1. (a) Right to seek redressal

 Explanation :

Right to seek redressal is highlighted here which says that the consumer has the right to get his complains heard against the concerned producer. Any issues arising out of any unfair trade practices or malpractice by the producer or seller has to be settled by the court concerned. The product has to be either repaired or taken back and replaced by the seller or producer.

2. (c) Rights issue

 Explanation :

The method of flotation being described in the above case is Rights issue. Right issue is an invitation to existing shareholders to purchase additional new shares in the company. This type of issue gives existing shareholders securities called rights.

3. (b) Cost of raw material

 Explanation :

The rise in the cost of raw material which is increased by 3% is more critical for the motor cycle manufacturing company. This is related to the critical point control concept of controlling. In this, giving more attention to the activities which is more important and critical whereas the noncritical activities are ignored.

4. (a) Economic environment

 Explanation :

Expansion of transportation and communication facilities is a component of the economic environment.

5. (a) It ensures efficient use of resources.

 Explanation :

The point of importance of controlling being highlighted in the above case is that it ensures efficient use of resources.

6. (a) Delegation

 Explanation :

The concept of management used here is delegation. This has reduced the burden of Viveka so that she can focus on priority assignments.

7. (a) Transfer

 Explanation :

Horizontal movement occurs when an employee moves across different departments or department locations within a company, usually on the similar position with comparable responsibilities.

8. (d) All of the above

 Explanation :

Financial markets work as on an intermediary between the savers and the investors and link the households which save funds and also allocate funds available for investment. So, all the given statements are correct.

9. (c) Strategy

 Explanation :

Strategy is a comprehensive action plan designed to achieve specific objectives in the event of difficulty. In the above case company decided to manufacture eco-friendly two wheelers at low prices, depicts their strategy to remain in the markets.

10. (a) Interest Coverage Ratio

 Explanation :

The interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation. This may be calculated as follows:

ICR = EBIT/ Interest

If the ratio is higher, lower is the company’s risk of failing to meet its interest payment obligations; hence debt may be issued or vice versa. But besides interest payment, related repayment obligations should also be considered.

11. (c) Equity shareholders

 Explanation :

The importance of “Trading on Equity” lies in the fact that if the company is earning more profit, it can use borrowed capital and preference share capital. By doing so, it can increase the income of equity shareholders. Trading on Equity oftenly referred as financial leverage.

12. (c) both (a) and (b)

 Explanation :

Ethical obligations of business include their moral values which they have to legally follow and it is essential for the welfare of the society. Consumer protection is a part of their ethical responsibility. So, we can say that consumer protection is ethical obligation of business.

13. (d) (i), (iii), (ii)

14. (a) positive

 Explanation :

It is true that when current assets exceed the current liabilities, then a positive net working capital arises.

15. (a) Managing Director

 Explanation :

The Employee Stock Option Plan (ESOP) is an employee benefit plan. It is issued by the company for its employees to encourage employee ownership in the company. The shares of the companies are given to the employees at discounted rates.

16. (c) Motivation is always positive. It can never be negative.

 Explanation :

Motivation can be positive and negative. Positive motivation includes incentive, rewards, bonuses and other benefits where as negative motivation involves punishment, for, use of force etc.

17. (d) human resource department

 Explanation :

In large firms, process of staffing is performed by human resource department. HR Department should have knowledge of employment lows, rules and policies, employes health and safety etc.

18. (d) both (a) and (b)

 Explanation :

The controlling is a pervasive function of the management as it is performed in all organisations (profit and non-profit) and at all managerial levels. It is that function of management  under which every manager at every level assures that the actual progress is in conformity with the plans.

19. (a) Dividend yield

 Explanation :

Features of bonds do not constitute dividend yield. It rather demand specified rate of interest.

20. (b) (i), (ii), (iii), (iv)

 Explanation :

The needs of an individual according to the Hierarchy theory given by Maslow are:

  • 1. Basic Physiological Needs
  • 2. Safety/ Security Needs
  • 3. Affiliation/ Belongingness Needs
  • 4. Esteem Needs
  • 5. Self- Actualization Needs.

21. An informal organisation permits the flow of communication in all the directions in Carhub Ltd. Another advantage of informal organisation is that it helps to fulfill the social needs of the members by giving them a sense of belongingness in the organisation and enhances their job satisfaction.

The two values that Carhub Ltd. wants to communicate to the society are:

  • 1. Trust
  • 2. Social Responsibility

22. Planning reduces creativity. Planning is done by the top management and the rest of the members just implements these plans. Therefore, middle management and other decision makers are neither allowed to deviate from plans nor are they permitted to act on their own. Thus, much of the initiative or creativity inherent in them also gets lost or reduced. Thus, planning in a way reduces creativity since people tend to think along the same lines as others. There is nothing new or innovative.

23. Internal sources of recruitment refers to the recruitment of employees who are already a part of the existing payroll of the organisation. The vacancy for the position can be informed to the employee through internal communication.

There are different types of internal hiring in the organisation and they are as follows:

  • 1. Promotion
  • 2. Transfer
  • 3. Employee referrals
  • 4. Former employees
  • OR

Under apprenticeship method, new employees work as trainees, under highly experienced supervisors or experts for a specific period of time. This method is used where higher level of skill is required to attain complete proficiency to perform a particular job. For example, electricians and plumbers are placed as apprentices or trainees for a certain period of time under their supervisors prior to managing jobs on their own.

24. The two objectives of Management are:

1. Profitability: Management must ensure that the enterprise earns sufficient profits to meet its various needs. The investors must be given a reasonable return on their money in the form of dividend, interest, etc. Profits can be earned when managers make best use of men, money, materials, machinery and other resources. They should ensure maximum output at minimum possible cost.

2. Prosperity and growth: Management should aim at continuously improving the performance of the organisation. It should create an environment in which people can give their best to the organisation. By providing right type of leadership management can secure prosperity and happiness for all.


Management is considered to be a discipline as any branch of knowledge that satisfies the following requirements is fit to qualify as a discipline:

  • 1. There must be scholars and thinkers who communicate relevant knowledge through research and publications.
  • 2. The knowledge should be formally imparted by education and training programmes. Since, management fulfills both the criteria, it is fit to be called a discipline.

25. There are various ways in which the objective of consumer protection can be achieved. Some of therm are:

  • 1. Self Regulation by Business: Socially responsible firms follow ethical standards and practices in dealing with their customers. Many firms have set up their customer service and grievance cells to redress the problems and grievances of their consumers.
  • 2. Business Associations: The associations of trade, commerce and business-like Federation of Indian Chambers of Commerce of India (FICCI) and Conference of Indian Industries (ClI) have laid down their code of conduct which lays down for their members the guidelines in their dealings with the customers.
  • 3. Consumer Awareness: A consumer, who is well informed about his rights and the reliefs, would be in a position to raise his voice against any unfair trade practices or exploitation.
  • 4. Consumer Organisations: Consumer organisations play an important role in educating consumers about their rights and protecting them. In addition, these organisations can force business firms to avoid malpractices and exploitation of consumers.


According to Consumer Protection Act, 2019, ‘Consumer’ means a person who:

1. Buys any goods for the consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys goods for consideration paid or promised or under any system of  deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or any commercial purpose.

2. Hires of avails of any services for a consideration which has been paid or promised or partly paid or promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of services for consideration paid or promised, or under any system of deferred payment, when such services are availed of with the approval of the first-mentioned person, but does not inculcate a person who avails of such service for any commercial purpose.

26. The differences between ‘Primary Market’ and ‘Secondary Market’ are as follows:

Basis of Difference Primary Market Secondary Market
1. Securities Traded Primary market deals solely in the sale and purchase of newly issued securities. Secondary market deals in the sale and purchase of already existing securities.
2. Securities Issued Securities are directly issued by the companies. Securities are transferred between the investors only. There is no involvement of a company here.
3. Price of Security The prices of securitiesare determined by the company and its management. The prices of securities are determined by the forces of demand and supply and other macro factor.
4. Geographical Area There is no fixed place for a primary market. That is, all institutions and companies constitute a primary market. Under a secondary market, trading takes place at specified locations and areas.
5. Purchase and Sale In this market, securities can only be purchased. In this market, securities can be purchased as well as sold.
6. Promotion of Capital Formation Capital formation is directly promoted as funds from savers to investors are directly channelised to their most productive uses. Capital formation is indirectly promoted as the liquidity of securities is augmented.


The differences between Capital market and Money market are as follows:

Basis of Difference Capital Market Money Market
1. Meaning The capital market refers to the market or the institutional facilities through which long-term funds are raised and invested. The money market refers to the market where trading in short-term securities of maturity periods varying from one day to a maximum of one year takes place.
2. Liquidity Capital market securities are liquid in nature as they are tradeable on stock exchanges, but they are less liquid in comparison to money market securities. The securities traded are highly liquid in nature. DFHI discounts money market securities and offers a ready market for them.
3. Safety Instruments are riskier both with respect to returns and principal repayment as issuing companies may fail to perform as per projection. Instruments are generally safe due to shorter duration of investment and financial soundness of the issuers.
4. Expected Return The expected return is higher due to the possibility of earning capital gains along with regular dividends or interest. The expected return is lower due to the shorter duration of the instruments.
5. Duration Securities traded are of medium term and long term wherein the maturity period is normally more than one year. Securities traded are of short term only wherein the maturity period can vary from one day to a maximum of one year.

27. The four factors which will help Pulkit, in taking the dividend decision are described below:

  • 1. Earnings: Since the dividends are paid out of current and past earnings, there is a direct relationship between the amount of earnings of the company and the rate at which it declares dividend. If the earnings of the company are high, it may declare a higher dividend or vice-versa
  • 2. Access to capital market: If the company enjoys an easy access to capital market because of its credit worthiness. It does not feel the need to depend entirely on retained earnings to meet its financial needs. Hence, it may declare higher dividend or vice-versa.
  • 3. Growth prospects: If the company has any forthcoming investment opportunities, it may like to retain profits to finance its expansion projects. This is because retained profits is considered to be the cheapest source of finance as it doesn’t involve any explicit costs. Hence, it may declare lower dividend or vice-versa.
  • 4. Preferences of the shareholders: The companies paying stable dividends are always preferred by small investors primarily if they want regular income in the form of ‘stable returns’ from their investments. Large shareholders may be willing to forgo their present dividend in pursuit of higher profits in future. Therefore, the preferences of the shareholders must be taken into consideration.

28. The facilitating functions of marketing are explained below:

  • 1. Marketing research: Marketing research is the systematic gathering, recording and analysing data about different aspects of marketing for making marketing decisions.
  • 2. Product planning and development: Product planning and development involves creating a product with features which will provide maximum satisfaction to customers of the target segment.
  • 3. Packaging: Packaging refers to designing and developing package for products. Packaging has become quite important tool for attracting customers as they have their first encounter with packaging of the product.
  • 4. Branding and labelling: Branding is the process of assigning brand to a product. Labelling has become quite important tool for attracting customers. It refers to designing and developing the label to be put.

29. (i) The elements of marketing mix being taken into consideration by Rupali are Product and Price.

(ii) The functions of marketing highlighted here are explained below:

  • 1. Gathering and analysing market information: The primary focus of marketing is to ‘find wants and fulfill them’. Therefore, it is absolutely essential for a company to study the needs and preferences of its target market in order to satisfy their needs and wants optimally.
  • 2. Product designing and evelopment: Every marketer strives to achieve his marketing objectives by creating offerings to satisfy a need or a want. Therefore, one of the core functions of marketing is to develop the product in the most effective and efficient way. Every marketer endeavours to add value to his product by introducing constant innovations in the product to enhance both its utility and attractiveness in the eyes of the potential buyers and gain a competitive edge.
  • 3. Pricing: Price is the monetary value paid in the consideration for purchase of a product or service by a buyer to its seller. The process of determining the price of a product or service is called pricing. It is a crucial decision for the marketers as consumers are very sensitive to the pricing. The factors affecting price determination are cost of product, the utility and demand, extent of competition in the market, government and legal regulations, pricing objectives and marketing methods used.

30. The following are the next two steps that Sahil should follow after selecting the heads:

1. Induction and placement: Once the selection is done Sahil should make the selected employees familiar with the working environment of the organisation In this regard, induction involves giving a brief overview about the workplace, introducing them to other employees and the managers and making them comfortable with the work environment. Placement refers to occupying the position by the employee for which he/she has been selected.

2. Training and development: Next step in the staffing process is training and development of the employee. Both the processes emphasise on improving the employee’s skill and competence. Training is a process of increasing the employee’s capabilities and skills required for performing the particular job. Development, on the other hand, focuses on the overall growth of the employee by enhancing his thinking and understanding capabilities. Thus, Sahil should provide training to
the workers to upgrade their knowledge and increase their efficiency and effectiveness along with providing them opportunities for growth and career development.

31. The major benefits of planning are given below:

  • 1. Planning provides direction: Planning sets clear goals which serve as the guide for actions to be taken. By stating in advance how work is to be done, planning provides direction.
  • 2. Planning reduces the risks of uncertainty: Planning enables managers to look ahead and anticipate changes. It shows the way to deal with changes and uncertain events. Changes can be anticipated and appropriate responses to them can be developed.
  • 3. Planning reduces overlapping and wasteful activities: Since planning ensures clarity in thought and action, work is carried on smoothly without interruptions. Useless and redundant activities are eliminated or minimised. It is easier to detect inefficiencies and to remove them. Confusion and misunderstanding are avoided.
  • 4. Planning promotes innovation: Planning helps in generating new ideas. Innovative ideas lead to growth and prosperity of business.
  • 5. Planning facilitates decision-making: Planning is helpful in making a choice from alternative courses of action. It involves predicting future conditions and setting targets. Therefore, it helps in taking rational decisions.
  • 6. Planning establishes standards for controlling: Planning provides the goals or standards against which actual performance is measured. By comparing actual performance with standards, managers can know whether there is need for any corrective action. Therefore, planning provides the basis of control.


Types of Planning:

On the basis of use and duration:

  • 1. Single use Plans: Single use plans are the ones that are formulated to deal with new or non-repetitive situations that may arise in an organisation from time-to-time. For exampleprogrammes, budgets and projects.
  • 2. Standing Plans: Standing plans refer to the another type of plans which once formulated may be used for a long period of time in similar or repetitive situations that may prevail in an organisation. For example—objectives, strategies, policies, methods, procedures and rules.

On the basis of what a plan seeks to achieve:

  • (a) Objectives are the end results of the activities that an organisation seeks to achieve through its existence.
  • (b) A strategy is a comprehensive plan for achieving the objectives of the organisation.
  • (c) Policy is a set of general guidelines that help in managerial decision making and action.
  • (d) Method refers to the prescribed ways or manner in which a task has to be performed considering the objective.
  • (e) Procedure refers to a series of specific steps to be performed in a chronological order to carry out the routine activities.
  • (f) Budget refers to a financial plan that is expressed in numerical terms.
  • (g) Rule is a specific statement relating to the general norms in terms of Do’s and Don’ts that guide the behaviour of people. It commands strict obedience and a penalty is likely to be imposed on its violation.

32. Yes, I agree. The following points of importance of management justify the given statement:

  • 1. Achievement of group objectives: Management creates coordination and team spirit in the group of individuals. Management also inspires the members of the groups to make their best contribution towards the achievement of the common objective. This common objective is set by the management itself.
  • 2. Optimum utilisation of resources: Management brings together men, money, material, machine in the right proportion to reduce cost and maximise production i.e., resources utilised optimally.
  • 3. Minimisation of cost: Management improves efficiency and reduces cost through better planning, sound organisation and effective control. By eliminating wastage and minimum cost, management helps an organisation to face cut-throat competition.
  • 4. Social development: Management increases the standard of living of the people by providing good quality products and services at minimum cost. It also helps in generating employment opportunities and adopting new technologies.
  • 5. Achievement of personal objectives: Each and every individual joins an organisation for pursuing their personal objectives. Some join for a good package of salary, some join for greater recognition, some just for survival. So, this depends upon individual to individual. Management plays an important role in identifying the personal objectives so as to integrate it with the organisational objectives to bring harmony in the organisation, as well as successful fulfilment of the personal objectives of the individuals.


No, management is not a full fledged profession like legal and medical profession because of the following reasons:

  • 1. Restricted entry: The entry to any profession is restricted through a prescribed qualification. But there is no restriction on anyone being appointed as a manager in any business enterprise.
  • 2. Professional association: Though AIMA, is an association for management graduates, it is not obligatory for managers to get registered with any professional body like the Medical Council or Bar Council of India, which regulates the professional conduct of doctors and lawyers respectively.
  • 3. Ethical code of conduct: Legal and medical professions are bound by a code of conduct, which guides the behaviour of its members. AIMA has devised a code of conduct for Indian managers but there is no statutory backing for this code.
  • 4. Service motive: The motive of legal and medical profession is to serve their client’s interests by rendering dedicated and committed service. The basic purpose of management is to help the organisation to achieve its goals by providing good quality products at reasonable prices. A manager is expected to adopt the service motive but the basic motive remains profit maximisation.

33. Comparison of formal and informal communication:

Formal Communication Informal Communication
(1) It follows the official chain of command. (i) It is based on personal relationships and does not follow a fixed pattern.
(2) It is slow as it has to follow the path laid down by the management. (ii) It is very fast as it’s not supposed to follow a particular path.
(3) It is rigid as deviations are not allowed. (iii) It is flexible as it moves freely.
(4) Formal communication is generally accurate. (iv) Informal message may not be authentic.
(5) Chances of wrong information are very few. (v) Chances of distortion of information are very high.
(6) In the case of formal communication, the status or position of the parties is very important. (vi) In case of informal communication, status or position of the parties has no relevance.
(7) It serves the needs of the organisation. (vii) It serves the social needs of the members and also of the organisation.

34. The principle of management which is being violated is Unity of command. There should be one and only one boss for every individual employee. Dual subordination should be avoided. Fayol felt that if this principle is violated, “authority is undermined, discipline is in jeopardy, order disturbed and stability threatened”.

The principle of management that Somveer feels to implement in the factory is Unity of direction. All the units of an organization should be moving towards the same objectives through coordinated and focused efforts. Each group of activities having the same objective must have one head and one plan.
This will lead to unity of action and coordination.

The difference between the principle of Unity of Command and Unity of Direction is given below:

S. No. Basis Unity of Command Unity of Direction
1. Meaning One subordinate should receive orders from and should be responsible to only one superior. Each group of activities having same objective must have one head and one plan.
2. Aim It prevents dual subordination. It prevents overlapping of activities.
3. Implications It affects an individual employee It affects the entire organisation.

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