Commerce Question Bank – 30 Short Questions With Answers on “Business Management”

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

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1. What are the various aspects that should be taken into consideration while formulating policies?

While framing policies, following aspects should be taken into consideration:

1. The policies are formed to achieve organizational goals.

2. Policies should be framed by the participation of persons at various levels of management.

3. The policies should be based on the internal and external environment.

4. Various policies of an enterprise should conform to each other.

5. The policies should be properly communicated to each level of management.

6. The policies should always be in writing. This will ensure their proper and correct implementation.

2. What are the various types of policies?

Every enterprise has a number of policies. Some of these are:

1. Major Policies:

Major policies are those, which give a unified direction to an enterprise and imply a commitment of resources.

2. Supportive Policies:

Supportive policies are meant to help in implementation of major policies.

3. Minor Policies:

The policies, which do not influence main objectives of the enterprise, may be called minor policies.

4. Composite Policies:

To achieve one objective a number of policies may be used, these are composite policies.

3. Point out the differences between objectives and policies.

1. Objectives are the goals to be achieved Policies are the broad ways of achieving business objectives.

2. Objectives are the foundations of a business. A business without objectives is like a directionless passenger who does not know where to go. Policies provide only the means of reaching goals. These may be essential but not indispensable.

3. Objectives decide the purpose of an organization. These are the path setters for other actions. Policies are not of primary importance. These only provide guidelines for reaching the objectives.

4. Objectives are set at top level of management, policies are determined at all levels of management.

4. What are the limitations of policies?

Policies are the guidelines, which may help the managers in their day-to-day working. Policies do not provide ready-made s to every problem.

They suffer from the following limitations:

1. Policies do not offer universal solutions to all problems.

2. Policies do not instant solutions to problems.

3. Too many policies kill initiatives of managers.

4. Policies do not provide standard solutions to various problems.

5. How does policy dampen human initiatives?

Too many policies kill the initiative of managers. They become habituated to act according to policies and do not try to use their judgement. Policies also have little room for individual initiative.

6. How does procedure help in the achievement of business objectives?

A procedure is a series of related tasks that make up the chronological sequence and the established way of performing the work to be accomplished. Procedures give details of how things are to be done. No room is left for judgement. These should help in implementation of policies. Procedures also determine the policy of responsibility and accountability.

7. Point out the differences between procedures and policies in an organization.

A procedure is a guide to action whereas a policy is a guide to thinking. Policies are guidelines for taking decisions and procedures consist of various methods to accomplish each phase of work. Policies offer scope for interpretation in order to see that they fit in a particular situation whereas procedures are tailor-made and do not offer any scope for interpretation.

8. Define Budget.

A budget is the monetary or/and quantitative expression of business plans and policies to be pursued in the future period of time. According to Institute of Cost and Works Accountants, London, “A budget is a financial statement and/or quantitative statement prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective.

9. What are the characteristics of budget?

Following are the characteristics of budget:

1. A budget should be based on past figures. The possibilities in future should also be taken into account.

2. A budget should be flexible so that it is modified according to the requirements of the situation.

3. The persons at various levels should be involved in preparing a budget. This will help in getting willing co-operation of everybody while implementing budgets

4. A budget should be a specific statement. The quantities or monetary information should be clearly mentioned in a budget.

5. There should be an active involvement of top management while preparing a budget.

10. Why is budgeting essential in an organization?

Budgeting is essential for policy planning and control. The budgets are essential due to following reasons:

1. Budgets are required for formulating future policies.

2. Budgets act as a tool of control in the hands of management. Budgets fixed for various persons will be the criterion fixed for assessing performance.

3. They are needed for ensuring co-ordination among various departments or segments of an enterprise.

4. Budgets act as motivation for various employees. When targets for performance are fixed then persons will try to achieve them at the earliest.

11. (a) What are the main objectives of Budgetary Control? (b) What do you mean by performance budget?

(a) The main objectives of budgetary control are:

(i) To ensure planning for future by setting up various budgets. The requirements and ex­pected performance of the enterprise are anticipated.

(ii) To co-ordinate the activities of different departments.

(b) Performance budget is based on functions, activities and projects which focus attention on the accomplishment, the general and relative importance of the work to be done and the service to be rendered rather than upon the means of accomplishments.

12. (a) What is a budget manual?

(b) What do you mean by capital gearing?

(a) A budget manual is a document which spells out the duties and also the responsibilities of the various executives concerned with the budgets. It specifies the relation among various function­aries.

(b) ‘Capital Gearing’ is used to describe the relationship between equity share capital including resources and surpluses to preference share capital and other fixed interest-bearing loans.

13. How will you define “decision making”?

Decision-making is a solution selected after examining several alternatives chosen because the decider presses that the course of action he selects will be more than the others to further his goals and will be accompanied by the fewest possible objectionable consequences. It is the selection based on some criteria from two or more possible alternatives. Though there are many alternatives available for manager but he has to choose the best out of them.

14. What are the characteristics of decision-making?

Following are the characteristics of decision-making:

1. Decision-making is based on rational thinking.

2. It is a process of selecting the best from among alternatives available.

3. It involves the evaluation of various alternatives available.

4. Decision making is the end product because it is preceded by discussions and deliberations.

5. Decision-making is aimed to achieve organizational goals.

6. It also involves certain commitment. Management is committed to every decision it takes.

15. What are the various steps involved in the process of decision making?

Decision-making involves the following steps:

1. Defining the problem

2. Analysis of problem

3. Alternative courses of action

4. Evaluation of alternatives

5. Experience

6. Experimentation

7. Taking decision and following up.

16. What do you mean by business ethics?

Ethics refers to a system of moral principles, a sense of right and wrong and goodness and badness of actions and their motives and consequences. Business ethics refers to the application of ethics to business. To be more specific, business ethics is the study of good and evil, right and wrong and just unjust actions of businessmen.

17. Mention the important ethical principles that should be followed in an organization.

Important ethical principles that should be followed are:

(a) Do not deceive or cheat customers by selling substandard or defective products, by under- measurement or by any other means.

(b) Ensure sincerity and accuracy in advertising, labeling and packaging.

(c) Do not resort to hoarding, black marketing or profiteering.

(d) Do not destroy or distort competition.

(e) Do not tarnish the image of competitors by unfair practices.

(f) Make accurate business records available to all authorized persons.

(g) Ensure payment of fair wages to and fair treatment of employees

(i) Refrain from secret kickbacks or pay-offs to customers, suppliers, administrators, politicians, etc.

(j) Do not form cartel agreements, even informal, to control production, price, etc. to the common detriment.

18. What is an organization?

Organization is the structural framework of duties and responsibilities required of personnel in performing various functions with a view to achieve business goals through organization.

In the words of Allen, organization is an instrument for achieving organizational goals. In the words of Allen, organisation is an instrument for achieving organisational goals. The work of each and every person is defined and authority and responsibility is fixed for accomplishing the same.

In Wheeler’s view, organization is a process of fixing duties and responsibilities of persons in an enterprise so that organizational goals are achieved.

19. What is meant by static concept of organization?

Under static concept the term organization is used as a structure, an entity or a network of specified relationship. In this sense, organization is a group of people bound together in a formal relationship to achieve common objectives. It lays emphasis on position and not individuals.

20. Mention the features of a good organization structure.

Features of a good organization structure are:

1. Clear line of authority

2. Adequate delegation of authority

3. Less managerial levels

4. Proper span of control

5. Simple or flexible.

21. What do you mean by control in an organization?

The objective of every organization is to use scarce resources in the best possible way. Plans are framed to achieve better results. Control is the process of checking whether the plans are being adhered to or not, keeping a record of progress and then taking corrective measures if there is any deviation. Control is one of the managerial functions. These functions start with planning and end at controlling.

22. Mention the characteristics of control in an organisation

Characteristics of control are:

1. Managerial function

2. Forward looking

3. Continuous activity

4. Control is related to planning

5. Essence of control is action.

23. What are the steps that should be followed in controlling process?

Steps that should be followed in controlling are:

1. Setting of control standards

2. Measurement of performance

3. Comparing actual and standard performance

4. Taking corrective action.

24. Briefly explain the following terms: (a) Project (b) MBO (c) Tactical decision.

(a) A project is a type of plan which can be thought of in terms of planned actions integrated into a unity and designed to bring about stated objective

(b) MBO is a process whereby superiors and subordinates jointly identify the common objectives, set the results that should be achieved by the subordinates; assess the contribution of each individual, so as to make the best use of organisational resources.

(c) Tactical decision relates to day-to-day operation of the organisation and has to be taken very frequently. The decision is mostly repetitive; for example, purchase of raw materials, assigning duties to employees, etc.

25. (a) Give the main characteristics of classical organisation theory, (b) What do you mean by organisation chart?

(a) (i) Classical organisation theory is built on an accounting model, (ii) It maximises neatness and control, (iii) It puts special emphasis on the detection of errors and their correction after they have happened.

(b) Organisation chart is a vital tool for providing information about organisational relationships. It shows the major functions and their respective relationships, the channels of formal authority, and the relative authority of each manager who is in charge of each respective function.

26. (a) What do you mean by manpower planning? (b) Give two basic characteristics of leadership.

(a) It is the process – including forecasting, developing, implementing and controlling by which a firm ensures that it has the right number of people doing jobs for which they are economically most suitable.

(b) (i) Leadership is basically personal quality. This quality motivates the individuals to be with leaders, (ii) Leader, by exercising his leadership, tries to influence the behaviour of individuals around him to fulfil certain pre-determined objectives.

27. (a) What do you understand by self-actualisation needs? (b) List down the hygiene factors.

(a) Self-actualisation is the need to maximise one’s potential. This is related with the development of intrinsic capabilities which lead people to seek situations that can utilise their potential.

(b) (i) Company policy and administration (ii) technical supervision (iii) interpersonal relationship with subordinates (iv) salary (v) job security (vi) personal life (vii) working conditions (viii) status.