DEPARTMENT OF ELECTRONIC & COMMUNICATION ENGINEERING

CLASS: IV–ECE/VIII SEM

EC T82 –INDUSTRIAL MANAGEMENT AND ENGINEERING ECONOMICS
Two Marks – Question Bank

UNIT I
1. What you mean by economics?
Economics is the science that deals with the production and consumption of goods and
services and the distribution and rendering of these for human welfare. The following are the
economic goals;
 A high level of employment
 Price stability

 Efficiency

 An equitable distribution of income

 Growth

2. Write short notes on Flow of Economy.

The flow of goods, services, resources and money payments in a simple economy are
shown in below diagram. Households and business are the two major entities in a simple
economy. Business organizations use various economics resources like land, labour and capital
which will be used by them. Business organizations make payment of money to the households
for receiving various resources. The households in turn make payment of money to business
organization for receiving consumer goods and services.

3. List out the Factors influencing demand.

The shape of the demand curve is influenced by the following factors;

o Income of the people

o Prices of related goods
o Tastes of consumers
If the income level of the people increases significantly, then their purchasing power will
naturally improve. This would definitely shift the demand curve to the north east direction. A
converse situation will shift the demand curve to the south west direction.

4. List out the Factors influencing supply.

The shape of the supply curve is affected by the following factors:

1) Cost of the inputs 2) Technology 3) Weather 4) Prices of related goods

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5. Define the Concept Of Engineering Economics.

Science is a field of study where the basic principles of different physical systems are
formulated and tested. Engineering is the application of science. It establishes varied applications
systems based on different scientific principles. It is clear that price has a major role in deciding
the demand and supply of the product. Hence from the organizations point of view, efficient and
effective functioning of the organization would certainly help it to provide goods/services at a
lowe cost which in turn will enable it to fix a lower price for its goods or services.
6. Write the scope of engineering economics.

The issues that covered in this book are elementary economic analysis, interest
formulae, bases for comparing alternatives, present worth method, future worth method, annual
equivalent method, rate of return method, replacement analysis, depreciation, evaluation of
public alternatives, inflation adjusted investment decisions, make or buy decisions, inventory
control, project management, value engineering and linear programming.

7. What is cost and list out its types?

An amount that has to be paid or given up in order to get something. In business, cost is
usually a monetary valuation of (1) effort, (2) material, (3) resources, (4) time and utilities
consumed, (5) risks incurred, and (6) opportunity forgone in production and delivery of a good
or service. All expenses are costs, but not all costs (such as those incurred in acquisition of an
income-generating asset) are expenses.

The following are the types of costs

 Marginal cost
 Marginal revenue
 Sunk cost
 Opportunity cost

8.What are the Types of Efficiency?

(i)Technical Efficiency-It is the ratio of the output to input of a physical system. The physical
system may be a diesel engine, a machine working in a shop floor, furnance etc,
(ii)Economic efficiency-is also called productivity. There are several ways of improving
productivity.

 Increased output for the same input

 Decreased output for the same output

 By a proporionate increase in the output which is more than the proportionate increase in
the input

 By a proportionate decrease in the input which is more than the proportionate decrease in
the output

 Through simultaneous increase in the output with decrease in the input.

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9.Define Engineering economics

In the process of managing organizations, the managers at different levels should take
appropriate economic decisions which will help in minimizing investment, operating and
maintenance expenditures besides increasing the revenue, savings and other related gains of the
organization.Engineering economics deals with the methods that enable one to take economic
decisions towards minimizing costs and /or maximizing benefits to business organizations.

10. Define Marginal cost (April 2017)

Marginal cost of a product is the cost of producing an additional unit of that product. Let
the cost of producing 20 units of a product be Rs.10,000, and the cost of producing 21 units of
the same product be Rs. 10045. Then the marginal cost of producing the 21 units is Rs.45.

11.Define Marginal revenue

Marginal revenue of a product is the incremental revenue of selling an additional unit of

that product. Let the revenue of selling 20 units of a product be Rs.15,000 and the revenue
selling 21 units of the same product be Rs.15085. then, the marginal revenue of selling the 21st
unit is Rs. 85.

12. Define Sunk Cost

This is known as the past cost of an equipment/asset. Let us assume that an equipment has been
purchased for Rs 1,00,000 about three years back. If it is considered for replacement, then its
present value is not Rs. 100000. Instead, its present market value should be taken as the present
value of the equipment for further analysis. So, the purchase value of the equipment in the past is
known as its sunk cost. The sunk cost should not be considered for any analysis done from
nowonwards.

13. What do you know abouit the Break Even Analysis? (April 2017)

The break-even level or break-even point (BEP) represents the sales amount—in either
unit or revenue terms—that is required to cover total costs (both fixed and variable). Profit at
break-even is zero. Break-even is only possible if a firm‘s prices are higher than its variable costs
per unit. If so, then each unit of the product sold will generate some ―contribution‖ toward
covering fixed costs.
In economics & business, specifically cost accounting, the break-even point (BEP) is the point
at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken
even." A profit or a loss has not been made, although opportunity costs have been "paid," and
capital has received the risk-adjusted, expected return. In short, all costs that need to be paid are
paid by the firm but the profit is equal to 0.
Break even Quantity = Fixed Cost

Selling price/Unit-Variable cost

Break even Sales = Fixed Cost ×Selling price/Unit

Selling price/Unit-Variable cost

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14. What is the formula to calculate contribution of Sales and margin of safety?

Contribution = Sales –Variable Costs.

Margin of safety = Actual sales - Break even Sales.

15. What is the formula to calculate Profit/Volume ratio?

P/V Ratio = Contribution

Sales
16. What are the steps in process planning?

a) Analyze the part drawing to get an overall picture of what is required.

b) Make recommendations to or consult with product engineers on product design changes.
c) List the basic operations required to produce the part to the drawing or specifications.
d) Determine the most practical and economical method for each operation.
e) Devise the best way to combine the operations and put them in sequence.
f) Specify the gauging required for the process.

17. Write the meaning for opportunity cost?

A benefit, profit, or value of something that must be given up

to acquire or achieve something else. Since every resource (land, money, time, etc.) can be put to
alternative uses, every action, choice, or decision has an associated opportunity cost.
Opportunity costs are fundamental costs in economics, and are used in computing cost benefit
analysis of a project. Such costs, however, are not recorded in the account books but are
recognized in decision making by computing the cash outlays and their resulting profit or loss.
18. State the Law of Supply and demand.

The Law of supply and demand states that when there is a decrease in the price of a
product, the demand for the product increases and its supply decreases.

19. Define Market.

The term ―market is derived from the Latin word mercatus, meaning ―to trade‖. Briefly
speaking ―market‖ denotes the following: An actual or nominal place where forces of demand
and supply operate, and where buyers and sellers interact (directly or through intermediaries) to
trade goods, services, or contracts or instruments, for money or barter. A market is a medium that
allows buyers and sellers of a specific good or service to interact in order to facilitate an
exchange.
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20. Define marketing.

The management process through which goods and services move from concept to the
customer. It includes the coordination of four elements called the 4 P's of marketing:
(1) Identification, selection and development of a product,
(2) Determination of its price,
(3) Selection of a distribution channel to reach the customer's place, and
(4) Development and implementation of a promotional strategy.

For example, new Apple products are developed to include improved applications and systems,
are set at different prices depending on how much capability the customer desires, and are sold
in places where other Apple products are sold.

21. Define pricing.

Method adopted by a firm to set its selling price. It usually depends on the firm's average
costs, and on the customer's perceived value of the product in comparison to his or her perceived
value of the competing products. Different pricing methods place varying degree of emphasis
on selection, estimation, and evaluation of costs, comparative analysis, and market situation.

22. What is the meaning of Value?

The term ―value ― is used in different ways and consequently, has different meanings.
The designer equates the value with reliability; a purchase person with the price paid for the
item; a production person with what it costs to manfacture, and a sales person with what the
customer is willing to pay.

23. When To Apply Value of Analysis?

1. Company s products show decline in sales.

2. Company s prices are higher than those of its competitors.
3. Raw materials cost has grown disaproportionste to the volume of production
4. Rate of return on investment has a falling trend.
5. The cost of manfacture is rising disproportionate to the volume of production.
6. Rate of return on investment has a falling trend.
7. Inability of the firm to meet its delivery commitments.

24.What is the meaning of Function ?

Function is the purpose for which the product is made. Identification of the basic
functions and determination of the cost currently being spent on them are the two major
considerations of value analysis.Function identifies the characterics which make the product
/component/part/item/device to work or sell. ―work functions― lend performance value while
―sell functions― provide esteem value. Verb like
support―,―hold―,―transmit―,―prevent―,―protect―,―exhibits―,―control―,etc ., are used to describe
work functions, while ―attract―,―enhance―,―improve―,―create―,etc are used to describe ―sell
―functions.
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25. What do you know aboutAIMS in Value engineering?
The aims of value engineering are as follows

1. Simplity the product.

2. Use(new) cheaper and better materials.
3. Modify and improve product design.
4. Use efficent processes.
5. Reduce the product cost.
6. Increase the utility of the product cost.
7. Save money or increase the profits.
26. Write the formula for single-payment compound amount.
The formula to obtain the single-payment compound amount is
F = P(1 + i)n = P(F/P, i, n)
Where
27. Write the formula for single-payment Present worth Amount.
The formula to obtain the present worth is

P = F(P/F, i, n)

28. Write the formula for Equal-Payment Series Compound Amount. The formula to
obtain the Equal-Payment Series Compound Amount.
F =A(F/A, i, n)
A = equal amount deposited at the end of each interest period
n = No. of interest periods
i= rate of interest
F = single future amount

29. Write the formula for Equal-Payment Series Sinking Fund.

The formula to obtain the Equal-Payment Series Sinking Fund
A =F(A/F, i, n)
A = equal amount to be deposited at the end of each interest period
n = No. of interest periods
i= rate of interest
F = single future amount at the end of the nth period

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 30. Write the formula for Equal-Payment Series Present Worth Amount.
The formula to obtain the Equal-Payment Series Present worth Amount
P =A(P/A, i, n)
P = present worth
A = annual equivalent payment
i= interest rate
n = No. of interest periods

31. Write the formula for Equal-Payment Series Capital Recovery Amount.
The formula to obtain the Equal-Payment Series Capital Recovery Amount
A =P(A/P, i, n)

P = present worth (loan amount)

A = annual equivalent payment (recovery amount)
i= interest rate
n = No. of interest periods
32. Write the formula for Uniform Gradient Series Annual Equivalent Amount.
The formula to obtain the Uniform Gradient Series Annual Equivalent Amount
A = A1 + G (A/G, i, n)
The objective of this mode of investment is to find the annual equivalent amount of a series
with an amount A1 at the end of the first year and with an equal increment (G) at the end of each
of the following n – 1 year with an interest rate i compounded annually.
33. Write the meaning for make or buy decision.
In the process of carrying out business activities of an organization, a component/product
can be made within the organization or bought from a subcontractor. Each decision involves its
own costs. So, in a given situation, the organization should evaluate each of the above make or
buy alternatives and then select the alternative which results in the lowest cost.
This is an important decision since it affects the productivity of the organization. In the
long run, the make or buy decision is not static. The make option of a component/product may be
economical today; but after some time, it may turn out to be uneconomical to make the same.
Thus, the make or buy decision should be reviewed periodically, say, every 1 to 3 years. This is
mainly to cope with the changes in the level of competition and various other environmental
factors.

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34. Write the meaning of value analysis.
According to the Society of American Value Engineers (SAVE), ―Value Analysis
is the systematic application of recognized techniques which identify the function of a
product or service, establish a monetary value for the function and provide the
necessaryfunction reliably at the lowest overall cost‖.
35. Write the meaning for value engineering.
Value engineering is the application of exactly the same set of techniques to a
new product at the design stage, project concept or preliminary design when no hardware
exists to ensure that bad features are not added. Value engineering, therefore, is a
preventive process.
36. Define the types of functions.
Primary functions are the basic functions for which the product is specially
designed to achieve. Primary functions, therefore, are the most essential functions whose
non-performance would make the product worthless, e.g. a photo frame exhibits
photographs, a chair supports weight, a fluorescent tube gives light.
Secondary functions are those which, if not in-built, would not prevent the
device from performing its primary functions, e.g., arms of a chair provide support for
hands. Secondary functions are usually related to convenience. The product can still work
and fulfill its intended objective even if these functions are not in-built and yet they may
be necessary to sell the product.
Tertiary functions are usually related to esteem appearance. For example,
Sunmica top of a table gives esteem appearance for the table

37. Define variable cost. (April 2017)

Variable cost varies with the volume of production

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 UNIT II

1. What do you know about Present worth Method?

In this method of comparison, the cash flows of each alternative will be reduced to time zero by
assuming an interest rate i. Then, depending on the type of decision, the best alternative will be
selected by comparing the present worth amounts of the alternatives.

2. What do you know about future worth method?

In the future worth method of comparison of alternatives, the future worth of various alternatives
will be computed. Then, the alternative with the maximum future worth of net revenue or with
the minimum future worth of net cost will be selected as the best alternative for implementation.
3. What do you know abou tannual equivalent method of comparison?
In the annual equivalent method of comparison, first the annual equivalent cost or the revenue of
each alternative will be computed. Then the alternative with the maximum annual equivalent
revenue in the case of revenue-based comparison or with the minimum annual equivalent cost in
the case of cost based comparison will be selected as the best alternative.
4. What do you know about the rate of return method?
The rate of return of a cash flow pattern is the interest rate at which the present worth of
that cash flow pattern reduces to zero. In this method of comparison, the rate of return for each
alternative is computed. Then the alternative which has the highest rate of return is selected as
the best alternative.

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5. Draw the diagram for revenue-dominated cash flow diagram.

6. Draw the diagram for cost-dominated cash flow diagram. (April 2017)

7. Discuss about cost dominated cash flow diagram. (April 2017)

A generalized cost-dominated cash flow diagram to demonstrate the present worth method of
comparison is presented in Fig. 4.2.

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 In Fig. 4.2, P represents an initial investment, Cj the net cost of operation and
maintenance at the end of the jth year, and S the salvage value at the end of the nth year.

To compute the present worth amount of the above cash flow diagram for a
given interest rate i, we have the formula

PW(i) = P + C1[1/(1 +i)1] + C2[1/(1 +i)2] + ... +Cj[1/(1 +i) j]+

Cn[1/(1 + i)n] – S[1/(1 + i)n]

In the above formula, the expenditure is assigned a positive sign and the revenue a negative
sign. If we have some more alternatives which are to be compared with this alternative, then
the corresponding present worth amounts are to be computed and compared. Finally, the
alternative with the minimum present worth amount should be selected as the best alternative.

UNIT - III

1.What is the meaning for depreciation?

The recovery of money from the earnings of an equipment for its replacement purpose is
called depreciation fund since we make an assumption that the value of the equipment decreases
with the passage of time.Thus, the word 'depreciation' means decrease in value of any physical
asset with the passage of time.

2.List out the methods of depreciation.

 Straight line method of depreciation.

 Declining balace method of depreciation.
 Sum of the years-digit method of depreciation.
 Sinking –fund method of depreciation.
 Service output depreciation.

3. What is Straight line method of depreciation.

In this method of depreciation, a fixed sum is charged as the depreciation amount

throughout the lifetime of an asset such that the accumulated sum at the end of the life of the
asset is exactly equal to the purchase value of the asset. Here, we make an important assumption
that inflation is absent.

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Let
P = first cost of the asset,
F = salvage value of the asset,

n = life of the asset,

Bt= book value of the asset at the end of the period t,

Dt= depreciation amount for the period t.

The formulae for depreciation and book value are as follows:
Dt= (P – F)/n
Bt= Bt–1 – Dt= P – t _ [(P – F)/n]

4. What is declining balace method of depreciation?

In this method of depreciation, a constant percentage of the book value of the previous
period of the asset will be charged as the depreciation amount for the current period. This
approach is a more realistic approach, since the depreciation charge decreases with the life of the
asset which matches with the earning potential of the asset. The book value at the end of the life
of the asset may not be exactly equal to the salvage value of the asset. This is a major limitation
of this approach.
Let
P = first cost of the asset,
F = salvage value of the asset,
n = life of the asset,
Bt= book value of the asset at the end of the period t,
K = a fixed percentage, and
Dt= depreciation amount at the end of the period t.
The formulae for depreciation and book value are as follows:
Dt= K _ Bt-1
Bt= Bt–1 – Dt= Bt–1 – K _ Bt–1
= (1 – K) _ Bt–1
The formulae for depreciation and book value in terms of P are as follows:
Dt= K(1 – K)t–1 _ P
Bt= (1 – K)t_ P

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5. What is Sinking –fund method of depreciation?(April 2017)

In this method of depreciation, the book value decreases at increasing rates withrespect to
the life of the asset. Let
P = first cost of the asset,
F = salvage value of the asset,
n = life of the asset,
i= rate of return compounded annually,
A = the annual equivalent amount,
Bt= the book value of the asset at the end of the period t, and
Dt= the depreciation amount at the end of the period t.

The loss in value of the asset (P – F) is made available in the form of Cumulative depreciation
amount at the end of the life of the asset by setting upon equal depreciation amount (A) at the end
of each period during the life time of the asset.
A = (P – F) _ [A/F, i, n]
The fixed sum depreciated at the end of every time period earns an interest at the rate of i%
compounded annually, and hence the actual depreciation amount will be in the increasing
manner with respect to the time period. A generalized formula for Dtis
Dt= (P – F) _ (A/F, i, n) _ (F/P, i, t – 1)
The formula to calculate the book value at the end of period t is
Bt= P – (P – F) (A/F, i, n) (F/A, i, t)

6. What is Service output depreciation?

In some situations, it may not be realistic to compute depreciation based on time period.
In such cases, the depreciation is computed based on service rendered by an asset. Let
P = first cost of the asset
F = salvage value of the asset
X = maximum capacity of service of the asset during its lifetime
x = quantity of service rendered in a period.
Then, the depreciation is defined per unit of service rendered:
Depreciation/unit of service = (P – F)/X

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7. Write Shortly About Evaluation of Public alternatives.

The main objective of any public alternative is to provide goods/services to the public at
the minimum cost. In this process, one should see whether the benefits of the public activity are
at least equal to its costs. If yes, then the public activity can be undertaken for implementation.
Otherwise, it can be cancelled. This is nothing but taking a decision based on Benefit-Cost ratio
(BC) given by BC ratio =Equivalent benefits
Equivalent costs

8.What do you know about inflation?Explain with eg.

Inflation is the rate of increase in the prices of goods per period. So, it has a
compounding effect. Thus, prices that are inflated at a rate of 7% per year will increase 7% in the
first year, and for the next year the expected increase will be 7%of these new prices. The same is
true for succeeding years and hence the rate of inflation is compounded in the same manner that
an interest rate is compounded. If the average inflation over six years period is 7%, then the
prices at the beginning of the seventh year would be 150% that of the first year by assuming
100% for the prices at the beginning of the first year of the six-year period.
If economic decisions are taken without considering the effect of inflation into account,
most of them would become meaningless and as a result the organizations would end up with
unpredictable return. But there is always difficulty in determining the rate of inflation. The world
wide trend/wish is to curtail inflation. But due to various reasons, it is very difficult to have zero
inflation. For practical decision making, an average estimate may be assumed depending on the
period of the proposals under consideration. Hence, we need a procedure which will combine the
effects of inflation rate and interest rate to take realistic economic decision.

9. Write the procedure to adjust inflation. (April 2017)

A procedure to deal with this situation is summarized now.
1. Estimate all the costs/returns associated with an investment proposal in terms of today‘s
rupees.
2. Modify the costs/returns estimated in step 1 using an assumed inflation rate so that at each
future date they represent the costs/returns at that date in terms of the rupees that must be
expended/received at that time, respectively.
3. As per our requirement, calculate either the annual equivalent amount or future amount or
present amount of the cash flow resulting from step 2by considering the time value of money.

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10. Problems based on inflation.
11. Explain the Benefit- Cost ratio.
The main objective of any public alternative is to provide goods/services to the public at
the minimum cost. In this process, one should see whether the benefits of the public activity are
at least equal to its costs. If yes, then the public activity can be undertaken for implementation.
Otherwise, it can be cancelled. This is nothing but taking a decision based on Benefit-Cost ratio
(BC) given by
BC ratio = Equivalent benefits
Equivalent costs
The benefits may occur at different time periods of the public activity. For the purpose of
comparison, these are to be converted into a common time base (present worth or future worth or
annual equivalent). Similarly, the costs consist of initial investment and yearly operation and
maintenance cost. These are to be converted to a common time base as done in the equivalent
benefits. Now the ratio between the equivalent benefits and equivalent costs is known as the
“Benefit-Cost ratio”. If this ratio is at least one, the public activity is justified; otherwise, it is
not justified.

12. What do you know about Simple probabilistic model?

Electronic items like transistors, resistors, tube lights, bulbs, etc. could fail all of a
sudden, instead of gradual deterioration. The failure of the item may result in complete
breakdown of the system. The system may contain a collection of such items or just one item,
say a tube light. Therefore, we use some replacement policy for such items which would avoid
the possibility of a complete breakdown.
The following are the replacement policies which are applicable for this situation.
(i) Individual replacement policy. Under this policy, an item is replaced
immediately after its failure.
(ii) Group replacement policy. Under this policy, the following decision is made:
At what equal intervals are all the items to be replaced simultaneously with a provision to
replace the items individually which fail during a fixed group replacement period?

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 UNIT IV

1. Define management.
Manage = Man (human) +Age (experience)
―Management is what a manager does‖ - Allen Louis
―Management is the art of getting things done through others‖ –Mary Parker Follet.
―Management is to forecast, to plan, to organize, to command, to coordinate and to
control –Henry Fayol.

2. What is the schematic representation of management process?

INPUT PROCESS OUTPUT
5m Planning Achievement of goals
Men Organizing Profit/loss
Money staffing Performance of the firm
Machine Directing
Materials Controlling
Method

3. What are the levels of management?

The different levels of management may be classified into three categories. They are:

 Top level management -It consists of owners, board of Directors, Chairman,

Managing Director, and Chief Executive Officer.
 Middle level management-It consists of sales manager, financial manager,
production manager, personnel manager R&D manager and so on.
 Lower level management-It includes of foremen, supervisors, charge-hands,
and inspectors and so on.
4. Define scientific management.
According to Taylor, management is ‗the art of knowing exactly what you want men to o
and seeing that they o it in the best and cheapest way‘. Its main objective is
improving economic efficiency, especially labor productivity. It was one of the earliest
attempts to apply science to the engineering of processes and to management.
Its development began with Frederick Winslow Taylor in the 1880s and 1890s within
the manufacturing industries. It emphasizes rationalization and standardization of work
through division of labor, time and motion studies, work measurement, and rate wages.

5. Write the meaning for organization.

A social unit of people that is structured and managed to meet a need or to pursue
collective goals. All organizations have a management structure that
determines relationships between the different activities and the members, and subdivides
and assigns roles, responsibilities, and authority to carry out different tasks. Organizations
are open systems--they affect and are affected by their environment.

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6. What are the different types of organization structure?
 Line Organization
 Functional Organization
 Committee Organization
 Matrix Organization
7. What is committee organization structure?
a. Standing or Permanent committee
b. Temporary or Ad hoc Committee
c. Executive Committee
d. Advisory Committee
e. Formal Committee
f. Informal Committee

8. What is the difference between standing and adhoc committee?

Standing or Permanent committee
A temporary committee is never dissolved. Although there may be changes in
membership, the committee remains always. The Board of Directors of a company is an
example.
Temporary or Ad hoc Committee A temporary committee is one that is created for a
specific purpose. As soon as the purpose has been accomplished, the committee stands
dissolved.

9. What are partnership and the types of Partnership?

Two or more persons join together to form a company and to share the earned profit is
called partner. The individual owner may wish to associate with him more persons who
have either capital to invest, or possess special skill and knowledge to make the existing
business still more profitable.
Types:
 Legal partner
 Active partner
 Sleeping partner
 Profit sharing

10. What are the Techniques of Scientific Management?

 Work Study
 Scientific task planning
 Scientific selection, placement an training of workers
 Standardization and simplification
 Mental revolution
11. What is Espirit De Corps?
The work done in any organization as team work. Team spirit and co-operation
among the members of an organization are essential for its success. It is a sense of unity
and of common interests and responsibilities, as developed among a group of persons
closely associated in a task, cause, enterprise, etc.

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 12. Write the meaning for joint stock companies.
It is an association of individuals, called shareholders, who join together for profit and
agree to supply capital divided into shares that are transferable for carrying on a specific
business. This type of companies consists of more than twenty persons for carrying any
business other than the banking business. The managing body of a joint stock company is
the Board of Directors elected by the shareholders.
13. What are the different types of Industrial Ownership?
 Single ownership (Private Undertaking).
 Partnership.
 Joint Stock Companies.
 Cooperative organization.
 State and Central Government owned.

14. Define Scalar chain.

It is a chain of superiors ranging from the highest to the lowest level in the
organization. Every communication should follow the prescribed line of authority.
Sometimes to avoid delay, direct contact with each other may also take place and that
is called as Gang Plank.

15. What is controlling?

The basic management function of (1) establishing benchmarks or standards, (2)
comparing actual performance against them, and (3) taking corrective action, if required.
Control in management means setting standards, measuring actual performance and
taking corrective action.
16. What is staffing?
According to Koontz, O'Donnell and Heinz Weihrich,
―The management function of staffing is defined as filling position in the organization
structure through identifying workforce requirements, inventorying the people available,
recruitment, selection, placement, promotion, appraisal, compensation, and training of
needs.
17. Write advantages of single ownership. (April 2017)
 Easy formation
 Quick decision
 Secrecy can be maintained regarding profit, expenditure, methods of
manufacturing.
 Cost of management is very less.
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 18. List out the elements of management. (April 2017)
 Planning
 Organizing
 Staffing
 Directing
 Controlling

UNIT V

1. What do you mean by financial management?

Financial Management means planning, organizing, directing and controlling the
financial activities such as procurement and utilization of funds of the enterprise. It means
applying general management principles to financial resources of the enterprise.

2. List the objectives of financial management.

 To ensure regular and adequate supply of funds to the concern.
 To ensure adequate returns to the shareholders and will depend upon the earning
capacity, market price of the share, expectations of the shareholders.
 To plan a sound capital structure-there should be sound and fair composition of
capital so that a balance is maintained between debt and equity capital.
 To ensure optimum funds utilization
 To ensure safety on investment.

3. Define working capital.

Working capital refers to a firm‘s investment in short term assets-cash, short term
securities, accounts receivable and inventories. It is the minimum amount of investment in
raw materials, work in process inventory, finished goods, stores and spares and cash
balance which a firm is required to have an order to carry on a desirable level of business
activity.

4. Write the meaning of cost.

The term cost refers to the money expenses incurred in the production of a
commodity and amount that has to be paid or given up in order to get something.
In business, cost is usually a monetary valuation of (1) effort, (2) material, (3) resources,
(4) time and utilities consumed, (5) risks incurred, and (6) opportunity forgone
in production and delivery of a good or service. All expenses are costs, but not all costs
(such as those incurred in acquisition of an income-generating asset) are expenses.

5. Write the meaning for asset.

Assets means all the things and properties under the ownership of the business like
building, plant, furniture, machinery, stock, cash etc. Assets also include anything against
which money or service will be received like prepaid expenses. The assets are purchased
to increase the value of the business firm.
6. Define Liabilities.
Liabilities means our dues to others or anything against which we are to pay money or
render service, i.e. creditors, outstanding expenses, amount payable to the owner of the
business(capital).

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 7. List the sources of short term and long term finance.
Sources of Short-term Finance
1. Trade credit
2. Bank credit
– Loans and advances
– Cash credit
– Overdraft
– Discounting of bills
3. Customers‘ advances
4. Installment credit
5. Loans from bank.
Sources of Long term finance
1. Shares
2. Debentures
3. Public deposits
4. Loan from financial institutions.
8. What are the types of capital?
Permanent capital- Finance that is not expected to be repaid as long as the business
operates. Repaid over a period of 5 years or longer. Example: Land & buildings, factory &
machinery.
Medium capital- Finance to be repaid in more than one but less than 5 years. Example:
fixed assets, movable assets, mobile, furniture, motor vehicles.
Short Term capital- Repayment is less than one year. Example: current expenses, direct
and indirect production expenses, current assets, work in progress, stock.

9. Write the meaning for balance sheet.

A statement of the assets, liabilities, and capital of a business or other organization at a

particular point in time, detailing the balance of income and expenditure over the preceding
period. A balance sheet is a financial statement that summarizes a company's assets, liabilities
and shareholders' equity at a specific point in time. These three balance sheet segments give
investors an idea as to what the company owns and owes, as well as the amount invested by
shareholders.
The balance sheet adheres to the following formula:
Assets = Liabilities + Shareholders' Equity
10. Define trading account.
Trading Account is the first stage in the process of preparing final accounts. Trading
account shows the gross profit or gross loss during an accounting year. Its main components are
sales, services rendered in the credit side of such sales or services rendered in the debit side.

11. Define profit and loss account.

A profit and loss statement (P&L) is a financial statement that summarizes the revenues,
costs and expenses incurred during a specific period of time, usually a fiscal quarter or year.
These records provide information about a company's ability – or lack thereof – to generate
profit by increasing revenue, reducing costs, or both. The P&L statement is also referred to as
"statement of profit and loss", "income statement," "statement of operations," "statement of
financial results," and "income and expense statement."It is prepared to ascertain the net
profit or net loss made by the company during the accounting period.

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