Commerce Question Bank – 27 Important Short Questions With Answers on “Business Management”

27 Important Short Questions with Answers on “Business Management” for Commerce Students:

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1. What do you mean by planning?

Planning is a process, which involves ‘thinking before doing.’ It is a decision in advance; what to do when to do, how to do and who will do a particular task. Planning helps in determining the course of action to be followed for achieving various organizational objectives. Planning focuses attention on setting up organizational objectives and suggests ways to achieve them.

2. Describe the steps of planning given by George B. Galloway

Planning embraces a series of steps:

(i) the determination of objectives to be sought;

(ii) research to understand the problem;

(iii) the discovery of alternative solutions;

(iv) policy making… choosing between alternatives;

(v) the detailed execution of the chosen alternative

3. Justify that the planning is intellectual in nature?

Planning is intellectual ii i nature; it is mental work. The facts relevant to the situation are related to the manager’s experience and knowledge. A planner must visualize the situation likely to develop in future. He should develop a future course of action to be taken for implementation plans.

4. Discuss whether planning and execution should be with the same person or should be performed by different persons.

There is a difference of opinion as to whether planning and execution should be with the same persons or should be performed by different persons. One view is that planning should be an independent function and the execution part should be exclusively in the purview of different persons.

This will bring specialization to these fields and will help in improving their performance. The other view is that both the functions should be undertaken by the same person. A planner will be able to execute his plans in a better way. This will help in coordination between planning and execution. A manager should plan as well as execute the things, as he perceives them.

5. How does planning lead to efficiency?

Planning involves the efficient utilization of various resources like capital, labour, machines, materials, etc. Every factor of production is put to efficient and economical use so that the output, i.e. results, is more than the efforts employed. Planning helps in controlling duplication of efforts, which also ensures economy.

6. What are the six P’s of planning?

The six P’s of planning are as follows:

1 Purpose,

2. Philosophy,

3. Promise,

4. Policies,

5. Plans,

6. Priorities.

7. What is the significance of planning in an organization?

Planning is the first step in management. The increasing complexities of business, technological changes, increasing marketing competition, changing consumer preferences have necessitated proper planning. Planning has a future outlook and it takes into account all possible future developments.

8. How is planning helpful in decision-making?

Planning is helpful in the process of decision-making. Since planning helps in specifying the actions to be taken for achieving organizational objectives, it serves as a basis for decision making for the future. The objectives, plans, policies, schedules, rules, etc. serve as guidelines for routine decision-making.

9. What are the fundamental principles of planning?

A number of fundamental principles have been devised ever the years for guiding managers to undertake planning. Some of these principles are:

1. Principle of Contribution to objectives.

2. Principles of Primacy of planning.

3. Principle of Planning Premises.

4. Principle of Alternatives.

5. Principle of Timing.

6. Principle of Flexibility.

7. Principle of Commitment.

8. Principle of Competitive Strategies.

10. Define business forecasting.

Business forecasting is the calculation of reasonable probabilities about the future, based on the analysis of all the latest relevant tested and logically sound statistical and econometric techniques, as interpreted, modified and applied in terms of an executive’s personal judgement and social knowledge of his own business and his own industry or trade.

11. Mention various steps of business forecasting.

The process of forecasting consists of the following steps:

1. Developing the Basis:

Forecasting has to be done by developing a basis through systematic investigation of economic situation, position of industry and products.

2. Estimating Business Operations:

On the basis of information collected through investigation, future business operations are estimated.

3. Regulating Forecasts:

The forecasts are compared with the actual results so as to determine any deviations and to take corrective action.

4. Reviewing the Forecasting Process:

Once the deviations in forecasting and actual performance are found then improvements can be made in the process of forecasting.

12. What are the various business forecasts important for every enterprise?

Forecasts are needed in all areas of a business but following forecasts are important for every enterprise:

1. General Business Forecasts

2. Sales forecast

3. Capital forecast.

13. What is sales forecasting? How does it influence general decision making in a business?

Sales forecast is linked to the general business forecasts. In view of the future business expectations the management forecasts its likely sales in a particular period. It is a sales potential of the business in future. This forecast will determine the volume of production, requirement for various inputs, number of persons required to carry out production, likely revenues to be released, the amount of funds needed to undertake such work, etc. So sales forecast influences various other forecasts.

14. What do you mean by capital forecasting?

This forecast is related to the company’s capital investment. Every business has to estimate its needs for fixed and working capital. In an existing business, capital forecasts are needed for taking up expansion and diversification plans. The amount required to achieve sales forecasts is also anticipated.

15. Describe the importance and limitations of business forecasting.

With the increase in scale of operations business risks are also multiplying. Business forecasting is becoming essential for anticipating future possibilities.

Forecasting helps business in the following ways:

1. Establishing a new business

2. Formulating plans

3. Estimating financial needs

4. Encourages co-operation.

Limitations of Business Forecasting:

Some people are of the view that forecasting is a wasteful exercise and it does not serve any business purpose. It is felt that forecasting is influenced by the attitude of the forecaster, and error in judgement is bound to occur. Forecasting should be done on the basis of past experiences and present conditions. It will certainly benefit the business if it is done systematically.

16. What are the characteristics of a good plan? Why should a plan be flexible in nature?

A good plan should have the following characteristics:

(a) Flexible

(b) Comprehensive

(c) Clear objective

(d) Proper understanding

(e) Economical.

A plan should be flexible to accommodate future uncertainties. The future cannot be accurately predicted and there is always a likelihood of new things coming up. A flexible plan will be one, which will smoothly adjust requirements of changing conditions.

17. In how many types can planning be classified?

Plans may be classified into several types. According to the nature of planning, some of the types are given as follows:

1. Long term, medium term and short term plans

2. Administrative and operative plans

3. Strategic and tactical planning

4. Standing and ad-hoc planning.

18. What are the advantages of planning?

Planning is one of the crucial functions of management. It is basic to all other functions of management. There will not be proper organization and direction without proper planning. It states the goals and means of achieving them.

Planning is important for the following reasons:

1. Attention on objectives

2. Better utilization of resources

3. Minimising uncertainties

4. Economy in operation

5. Better coordination

6. Encourages innovation and creativity

7. Management by exception possible

8. Facilitates control

9. Facilitates delegation.

19. How does planning lead to better co-ordination?

The objectives of the organization being common, all efforts are made to achieve these objectives by a concerted effort of all. The duplication in efforts is avoided. Planning leads to better co-ordination in the organization, which ultimately leads to better results.

20. How does planning encourage innovations and creativity in an organization?

It helps create innovative and creative thinking among managers because they will think of many new things while planning. It is a process which provides awareness of individual participation and encourages an atmosphere of frankness which helps in achieving better results

21. What are the limitations of planning?

Despite many advantages of planning, there may be some obstacles and limitations in this process. Planning is not a panacea for all the ills of the business. Planning only helps in minimizing uncertainties to a certain extent.

The following are some of the limitations of planning:

1. It is expensive

2. Lack of reliable data

3. Time consuming process

4. External factors may reduce utility

5. Sudden emergencies

6. Resistance to change.

22. Briefly explain the planning process.

Planning process involves the setting up of business objectives and allocation of resources for achieving them. It is a combination of information handling and decision making systems based on information inputs, outputs and a feedback loop.

Following steps are taken in planning process:

1. Recognizing need for action

2. Gathering necessary information

3. Laying down objectives

4. Determining planning premises

5. Examining alternative course of action

6. Evaluation of action patterns

7. Determining secondary plans

8. Implementation of plans.

23. What is the significance of objectives in planning?

Objectives are pre-requisite for planning. No planning is possible without setting up of objectives. Objectives are not only helpful in planning but also in other managerial functions like organizing, directing and controlling. Clear-cut objectives help in proper decision-making and in achieving better results.

24. What are the main characteristics of the business objectives?

Business objectives are the standards of performance expected to be achieved. These are the aims, the attainment of which gives an idea about the efficiency or inefficiency of various departments or cost centres. Following are the main characteristics of objectives:

1. All are inter-related

2. Multiple in nature

3. Hierarchical pattern

4. Realistic and operational

5. Time oriented.

25. Briefly describe the classification of planning objectives.

The objectives are classified into basic, outstanding major or derivative, etc. The basic objectives are essential for the present. The outstanding objectives will need more efforts than normal for their attainment. The major objectives will relate to the organizations while derivative objectives are concerned with departments, sections or individuals. The ultimate aim is to achieve organizational objectives and all other objectives will mingle into main objectives.

26. What do understand by the term ‘policy’?

Policies are guides to thinking in decision-making. They assume that when decisions are made, these will fall within certain boundaries. Policies do not require action, but are intended to guide managers in their decision commitments when they do make decisions.

Policy is verbal, written or implied overall guide setting up boundaries that supply the general limits and direction in which managerial action will take place. Policies provide a framework within which a person has freedom to act.

27. What are the purposes of policy formation in an organization?

Policies are regarded as important for realizing the objectives of the organization. They also ensure co­ordination of efforts and activities in the enterprise.

The policies are formulated for the following purposes:

1. To ensure that there is no deviation from the planned course of action.

2. Policies serve the purpose of delegating adequate authority downwards.

3. Policies allow the scope for interpretation. The main aspects are given in a policy but the actual mode of implementation is decided by the concerned person.

4. Policies are helpful for future planning also.

5. Policies also ensure consistency of action. The guidelines are similar for everybody and actions must conform to the board outlines.