UGC NET Managemnet Book PDF [Sample]
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Slide Content
MANAGEMENT UNIT-1
Second Edition
Second Edition
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 2
MANAGEMENT – CONCEPT, PROCESS, THEORIES AND APPROACHES, MANAGEMENT ROLES
AND SKILLS
Management is required in all kinds of Organizations whether they are manufacturing
computers or handlooms, trading in consumer goods or providing saloon services and even in
non-business Organizations. No matter what the organization is or what its goals might be,
they all have something in common – management and managers. Successful Organizations
achieve their goals by following a deliberate process called ‘management. Management
consists of a series of interrelated functions that are performed by all managers. In simple
words Management is the art of getting things done through people. Let’s understand the
concept of management.
Concept & Process of Management
Some of the common definition of management given by famous writers and thinkers are:
According to Harold Koontz and Heinz Weihrich, Management is the process of
designing and maintaining an environment in which individuals, working together in
groups, efficiently accomplish selected aims.
According to Robert L. Trewelly and M. Gene Newport, Management is defined as the
process of planning, organizing , actuating and controlling an Organization’s operations
in order to achieve coordination of the human and material resources essential in the
effective and efficient attainment of objectives.
According to Kreitner, “Management is the process of working with and through others
to effectively achieve Organizational objectives by efficiently using limited resources in
the changing environment.
According to George R Terry, Management consists of planning, organizing , actuating
and controlling, performed to determine and accomplish the objectives by the use of
people and resources.
So Management can be defined as a process of getting things done with the aim of achieving
goals effectively and efficiently. Some important terms in this definition are:
1. Process: Process means the primary functions or activities that management performs
to get things done. These functions are planning, organizing , staffing, directing and
controlling.
2. Effectiveness: Effectiveness is concerned with the end result. It basically means finishing
the given task. Thus Effectiveness in management is concerned with doing the right task,
completing activities and achieving goals
3. Efficient: Efficiency means doing the task correctly and with minimum cost.
Management is concerned with the efficient use of input resources which ultimately
reduce costs and lead to higher profits.
It is important for management to achieve goals (effectiveness) with minimum resources i.e.,
as efficiently as possible while maintaining a balance between effectiveness and efficiency.
Characteristics of Management
Basic characteristics of management are:
1. Management is a goal-oriented process: An organization has a set of basic goals
which are the basic reason for its existence. Management unites the efforts of
different individuals in the organization towards achieving these goals.
Copyright (Diwakar Education Hub) Page 2
MANAGEMENT – CONCEPT, PROCESS, THEORIES AND APPROACHES, MANAGEMENT ROLES
AND SKILLS
Management is required in all kinds of Organizations whether they are manufacturing
computers or handlooms, trading in consumer goods or providing saloon services and even in
non-business Organizations. No matter what the organization is or what its goals might be,
they all have something in common – management and managers. Successful Organizations
achieve their goals by following a deliberate process called ‘management. Management
consists of a series of interrelated functions that are performed by all managers. In simple
words Management is the art of getting things done through people. Let’s understand the
concept of management.
Concept & Process of Management
Some of the common definition of management given by famous writers and thinkers are:
According to Harold Koontz and Heinz Weihrich, Management is the process of
designing and maintaining an environment in which individuals, working together in
groups, efficiently accomplish selected aims.
According to Robert L. Trewelly and M. Gene Newport, Management is defined as the
process of planning, organizing , actuating and controlling an Organization’s operations
in order to achieve coordination of the human and material resources essential in the
effective and efficient attainment of objectives.
According to Kreitner, “Management is the process of working with and through others
to effectively achieve Organizational objectives by efficiently using limited resources in
the changing environment.
According to George R Terry, Management consists of planning, organizing , actuating
and controlling, performed to determine and accomplish the objectives by the use of
people and resources.
So Management can be defined as a process of getting things done with the aim of achieving
goals effectively and efficiently. Some important terms in this definition are:
1. Process: Process means the primary functions or activities that management performs
to get things done. These functions are planning, organizing , staffing, directing and
controlling.
2. Effectiveness: Effectiveness is concerned with the end result. It basically means finishing
the given task. Thus Effectiveness in management is concerned with doing the right task,
completing activities and achieving goals
3. Efficient: Efficiency means doing the task correctly and with minimum cost.
Management is concerned with the efficient use of input resources which ultimately
reduce costs and lead to higher profits.
It is important for management to achieve goals (effectiveness) with minimum resources i.e.,
as efficiently as possible while maintaining a balance between effectiveness and efficiency.
Characteristics of Management
Basic characteristics of management are:
1. Management is a goal-oriented process: An organization has a set of basic goals
which are the basic reason for its existence. Management unites the efforts of
different individuals in the organization towards achieving these goals.
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 3
2. Management is all pervasive: The activities involved in managing an enterprise are
common to all Organizations whether economic, social or political.
3. Management is multidimensional: Management is a complex activity that has three
main dimensions:
1. Management of work: All Organizations exist for the performance of some work.
Management translates this work in terms of goals to be achieved and assigns the
means to achieve it.
2. Management of people: Human resources or people are an Organization’s greatest
asset. Managing people has two dimensions:
1. it implies dealing with employees as individuals with diverse needs and
behavior;
2. it also means dealing with individuals as a group of people
The task of management is to make people work towards achieving the Organization’s goals,
by making their strengths effective and their weaknesses irrelevant.
3. Management of operations: It requires a production process which entails the flow of
input material and the technology for transforming this input into the desired output
for consumption
4. Management of operations: It requires a production process which entails the flow of
input material and the technology for transforming this input into the desired output
for consumption
5. Management is a continuous process: The process of management is a series of
continuous, composite, but separate functions (planning, organizing , directing,
staffing and controlling). These functions are simultaneously performed by all
managers all the time.
6. Management is a group activity: An organization is a collection of diverse individuals
with different needs. Management should enable all its members to grow and
develop as needs and opportunities change
7. Management is a dynamic function: Management is a dynamic function and has to
adapt itself to the changing environment. In order to be successful, an organization
must change itself and its goals according to the needs of the environment.
8. Management is an intangible force: Management is an intangible force that cannot be
seen but its presence can be felt in the way the organization functions
THEORIES: APPROACHES OF MANAGEMENT
Management theories are concepts surrounding recommended management strategies, which
may include tools such as frameworks and guidelines that can be implemented in
modern organizations. Generally, professionals will not rely solely on one management theory
alone, but instead, introduce several concepts from different management theories that best
suit their workforce and company culture.
There are many management theories floating around in the business world. Some are old and
some are new. But pretty much all of them are based — in one form or another —
Copyright (Diwakar Education Hub) Page 3
2. Management is all pervasive: The activities involved in managing an enterprise are
common to all Organizations whether economic, social or political.
3. Management is multidimensional: Management is a complex activity that has three
main dimensions:
1. Management of work: All Organizations exist for the performance of some work.
Management translates this work in terms of goals to be achieved and assigns the
means to achieve it.
2. Management of people: Human resources or people are an Organization’s greatest
asset. Managing people has two dimensions:
1. it implies dealing with employees as individuals with diverse needs and
behavior;
2. it also means dealing with individuals as a group of people
The task of management is to make people work towards achieving the Organization’s goals,
by making their strengths effective and their weaknesses irrelevant.
3. Management of operations: It requires a production process which entails the flow of
input material and the technology for transforming this input into the desired output
for consumption
4. Management of operations: It requires a production process which entails the flow of
input material and the technology for transforming this input into the desired output
for consumption
5. Management is a continuous process: The process of management is a series of
continuous, composite, but separate functions (planning, organizing , directing,
staffing and controlling). These functions are simultaneously performed by all
managers all the time.
6. Management is a group activity: An organization is a collection of diverse individuals
with different needs. Management should enable all its members to grow and
develop as needs and opportunities change
7. Management is a dynamic function: Management is a dynamic function and has to
adapt itself to the changing environment. In order to be successful, an organization
must change itself and its goals according to the needs of the environment.
8. Management is an intangible force: Management is an intangible force that cannot be
seen but its presence can be felt in the way the organization functions
THEORIES: APPROACHES OF MANAGEMENT
Management theories are concepts surrounding recommended management strategies, which
may include tools such as frameworks and guidelines that can be implemented in
modern organizations. Generally, professionals will not rely solely on one management theory
alone, but instead, introduce several concepts from different management theories that best
suit their workforce and company culture.
There are many management theories floating around in the business world. Some are old and
some are new. But pretty much all of them are based — in one form or another —
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 4
Why is that important? Shouldn’t you concentrate on running your business instead of
reading up on old ideas? Yes, you should focus on making your business a success. But that
success depends, in large part, on the way you lead your employees.
(Systems Theory of Management)
At its creation, Systems Theory (or The Systems Approach) had nothing to with business
management and everything to do with biology. That’s because Ludwig von Bertalanffy (1901-
1972) — a biologist at the time — founded general systems theory (GST) in an attempt to
refute reductionism and revive the unity of science.
The premise of general systems theory is that a system is composed of interacting elements
that are affected by their environment. Because of this interaction, the system as a whole can
evolve (develop new properties) and self-regulate (correct itself).
When applied to business, experts shorten “general systems theory” to just Systems Theory. In
actual fact, Systems Theory is more a perspective than a fully formed practice. Systems Theory
encourages you to realize that your business is a system and is governed by the same laws and
behaviors that affect every other biological organization.
This introduces such concepts as:
Entropy — The tendency for a system to run down and die (a thing to be avoided in
business)
Synergy — Working together, the parts can produce something greater than those same
parts could produce on their own
Subsystem — The whole (your business) is built on subsystems, which themselves are
built on yet more subsystems
Because it is a way of looking at your business rather than a concrete management process,
you can use Systems Theory in concert with the other management theories on this list.
(Administrative Theory of Management)
Copyright (Diwakar Education Hub) Page 4
Why is that important? Shouldn’t you concentrate on running your business instead of
reading up on old ideas? Yes, you should focus on making your business a success. But that
success depends, in large part, on the way you lead your employees.
(Systems Theory of Management)
At its creation, Systems Theory (or The Systems Approach) had nothing to with business
management and everything to do with biology. That’s because Ludwig von Bertalanffy (1901-
1972) — a biologist at the time — founded general systems theory (GST) in an attempt to
refute reductionism and revive the unity of science.
The premise of general systems theory is that a system is composed of interacting elements
that are affected by their environment. Because of this interaction, the system as a whole can
evolve (develop new properties) and self-regulate (correct itself).
When applied to business, experts shorten “general systems theory” to just Systems Theory. In
actual fact, Systems Theory is more a perspective than a fully formed practice. Systems Theory
encourages you to realize that your business is a system and is governed by the same laws and
behaviors that affect every other biological organization.
This introduces such concepts as:
Entropy — The tendency for a system to run down and die (a thing to be avoided in
business)
Synergy — Working together, the parts can produce something greater than those same
parts could produce on their own
Subsystem — The whole (your business) is built on subsystems, which themselves are
built on yet more subsystems
Because it is a way of looking at your business rather than a concrete management process,
you can use Systems Theory in concert with the other management theories on this list.
(Administrative Theory of Management)
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 5
Miner and engineer Henri Fayol (1841 -1925) developed his principles of
administrative management as a top-down approach to examining a business. He put himself
in his manager’s shoes and imagined what situations they might encounter when dealing with
their team.
From this, he concluded that his managers — and indeed management in general —
Initiative: This refers to the level of freedom employees should have to carry out their
responsibilities without being forced or ordered.
Equity: This principle implies everyone in the organization should be treated equally and
that it should be an environment of kindness.
Scalar chain: This principle says there should be a chain of supervisors from the top level
of management to the lower level and that communication generally flows from top to
bottom. He emphasized that there is no hard rule regarding the communication process
through the chain of command.
Remuneration of personnel: This principle refers to the assertion that there should be
both monetary and non-monetary remuneration based on performance levels to create
a bond between the employee and the organization.
Unity of direction: This principle asserts that there should be only one manager per
department who is in charge of coordinating the group activity to attain a single goal.
Discipline: According to this principle, employees should be respectful and obedient,
and an organization should outline rules and regulations that clarify rules, good
supervision and a reward-punishment system.
Division of work: This principle asserts that the overall action of management should be
divided and that team members should be given responsibilities based on their skills and
interests to make them more effective and efficient.
Authority and responsibility: According to this principle, there should be a balance
between authority—the right to give commands and make decisions—and
responsibility—the obligation of an employee to perform the tasks they’re
designated.
Unity of command: This refers to the assertion that employees must get orders from
only one immediate supervisor and be accountable to that person only.
Subordination of individual interest to general interests: There must be harmony
between the interests of the individual and the organization, although the
organizational interest should be given priority since it will bring rewards for the
individual.
Centralization: According to this principle, the topmost level of authority should be
centralized to the top level of management, who has the power to make the most
important decisions in an organization.
Order: This principle asserts that for an organization to run smoothly, the right person
must be in the right job and that, therefore, every material and employee should be
given a proper place.
Stability of tenure: According to this principle, employees must have job security to be
efficient.
Copyright (Diwakar Education Hub) Page 5
Miner and engineer Henri Fayol (1841 -1925) developed his principles of
administrative management as a top-down approach to examining a business. He put himself
in his manager’s shoes and imagined what situations they might encounter when dealing with
their team.
From this, he concluded that his managers — and indeed management in general —
Initiative: This refers to the level of freedom employees should have to carry out their
responsibilities without being forced or ordered.
Equity: This principle implies everyone in the organization should be treated equally and
that it should be an environment of kindness.
Scalar chain: This principle says there should be a chain of supervisors from the top level
of management to the lower level and that communication generally flows from top to
bottom. He emphasized that there is no hard rule regarding the communication process
through the chain of command.
Remuneration of personnel: This principle refers to the assertion that there should be
both monetary and non-monetary remuneration based on performance levels to create
a bond between the employee and the organization.
Unity of direction: This principle asserts that there should be only one manager per
department who is in charge of coordinating the group activity to attain a single goal.
Discipline: According to this principle, employees should be respectful and obedient,
and an organization should outline rules and regulations that clarify rules, good
supervision and a reward-punishment system.
Division of work: This principle asserts that the overall action of management should be
divided and that team members should be given responsibilities based on their skills and
interests to make them more effective and efficient.
Authority and responsibility: According to this principle, there should be a balance
between authority—the right to give commands and make decisions—and
responsibility—the obligation of an employee to perform the tasks they’re
designated.
Unity of command: This refers to the assertion that employees must get orders from
only one immediate supervisor and be accountable to that person only.
Subordination of individual interest to general interests: There must be harmony
between the interests of the individual and the organization, although the
organizational interest should be given priority since it will bring rewards for the
individual.
Centralization: According to this principle, the topmost level of authority should be
centralized to the top level of management, who has the power to make the most
important decisions in an organization.
Order: This principle asserts that for an organization to run smoothly, the right person
must be in the right job and that, therefore, every material and employee should be
given a proper place.
Stability of tenure: According to this principle, employees must have job security to be
efficient.
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 6
Espirit de corps: This refers to the belief that there must be a unified team contribution
and that cooperation is always greater than the aggregate of individual performances.
(Bureaucratic Theory of Management)
Max Weber (1864-1920) took a more sociological approach when creating his bureaucratic
management theory. Weber’s ideas revolve around the importance of structuring your
business in a hierarchical manner with clear rules and roles.
According to Weber, the ideal business structure (or bureaucratic system) is based on:
Clear division of labor
Separation of the owner’s personal and organizational assets
Hierarchical chain of command
Accurate record keeping
Hiring and promotion based on qualifications and performance, not personal
relationships
Consistent regulations
Many today see Bureaucratic Management as an impersonal style that can become
overwhelmed by rules and formalities. That said, it can be very useful for new businesses that
are in need of standards, procedures, and structure.
(Scientific Theory of Management)
Copyright (Diwakar Education Hub) Page 6
Espirit de corps: This refers to the belief that there must be a unified team contribution
and that cooperation is always greater than the aggregate of individual performances.
(Bureaucratic Theory of Management)
Max Weber (1864-1920) took a more sociological approach when creating his bureaucratic
management theory. Weber’s ideas revolve around the importance of structuring your
business in a hierarchical manner with clear rules and roles.
According to Weber, the ideal business structure (or bureaucratic system) is based on:
Clear division of labor
Separation of the owner’s personal and organizational assets
Hierarchical chain of command
Accurate record keeping
Hiring and promotion based on qualifications and performance, not personal
relationships
Consistent regulations
Many today see Bureaucratic Management as an impersonal style that can become
overwhelmed by rules and formalities. That said, it can be very useful for new businesses that
are in need of standards, procedures, and structure.
(Scientific Theory of Management)
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 7
Toward the end of the 19th century, Frederick Taylor (1856-1915) conducted controlled
experiments to optimize his workers’ productivity. The results of these experiments helped
him form the belief that the scientific method — not judgment or discretion — is the best
determiner of efficiency in the workplace.
Scientific Management promotes standardization, specialization, assignment based on ability,
and extensive training and supervision. Only through those practices can a business achieve
efficiency and productivity. This management theory attempts to find the optimal way to
complete a given task, often at the expense of the employees’ humanity.
The theory as a whole isn’t used much anymore, but parts of it — workplace efficiency,
training, and cooperation — are the foundation of some of the most successful businesses on
the planet.
The strategy was a bit different from how businesses were conducted beforehand. Initially, a
factory executive enjoyed minimal, if any, contact with his employees. There was absolutely
no way of standardizing workplace rules and the only motivation of the employees was job
security.
According to Taylor, money was the key incentive for working, which is why he developed the
“fair day’s wages for a fair day’s work” concept. Since then, the scientific management theory
has been practiced worldwide. The resulting collaboration between employees and employers
evolved into the teamwork that people now enjoy.
(Theories X and Y Theory of Management)
In 1960, social psychologist Douglas McGregor (1906-1964) published his book The Human
Side Of Enterprise. In it, he outlined two drastically different styles of management (theories X
and Y). Each style is guided by a manager’s perceptions of their employees’ motivations.
Theory X posits that employees are apathetic or dislike their work. Managers who adhere to
Theory X are often authoritarian and will micromanage everything because they don’t trust
their employees.
Theory Y posits that employees are self-motivated, responsible, and want to take ownership of
their work. Managers who adhere to Theory Y include their employees in the decision-making
process and encourage creativity at all levels.
In practice, small businesses tend to operate on Theory Y while large businesses tend to
operate on Theory X.
Do you believe that every individual gets maximum satisfaction from the work they do? Or are
you of the opinion that some view work as a burden and only do it for the money? Such
assumptions influence how an organization is run. The assumptions also form the basis of
Theory X and Theory Y.
Copyright (Diwakar Education Hub) Page 7
Toward the end of the 19th century, Frederick Taylor (1856-1915) conducted controlled
experiments to optimize his workers’ productivity. The results of these experiments helped
him form the belief that the scientific method — not judgment or discretion — is the best
determiner of efficiency in the workplace.
Scientific Management promotes standardization, specialization, assignment based on ability,
and extensive training and supervision. Only through those practices can a business achieve
efficiency and productivity. This management theory attempts to find the optimal way to
complete a given task, often at the expense of the employees’ humanity.
The theory as a whole isn’t used much anymore, but parts of it — workplace efficiency,
training, and cooperation — are the foundation of some of the most successful businesses on
the planet.
The strategy was a bit different from how businesses were conducted beforehand. Initially, a
factory executive enjoyed minimal, if any, contact with his employees. There was absolutely
no way of standardizing workplace rules and the only motivation of the employees was job
security.
According to Taylor, money was the key incentive for working, which is why he developed the
“fair day’s wages for a fair day’s work” concept. Since then, the scientific management theory
has been practiced worldwide. The resulting collaboration between employees and employers
evolved into the teamwork that people now enjoy.
(Theories X and Y Theory of Management)
In 1960, social psychologist Douglas McGregor (1906-1964) published his book The Human
Side Of Enterprise. In it, he outlined two drastically different styles of management (theories X
and Y). Each style is guided by a manager’s perceptions of their employees’ motivations.
Theory X posits that employees are apathetic or dislike their work. Managers who adhere to
Theory X are often authoritarian and will micromanage everything because they don’t trust
their employees.
Theory Y posits that employees are self-motivated, responsible, and want to take ownership of
their work. Managers who adhere to Theory Y include their employees in the decision-making
process and encourage creativity at all levels.
In practice, small businesses tend to operate on Theory Y while large businesses tend to
operate on Theory X.
Do you believe that every individual gets maximum satisfaction from the work they do? Or are
you of the opinion that some view work as a burden and only do it for the money? Such
assumptions influence how an organization is run. The assumptions also form the basis of
Theory X and Theory Y.
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 8
Douglas McGregor is the theorist credited with developing these two contrasting concepts.
More specifically, these theories refer to two management styles: the authoritarian (Theory X)
and participative (Theory Y).
(Human Relations Theory of Management)
In the first quarter of the 20th century, psychologist Elton Mayo (1880-1949) was tasked with
improving productivity among dissatisfied employees. Mayo attempted to improve worker
satisfaction by changing environmental conditions like lighting, temperature, and break time.
All of those changes had a positive effect.
Mayo then tried changing variables that he perceived would have a negative effect on
satisfaction, like the length of the workday and quotas (he increased both). What he observed
was that regardless of the change — good or bad — worker satisfaction always increased.
This led Mayo to conclude that performance was a result of the attention the researchers paid
to the workers. In other words, the attention made the workers feel valuable.
These findings gave rise to Mayo’s Human Relations Theory, in which he states that employees
are more motivated by social factors — like personal attention or being part of a group — than
environmental factors, such as money and working conditions.
Copyright (Diwakar Education Hub) Page 8
Douglas McGregor is the theorist credited with developing these two contrasting concepts.
More specifically, these theories refer to two management styles: the authoritarian (Theory X)
and participative (Theory Y).
(Human Relations Theory of Management)
In the first quarter of the 20th century, psychologist Elton Mayo (1880-1949) was tasked with
improving productivity among dissatisfied employees. Mayo attempted to improve worker
satisfaction by changing environmental conditions like lighting, temperature, and break time.
All of those changes had a positive effect.
Mayo then tried changing variables that he perceived would have a negative effect on
satisfaction, like the length of the workday and quotas (he increased both). What he observed
was that regardless of the change — good or bad — worker satisfaction always increased.
This led Mayo to conclude that performance was a result of the attention the researchers paid
to the workers. In other words, the attention made the workers feel valuable.
These findings gave rise to Mayo’s Human Relations Theory, in which he states that employees
are more motivated by social factors — like personal attention or being part of a group — than
environmental factors, such as money and working conditions.
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 9
(Classical Theory of Management)
Classical Management Theory is predicated on the idea that employees only have physical
needs. Because employees can satisfy these physical needs with money, Classical
Management Theory focuses solely on the economics of organizing workers.
Due to this narrow view of the workforce, Classical Management Theory ignores the personal
and social needs that influence employees’ job satisfaction. As a result, Classical Management
Theory advocates seven key principles:
1. Profit maximization
2. Labor specialization
3. Centralized leadership
4. Streamlined operations
5. Emphasis on productivity
6. Single-person or select-few decision making
7. Priority to the bottom line
When these seven principles are put into practice, they create an “ideal” workplace based on a
hierarchical structure, employee specialization, and financial rewards.
Copyright (Diwakar Education Hub) Page 9
(Classical Theory of Management)
Classical Management Theory is predicated on the idea that employees only have physical
needs. Because employees can satisfy these physical needs with money, Classical
Management Theory focuses solely on the economics of organizing workers.
Due to this narrow view of the workforce, Classical Management Theory ignores the personal
and social needs that influence employees’ job satisfaction. As a result, Classical Management
Theory advocates seven key principles:
1. Profit maximization
2. Labor specialization
3. Centralized leadership
4. Streamlined operations
5. Emphasis on productivity
6. Single-person or select-few decision making
7. Priority to the bottom line
When these seven principles are put into practice, they create an “ideal” workplace based on a
hierarchical structure, employee specialization, and financial rewards.
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 10
Control of the business is held by a select few who exercise exclusive control over the
decisions and direction the company takes. Underneath those select few, middle managers
govern the day-to-day activities of the employees who are at the bottom of the pecking order.
And all of this revolves around the idea that employees will work harder and be more
productive if they are rewarded in larger and larger increments (via wages or benefits).
While this may not sound like an “ideal” management theory by today’s standards, it worked
well for many years prior to the early 20th century. And even though the system isn’t applied
lock-stock-and-barrel as it once was, there are several strong points that managers can use in
the 21st century. They include:
Clear managerial structure
Division of labor
Clear definition of employee roles
These three principles, combined with other management theories on this list, can improve
the way your employees — and your business — works in this modern age.
(Contingency Management)
Fred Fiedler and others conceived of Contingency Management Theory in the 1950s and 60s.
Fiedler based his theories on the idea that effective leadership was directly related to the
traits the leader displayed in any given situation.
From that idea sprang the belief that there exist a set of traits that are effective for every
situation and that different situations demand different leadership traits. As such, leaders
must be flexible and adapt to change as the market, the business, and the team demands.
Fiedler then extended that concept from an individual, management focus to a much broader
organization-focused theory. Fiedler’s theory suggests that there is no one management
approach that suits every situation and every organization.
Instead, three general variables determine business management and structure. They are:
The size of the organization
The technology employed
The leadership at all levels of the business
What that means for the individual manager who subscribes to Contingency Management
Theory is that they must be able to identify the particular management style suitable for every
given situation. They must also be willing and able to apply that management style quickly and
effectively whenever necessary.
In a larger sense, businesses and managers who adhere to Contingency Management Theory
— whether intentionally or unintentionally — will be concerned, above all else, with
maintaining the alignment of their team and achieving a good fit in all projects and situations.
Copyright (Diwakar Education Hub) Page 10
Control of the business is held by a select few who exercise exclusive control over the
decisions and direction the company takes. Underneath those select few, middle managers
govern the day-to-day activities of the employees who are at the bottom of the pecking order.
And all of this revolves around the idea that employees will work harder and be more
productive if they are rewarded in larger and larger increments (via wages or benefits).
While this may not sound like an “ideal” management theory by today’s standards, it worked
well for many years prior to the early 20th century. And even though the system isn’t applied
lock-stock-and-barrel as it once was, there are several strong points that managers can use in
the 21st century. They include:
Clear managerial structure
Division of labor
Clear definition of employee roles
These three principles, combined with other management theories on this list, can improve
the way your employees — and your business — works in this modern age.
(Contingency Management)
Fred Fiedler and others conceived of Contingency Management Theory in the 1950s and 60s.
Fiedler based his theories on the idea that effective leadership was directly related to the
traits the leader displayed in any given situation.
From that idea sprang the belief that there exist a set of traits that are effective for every
situation and that different situations demand different leadership traits. As such, leaders
must be flexible and adapt to change as the market, the business, and the team demands.
Fiedler then extended that concept from an individual, management focus to a much broader
organization-focused theory. Fiedler’s theory suggests that there is no one management
approach that suits every situation and every organization.
Instead, three general variables determine business management and structure. They are:
The size of the organization
The technology employed
The leadership at all levels of the business
What that means for the individual manager who subscribes to Contingency Management
Theory is that they must be able to identify the particular management style suitable for every
given situation. They must also be willing and able to apply that management style quickly and
effectively whenever necessary.
In a larger sense, businesses and managers who adhere to Contingency Management Theory
— whether intentionally or unintentionally — will be concerned, above all else, with
maintaining the alignment of their team and achieving a good fit in all projects and situations.
MANAGEMENT UNIT-1
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independence
security
challenge
influence
learning
compassion
friendliness
discipline/order
generosity
persistence
optimism
dependability
flexibility
Identifying and Establishing Values
Effective organizations identify and develop a clear, concise, and shared meaning of
values/beliefs, priorities, and direction so that everyone understands and can contribute to
their accomplishment. Once defined, values impact every aspect of your organization.
People demonstrate and model the values in action in their personal work behaviors,
decision making, contribution, and interpersonal interaction.
Organizational values help each person establish priorities in their daily work life.
Values guide every decision that is made once the organization has cooperatively
created the values and the value statements.
Rewards and recognition within the organization are structured to recognize those
people whose work embodies the values the organization embraced.
Organizational goals are grounded in the identified values.
Adoption of the values and the behaviors that result is recognized in regular
performance feedback.
People hire and promote individuals whose outlook and actions are congruent with the
values.
Only the active participation of all members of the organization will ensure a truly
organization-wide, value-based, shared culture.
Please Be Careful from Fake Person buy our Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
MANAGEMENT UNIT-1 MCQS
1-In management process, the most
misinterpreted word is
(1) Organizing
(2) Delegating
(3) Controlling
(4) Planning
Copyright (Diwakar Education Hub) Page 151
independence
security
challenge
influence
learning
compassion
friendliness
discipline/order
generosity
persistence
optimism
dependability
flexibility
Identifying and Establishing Values
Effective organizations identify and develop a clear, concise, and shared meaning of
values/beliefs, priorities, and direction so that everyone understands and can contribute to
their accomplishment. Once defined, values impact every aspect of your organization.
People demonstrate and model the values in action in their personal work behaviors,
decision making, contribution, and interpersonal interaction.
Organizational values help each person establish priorities in their daily work life.
Values guide every decision that is made once the organization has cooperatively
created the values and the value statements.
Rewards and recognition within the organization are structured to recognize those
people whose work embodies the values the organization embraced.
Organizational goals are grounded in the identified values.
Adoption of the values and the behaviors that result is recognized in regular
performance feedback.
People hire and promote individuals whose outlook and actions are congruent with the
values.
Only the active participation of all members of the organization will ensure a truly
organization-wide, value-based, shared culture.
Please Be Careful from Fake Person buy our Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
MANAGEMENT UNIT-1 MCQS
1-In management process, the most
misinterpreted word is
(1) Organizing
(2) Delegating
(3) Controlling
(4) Planning
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 152
Answer: (1)
Explanation: Organizing or organizing is the
establishment of effective authority
relationships among selected work, persons
and work places in order for the group to work
together efficiently. Or the process of dividing
work into sections and departments.
2-The department(s) that an event
management company will have is (are)
(1) Creative
(2) Production
(3) Client servicing
(4) All of the above
Answer: (4)
Explanation: Management has been defined as
“the process of planning, organizing, leading
and controlling the efforts of company
members and of using all company resources
to achieve stated company goals.”
3- Who said, “Management is a multiple
purpose organ that manages a business,
manages a manager and manages workers and
work”?
(1) Harold Konntz
(2) Peter Drucker
(3) Kenneth O ‘Donell
(4) Anonymous
Answer: (2)
Explanation: He placed high importance on
decentralization, knowledge
work, management by objectives (MBO) and a
process called SMART.
4- Under mechanism of scientific
management, scientific task setting includes:
(1) Time study
(2) Motion study
(3) Method study
(4) All of the above
Answer: (4)
Explanation: Under mechanism of scientific
management, scientific task setting includes:
Time study. Method study. ... Motion study.
5- Management as a discipline is the function
of________.
(1) Science
(2) Art
(3) Creativity
(4) All of the above
Answer: (3)
Explanation: Management as a discipline refers
to that branch of knowledge which is
connected to study of principles & practices of
basic administration.
6- Which theory assumes that people are
naturally lazy and will avoid work and
responsibilities if possible?
(1) Theory X
(2) Theory Y
(3) Theory Z
(4) None of the above
Answer: (1)
Explanation: As a result, they think that team
members need to be prompted, rewarded or
punished constantly to make sure that they
complete their tasks.
7- Who is the person you have to give
importance under the company’s checklist
before making call to the consultant.
(1) Managers
(2) Employees
(3) Customer
(4) All of the above
Answer: (2)
Explanation: A new hire onboarding checklist
helps managers and HR make sure they are
covering all the necessary steps to prepare for
onboarding a new employee and guiding them
through the process of becoming part of a
successful team.
8- What is one of the most significant
inhibitors in customer preference while
purchasing perishable items in retail?
(1) Proximity of markets
(2) Customer preference to brands
(3) Both (1) and (2)
(4) None of the above
Copyright (Diwakar Education Hub) Page 152
Answer: (1)
Explanation: Organizing or organizing is the
establishment of effective authority
relationships among selected work, persons
and work places in order for the group to work
together efficiently. Or the process of dividing
work into sections and departments.
2-The department(s) that an event
management company will have is (are)
(1) Creative
(2) Production
(3) Client servicing
(4) All of the above
Answer: (4)
Explanation: Management has been defined as
“the process of planning, organizing, leading
and controlling the efforts of company
members and of using all company resources
to achieve stated company goals.”
3- Who said, “Management is a multiple
purpose organ that manages a business,
manages a manager and manages workers and
work”?
(1) Harold Konntz
(2) Peter Drucker
(3) Kenneth O ‘Donell
(4) Anonymous
Answer: (2)
Explanation: He placed high importance on
decentralization, knowledge
work, management by objectives (MBO) and a
process called SMART.
4- Under mechanism of scientific
management, scientific task setting includes:
(1) Time study
(2) Motion study
(3) Method study
(4) All of the above
Answer: (4)
Explanation: Under mechanism of scientific
management, scientific task setting includes:
Time study. Method study. ... Motion study.
5- Management as a discipline is the function
of________.
(1) Science
(2) Art
(3) Creativity
(4) All of the above
Answer: (3)
Explanation: Management as a discipline refers
to that branch of knowledge which is
connected to study of principles & practices of
basic administration.
6- Which theory assumes that people are
naturally lazy and will avoid work and
responsibilities if possible?
(1) Theory X
(2) Theory Y
(3) Theory Z
(4) None of the above
Answer: (1)
Explanation: As a result, they think that team
members need to be prompted, rewarded or
punished constantly to make sure that they
complete their tasks.
7- Who is the person you have to give
importance under the company’s checklist
before making call to the consultant.
(1) Managers
(2) Employees
(3) Customer
(4) All of the above
Answer: (2)
Explanation: A new hire onboarding checklist
helps managers and HR make sure they are
covering all the necessary steps to prepare for
onboarding a new employee and guiding them
through the process of becoming part of a
successful team.
8- What is one of the most significant
inhibitors in customer preference while
purchasing perishable items in retail?
(1) Proximity of markets
(2) Customer preference to brands
(3) Both (1) and (2)
(4) None of the above
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 153
Answer: (1)
Explanation: "Proximity-to-market" refers to
the ability of SaaS providers to stay close to
customers so as to be in a position to
accurately read and analyze customer needs
and to respond quickly.
9- The objectives in corporate governance are
(1) Growth
(2) Stability
(3) Shareholders value maximization
(4) All of the above
Answer: (4)
Explanation: Governance at a corporate level
includes the processes through which
a company's objectives are set and pursued in
the context of the social, regulatory and
market environment.
10- The word________denotes a function, a
task, a discipline.
(1) Management
(2) Leadership
(3) Motivation
(4) None of the above
Answer: (1)
Explanation: Management as a discipline refers
to that branch of knowledge which is
connected to study of principles & practices of
basic administration.
11. Scientific Management were more
concerned with the problems at the
...................................... levels
(1) Higher levels
(2) Middle
(3) Operating
(4) None
Answer: (3)
Explanation: management is chiefly concerned
with planning, organizing and supervising in the
contexts of production, manufacturing or the
provision of services.
12. Father of Modern Management theory
is………………
(1) Henry Fayol
(2) F.W.Taylor
(3) Henry Gantt
(4) None
Answer: (1)
Explanation: Fayol has been regarded by many
as the father of the modern operational
management theory, and his ideas have
become a fundamental part of modern
management concepts.
13. ………….suggests that each communication
going up or coming down must flow through
each position in the line of authority
(1) Communication Pattern
(2) Horizontal communications
(3) Scalar chain
(4) None of these
Answer: (3)
Explanation: Scalar chain is a chain of all
supervisors from the top management to the
person working in the lowest rank.
14. Management can be considered
as………………..
(1) Exact science
(2) Inexact science
(3) Psuedo science
(4) (2) or (3)
Answer: (4)
Explanation: It is called an art
because managing requires certain skills which
are personal possessions of managers.
15. …………………..is that phase of business
enterprise that concerns itself with the overall
determination of institutional objectives and
the policies necessary to be followed in
achieving those objectives.
(1) Management
(2) Administration
(3) Both of these
(4) None
Answer: (2)
Explanation: Management is an activity of
business and functional level,
whereas Administration is a high-level activity.
Copyright (Diwakar Education Hub) Page 153
Answer: (1)
Explanation: "Proximity-to-market" refers to
the ability of SaaS providers to stay close to
customers so as to be in a position to
accurately read and analyze customer needs
and to respond quickly.
9- The objectives in corporate governance are
(1) Growth
(2) Stability
(3) Shareholders value maximization
(4) All of the above
Answer: (4)
Explanation: Governance at a corporate level
includes the processes through which
a company's objectives are set and pursued in
the context of the social, regulatory and
market environment.
10- The word________denotes a function, a
task, a discipline.
(1) Management
(2) Leadership
(3) Motivation
(4) None of the above
Answer: (1)
Explanation: Management as a discipline refers
to that branch of knowledge which is
connected to study of principles & practices of
basic administration.
11. Scientific Management were more
concerned with the problems at the
...................................... levels
(1) Higher levels
(2) Middle
(3) Operating
(4) None
Answer: (3)
Explanation: management is chiefly concerned
with planning, organizing and supervising in the
contexts of production, manufacturing or the
provision of services.
12. Father of Modern Management theory
is………………
(1) Henry Fayol
(2) F.W.Taylor
(3) Henry Gantt
(4) None
Answer: (1)
Explanation: Fayol has been regarded by many
as the father of the modern operational
management theory, and his ideas have
become a fundamental part of modern
management concepts.
13. ………….suggests that each communication
going up or coming down must flow through
each position in the line of authority
(1) Communication Pattern
(2) Horizontal communications
(3) Scalar chain
(4) None of these
Answer: (3)
Explanation: Scalar chain is a chain of all
supervisors from the top management to the
person working in the lowest rank.
14. Management can be considered
as………………..
(1) Exact science
(2) Inexact science
(3) Psuedo science
(4) (2) or (3)
Answer: (4)
Explanation: It is called an art
because managing requires certain skills which
are personal possessions of managers.
15. …………………..is that phase of business
enterprise that concerns itself with the overall
determination of institutional objectives and
the policies necessary to be followed in
achieving those objectives.
(1) Management
(2) Administration
(3) Both of these
(4) None
Answer: (2)
Explanation: Management is an activity of
business and functional level,
whereas Administration is a high-level activity.
MANAGEMENT UNIT-1
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16.……..has defined the basic problem of
managing as the art of “knowing exactly what
you want men to do and then see that they do
it in the best and cheapest way”
(1) Henry Fayol
(2) F.W. Taylor
(3) Mary parker Follet
(4) None of these
Answer: (2)
Explanation: according to Taylor, rather than
scolding employees for every minor mistake,
employers should reward workers for
increased productivity.
17. According to functional foremanship, the
speed boss, Inspector, foreman and gang boss
are entrusted with the........................... aspect
of work. (1) Planning
(2) Organizing
(3) Doing
(4) None of these
Answer: (3)
Explanation: management requires skills that
will help the managers to move to the heights
that they expect.
18.…..is undertaken to find out the one best
way of doing the thing
(1) Job Analysis
(2) Merit rating
(3) Job enrichment
(4) None
Answer: (1)
Explanation: Job analysis is a systematic
process of collecting the information on nature
of a job, qualities and qualifications required to
a job,
19. The principle of Unity of command is
contrary to Taylors……………………..
(1) Rule of thumb
(2) Unity of Direction
(3) Functional foremanship
(4) None of these
Answer: (3)
Explanation: Functional foremanship is a form,
of organisation which involves supervision of a
worker by several specialist foremen.
20. According to …………..principle, each group
of activities with the same objective must have
one head and one plan
(1) Unity of Direction
(2) Unity of command
(3) Either of these
(4) None
Answer: (1)
Explanation: Unity of direction is a concept in
team management that assumes that all the
team members should share the same
objectives in order to work toward common
results, using one plan.
21. Everything which goes to increase the
importance of subordinates role is……………….
(1) Decentralization
(2) Centralization
(3) Either A or B
(4) None
Answer: (1)
Explanation: Decentralisation is referred to as a
form of an organisational structure where
there is the delegation of authority by the
top management to the middle and lower
levels of management in an organisation.
22. The Book “ Functions of Executive” was
written by …………………..
(1) P.F. Drucker
(2) Chester Barnard
(3) Herbert Simon
(4) None
Answer: (2)
Explanation: One is an exposition of a theory of
cooperation and organization and constitutes
the first half of the book. The second is a study
of the functions and of the methods of
operation of executives in formal
organizations.
Copyright (Diwakar Education Hub) Page 154
16.……..has defined the basic problem of
managing as the art of “knowing exactly what
you want men to do and then see that they do
it in the best and cheapest way”
(1) Henry Fayol
(2) F.W. Taylor
(3) Mary parker Follet
(4) None of these
Answer: (2)
Explanation: according to Taylor, rather than
scolding employees for every minor mistake,
employers should reward workers for
increased productivity.
17. According to functional foremanship, the
speed boss, Inspector, foreman and gang boss
are entrusted with the........................... aspect
of work. (1) Planning
(2) Organizing
(3) Doing
(4) None of these
Answer: (3)
Explanation: management requires skills that
will help the managers to move to the heights
that they expect.
18.…..is undertaken to find out the one best
way of doing the thing
(1) Job Analysis
(2) Merit rating
(3) Job enrichment
(4) None
Answer: (1)
Explanation: Job analysis is a systematic
process of collecting the information on nature
of a job, qualities and qualifications required to
a job,
19. The principle of Unity of command is
contrary to Taylors……………………..
(1) Rule of thumb
(2) Unity of Direction
(3) Functional foremanship
(4) None of these
Answer: (3)
Explanation: Functional foremanship is a form,
of organisation which involves supervision of a
worker by several specialist foremen.
20. According to …………..principle, each group
of activities with the same objective must have
one head and one plan
(1) Unity of Direction
(2) Unity of command
(3) Either of these
(4) None
Answer: (1)
Explanation: Unity of direction is a concept in
team management that assumes that all the
team members should share the same
objectives in order to work toward common
results, using one plan.
21. Everything which goes to increase the
importance of subordinates role is……………….
(1) Decentralization
(2) Centralization
(3) Either A or B
(4) None
Answer: (1)
Explanation: Decentralisation is referred to as a
form of an organisational structure where
there is the delegation of authority by the
top management to the middle and lower
levels of management in an organisation.
22. The Book “ Functions of Executive” was
written by …………………..
(1) P.F. Drucker
(2) Chester Barnard
(3) Herbert Simon
(4) None
Answer: (2)
Explanation: One is an exposition of a theory of
cooperation and organization and constitutes
the first half of the book. The second is a study
of the functions and of the methods of
operation of executives in formal
organizations.
MANAGEMENT UNIT-1
Copyright (Diwakar Education Hub) Page 155
23. school of Management recognizes the
existence of a centralized body of knowledge
for the Management.
(1) System approach
(2) Empirical
(3) Contingency
(4) Operational
Answer: (4)
Explanation: The term operational risk
management (ORM) is defined as a continual
cyclic process which includes risk assessment
, risk decision making
24. …………..school of thought has developed on
the idea that there is no single best method to
find solutions to Managerial problems
(1) System approach
(2) Empirical
(3) Contingency
(4) Operational
Answer: (3)
Explanation: A contingency plan is executed
when the risk presents itself. The purpose of
the plan is to lessen the damage of
the risk when it occurs.
25. Koontz and O’Donnel are the advocates of
……………….approach to management
(1) System approach
(2) Empirical
(3) Contingency
(4) Operational
Answer: (4)
Explanation: A contingency plan is executed
when the risk presents itself. The purpose of
the plan is to lessen the damage of
the risk when it occurs.
26. According to....................approach,
management is a logical process and it can be
expressed in terms of mathematical symbols
and relationships.
(1) Empirical
(2) Management science
(3) Contingency
(4) Operational
Answer: (2)
Explanation: Management science is the broad
interdisciplinary study of problem solving and
decision making in human organizations, with
strong links to management, economics,
business, engineering, management consulting,
and other fields.
27. ……………….approach of management
heavily concentrates on ‘People’ aspect of
management. (1) Human relations
(2) System
(3) Empirical
(4) Management science
Answer: (1)
Explanation: Quick Reference. An approach to
management based on the idea that
employees are motivated not only by financial
reward but also by a range of social factors
(e.g. praise, a sense of belonging, feelings of
achievement and pride in one's work).
28. ……………is the art of knowing exactly what
you want men to do and then seeing that how
they do it in the best and cheapest way.
(1) General management
(2) Scientific Management
(3) Administration
(4) None
Answer: (2)
Explanation: Scientific management is a theory
of management that analyzes and synthesizes
workflows. Its main objective is improving
economic efficiency, especially labor
productivity.
29. …………..is introduced to secure the benefits
of division of labor or specialization at the
supervising level under scientific management
(1) Operating management
(2) Functional foremanship
(3) Either a or b
(4) None
Answer: (2)
Explanation: Functional foremanship is a
factory management technique that advocates
for having multiple foremen in different,
specialized roles. Traditionally, factories had
Copyright (Diwakar Education Hub) Page 155
23. school of Management recognizes the
existence of a centralized body of knowledge
for the Management.
(1) System approach
(2) Empirical
(3) Contingency
(4) Operational
Answer: (4)
Explanation: The term operational risk
management (ORM) is defined as a continual
cyclic process which includes risk assessment
, risk decision making
24. …………..school of thought has developed on
the idea that there is no single best method to
find solutions to Managerial problems
(1) System approach
(2) Empirical
(3) Contingency
(4) Operational
Answer: (3)
Explanation: A contingency plan is executed
when the risk presents itself. The purpose of
the plan is to lessen the damage of
the risk when it occurs.
25. Koontz and O’Donnel are the advocates of
……………….approach to management
(1) System approach
(2) Empirical
(3) Contingency
(4) Operational
Answer: (4)
Explanation: A contingency plan is executed
when the risk presents itself. The purpose of
the plan is to lessen the damage of
the risk when it occurs.
26. According to....................approach,
management is a logical process and it can be
expressed in terms of mathematical symbols
and relationships.
(1) Empirical
(2) Management science
(3) Contingency
(4) Operational
Answer: (2)
Explanation: Management science is the broad
interdisciplinary study of problem solving and
decision making in human organizations, with
strong links to management, economics,
business, engineering, management consulting,
and other fields.
27. ……………….approach of management
heavily concentrates on ‘People’ aspect of
management. (1) Human relations
(2) System
(3) Empirical
(4) Management science
Answer: (1)
Explanation: Quick Reference. An approach to
management based on the idea that
employees are motivated not only by financial
reward but also by a range of social factors
(e.g. praise, a sense of belonging, feelings of
achievement and pride in one's work).
28. ……………is the art of knowing exactly what
you want men to do and then seeing that how
they do it in the best and cheapest way.
(1) General management
(2) Scientific Management
(3) Administration
(4) None
Answer: (2)
Explanation: Scientific management is a theory
of management that analyzes and synthesizes
workflows. Its main objective is improving
economic efficiency, especially labor
productivity.
29. …………..is introduced to secure the benefits
of division of labor or specialization at the
supervising level under scientific management
(1) Operating management
(2) Functional foremanship
(3) Either a or b
(4) None
Answer: (2)
Explanation: Functional foremanship is a
factory management technique that advocates
for having multiple foremen in different,
specialized roles. Traditionally, factories had
MANAGEMENT UNIT-2
Second Edition
Second Edition
MANAGEMENT UNIT-2
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ORGANIZATIONAL BEHAVIOR – SIGNIFICANCE & THEORIES
Organizational Behavior (OB) is very interesting and challenging too. It is related to individuals,
group of people working together in teams. The study becomes more challenging when
situational factors interact. The study of organizational behavior relates to the expected
behavior of an individual in the organization.
No two individuals are likely to behave in the same manner in a particular work situation. It is
the predictability of a manager about the expected behavior of an individual. There are no
absolutes in human behavior. It is the human factor that is contributory to the productivity
hence the study of human behavior is important. Great importance therefore must be
attached to the study.
According to L. M. Prasad, “Organizational behavior can be defined as the study and
application of knowledge about human behavior related to other elements of an organization
such as structure, technology and social systems.”
Researchers, management practitioners, psychologists, and social scientists must understand
the very credentials of an individual, his background, social framework, educational update,
impact of social groups and other situational factors on behavior.
Managers under whom an individual is working should be able to explain, predict, evaluate
and modify human behavior that will largely depend upon knowledge, skill and experience of
the manager in handling large group of people in diverse situations. Preemptive actions need
to be taken for human behavior forecasting.
In words of K Aswathappa, “OB is the study of human behavior in organizational setting, of
the interface between human behavior and organization and of the organization itself.”
In words of Stephen P. Robbins, “OB is a field of study that investigates the impact that
individuals, groups and structures have on behavior within organizations for the purpose of
applying such knowledge towards improving an organization’s effectiveness.”
According to Davis and Newstram, “Organizational behavior is the study and application of
knowledge about how people act within organizations.”
According to Fred Luthans, “Behavior is directly concerned with the understanding, prediction
and control of human behavior in organizations.”
In words of John Newstram and Keith Devis, “Organizational behavior is the study and
application of knowledge about how people as individuals and as groups act within
organizations. It strives to identify ways in which people can act more effectively.”
OB is the study of individual behavior in isolation, when in group and as a part of an
organization. The study of individual behavior only, would be incomplete because behavior is
affected by the people surrounding us as well as by the organization, in which we work.
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ORGANIZATIONAL BEHAVIOR – SIGNIFICANCE & THEORIES
Organizational Behavior (OB) is very interesting and challenging too. It is related to individuals,
group of people working together in teams. The study becomes more challenging when
situational factors interact. The study of organizational behavior relates to the expected
behavior of an individual in the organization.
No two individuals are likely to behave in the same manner in a particular work situation. It is
the predictability of a manager about the expected behavior of an individual. There are no
absolutes in human behavior. It is the human factor that is contributory to the productivity
hence the study of human behavior is important. Great importance therefore must be
attached to the study.
According to L. M. Prasad, “Organizational behavior can be defined as the study and
application of knowledge about human behavior related to other elements of an organization
such as structure, technology and social systems.”
Researchers, management practitioners, psychologists, and social scientists must understand
the very credentials of an individual, his background, social framework, educational update,
impact of social groups and other situational factors on behavior.
Managers under whom an individual is working should be able to explain, predict, evaluate
and modify human behavior that will largely depend upon knowledge, skill and experience of
the manager in handling large group of people in diverse situations. Preemptive actions need
to be taken for human behavior forecasting.
In words of K Aswathappa, “OB is the study of human behavior in organizational setting, of
the interface between human behavior and organization and of the organization itself.”
In words of Stephen P. Robbins, “OB is a field of study that investigates the impact that
individuals, groups and structures have on behavior within organizations for the purpose of
applying such knowledge towards improving an organization’s effectiveness.”
According to Davis and Newstram, “Organizational behavior is the study and application of
knowledge about how people act within organizations.”
According to Fred Luthans, “Behavior is directly concerned with the understanding, prediction
and control of human behavior in organizations.”
In words of John Newstram and Keith Devis, “Organizational behavior is the study and
application of knowledge about how people as individuals and as groups act within
organizations. It strives to identify ways in which people can act more effectively.”
OB is the study of individual behavior in isolation, when in group and as a part of an
organization. The study of individual behavior only, would be incomplete because behavior is
affected by the people surrounding us as well as by the organization, in which we work.
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 3
Studying only individuals or only organizations would be of no use. It is essential to study both
simultaneously.
Personality, perception, learning, attitude, family background, training, motivation, job
satisfaction, performance appraisal, leadership effectiveness, norms, values and ethics are the
factors which affect the individual behavior . Group dynamics, communication, organizational
environment, individual and organizational culture affect group behavior . Organizational
structure, power & politics, status, relation with juniors & seniors, conflicts and culture affect
the individual behavior in the organization.
These various factors relate to different disciplines including psychology, sociology, social
psychology, political science, anthropology, etc.
(History and Evolution of Organisational Behavior Studies)
Origin of Organisational Behaviour can trace its roots back to Max Weber and earlier
organizational studies.
The Industrial Revolution is the period from approximately 1760 when new technologies
resulted in the adoption of new manufacturing techniques, including increased
mechanization.
The industrial revolution led to significant social and cultural change, including new
forms of organization.
Analyzing these new organizational forms, sociologist Max Weber described
bureaucracy as an ideal type of organization that rested on rational-legal principles and
maximized technical efficiency.
In the 1890’s; with the arrival of scientific management and Taylorism, Organizational
Behavior Studies was forming it as an academic discipline.
Failure of scientific management gave birth to the human relations movement which is
characterized by a heavy emphasis on employee cooperation and morale.
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Studying only individuals or only organizations would be of no use. It is essential to study both
simultaneously.
Personality, perception, learning, attitude, family background, training, motivation, job
satisfaction, performance appraisal, leadership effectiveness, norms, values and ethics are the
factors which affect the individual behavior . Group dynamics, communication, organizational
environment, individual and organizational culture affect group behavior . Organizational
structure, power & politics, status, relation with juniors & seniors, conflicts and culture affect
the individual behavior in the organization.
These various factors relate to different disciplines including psychology, sociology, social
psychology, political science, anthropology, etc.
(History and Evolution of Organisational Behavior Studies)
Origin of Organisational Behaviour can trace its roots back to Max Weber and earlier
organizational studies.
The Industrial Revolution is the period from approximately 1760 when new technologies
resulted in the adoption of new manufacturing techniques, including increased
mechanization.
The industrial revolution led to significant social and cultural change, including new
forms of organization.
Analyzing these new organizational forms, sociologist Max Weber described
bureaucracy as an ideal type of organization that rested on rational-legal principles and
maximized technical efficiency.
In the 1890’s; with the arrival of scientific management and Taylorism, Organizational
Behavior Studies was forming it as an academic discipline.
Failure of scientific management gave birth to the human relations movement which is
characterized by a heavy emphasis on employee cooperation and morale.
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 4
Human Relations Movement from the 1930’s to 1950’s contributed to shaping the
Organizational Behavior studies.
Works of scholars like Elton Mayo, Chester Barnard, Henri Fayol, Mary Parker Follett,
Frederick Herzberg, Abraham Mas low, David Mc Cellan and Victor Vroom contributed
to the growth of Organisational Behaviour as a discipline.
Works of scholars like Elton Mayo, Chester Barnard, Henri Fayol, Mary Parker Follett,
Frederick Herzberg, Abraham Maslow, David Mc Cellan and Victor Vroom contributed to
the growth of Organisational Behaviour as a discipline.
Herbert Simon’s Administrative Behavior introduced a number of important concepts to
the study of organizational behavior, most notably decision making.
Simon along with Chester Barnard; argued that people make decisions differently in
organizations than outside of them. Simon was awarded the Nobel Prize in Economics
for his work on organizational decision making.
In the 1960s and 1970s, the field became more quantitative and produced such ideas as
the informal organization, and resource dependence. Contingency theory, institutional
theory, and organizational ecology also enraged.
Starting in the 1980s, cultural explanations of organizations and organizational change
became areas of study.
Informed by anthropology, psychology, and sociology, qualitative research became
more acceptable in OB.
Study of organizational behavior helps in studying:
i. Why people behave in a particular way?
ii. Why one person is more effective than the other?
iii. Why one group is more effective than the other?
iv. Why one person is more effective in one organization as compared to the other
organizations?
The study of above things gives sound knowledge about human behavior and this knowledge
can be applied in shaping the behavior and taking various decisions related to policy making in
human resource management.
Scope
The scope of the organizational behavior is as under:
Impact of personality on performance
Employee motivation
Leadership
How to create effective teams and groups
Study of different organizational structures
Individual behavior, attitude and learning
Perception
Design and development of effective organization
Job design
Impact of culture on organizational behavior
Copyright (Diwakar Education Hub) Page 4
Human Relations Movement from the 1930’s to 1950’s contributed to shaping the
Organizational Behavior studies.
Works of scholars like Elton Mayo, Chester Barnard, Henri Fayol, Mary Parker Follett,
Frederick Herzberg, Abraham Mas low, David Mc Cellan and Victor Vroom contributed
to the growth of Organisational Behaviour as a discipline.
Works of scholars like Elton Mayo, Chester Barnard, Henri Fayol, Mary Parker Follett,
Frederick Herzberg, Abraham Maslow, David Mc Cellan and Victor Vroom contributed to
the growth of Organisational Behaviour as a discipline.
Herbert Simon’s Administrative Behavior introduced a number of important concepts to
the study of organizational behavior, most notably decision making.
Simon along with Chester Barnard; argued that people make decisions differently in
organizations than outside of them. Simon was awarded the Nobel Prize in Economics
for his work on organizational decision making.
In the 1960s and 1970s, the field became more quantitative and produced such ideas as
the informal organization, and resource dependence. Contingency theory, institutional
theory, and organizational ecology also enraged.
Starting in the 1980s, cultural explanations of organizations and organizational change
became areas of study.
Informed by anthropology, psychology, and sociology, qualitative research became
more acceptable in OB.
Study of organizational behavior helps in studying:
i. Why people behave in a particular way?
ii. Why one person is more effective than the other?
iii. Why one group is more effective than the other?
iv. Why one person is more effective in one organization as compared to the other
organizations?
The study of above things gives sound knowledge about human behavior and this knowledge
can be applied in shaping the behavior and taking various decisions related to policy making in
human resource management.
Scope
The scope of the organizational behavior is as under:
Impact of personality on performance
Employee motivation
Leadership
How to create effective teams and groups
Study of different organizational structures
Individual behavior, attitude and learning
Perception
Design and development of effective organization
Job design
Impact of culture on organizational behavior
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 5
Management of change
Management of conflict and stress
Organizational development
Organizational culture
Transactional analysis
Group behavior, power and politics
Job design
Study of emotions
The field of the organizational behavior does not depend upon deductions based on gut
feelings but attempts to gather information regarding an issue in a scientific manner under
controlled conditions. It uses information and interprets the findings so that the behavior of an
individual and group can be canalized as desired.
Large number of psychologists, social scientists and academicians has carried out research on
various issues related to organization behavior. Employee performance and job satisfaction
are determinants of accomplishment of individual and organizational goals.
Organizations have been set up to fulfill needs of the people. In today’s competitive world, the
organizations have to be growth-oriented. This is possible when productivity is ensured with
respect to quantity of product to be produced with zero error quality. Employee absenteeism
and turnover has a negative impact on productivity.
Employee who absents frequently cannot contribute towards productivity and growth of the
organization. In the same manner, employee turnover causes increased cost of production.
Job satisfaction is a major factor to analyze performance of an individual towards his work.
Satisfied workers are productive workers who contribute towards building an appropriate
work culture in an organization.
Organizations are composed of number of individuals working independently or collectively in
teams, and number of such teams makes a department and number of such departments
makes an organization. It is a formal structure and all departments have to function in a
coordinated manner to achieve the organizational objective.
It is therefore important for all employees to possess a positive attitude towards work. They
need to function in congenial atmosphere and accomplish assigned goals. It is also important
for managers to develop an appropriate work culture. Use of authority, delegation of certain
powers to subordinates, division of labor, efficient communication.
Benchmarking, re-engineering, job re-design and empowerment are some of the important
factors so that an organization can function as well-oiled machine. This is not only applicable
to manufacturing organizations but also to service and social organizations.
Organisational Behaviour – Nature: A Separate Field of Study and Not a Discipline Only, An
Interdisciplinary Approach, An Applied Science and a Few Others
Copyright (Diwakar Education Hub) Page 5
Management of change
Management of conflict and stress
Organizational development
Organizational culture
Transactional analysis
Group behavior, power and politics
Job design
Study of emotions
The field of the organizational behavior does not depend upon deductions based on gut
feelings but attempts to gather information regarding an issue in a scientific manner under
controlled conditions. It uses information and interprets the findings so that the behavior of an
individual and group can be canalized as desired.
Large number of psychologists, social scientists and academicians has carried out research on
various issues related to organization behavior. Employee performance and job satisfaction
are determinants of accomplishment of individual and organizational goals.
Organizations have been set up to fulfill needs of the people. In today’s competitive world, the
organizations have to be growth-oriented. This is possible when productivity is ensured with
respect to quantity of product to be produced with zero error quality. Employee absenteeism
and turnover has a negative impact on productivity.
Employee who absents frequently cannot contribute towards productivity and growth of the
organization. In the same manner, employee turnover causes increased cost of production.
Job satisfaction is a major factor to analyze performance of an individual towards his work.
Satisfied workers are productive workers who contribute towards building an appropriate
work culture in an organization.
Organizations are composed of number of individuals working independently or collectively in
teams, and number of such teams makes a department and number of such departments
makes an organization. It is a formal structure and all departments have to function in a
coordinated manner to achieve the organizational objective.
It is therefore important for all employees to possess a positive attitude towards work. They
need to function in congenial atmosphere and accomplish assigned goals. It is also important
for managers to develop an appropriate work culture. Use of authority, delegation of certain
powers to subordinates, division of labor, efficient communication.
Benchmarking, re-engineering, job re-design and empowerment are some of the important
factors so that an organization can function as well-oiled machine. This is not only applicable
to manufacturing organizations but also to service and social organizations.
Organisational Behaviour – Nature: A Separate Field of Study and Not a Discipline Only, An
Interdisciplinary Approach, An Applied Science and a Few Others
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 6
Organizational behaviour has emerged as a separate field of study.
The nature it has acquired is identified as follows:
1. A Separate Field of Study and Not a Discipline Only:
By definition, a discipline is an accepted science that is based on a theoretical foundation. But,
O.B. has a multi- interdisciplinary orientation and is, thus, not based on a specific theoretical
background. Therefore, it is better reasonable to call O.B. a separate field of study rather than
a discipline only.
2. An Interdisciplinary Approach:
Organizational behaviour is essentially an interdisciplinary approach to study human
behaviour at work. It tries to integrate the relevant knowledge drawn from related disciplines
like psychology, sociology and anthropology to make them applicable for studying and
analysing organizational behaviour.
3. An Applied Science:
The very nature of O.B. is applied. What O.B. basically does is the application of various
researches to solve the organizational problems related to human behaviour. The basic line of
difference between pure science and O.B. is that while the former concentrates of
fundamental researches, the latter concentrates on applied researches. O.B. involves both
applied research and its application in organizational analysis. Hence, O.B. can be called both
science as well as art.
4. A Normative Science:
Organizational Behaviour is a normative science also. While the positive science discusses only
cause effect relationship, O.B. prescribes how the findings of applied researches can be
applied to socially accepted organizational goals. Thus, O.B. deals with what is accepted by
individuals and society engaged in an organization. Yes, it is not that O.B. is not normative at
all. In fact, O.B. is normative as well that is well underscored by the proliferation of
management theories.
5. A Humanistic and Optimistic Approach:
Organizational Behaviour applies humanistic approach towards people working in the
organization. It, deals with the thinking and feeling of human beings. O.B. is based on the
belief that people have an innate desire to be independent, creative and productive. It also
realizes that people working in the organization can and will actualise these potentials if they
are given proper conditions and environment. Environment affects performance or workers
working in an organization.
6 A Total System Approach:
The system approach is one that integrates all the variables, affecting organizational
functioning. The systems approach has been developed by the behavioural scientists to
analyse human behaviour in view of his/her socio-psychological framework. Man’s socio-
psychological framework makes man a complex one and the systems approach tries to study
his/her complexity and find solution to it.
Important Characteristics
Copyright (Diwakar Education Hub) Page 6
Organizational behaviour has emerged as a separate field of study.
The nature it has acquired is identified as follows:
1. A Separate Field of Study and Not a Discipline Only:
By definition, a discipline is an accepted science that is based on a theoretical foundation. But,
O.B. has a multi- interdisciplinary orientation and is, thus, not based on a specific theoretical
background. Therefore, it is better reasonable to call O.B. a separate field of study rather than
a discipline only.
2. An Interdisciplinary Approach:
Organizational behaviour is essentially an interdisciplinary approach to study human
behaviour at work. It tries to integrate the relevant knowledge drawn from related disciplines
like psychology, sociology and anthropology to make them applicable for studying and
analysing organizational behaviour.
3. An Applied Science:
The very nature of O.B. is applied. What O.B. basically does is the application of various
researches to solve the organizational problems related to human behaviour. The basic line of
difference between pure science and O.B. is that while the former concentrates of
fundamental researches, the latter concentrates on applied researches. O.B. involves both
applied research and its application in organizational analysis. Hence, O.B. can be called both
science as well as art.
4. A Normative Science:
Organizational Behaviour is a normative science also. While the positive science discusses only
cause effect relationship, O.B. prescribes how the findings of applied researches can be
applied to socially accepted organizational goals. Thus, O.B. deals with what is accepted by
individuals and society engaged in an organization. Yes, it is not that O.B. is not normative at
all. In fact, O.B. is normative as well that is well underscored by the proliferation of
management theories.
5. A Humanistic and Optimistic Approach:
Organizational Behaviour applies humanistic approach towards people working in the
organization. It, deals with the thinking and feeling of human beings. O.B. is based on the
belief that people have an innate desire to be independent, creative and productive. It also
realizes that people working in the organization can and will actualise these potentials if they
are given proper conditions and environment. Environment affects performance or workers
working in an organization.
6 A Total System Approach:
The system approach is one that integrates all the variables, affecting organizational
functioning. The systems approach has been developed by the behavioural scientists to
analyse human behaviour in view of his/her socio-psychological framework. Man’s socio-
psychological framework makes man a complex one and the systems approach tries to study
his/her complexity and find solution to it.
Important Characteristics
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 7
According the Keith Davis, ‘Organisational behaviour is an academic discipline concerned with
understanding and describing human behaviour in an organisational environment’. It seeks to
shed light on the whole complex human factor in organisations by identifying causes and
effects of that behaviour.
Another definition provided by Joe Kelly states, ‘Organisational behaviour is the systematic
study of the nature of organisations, how they begin, grow, develop, and their effect on
individual members, constituent groups, other organisations and larger institutions’.
Modern organisational behaviour is characterised by the acceptance of a human resource
model. It takes a more positive view of human beings. People are accepted as they are and not
prejudged using stereotypes.
Some of the important characteristics of organisational behaviour are discussed as follows:
1. Organisational behaviour is a rational thinking, not an emotional feeling about people. The
major goals of organisational behaviour are to explain and predict human behavioural in
organisations. It is action-oriented and goal-directed.
2. Organisational behavioural seeks to balanced human and technical values at work. It seeks
to achieve productivity by building and maintaining employee’s dignity, growth and
satisfaction, rather than at the expense of these values.
3. Organisational behaviour integrates behavioural sciences. Many of its core concepts are
borrowed from others fields and discipline like social psychology, sociology, and anthropology,
etc.
4. Organisational behaviour is both a science and an art, the knowledge about human
behaviour in organisations leans towards being science. Modern organisational behaviour is,
at once, empirical, interpretative, and critical. It is an interpretative science in the pursuit of
knowledge and meaning.
5. Organisational behaviour exists at multiple like levels. Behaviour occurs at the individual,
the group, and the organisational systems levels. Behaviour that is attributable to each of
these levels can be both identified and isolated but at the same time these three levels
interact with each other and OB-being affected by the behaviour of individuals, group level
behaviour is affected by the organisational level phenomena and so on.
6. Organisational behaviour does not exist in vacuum. Organisations are made up of both
social and technical components and therefore characterized as social-technical systems. The
operational implication of this is that any approach of looking at behaviour must also take into
account the technical component of organisation especially such issues as the nature of work
and the technology. Organisations at the same time, must take into account the constructs of
the working environment, for example, the extent to which the market and the product is
changing.
Organisational Level
Copyright (Diwakar Education Hub) Page 7
According the Keith Davis, ‘Organisational behaviour is an academic discipline concerned with
understanding and describing human behaviour in an organisational environment’. It seeks to
shed light on the whole complex human factor in organisations by identifying causes and
effects of that behaviour.
Another definition provided by Joe Kelly states, ‘Organisational behaviour is the systematic
study of the nature of organisations, how they begin, grow, develop, and their effect on
individual members, constituent groups, other organisations and larger institutions’.
Modern organisational behaviour is characterised by the acceptance of a human resource
model. It takes a more positive view of human beings. People are accepted as they are and not
prejudged using stereotypes.
Some of the important characteristics of organisational behaviour are discussed as follows:
1. Organisational behaviour is a rational thinking, not an emotional feeling about people. The
major goals of organisational behaviour are to explain and predict human behavioural in
organisations. It is action-oriented and goal-directed.
2. Organisational behavioural seeks to balanced human and technical values at work. It seeks
to achieve productivity by building and maintaining employee’s dignity, growth and
satisfaction, rather than at the expense of these values.
3. Organisational behaviour integrates behavioural sciences. Many of its core concepts are
borrowed from others fields and discipline like social psychology, sociology, and anthropology,
etc.
4. Organisational behaviour is both a science and an art, the knowledge about human
behaviour in organisations leans towards being science. Modern organisational behaviour is,
at once, empirical, interpretative, and critical. It is an interpretative science in the pursuit of
knowledge and meaning.
5. Organisational behaviour exists at multiple like levels. Behaviour occurs at the individual,
the group, and the organisational systems levels. Behaviour that is attributable to each of
these levels can be both identified and isolated but at the same time these three levels
interact with each other and OB-being affected by the behaviour of individuals, group level
behaviour is affected by the organisational level phenomena and so on.
6. Organisational behaviour does not exist in vacuum. Organisations are made up of both
social and technical components and therefore characterized as social-technical systems. The
operational implication of this is that any approach of looking at behaviour must also take into
account the technical component of organisation especially such issues as the nature of work
and the technology. Organisations at the same time, must take into account the constructs of
the working environment, for example, the extent to which the market and the product is
changing.
Organisational Level
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 8
OB can be defined as actions and behaviors of individuals and groups towards and their impact
on the organization’s overall functioning and performance. OB can be studied at various levels
within an organization, and each level has a unique set of roles, responsibilities, and goals.
Following points discuss the three levels briefly:
Individual Level – Deals with the concepts at the individual level. Examples of individual-level
concepts are perception, personality, learning, motivation, and attitude.
Group Level – Deals with the concepts at the group level. Examples of group-level concepts are
team, conflict, leadership, power, and politics. Group-level concepts may include how groups
are formed, how to make effective teams, how individually and collectively the group activities
can be improved, how to motivate employees, and which type of group would be suitable for
a particular assignment.
Organizational Level – Deals with the concepts at the organizational level. Examples of
organizational-level concepts are change management and organizational culture. Other
topics discussed at organizational level include the concept of organization, different
organizational models, and organizational change along with its impact and implementation.
The working conditions and stress management are also discussed at the organizational level.
Organisational Behaviour – Four Major Models: Autocratic, Custodial, Supportive and
Collegial
There are four major models or frameworks that organizations operate out of-
1. Autocratic,
2. Custodial,
3. Supportive, and
4. Collegial.
1. Autocratic:
The basis of this model is power with a managerial orientation of authority. The employees in
turn are oriented towards obedience and dependence on the boss. The employee need that is
met is subsistence. The performance result is minimal.
2. Custodial:
The basis of this model is economic resources with a managerial orientation of money. The
employees in turn are oriented towards security and benefits and dependence on the
organization. The employee need that is met is security. The performance result is passive
cooperation.
3. Supportive:
The basis of this model is leadership with a managerial orientation of support. The employees
in turn are oriented towards job performance and participation. The employee need that is
met is status and recognition. The performance result is awakened drives.
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OB can be defined as actions and behaviors of individuals and groups towards and their impact
on the organization’s overall functioning and performance. OB can be studied at various levels
within an organization, and each level has a unique set of roles, responsibilities, and goals.
Following points discuss the three levels briefly:
Individual Level – Deals with the concepts at the individual level. Examples of individual-level
concepts are perception, personality, learning, motivation, and attitude.
Group Level – Deals with the concepts at the group level. Examples of group-level concepts are
team, conflict, leadership, power, and politics. Group-level concepts may include how groups
are formed, how to make effective teams, how individually and collectively the group activities
can be improved, how to motivate employees, and which type of group would be suitable for
a particular assignment.
Organizational Level – Deals with the concepts at the organizational level. Examples of
organizational-level concepts are change management and organizational culture. Other
topics discussed at organizational level include the concept of organization, different
organizational models, and organizational change along with its impact and implementation.
The working conditions and stress management are also discussed at the organizational level.
Organisational Behaviour – Four Major Models: Autocratic, Custodial, Supportive and
Collegial
There are four major models or frameworks that organizations operate out of-
1. Autocratic,
2. Custodial,
3. Supportive, and
4. Collegial.
1. Autocratic:
The basis of this model is power with a managerial orientation of authority. The employees in
turn are oriented towards obedience and dependence on the boss. The employee need that is
met is subsistence. The performance result is minimal.
2. Custodial:
The basis of this model is economic resources with a managerial orientation of money. The
employees in turn are oriented towards security and benefits and dependence on the
organization. The employee need that is met is security. The performance result is passive
cooperation.
3. Supportive:
The basis of this model is leadership with a managerial orientation of support. The employees
in turn are oriented towards job performance and participation. The employee need that is
met is status and recognition. The performance result is awakened drives.
MANAGEMENT UNIT-2
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4. Collegial:
The basis of this model is partnership with a managerial orientation of teamwork. The
employees in turn are oriented towards responsible behavior and self-discipline. The
employee need that is met is self-actualization. The performance result is moderate
enthusiasm.
Although there are four separate models, almost no organization operates exclusively in one.
There will usually be a predominate one, with one or more areas over-lapping in the other
models.
Emergence and Ethical Perspective:
Organisational behaviour has emerged gradually, right from inception of social organisation.
The main factor which promoted the growth of OB was understanding the needs and motives
of the people engaged in organisational activities. Individual’s desires and wants were focused
on the activities devoted to obtain material means of satisfaction of his wants.
In this context, one can observe that it has direct link between labour, capital and
management. The fact that needs of the labour force have not been given adequate
importance by the management. The discontent at the work places becomes severe due to
bad working conditions, occupational diseases and the unhealthy atmosphere.
The salient features of ethical perspective are given below:
i. Higher performance criteria.
ii. Subordinates have been given the freedom to control and execute the work with proper
accountability.
iii. Understanding and providing job security to workers and also recognising them as human
beings.
iv. Workers’ sense of belongingness to the organisation.
v. Acknowledging that in an organisation the informal group has a great role over the ethical
aspects of workers and their performance
vi. To achieve objectives, the leadership has a responsibility to suitably change the behaviour
pattern of the workers.
vii. A shift from the unions’ collective relations, OB has led to individualisation of collective
relations.
viii. Employees’ commitment is achieved by giving more power to them by cooperative
decision making.
ix. Human relations to promote “Neo-unitarianism” (a new type of relation based on
consensus and belief between the workers and management).
x. OB directs the employees to Quality of Work Life (QWL).
There are several objectives of organisational behaviour and some of them are briefly stated
here:
(i) To analyse different perspective and potentialities to create and develop the ethical values
in an organisation,
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4. Collegial:
The basis of this model is partnership with a managerial orientation of teamwork. The
employees in turn are oriented towards responsible behavior and self-discipline. The
employee need that is met is self-actualization. The performance result is moderate
enthusiasm.
Although there are four separate models, almost no organization operates exclusively in one.
There will usually be a predominate one, with one or more areas over-lapping in the other
models.
Emergence and Ethical Perspective:
Organisational behaviour has emerged gradually, right from inception of social organisation.
The main factor which promoted the growth of OB was understanding the needs and motives
of the people engaged in organisational activities. Individual’s desires and wants were focused
on the activities devoted to obtain material means of satisfaction of his wants.
In this context, one can observe that it has direct link between labour, capital and
management. The fact that needs of the labour force have not been given adequate
importance by the management. The discontent at the work places becomes severe due to
bad working conditions, occupational diseases and the unhealthy atmosphere.
The salient features of ethical perspective are given below:
i. Higher performance criteria.
ii. Subordinates have been given the freedom to control and execute the work with proper
accountability.
iii. Understanding and providing job security to workers and also recognising them as human
beings.
iv. Workers’ sense of belongingness to the organisation.
v. Acknowledging that in an organisation the informal group has a great role over the ethical
aspects of workers and their performance
vi. To achieve objectives, the leadership has a responsibility to suitably change the behaviour
pattern of the workers.
vii. A shift from the unions’ collective relations, OB has led to individualisation of collective
relations.
viii. Employees’ commitment is achieved by giving more power to them by cooperative
decision making.
ix. Human relations to promote “Neo-unitarianism” (a new type of relation based on
consensus and belief between the workers and management).
x. OB directs the employees to Quality of Work Life (QWL).
There are several objectives of organisational behaviour and some of them are briefly stated
here:
(i) To analyse different perspective and potentialities to create and develop the ethical values
in an organisation,
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 10
(ii) To analyse the potentialities towards the ways and means to conduct and organise the
systems, methods and approaches for organisation development in an organisation,
(iii) To analyse the potentialities to develop process, methods and approaches of formal and
informal patterns of organisation and society,
(iv) To analyse how to make perspective methods and process of effective communication to
formulate ethical norms in an organisation,
(v) To analyse various aspects and factors affecting the group cohesiveness,
(vi) To analyse the ways and means to develop different ethical aspects for group dynamism,
(vii) To analyse the mutual interest of individual and group. Mutual interest is represented by
the statement ‘Organisation needs people, and people also need organisation’,
(viii) To analyse and evaluate the role of different key elements like people, structure,
technology interactive behaviour and environment etc.
(ix) To analyse and evaluate the behavioural approaches in organisation. In context of that all
of them are based on ‘Art’ and ‘Science’,
(x) To analyse different aspects of work environment which duly affects the behavioural
patterns and attitudes of persons.
Key Elements: People, Structure, Technology, Interactive Behaviour and Environment
Organisation behaviour is an integrated process by which the role and behaviour of people are
incurred. Indian ethical norms emphasised for better work environment with behavioural
aspects. In order to perform interactive and mutual tasks and to develop some behavioural
aspects, certain key elements or constitutes are to be included. These element may develop
the interactive aspects for the well-being of persons.
As such, the key elements of organisational behaviour are stated here:
1. People:
People makes the interactive and behavioural platform in any organisation and people consists
in the form of individuals and group. The role and behaviour of people identifies, recognise
and develop the interactive relations towards behavioural attitudes in society.
2. Structure:
The formal relationship of people makes the structural design in organisation. The managerial
and organisational levels are decorated by specific job as well as level to be incurred in
structural design. The rights and responsibilities are also being determined in a particular
group or structure.
3. Technology:
The technology represent all the resources with which people work and affects the task that
they perform. The role and utilisation of technology has a significant influence on the
performance of people and thereby to achieve perfections in the betterment of interactive
behaviour.
4. Interactive Behaviour:
Copyright (Diwakar Education Hub) Page 10
(ii) To analyse the potentialities towards the ways and means to conduct and organise the
systems, methods and approaches for organisation development in an organisation,
(iii) To analyse the potentialities to develop process, methods and approaches of formal and
informal patterns of organisation and society,
(iv) To analyse how to make perspective methods and process of effective communication to
formulate ethical norms in an organisation,
(v) To analyse various aspects and factors affecting the group cohesiveness,
(vi) To analyse the ways and means to develop different ethical aspects for group dynamism,
(vii) To analyse the mutual interest of individual and group. Mutual interest is represented by
the statement ‘Organisation needs people, and people also need organisation’,
(viii) To analyse and evaluate the role of different key elements like people, structure,
technology interactive behaviour and environment etc.
(ix) To analyse and evaluate the behavioural approaches in organisation. In context of that all
of them are based on ‘Art’ and ‘Science’,
(x) To analyse different aspects of work environment which duly affects the behavioural
patterns and attitudes of persons.
Key Elements: People, Structure, Technology, Interactive Behaviour and Environment
Organisation behaviour is an integrated process by which the role and behaviour of people are
incurred. Indian ethical norms emphasised for better work environment with behavioural
aspects. In order to perform interactive and mutual tasks and to develop some behavioural
aspects, certain key elements or constitutes are to be included. These element may develop
the interactive aspects for the well-being of persons.
As such, the key elements of organisational behaviour are stated here:
1. People:
People makes the interactive and behavioural platform in any organisation and people consists
in the form of individuals and group. The role and behaviour of people identifies, recognise
and develop the interactive relations towards behavioural attitudes in society.
2. Structure:
The formal relationship of people makes the structural design in organisation. The managerial
and organisational levels are decorated by specific job as well as level to be incurred in
structural design. The rights and responsibilities are also being determined in a particular
group or structure.
3. Technology:
The technology represent all the resources with which people work and affects the task that
they perform. The role and utilisation of technology has a significant influence on the
performance of people and thereby to achieve perfections in the betterment of interactive
behaviour.
4. Interactive Behaviour:
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 158
Therefore, to manage the industrial harmony, desired productivity and satisfactory
interpersonal relationship with the employees, an effective method of conflict resolution is
needed in any organization as an effective management tool.
Please Be Careful from Fake Person buy our Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
MANAGEMENT UNIT-2 MCQS
1. Organization structure primarily refers to
________
(1) How activities are coordinated & controlled
(2) How resources are allocated
(3) The location of departments and office
space
(4) The policy statements developed by the
firm
Answer: (1)
Explanation:
Coordination is the means by which
the activities of various departments, peoples,
groups, or individuals are linked with in an
organization that enables the team to perform
effective and efficiently.
2. The purpose of job enrichment is to ______
(1) Expand the number of tasks an individual
can do
(2) Increase job efficiency
(3) Increase job effectiveness
(4) Increase job satisfaction of middle
management
Answer: (1)
Explanation: By improving efficiency a business
can reduce its costs and improve its
competitiveness. There is a difference between
production and productivity.
3. Strategic planning as a broad concept
consists of ______
(1) Corporate strategy and business strategy
(2) Strategy formulation and strategy
implementation
(3) Inputs and outputs
(4) Environmental analysis and internal analysis
Answer: (2)
Explanation: Strategy Formulation includes
planning and decision-making involved in
developing organization's strategic goals and
plans. Strategy Implementation involves all
those means related to executing
the strategic plans. In short, Strategy
Formulation is placing the Forces before the
action.
4. Functional managers are responsible _____
(1) For a single area of activity
(2) To the upper level of management and staff
(3) For complex organizational sub-units
(4) For obtaining copyrights and patents for
newly developed processes and equipment
Answer: (1)
Explanation: As businesses grow larger and
their products and services become more
complex, the number of functional areas within
a business grows.
5. Hawthorne Studies is related to which stage
of the organisational behaviour evolution
(1) Industrial revolution
(2) Scientific management
(3) Organisational behaviour
(4) Human relations movement
Answer: Human relations movement
Copyright (Diwakar Education Hub) Page 158
Therefore, to manage the industrial harmony, desired productivity and satisfactory
interpersonal relationship with the employees, an effective method of conflict resolution is
needed in any organization as an effective management tool.
Please Be Careful from Fake Person buy our Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
MANAGEMENT UNIT-2 MCQS
1. Organization structure primarily refers to
________
(1) How activities are coordinated & controlled
(2) How resources are allocated
(3) The location of departments and office
space
(4) The policy statements developed by the
firm
Answer: (1)
Explanation:
Coordination is the means by which
the activities of various departments, peoples,
groups, or individuals are linked with in an
organization that enables the team to perform
effective and efficiently.
2. The purpose of job enrichment is to ______
(1) Expand the number of tasks an individual
can do
(2) Increase job efficiency
(3) Increase job effectiveness
(4) Increase job satisfaction of middle
management
Answer: (1)
Explanation: By improving efficiency a business
can reduce its costs and improve its
competitiveness. There is a difference between
production and productivity.
3. Strategic planning as a broad concept
consists of ______
(1) Corporate strategy and business strategy
(2) Strategy formulation and strategy
implementation
(3) Inputs and outputs
(4) Environmental analysis and internal analysis
Answer: (2)
Explanation: Strategy Formulation includes
planning and decision-making involved in
developing organization's strategic goals and
plans. Strategy Implementation involves all
those means related to executing
the strategic plans. In short, Strategy
Formulation is placing the Forces before the
action.
4. Functional managers are responsible _____
(1) For a single area of activity
(2) To the upper level of management and staff
(3) For complex organizational sub-units
(4) For obtaining copyrights and patents for
newly developed processes and equipment
Answer: (1)
Explanation: As businesses grow larger and
their products and services become more
complex, the number of functional areas within
a business grows.
5. Hawthorne Studies is related to which stage
of the organisational behaviour evolution
(1) Industrial revolution
(2) Scientific management
(3) Organisational behaviour
(4) Human relations movement
Answer: Human relations movement
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 159
Explanation: The human relations movement
was born from the Hawthorne studies, which
were conducted by Elton Mayo and Fritz
Roethlisberger from 1924 to 1932.
6. The field of organisational behaviour
examines such questions as the nature of
leadership, effective team development,
and______
(1) Interpersonal conflict resolution; motivation
of individuals
(2) Organisational control; conflict
management
(3) Motivation of individuals; planning
(4) Planning; development
Answer/Explanation: Interpersonal conflict
resolution; motivation of individuals
7. The field of organisational behaviour is
primarily concerned with _____
(1) The behaviour of individual and groups.
(2) How resources are effectively managed.
(3) Control processes and interactions between
organisations, external context.
(4) Both a and c.
Answer/Explanation: (4)
The behaviour of individual and groups &
Control processes and interactions between
8. The study of organizational behaviour has
certain basic assumptions. They are _____
(1) An industrial enterprise is an organisation of
people.
(2) These people must be motivated to work
effectively.
(3) The goals of the employee and the
employer may not necessarily coincide.
(4) All of the above.
Answer/Explanation:
All of the above.
9. Which of the following represents the
correct sequencing of historical developments
of Organisational Behaviour?
(1) Industrial revolution —> Scientific
management –> Human relations movement –
> OB
(2) Industrial revolution —> Human relations
movement —> Scientific management –> OB
(3) Scientific management —> Human relations
movement –> Industrial revolution –> OB
(4) None of these.
Answer/Explanation:
Industrial revolution —> Scientific
management –> Human relations movement –
> OB
10. Which one of the following is the definition
given by Fred Luthans _____
(1) “Organisational behaviour is to understand,
predicting and controlling human behaviour at
work”
(2) “Organisational behaviour is subset of
management activities concerned to human
behaviour”
(3) “Organisational behaviour is a branch of
social sciences that seeks to build theories”
(4) “Organisational behaviour is a field of study
that investigates the impact on behaviour”
Answer/Explanation:
“Organisational behaviour is to understand,
predicting and controlling human behaviour at
work”
11. Which of the following is not correct for the
organisational behaviour?
(1) Organisational behaviour is an integral part
of management
(2) Organisational behaviour is a disciplinary
approach
(3) Organisational behaviour helps in analysis
of behaviour
(4) “Organisational behaviour is goal-oriented
Answer/Explanation:
Organisational behaviour is a disciplinary
approach
12. MBTI stands for
(1) Myers- Briggs Test indicator
(2) Myers- Briggs Test investigator
(3) Myers- Briggs Type indicator
(4) Myers- Briggs Type investigator
Answer: Myers- Briggs Type indicator
Copyright (Diwakar Education Hub) Page 159
Explanation: The human relations movement
was born from the Hawthorne studies, which
were conducted by Elton Mayo and Fritz
Roethlisberger from 1924 to 1932.
6. The field of organisational behaviour
examines such questions as the nature of
leadership, effective team development,
and______
(1) Interpersonal conflict resolution; motivation
of individuals
(2) Organisational control; conflict
management
(3) Motivation of individuals; planning
(4) Planning; development
Answer/Explanation: Interpersonal conflict
resolution; motivation of individuals
7. The field of organisational behaviour is
primarily concerned with _____
(1) The behaviour of individual and groups.
(2) How resources are effectively managed.
(3) Control processes and interactions between
organisations, external context.
(4) Both a and c.
Answer/Explanation: (4)
The behaviour of individual and groups &
Control processes and interactions between
8. The study of organizational behaviour has
certain basic assumptions. They are _____
(1) An industrial enterprise is an organisation of
people.
(2) These people must be motivated to work
effectively.
(3) The goals of the employee and the
employer may not necessarily coincide.
(4) All of the above.
Answer/Explanation:
All of the above.
9. Which of the following represents the
correct sequencing of historical developments
of Organisational Behaviour?
(1) Industrial revolution —> Scientific
management –> Human relations movement –
> OB
(2) Industrial revolution —> Human relations
movement —> Scientific management –> OB
(3) Scientific management —> Human relations
movement –> Industrial revolution –> OB
(4) None of these.
Answer/Explanation:
Industrial revolution —> Scientific
management –> Human relations movement –
> OB
10. Which one of the following is the definition
given by Fred Luthans _____
(1) “Organisational behaviour is to understand,
predicting and controlling human behaviour at
work”
(2) “Organisational behaviour is subset of
management activities concerned to human
behaviour”
(3) “Organisational behaviour is a branch of
social sciences that seeks to build theories”
(4) “Organisational behaviour is a field of study
that investigates the impact on behaviour”
Answer/Explanation:
“Organisational behaviour is to understand,
predicting and controlling human behaviour at
work”
11. Which of the following is not correct for the
organisational behaviour?
(1) Organisational behaviour is an integral part
of management
(2) Organisational behaviour is a disciplinary
approach
(3) Organisational behaviour helps in analysis
of behaviour
(4) “Organisational behaviour is goal-oriented
Answer/Explanation:
Organisational behaviour is a disciplinary
approach
12. MBTI stands for
(1) Myers- Briggs Test indicator
(2) Myers- Briggs Test investigator
(3) Myers- Briggs Type indicator
(4) Myers- Briggs Type investigator
Answer: Myers- Briggs Type indicator
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 160
Explanation: The Myers-Briggs Company offers
a way for you to take the
MBTI
®
instrument online and verify your results
at MBTIonline.com.
13. The____________ is based on the
environment. Though____________ like
thinking, expectations and perception do exist,
and they are not needed to manage or predict
behaviour.
(1) Behaviouristic approach, Cognitive
processes,
(2) cognitive processes, behaviouristic
approach
(3) Social cognitive, behaviouristic approach
(4) Cognitive processes, social cognitive
Answer: Behaviouristic approach, Cognitive
processes,
Explanation: The behaviorists approach only
studies external observable (stimulus and
response) behavior which can be objectively
measured. ... They come after the stimulus and
before the response.
Therefore, cognitive psychologists' say if you
want to understand behavior, you have to
understand these mediational processes.
14. OB focuses at 3 Levels-
(1) Individuals, Organisation, Society
(2) Society, Organisation, Nation
(3) Employee, Employer, Management
(4) Individual, Groups, Organisation.
Answer: Individual, Groups, Organisation.
Explanation: When used as
nouns, group means a number of things or
persons being in some relation to one another,
whereas individual means a person considered
alone, rather than as belonging to a group of
people.
15. The most significant management skills are
(1) Technical, Human and Conceptual
(2) Technical, behavioural and Conceptual
(3) Systematic, Human and Conceptual
(4) Technical, Human and cognitive
Answer: Technical, Human and Conceptual
Explanation: Conceptual skills—the ability to
work with abstract concepts and ideas.
uman skills—the ability to communicate and
cooperate with others. In other words,
interpersonal skills.
Technical skills—the skills necessary to get the
job done, or hard skills.
16. Concerning organizational cultures,
(1) A strong culture is a more productive
environment
(2) A weak culture is a more productive
environment
(3) The specific culture that contributes to
positive effectiveness is well known
(4) The stronger the culture, the more
influential it is on employee behavior
Answer/Explanation:
The stronger the culture, the more influential it
is on employee behavior
17. Shared organizational values are
(1) Unconscious, affective desires or wants that
guide society’s behavior
(2) Influenced by international values
(3) Different for the various components of a
diverse work force
(4) A myth
Answer/Explanation:
Different for the various components of a
diverse work force
18. Which of the following best explains why an
employee behaves as s/he does?
(1) The environment is the most important
consideration in understanding individual
employee behavior.
(2) Both the environment and individual
differences are important considerations in
understanding individual employee behavior.
(3) Neither the environment nor individual
differences are important considerations in
understanding individual employee behavior.
(4) Employee personality and attitudes are
primarily dictated by the environment.
Answer/Explanation:
Copyright (Diwakar Education Hub) Page 160
Explanation: The Myers-Briggs Company offers
a way for you to take the
MBTI
®
instrument online and verify your results
at MBTIonline.com.
13. The____________ is based on the
environment. Though____________ like
thinking, expectations and perception do exist,
and they are not needed to manage or predict
behaviour.
(1) Behaviouristic approach, Cognitive
processes,
(2) cognitive processes, behaviouristic
approach
(3) Social cognitive, behaviouristic approach
(4) Cognitive processes, social cognitive
Answer: Behaviouristic approach, Cognitive
processes,
Explanation: The behaviorists approach only
studies external observable (stimulus and
response) behavior which can be objectively
measured. ... They come after the stimulus and
before the response.
Therefore, cognitive psychologists' say if you
want to understand behavior, you have to
understand these mediational processes.
14. OB focuses at 3 Levels-
(1) Individuals, Organisation, Society
(2) Society, Organisation, Nation
(3) Employee, Employer, Management
(4) Individual, Groups, Organisation.
Answer: Individual, Groups, Organisation.
Explanation: When used as
nouns, group means a number of things or
persons being in some relation to one another,
whereas individual means a person considered
alone, rather than as belonging to a group of
people.
15. The most significant management skills are
(1) Technical, Human and Conceptual
(2) Technical, behavioural and Conceptual
(3) Systematic, Human and Conceptual
(4) Technical, Human and cognitive
Answer: Technical, Human and Conceptual
Explanation: Conceptual skills—the ability to
work with abstract concepts and ideas.
uman skills—the ability to communicate and
cooperate with others. In other words,
interpersonal skills.
Technical skills—the skills necessary to get the
job done, or hard skills.
16. Concerning organizational cultures,
(1) A strong culture is a more productive
environment
(2) A weak culture is a more productive
environment
(3) The specific culture that contributes to
positive effectiveness is well known
(4) The stronger the culture, the more
influential it is on employee behavior
Answer/Explanation:
The stronger the culture, the more influential it
is on employee behavior
17. Shared organizational values are
(1) Unconscious, affective desires or wants that
guide society’s behavior
(2) Influenced by international values
(3) Different for the various components of a
diverse work force
(4) A myth
Answer/Explanation:
Different for the various components of a
diverse work force
18. Which of the following best explains why an
employee behaves as s/he does?
(1) The environment is the most important
consideration in understanding individual
employee behavior.
(2) Both the environment and individual
differences are important considerations in
understanding individual employee behavior.
(3) Neither the environment nor individual
differences are important considerations in
understanding individual employee behavior.
(4) Employee personality and attitudes are
primarily dictated by the environment.
Answer/Explanation:
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 161
Both the environment and individual
differences are important considerations in
understanding individual employee behavior.
19. In order from lowest to highest, what are
Maslow’s five classes of needs?
(1) Social-esteem-physiological-safety-self-
actualization
(2) Physiological-safety-social-self-
actualization-esteem
(3) Physiological-safety-social-esteem-self-
actualization
(4) Self-actualization-esteem-safety-social-
physiological
Answer/Explanation: Physiological-safety-
social-esteem-self-actualization
20. Organization structures
(1) Affect group behavior more than individual
behavior
(2) Change rapidly to meet environmental and
market changes
(3) Contribute positively to organizational
performance
(4) Can be defined simply as activities that
occur regularly
Answer/Explanation:
Can be defined simply as activities that occur
regularly
21. Continued membership in a group will
usually require
(1) Supporting the group leader
(2) Conforming to group norms
(3) Encouraging cohesiveness in the group
(4) Developing a status system
Answer: Conforming to group norms
Explanation: One common explanation
for norm conformity is that, if everyone else is
choosing to do one thing, it is probably a good
thing to do.
22. The definition of communication implies
that
(1) Communication is mostly verbal
(2) Communication is mostly written
(3) Most communication is in a vertical
direction
(4) Understanding must occur to have
communication
Answer: Understanding must occur to have
communication
Explanation: Understanding exists when all
parties involved have a mutual agreement as to
not only the information, but also the meaning
of the information.
23. _______ insist that it is advisable and
fruitful to the study the behaviour of the
human being which is visible than studying the
mind which is elusive in nature.
(1) Ivan Pavlov and Jon
(2) Watson
(3) Ivan Pavlov
(4) Jon B. Watson Ivan Pavlov and A.Maslow
Answer/Explanation: Ivan Pavlov and Jon B.
Watson
24. Behavioural framework based on ______
behaviour and ___environmental variables.
(1) Observable —- Non Observable
(2) Observable —- Observable
(3) Non Observable —- Observable
(4) Non observable —- Non Observable
Answer: Observable —- Observable
Explanation:
Observable behaviors (also known as
overt behaviors) are actions performed by an
organism that can be seen and measured.
25. Human can project ____ behaviour for
____ stimulus and he exhibit a response
depending on environmental consequences.
(1) Different—– different
(2) Same——same
(3) Same———different
(4) Different—— same
Answer: Different——– same
Explanation: Human behavior is shaped by
psychological traits, as personality types vary
from person to person,
producing different actions and behavior.
Copyright (Diwakar Education Hub) Page 161
Both the environment and individual
differences are important considerations in
understanding individual employee behavior.
19. In order from lowest to highest, what are
Maslow’s five classes of needs?
(1) Social-esteem-physiological-safety-self-
actualization
(2) Physiological-safety-social-self-
actualization-esteem
(3) Physiological-safety-social-esteem-self-
actualization
(4) Self-actualization-esteem-safety-social-
physiological
Answer/Explanation: Physiological-safety-
social-esteem-self-actualization
20. Organization structures
(1) Affect group behavior more than individual
behavior
(2) Change rapidly to meet environmental and
market changes
(3) Contribute positively to organizational
performance
(4) Can be defined simply as activities that
occur regularly
Answer/Explanation:
Can be defined simply as activities that occur
regularly
21. Continued membership in a group will
usually require
(1) Supporting the group leader
(2) Conforming to group norms
(3) Encouraging cohesiveness in the group
(4) Developing a status system
Answer: Conforming to group norms
Explanation: One common explanation
for norm conformity is that, if everyone else is
choosing to do one thing, it is probably a good
thing to do.
22. The definition of communication implies
that
(1) Communication is mostly verbal
(2) Communication is mostly written
(3) Most communication is in a vertical
direction
(4) Understanding must occur to have
communication
Answer: Understanding must occur to have
communication
Explanation: Understanding exists when all
parties involved have a mutual agreement as to
not only the information, but also the meaning
of the information.
23. _______ insist that it is advisable and
fruitful to the study the behaviour of the
human being which is visible than studying the
mind which is elusive in nature.
(1) Ivan Pavlov and Jon
(2) Watson
(3) Ivan Pavlov
(4) Jon B. Watson Ivan Pavlov and A.Maslow
Answer/Explanation: Ivan Pavlov and Jon B.
Watson
24. Behavioural framework based on ______
behaviour and ___environmental variables.
(1) Observable —- Non Observable
(2) Observable —- Observable
(3) Non Observable —- Observable
(4) Non observable —- Non Observable
Answer: Observable —- Observable
Explanation:
Observable behaviors (also known as
overt behaviors) are actions performed by an
organism that can be seen and measured.
25. Human can project ____ behaviour for
____ stimulus and he exhibit a response
depending on environmental consequences.
(1) Different—– different
(2) Same——same
(3) Same———different
(4) Different—— same
Answer: Different——– same
Explanation: Human behavior is shaped by
psychological traits, as personality types vary
from person to person,
producing different actions and behavior.
MANAGEMENT UNIT-2
Copyright (Diwakar Education Hub) Page 162
26. __________ states that along with
cognitive and external situation the
experiences faced through relevant past events
determines what a person becomes and this
will create an impact in subsequent behaviour.
(1) Behaviouristic Framework
(2) Cognitive Framework
(3) Social Cognitive Framework
(4) Social Framework
Answer/Explanation: Social Cognitive
Framework
27. _______have translated this SCT into the
theoretical framework for organizational
behavior.
(1) Stajkovic and Luthans
(2) Stajkovic and Sinner
(3) Sinner and Luthans
(4) Stajkovic and Pavlo
Answer: Stajkovic and Luthans
28. If modern-day managers do not positively
address and manage workforce diversity of the
following may become negative outcomes for
an organisation except
(1) More difficult communication
(2) Increased creativity and innovation
(3) More interpersonal conflicts
(4) Potential for higher employee turnover
Answer/Explanation: Increased creativity and
innovation
Please Be Careful from Fake Person buy our
Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
29. The structure of an OB model includes 3
levels of analysis individual, group and
organizational systems. Issues that influence all
3 levels in various ways and thus affect
behavioural dynamics are
(1) Change and stress
(2) Organisational culture and commitment
(3) Power and politics
(4) Work design and technology
Answer/Explanation: change and stress
30. Some of OB’s challenges and opportunities
include all of the following except
(1) Reinforcing the importance of traditional
methods of management
(2) Offering specific insights to improve
interpersonal and people skills
(3) Helping us learnt to cope in a continues
changing world
(4) Facilitating the improvement of quality and
employee productivity
Answer/Explanation: reinforcing the
importance of traditional methods of
management
31. The five personality traits as per Big Five
Personality Traits are
(1) Extroversion, Agreeableness, Conscientious,
Emotional Stability, Openness to experience
(2) Extroversion, Agreeableness, Friendly,
Emotional Stability, Openness to experience
(3) Extroversion, Agreeableness, Courage,
Friendly, Openness to experience
(4) Extroversion, Agreeableness, Conscientious,
Emotional Stability, Easy going
Answer/Explanation: Extroversion,
Agreeableness, Conscientious, Emotional
Stability, Openness to experience
32. OB's current state of investigation and
study is best described as:
(1). All of OB is based on universal truths
proposed by academics, researchers and
practitioners. Political forces have a tendency
to influence the study of OB and, hence, skew
resulting conclusions.
(2). There is little disagreement among OB
researchers and scholars as to the current
state.
(3). OB is practically based on situational or
contingency conditions driven by leadership
style.
(4). Cause-effect principles, which tend to apply
to all situations, have been isolated.
Answer/Explanation: OB is practically based on
situational or contingency conditions driven by
leadership style.
Copyright (Diwakar Education Hub) Page 162
26. __________ states that along with
cognitive and external situation the
experiences faced through relevant past events
determines what a person becomes and this
will create an impact in subsequent behaviour.
(1) Behaviouristic Framework
(2) Cognitive Framework
(3) Social Cognitive Framework
(4) Social Framework
Answer/Explanation: Social Cognitive
Framework
27. _______have translated this SCT into the
theoretical framework for organizational
behavior.
(1) Stajkovic and Luthans
(2) Stajkovic and Sinner
(3) Sinner and Luthans
(4) Stajkovic and Pavlo
Answer: Stajkovic and Luthans
28. If modern-day managers do not positively
address and manage workforce diversity of the
following may become negative outcomes for
an organisation except
(1) More difficult communication
(2) Increased creativity and innovation
(3) More interpersonal conflicts
(4) Potential for higher employee turnover
Answer/Explanation: Increased creativity and
innovation
Please Be Careful from Fake Person buy our
Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
29. The structure of an OB model includes 3
levels of analysis individual, group and
organizational systems. Issues that influence all
3 levels in various ways and thus affect
behavioural dynamics are
(1) Change and stress
(2) Organisational culture and commitment
(3) Power and politics
(4) Work design and technology
Answer/Explanation: change and stress
30. Some of OB’s challenges and opportunities
include all of the following except
(1) Reinforcing the importance of traditional
methods of management
(2) Offering specific insights to improve
interpersonal and people skills
(3) Helping us learnt to cope in a continues
changing world
(4) Facilitating the improvement of quality and
employee productivity
Answer/Explanation: reinforcing the
importance of traditional methods of
management
31. The five personality traits as per Big Five
Personality Traits are
(1) Extroversion, Agreeableness, Conscientious,
Emotional Stability, Openness to experience
(2) Extroversion, Agreeableness, Friendly,
Emotional Stability, Openness to experience
(3) Extroversion, Agreeableness, Courage,
Friendly, Openness to experience
(4) Extroversion, Agreeableness, Conscientious,
Emotional Stability, Easy going
Answer/Explanation: Extroversion,
Agreeableness, Conscientious, Emotional
Stability, Openness to experience
32. OB's current state of investigation and
study is best described as:
(1). All of OB is based on universal truths
proposed by academics, researchers and
practitioners. Political forces have a tendency
to influence the study of OB and, hence, skew
resulting conclusions.
(2). There is little disagreement among OB
researchers and scholars as to the current
state.
(3). OB is practically based on situational or
contingency conditions driven by leadership
style.
(4). Cause-effect principles, which tend to apply
to all situations, have been isolated.
Answer/Explanation: OB is practically based on
situational or contingency conditions driven by
leadership style.
MANAGEMENT UNIT-3
Second Edition
Second Edition
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 2
Strategic Role of Human Resource Management
An organization cannot form a good team of working professionals without the aid of a
sound Human Resource Management. The key functions of Human Resource Management team
comprised of recruiting the right people, providing them the right training, administering
performance appraisal, motivating workers and the workplace communication plus the
workplace safety and lots more.
Recruitment and Training are a few of the primary responsibilities of the human resource team.
Human Resource managers create plans and strategies for hiring the appropriate individuals.
They formulate the criteria that are most suited for a certain job description. Their other tasks
connected to recruitment involve creating employee obligations as well as the scope of tasks
assigned to her/him.
Founded on these two factors, the contract of a worker with the firm is prepared. When
necessary, they also offer training to the workers in accordance to the requirements of the
company or organization.
Strategic human resource management is an approach to the practice of human resources that
addresses business challenges and makes a direct contribution to long-term objectives. The
primary principle of strategic human resource management is to improve business performance
and uphold a culture that inspires innovation and works unremittingly to gain a competitive
advantage. It’s a step above traditional human resources and has a wider reach throughout the
organization.
Strategic Human Resource Management’s Relationship to Business Strategy
Copyright (Diwakar Education Hub) Page 2
Strategic Role of Human Resource Management
An organization cannot form a good team of working professionals without the aid of a
sound Human Resource Management. The key functions of Human Resource Management team
comprised of recruiting the right people, providing them the right training, administering
performance appraisal, motivating workers and the workplace communication plus the
workplace safety and lots more.
Recruitment and Training are a few of the primary responsibilities of the human resource team.
Human Resource managers create plans and strategies for hiring the appropriate individuals.
They formulate the criteria that are most suited for a certain job description. Their other tasks
connected to recruitment involve creating employee obligations as well as the scope of tasks
assigned to her/him.
Founded on these two factors, the contract of a worker with the firm is prepared. When
necessary, they also offer training to the workers in accordance to the requirements of the
company or organization.
Strategic human resource management is an approach to the practice of human resources that
addresses business challenges and makes a direct contribution to long-term objectives. The
primary principle of strategic human resource management is to improve business performance
and uphold a culture that inspires innovation and works unremittingly to gain a competitive
advantage. It’s a step above traditional human resources and has a wider reach throughout the
organization.
Strategic Human Resource Management’s Relationship to Business Strategy
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 3
Reaching ultimate business goals requires leadership. Strategic human resource management
encompasses the traditional human resources functions of recruiting, screening, interviewing,
and hiring employees, but also works with the overall organizational strategy to achieve success.
The Roots of Strategic Human Resource Management
Langbert says that strategic human resource management grew out of important social and
historical events: “Industrial psychologists and reformers laid the groundwork for human
resource management in the early twentieth century. A few of the developments that led to an
interest in Human Resource Management include the development of psychological, especially
IQ testing during World War I, the social work and YMCA movements that helped immigrant
workers adjust to industrial life, and the threat of labor unions and strikes.”
Efficient HR Functions Support Strategic Human Resource
Management
Managing basic human resources functions is an essential element of overall organizational
success and an indispensable component of effective strategic human resource management.
For information and free templates to keep your human resources running smoothly, read Top
Excel Templates for Human Resources. The article includes useful tools, like the one below,
concerning a staffing/recruiting plan:
Strategic Planning in Human Resource Management
Copyright (Diwakar Education Hub) Page 3
Reaching ultimate business goals requires leadership. Strategic human resource management
encompasses the traditional human resources functions of recruiting, screening, interviewing,
and hiring employees, but also works with the overall organizational strategy to achieve success.
The Roots of Strategic Human Resource Management
Langbert says that strategic human resource management grew out of important social and
historical events: “Industrial psychologists and reformers laid the groundwork for human
resource management in the early twentieth century. A few of the developments that led to an
interest in Human Resource Management include the development of psychological, especially
IQ testing during World War I, the social work and YMCA movements that helped immigrant
workers adjust to industrial life, and the threat of labor unions and strikes.”
Efficient HR Functions Support Strategic Human Resource
Management
Managing basic human resources functions is an essential element of overall organizational
success and an indispensable component of effective strategic human resource management.
For information and free templates to keep your human resources running smoothly, read Top
Excel Templates for Human Resources. The article includes useful tools, like the one below,
concerning a staffing/recruiting plan:
Strategic Planning in Human Resource Management
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 4
HR leaders in successful international companies, like Starbucks and Coca-Cola, make proactive
decisions and are an integral part of the organization's strategy team. A majority of these leaders
state that strategic planning is part of their role. Deshler notes that startups and smaller
organizations should pay attention: If big players use the strategic human resource management
approach, they too may want to use strategic human resource management to help their
businesses thrive.
Strategic Planning in Human Resource Management
HR leaders in successful international companies, like Starbucks and Coca-Cola, make proactive
decisions and are an integral part of the organization's strategy team. A majority of these leaders
state that strategic planning is part of their role. Deshler notes that startups and smaller
organizations should pay attention: If big players use the strategic human resource management
approach, they too may want to use strategic human resource management to help their
businesses thrive.
Creating your strategic human resource management approach begins with writing a plan based
on your organization’s strategic goal. Start with a SWOT analysis (strengths, weaknesses,
opportunities, and threats).
SWOT Analysis Strategy Template
Understanding strengths, weaknesses, opportunities, and threats is the basis of every strategic
plan. Seeing these factors side by side clarifies what to address to formulate a powerful strategic
human resource management plan.
Strategic Human Resource Management Plan Template
Organize your strategic HR plan and share it with team members for their input. Add your
completed SWOT analysis. Use the template as is, or modify it based on your requirements, and
translate your strategies into measurable action plans. This simple layout makes it easy for
stakeholders to review critical information.
The Strategic Role of Human Resource Managers
Strengthening the employer-employee relationship is the strategic role of a human resources
manager. However, there’s more to this job than many people realize. Human resources
managers formulate workforce strategy and determine the functional processes necessary to
meet organizational goals. Their job requires expertise as an HR generalist, which means they
must be familiar with every human resources discipline.
Evolving Roles in Human Resources
During the 1980s, personnel departments were responsible for handing out applications,
providing employees with insurance enrollment forms and processing payroll. The role of the
personnel department was mainly administrative. Over the next several decades, personnel
administration became more involved with overall business goals. Companies began to recruit
human resources leaders who were capable of strategic management.
Copyright (Diwakar Education Hub) Page 4
HR leaders in successful international companies, like Starbucks and Coca-Cola, make proactive
decisions and are an integral part of the organization's strategy team. A majority of these leaders
state that strategic planning is part of their role. Deshler notes that startups and smaller
organizations should pay attention: If big players use the strategic human resource management
approach, they too may want to use strategic human resource management to help their
businesses thrive.
Strategic Planning in Human Resource Management
HR leaders in successful international companies, like Starbucks and Coca-Cola, make proactive
decisions and are an integral part of the organization's strategy team. A majority of these leaders
state that strategic planning is part of their role. Deshler notes that startups and smaller
organizations should pay attention: If big players use the strategic human resource management
approach, they too may want to use strategic human resource management to help their
businesses thrive.
Creating your strategic human resource management approach begins with writing a plan based
on your organization’s strategic goal. Start with a SWOT analysis (strengths, weaknesses,
opportunities, and threats).
SWOT Analysis Strategy Template
Understanding strengths, weaknesses, opportunities, and threats is the basis of every strategic
plan. Seeing these factors side by side clarifies what to address to formulate a powerful strategic
human resource management plan.
Strategic Human Resource Management Plan Template
Organize your strategic HR plan and share it with team members for their input. Add your
completed SWOT analysis. Use the template as is, or modify it based on your requirements, and
translate your strategies into measurable action plans. This simple layout makes it easy for
stakeholders to review critical information.
The Strategic Role of Human Resource Managers
Strengthening the employer-employee relationship is the strategic role of a human resources
manager. However, there’s more to this job than many people realize. Human resources
managers formulate workforce strategy and determine the functional processes necessary to
meet organizational goals. Their job requires expertise as an HR generalist, which means they
must be familiar with every human resources discipline.
Evolving Roles in Human Resources
During the 1980s, personnel departments were responsible for handing out applications,
providing employees with insurance enrollment forms and processing payroll. The role of the
personnel department was mainly administrative. Over the next several decades, personnel
administration became more involved with overall business goals. Companies began to recruit
human resources leaders who were capable of strategic management.
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 5
Evolving Terminology and Language
Some businesses no longer use the term "human resources," preferring "human capital" instead.
This is due to a sea-change in how employers understand their relationship to their employees.
Instead of defining employment as a role with functions, which is the traditional human
resources approach, human capital recognizes the value that employees bring to an organization.
Workplace Safety and Risk Management
Creating a work environment free from unnecessary hazards is a strategic role of every human
resources manager. Strategic development for workplace safety entails risk management and
mitigating potential losses from on-the-job injuries and fatalities. Workers' compensation
insurance is an area in which a strategic plan helps lower company expense for insurance
coverage. Reducing accidents through training employees on the proper use of complex
machinery and equipment is one of the functional tasks associated with creating a safe work
environment.
Compensation and Benefits
An employer's compensation and benefits structure partly determines the company's business
reputation and image. In addition, the decisions that human resources managers make regarding
pay scales and employee benefits can impact employee satisfaction, as well as the organization’s
ability to recruit talented workers. Job evaluation, labor market conditions, workforce shortages
and budget constraints are factors that HR managers consider in a strategic plan for pay and
benefits. A strategy includes weighing an employer’s choices between satisfying its workforce
and pleasing the company’s stakeholders.
Employee Training and Development
Human resources managers’ strategic role with respect to employee training and development
prepares the workforce for future positions within the company. Succession planning,
promotion-from-within policies and performance evaluation factor into the human resources
manager’s role. Training and development motivate employees, and in some cases, improve
employee retention.
Recruitment and Selection
Employee recruitment and selection is as much a part of employee relations as it is a separate
discipline unto itself. Therefore, a human resources manager’s strategic role is to combine
elements of employee relations into the employer’s recruitment and selection strategy.
Integrating employee recognition programs into promotion-from-within policies is an effective
form of employee motivation that combines employee relations and recruitment and selection
areas of human resources.
Employer-Employee Relations
Some human resources managers believe that strengthening the employer-employee
relationship rests solely in the employee relations areas of the HR department. This isn’t true.
Nevertheless, employee relations is such a large part of every discipline – including salaries,
Copyright (Diwakar Education Hub) Page 5
Evolving Terminology and Language
Some businesses no longer use the term "human resources," preferring "human capital" instead.
This is due to a sea-change in how employers understand their relationship to their employees.
Instead of defining employment as a role with functions, which is the traditional human
resources approach, human capital recognizes the value that employees bring to an organization.
Workplace Safety and Risk Management
Creating a work environment free from unnecessary hazards is a strategic role of every human
resources manager. Strategic development for workplace safety entails risk management and
mitigating potential losses from on-the-job injuries and fatalities. Workers' compensation
insurance is an area in which a strategic plan helps lower company expense for insurance
coverage. Reducing accidents through training employees on the proper use of complex
machinery and equipment is one of the functional tasks associated with creating a safe work
environment.
Compensation and Benefits
An employer's compensation and benefits structure partly determines the company's business
reputation and image. In addition, the decisions that human resources managers make regarding
pay scales and employee benefits can impact employee satisfaction, as well as the organization’s
ability to recruit talented workers. Job evaluation, labor market conditions, workforce shortages
and budget constraints are factors that HR managers consider in a strategic plan for pay and
benefits. A strategy includes weighing an employer’s choices between satisfying its workforce
and pleasing the company’s stakeholders.
Employee Training and Development
Human resources managers’ strategic role with respect to employee training and development
prepares the workforce for future positions within the company. Succession planning,
promotion-from-within policies and performance evaluation factor into the human resources
manager’s role. Training and development motivate employees, and in some cases, improve
employee retention.
Recruitment and Selection
Employee recruitment and selection is as much a part of employee relations as it is a separate
discipline unto itself. Therefore, a human resources manager’s strategic role is to combine
elements of employee relations into the employer’s recruitment and selection strategy.
Integrating employee recognition programs into promotion-from-within policies is an effective
form of employee motivation that combines employee relations and recruitment and selection
areas of human resources.
Employer-Employee Relations
Some human resources managers believe that strengthening the employer-employee
relationship rests solely in the employee relations areas of the HR department. This isn’t true.
Nevertheless, employee relations is such a large part of every discipline – including salaries,
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 6
benefits, safety, training and employee development – that sustaining an employee relations
program is an important element of human resources strategy.
Benefits of HR Strategic Planning
The closer the alignment between HR and an organization's overall business strategy, the better
the company's ability to anticipate and respond to customer needs and to maintain competitive
advantage. Rigorous research, planning and development involving workforce culture, behaviors
and competencies promote the successful execution of business strategy.
Particular benefits of HR strategic planning include the following:
Avoiding costly and disruptive surprises that interfere with achieving goals.
Addressing key issues in a timely manner to avoid crises.
Promoting employee productivity and overall organizational success.
Providing a sense of direction to positively affect how work gets done.
Keeping employees focused on organizational goals.
Providing a strategic focus to guide training and development initiatives.
Giving leaders tools to help focus and implement their strategic initiatives.
Developing a Strategic HR Plan
HR's role includes developing a plan of HR initiatives to achieve and promote the behaviors,
culture and competencies needed to achieve organizational goals.
Results-oriented goals broadly include the following:
Correctly assessing staffing and skills needs and keeping training up-to-date.
Developing and maintaining competitive pay and benefits.
Managing performance and designing a rewards system that keeps employees motivated.
Knowing what competitors are doing to recruit and retain talent.
Providing training, including ethics, which reinforces corporate values.
DEVELOP STRATEGIC HR OBJECTIVES
Setting strategic objectives is an important part of the strategic planning process. Therefore,
these objectives must be aligned with the organization's mission, vision and overall strategy.
Strategic objectives will vary from organization to organization.
HR professionals should monitor and respond accordingly to factors that may affect workforce
composition, including the following:
Age. The age of the existing employees, the age of the available workforce, and the
patterns of retirement for older workers and for the entrance of younger workers can
significantly affect workforce availability.
Current economic conditions. Unemployment rates, natural disasters and political
changes can also have an impact the availability of workers.
Globalization. One aspect of globalization that will affect almost all organizations is the
increasing diversity of the workforce. Another aspect of globalization is the economic
incentive to outsource labor and production activities to wherever such costs are lower. A
Copyright (Diwakar Education Hub) Page 6
benefits, safety, training and employee development – that sustaining an employee relations
program is an important element of human resources strategy.
Benefits of HR Strategic Planning
The closer the alignment between HR and an organization's overall business strategy, the better
the company's ability to anticipate and respond to customer needs and to maintain competitive
advantage. Rigorous research, planning and development involving workforce culture, behaviors
and competencies promote the successful execution of business strategy.
Particular benefits of HR strategic planning include the following:
Avoiding costly and disruptive surprises that interfere with achieving goals.
Addressing key issues in a timely manner to avoid crises.
Promoting employee productivity and overall organizational success.
Providing a sense of direction to positively affect how work gets done.
Keeping employees focused on organizational goals.
Providing a strategic focus to guide training and development initiatives.
Giving leaders tools to help focus and implement their strategic initiatives.
Developing a Strategic HR Plan
HR's role includes developing a plan of HR initiatives to achieve and promote the behaviors,
culture and competencies needed to achieve organizational goals.
Results-oriented goals broadly include the following:
Correctly assessing staffing and skills needs and keeping training up-to-date.
Developing and maintaining competitive pay and benefits.
Managing performance and designing a rewards system that keeps employees motivated.
Knowing what competitors are doing to recruit and retain talent.
Providing training, including ethics, which reinforces corporate values.
DEVELOP STRATEGIC HR OBJECTIVES
Setting strategic objectives is an important part of the strategic planning process. Therefore,
these objectives must be aligned with the organization's mission, vision and overall strategy.
Strategic objectives will vary from organization to organization.
HR professionals should monitor and respond accordingly to factors that may affect workforce
composition, including the following:
Age. The age of the existing employees, the age of the available workforce, and the
patterns of retirement for older workers and for the entrance of younger workers can
significantly affect workforce availability.
Current economic conditions. Unemployment rates, natural disasters and political
changes can also have an impact the availability of workers.
Globalization. One aspect of globalization that will affect almost all organizations is the
increasing diversity of the workforce. Another aspect of globalization is the economic
incentive to outsource labor and production activities to wherever such costs are lower. A
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 7
third, and related, aspect is immigration, both legal and illegal, in the United States and
abroad.
Competitive Advantages of Strategic Human Resource Management
The greatest benefit of strategic human resource management is also its purpose: to improve
organizational performance by integrating and aligning with business strategy.
“Strategic human resource management is certainly a competitive advantage. In manufacturing
firms, quality processes depend on stable HR systems. In service companies, HR provides
training, rewards, performance management, and employee selection support that enable
businesses to serve customers best. Great hotels, whether high-end ones like the Four Seasons
chain or more modest ones like Hampton Inn, utilize quality processes that depend on training,
support, employee selection, and rewards,” says Lambert.
By creating systems to achieve better organizational performance, strategic human resource
management promotes the following benefits:
HR-Related Outcomes: Lower turnover, reduced absenteeism, increased job satisfaction,
and higher employee commitment
Organizational Outcomes: Heightened productivity, quality, service, efficiencies, and
customer satisfaction
Financial Outcomes: Higher profits, sales, return on assets, and return on investment
Capital Market Outcomes: Increased market share, stock price, and growth
Deshler says that a company can achieve these benefits only if the strategic human resource
management aligns with the business strategy.
Organizational Change Management Communications Plan
Keeping team members informed about impending changes makes transitions smoother and less
stressful. Use this template to keep track of the communications process and ensure that you
stay on schedule.
Change Impact Assessment Template
Every change impacts team members and business performance. Before you initiate changes,
impact assessment will help you determine how alterations may affect team members,
processes, and systems. Examine impact timing, risks to consider, and actions that may help
mitigate the impact. Use this template on its own to assess changes, or add it to an overall HR
plan.
Barriers to Strategic Human Resource Management
HR departments may need to overcome their ideas and discomfort to achieve long-term goals.
As Deshler notes, “Change is difficult. Strategic human resource management has been trending
upward for decades but continues to challenge HR professionals due to their resistance and
other forces.”
Here are the resistance factors you may encounter:
Copyright (Diwakar Education Hub) Page 7
third, and related, aspect is immigration, both legal and illegal, in the United States and
abroad.
Competitive Advantages of Strategic Human Resource Management
The greatest benefit of strategic human resource management is also its purpose: to improve
organizational performance by integrating and aligning with business strategy.
“Strategic human resource management is certainly a competitive advantage. In manufacturing
firms, quality processes depend on stable HR systems. In service companies, HR provides
training, rewards, performance management, and employee selection support that enable
businesses to serve customers best. Great hotels, whether high-end ones like the Four Seasons
chain or more modest ones like Hampton Inn, utilize quality processes that depend on training,
support, employee selection, and rewards,” says Lambert.
By creating systems to achieve better organizational performance, strategic human resource
management promotes the following benefits:
HR-Related Outcomes: Lower turnover, reduced absenteeism, increased job satisfaction,
and higher employee commitment
Organizational Outcomes: Heightened productivity, quality, service, efficiencies, and
customer satisfaction
Financial Outcomes: Higher profits, sales, return on assets, and return on investment
Capital Market Outcomes: Increased market share, stock price, and growth
Deshler says that a company can achieve these benefits only if the strategic human resource
management aligns with the business strategy.
Organizational Change Management Communications Plan
Keeping team members informed about impending changes makes transitions smoother and less
stressful. Use this template to keep track of the communications process and ensure that you
stay on schedule.
Change Impact Assessment Template
Every change impacts team members and business performance. Before you initiate changes,
impact assessment will help you determine how alterations may affect team members,
processes, and systems. Examine impact timing, risks to consider, and actions that may help
mitigate the impact. Use this template on its own to assess changes, or add it to an overall HR
plan.
Barriers to Strategic Human Resource Management
HR departments may need to overcome their ideas and discomfort to achieve long-term goals.
As Deshler notes, “Change is difficult. Strategic human resource management has been trending
upward for decades but continues to challenge HR professionals due to their resistance and
other forces.”
Here are the resistance factors you may encounter:
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 8
Fear of Failure: Strategic human resource management is a significant shift for the people
in organizations, particularly because of metrics and the need for transparency. Senior-
level managers may resist taking strategic steps because of a fear of incompetence. There
may also be a fear of victimization in the wake of potential failure.
Lack of Commitment/Cooperation: A status-quo approach from employees is a barrier to
change. You may not have buy-in from all of the senior management team. Unresolved
interdepartmental conflicts may make it difficult to adopt a new approach. There may also
be leadership conflict over the question of authority.
Resource Challenges: There may be real or perceived time and resource limits.
Outside Pressures: Immediate economic and market pressures may prevent the adoption
of strategic human resource management. The organization may be vulnerable to
legislative changes. The resistance may also come from labor unions.
Best Practices in Strategic Human Resource Management
Every organization needs to create its own detailed best practices since, by its very nature,
strategic human resource management planning should be tailored to each specific organization.
Improve Your Strategic Human Resource Management Skills with Smartsheet for Human
Resources
Empower your people to go above and beyond with a flexible platform designed to match the
needs of your team — and adapt as those needs change.
The Smartsheet platform makes it easy to plan, capture, manage, and report on work from
anywhere, helping your team be more effective and get more done. Report on key metrics and
get real-time visibility into work as it happens with roll-up reports, dashboards, and automated
workflows built to keep your team connected and informed.
Competency Mapping & Balanced Scoreboard
The term ‘competency mapping’ has gained a wider circulation and importance among
academicians and businesses in recent times. In a competitive business scenario, organizations
have felt the utmost need for procuring and retaining competent employees and developing
distinct competencies. Most of the jobs contain some critical elements or parts.
Competency Mapping is a process of identifying key competencies for a company or institution
and the jobs and functions within it. Competency mapping is important and is an essential
exercise. Every well managed firm should – have well defined roles and list of competencies
required to perform each role effectively. Such list should be used for recruitment, performance
management, promotions, placement and training needs identification.
Copyright (Diwakar Education Hub) Page 8
Fear of Failure: Strategic human resource management is a significant shift for the people
in organizations, particularly because of metrics and the need for transparency. Senior-
level managers may resist taking strategic steps because of a fear of incompetence. There
may also be a fear of victimization in the wake of potential failure.
Lack of Commitment/Cooperation: A status-quo approach from employees is a barrier to
change. You may not have buy-in from all of the senior management team. Unresolved
interdepartmental conflicts may make it difficult to adopt a new approach. There may also
be leadership conflict over the question of authority.
Resource Challenges: There may be real or perceived time and resource limits.
Outside Pressures: Immediate economic and market pressures may prevent the adoption
of strategic human resource management. The organization may be vulnerable to
legislative changes. The resistance may also come from labor unions.
Best Practices in Strategic Human Resource Management
Every organization needs to create its own detailed best practices since, by its very nature,
strategic human resource management planning should be tailored to each specific organization.
Improve Your Strategic Human Resource Management Skills with Smartsheet for Human
Resources
Empower your people to go above and beyond with a flexible platform designed to match the
needs of your team — and adapt as those needs change.
The Smartsheet platform makes it easy to plan, capture, manage, and report on work from
anywhere, helping your team be more effective and get more done. Report on key metrics and
get real-time visibility into work as it happens with roll-up reports, dashboards, and automated
workflows built to keep your team connected and informed.
Competency Mapping & Balanced Scoreboard
The term ‘competency mapping’ has gained a wider circulation and importance among
academicians and businesses in recent times. In a competitive business scenario, organizations
have felt the utmost need for procuring and retaining competent employees and developing
distinct competencies. Most of the jobs contain some critical elements or parts.
Competency Mapping is a process of identifying key competencies for a company or institution
and the jobs and functions within it. Competency mapping is important and is an essential
exercise. Every well managed firm should – have well defined roles and list of competencies
required to perform each role effectively. Such list should be used for recruitment, performance
management, promotions, placement and training needs identification.
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 9
To perform or fulfill these parts, it is important for the employees to have special competencies.
It is also natural that some people perform a particular job more effectively than others. This
difference exists because a particular individual may have certain competencies that other
individuals might lack. This might help him/her to have an edge over the other in a particular job.
An organization examines every job to ascertain the component parts and the work environment
in which it is performed. The process of examining a job is termed as job analysis. Job analysis
comprises two functions, namely, job description and job specification. These are interrelated,
interactive, and interdependent. Job description comprises job orientation, whereas job
specification is oriented towards the jobholder.
Concept of Competency Mapping
Competency Mapping is processes of identifying key competencies for an organisation and/or a
job and incorporating those competencies throughout the various processes (i.e., job evaluation,
training, recruitment) of the organisation. It generally examines two areas – emotional
intelligence or emotional quotient (EQ), and strengths of the individual in areas like team
structure, leadership, and decision-making.
Need for Competency Mapping
Competency mapping has gained commonness, momentum, and popularity. The old maxim,
‘Slow and steady wins the race’ has lost its validity in view of the fast changing business
environment. In order to cope with the changing world economy and keeping in view that the
world is becoming a global village, companies have become more aware of the need for having
competent employees and developing distinguished competencies for every organization.
The needs for competency mapping are enumerated here:
1. The cost of manpower is becoming increasingly high.
2. Realization of the truth that people can transform an organization.
3. Getting more from the people rather than getting more people.
4. Increased customer focus; identifying and fulfilling implied customer needs and expectations.
Components of competency mapping are:
1. Identification of Competencies:
Various competencies such as workplace competencies, core competencies, and threshold
competencies, differentiating competencies, technical and behavioural competencies have to be
identified by the organization. The competency framework must not just identify job specific
competencies but also define those competencies that are essential for superior performance on
the job.
2. Competency Models:
An organization can use an existing competency model often referred to as ‘Off-the-shelf’ ready
to use models or can develop its own models. A popular approach is to customize an existing one
as per organization’s needs.
3. Employee Competency Assessment:
Copyright (Diwakar Education Hub) Page 9
To perform or fulfill these parts, it is important for the employees to have special competencies.
It is also natural that some people perform a particular job more effectively than others. This
difference exists because a particular individual may have certain competencies that other
individuals might lack. This might help him/her to have an edge over the other in a particular job.
An organization examines every job to ascertain the component parts and the work environment
in which it is performed. The process of examining a job is termed as job analysis. Job analysis
comprises two functions, namely, job description and job specification. These are interrelated,
interactive, and interdependent. Job description comprises job orientation, whereas job
specification is oriented towards the jobholder.
Concept of Competency Mapping
Competency Mapping is processes of identifying key competencies for an organisation and/or a
job and incorporating those competencies throughout the various processes (i.e., job evaluation,
training, recruitment) of the organisation. It generally examines two areas – emotional
intelligence or emotional quotient (EQ), and strengths of the individual in areas like team
structure, leadership, and decision-making.
Need for Competency Mapping
Competency mapping has gained commonness, momentum, and popularity. The old maxim,
‘Slow and steady wins the race’ has lost its validity in view of the fast changing business
environment. In order to cope with the changing world economy and keeping in view that the
world is becoming a global village, companies have become more aware of the need for having
competent employees and developing distinguished competencies for every organization.
The needs for competency mapping are enumerated here:
1. The cost of manpower is becoming increasingly high.
2. Realization of the truth that people can transform an organization.
3. Getting more from the people rather than getting more people.
4. Increased customer focus; identifying and fulfilling implied customer needs and expectations.
Components of competency mapping are:
1. Identification of Competencies:
Various competencies such as workplace competencies, core competencies, and threshold
competencies, differentiating competencies, technical and behavioural competencies have to be
identified by the organization. The competency framework must not just identify job specific
competencies but also define those competencies that are essential for superior performance on
the job.
2. Competency Models:
An organization can use an existing competency model often referred to as ‘Off-the-shelf’ ready
to use models or can develop its own models. A popular approach is to customize an existing one
as per organization’s needs.
3. Employee Competency Assessment:
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 10
The competency framework should also extend itself in developing the behavioral indicators for
each of the identified competency so that observation and measurement of the identified
competencies becomes possible. The HR department would create ways of measuring
competencies so that the model can be actually put to use. Some methods include assessment
centers, potential appraisals, 360 degree feedback, etc.
4. Competency Development:
The surest way of developing talent in any organization is by developing competencies of
workforce. This has to be a continuous process and not a sporadic event or even series of events.
5. Linking Competency Framework to Other HR Systems:
A competency management framework should be synergized with other HR systems for optimal
utilization of the same.
Objectives and Purpose of Competency Mapping
The concept of competency mapping now exists in organizations with well-developed HR
practices. HR directors and their top management have always paid attention to consider
competencies and incorporated them in the appraisal forms in order to improve the
performance management system. Companies such as Larsen & Toubro, National Dairy
Development Board, Life Insurance Corporation of India, Hindustan Lever Ltd (presently
Hindustan Unilever Ltd), NOCIL Ltd, Bharat Petroleum, and so on, have felt the utmost need for
management of competencies and revised their performance appraisal systems.
Some of their objectives while performing their competency mapping are as follows:
1. Identifying the key success factors
2. Pinpointing triggers for each role
3. Laying direction for superior performance
4. Setting defined expectations from employees
5. Serving means for communicating performance expectations
Purpose:
The main purpose of competency mapping is to ensure effectiveness of an organization in terms
of having a clear idea regarding the summation of the required competencies.
This facilitates further:
1. Gap analysis in competencies
2. Role clarity
3. Selection, potential identification, growth plans.
4. Succession planning.
5. Restructuring
6. Inventory of competencies for future planning.
6 Important Approaches to Competency Mapping – Expert Opinion, Structured Interviews,
Workshops, Critical Incident Techniques, Repertory Grid Analysis and More
Copyright (Diwakar Education Hub) Page 10
The competency framework should also extend itself in developing the behavioral indicators for
each of the identified competency so that observation and measurement of the identified
competencies becomes possible. The HR department would create ways of measuring
competencies so that the model can be actually put to use. Some methods include assessment
centers, potential appraisals, 360 degree feedback, etc.
4. Competency Development:
The surest way of developing talent in any organization is by developing competencies of
workforce. This has to be a continuous process and not a sporadic event or even series of events.
5. Linking Competency Framework to Other HR Systems:
A competency management framework should be synergized with other HR systems for optimal
utilization of the same.
Objectives and Purpose of Competency Mapping
The concept of competency mapping now exists in organizations with well-developed HR
practices. HR directors and their top management have always paid attention to consider
competencies and incorporated them in the appraisal forms in order to improve the
performance management system. Companies such as Larsen & Toubro, National Dairy
Development Board, Life Insurance Corporation of India, Hindustan Lever Ltd (presently
Hindustan Unilever Ltd), NOCIL Ltd, Bharat Petroleum, and so on, have felt the utmost need for
management of competencies and revised their performance appraisal systems.
Some of their objectives while performing their competency mapping are as follows:
1. Identifying the key success factors
2. Pinpointing triggers for each role
3. Laying direction for superior performance
4. Setting defined expectations from employees
5. Serving means for communicating performance expectations
Purpose:
The main purpose of competency mapping is to ensure effectiveness of an organization in terms
of having a clear idea regarding the summation of the required competencies.
This facilitates further:
1. Gap analysis in competencies
2. Role clarity
3. Selection, potential identification, growth plans.
4. Succession planning.
5. Restructuring
6. Inventory of competencies for future planning.
6 Important Approaches to Competency Mapping – Expert Opinion, Structured Interviews,
Workshops, Critical Incident Techniques, Repertory Grid Analysis and More
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 114
Suzloan Energy
Suzloan Company has the most energy efficient building built in India with green roof, energy
efficient and renewable energy based hot water system. Many other policies like carpooling, zero
waste management, green management etc. are practiced by the companies.
Tata Consultancy Services
TCS mainly focus on agricultural demands of community. It provide consultancy services and it is
also a largest software services exporter.
Oil & Natural Gas Company
ONGC had taken many incentives to go green and help to reduce wastages by producing oil and
gas, which help to create sustainable development.
Idea Celluar, HCL Technologies, ITC Limited, Tamil Nadu Newsprint and Paper Limited, Indusland
Bank and many other also practices green HRM.
Please Be Careful from Fake Person buy our Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
MANAGEMENT UNIT-3 MCQS
1. Kochan and Barocci's (1985) model of HRM
has three elements. These elements are:
(1) The external environment, the internal
environment and human resource management
(2) HRM/lR system effectiveness, the external
environment and the internal environment
(3) Human resource management, the internal
environment and HRM/lR system effectiveness .
(4) The external environment, human resource
management and HRM/lR system effectiveness
Answer/Explanation: (1)
2. The critical role of the SHRM Application Tool
is to:
(1) Develop a better strategic management
process to deal with the dynamic changing
environment today's organisations face
(2) Identify if the organisation has enough staff,
if the staff need training, if the compensation
practices are appropriate, and if jobs are
designed correctly
(3) Identify and assess a narrow group of actions
and plan how the organisation can overcome
resistance to change
(4) Outline techniques, frameworks, and six
steps that must be followed to effectively
implement change in an organization
Answer/Explanation: (1)
3. What are the ideas underpinning 'soft', 'e
commitment', or 'high-road' HRM practices?
(1) Labour needs to be treated as an asset to be
invested in
(2) Employees are a cost which should be
minimized
(3) A lack of mutuality existing between
employer and employee
(4) A disregard for unlocking discretionary effort
Answer/Explanation: (1)
4. Which consulting company is associated with
the concept of talent management?
(1) Price Waterhouse Coopers
(2) Boston Consulting Group
(3) Deloitte
(4) McKinsey
Copyright (Diwakar Education Hub) Page 114
Suzloan Energy
Suzloan Company has the most energy efficient building built in India with green roof, energy
efficient and renewable energy based hot water system. Many other policies like carpooling, zero
waste management, green management etc. are practiced by the companies.
Tata Consultancy Services
TCS mainly focus on agricultural demands of community. It provide consultancy services and it is
also a largest software services exporter.
Oil & Natural Gas Company
ONGC had taken many incentives to go green and help to reduce wastages by producing oil and
gas, which help to create sustainable development.
Idea Celluar, HCL Technologies, ITC Limited, Tamil Nadu Newsprint and Paper Limited, Indusland
Bank and many other also practices green HRM.
Please Be Careful from Fake Person buy our Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
MANAGEMENT UNIT-3 MCQS
1. Kochan and Barocci's (1985) model of HRM
has three elements. These elements are:
(1) The external environment, the internal
environment and human resource management
(2) HRM/lR system effectiveness, the external
environment and the internal environment
(3) Human resource management, the internal
environment and HRM/lR system effectiveness .
(4) The external environment, human resource
management and HRM/lR system effectiveness
Answer/Explanation: (1)
2. The critical role of the SHRM Application Tool
is to:
(1) Develop a better strategic management
process to deal with the dynamic changing
environment today's organisations face
(2) Identify if the organisation has enough staff,
if the staff need training, if the compensation
practices are appropriate, and if jobs are
designed correctly
(3) Identify and assess a narrow group of actions
and plan how the organisation can overcome
resistance to change
(4) Outline techniques, frameworks, and six
steps that must be followed to effectively
implement change in an organization
Answer/Explanation: (1)
3. What are the ideas underpinning 'soft', 'e
commitment', or 'high-road' HRM practices?
(1) Labour needs to be treated as an asset to be
invested in
(2) Employees are a cost which should be
minimized
(3) A lack of mutuality existing between
employer and employee
(4) A disregard for unlocking discretionary effort
Answer/Explanation: (1)
4. Which consulting company is associated with
the concept of talent management?
(1) Price Waterhouse Coopers
(2) Boston Consulting Group
(3) Deloitte
(4) McKinsey
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 115
Answer: McKinsey
Explanation: Talent management is a constant
process that involves attracting and retaining
high-quality employees, developing their skills,
and continuously motivating them to improve
their performance. The primary purpose
of talent management is to create a motivated
workforce who will stay with your company in
the long run.
5. Why are employers interested in employee
engagement?
(1) To encourage employees to trust their
managers
(2) To make a quick profit
(3) Because engaged employees are more
motivated and prepared to give of their best to
make the firm succeed
(4) To make employees work harder for less
Answer/Explanation: To make employees work
harder for less
6. Which of the following is a key HR role as
defined by Ulrich et al (2009)?
(1) Personnel administrator
(2) Business ally
(3) Payroll adviser
(4) Organisational geographer
Answer: (2)
Explanation: Business Ally is digital platform
which helps you accomplish all
your business needs.
7. Hochschild defines “emotional labor” as:
(1) Less useful than physical labor
(2) A problem of courtesy and civility
(3) Not important for business ethics
(4) Work that you feel strongly about
(5) Suppressing feelings to maintain an
appearance
Answer: (5)
8. The term 'emotional labour' is associated with
which author?
(1) Arlie Hochschild
(2) Stephen Fineman
(3) David Sims
(4) Yiannis Gabriel
Answer: (1)
Explanation: Emotional labor is a term coined by
sociologist Arlie Hochschild in her famous book,
The Managed Heart (1983).
9. Why do some commentators claim that it is
unlikely that the UK economy will become a
knowledge economy?
(1) The lack of IT education in schools
(2) Culturally low in intelligence.
(3) Historically low levels of company investment
into research and development
(4) Unions try to prevent knowledge transfer
from management level to the broader
workforce.
Answer/Explanation: (4)
10. What measures are typically involved in the
rationalising of businesses?
(1) Downsizing and Layering
(2) Expanding and Layering
(3) Downsizing and Delayering
(4) Expanding and Delayering
Answer: (4)
Explanation: Many companies have the right
level of management but some will find that
they have too much and will need to delayer at
some point in the future.
11. What kinds of practices outlined below are
typically associated with non-standard working
and flexibility?
(1) 9-5 working hours
(2) The reduction in distinctions between
standard and unsocial hours or standard and
extra
hours
(3) Premium rates for unsocial hours
(4) The voluntary agreement of unsocial hours
working
Answer/Explanation: The reduction in
distinctions between standard and unsocial
hours or standard and extra
hours
Copyright (Diwakar Education Hub) Page 115
Answer: McKinsey
Explanation: Talent management is a constant
process that involves attracting and retaining
high-quality employees, developing their skills,
and continuously motivating them to improve
their performance. The primary purpose
of talent management is to create a motivated
workforce who will stay with your company in
the long run.
5. Why are employers interested in employee
engagement?
(1) To encourage employees to trust their
managers
(2) To make a quick profit
(3) Because engaged employees are more
motivated and prepared to give of their best to
make the firm succeed
(4) To make employees work harder for less
Answer/Explanation: To make employees work
harder for less
6. Which of the following is a key HR role as
defined by Ulrich et al (2009)?
(1) Personnel administrator
(2) Business ally
(3) Payroll adviser
(4) Organisational geographer
Answer: (2)
Explanation: Business Ally is digital platform
which helps you accomplish all
your business needs.
7. Hochschild defines “emotional labor” as:
(1) Less useful than physical labor
(2) A problem of courtesy and civility
(3) Not important for business ethics
(4) Work that you feel strongly about
(5) Suppressing feelings to maintain an
appearance
Answer: (5)
8. The term 'emotional labour' is associated with
which author?
(1) Arlie Hochschild
(2) Stephen Fineman
(3) David Sims
(4) Yiannis Gabriel
Answer: (1)
Explanation: Emotional labor is a term coined by
sociologist Arlie Hochschild in her famous book,
The Managed Heart (1983).
9. Why do some commentators claim that it is
unlikely that the UK economy will become a
knowledge economy?
(1) The lack of IT education in schools
(2) Culturally low in intelligence.
(3) Historically low levels of company investment
into research and development
(4) Unions try to prevent knowledge transfer
from management level to the broader
workforce.
Answer/Explanation: (4)
10. What measures are typically involved in the
rationalising of businesses?
(1) Downsizing and Layering
(2) Expanding and Layering
(3) Downsizing and Delayering
(4) Expanding and Delayering
Answer: (4)
Explanation: Many companies have the right
level of management but some will find that
they have too much and will need to delayer at
some point in the future.
11. What kinds of practices outlined below are
typically associated with non-standard working
and flexibility?
(1) 9-5 working hours
(2) The reduction in distinctions between
standard and unsocial hours or standard and
extra
hours
(3) Premium rates for unsocial hours
(4) The voluntary agreement of unsocial hours
working
Answer/Explanation: The reduction in
distinctions between standard and unsocial
hours or standard and extra
hours
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 116
12. Which of the following is not a limitation of
SWOT (Strengths, Weaknesses, Opportunity,
Threats)
analysis?
(1) Organisational strengths may not lead to
competitive advantage
(2) SWOT gives a one-shot view of a moving
target
(3) SWOT's focus on the external environment is
too broad and integrative
(4) SWOT overemphasises a single dimension of
strategy
Answer/Explanation: SWOT overemphasises a
single dimension of strategy
13. A marketing department that promises
delivery quicker than the production
department's ability to
produce is an example of a lack of understanding
of the:
(1) synergy of the business units.
(2) need to maintain the reputation of the
company.
(3) organisational culture and leadership
(4) interrelationships among functional areas
and firm strategies
Answer/Explanation: interrelationships among
functional areas and firm strategies
14. XYZ Corp. is centering on the objective of
low-cost, high quality, on-time production by
curtailing idle productive facilities and workers.
The XYZ Corp. is taking advantage of a system
(1) Just-In-Time (JIT)
(2) Last In, First Out (UFO)
(3) First In, First Out (FIFO)
(4) Highly mechanized
Answer: (1)
Explanation: Just-in-time also known as JIT is an
inventory management method whereby labour,
material and goods (to be used in
manufacturing) are re-filled or scheduled to
arrive exactly when needed in the
manufacturing process.
15. Which of the following lists is comprised of
support activities?
(1) Human resource management, information
systems, procurement, and firm infrastructure
(2) Customer service, information systems,
technology development, and procurement
(3) Human resource management, technology
development, customer service, and
procurement
(4) Human resource management, customer
service, marketing and sales, and operations
Answer/Explanation: Human resource
management, information systems,
procurement, and firm infrastructure
16. Although firm infrastructure is quite
frequently viewed only as overhead expense, it
can become a source of competitive advantage.
Examples include all of the following except:
(1) negotiating and maintaining ongoing
relations with regulatory bodies
(2) marketing expertise increasing a firm's
revenues and enabling it to enter new markets.
(3) effective information systems contributing
significantly to a firm's overall cost leadership
strategy.
(4) top management providing a key role in
collaborating with important customers.
Answer/Explanation: negotiating and
maintaining ongoing relations with regulatory
bodies
17. Boundary crossing is an activity that
(1) Creates internal organisational conflict
between different departments as they compete
to
generate new practices
(2) Occurs when organisations advance into new
areas of the market
(3) Undermines the integration of an
organisation through the breakdown of the
departmental
boundaries.
(4) focused upon achieving internal
organisational integration between various
organizational roles and units in order to
generate creativity and synergy
Answer/Explanation: focused upon achieving
internal organisational integration between
Copyright (Diwakar Education Hub) Page 116
12. Which of the following is not a limitation of
SWOT (Strengths, Weaknesses, Opportunity,
Threats)
analysis?
(1) Organisational strengths may not lead to
competitive advantage
(2) SWOT gives a one-shot view of a moving
target
(3) SWOT's focus on the external environment is
too broad and integrative
(4) SWOT overemphasises a single dimension of
strategy
Answer/Explanation: SWOT overemphasises a
single dimension of strategy
13. A marketing department that promises
delivery quicker than the production
department's ability to
produce is an example of a lack of understanding
of the:
(1) synergy of the business units.
(2) need to maintain the reputation of the
company.
(3) organisational culture and leadership
(4) interrelationships among functional areas
and firm strategies
Answer/Explanation: interrelationships among
functional areas and firm strategies
14. XYZ Corp. is centering on the objective of
low-cost, high quality, on-time production by
curtailing idle productive facilities and workers.
The XYZ Corp. is taking advantage of a system
(1) Just-In-Time (JIT)
(2) Last In, First Out (UFO)
(3) First In, First Out (FIFO)
(4) Highly mechanized
Answer: (1)
Explanation: Just-in-time also known as JIT is an
inventory management method whereby labour,
material and goods (to be used in
manufacturing) are re-filled or scheduled to
arrive exactly when needed in the
manufacturing process.
15. Which of the following lists is comprised of
support activities?
(1) Human resource management, information
systems, procurement, and firm infrastructure
(2) Customer service, information systems,
technology development, and procurement
(3) Human resource management, technology
development, customer service, and
procurement
(4) Human resource management, customer
service, marketing and sales, and operations
Answer/Explanation: Human resource
management, information systems,
procurement, and firm infrastructure
16. Although firm infrastructure is quite
frequently viewed only as overhead expense, it
can become a source of competitive advantage.
Examples include all of the following except:
(1) negotiating and maintaining ongoing
relations with regulatory bodies
(2) marketing expertise increasing a firm's
revenues and enabling it to enter new markets.
(3) effective information systems contributing
significantly to a firm's overall cost leadership
strategy.
(4) top management providing a key role in
collaborating with important customers.
Answer/Explanation: negotiating and
maintaining ongoing relations with regulatory
bodies
17. Boundary crossing is an activity that
(1) Creates internal organisational conflict
between different departments as they compete
to
generate new practices
(2) Occurs when organisations advance into new
areas of the market
(3) Undermines the integration of an
organisation through the breakdown of the
departmental
boundaries.
(4) focused upon achieving internal
organisational integration between various
organizational roles and units in order to
generate creativity and synergy
Answer/Explanation: focused upon achieving
internal organisational integration between
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 117
various organizational roles and units in order to
generate creativity and synergy
18. How can HRM help to build successful cross-
border alliances?
(1) By ensuring that organisations spend 25% of
their budgets on cross-border alliances
(2) By ensuring that a strategy is in place before
embarking on a cross-border alliance
(3) By ensuring that organisations export their
ideas to other societies and cultures
(4) By ensuring that international joint ventures
are staffed by high-quality managers
Answer/Explanation: By ensuring that
international joint ventures are staffed by high-
quality managers
19. Which of the following statements most
accurately defines human resource
management?
(1) human resource management contributes to
business strategy and plays and important role
in
the implementation of business strategy
(2) human resource management is an approach
to managing people
(3) human resource management seeks to
achieve competitive advantage through the
strategic deployment of a highly committed and
capable workforce, using an integrated array of
cultural, structural and personnel techniques
(4) human resource management focuses on
people as the source of competitive advantage
Answer/Explanation: human resource
management focuses on people as the source of
competitive advantage
20. Which statement best describes '360 degree
feedback'? It is:
(1) A method used to appraise employees
(2) A system where managers give feedback to
all their staff
(3) A system where feedback on any individual is
derived from peers, subordinates supervisors
and occasionally, customers
(4) A development tool
Answer: (4)
Explanation: 360-Degree Feedback Is Powerful
Leadership Development Tool. A 360-
degree feedback process is a great tool for giving
leaders clear feedback from their peers,
employees and managers.
21. SHRM mold the human resource in such a
way to attain the
(1) Profit
(2) Organizational goal
(3) Individual goal
(4) Market Share
Answer (2)
Explanation: General organizational goals are
found in the mission/vision statement of the
company, but details of those goals are defined
in the business plan.
22. Perception of human assets as higher risk
investment is a barrier to
(1) HRM
(2) SHRM
(3) HRP
(4) Economy
Answer (2)
Explanation: SHRM, the Society for Human
Resource Management, creates better
workplaces where employers and employees
thrive together.
23. SHRM was first time evolved in the year
(1) 1964
(2) 1974
(3) 1984
(4) 1994
Answer (3) 1984
24. The primary source of competitive
advantage in SHRM is
(1) People
(2) Pattern
(3) Technology
(4) Process
Answer (1) People
Explanation: A company's strategic vision will
ideally rely on input from a broad range of
stakeholders including managers, employees,
customers and investors.
Copyright (Diwakar Education Hub) Page 117
various organizational roles and units in order to
generate creativity and synergy
18. How can HRM help to build successful cross-
border alliances?
(1) By ensuring that organisations spend 25% of
their budgets on cross-border alliances
(2) By ensuring that a strategy is in place before
embarking on a cross-border alliance
(3) By ensuring that organisations export their
ideas to other societies and cultures
(4) By ensuring that international joint ventures
are staffed by high-quality managers
Answer/Explanation: By ensuring that
international joint ventures are staffed by high-
quality managers
19. Which of the following statements most
accurately defines human resource
management?
(1) human resource management contributes to
business strategy and plays and important role
in
the implementation of business strategy
(2) human resource management is an approach
to managing people
(3) human resource management seeks to
achieve competitive advantage through the
strategic deployment of a highly committed and
capable workforce, using an integrated array of
cultural, structural and personnel techniques
(4) human resource management focuses on
people as the source of competitive advantage
Answer/Explanation: human resource
management focuses on people as the source of
competitive advantage
20. Which statement best describes '360 degree
feedback'? It is:
(1) A method used to appraise employees
(2) A system where managers give feedback to
all their staff
(3) A system where feedback on any individual is
derived from peers, subordinates supervisors
and occasionally, customers
(4) A development tool
Answer: (4)
Explanation: 360-Degree Feedback Is Powerful
Leadership Development Tool. A 360-
degree feedback process is a great tool for giving
leaders clear feedback from their peers,
employees and managers.
21. SHRM mold the human resource in such a
way to attain the
(1) Profit
(2) Organizational goal
(3) Individual goal
(4) Market Share
Answer (2)
Explanation: General organizational goals are
found in the mission/vision statement of the
company, but details of those goals are defined
in the business plan.
22. Perception of human assets as higher risk
investment is a barrier to
(1) HRM
(2) SHRM
(3) HRP
(4) Economy
Answer (2)
Explanation: SHRM, the Society for Human
Resource Management, creates better
workplaces where employers and employees
thrive together.
23. SHRM was first time evolved in the year
(1) 1964
(2) 1974
(3) 1984
(4) 1994
Answer (3) 1984
24. The primary source of competitive
advantage in SHRM is
(1) People
(2) Pattern
(3) Technology
(4) Process
Answer (1) People
Explanation: A company's strategic vision will
ideally rely on input from a broad range of
stakeholders including managers, employees,
customers and investors.
MANAGEMENT UNIT-3
Copyright (Diwakar Education Hub) Page 118
25. Advantages of Outsourcing doesn’t include
(1) Avoid over staffing
(2) Avoid difference in HRM
(3) Reduce cost
(4) None of the above
Answer (4) None of the above
Explanation: management difficulties - changes
at the outsourcing company could lead to
friction. instability - the outsourcing company
could go out of business.
26. ________ are the resources that provide
utility value to all other resources.
(1) Finance
(2) Men
(3) Machine
(4) Capital
Answer (2) Men
Explanation: Men or humans are the
only resources capable of providing utility
value to other resources as men or humans are
the ones who use or utilize all
other resources like money, material, and
machinery.
27. Which of the following is not a component of
SHRM
(1) Process
(2) Pattern
(3) Procedure
(4) People
Answer (3) Procedure
Explanation: There are 3 main elements to
resource management:
The People. The fact that people are
ultimately responsible for project success
is the most important thing to remember
about resource management. ...
The Plan. Every project, no matter the
size, needs a plan. ...
The Time. ...
Free Project Management Software.
28. SHRM develop an organizational culture that
fosters
(1) Innovation
(2) Flexibility
(3) Competitive Advantage
(4) All of the above
Answer (4) All of the above
29. SHRM is the linkage between the human
resource strategy and _______________
You may also Like: MCQ's on Attitude in OB
(1) Organizational Goal
(2) corporate-level strategies
(3) Organizational Policies
(4) All of the above
Answer (2) Corporate-Level Strategies
Explanation: The three levels of strategy are:
Corporate level strategy:
This level answers the foundational
question of what you want to achieve. ...
Business unit level strategy:
This level focuses on how you're going to
compete. ...
Market level strategy: This strategy
level focuses on how you're going to
grow.
30. SHRM Considers people as a strategic
resource for attaining
(1) Organizational Goal
(2) Organizational Objectives
(3) Competitive advantage
(4) Top Position in the market
Answer: (3)
Explanation: Competitive advantage refers to
factors that allow a company to produce goods
or services better or more cheaply than its
rivals.
31. __________________ links HR management
directly to the strategic plan of your organization
(1) Systematic HRD
(2) Continuous Training
(3) Strategic HRP
(4) none of the above
Answer: Strategic HRP
Explanation: Strategic HR planning is a process
that helps your organization identify current and
Copyright (Diwakar Education Hub) Page 118
25. Advantages of Outsourcing doesn’t include
(1) Avoid over staffing
(2) Avoid difference in HRM
(3) Reduce cost
(4) None of the above
Answer (4) None of the above
Explanation: management difficulties - changes
at the outsourcing company could lead to
friction. instability - the outsourcing company
could go out of business.
26. ________ are the resources that provide
utility value to all other resources.
(1) Finance
(2) Men
(3) Machine
(4) Capital
Answer (2) Men
Explanation: Men or humans are the
only resources capable of providing utility
value to other resources as men or humans are
the ones who use or utilize all
other resources like money, material, and
machinery.
27. Which of the following is not a component of
SHRM
(1) Process
(2) Pattern
(3) Procedure
(4) People
Answer (3) Procedure
Explanation: There are 3 main elements to
resource management:
The People. The fact that people are
ultimately responsible for project success
is the most important thing to remember
about resource management. ...
The Plan. Every project, no matter the
size, needs a plan. ...
The Time. ...
Free Project Management Software.
28. SHRM develop an organizational culture that
fosters
(1) Innovation
(2) Flexibility
(3) Competitive Advantage
(4) All of the above
Answer (4) All of the above
29. SHRM is the linkage between the human
resource strategy and _______________
You may also Like: MCQ's on Attitude in OB
(1) Organizational Goal
(2) corporate-level strategies
(3) Organizational Policies
(4) All of the above
Answer (2) Corporate-Level Strategies
Explanation: The three levels of strategy are:
Corporate level strategy:
This level answers the foundational
question of what you want to achieve. ...
Business unit level strategy:
This level focuses on how you're going to
compete. ...
Market level strategy: This strategy
level focuses on how you're going to
grow.
30. SHRM Considers people as a strategic
resource for attaining
(1) Organizational Goal
(2) Organizational Objectives
(3) Competitive advantage
(4) Top Position in the market
Answer: (3)
Explanation: Competitive advantage refers to
factors that allow a company to produce goods
or services better or more cheaply than its
rivals.
31. __________________ links HR management
directly to the strategic plan of your organization
(1) Systematic HRD
(2) Continuous Training
(3) Strategic HRP
(4) none of the above
Answer: Strategic HRP
Explanation: Strategic HR planning is a process
that helps your organization identify current and
MANAGEMENT UNIT-4
Second Edition
Second Edition
MANAGEMENT UNIT-4
Copyright (Diwakar Education Hub) Page 2
Accounting Principles and Standards, Preparation of Financial Statements
There are general rules and concepts that govern the field of accounting. These general rules–
referred to as basic accounting princ-
iples and Standards–form the groundwork on which more detailed, complicated, and legalistic
accounting rules are based. For example, the Financial Accounting Standards Board (FASB) uses
the basic accounting principles and Standards as a basis for their own detailed and
comprehensive set of accounting rules and standards.
The phrase "generally accepted accounting principles" (or "GAAP") consists of three important
sets of rules:
(1) the basic accounting principles and Standards,
(2) the detailed rules and standards issued by FASB and its predecessor the Accounting Principles
Board (APB), and
(3) the generally accepted industry practices.
If a company distributes its financial statements to the public, it is required to follow generally
accepted accounting principles in the preparation of those statements. Further, if a company's
stock is publicly traded, federal law requires the company's financial statements be audited by
independent public accountants. Both the company's management and the independent
accountants must certify that the financial statements and the related notes to the financial
statements have been prepared in accordance with GAAP.
AP&S is exceedingly useful because it attempts to standardize and regulate accounting
definitions, assumptions, and methods. Because of generally accepted accounting principles we
are able to assume that there is consistency from year to year in the methods used to prepare a
company's financial statements. And although variations may exist, we can make reasonably
confident conclusions when comparing one company to another, or comparing one company's
financial statistics to the statistics for its industry. Over the years the generally accepted
accounting principles have become more complex because financial transactions have become
more complex.
Basic Accounting Principles and Standards
Since AP&S is founded on the basic accounting principles and Standards, we can better
understand AP&S if we understand those accounting principles. The following is a list of the ten
main accounting principles and Standards together with a highly condensed explanation of each.
1. Economic Entity Principle
The accountant keeps all of the business transactions of a sole propriet-
orship separate from the business owner's personal transactions. For legal purposes, a sole
proprietorship and its owner are considered to be one entity, but for accounting purposes they
are considered to be two separate entities.
2. Monetary Unit Principle
Economic activity is measured in U.S. dollars, and only transactions that can be expressed in U.S.
dollars are recorded. Because of this basic
Copyright (Diwakar Education Hub) Page 2
Accounting Principles and Standards, Preparation of Financial Statements
There are general rules and concepts that govern the field of accounting. These general rules–
referred to as basic accounting princ-
iples and Standards–form the groundwork on which more detailed, complicated, and legalistic
accounting rules are based. For example, the Financial Accounting Standards Board (FASB) uses
the basic accounting principles and Standards as a basis for their own detailed and
comprehensive set of accounting rules and standards.
The phrase "generally accepted accounting principles" (or "GAAP") consists of three important
sets of rules:
(1) the basic accounting principles and Standards,
(2) the detailed rules and standards issued by FASB and its predecessor the Accounting Principles
Board (APB), and
(3) the generally accepted industry practices.
If a company distributes its financial statements to the public, it is required to follow generally
accepted accounting principles in the preparation of those statements. Further, if a company's
stock is publicly traded, federal law requires the company's financial statements be audited by
independent public accountants. Both the company's management and the independent
accountants must certify that the financial statements and the related notes to the financial
statements have been prepared in accordance with GAAP.
AP&S is exceedingly useful because it attempts to standardize and regulate accounting
definitions, assumptions, and methods. Because of generally accepted accounting principles we
are able to assume that there is consistency from year to year in the methods used to prepare a
company's financial statements. And although variations may exist, we can make reasonably
confident conclusions when comparing one company to another, or comparing one company's
financial statistics to the statistics for its industry. Over the years the generally accepted
accounting principles have become more complex because financial transactions have become
more complex.
Basic Accounting Principles and Standards
Since AP&S is founded on the basic accounting principles and Standards, we can better
understand AP&S if we understand those accounting principles. The following is a list of the ten
main accounting principles and Standards together with a highly condensed explanation of each.
1. Economic Entity Principle
The accountant keeps all of the business transactions of a sole propriet-
orship separate from the business owner's personal transactions. For legal purposes, a sole
proprietorship and its owner are considered to be one entity, but for accounting purposes they
are considered to be two separate entities.
2. Monetary Unit Principle
Economic activity is measured in U.S. dollars, and only transactions that can be expressed in U.S.
dollars are recorded. Because of this basic
MANAGEMENT UNIT-4
Copyright (Diwakar Education Hub) Page 3
Acco-unting principle, it is assumed that the dollar's purchasing power has not changed over
time. As a result accountants ignore the effect of inflation on recorded amounts. For example,
dollars from a 1960 transaction are combined (or shown) with dollars from a 2020 transaction.
3. Time Period Assumption
This accounting principle assumes that it is possible to report the complex and ongoing activities
of a business in relatively short, distinct time intervals such as the five months ended May 31,
2020, or the 5 weeks ended May 1, 2020. The shorter the time interval, the more likely the need
for the accountant to estimate amounts relevant to that period. For example, the property tax
bill is received on December 15 of each year. On the income statement for the year ended
December 31, 2019, the amount is known; but for the income statement for the three months
ended March 31, 2020, the amount was not known and an estimate had to be used.
It is imperative that the time interval (or period of time) be shown in the heading of each income
statement, statement of stockholders' equity, and statement of cash flows. Labeling one of
these financial statements with "December 31" is not good enough–the reader needs to know if
the statement covers the one week ended December 31, 2020 the month ended December 31,
2020 the three months ended December 31, 2020 or the year ended December 31, 2020.
4. Cost Principle
From an accountant's point of view, the term "cost" refers to the amount spent (cash or the cash
equivalent) when an item was originally obtained, whether that purchase happened last year or
thirty years ago. For this reason, the amounts shown on financial statements are referred to
as historical cost amounts.
Because of this accounting principle asset amounts are not adjusted upward for inflation. In fact,
as a general rule, asset amounts are not adjusted to reflect any type of increase in value. Hence,
an asset amount does not reflect the amount of money a company would receive if it were to sell
the asset at today's market value. (An exception is certain investments in stocks and bonds that
are actively traded on a stock exchange.) If you want to know the current value of a company's
long-term assets, you will not get this information from a company's financial statements–you
need to look elsewhere, perhaps to a third-party appraiser.
5. Full Disclosure Principle
If certain information is important to an investor or lender using the financial statements, that
information should be disclosed within the statement or in the notes to the statement. It is
because of this basic accounting principle that numerous pages of "footnotes" are often attached
to financial statements.
As an example, let's say a company is named in a lawsuit that demands a significant amount of
money. When the financial statements are prepared it is not clear whether the company will be
able to defend itself or whether it might lose the lawsuit. As a result of these conditions and
because of the full disclosure principle the lawsuit will be described in the notes to the financial
statements.
Copyright (Diwakar Education Hub) Page 3
Acco-unting principle, it is assumed that the dollar's purchasing power has not changed over
time. As a result accountants ignore the effect of inflation on recorded amounts. For example,
dollars from a 1960 transaction are combined (or shown) with dollars from a 2020 transaction.
3. Time Period Assumption
This accounting principle assumes that it is possible to report the complex and ongoing activities
of a business in relatively short, distinct time intervals such as the five months ended May 31,
2020, or the 5 weeks ended May 1, 2020. The shorter the time interval, the more likely the need
for the accountant to estimate amounts relevant to that period. For example, the property tax
bill is received on December 15 of each year. On the income statement for the year ended
December 31, 2019, the amount is known; but for the income statement for the three months
ended March 31, 2020, the amount was not known and an estimate had to be used.
It is imperative that the time interval (or period of time) be shown in the heading of each income
statement, statement of stockholders' equity, and statement of cash flows. Labeling one of
these financial statements with "December 31" is not good enough–the reader needs to know if
the statement covers the one week ended December 31, 2020 the month ended December 31,
2020 the three months ended December 31, 2020 or the year ended December 31, 2020.
4. Cost Principle
From an accountant's point of view, the term "cost" refers to the amount spent (cash or the cash
equivalent) when an item was originally obtained, whether that purchase happened last year or
thirty years ago. For this reason, the amounts shown on financial statements are referred to
as historical cost amounts.
Because of this accounting principle asset amounts are not adjusted upward for inflation. In fact,
as a general rule, asset amounts are not adjusted to reflect any type of increase in value. Hence,
an asset amount does not reflect the amount of money a company would receive if it were to sell
the asset at today's market value. (An exception is certain investments in stocks and bonds that
are actively traded on a stock exchange.) If you want to know the current value of a company's
long-term assets, you will not get this information from a company's financial statements–you
need to look elsewhere, perhaps to a third-party appraiser.
5. Full Disclosure Principle
If certain information is important to an investor or lender using the financial statements, that
information should be disclosed within the statement or in the notes to the statement. It is
because of this basic accounting principle that numerous pages of "footnotes" are often attached
to financial statements.
As an example, let's say a company is named in a lawsuit that demands a significant amount of
money. When the financial statements are prepared it is not clear whether the company will be
able to defend itself or whether it might lose the lawsuit. As a result of these conditions and
because of the full disclosure principle the lawsuit will be described in the notes to the financial
statements.
MANAGEMENT UNIT-4
Copyright (Diwakar Education Hub) Page 4
A company usually lists its significant accounting policies as the first note to its financial
statements.
6. Going Concern Principle
This accounting principle assumes that a company will continue to exist long enough to carry out
its objectives and commitments and will not liquidate in the foreseeable future. If the company's
financial situation is such that the accountant believes the company will not be able to continue
on, the accountant is required to disclose this assessment.
The going concern principle allows the company to defer some of its prepaid expenses until
future accounting periods.
7. Matching Principle
This accounting principle requires companies to use the accrual basis of accounting. The
matching principle requires that expenses be matched with revenues. For example, sales
commissions expense should be reported in the period when the sales were made (and not
reported in the period when the commissions were paid). Wages to employees are reported as
an expense in the week when the employees worked and not in the week when the employees
are paid. If a company agrees to give its employees 1% of its 2020 revenues as a bonus on
January 15, 2021, the company should report the bonus as an expense in 2020 and the amount
unpaid at December 31, 2020 as a liability. (The expense is occurring as the sales are occurring.)
Because we cannot measure the future economic benefit of things such as advertisements (and
thereby we cannot match the ad expense with related future revenues), the accountant charges
the ad amount to expense in the period that the ad is run.
8. Revenue Recognition Principle
Under the accrual basis of accounting (as opposed to the cash basis of accounting), revenues are
recognized as soon as a product has been sold or a service has been performed, regardless of
when the money is actually received. Under this basic accounting principle, a company could
earn and report $20,000 of revenue in its first month of operation but receive $0 in actual cash in
that month.
For example, if ABC Consulting completes its service at an agreed price of $1,000, ABC should
recognize $1,000 of revenue as soon as its work is done—it does not matter whether the client
pays the $1,000 immediately or in 30 days. Do not confuse revenue with a cash receipt.
9. Materiality
Because of this basic accounting principle or guideline, an accountant might be allowed to violate
another accounting principle if an amount is insignificant. Professional judgement is needed to
decide whether an amount is insignificant or immaterial.
Copyright (Diwakar Education Hub) Page 4
A company usually lists its significant accounting policies as the first note to its financial
statements.
6. Going Concern Principle
This accounting principle assumes that a company will continue to exist long enough to carry out
its objectives and commitments and will not liquidate in the foreseeable future. If the company's
financial situation is such that the accountant believes the company will not be able to continue
on, the accountant is required to disclose this assessment.
The going concern principle allows the company to defer some of its prepaid expenses until
future accounting periods.
7. Matching Principle
This accounting principle requires companies to use the accrual basis of accounting. The
matching principle requires that expenses be matched with revenues. For example, sales
commissions expense should be reported in the period when the sales were made (and not
reported in the period when the commissions were paid). Wages to employees are reported as
an expense in the week when the employees worked and not in the week when the employees
are paid. If a company agrees to give its employees 1% of its 2020 revenues as a bonus on
January 15, 2021, the company should report the bonus as an expense in 2020 and the amount
unpaid at December 31, 2020 as a liability. (The expense is occurring as the sales are occurring.)
Because we cannot measure the future economic benefit of things such as advertisements (and
thereby we cannot match the ad expense with related future revenues), the accountant charges
the ad amount to expense in the period that the ad is run.
8. Revenue Recognition Principle
Under the accrual basis of accounting (as opposed to the cash basis of accounting), revenues are
recognized as soon as a product has been sold or a service has been performed, regardless of
when the money is actually received. Under this basic accounting principle, a company could
earn and report $20,000 of revenue in its first month of operation but receive $0 in actual cash in
that month.
For example, if ABC Consulting completes its service at an agreed price of $1,000, ABC should
recognize $1,000 of revenue as soon as its work is done—it does not matter whether the client
pays the $1,000 immediately or in 30 days. Do not confuse revenue with a cash receipt.
9. Materiality
Because of this basic accounting principle or guideline, an accountant might be allowed to violate
another accounting principle if an amount is insignificant. Professional judgement is needed to
decide whether an amount is insignificant or immaterial.
MANAGEMENT UNIT-4
Copyright (Diwakar Education Hub) Page 5
An example of an obviously immaterial item is the purchase of a $150 printer by a highly
profitable multi-million dollar company. Because the printer will be used for five years,
the matching principle directs the accountant to expense the cost over the five-year period.
The materiality guideline allows this company to violate the matching principle and to expense
the entire cost of $150 in the year it is purchased. The justification is that no one would consider
it misleading if $150 is expensed in the first year instead of $30 being expensed in each of the
five years that it is used.
Because of materiality, financial statements usually show amounts rounded to the nearest dollar,
to the nearest thousand, or to the nearest million dollars depending on the size of the company.
10. Conservatism
If a situation arises where there are two acceptable alternatives for reporting an item,
conservatism directs the accountant to choose the alternative that will result in less net income
and/or less asset amount. Conservatism helps the accountant to "break a tie." It does not direct
accountants to be conservative. Accountants are expected to be unbiased and objective.
The basic accounting principle of conservatism leads accountants to anticipate or disclose losses,
but it does not allow a similar action for gains. For example, potential losses from lawsuits will be
reported on the financial statements or in the notes, but potential gains will not be reported.
Also, an accountant may write inventory down to an amount that is lower than the original cost,
but will not write inventory up to an amount higher than the original cost.
(Accounting standards)
Accounting standards are authoritative standards for financial reporting and are the primary
source of generally accepted accounting principles (GAAP).
Accounting standards specify how transactions and other events are to be recognized, measured,
presented and disclosed in financial statements. Their objective is to provide financial
information to investors, lenders, creditors, contributors, and others that is useful in making
decisions about providing resources to the entity.
There are ten principles that can help you understand the mission of the GAAP standards and
rules.
1. PRINCIPLE OF REGULARITY
The principle states that the accountant has complied to the GAAP rules and regulations.
2. PRINCIPLE OF CONSISTENCY
The accountants should enter all items in exactly the same way that it has been fixed. By applying
similar standards in the reporting process, accountants can avoid errors or discrepancies.
If the standards are changed or updates, the accountants are expected to fully disclose and
explain the reasons behind the changes.
Copyright (Diwakar Education Hub) Page 5
An example of an obviously immaterial item is the purchase of a $150 printer by a highly
profitable multi-million dollar company. Because the printer will be used for five years,
the matching principle directs the accountant to expense the cost over the five-year period.
The materiality guideline allows this company to violate the matching principle and to expense
the entire cost of $150 in the year it is purchased. The justification is that no one would consider
it misleading if $150 is expensed in the first year instead of $30 being expensed in each of the
five years that it is used.
Because of materiality, financial statements usually show amounts rounded to the nearest dollar,
to the nearest thousand, or to the nearest million dollars depending on the size of the company.
10. Conservatism
If a situation arises where there are two acceptable alternatives for reporting an item,
conservatism directs the accountant to choose the alternative that will result in less net income
and/or less asset amount. Conservatism helps the accountant to "break a tie." It does not direct
accountants to be conservative. Accountants are expected to be unbiased and objective.
The basic accounting principle of conservatism leads accountants to anticipate or disclose losses,
but it does not allow a similar action for gains. For example, potential losses from lawsuits will be
reported on the financial statements or in the notes, but potential gains will not be reported.
Also, an accountant may write inventory down to an amount that is lower than the original cost,
but will not write inventory up to an amount higher than the original cost.
(Accounting standards)
Accounting standards are authoritative standards for financial reporting and are the primary
source of generally accepted accounting principles (GAAP).
Accounting standards specify how transactions and other events are to be recognized, measured,
presented and disclosed in financial statements. Their objective is to provide financial
information to investors, lenders, creditors, contributors, and others that is useful in making
decisions about providing resources to the entity.
There are ten principles that can help you understand the mission of the GAAP standards and
rules.
1. PRINCIPLE OF REGULARITY
The principle states that the accountant has complied to the GAAP rules and regulations.
2. PRINCIPLE OF CONSISTENCY
The accountants should enter all items in exactly the same way that it has been fixed. By applying
similar standards in the reporting process, accountants can avoid errors or discrepancies.
If the standards are changed or updates, the accountants are expected to fully disclose and
explain the reasons behind the changes.
MANAGEMENT UNIT-4
Copyright (Diwakar Education Hub) Page 6
3. PRINCIPLE OF SINCERITY
As per this principle, the accountant should provide the correct depiction of the financial
situation of a business.
4. PRINCIPLE OF PERMANENCE OF METHOD
The focus of this principle is that there should be a consistency in the procedures used in
financial reporting.
5. PRINCIPLE OF NON-COMPENSATION
The full details of the financial information should be disclosed including negatives and positives.
This should be done without the expectation of debt compensation by an asset or revenue by an
expense.
6. PRINCIPLE OF PRUDENCE
The financial data representation should be done “as it is” and not based on any speculation.
7. PRINCIPLE OF CONTINUITY
The principle assumes that the business will continue its operations in the future.
8. PRINCIPLE OF PERIODICITY
The accounting entries are distributed across the suitable time periods.
9. PRINCIPLE OF FULL DISCLOSURE
While creating the financial reports, the accountants must strive for full disclosure.
10. PRINCIPLE OF UTMOST GOOD FAITH
This principle states presupposes that the parties remain honest in transactions.
While the GAAP principles are used by large companies while reporting their financial
information, if you believe your small business may eventually be subject to GAAP, you may want
to adopt the standard early on.
Accounting is the art of recording transactions in a way to help the reader to arrive at
judgments/come to conclusions. So it becomes essential that they should be incorporated into
some standardized guidelines. These guidelines are generally known to be as accounting policies.
The intricacies of accounting policies allow various companies to alter their accounting principles
to suit their benefit. Therefore, making it almost impossible to make any kind of comparisons.
In order to avoid this and to have a harmonized accounting principle, Standards needed to be set
by recognized accounting bodies. This concept paved the way for the formation of Accounting
Standards in the world.
Accounting Standards in India are issued by the Institute of Chartered
Accountants of India (ICAI).
Copyright (Diwakar Education Hub) Page 6
3. PRINCIPLE OF SINCERITY
As per this principle, the accountant should provide the correct depiction of the financial
situation of a business.
4. PRINCIPLE OF PERMANENCE OF METHOD
The focus of this principle is that there should be a consistency in the procedures used in
financial reporting.
5. PRINCIPLE OF NON-COMPENSATION
The full details of the financial information should be disclosed including negatives and positives.
This should be done without the expectation of debt compensation by an asset or revenue by an
expense.
6. PRINCIPLE OF PRUDENCE
The financial data representation should be done “as it is” and not based on any speculation.
7. PRINCIPLE OF CONTINUITY
The principle assumes that the business will continue its operations in the future.
8. PRINCIPLE OF PERIODICITY
The accounting entries are distributed across the suitable time periods.
9. PRINCIPLE OF FULL DISCLOSURE
While creating the financial reports, the accountants must strive for full disclosure.
10. PRINCIPLE OF UTMOST GOOD FAITH
This principle states presupposes that the parties remain honest in transactions.
While the GAAP principles are used by large companies while reporting their financial
information, if you believe your small business may eventually be subject to GAAP, you may want
to adopt the standard early on.
Accounting is the art of recording transactions in a way to help the reader to arrive at
judgments/come to conclusions. So it becomes essential that they should be incorporated into
some standardized guidelines. These guidelines are generally known to be as accounting policies.
The intricacies of accounting policies allow various companies to alter their accounting principles
to suit their benefit. Therefore, making it almost impossible to make any kind of comparisons.
In order to avoid this and to have a harmonized accounting principle, Standards needed to be set
by recognized accounting bodies. This concept paved the way for the formation of Accounting
Standards in the world.
Accounting Standards in India are issued by the Institute of Chartered
Accountants of India (ICAI).
MANAGEMENT UNIT-4
Copyright (Diwakar Education Hub) Page 7
Objectives of Accounting Standards
The main objective of Accounting Standards is to standardize the diverse accounting policies and
practices. These Accounting Standards were implemented to eliminate the non-comparability of
financial statements and the reliability to the financial statements.
The Institute of Chartered Accountants of India (ICAI), to harmonize the diverse accounting
policies and practices, constituted at Accounting Standard Board (ASB) on 21st April 1977.
Compliance with Accounting Standards issued by ICAI
Sub Section(3A) to section 211 of Companies Act, 1956 requires that every Profit/Loss Account
and Balance Sheet shall comply with the Accounting Standards.
Accounting Standards means the standard of accounting recommended by the ICAI and
prescribed by the Central Government in consultation with the National Advisory Committee on
Accounting Standards (NACAs) constituted under section 210(1) of Companies Act, 1956.
List of Indian Accounting Standards
INDIAN ACCOUNTING
STANDARD NO (IAS NO)
NAME OF INDIAN ACCOUNTING STANDARD
Ind AS 101 First-time Adoption of Indian Accounting
Standards
Ind AS 102 Share-based Payment
Ind AS 103 Business Combinations
Ind AS 104 Insurance Contracts
Ind AS 105 Non-current Assets Held for Sale and
Discontinued Operations
Ind AS 106 Exploration for and Evaluation of Mineral
Resources
Ind AS 107 Financial Instruments: Disclosures
Ind AS 108 Operating Segments
Ind AS 109 Financial Instruments
Ind AS 110 Consolidated Financial Statements
Ind AS 111 Joint Arrangements
Ind AS 112 Disclosure of Interests in Other Entities
Ind AS 113 Fair Value Measurement
Ind AS 114 Regulatory Deferral Accounts
Ind AS 115 Revenue from Contracts with Customers
Ind AS 1 Presentation of Financial Statements
Ind AS 2 Inventories
Ind AS 7 Statement of Cash Flows
Ind AS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
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Objectives of Accounting Standards
The main objective of Accounting Standards is to standardize the diverse accounting policies and
practices. These Accounting Standards were implemented to eliminate the non-comparability of
financial statements and the reliability to the financial statements.
The Institute of Chartered Accountants of India (ICAI), to harmonize the diverse accounting
policies and practices, constituted at Accounting Standard Board (ASB) on 21st April 1977.
Compliance with Accounting Standards issued by ICAI
Sub Section(3A) to section 211 of Companies Act, 1956 requires that every Profit/Loss Account
and Balance Sheet shall comply with the Accounting Standards.
Accounting Standards means the standard of accounting recommended by the ICAI and
prescribed by the Central Government in consultation with the National Advisory Committee on
Accounting Standards (NACAs) constituted under section 210(1) of Companies Act, 1956.
List of Indian Accounting Standards
INDIAN ACCOUNTING
STANDARD NO (IAS NO)
NAME OF INDIAN ACCOUNTING STANDARD
Ind AS 101 First-time Adoption of Indian Accounting
Standards
Ind AS 102 Share-based Payment
Ind AS 103 Business Combinations
Ind AS 104 Insurance Contracts
Ind AS 105 Non-current Assets Held for Sale and
Discontinued Operations
Ind AS 106 Exploration for and Evaluation of Mineral
Resources
Ind AS 107 Financial Instruments: Disclosures
Ind AS 108 Operating Segments
Ind AS 109 Financial Instruments
Ind AS 110 Consolidated Financial Statements
Ind AS 111 Joint Arrangements
Ind AS 112 Disclosure of Interests in Other Entities
Ind AS 113 Fair Value Measurement
Ind AS 114 Regulatory Deferral Accounts
Ind AS 115 Revenue from Contracts with Customers
Ind AS 1 Presentation of Financial Statements
Ind AS 2 Inventories
Ind AS 7 Statement of Cash Flows
Ind AS 8 Accounting Policies, Changes in Accounting
Estimates and Errors
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Ind AS 10 Events after the Reporting Period
Ind AS 12 Income Taxes
Ind AS 16 Property, Plant, and Equipment
Ind AS 17 Leases
Ind AS 19 Employee Benefits
Ind AS 20 Accounting for Government Grants and
Disclosure of Government Assistance
Ind AS 21 The Effects of Changes in Foreign Exchange
Rates
Ind AS 23 Borrowing Costs
Ind AS 24 Related Party Disclosures
Ind AS 27 Separate Financial Statements
Ind AS 28 Investments in Associates and Joint Ventures
Ind AS 29 Financial Reporting in Hyperinflationary
Economies
Ind AS 32 Financial Instruments: Presentation
Ind AS 33 Earnings per Share
Ind AS 34 Interim Financial Reporting
Ind AS 36 Impairment of Assets
Ind AS 37 Provisions, Contingent Liabilities and Contingent
Assets
Ind AS 38 Intangible Assets
Ind AS 40 Investment Property
Ind AS 41 Agriculture
Preparation of Financial Statements
A financial statement is a formal record of a company’s financial activity. These plans give a
current landscape of your small business and forecast the future vision and plans of the business.
Creating financial statements for your small business starts with your day to day bookkeeping.
You will use pull and organize the data from these records to put together your financial
statements.
Financial statements are a key part of a business plan that will help your business attract an
investor or obtain bank loans.
Here are the types of financial statements and tips on how to create them:
BALANCE SHEET
A balance shows the assets, liabilities and shareholder equity during a specific period. To create a
balance sheet, start by listing your assets on the left side of the page including cash you have in
hand and in the bank, the value of the equipment you own, the value of the inventory you have
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Ind AS 10 Events after the Reporting Period
Ind AS 12 Income Taxes
Ind AS 16 Property, Plant, and Equipment
Ind AS 17 Leases
Ind AS 19 Employee Benefits
Ind AS 20 Accounting for Government Grants and
Disclosure of Government Assistance
Ind AS 21 The Effects of Changes in Foreign Exchange
Rates
Ind AS 23 Borrowing Costs
Ind AS 24 Related Party Disclosures
Ind AS 27 Separate Financial Statements
Ind AS 28 Investments in Associates and Joint Ventures
Ind AS 29 Financial Reporting in Hyperinflationary
Economies
Ind AS 32 Financial Instruments: Presentation
Ind AS 33 Earnings per Share
Ind AS 34 Interim Financial Reporting
Ind AS 36 Impairment of Assets
Ind AS 37 Provisions, Contingent Liabilities and Contingent
Assets
Ind AS 38 Intangible Assets
Ind AS 40 Investment Property
Ind AS 41 Agriculture
Preparation of Financial Statements
A financial statement is a formal record of a company’s financial activity. These plans give a
current landscape of your small business and forecast the future vision and plans of the business.
Creating financial statements for your small business starts with your day to day bookkeeping.
You will use pull and organize the data from these records to put together your financial
statements.
Financial statements are a key part of a business plan that will help your business attract an
investor or obtain bank loans.
Here are the types of financial statements and tips on how to create them:
BALANCE SHEET
A balance shows the assets, liabilities and shareholder equity during a specific period. To create a
balance sheet, start by listing your assets on the left side of the page including cash you have in
hand and in the bank, the value of the equipment you own, the value of the inventory you have
MANAGEMENT UNIT-4
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in stock and any other financial assets. On the right side of the page list your liabilities including
accounts payable, credit card balances, bank loans and any other money your company owes.
Finally, total your assets and liabilities and then subtract your liabilities from your assets. The
amount left is known as owner equity.
INCOME SHEET
An income sheet shows revenues, expenses and income or loss for a period. First, gather all types
of earnings during the time period the statement will cover. These sources of earnings could be
wholesale and retail sales or income from renting out propriety. Next total up all of your
expenses such money spent on materials, payroll, advertising, utilities, equipment and rent on
business properties. You can find your bottom line by subtracting your total expenses from your
total income.
STATEMENT OF CASH FLOW
A statement of cash flow shows the inflows and outflows of cash and the ending balance during a
period. The statement of cash flows has three sections operating activities, investing
activities and financing activities.
A financial statement reports the financial health and activity to potential investors and
creditors.
Since the report is sent to external stakeholders, a business must prepare their reports according
to the generally accepted accounting principles of the United States. This makes it easier for
investors and creditors to compare the financial health of your companies to other by comparing
financial statements.
Therefore it is standard practice to include these elements to your financial statement.
Assets: probable forecasted economic benefits obtained or managed by an external entity due to
past transactions.
Comprehensive income: change in equity (net assets) during a period from transactions and
other events and circumstances from external sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to owners.
Distributions to owners: decreases in net assets resulting from transferring assets, rendering
services, or incurring liabilities to owners. Distributions to owners decrease ownership interest.
Equity: residual interest in the assets that remain after deducting its liabilities. In your company,
equity is the ownership interest.
Expenses: outflows, uses of assets or incurring liabilities during a period from delivering or
producing goods or services that make up your central operations.
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in stock and any other financial assets. On the right side of the page list your liabilities including
accounts payable, credit card balances, bank loans and any other money your company owes.
Finally, total your assets and liabilities and then subtract your liabilities from your assets. The
amount left is known as owner equity.
INCOME SHEET
An income sheet shows revenues, expenses and income or loss for a period. First, gather all types
of earnings during the time period the statement will cover. These sources of earnings could be
wholesale and retail sales or income from renting out propriety. Next total up all of your
expenses such money spent on materials, payroll, advertising, utilities, equipment and rent on
business properties. You can find your bottom line by subtracting your total expenses from your
total income.
STATEMENT OF CASH FLOW
A statement of cash flow shows the inflows and outflows of cash and the ending balance during a
period. The statement of cash flows has three sections operating activities, investing
activities and financing activities.
A financial statement reports the financial health and activity to potential investors and
creditors.
Since the report is sent to external stakeholders, a business must prepare their reports according
to the generally accepted accounting principles of the United States. This makes it easier for
investors and creditors to compare the financial health of your companies to other by comparing
financial statements.
Therefore it is standard practice to include these elements to your financial statement.
Assets: probable forecasted economic benefits obtained or managed by an external entity due to
past transactions.
Comprehensive income: change in equity (net assets) during a period from transactions and
other events and circumstances from external sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to owners.
Distributions to owners: decreases in net assets resulting from transferring assets, rendering
services, or incurring liabilities to owners. Distributions to owners decrease ownership interest.
Equity: residual interest in the assets that remain after deducting its liabilities. In your company,
equity is the ownership interest.
Expenses: outflows, uses of assets or incurring liabilities during a period from delivering or
producing goods or services that make up your central operations.
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Gains: increases in equity (net assets) from business transactions and from all other transactions
except those that result from revenues or investments by owner.
Investments by owners: increases in net assets resulting from transfers to it from other entities
of something of value to obtain or increase ownership interest (or equity) in it.
Liabilities: probable future sacrifices of economic benefits from present obligations to transfer
assets or provide services in the future because of past transactions or events.
Losses: decreases in equity (net assets) from all business transactions and events and
circumstances affecting a business during a period except that result from expenses or
distributions to owners.
Revenues: inflows or enhancements of assets of a business or settlement of its liabilities during a
period from delivering or producing goods, rendering services, or other activities that constitute
the business’ ongoing central operations.
Business planning or forecasting is the view of your business starting today and going into the
future. You don’t do the financials in a business plan the same way you calculate the details in
your accounting reports.
There are two main purposes of the financial section of your business plan. First, this information
is needed by potential investors, venture capitalists, angel investors and anyone else with a
financial stake in your business. The second, and arguably, the most important purpose of the
financial section of your business plan is for your own benefit, so you understand how to project
how your business will do.
STEP 1: MAKE A SALES FORECAST
Create a spreadsheet projecting your sales over the course of three years. Set different sections
for different lines of sales and columns for every month of the first year and on a quarterly basis
for year two and three. You should spreadsheet blocks that include one block for unit sales, one
block for pricing, a third block that multiplies units by unit cost to calculate cost of sales. You cost
of sales in your sales forecast because you want to calculate the gross margin. The gross margin
is sales less cost of sales.
STEP 2: CREATE A BUDGET FOR YOUR EXPENSES
You need to understand how much it will cost you to actually make the sales you have
forecasted. Consider your fixed costs (i.e., rent and payroll) and variable costs (i.e., most
advertising and promotional expenses) when you are creating your budget. With many of these
numbers, you are going to have to estimate things like interest and taxes. multiply estimated
profits by your best-guess tax percentage rate to estimate taxes and then multiply your
estimated debts balance by an estimated interest rate to estimate interest.
STEP 3: DEVELOP CASH FLOW STATEMENT
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Gains: increases in equity (net assets) from business transactions and from all other transactions
except those that result from revenues or investments by owner.
Investments by owners: increases in net assets resulting from transfers to it from other entities
of something of value to obtain or increase ownership interest (or equity) in it.
Liabilities: probable future sacrifices of economic benefits from present obligations to transfer
assets or provide services in the future because of past transactions or events.
Losses: decreases in equity (net assets) from all business transactions and events and
circumstances affecting a business during a period except that result from expenses or
distributions to owners.
Revenues: inflows or enhancements of assets of a business or settlement of its liabilities during a
period from delivering or producing goods, rendering services, or other activities that constitute
the business’ ongoing central operations.
Business planning or forecasting is the view of your business starting today and going into the
future. You don’t do the financials in a business plan the same way you calculate the details in
your accounting reports.
There are two main purposes of the financial section of your business plan. First, this information
is needed by potential investors, venture capitalists, angel investors and anyone else with a
financial stake in your business. The second, and arguably, the most important purpose of the
financial section of your business plan is for your own benefit, so you understand how to project
how your business will do.
STEP 1: MAKE A SALES FORECAST
Create a spreadsheet projecting your sales over the course of three years. Set different sections
for different lines of sales and columns for every month of the first year and on a quarterly basis
for year two and three. You should spreadsheet blocks that include one block for unit sales, one
block for pricing, a third block that multiplies units by unit cost to calculate cost of sales. You cost
of sales in your sales forecast because you want to calculate the gross margin. The gross margin
is sales less cost of sales.
STEP 2: CREATE A BUDGET FOR YOUR EXPENSES
You need to understand how much it will cost you to actually make the sales you have
forecasted. Consider your fixed costs (i.e., rent and payroll) and variable costs (i.e., most
advertising and promotional expenses) when you are creating your budget. With many of these
numbers, you are going to have to estimate things like interest and taxes. multiply estimated
profits by your best-guess tax percentage rate to estimate taxes and then multiply your
estimated debts balance by an estimated interest rate to estimate interest.
STEP 3: DEVELOP CASH FLOW STATEMENT
MANAGEMENT UNIT-4
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First step would be to calculate the earnings before taxes, preferred dividend payments, taxes
and interest expenses.
Preferred Dividends = 100 x 5% = $5 million
Net Interest expense = $10 million – $1 million = $9 million
Now, that we have all the metrics to calculate the financial break-even point, let’s see the final
calculation;
Financial breakeven (EBIT) = Preferred Dividends/ 1- tax rate+ Net Interest expense
= ($55 million/1-33%) + $9 million = $16.58 million.
Example 2: Let’s consider another example to make things clearer. Company A has come up with
three financing plans to fund its new project. Plan 1 – $15,0000 Equity, Plan 2 – $100000 in
Equity and $50000 in 8% Debentures; Plan 3 – $75000 in Equity, $25000 in 8% Debenture and
$50000 in 10% Preference Share Capital. In this, we have to calculate the financial breakeven for
each option assuming a 50% tax rate.
For Plan 1, the break-even point is 0 as there is no interest expense and preference dividend.
In the Plan 2, the financial break-even level will be = $50000*8% = $4000. In this case, there are
only interest expenses and no preference dividend.
For the Plan 3, the financial break-even point will be = (10%*$50000)/(1-50%) + (8%*$25000) =
$10000 + $2000 = $12000.
It is clear from the second example that the financial break-even point increases as the company
takes on more debt.
Please Be Careful from Fake Person buy our Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
MANAGEMENT UNIT-4 MCQS
1 According to money measurement concept,
which one of the following will be recorded in
the books of accounts?
(a) Excellent moral of workers
(b) Cost of Machinery
(c) Managing ability of the manager
(d) Quality control in the business
Answer: (2)
Explanation: At the simplest level, a machine's
cost per hour is equal to its total cost minus its
eventual salvage value divided by its total
expected life.
2 Which accounting principle states that
companies and owners should be treated as
separate entities.
(1) Monetary Unit Assumption
(2) Business Entity Concept
(3) Periodicity Assumption
(4) Going Concern Concept
Answer: (2)
Explanation: Under the business entity concept,
a business holds separate entity and distinct
from its owners.
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First step would be to calculate the earnings before taxes, preferred dividend payments, taxes
and interest expenses.
Preferred Dividends = 100 x 5% = $5 million
Net Interest expense = $10 million – $1 million = $9 million
Now, that we have all the metrics to calculate the financial break-even point, let’s see the final
calculation;
Financial breakeven (EBIT) = Preferred Dividends/ 1- tax rate+ Net Interest expense
= ($55 million/1-33%) + $9 million = $16.58 million.
Example 2: Let’s consider another example to make things clearer. Company A has come up with
three financing plans to fund its new project. Plan 1 – $15,0000 Equity, Plan 2 – $100000 in
Equity and $50000 in 8% Debentures; Plan 3 – $75000 in Equity, $25000 in 8% Debenture and
$50000 in 10% Preference Share Capital. In this, we have to calculate the financial breakeven for
each option assuming a 50% tax rate.
For Plan 1, the break-even point is 0 as there is no interest expense and preference dividend.
In the Plan 2, the financial break-even level will be = $50000*8% = $4000. In this case, there are
only interest expenses and no preference dividend.
For the Plan 3, the financial break-even point will be = (10%*$50000)/(1-50%) + (8%*$25000) =
$10000 + $2000 = $12000.
It is clear from the second example that the financial break-even point increases as the company
takes on more debt.
Please Be Careful from Fake Person buy our Notes From Our Official Website (DIWAKAR
EDUCATION HUB) only OR Call 7310762592.
MANAGEMENT UNIT-4 MCQS
1 According to money measurement concept,
which one of the following will be recorded in
the books of accounts?
(a) Excellent moral of workers
(b) Cost of Machinery
(c) Managing ability of the manager
(d) Quality control in the business
Answer: (2)
Explanation: At the simplest level, a machine's
cost per hour is equal to its total cost minus its
eventual salvage value divided by its total
expected life.
2 Which accounting principle states that
companies and owners should be treated as
separate entities.
(1) Monetary Unit Assumption
(2) Business Entity Concept
(3) Periodicity Assumption
(4) Going Concern Concept
Answer: (2)
Explanation: Under the business entity concept,
a business holds separate entity and distinct
from its owners.
MANAGEMENT UNIT-4
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3 Cost or expenses must be recorded at the
same time as the revenue to which they
correspond is specified by which principle?
(1) Matching Principle
(2) Going Concern Principle
(3) Consistency Principle
(4) Prudence Principle
Answer: (1)
Explanation: Matching principle is
the accounting principle that requires that the
expenses incurred during a period be recorded
in the same period in which the related revenues
are earned. ... If there's no cause and effect
relationship, then the accountant will charge the
cost to the expense immediately.
4 Which concept states that “for every debit,
there is a credit”?
(1) Money Measurement Concept
(2) Accounting Period Concept
(3) Separate Entity Concept
(4) Dual Aspect Concept
Answer: (1)
Explanation: A business should only record an
accounting transaction if it can be expressed in
terms of money. ... Examples of items that
cannot be recorded as accounting transactions
because they cannot be expressed in terms
of money include: Employee skill level.
Employee working conditions.
5 For measuring income, the most acceptable
method is?
(1) To apply normal rate of return on capital
invested
(2) To apply the average return in industry on
capital
(3) To match the cost with revenue
(4) To find out the difference in net worth as on
two dates
Answer: (3)
Explanation: The matching principle , part of
accrual accounting, requires that expenses be
recognized when obligations are (1) incurred
(usually when goods are transferred or services
rendered), and (2) that they offset
recognized revenues, which were generated
from those expenses.
6 The correct form of Accounting equation is
(1) Assets – Receivable = Equity
(2) Assets + Receivable = Equity
(3) Assets – Liabilities = Equity
(4) Assets + Liabilities = Equity
Answer: (3)
Explanation: The accounting equation is also
called the basic accounting equation or the
balance sheet equation. While assets represent
the valuable resources controlled by the
company, the liabilities represent its
obligations. Both liabilities and
shareholders' equity represent how the assets of
a company are financed.
7 As per revenue recognition principle, sales
revenues should be recognized at the time
when?
(1) Order is taken for merchandise
(2) Ownership of goods gets transferred from
the seller to the buyer
(3) Cash is received
(4) All of the above
Answer/ Ownership of goods gets transferred
from the seller to the buyer: (2)
8 Due to which concept, accounting does not
record non-financial transactions?
(1) Going concern concept
(2) Money measurement concept
(3) Accrual concept
(4) Cost concept
Answer: (2)
Explanation: Money Measurement Concept in
accounting, also known as
Measurability Concept, means that only
transactions and events that are capable of
being measured in monetary terms are
recognized in the financial statements.
9 The owner of the business is treated as a
creditor of the business according to which of
the following concept?
(1) Entity concept
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3 Cost or expenses must be recorded at the
same time as the revenue to which they
correspond is specified by which principle?
(1) Matching Principle
(2) Going Concern Principle
(3) Consistency Principle
(4) Prudence Principle
Answer: (1)
Explanation: Matching principle is
the accounting principle that requires that the
expenses incurred during a period be recorded
in the same period in which the related revenues
are earned. ... If there's no cause and effect
relationship, then the accountant will charge the
cost to the expense immediately.
4 Which concept states that “for every debit,
there is a credit”?
(1) Money Measurement Concept
(2) Accounting Period Concept
(3) Separate Entity Concept
(4) Dual Aspect Concept
Answer: (1)
Explanation: A business should only record an
accounting transaction if it can be expressed in
terms of money. ... Examples of items that
cannot be recorded as accounting transactions
because they cannot be expressed in terms
of money include: Employee skill level.
Employee working conditions.
5 For measuring income, the most acceptable
method is?
(1) To apply normal rate of return on capital
invested
(2) To apply the average return in industry on
capital
(3) To match the cost with revenue
(4) To find out the difference in net worth as on
two dates
Answer: (3)
Explanation: The matching principle , part of
accrual accounting, requires that expenses be
recognized when obligations are (1) incurred
(usually when goods are transferred or services
rendered), and (2) that they offset
recognized revenues, which were generated
from those expenses.
6 The correct form of Accounting equation is
(1) Assets – Receivable = Equity
(2) Assets + Receivable = Equity
(3) Assets – Liabilities = Equity
(4) Assets + Liabilities = Equity
Answer: (3)
Explanation: The accounting equation is also
called the basic accounting equation or the
balance sheet equation. While assets represent
the valuable resources controlled by the
company, the liabilities represent its
obligations. Both liabilities and
shareholders' equity represent how the assets of
a company are financed.
7 As per revenue recognition principle, sales
revenues should be recognized at the time
when?
(1) Order is taken for merchandise
(2) Ownership of goods gets transferred from
the seller to the buyer
(3) Cash is received
(4) All of the above
Answer/ Ownership of goods gets transferred
from the seller to the buyer: (2)
8 Due to which concept, accounting does not
record non-financial transactions?
(1) Going concern concept
(2) Money measurement concept
(3) Accrual concept
(4) Cost concept
Answer: (2)
Explanation: Money Measurement Concept in
accounting, also known as
Measurability Concept, means that only
transactions and events that are capable of
being measured in monetary terms are
recognized in the financial statements.
9 The owner of the business is treated as a
creditor of the business according to which of
the following concept?
(1) Entity concept
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Copyright (Diwakar Education Hub) Page 136
(2) Materiality concept
(3) Consistency concept
(4) Periodicity concept
Answer: (1)
Explanation: The business entity concept states
that the business is separate from the owner(s)
of the business. Therefore the accounting
records for even the simplest business, the sole
trader, must be kept separate from the personal
affairs of the owner or owners.
10 As per the accrual concept of accounting, any
financial or business transaction should be
recorded:
(1) when profit is computed
(2) when balance sheet is prepared
(3) when cash is received or paid
(4) when transaction occurs
Answer: (4)
Explanation: By reducing costs and ensuring
customers pay on time and the right amount,
you will gradually improve profit. ... Additionally,
you can manage your outgoings much more
effectively by tracking your transactions.
11. The accounting principle that states
companies and owners should be account for
separately.
1. BUSINESS ENTITY CONCEPT
2. GOING CONCERN CONCEPT
3. MONETARY UNIT ASSUMPTION
4. PERIODICITY ASSUMPTION
Answer: (1)
Explanation: Business Entity Concept states that
the business and the owner are two
separate entities and accordingly must be
treated separately. ... For example in a
partnership firm, partners and the
partnership/business are two separate entities.
12. Companies not disclosing an immanent
bankruptcy would violate the:
1. BUSINESS ENTITY CONCEPT
2. GOING CONCERN CONCEPT
3. MONETARY UNIT ASSUMPTION
4. PERIODICITY ASSUMPTION
Answer: (2)
Explanation: The going concern concept of
accounting implies that the business entity will
continue its operations in the future and will not
liquidate or be forced to discontinue operations
due to any reason. ... Another example of
the going concern assumption is the prepayment
and accrual of expenses.
13. The assumption that states that businesses
can divide up their activities into artificial time
periods.
1. BUSINESS ENTITY CONCEPT
2. GOING CONCERN CONCEPT
3. MONETARY UNIT ASSUMPTION
4. PERIODICITY ASSUMPTION
Answer: (4)
Explanation: The periodicity assumption or time
period assumption states that businesses can
divide up their activities into artificial time
periods. ... The periodicity
assumption is important to financial accounting
because it allows businesses to show current
performance to investors and creditors for
shorter periods of time.
14. Assets are recorded at their original
purchase price according to the:
1. MATERIALITY PRINCIPLE
2. HISTORICAL COST PRINCIPLE
3. COST BENEFIT PRINCIPLE
4. CONSISTENCY PRINCIPLE
Answer: (2)
Explanation: It states that all goods and services
purchased by a business must be recorded
at historical cost, not fair market
value. Historical cost is important to people
reading a balance sheet or analyzing the books
(records) of a company. ... This
is important when making decisions about
assets.
15. Management concealing important financial
information violates the:
1. MATERIALITY PRINCIPLE
2. HISTORICAL COST PRINCIPLE
3. FULL DISCLOSURE PRINCIPLE
4. CONSISTENCY PRINCIPLE
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(2) Materiality concept
(3) Consistency concept
(4) Periodicity concept
Answer: (1)
Explanation: The business entity concept states
that the business is separate from the owner(s)
of the business. Therefore the accounting
records for even the simplest business, the sole
trader, must be kept separate from the personal
affairs of the owner or owners.
10 As per the accrual concept of accounting, any
financial or business transaction should be
recorded:
(1) when profit is computed
(2) when balance sheet is prepared
(3) when cash is received or paid
(4) when transaction occurs
Answer: (4)
Explanation: By reducing costs and ensuring
customers pay on time and the right amount,
you will gradually improve profit. ... Additionally,
you can manage your outgoings much more
effectively by tracking your transactions.
11. The accounting principle that states
companies and owners should be account for
separately.
1. BUSINESS ENTITY CONCEPT
2. GOING CONCERN CONCEPT
3. MONETARY UNIT ASSUMPTION
4. PERIODICITY ASSUMPTION
Answer: (1)
Explanation: Business Entity Concept states that
the business and the owner are two
separate entities and accordingly must be
treated separately. ... For example in a
partnership firm, partners and the
partnership/business are two separate entities.
12. Companies not disclosing an immanent
bankruptcy would violate the:
1. BUSINESS ENTITY CONCEPT
2. GOING CONCERN CONCEPT
3. MONETARY UNIT ASSUMPTION
4. PERIODICITY ASSUMPTION
Answer: (2)
Explanation: The going concern concept of
accounting implies that the business entity will
continue its operations in the future and will not
liquidate or be forced to discontinue operations
due to any reason. ... Another example of
the going concern assumption is the prepayment
and accrual of expenses.
13. The assumption that states that businesses
can divide up their activities into artificial time
periods.
1. BUSINESS ENTITY CONCEPT
2. GOING CONCERN CONCEPT
3. MONETARY UNIT ASSUMPTION
4. PERIODICITY ASSUMPTION
Answer: (4)
Explanation: The periodicity assumption or time
period assumption states that businesses can
divide up their activities into artificial time
periods. ... The periodicity
assumption is important to financial accounting
because it allows businesses to show current
performance to investors and creditors for
shorter periods of time.
14. Assets are recorded at their original
purchase price according to the:
1. MATERIALITY PRINCIPLE
2. HISTORICAL COST PRINCIPLE
3. COST BENEFIT PRINCIPLE
4. CONSISTENCY PRINCIPLE
Answer: (2)
Explanation: It states that all goods and services
purchased by a business must be recorded
at historical cost, not fair market
value. Historical cost is important to people
reading a balance sheet or analyzing the books
(records) of a company. ... This
is important when making decisions about
assets.
15. Management concealing important financial
information violates the:
1. MATERIALITY PRINCIPLE
2. HISTORICAL COST PRINCIPLE
3. FULL DISCLOSURE PRINCIPLE
4. CONSISTENCY PRINCIPLE
MANAGEMENT UNIT-4
Copyright (Diwakar Education Hub) Page 137
Answer: (3)
Explanation: The purpose of the full
disclosure principle is to share relevant and
material financial information with the outside
world. Since outsiders don't know the details of
a company's business deals, contracts, and
loans, it's difficult to form an opinion of the
entity.
16. When estimating unearned revenues, what
principle applies?
1. CONVERATISM PRINCIPLE
2. HISTORICAL COST PRINCIPLE
3. FULL DISCLOSURE PRINCIPLE
4. CONSISTENCY PRINCIPLE
Answer: (1)
Explanation: The principle of conservatism in
accounting gives guidance when recording cases
of uncertainty or estimates.
17. What is not a value of accounting relevance?
1. PREDICTIVE VALUE
2. FEEDBACK VALUE
3. TIMELINESS
4. RELIBILITY
Answer: (4)
Explanation: Accounting relevance deals with
the usefulness of financial information to users
during the decision making process. Obviously
financial information that isn't related to users
decisions isn't useful to creditors or investors.
18. What is not a value of accounting reliability?
1. VERIFIABILITY
2. REPRESENTATIONAL FAITHFULNESS
3. TIMELINESS
4. NEUTRALITY
Answer: (3)
Explanation: It is a goal of an accounting
information system to provide information that
is relevant, meaningful, reliable, useful, and
current.
19. Switching accounting principles every year
would violate the:
1. CONVERATISM PRINCIPLE
2. HISTORICAL COST PRINCIPLE
3. FULL DISCLOSURE PRINCIPLE
4. CONSISTENCY PRINCIPLE
Answer: (4)
Explanation: The consistency principle states
that once you decide on an accounting method
or principle to use in your business, you need to
stick with and follow this method
or principle consistently throughout your
accounting periods.
20. Recording expenses and revenues in the
same period in which they occur.
1. OBJECTIVITY PRINCIPLE
2. MATCHING PRINCIPLE
3. HISTORICAL COST PRINCIPLE
4. INDUSTRY PRACTICES CONSTRAINT
Answer: (2)
Explanation: Matching principle is
the accounting principle that requires that the
expenses incurred during a period be recorded
in the same period in which the related revenues
are earned.
21. The liabilities of a business are Rs. 30,000;
the capital of the proprietor is Rs. 70,000. The
total assets are?
(a) Rs.70,000
(b) Rs. 30,000
(c) Rs.40,000
(d) None
Answer: (4)
22. Which of the following account is affected
from the drawings of cash in sole-proprietorship
business?
(a) Shareholder account
(b) Capital account
(c) Liability account
(d) Expense account
Answer: (2)
Explanation: The capital account is part of a
country's balance of payments. It measures
financial transactions that affect a country's
future income, production, or savings.
An example is a foreigner's purchase of a U.S.
copyright to a song, book, or film. Its value is
based on what it will produce in the future.
Copyright (Diwakar Education Hub) Page 137
Answer: (3)
Explanation: The purpose of the full
disclosure principle is to share relevant and
material financial information with the outside
world. Since outsiders don't know the details of
a company's business deals, contracts, and
loans, it's difficult to form an opinion of the
entity.
16. When estimating unearned revenues, what
principle applies?
1. CONVERATISM PRINCIPLE
2. HISTORICAL COST PRINCIPLE
3. FULL DISCLOSURE PRINCIPLE
4. CONSISTENCY PRINCIPLE
Answer: (1)
Explanation: The principle of conservatism in
accounting gives guidance when recording cases
of uncertainty or estimates.
17. What is not a value of accounting relevance?
1. PREDICTIVE VALUE
2. FEEDBACK VALUE
3. TIMELINESS
4. RELIBILITY
Answer: (4)
Explanation: Accounting relevance deals with
the usefulness of financial information to users
during the decision making process. Obviously
financial information that isn't related to users
decisions isn't useful to creditors or investors.
18. What is not a value of accounting reliability?
1. VERIFIABILITY
2. REPRESENTATIONAL FAITHFULNESS
3. TIMELINESS
4. NEUTRALITY
Answer: (3)
Explanation: It is a goal of an accounting
information system to provide information that
is relevant, meaningful, reliable, useful, and
current.
19. Switching accounting principles every year
would violate the:
1. CONVERATISM PRINCIPLE
2. HISTORICAL COST PRINCIPLE
3. FULL DISCLOSURE PRINCIPLE
4. CONSISTENCY PRINCIPLE
Answer: (4)
Explanation: The consistency principle states
that once you decide on an accounting method
or principle to use in your business, you need to
stick with and follow this method
or principle consistently throughout your
accounting periods.
20. Recording expenses and revenues in the
same period in which they occur.
1. OBJECTIVITY PRINCIPLE
2. MATCHING PRINCIPLE
3. HISTORICAL COST PRINCIPLE
4. INDUSTRY PRACTICES CONSTRAINT
Answer: (2)
Explanation: Matching principle is
the accounting principle that requires that the
expenses incurred during a period be recorded
in the same period in which the related revenues
are earned.
21. The liabilities of a business are Rs. 30,000;
the capital of the proprietor is Rs. 70,000. The
total assets are?
(a) Rs.70,000
(b) Rs. 30,000
(c) Rs.40,000
(d) None
Answer: (4)
22. Which of the following account is affected
from the drawings of cash in sole-proprietorship
business?
(a) Shareholder account
(b) Capital account
(c) Liability account
(d) Expense account
Answer: (2)
Explanation: The capital account is part of a
country's balance of payments. It measures
financial transactions that affect a country's
future income, production, or savings.
An example is a foreigner's purchase of a U.S.
copyright to a song, book, or film. Its value is
based on what it will produce in the future.
MANAGEMENT UNIT-4
Copyright (Diwakar Education Hub) Page 138
23. Mr. “A” borrowed money from bank; this
transaction involves which one of the following
accounts?
(a) Cash & Bank Loan
(b) Bank & Debtors
(c) Drawing & Cash
(d) Cash & Bank
Answer: (1)
Explanation: A cash basis loan is one in which
interest is recorded as earned when payment is
collected. ... However, in the case of
nonperforming loans (or loans gone bad),
continuing payments are doubtful.
24. Mr. A provided the following information
from his books of accounts at the end of the
month. What is the amount of his capital?
(a) Rs. 200
(b) Rs. 900
(c) Rs. 1,200
(d) Rs. 1,300
Answer: (4)
25. Which of the following accounts will be used
in equation, if the goods are sold on credit to
Mr. Mahmood?
(a) Cash account and Owner’s equity
(b) Account Receivable and Owner’s equity
(c) Cash and Account Receivable
(d) Account Payable and Owner’s Equity
Answer: (2)
Explanation: The company's asset (cash)
increases and another asset (accounts
receivable) decreases. Liabilities and
owner's equity are unaffected.
26. The favorable balance of profit and loss
account should be?
(a) Added in liabilities
(b) Subtracted from current assets
(c) Subtracted from liabilities
(d) Added in capital
Answer: (4)
Explanation: The capital account is part of a
country's balance of payments. It measures
financial transactions that affect a country's
future income, production, or savings.
An example is a foreigner's purchase of a U.S.
copyright to a song, book, or film
Please Be Careful from Fake Person buy our
Study Notes From Our Official Website
DIWAKAR EDUCATION HUB only OR Call Us at
Our Official Number 7310762592.
27. Which of the following transactions would
have no impact on stockholders' equity?
(a) Purchase of land on credit
(b) Dividends to stockholders
(c) Net loss
(d) Investment in cash by stockholders
Answer: (3)
Explanation: Net income is the portion of a
company's revenues that remains after it pays all
expenses. Owner's equity is the difference
between the company's assets and liabilities.
28. Which of the following is not a satisfactory
statement of the balance sheet equation?
(a) Assets = liabilities + owner’s equity
(b) Assets - liabilities = owner’s equity
(c) Assets = liabilities - owner’s equity
(d) Assets - owner’s equity = liabilities
Answer: (2)
Explanation: This formula, also known as the
balance sheet equation, shows that what a
company owns (assets) is purchased by either
what it owes (liabilities) or by what
its owners invest (equity).
29. Revenue of the business includes?
(a) Cash sales only
(b) Credit sales only
(c) Credit purchases only
(d) Both cash sales and credit sales
Answer: (3)
Copyright (Diwakar Education Hub) Page 138
23. Mr. “A” borrowed money from bank; this
transaction involves which one of the following
accounts?
(a) Cash & Bank Loan
(b) Bank & Debtors
(c) Drawing & Cash
(d) Cash & Bank
Answer: (1)
Explanation: A cash basis loan is one in which
interest is recorded as earned when payment is
collected. ... However, in the case of
nonperforming loans (or loans gone bad),
continuing payments are doubtful.
24. Mr. A provided the following information
from his books of accounts at the end of the
month. What is the amount of his capital?
(a) Rs. 200
(b) Rs. 900
(c) Rs. 1,200
(d) Rs. 1,300
Answer: (4)
25. Which of the following accounts will be used
in equation, if the goods are sold on credit to
Mr. Mahmood?
(a) Cash account and Owner’s equity
(b) Account Receivable and Owner’s equity
(c) Cash and Account Receivable
(d) Account Payable and Owner’s Equity
Answer: (2)
Explanation: The company's asset (cash)
increases and another asset (accounts
receivable) decreases. Liabilities and
owner's equity are unaffected.
26. The favorable balance of profit and loss
account should be?
(a) Added in liabilities
(b) Subtracted from current assets
(c) Subtracted from liabilities
(d) Added in capital
Answer: (4)
Explanation: The capital account is part of a
country's balance of payments. It measures
financial transactions that affect a country's
future income, production, or savings.
An example is a foreigner's purchase of a U.S.
copyright to a song, book, or film
Please Be Careful from Fake Person buy our
Study Notes From Our Official Website
DIWAKAR EDUCATION HUB only OR Call Us at
Our Official Number 7310762592.
27. Which of the following transactions would
have no impact on stockholders' equity?
(a) Purchase of land on credit
(b) Dividends to stockholders
(c) Net loss
(d) Investment in cash by stockholders
Answer: (3)
Explanation: Net income is the portion of a
company's revenues that remains after it pays all
expenses. Owner's equity is the difference
between the company's assets and liabilities.
28. Which of the following is not a satisfactory
statement of the balance sheet equation?
(a) Assets = liabilities + owner’s equity
(b) Assets - liabilities = owner’s equity
(c) Assets = liabilities - owner’s equity
(d) Assets - owner’s equity = liabilities
Answer: (2)
Explanation: This formula, also known as the
balance sheet equation, shows that what a
company owns (assets) is purchased by either
what it owes (liabilities) or by what
its owners invest (equity).
29. Revenue of the business includes?
(a) Cash sales only
(b) Credit sales only
(c) Credit purchases only
(d) Both cash sales and credit sales
Answer: (3)
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