A public company is generally suitable for __________ businesses.
A public company is suitable for large scale businesses as it can raise funds through the issue of shares and incur heavy expenses, expand business or diversify its operations.
Specialised Financial Institutions (SFI) were set up to provide funds to enterprises for investment in fixed assets and development of these enterprises. Hence, SFI's are also known as __________ banks.
Specialised Financial Institutions (SFI) were set up to provide funds to enterprises for investment in fixed assets and development of these enterprises. Hence, SFI's are also known as development banks.
Under SWOT analysis, _______ is a favourable condition in the organisation's environment which enables it to consolidate and strengthen its position.
Under SWOT analysis, opportunities refer to a favourable condition in the organisation's environment which enables it to consolidate and strengthen its position.
Private placement involves the issue of securities by a company to the _______________ and some selective individuals.
Private placement involves the issue of securities by a company to the institutional investors and some selective individuals.
_____________ defines the quantity that should be ordered when stock reaches re-order level.
Economic order quantity defines the quantity that should be ordered when stock reaches re-order level.
The type of franchising where the manufacturer grants store owner, authority to distribute goods manufactured under their brand name is _______________.
The type of franchising where the manufacturer grants store owner, authority to distribute goods manufactured under their brand name is product franchise business opportunity.
Under primary activities of the value chain, __________ include activities related to the procurement of raw material from suppliers for the production of final products.
Under primary activities of the value chain, inbound logistics include activities related to the procurement of raw material from suppliers for the production of final products.
Innovation involves finding a roadblock or a hurdle that poses conflict and forces to arrive at the solution is known as problem identification. (True/ False)
False, the process of finding a roadblock or a hurdle that poses conflict and forces to arrive at the solution is known as problem identification.
Financial planning helps management to estimate fund requirements, in terms of its quantum and timing and ensures the availability of enough funds at the right time. (True / False)
True, financial planning helps management to estimate fund requirements, in terms of its quantum and timing and ensures the availability of enough funds at the right time.
Securities and Exchange Board of India (SEBI) was established on 12th April, 1992 through the Companies Act, 1956. (True / false)
False, the Securities and Exchange Board of India (SEBI) was established on 12th April, 1992 through the SEBI Act, 1992.
Under ABC analysis, the 'A' category consists of 15-25% of the items that account for 10-20% of the total value of inventory. (True / False)
False, under ABC analysis, the 'B' category consists of 15-25% of the items that account for 10-20% of the total value of inventory.
WSK Ltd. launched its new product “TECHY Play station” in the market with features like Bluetooth, standby mode, share button, etc. Due to its brand name and new innovative features, the company set a high price for the product. The type of pricing method adopted by the company is cost-plus pricing. (True / False)
False, the type of pricing method adopted by the company is skimming pricing. Price skimming is a pricing strategy in which a marketer sets a relatively high initial price for a product or service that is introduced in the market initially.
Promotion strategy refers to an overall plan that aims to find an appropriate market for a product or service through the use of advertising and discounts used to promote the product or service. (True/ False)
True, promotion strategy refers to an overall plan that aims to find an appropriate market for a product or service through the use of advertising and discounts used to promote the product or service.
Which of the following is NOT a factor of price mix?
Perishability of product.
Many sources like e-mails, newsletters or websites and forums are used to spot new trends. Such a way of spotting trends is
read trends.
Joy works in a large scale company that produces dairy products. The company does not give good incentives to its employees, even though it earns huge revenues. It also charges high prices for its products as compared to other products. After working for 3 years and not getting any incentives, Joy along with some of the co-workers decided to quit and start their own firm so that the products are sold at reasonable price for people and every member is able to earn good economic values. The type of business organisation started by Joy and his co-workers is
cooperative society.
Subway uses small catchy phrase ‘Eat Fresh’, KFC uses ‘Finger Lickin Good’. These phrases are used to communicate the ideology of a company and are known as
tagline.
A company HG ltd. plans to raise money by the issue of securities to institutional investors. Such type of method of floatation is
private placement.
Explain the concept of unit price with the help of an example.
Unit price is the price at which a unit of product is sold.
Example: Suppose ABC ltd incurred the cost of `100 per shirt and sold it for `250 per shirt to the customers. Here, the unit price is `250 i.e. cost of 1 shirt sold. The unit price has to more than unit cost so as to earn profits.
Thus, unit price helps to determine the profit or loss for the company.
MTZ is a mobile manufacturing company. The company is famous for its stylish mobiles with the latest technology. Company plans to introduce a new product in the market which would be superior from all other mobiles and would have high cost as they know that the consumers would pay. Explain the type of pricing strategy used by MTZ.
The pricing strategy used by MTZ is skimming pricing.
Skimming pricing strategy is a method of setting high price for a new or unique product in the market. The consumers are willing to pay high price for such products so as to own the latest technology.
This strategy helps in maximisation of short term profits of the business and recover the costs incurred in research and development of such products.
Briefly explain about the institution setup for rehabilitating sick industrial units.
Industrial Investment Bank of India (IIBI) was setup for rehabilitating sick industrial units by IDBI in April 1947. It was formed by transforming the Industrial Reconstruction Bank of India (IRBI).
It provides term-loans for project finance, finance to companies (non-project asset-backed) for their working capital requirements, funds for equipment and investments in capital and money markets.
What happens during the last stage of venture capital financing?
During the last stage, venture capitalists are interested in the profitable exit from the business. Business goes public at this stage and have opportunities such as:
Trendz clothing spends over 40 lakhs every year on promotion of its brand. Briefly list the objectives of promoting the products.
Promotion of products involves following objectives:
Farhan is an entrepreneur who has his own IT firm and specifically provides services to the government enterprises. Define the two type of enterprises discusses above.
The two type of enterprises discussed are:
Private sector enterprises: these businesses are controlled and managed by private persons who aim to achieve profits like sole trader, partnership, HUF, etc.
Public sector enterprises: these businesses are controlled and managed by government bodies that aim towards welfare of society like statutory corporations, departmental undertakings, etc.
Since his college days Mark, loved the thrill of adventure sports. He was an avid reader that helped him to be updated about various new adventure sports taken up all around the world. He had recently read an article on increasing trend towards 'space tourism and adventurous holidays'. With his personal experiences and passion for adventure sports he decided to start a company called ‘PLAYO’. For the same purpose he also decided to collect statistics to see how much of these sports were accepted in our country. Identify the way in which he was able to spot the trend.
By reading the trends :
Information about latest trends can be collected from sources such as by reading the leading publications, various websites related, Industry publications, magazines, influential blogs, niche blogs that focus on specific aspects of their industry, etc.
Tech-tools like RSS feeds, e-mails, newsletters or websites and forums can be used to get the information required.
State the objective of a financial plan.
A financial plan should be able to define what the business plans to do and how it will meet its fund requirements along with maintaining it credibility to pay debts to creditors and dividends to its investors.
State any two characteristics of business.
Characteristics of business are:
1. Earning profits: every business involves risk taken by the entrepreneur so as to earn profits. Profits is essential for survival and growth of a business.
2. Economic activity: it refers to the activities related to production and manufacturing of goods so as to earn profits. These activities are performed to earn economic gains.
Piageo is a well known beverage company that started bottling some naturally healthy drinks. It is planning to expand externally without compromising on the unique taste of these drinks. Pureed Juices got exclusive rights to manufacture and sell a drink under the name Piageo. Pureed Juices had to use only the ingredients supplied by Piageo to produce, bottle and distribute that drink.
a. Explain the form of external expansion adopted by Piageo.
b. State any one characteristic of this form of expansion.
a. This is a Manufacturing franchise opportunity. These types of franchises provide an organization with the right to manufacture a product and sell it to the public, using the franchisor's name and trademark. This type of franchise is found most often in the food and beverage industry.
b. In this, Franchisee is conferred with exclusive rights to manufacture and sell a product, by using the franchisor’s name and trademark.
A bakery sells 50 packets of bread per day. The cost of making one packet of bread is `20 and the bread is sold at `35 per packet. Calculate the total gross profit earned by the bakery on selling the bread.
Total packets sold in one day: 50
Unit price of a packet: `35
Unit Cost of a packet: `20
Total cost of 50 packets: 50 x unit cost of a packet
= 50 x 20
=`1000
Total sale price of 50 packets: 50 x unit price of a packet = 50 x 35
= `1400
Gross profit= total selling price – total cost
= 1400 – 1000
= `400
Hence, the gross profit earned by the bakery is `400
BSE is one of the major stock exchange in India. Do you think BSE helps in development of society?
Yes, BSE helps in development of society as it performs the functions of a stock exchange which are important for society.
Why was ICICI established?
ICICI was established with following objectives:
Since 50 years, Mohan’s family has been involved in family business of making and selling sweets and food items. The business has a very good reputation as regard to its quality and taste of products. Mohan is also now member of his family business and works with father and grandfather so as maintain the reputation and continuity of their business. Explain any three merits of the type of business conducted by Mohan’s family.
Merits of a HUF are:
What do you understand by PESTEL analysis?
How does observation in the market place helps to spot trends?
Observation helps entrepreneurs to analyse and watch the changes in preferences and consumers.
Many business stores hire specialists that observe the behavior of consumers while buying the products so as to know what consumers actually desire.
It also helps to know what kind of products attract customers and how customers respond to the products being offered by a business.
Calculate ROE from following information:
Total capital: ` 20,00,000 |
Owner’s fund: ` 8,00,000 |
Borrowed money: ` 12,00,000 |
Interest p.a.: 10% |
Monthly sales revenue: ` 12,00,000 |
Cost of goods sold: ` 6,00,000 |
Monthly fixed costs: ` 4,00,000 |
Depreciation: ` 20,000 |
Tax rate: 20% |
Particulars | ` |
Sales revenue | 12,00,000 |
(-) cost of goods sold | 6,00,000 |
Gross margin | 6,00,000 |
(-) fixed costs | 4,00,000 |
(-) interest (10% of 12,00,000 for 1 month) | 10,000 |
(-) depreciation (24,000/12) | 2,000 |
Profit before tax | 1,88,000 |
(-) tax @ 20% | 37,600 |
Profit after tax | 1,50,400 |
Return on equity = (net profit/equity) x 100
= (1,50,400 / 8,00,000) X 100 = 18.8 %
A company should consider important guidelines before planning and advertising campaign. Explain.
Before planning an advertising campaign, a company should consider following rules and guidelines:
a. Aim: the objective that a company aims to achiev through an advertisement should be defined and clearly stated.
b. Target: the target market should be selected for whom the advertisement is being displayed whether it’s for women, men, children, youth or old.
c. Media: the most appropriate medium of communication like TV, radio, newspaper, internet etc. should be used which create a more influential impact on customers and attract them to but a product or service.
d. Competitors: the promotional strategy used by competitors should also be considered so as to defeat them and develop a better advertisement that diverts the attention of customers from its competitors towards the company.
State any four reasons that can cause a business to shut down.
A business can shut down due to following reasons:
a. Inadequate Cash Flows: Cash flow measures the ability of the firm to generate enough cash to meet its operational costs. Businesses fail as they are unable to analyse the probable cash flows required from time to time to meet the cost.
b. Lack of proper Business Planning: A business plan helps to know external and internal factors involved in starting a new venture and analyse the mission, cost structure, market, external influences etc., of a business. A poor business plan leads to failure of a business.
c. Unrealistic Goals: Goals of the business must be real, workable and attainable and should be set keepin in mind the risk as unattainable goals can lead to business failure.
d. Failure in maintaining the customer Base: Competition can lead to diminishing the customer base and if there is not much flexibility in operations to meet the changing demand of customers, it can cause a business to fail.
Through franchising, a franchisor is able to reap benefits and earn more profits. Explain.
Through franchising, a franchisor is able to enjoy following advantages:
1. External expansion
2. Cost advantages
Karin decided to buy a house for his family. He approached a real estate agent to help in find a nice house. After seeing many houses, Karin liked a house which and decided to buy. However, Karin negotiated the price to a bit low. After several considerations, the seller agreed to sell the house at a price agreed by Karin and his agent.
a. What type of negotiation was conducted between Karin and the seller?
b. State other forms of negotiations that takes place between different parties.
a. The negotiation between Karin and the seller was distributive negotiation.
It is a type of negotiation where one party wins and the other party loses or compromises. In this, one party negotiates by asking a lower price while the other party aims to sell at a higher price. Both the parties have their own interests.
b. Other type of negotiations are:
a. Integrative: in this, all the parties involved in a negotiation deal wins and benefit together. Both the parties cooperate and mutually decide what is good for both of them. it is also called a win-win situation.
b. Inductive: this involves negotiations about small things which then result in a final big deal. After discussing all the terms and conditions, a final deal is made between the parties.
c. Deductive: this involves use of strategy that is decided by both the parties and involves use of principles and regulations for finalizing a detail. The minute and small details of the deal are talked about after negotiating the deal.
d. Mixed: it involves use of both inductive and deductive method as it involves negotiating everything from small details to the overall main conditions of a negotiation. A deal is finalized when all the matters are considered and agreed upon.
What benefits are provided by a franchise if a firm or an entrepreneur decided to take a franchise business?
Following benefits are provided:
State the requirements for an effective value chain management.
Following are required for an effective value chain management:
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