TyroCity: Business Studies Notes

Meaning and Importance of Decision Making

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

Meaning of decision-making
Decision-making is a process of selecting the best among the different alternatives. It is the act of making a choice. There are so many alternatives found in the organization and departments. Decision-making is defined as the selection of choice of one best alternative. Before making decisions all alternatives should be evaluated from which advantages and disadvantages are known. It helps to make the best decisions. It is also one of the important functions of management. Without other management functions such as planning, Organizing, directing, controlling, staffing can’t be conducted because in this managerial function decision is very important. According to Stephen P. Robbins, “decision-making is defines as the selection of a preferred course of action from two or more alternatives.”

Importance of decision-making
1. Implementation of managerial function: Without decision-making different managerial function such as planning, organizing, directing, controlling, staffing can’t be conducted. In other words, when an employee does, s/he does the work through decision-making function. Therefore, we can say that decision is important element to implement the managerial function.

2. Pervasiveness of decision-making: the decision is made in all managerial activities and in all functions of the organization. It must be taken by all staff. Without decision-making any kinds of function is not possible. So it is pervasive.

3. Evaluation of managerial performance: Decisions can evaluate managerial performance. When decision is correct it is understood that the manager is qualified, able and efficient. When the decision is wrong, it is understood that the manager is disqualified. So decision-making evaluate the managerial performance.

4. Helpful in planning and policies: Any policy or plan is established through decision making. Without decision making, no plans and policies are performed. In the process of making plans, appropriate decisions must be made from so many alternatives. Therefore, decision making is an important process which is helpful in planning.

5. Selecting the best alternatives: Decision making is the process of selecting the best alternatives. It is necessary in every organization because there are many alternatives. So decision makers evaluate various advantages and disadvantages of every alternative and select the best alternative.

6. Successful; operation of business: Every individual, departments and organization make the decisions. In this competitive world; organization can exist when the correct and appropriate decisions are made. Therefore, correct decisions help in successful operation of business.

Difference between private company and public company

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Bases of difference	Private company	Public company
Number of members	It needs at least 1 member for its formation. The maximum number can be 50.	It needs at least 7 members for its formation. The maximum number is not limited.
Invitation for capital	It cannot invite the public to buy its shares	It is free to invite the public to buy its shares
Commencement of business	It can commence the business immediately after the incorporation	It can commence the business after receiving the certificate of commencement of business.
Issue of prospectus	It does not need to issue prospectus	It must issue prospectus
Statutory meeting	It does not need to hold statutory meeting and file statutory report.	It must hold statutory meeting and file statutory report
Transfer of shares	The transferability of share is not allowed and hence its ownership cannot be transferred	The transferability of share is allowed and hence its ownership can be transferred
Use of word	It must use the word Pvt. Ltd. at the end of its name.	It must use the word Ltd. at the end of its name

Concept of partnership firm and partners

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Partnership is a form of business organization which as evolved to overcome the shortcomings of sole proprietor. As the size of business expands, one person is unable to provide the necessary capital and managerial skills. Therefore, two or more than two persons form a partnership to carry on business by pooling their financial resources and managerial skills. Thus, partnership is an extension of sole trading concern.

Meaning of business letters

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

The letter which is drafted by a business organization is called business letter. Oral communication is not possible in everywhere. So, written communication is preferable for communication in business organization. Generally, it is written for making inquiry, giving reply, placing order, confirming an order, making complaint, adjusting complaint and collecting dues.

National Co-operative Development Board : Formations and Functions

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

National cooperative development board (NCDB)

It was established an enacted in kartik 21, 2049. It has been established for economical and social development of weaker section of the society according to the cooperative principles under the co-operative development board act, 2049. It is established under national cooperative development act, 2049. It is autonomous and corporate boy with perpetual existence. It has its own common seal. Board can purchase, sale or manage property. It is managed by an executive committee under the chairperson of the minister of agriculture and corporate.

Features

It is established under national cooperative development act, 2049.
It is autonomous and corporate boy with perpetual existence.
It has its own common seal.
Board can purchase, sale or manage property.
It is managed by an executive committee under the chairperson of the minister of agriculture and corporate.

Formation of NCDB

NCDB was established on kartik 21, 2049. Its main aim is to support economical and social development of weaker section of the society by formulating plan, policies and programs etc. The board is managed by an executive committee of 25 members. It consists of following member

Minister of agriculture → chairman
Person appointed by the mister of agriculture → joint chairman
Chairman, national cooperative → member.
Governor of Nepal Rastra Bank → member
Secretary ministry of finance → member
Secretary ministry of supply → member
Secretary ministry of industry → member
Secretary ministry of agriculture → member
Secretary ministry of local development → member
Representative from national planning commission → member
Registrar of cooperative department → member
Any two chairmen elected among chairman of central cooperative association→ members
Any 5 person nominated by government from among cooperative (1 from each development region) → members
One from female cooperative worker → member
Any two expert → members
General Manager of agricultural development bank → member
Person nominated by Nepal’s government → member secretary

Functions of NCDB:

To formulate plan and policies
Promotion for development of cooperative societies
Provide cooperation to government for policy formation
To prepare and implement the development plans and policies
To undertake research studies for the development of cooperatives
To invest in cooperative society
To provide necessary security if cooperative society demands for issuing debentures or obtaining loan from the bank and financial institution
To provide technical cooperative for the promotion and protection of cooperative society
To make agreement for joint investment with local and foreign investor

Types of filing : traditional and modern

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Types of filing system

1. Traditional system
It is old method of filing. It is used in small and medium scale organizations. There are 4 types of traditional filing. They are

A. Wire fling
It is also known as spike filing. It is the oldest filing method. In this method a piece of wire is fixed in wooden stand and that stand is kept on table or hanged somewhere. The letters and documents are inserted inside the spike. Whenever letters and documents are required for reference all subsequent letter are taken out. It used to be used in banks, retailer shop, hospitals etc.

Advantages of wire filing

It is very simple
It is the cheapest method.
It uses less space
It uses less time

Disadvantages of wire filing

Used only in small and medium scale organization
Limited number of documents can only be filed
The documents are not protected by fire, dust, water etc.
It is inconvenient
There is possibility of leakage.

B. Pigeon hole filing
This filing is also known as docket filing. A small cabinet is used for filing. The holes look like pigeonhole and each hole is given alphabet label. Letters and documents are kept into related holes. It is usually kept in post office. Here, the unnecessary files are destroyed.

Advantages of pigeonhole filing

It is simple and easy
It protects files from dust and water.
It is economical
It takes less time

Disadvantages of pigeonhole filing

It is only suitable for small organization
The cabinets are small
Only limited number of documents can be kept
It is difficult to keep old records

C. Cardboard filing
It is one of the popular traditional methods of filing. In this, a thick cardboard file and folding sheet are placed one upon another. The two ends are tied with each other with the help of rubber. The papers are kept in chronological order. It is used for few transactions. The files can be kept in cabinet for protection

Advantages of cardboard filing

It is simple and easy
It is economical
It helps in fast recording of documents
It requires less space

Disadvantages of cardboard filing

It is useful only for few records
It needs cabinet for protection
It is time-consuming
There is chance of loss of documents

D. Box filing
In this filing method, boxes are made up of wood or cardboard. The spring clips are fixed inside the box to hold papers. Whenever letters and documents are required for reference all subsequent letters are taken out. The documents are kept chronologically one upon another.

Advantages of box filing

It is simple and easy
It protects the documents from fire, dust, insects, water and so on.
It is cheap
It is convenient

Disadvantages of box filing

The spring becomes very loose because of constant use
Sometimes papers can’t be held properly
It is difficult to locate documents timely.

2. Modern filing system
Filing system is very simple. Traditional system of filing didn’t fulfill the requirement of the business. So it has been replaced with modern filing system. Modern filing system is the improvement of traditional method of filing. It can be classified into 2 types. They are

A. Horizontal filing
In this system, the documents or letters are chronologically placed in folders one upon another in a horizontal way. It is of two types. They are

Flat file
It is made up of cardboard or thick paper. Each flat file is attached with a pair of metal clips or laces on the left-hand side of it to tightly hold the papers. Pair of holes is made on the left-hand side of the paper using a punching machine. Then the papers are inserted into the clips or laces and the clips are locked or the laces are tied up to tightly hold the papers. The papers are chronologically placed one upon another in a flat position in a file.
Arch level file
It is made up of cardboard or thick plastic. The metal arches are made for holding papers or documents. Pair of holes is made on the left-hand side of the paper using a punching machine. Then the papers are inserted into the arches and the arches are locked to tightly hold the papers. The papers are chronologically placed one upon another in a flat position in a file in alphabetical order. In these papers can be taken out or inserted without disturbing other papers.

Advantages of horizontal filing

It is simple to understand and easy to operate
The papers are chronologically placed in alphabetical order which helps in easy location of documents
The documents are protected by fire, dust, water etc
It requires less space

Disadvantages of horizontal filing

The files are kept one over another, so they are difficult to locate.
It is time-consuming.
It is difficult to take papers out and insert them in.
It has less expansion and flexibility.

Vertical filing:
It is the most popular type of filing in modern offices. In this method, documents are kept on upright position in especially pre prepared folders or files. The folders or files are made up of cardboard or papers which are folded in the middle to hold the documents in them. Documents are placed in a chronological order without punching and typing them up in a pair of clips. It requires following tools and equipments.

1. Folders
They are made up of strong cardboard papers to hold the documents. The back of the folder is higher than the front part. They are placed in cabinet and their external part is visible.

2. Cabinet or drawer
It is necessary to keep the folders properly. Folders are kept vertically inside it. The size of drawer is dependent upon the number of papers to be kept in it. Generally 5000 papers are kept in one drawer.

3. Guide cards
The files are kept in a drawer of filing cabinet. A guide cared is placed between the folders to divide the drawer.

Advantages of vertical filing:

It is easy to file the documents
It is economical
It is flexible
It provides safety to the documents
It maintains the secrecy of the documents
Disadvantages of vertical filing
It is costly compared to horizontal filing
There is more chance of wearing and tearing of letters and documents
There are chances of mixing up of files.

Suspension filing:
It is an improved form of vertical filing. In this filing, drawer containing documents are fitted metal frames in which folders are fitted with hinges or hooks to suspend the file. Here, the headings or caption are found in the folder. It is the best method of filing. It contains all the merits of vertical filing method. In this filing when the drawer is opened all files names can be clearly seen. It contains folders and cabinet which is expensive. Therefore, it is its disadvantage.

Lateral filing
It is modified version of suspension filing; it is one of the most popular forms of filing system used in modern offices. In this filing system, envelope type of folders are used which is made up of metal strip. It uses hinges or hooks that can hold papers better than shelf. The top of the folder is fitted with an indicator. It is useful for larger organization. It uses less space and folders are also quickly located. It is less expensive and can also expand its space

Open shelf filing
In this stage, high shelf is used to keep folders. The files are laterally kept in open shelves in numerical order. In some cases, files are horizontally kept in the shelves. Guide cards can be used in between folders. The open shelves may be of any height. It may even touch the ceiling of 9-10 feet. It includes all merits of lateral filing. The main disadvantage is that it lacks secrecy and safety. It is not suitable for small offices.

Characteristics of Sole Trading Concern

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Some characteristics of sole trading concern:

1. Single ownership:
A sole proprietorship is wholly owned by one individual. The individual supplies the total capital from which his own wealth or from borrowed funds.

2. One man control:
The proprietor alone takes all the decisions pertaining to the business. He is not required to consult anybody. Ownership and management are vested in a person.

3. No legal entity:
A sole proprietorship has no legal entity separate from its owner. The law makes no distinction between the proprietor and the business. The assets and liabilities of the business and its proprietor are not different.

4. Unlimited liability:
Proprietor is liable for all the debts of the business. In case the assets are insufficient to meet the debts, the personal property of the proprietor can be attached.

5. No profit sharing:
The proprietor is all alone entitled for all the profits and the losses of the business. He bears the complete risk and there is nobody to share the risks, workload or any profit or losses.

6. Small size:
The scale of operation carried out by sole proprietor is generally small.

Components of direction

Business Studies XII — Sun, 18 Aug 2013 05:41:42 +0000

Aspects of direction
Direction is an integration of motivation, leadership, communication and coordination. It is an important function of management which is related to issue orders to staff.

1. Motivation: it is the process of inspiring and encouraging the people to do work. It is a skill of using the capability of manpower for the organization. It is a mental and physical presence of employee to do work. Effective motivation helps to raise the effective direction. Therefore, motivation is important aspect of direction.

2. Leadership: it is another important aspect of direction. It is defined as the process of influencing people to perform work effectively. In other words, it influences the behavior of employees or subordinate. According to time, situation and behavior of followers, a leader must conduct his followers. Therefore, it is an important aspect of direction.

3. Communication: communication means transferring information from one person to another. In other words when the information is transmitted from one person to another and information receiver easily take the information, it is known as communication. It includes sending message and receiving message. After sending message receiver receives the message and understands it. Therefore, message receiver responds and reacts about the message. In an organization manager must develop an effective communication system so that s/he may give instruction and guidance to the subordinates and motivate them to do the work to the best of their ability.

4. Coordination: it is also an important aspect of direction. When the coordination activity is not conducted effectively. Direction is not effective. Coordination is the process of linking activity of resources and various departments so that desired goal can be achieved easily. It is inter-related with all managerial function.

5. Supervision: it is another important aspect of direction. Direction is not only to issue order but also supervising job of subordinates. It is an important function of every manager. So the manager’s duty is to look after their work and examine that whether they have done according to the order issued or not and also help in solving their work problems.

Types of company

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Types of company on the basis of incorporation

Chartered company
A chartered company is established by the royal charter or a special sanction granted by the head of the state. East India company, Hudson’s bay are the examples of this type of company. This type of company is no more popular today.

Statutory company
A company created by the special act of the parliament is called statutory company. Its objectives, powers and activities are defined by the act. Nepal Rastra Bank, Agriculture Development Bank, Nepal Industrial Development Corporation are some examples.

Registered company
It is formed under company act of the country. The working of registered company is governed by the provision of the company act. Himal Cement Company, Gorkha Biscuits Pvt Ltd is some examples.

Types of company on the basis of liability

Unlimited company
It is a company in which the liability of the members is unlimited like that of partnership firm. If the assets of the company are not sufficient for satisfying the claims of the creditors, the shareholders are liable to pay more than the face or nominal value of shares held by them even form their personal property.

Company limited by shares
A company limited by shares is registered under the provisions of the Company act with a specific amount of share capital divided into a definite number of shares. The liability of shareholders is limited to the extent of face value of the shares they have paid for. This type of company is quite common these days.

Company limited by guarantee
The company, under which each shareholder promises to pay a specific sum as guarantee at the time of winding up of company, is called company limited by guarantee. Such guarantee is specified in the Memorandum of Association of the company. The amount of such guarantee may differ from member to member.

On the basis of ownership

Government companies
A government company is a company in which no less than 51 % of the paid up share capital is held by the government

Non government companies
A company which is not a government undertaking is called non government company. Generally, company owned, managed and controlled by the private sector come under this category.

Types of company on the basis of number of members

Private company
A private company is a company which, by its Memorandum Of Association, limits the number of its members not exceeding 50 and prohibits the sales of its shares to the general public. A private company must use the words ‘private limited (Pvt. Ltd.) in its name.

Privileges of private company

Established by single person
Does not need to publish prospectus at the time of issue of its shares
It can refuse transfer of shares from one member to another.
It is not necessary for such a company to obtain the certificate of commencement of business before starting its business activities
It is not necessary to held statutory meeting.

Public company

A public company is a company which, by its Memorandum of Association, limits the number of its members not to be at least 7 and to open the boundary of having the maximum number of shareholders to the fullest. It doesn’t prohibit the sales of its shares to the general public but rather it allows collecting major capital by offering shares to the public. The public company is governed by the authorized capital with which is registered. The shares are transferable. A public company must use the word ‘limited (Ltd.) in its name.

Privileges of public company

Established by at least 7 promoters
Needs to publish prospectus at the time of issue of its shares
It cannot refuse transfer of shares from one member to another.
It is necessary for such a company to obtain the certificate of commencement of business before starting its business activities
It is necessary to held statutory meeting.

Partnership deed : meaning and contents

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Partnership deed
The written agreement duly signed by the partners is known as partnership deed. It is also known as agreement or article of partnership. It is the document, which mentions the rules and regulations, way of operation of management and way of control of activities of the firm. It is also required at the time of registration. It helps to minimize conflict and misunderstanding among the partners.

Content of partnership deed

Name and address of the firm
Name and address o the partners
Nature of rim’s business
Duration of partnership
Amount of capital invested by the partners.
Interest on capital
Division of profit
Salary and commission
Right and duties of partner
Admission and removal of partnership
Valuation of capital and goodwill at the time of admission, death and retirement of partners
Accounts and audits
Dissolution of partnership.

Nepal Chamber of Commerce : Formation and Functions

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

It was established in 1952 (2009 B.S). It was first chamber of commerce of Nepal. It is located in Kathmandu. It plays important role in formulation of commercial and industrial policies of Nepal government. It gives advice to Nepal government time to time. Nepal chamber of commerce involve in social welfare organization. It has good relationship with international organization i.e. WTO, UN. It conducts seminar and training related to business and economy collaboration.

Formation

Any individual firm, Company Corporation engaged in trade, industry and commerce can receive membership of Nepal chamber of commerce. It has introduced 4 types of membership.

Life member
Ordinary member
Affiliated member
Honorary member

All the activities of NCC are planned, programmed and implemented by executive committee includes 36 members. The executive committee is formed by

Elected by general assembly → 29 members
Immediate post president →1 member
Nominated from among affiliated → 4 members
Nominated from general member → 1 member
Nominated by NCC president → 1member President, 1st and 2nd vice president, secretary, general treasurer, 2 secretary and joint treasurers are elected from among elected members of executive committee are the members.

Function

Help in economic development of the country.
Promote and protect the trade, commerce and industries
Maintain good relationship with trading community and industrialist
Develop link with commercial and industrial communities around the world.
Cooperation among all trading, commercial and industrial communities for betterment of economy
Conduct and organize industrial and trade markets and fare
Issue the certificate of origin for Nepalese product
Establish academic institution regarding trade, commerce and industries
Finance technical management
Conduct seminar, training, workshop and research programs

Concept of business communication

Business Studies XI Notes — Sun, 18 Aug 2013 05:41:42 +0000

Meaning of business communication

The word communication is derived from the word “communis” which means to inform or tell information. Communication is the process of transformation of information from one person to another. It is a process of exchanging opinions ideas, feelings, information, views and other fast between or among two or more people. It involves the systematic and continuous process of telling, listening and understanding. Communication skill means conveying the message to others and understanding the message from others. Business communication is a bridge of passing information between the management and the employees.