & Management
c. Limited Liability Protection
d. Ease of Incorporation
2 . What is district industrial centre?
The District Industries Centre is functioning mainly with the aim of promoting,
facilitating and developing industrial growth in the territory. The district
industry centre major role is to promote industrialization and help small scale
and cottage industries.
3.Write the full form of RIICO?
The Rajasthan State Industrial Development & Industrial Corporation .
4. State two main objectives of RFC.
RFC main objectives are as follows:
a. Providing assistance for aquisation of fixed assets by small scale cottage
industries.
b. It is also providing financial assistance for establishments of hotels ,
restaurants , mall and multiplexes to promote tourism in rajasthan.
6. What is SEBI ?
The Security and Exchange Board of India ( SEBI) protects the interests of
investors in securities and promotes the development of the securities market
through appropriate regulation.
7. What do you mean by business ethics ?
Business ethics is the behavior that a business adheres to in its daily
dealings with the world. The ethics of a particular business can be
diverse. They apply not only to how the business interacts with the world
at large, but also to their one-on-one dealings with a single customer.
8. What is advertisement?
Advertising is a form of communication used to persuade an audience
(viewers, readers or listeners) to take some action with respect to
products, ideas, or services.
9. What do you mean by Globalisation of business?
Globalization of business refers to the increasing unification of the world's
economic order through reduction of such barriers to international trade as
tariffs, export fees, and import quotas. The goal is to increase material wealth,
goods, and services through an international division of labor .

9.What do you mean by economic liberalization?
Economic liberalization is a very broad term that usually refers to fewer
government regulations and restrictions in the economy in exchange for greater
participation of private entities.
10 .What is meant by industrial democracy?
Participation of employees' representatives from all or most levels of
an industrial organization in its decision making process. This is known
as industrial democracy.

DESCRIPTIVE PART I

1. Explain the utilities created by business.
The various forms of utility created by business are as follows:
1. Form - chemical composition of a certain commodity transforming it
to another commodity, thus a change in shape or structure is made.
2. Place - occurs when a good or service is more useful in one location or
another.
3. Time - occurs when a good or service is more useful at one time than
another.
4. Possession - change of ownership/ transfers from one person to another
person.
6. Service - created when we are rendering personal services or help.

2. State four distinctions between equity and preference shares.
The major differences are:

I. As far as dividend and refund of capital in case of winding up is
concerned it is the preference shareholders who get paid before
the equity shareholders.
II. In case of preference shares rate of dividend is fixed while equity
shareholders get dividend on the basis of performance of company,
sometimes when company make loss then they are not paid any
dividend.
III. While preference shares can be converted into equity shares after
some years, if the terms of issue provide so while equity share
cannot be converted.
IV. Equity shareholders have voting rights and also they have right to
participate in the management of the company which is not the
case as far as preference shareholders are concerned .

3. Distinguish between publicity and advertising
Advertising is content you pay for (radio, tv, newspaper, banner
advertising, etc). Publicity on the other hand, refers to free content
about you and your company that appears in the media. . Publicity
has more credibility than advertising to the mass. Publicity cannot
be controlled whereas advertising which is a paid form can be
controlled by the marketer.

4. State the bad implications of economic liberalisati on.
Repeat from first QP.
5. State the functions of Joint management Council .
y Settlement of Matters
y Unit level matters having bearing in/or on other branches or on
enterprise
y Development of skills ,safety measures
y Improvement of general condition of work
y Proper recognition and recognitions of suggestions from workers
y Preparation of working hours and holidays
y All matters like wages ,bonus are matters of collective bargaining
excluded from the scope of JMC.

Descriptive part II

1. Describe the various steps to be taken for the establishment of a business
organisation.
2. What do you mean by Entrepreneur? Explain the functions of an
industrial entrepreneur.
An entrepreneur searches for change, responds to it and exploits opportunities.
Innovation is a specific tool of an entrepreneur hence an effective entrepreneur
converts a source into a resource. It can be also explained as an individual who
introduces something new in the economy - a method of production not yet
tested by experience in the branch of manufacture concerned, a product with
which consumers are not yet familiar, a new source of raw material or of new
markets .
An entrepreneur frequently has to wear many hats. He has to perceive
opportunity, plan, organize resources, and oversee production, marketin g, and
liaison with officials. Most importantly he has to innovate and bear risk. The
main functions of an entrepreneur are as follows:
1. Innovation: Innovation is one of the most important functions of an
entrepreneur according to Schumpeter. An entrepre neur uses information,
knowledge and intuition to come up with new products, new methods of
reducing costs of a product, improvement in design or function of a product,
discovering new markets or new ways of organization of industry. Through
innovation, an entrepreneur converts a material into a resource or combines
existing resources into new and more productive configurations. It is the
creativity of an entrepreneur that results in invention [creation of new
knowledge] and innovation [application of knowl edge to create new products,
services or processes.]
Systematic innovation means monitoring the following for innovative
opportunity
i. The unexpected success or failure or any unexpected outside event,
(e.g. when the IT bubble burst the ITES sector start ed growing.)
ii. Innovation based on process need [e.g. plate based cameras, film based
cameras, digital cameras]
iii. Changes in industry and market structure [e.g. video cassette VCD,
DVD, Blue ray disc]
iv. Demographics changes (e.g. increasing number o f working women and
nuclear families in most metropolitan cities)
v. New knowledge (e.g. Pentium chip)
2. Risk and uncertainty bearing: According to Hozelist an entrepreneur
performs the function of risk and uncertainty bearing. Every decision
pertaining to development of new products, adapting new technologies,
opening up new markets involves risk. Decision-making in an environment of
uncertainty requires anticipation of risk. Profit is said to be the reward for
anticipating and taking such risks. However it is pertinent to mention that the
entrepreneur is not a gambler, he only takes calculated risks. An entrepreneur
develops the art of decision-making under conditions of uncertainty as a
matter of survival.
3. Organization building: An entrepreneur has to organize men, material and
other resources. He has to perform the functions of planning, co -ordination
and control. He has to use his leadership qualities to build a team, generate
resources and solve problems. With his organizational skills an entrepreneur
builds an enterprise from scratch, nurtures it and makes it grow. His vision
sows the seeds for a sound and vibrant organization and synergies are built in
the enterprise.
According to Kilby in a developing country even the imitator entrepreneurs are
very important and the entrepreneurial role encompasses the following:
i. Perception of market opportunities
ii. Gaining command over scarce resources
iii. Purchasing inputs
iv. Marketing the products
v. Dealing with bureaucrats
vi. Managing human relations within the firm
vii. Managing customer and supplier relations
viii. Managing finance
ix. Managing production
x. Acquiring and overseeing assembly of the factory
xi. Industrial engineering
xii. Upgrading process and product
xiii. Introducing new production techniques and products

3. What do you mean by stock exchange? What functions are performed by
the stock exchange ?
A stock exchange is an entity that provides services for stock
brokers and traders to trade stocks, bonds, and other securities. Stock
exchanges also provide facilities for issue and redemption of securities and
other financial instruments, and capital events including the payment of
income and dividends. Securities traded on a stock exchange
include shares issued by companies, unit trusts, derivatives, pooled
investment products and bonds.
To be able to trade a security on a certain stock exchange, it must be
listed there. Usually, there is a central location at least for record keeping,
but trade is increasingly less linked to such a physical place, as modern
markets are electronic networks, which gives them advantages of
increased speed and reduced cost of transactions. Trade on an exchange is
by members only.
The initial offering of stocks and bonds to investors is by definition done
in the primary market and subsequent trading is done in the secondary
market. A stock exchange is often the most important component of
a stock market. Supply and demand in stock markets is driven b y various
factors that, as in all free markets, affect the price of stocks.
Functions of stock exchange are as follows:
Raising capital for businesses
The Stock Exchange provide companies with the facility to raise capital for
expansion through selling shares to the investing public.
Mobilizing savings for investment
When people draw their savings and invest in shares (through a IPO or
the issuance of new company shares of an already listed company), it usually
leads to rational allocation of resources because funds, which could have been
consumed, or kept in idle deposits with banks, are mobilized and redirected to
help companies' management boards finance their organizations. This may
promote business activity with benefits for several economic sectors such
as agriculture, commerce and industry, resulting in stronger economic
growth and higher productivity levels of firms. Sometimes it is very difficult for
the stock investor to determine whether or not the allocation of those funds is in
good faith and will be able to generate long-term company growth, without
examination of a company's internal auditing.
Facilitating company growth
Companies view acquisitions as an opportunity to expand product lines,
increase distribution channels, hedge against volat ility, increase its market
share, or acquire other necessary business assets. A takeover bid or
a merger agreement through the stock market is one of the simplest and most
common ways for a company to grow by acquisition or fusion.
Profit sharing
Both casual and professional stock investors, as large as institutional
investors or as small as an ordinary middle class family,
through dividends and stock price increases that may result in capital gains,
share in the wealth of profitable businesses. Unprofitable and troubled
businesses may result in capital losses for shareholders.
Corporate governance
By having a wide and varied scope of owners, companies generally tend to
improve management standards and efficiency to satisfy the demands of these
shareholders, and the more stringent rules for public corporations imposed by
public stock exchanges and the government.
Creating investment opportunities for small investors
As opposed to other businesses that require huge capital outlay, investing in
shares is open to both the large and small stock investors because a person buys
the number of shares they can afford. Therefore the Stock Exchange provides
the opportunity for small investors to own shares of the same companies as
large investors.
Government capital-raising for development projects
Governments at various levels may decide to borrow money to finance
infrastructure projects such as sewage and water treatment works or housing
estates by selling another category of securities known as bonds. These bonds
can be raised through the Stock Exchange whereby members of the public buy
them, thus loaning money to the government. The issuance of such bonds can
obviate the need, in the short term, to directly tax citizens to finance
development.
Barometer of the economy
At the stock exchange, share prices rise and fall depending, largely,
on market forces. Share prices tend to rise or remain stable when companies and
the economy in general show signs of stability and growth. An economic
recession, depression, or financial crisis could eventually lead to a stock market
crash. Therefore the movement of share prices and in general of the stock
indexes can be an indicator of the general trend in the economy.
4. What do you understand by business combination. Discuss i ts merits and
demerits.
Business combination is the process under which two or more business
organizations or their net assets are brought under common control in a
single business entity. Generally, companies doing similar type of
business or involved in similar line of activities may go for business
combination to get the economies of large scale production and to
minimize the possibility of cut-throat competition. Business combination
result the growth. Other terms applied to business combination are
merger and acquisition. A 'merger' refers to a situation where two or more
than two companies of similar nature combine willingly while an
'acquisition' or 'take over' refers to the situation where a bigger company
takes over a smaller company. Business combi nation can take place either
through amalgamation or through absorption.
The merits and demerits of business combination are:
1. Competition between and among the companies will be eliminated.
2. Amount of capital can be increased by combining business.
3. Establishment and management cost can be reduced.
4. Benefits of large scale production can be secured.
5. Operating cost can be reduced by avoiding duplication.
6. Research and development facilities are increased.
7. Monopoly in the market can be achieved.
8. Bulk purchase of materials at reduced price is possible.
9. Stability of the price of goods is maintained.

Following are the disadvantages of business combination

1. Business combination brings monopoly in the market, which may
be harmful for the society.
2. The identity of the old company finishes.
3. Goodwill of the old companies decrease.
4. Management of the company becomes difficult.
5. Business combination may result in over -capitalization.

5. What do you mean by welfare state? Clearly explain the functions of the
welfare state.
A welfare state is a government that provides for the welfare, or the well-
being, of its citizens completely. Such a government is involved in
citizens lives at every level. It provides for physical, material, and social
needs rather than the people providing for their own. The purpose of
the welfare state is to create economic equality or to assure equitable
standards of living for all.
The welfare state provides education, housing, sustenance, healthcare,
pensions, unemployment insurance, sick leave or time off due to injury,
supplemental income in some cases, and equal wages through price and
wage controls. It also provides for public transportation, childcare, social
amenities such as public parks and libraries, as well as many other goods
and services. Some of these items are paid for via government insurance
programs while others are paid for by taxes .
Functions of welfare state are:
The welfare state stands for the welfare of, its citizens with welfare as its
primary objective, the welfare state make provisions for free medical service,
public health and hygine and preventive measures against epidemics. Secondly,
it takes care of old, invalid and sick people providing them financial assistance
in the form of allowance, pension, relief etc. The unemployed receive
unemployment from the state. In the third, place it if the duty of the welfare
state to provide opportunities for education to all its citizens and to make
education free and compulsory upto a certain stand ard.
Furthermore, the state should establish and maintain a target number of
institutions for general and technical education..
. The development activities which a welfare state must undertake include the
development of agriculture and industry, irrigation facilities, co-operative
farming, the management of basic industry, Railways, Road Transport, Post and
Telegraph, supply of electricity, gas water, the Civil Aviation, insurance and
other public utility services.
The stress on nationalization of industri es and enterprises is a recent
development especially in India. The Railways, Civil Aviation, Insurance and
fourteen major banks have already been nationalized in India. Under the
auspicious of the state a number of industries such as fertilizer, Iron and steel
plant etc. are established or expanded in India. While creating or expanding
industries labor welfare service to those citizen who are engaged in these
industries. One of the functions of the welfare state is to regulate the payment of
wages, compensation, duration, of work and conditions for the benefit of those
who work in different industries and public concerns.
Another important responsibility of the welfare state is to create conditions
congenial for an increase in production and equitable dist ribution of wealth
among people. This move is intended to reduce inequality and enhance the
general standard of living among them.
For economic security, the state takes upon itself the responsibility for
providing food, clothing and shelter to its citizen. The state achieves its primary
objective and welfare of people, by adopting economic planning and other
measures intended to provide the maximum happiness to the largest number of
people. It is said that in a welfare state, the individual has only to get himself
born the state will do the rest. The welfare state places equal emphasis on
individual and society. The best example of a welfare state is Great Britain .

6. Critically examine the present industri al policy of the government of
India?
Post 1990s have seen a sea of change in the Industrial Policy of India. The
overprotective Indian Market were opened to foreign
companies and investors. Thus Indian Industry registered an impressive
growth during the last decade and half. The number of industries in India have
increased manifold in the last fifteen years. Though the main occupation has
been agriculture for the bulk of the Indian population, it was realized that India
would become a prosperous and a modern state with industrialization. Therefore
different programs were formulated and initiated to build up an adequate
infrastructure for rapid industrialization and improve the industrial scenario in
India.
Industrial Policy revolves around the core parameters like -
y Industrial Licensing.
y Industrial Entrepreneurs Memorandum.
y Locational Policy.
y Policy Relating to Small Scale Undertakings.
y Environmental issues.
The Industrial Policy of India fueled rapid increase in the various sectors in all
verticals. But the striking factor was observed in the IT, Telecommunication
and Pharmaceutical Industry. The Indian software industry has grown at a
massive rate from a mere US $ 150 million in 1991 -92 to a staggering US $ 5.7
billion (including over $4 billion worth of software exports) in 1999-2000. No
other Indian industry has performed this well against the global competition.
The telecommunication industry also marked stupendous growth, so is the
pharmaceutical industry. The Industrial Policy of resurgent India has helped
Indian industry to grow in leaps and bounds.

The Government of India's liberalized Industrial Policy aims at rapid and
substantial economic growth, and integration with the global econom y in a
harmonized manner. The Industrial Policy reforms have reduced the industrial
licensing requirements, removed restrictions on investment and expansion, and
facilitated easy access to foreign technology and foreign direct
investment. According to the current policy FDI can come into India in two
ways. Firstly FDI up to100% is allowed under the automatic route in all
activities/sectors except a small list that require approval of the Government.
FDI in sectors/activities under automatic route does not require any prior
approval either by the Government or RBI. The investors are required to notify
the Regional office concerned of RBI within 30 days of receipt of inward
remittances and file the required documents with that office within 30 days of
issue of shares to foreign investors. All proposals for foreign investment
requiring Government approval are considered by the Foreign Investment
Promotion Board (FIPB). The FIPB also grants composite approvals involving
foreign investment/foreign technical collaboration. As this clarity is useful for
future investors, it has to be seen if these bodies are effective. The Initial
research revealed four major bodies that have been constituted and could
provide data pertaining to FDI. So in this way we have analysed the present
industrial policy of india.


PAPER III

Objective part I
1. Business is a game of risk.
Business involves lots of uncertainity like growth, efficient use of resources, demand
of product in the market with proportionate supply of raw materials , natural perils ,
satisfying the customer needs and capital. Last no certainty of profit. Hence business
a game of risk.

2. What do you mean by system?
A set of detailed methods, procedures, and routines established or
formulated to carry out a specific activity, perform a duty, or solve
a problem.
3. What is business ethics?(repeat)
4. State four function of an enterprenuer.
The functions are:
y An entrepreneur generates employment for others.
y An entrepreneur can make significant contributions to the development of
the country
y Entrepreneur has an opportunity for self -expression and the realisation of
ones dream by doing something new and different.
y An entrepreneur is an independent person and has enough scope for
innovation.
5. When was RIICO established?
Rajasthan State Industrial Development & Investment Corporation
Ltd was established in 1969.
6. What do you mean by working capital?
Working capital is the amount of money that a company has tied up in
funding its day to day operations. A company has to tie up money to
fund its stocks, credit sales and other current assets, but this is offset
by its ability to fund this from current liabilities such as purchases on
credit.
7. Whut ls sensex?
Sensex ls un lndex to meusure the heulth of the stock murket ln terms of
shure vulue whether lt hus gone down or up. If the Sensex goes up, it
means that the prices of the stocks of most of the major companies on the
BSE have gone up. If the Sensex goes down, this tells us that the stock
price of most of the major stocks on the BSE have gone down.
8. In which year was SEBI constituted and the name of its present
chairman.
SEBI was established in april 12, 1992 and the the Chairman of SEBI
is U.K. Sinha.
9. What is cartel?
A cartel is a formal (explicit) agreement among competing firms. It is
a formal organization of producers and manufacturers that agree to fix
prices, marketing, and production. Cartels usually occur in
an oligopolistic industry, where there is a small number of sellers and
usually involve homogeneous products.
10. What is meant by welfare state?
A social system whereby the state assumes primary responsibility for
the welfare of its citizens, as in matters of health care, education,
employment, and social security.