1 What is financial management?

What are the decisions taken in the financial

management?
Ans. Financial management is the process of managing an organization’s financial
resources to achieve its goals. It involves making decisions about how to acquire,
allocate, and control financial resources.
The decisions to be made in financial management are-
 Investment decision is the process of allocating financial resources to different
types of assets, securities, etc. depending on the needs of the organization.
 Financing decision is the process of raising funds to finance the investments
made by the organization. It involves deciding the optimal mix of debt and
equity financing.
 Dividend decision is the process of deciding how much of the profits earned by
the organization should be distributed to shareholders as dividends and how
much should be retained for future investments.

2 What is a budget? What are the different types of budget?

Ans. A budget is a financial plan that outlines an organization’s expected income and
expenses over a specific period. It is a tool used to help organizations manage their
finances effectively.
Different types of budgets are-
 Incremental budgeting: This type of budget takes last year’s actual figures and
adds or subtracts a percentage to obtain the current year’s budget.
 Activity-based budgeting: This is a top-down type of budget that determines the
amount of inputs required to support the targets or outputs set by the company.
 Value proposition budgeting: In this type of budgeting, the budgeter considers
whether each item included in the budget creates value for customers, staff, or
other stakeholders.
 Zero-based budgeting: This type of budgeting starts from scratch each year and
requires managers to justify every expense in the budget.

3 What types of people are likely to be good entrepreneur?

Ans. The people having following characteristics are likely to be good interpreneurs-
 Passion: Entrepreneurs need to be passionate about their work in order to stay
motivated and overcome obstacles.
 Creativity: Entrepreneurs need to be creative in order to come up with
innovative ideas and solutions.
 Motivation: Entrepreneurs need to be self-motivated and driven in order to
succeed.
 Ability to network: Entrepreneurs need to be able to build relationships with
others in order to grow their business.
 Self-confidence: Entrepreneurs need to be confident in their abilities and
decisions in order to take risks and succeed.
 Optimism: Entrepreneurs need to be optimistic in order to maintain a positive
attitude and overcome setbacks.
4 How an enterprise is affected by the change in society?
Ans. Enterprises are affected by changes in society in various ways. For instance,
changes in consumer preferences and behavior can impact the demand for a
company’s products or services. Similarly, changes in technology can affect the way
companies operate and compete with each other. Changes in government policies
and regulations can also have a significant impact on businesses

5 What is the procedure for determining the amount of finance to lunch a new
enterprise?
Ans. Procedure for determining the amount of finance to lunch a new enterprise
are-
 Identify your expenses: The first step is to identify the expenses that you will
incur while starting your business
 Calculate your financial resources: Estimate how much starting capital you will
have and the amount of revenue you’ll be able to generate each month during
the start-up period. To calculate the latter, research your potential market and
industry averages to come up with realistic numbers.
 Create a financial projection: Once you’ve determined your initial and follow-on
expenses, you will need to estimate how much money you will have at your
disposal. A quick examination of your projections will show if you’ll have a
financial shortfall.

6 What is a demand supply gap? How does it affect the market scope?
Ans. A demand-supply gap is a situation where the demand for a product or service
exceeds the supply of that product or service. This can lead to a shortage of the
product or service in the market, which can cause prices to rise. On the other hand, if
the supply of a product or service exceeds the demand for it, this can lead to a
surplus, which can cause prices to fall.
In general, a demand-supply gap can create opportunities for new businesses to
enter the market and fill the gap. For example, if there is a shortage of a particular
type of food in the market, a new restaurant that specializes in that type of food
could be successful.

7 How do you determine the bankability of a PPR?

Ans. In order to determine the bankability of a PPR, several factors need to be
considered. Here are some of the most important ones:
 Market demand: The first factor to consider is the level of demand for the PPR
in the market. If there is a high level of demand, it is more likely that the PPR will
be successful.
 Technical feasibility: The PPR must be technically feasible and capable of being
implemented successfully.
 Financial viability: The PPR must be financially viable and capable of generating
sufficient cash flow to cover its costs and provide a return on investment.
 Risk assessment: The risks associated with the PPR must be assessed and
managed effectively.
 Legal and regulatory requirements: The PPR must comply with all relevant legal
and regulatory requirements.
8 How and why idea is the most important asset in entrepreneurship?
Ans. An idea is the foundation of any entrepreneurial venture. It is the starting point
for any business and is the most important asset for an entrepreneur 12. Here are
some reasons why:
 Differentiation: A unique idea can differentiate a business from its competitors
and help it stand out in the market .
 Innovation: An innovative idea can lead to the development of new products or
services that can revolutionize the market.
 Motivation: A good idea can motivate entrepreneurs to work hard and
overcome obstacles.
 Market demand: A good idea is one that meets a market need or demand.
 Attracting investors: A good idea can attract investors and help entrepreneurs
secure funding for their business.

9 Discuss the use of mind and money in organizing an enterprise.

Ans. In order to organize an enterprise successfully, entrepreneurs need to be able
to balance these two factors effectively. They need to have a clear vision for their
business and be able to communicate that vision to others. They also need to be able
to manage their finances effectively and make informed decisions about how to
allocate resources.

10 What is a preliminary expense?

Ans. Preliminary expenses are the costs incurred by an organization before the start
of business operations. These expenses are incurred during the formation of a
company and include costs such as legal fees, printing fees, stamp duty, and
professional fees. Preliminary expenses are a common example of fictitious assets
and are written off every year from the profits earned by the business. They are
shown on the asset side of a balance sheet and are preferably written off within the
same year (depending on amount & local accounting standards).

11 What personal factors influence the selection of a business opportunity?

Ans. The personal factors which influence the selection of a business opportunity
are-
 Skills and experience: Entrepreneurs often choose business opportunities that
align with their skills and experience.
 Passion: Entrepreneurs often choose business opportunities that they are
passionate about. This can help them stay motivated and overcome obstacles.
 Risk tolerance: Entrepreneurs often have different levels of risk tolerance. Some
entrepreneurs are willing to take on more risk in order to pursue a potentially
lucrative opportunity, while others prefer to minimize risk.
 Financial resources: Entrepreneurs often choose business opportunities that are
aligned with their financial resources.
 Market demand: Entrepreneurs often choose business opportunities that meet
a market need or demand. By identifying a gap in the market and developing a
product or service to fill that gap, entrepreneurs can create a successful business.
12 What are different appraisals?
Ans. There are several types of performance appraisals that organizations use to
evaluate their employees.
 Check-ins: These are informal meetings between employees and managers to
discuss progress towards company goals, overall performance since the last
check-in, and the employee’s aspirations.
 360 feedback: This involves getting broad feedback from an employee’s
coworkers. This can mean peer reviews, self-reviews, manager-reviews,
secondary manager reviews, or upward reviews.
 Behaviorally anchored rating scale (BARS): This is a performance appraisal
method that uses specific behavioral examples to evaluate employees.
 Self-appraisal: This is a method where employees evaluate their own
performance.

13 What is advertising? What is importance in marketing?

Ans. Advertising is a means of communication with the users of a product or
service. Advertisements are messages paid for by those who send them and are
intended to inform or influence people who receive them.
The importance of advertising in marketing is significant. Here are some reasons
why-
 Increases sales: Advertising’s main goal is to increase the number of people who
buy your product.
 Informs customers: Creating an advertisement is a simple way to inform
potential customers of your product and any advantages or features it may have.
 Helps introduce products: When your company introduces a new product or
service, you can create an ad to inform your customers about it.
 Brand awareness: Advertising can help build brand awareness and establish
your brand identity and values.

15 What are the different methods of forecasting market conditions?

Ans. Different methods of forcasting market conditions are-
 Qualitative forecasting: This method is based on expert opinions and subjective
judgments. It is often used when there is limited historical data available.
 Quantitative forecasting: This method is based on statistical analysis of
historical data. It is often used when there is a large amount of historical data
available.
 Time series analysis: This method involves analyzing historical data to identify
patterns and trends.
 Causal forecasting: This method involves identifying the cause-and-effect
relationships between different variables. It is often used to forecast the impact
of changes in one variable on another variable.
16 What is the importance of after sale service in marketing a
product meant for long use?
Ans. After-sale service is the support provided to customers after they have
purchased a product. It includes services such as installation, maintenance, repairs,
and customer support.
After-sale service is particularly important for products meant for long use
because it helps to ensure customer satisfaction and loyalty.
 Customer retention: Providing great after-sale service improves customer
retention and increases the likelihood of customers purchasing from you again.
 Word-of-mouth referrals: Satisfied customers are more likely to recommend
your product to others, which can help to increase sales.
 Brand image: Providing great after-sale service can help to build a positive brand
image and establish your brand identity and values.

17 Describe different methods of pricing?

Ans. Different methods of pricing are-
 Cost-plus pricing: This method involves calculating the total cost of producing a
product or service and adding a markup to determine the final price.
 Value-based pricing: This method involves setting the price of a product or
service based on the perceived value to the customer.
 Competitive pricing: This method involves setting the price of a product or
service based on the prices charged by competitors.
 Penetration pricing: This method involves setting a low price for a new product
or service in order to attract customers and gain market share.
 Dynamic pricing: This method involves setting the price of a product or service
based on real-time supply and demand.

18 What should be the objectives of a pricing policy?

Ans. The objectives of a pricing policy should be-
 Maximizing profits: One of the most common objectives of a pricing policy is to
maximize profits.
 Increasing market share: Another objective of a pricing policy is to increase
market share by offering lower prices than competitors.
 Achieving target return on investment: A pricing policy can be designed to
achieve a target return on investment.
 Maintaining price stability: A pricing policy can be designed to maintain price
stability and avoid price fluctuations.
 Meeting competition: A pricing policy can be designed to meet or beat the
prices of competitors.
 Building brand image: A pricing policy can be designed to build a positive brand
image and establish your brand identity and values.
19 How price of a commodity is determined?
Ans. The price of a commodity is determined by the interaction between demand for
and supply of it. The theory of demand and supply shows how consumer preferences
determine consumer demand for commodities, while business costs are the
foundation of the supply of commodities. If the demand for a commodity goes down
or the supply of a commodity goes up, the price of that commodity falls. Conversely,
if the demand for a commodity goes up or the supply of a commodity goes down,
the price of that commodity rises.

20 What is branding? What are its principles?

Ans. Branding is the process of creating a unique name, design, symbol, or image
that identifies and differentiates a product or service from other products or services
in the market. The principles of branding are as follows:
 Differentiation: A brand should be unique and different from its competitors.
 Consistency: A brand should be consistent across all marketing channels and
touchpoints.
 Simplicity: A brand should be simple and easy to understand .
 Relevance: A brand should be relevant to its target audience.
 Flexibility: A brand should be flexible enough to adapt to changing market
conditions and customer needs.

21 What is product policy? What are the elements of product

policy?
Ans. Product policy is concerned with defining the type, volume, and timing of
products a company offers for sale. It is a set of general rules established by the
management to make product decisions. The elements of product policy are as
follows:
 Product planning and development: This involves establishing the product in
line with market needs. It includes making out and supervising the search,
screening, development, and commercialization of new products, the
modification of existing lines, and the discontinuance of marginal or unprofitable
items.
 Product line: This involves determining the range of products that a company
offers. It includes deciding which products to offer, which products to
discontinue, and which new products to introduce.
 Product mix: This involves determining the variety of products that a company
offers. It includes deciding which product categories to offer and which products
to include in each category.
 Product branding: This involves creating a unique name, design, symbol, or
image that identifies and differentiates a product from other products in the
market.
 Product positioning: This involves creating a unique image and identity for a
product in the minds of customers. It includes identifying the key benefits of the
product and communicating them to customers.
 Product packaging: This involves designing the packaging for a product. It
includes deciding on the size, shape, color, and materials used for the packaging.
23 What is managerial dimension of a product policy?
Ans. The managerial dimension is one of the three dimensions of the product
concept. It covers the core specifications or physical attributes, related services,
brand, package, product life cycle, and product planning and development. Product
planning and development can assure normal rate of return on investment and
continuous growth of the enterprise.

24 What is convenience goods?

Ans. Convenience goods are consumer items that are widely available and
purchased frequently with minimal effort. These goods are often purchased through
habit or impulse because they are easily obtained by consumers and relatively
inexpensive. Examples of convenience goods include newspapers, candy, and
tobacco products. Convenience goods are different from specialty goods, such as
cars, which are more expensive and often carry a greater opportunity cost for the
consumer.

25 How revival packages for a sick unit may be prepared?

Ans. Here are some steps that can be taken to prepare a revival package for a sick
unit:
 Assess the situation: The first step is to assess the situation and determine the
root cause of the financial distress.
 Develop a plan: Once the root cause of the financial distress has been identified,
a plan can be developed to address the issues.
 Secure financing: Reviving a sick unit often requires significant financing. This
can involve securing loans from banks or other financial institutions, or
attracting investors to provide capital.
 Implement the plan: Once the plan has been developed and financing has been
secured, it is time to implement the plan.
 Monitor progress: It is important to monitor the progress of the revival package
to ensure that it is working as intended.

26 What are the different revival packages for a sick unit?

Ans. Different revival packages for a sick unit are-
 Debt restructuring: This involves restructuring the company’s debt in order to
make it more manageable.
 Infusion of external funds: This involves securing financing from banks or other
financial institutions to provide capital for the company.
 Government assistance: Governments may provide assistance to sick units in
the form of tax breaks, subsidies, or other financial incentives.
 Asset sale: This involves selling off assets that are no longer needed in order to
generate cash for the company.
 Joint venture: This involves forming a partnership with another company in
order to share resources and expertise.
27 What preventive measures can be taken to avoid industrial
sickness?
Ans. Some preventive measures that can be taken to avoid industrial sickness are-
 Effective management: Good management practices can help prevent industrial
sickness. This includes effective leadership, adequate planning, and efficient
operations.
 Financial planning: Proper financial planning can help prevent financial
distress. This includes maintaining sufficient working capital, managing debt
effectively, and securing loans.
 Technology upgrades: Adopting modern technology and upgrading existing
systems can improve efficiency and competitiveness.
 Employee training: Providing training and development opportunities for
employees can improve productivity and reduce inefficiencies.
 Market research: Conducting market research can help companies identify new
opportunities and stay ahead of competitors.
28 Describe the entrepreneurial causes of industrial sickness.
Ans. Some entrepreneurial causes of industrial sickness are-
 Mismanagement: Poor management decisions, lack of effective leadership, and
inadequate planning can lead to a company’s downfall.
 Financial issues: Insufficient working capital, poor financial planning, and
inability to secure loans or investments can lead to financial distress.
 Obsolete technology: Failure to adopt modern technology or upgrade existing
systems can reduce efficiency and competitiveness.
 Incompetence: Incompetence on the parts of entrepreneurs and unskilled
laborers to work with modern technology can lead to inefficiencies and reduced
productivity.
29 Describe some internal causes of industrial sickness.
Ans. Some internal causes of industrial sickness are-
 Mismanagement: Poor management decisions, lack of effective leadership, and
inadequate planning can lead to a company’s downfall.
 Financial issues: Insufficient working capital, poor financial planning, and
inability to secure loans or investments can lead to financial distress.
 Obsolete technology: Failure to adopt modern technology or upgrade existing
systems can reduce efficiency and competitiveness.
 Incompetence: Incompetence on the parts of entrepreneurs and unskilled
laborers to work with modern technology can lead to inefficiencies and reduced
productivity.
30 Describe some external causes of industrial sickness.
Ans. (1) Economic conditions: Economic downturns or recessions can lead to
reduced demand and increased competition, which can cause financial distress for
companies
 Technological changes: Rapid technological changes can make existing products
or services obsolete and reduce demand for them.
 Natural disasters: Natural disasters such as floods, earthquakes, and hurricanes
can damage facilities and disrupt supply chains, leading to financial distress.
 Labor issues: Labor strikes, shortages, or disputes can disrupt operations and
reduce productivity.