Bihar Board 12th Business Studies Model Question Paper 2 in English Medium

Bihar Board 12th Business Studies Model Papers

Bihar Board 12th Business Studies Model Question Paper 2 in English Medium

Time : 3 Hour 15 Min
Full Marks : 100

Instructions

1. Candidates are required to give their answers in their own words as far as practicable.
2. Figures in the right hand margin indicate full marks.
3. 15 minutes of extra time has been allotted for the candidate to read the questions carefull.
4. This question paper has two sections : Section -A and Section-B.
5. In Section-A, there are 50 objective type questions which are compulsory, each carrying 1 mark. Darken the circle with black/blue ball pen against the correct option on OMR Sheet provided to you. Do not use Whitener/ Liquid/Blade/Nail on OMR Sheet, otherwise the result will be treated as invalid.
6. In Section-B, there are 25 Short answer type questions, out of which any 15 questions are to be answered. Each question carries 2 marks. Apart from this, there are 08 Long answer type questions, out-of which any 04 of them are to be answered. Each question carries 5 marks.
7. Use of any electronic device is prohibited.

Objective Type Questions

Question No. -1 to 50 have four options provided, out of which only one is correct. You have to mark, your selected option, on the OMR-Sheet. Each questiion carries 1 (one) mark. [50 x 1 = 50]

Question 1.
Henri Fayol was a ___________
(a) Scientist
(b) Mining engineer
(c) Accountant
(d) Production engineer
Answer:
(b) Mining engineer

Question 2.
Of all managerial activities planning is the :
(a) Beginnings
(b) End
(c) Beginning & end both
(d) None of these
Answer:
(c) Beginning & end both

Question 3.
Staffing is:
(a) part of organisation
(b) function of Management
(c) part of personnel Management
(d) all of the above
Answer:
(d) all of the above

Question 4.
How are the principles of Management formed ?
(a) In a laboratory
(b) By experiences of managers
(c) By experiences of customers
(d) By propagation of social scientists
Answer:
(b) By experiences of managers

Question 5.
The following is not an objective of
Management: .
(a) earning profits
(b) growth of the organisation
(c) providing employment
(d) policy making
Answer:
(c) providing employment

Question 6.
Controlling is the aspect of Management:
(a) theoretical
(b) practical
(c) mental
(d) physical
Answer:
(b) practical

Question 7.
Commercial bill is written :
(a) by purchaser
(b) by seller
(c) by bank
(d) by the government
Answer:
(c) by bank

Question 8.
Marketing concept is :
(a) Production-oriented
(b) Sales-oriented
(c) Customer-oriented
(d) All the three
Answer:
(b) Sales-oriented

Question 9.
Which of the following statements best describes the principle of ‘Division of Work’
(a) Work should be divided into small tasks.
(b) Labour should be divided
(c) Resources should be divided among jobs
(d) It leads to specialisation
Answer:
(a) Work should be divided into small tasks.

Question 10.
Management control is done :
(a) by lower level managers
(b) by middle level managers
(c) by top level managers
(d) by all level managers
Answer:
(d) by all level managers

Question 11.
Money market deals in :
(a) Short term funds
(b) Medium term funds
(c) Long term funds
(d) None of these
Answer:
(a) Short term funds

Question 12.
Treasury Bills are basically :
(a) An instrument to borrow short term funds
(b) An instrument to borrow long-term funds
(c) An instrument of capital market
(d) None of the above
Answer:
(a) An instrument to borrow short term funds

Question 13.
Policy formulation is the function of:
(a) top level managers
(b) middle level managers
(c) operational Management
(d) all of the above
Answer:
(a) top level managers

Question 14.
Consumer dispute settlement agencies are :
(a) District Forum
(b) State commission
(c) National commission
(d) All the above
Answer:
(d) All the above

Question 15.
There is no discipline in ___________ Organisation :
(a) formal
(b) divisional
(c) functional
(d) informal
Answer:
(d) informal

Question 16.
Goods may be purchased on the basis of:
(a) inspection
(b) pattern and sample
(c) description & brand
(d) all of the above
Answer:
(d) all of the above

Question 17.
The cheapest source of Finance is:
(a) debenture share
(b) equity share capital
(c) preference share
(d) retained earning
Answer:
(b) equity share capital

Question 18.
Supervisor is ___________ of the workers.
(a) friend
(b) guide
(c) philosopher
(d) all of these
Answer:
(b) guide

Question 19.
Budget refers to :
(a) Planned target of performance
(b) Use of handling future activities
(c) Systematic action and allocation of resources
(d) Statement of expected results expressed in numerical terms
Answer:
(d) Statement of expected results expressed in numerical terms

Question 20.
In which form of Management science is :
(a) Pure Science
(b) Soft Science
(c) Semi Science
(d) None of these
Answer:
(b) Soft Science

Question 21.
Recruitment in the life of Organisation is done :
(a) Once
(b) Twice
(c) Occasionally
(d) Continuosly
Answer:
(d) Continuosly

Question 22.
Marketing means:
(a) Transfer of ownership
(b) Formation of marketing policies
(c) Salesmanship and sales promotion
(d) All of the above
Answer:
(b) Formation of marketing policies

Question 23.
Which of the following is not a principle of Management given by Taylor ?
(a) Science, not rule of thumb
(b) Functional foremanship
(c) Co-operation, not individualism
(d) Harmony, not discord
Answer:
(b) Functional foremanship

Question 24.
Which of the following is not a controlling technique ?
(a) Break-even anaysis
(b) Cash flow statement
(c) Budget
(d) Managerial Audit
Answer:
(b) Cash flow statement

Question 25.
In India Entrepreneurial development programme is:
(a) Necessary
(b) Unnecessary
(c) Wastage of time
(d) wastage of money
Answer:
(a) Necessary

Question 26.
The disputes coming under Consumer Protection Act are:
(a) Dispute as to shares of company
(b) Dispute as to service
(c) Dispute as to sale of defective goods by the seller
(d) None of these
Answer:
(c) Dispute as to sale of defective goods by the seller

Question 27.
Stock exchange protects the interest of:
(a) Investors
(b) Company
(c) Government
(d) None of these
Answer:
(a) Investors

Question 28.
Which of the following is not an element of promotion mix ?
(a) Advertisement
(b) Personal selling
(c) Sales Promotion
(d) Product Development
Answer:
(d) Product Development

Question 29.
Co-ordination is:
(a) Voluntary
(b) Necessary
(c) Unnecessary
(d) Wastage of time
Answer:
(b) Necessary

Question 30.
Principle of Management are :
(a) dynamic
(b) flexible .
(c) Universal
(d) all of above
Answer:
(d) all of above

Question 31.
___________ refers to those general statement which are decided for the guidance of the employees while taking decision.
(a) objectives
(b) strategy
(c) policies
(d) All of the above
Answer:
(b) strategy

Question 32.
In the process of delegation, accountability cannot be:
(a) shared
(b) delegated
(c) neither (a) & nor
(b) (d) both (a) and (b)
Answer:
(b) (d) both (a) and (b)

Question 33.
Management itself expands :
(a) Through delegation
(b) Through centralisation
(c) Through decentralisation
(d) Through all
Answer:
(a) Through delegation

Question 34.
Control is the ___________ function of the Management:
(a) first
(b) last
(c) third
(d) second
Answer:
(b) last

Question 35.
The leader takes work from his subordinates :
(a) by tact
(b) by rod
(c) by threatening
(d) none of these
Answer:
(a) by tact

Question 36.
The foremost need of development in a country is of:
(a) Physical Resources
(b) Economic Resources
(c) Human Resources
(d) Efficient Management
Answer:
(b) Economic Resources

Question 37.
A good plan is :
(a) Rigid
(b) Expensive
(c) flexible
(d) Time consuming
Answer:
(b) Expensive

Question 38.
Which of the following is not a staffing function :
(a) Planning
(b) recruitment
(c) selection
(d) training
Answer:
(a) Planning

Question 39.
Effective controlling is :
(a) static
(b) determined
(c) dynamic
(d) all the above
Answer:
(c) dynamic

Question 40.
Liquidity is created by :
(a) Organised market
(b) Unorganised market
(c) Primary Market
(d) Secondary Market
Answer:
(d) Secondary Market

Question 41.
Which of the following is not the tool of sales promotion ?
(a) Samples
(b) Prize in packet
(c) Coupons
(d) Publicity
Answer:
(c) Coupons

Question 42.
Modern approach of financial Management is :
(a) procurement of funds
(b) utilisation of funds
(c) (a) and (b) both
(d) None of these
Answer:
(c) (a) and (b) both

Question 43.
The functions of Entreprener are :
(a) To imagine business idea
(b) To study project feasibility
(c) To set up enterprise
(d) All of above
Answer:
(c) To set up enterprise

Question 44.
Which of the following is function of packaging ?
(a) Protection
(b) convenience
(c) Identification
(d) All of the above
Answer:
(d) All of the above

Question 45.
Planning is not the remedy of all business evils, because:
(a) planning is generally biased & time consuming
(b) planning is goal oriented
(c) planning enables us to face future uncertainties
(d) planning improves competitive strength
Answer:
(c) planning enables us to face future uncertainties

Question 46.
Which of the following is a determinant of Capital structure ?
(a) Cash Flow Statement
(b) Interest Coverage Ratio
(c) Debt Service Coverage Ratio
(d) All of the above
Answer:
(b) Interest Coverage Ratio

Question 47.
Which of the followiwng is not a characteristic of Entrepreneurship ?
(a) Risk taking
(b) Innovation
(c) Creative activity
(d) Managerial training
Answer:
(d) Managerial training

Question 48.
Grapevine Communication is :
(a) informal
(b) formal
(c) written
(d) none of these
Answer:
(a) informal

Question 49.
The foremost stock exchange in the world was established in:
(a) Delhi.
(b) London
(c) America
(d) Japan
Answer:
(b) London

Question 50.
State Commission can settle consumer disputes :
(a) up to 5 lakh Rs.
(b) up to 10 lakh Rs.
(c) up to 20 lakh Rs.
(d) Above 20 lakh Rs.
Answer:
(d) Above 20 lakh Rs.

Non-Objective Type Questions

Short Answer Type Questions

Question no. 1 to 25 are Short answer type questions. Answer any 15 out of them. Each question carries 2 marks. (15 x 3 = 30)

Question 1.
Does mere planning ensure success ?
Answer:
Does mere planning ensure success ? yes planning ensure success merely if following features are consiist in planning.

1. Planning must be simple and understandable.
2. planning must be according to the employee.
3. Planning must be felxible
4. Planning must be consist element of selection.
5. Draft separate planning for excution of planning.

Question 2.
What is meant by lay-off ?
Answer:
A lay off is the temporary suspension of employment of an employee or more commonly, a group of employees for business reasons. Such as personnel management or down sizing an organisation.

Question 3.
What is meant by investment decision ?
Answer:
A determination made by direction and management as to how, when, where and how much capital will be spent on investment opportunities, is called investment decesion.

Question 4.
Why NSEI is known as Model Exchange ?
Answer:
National stock exchange is the first stock exchange in India. The security transaction in stock exchange of India is very transmitted and simple so it is called model exchange.

Question 5.
The word communication has been derived from Latin word ‘Communist.’ What does it mean ?
Answer:
The word communication is derived from the latin word communist meaning “common”.

Question 6.
“Management is a soft science.” How ?
Answer:
Management is a soft science because management have principles like science as they can applied anytime, any where but it is not exact science because principle are applied according to situations.

Question 7.
What is meant by Authority ?
Answer:
Authority is refers to the power to take decisions.

Question 8.
Why is it said that ‘Controlling is blind without planning ?
Answer:
Under the system of controlling actual work performance is compared with the standards. Hence, if the standards are not determined there is no justification left for control, and the standards are determined under planning. It is therefore, said that control is blind without planning or it is with out any base.

Question 9.
What is meant by Channels of Distribution ?
Answer:
A distribution channel refers to the path or route through which goods and services traval to get from the place of production or manufacture to the final users. It has at its center transportation and logistical considerations.

Question 10.
Why it is said that principles of Management are universal ?
Answer:
Management is an universal phenomenon in the same that it is common and essential element in all enterprises. Every group effort requires setting objectives, making plans, handling people, co – ordinating and controlling activities achieving goass and, evaluating performance directed towards organisational goals.

Question 11.
What is meant by the ‘Right to Choose’ to a consumer ?
Answer:
Following are the six rights of consumers.

1. Right to safety : Consumers have the right to protected against the marketing of goods and services which are hazardous to life and property.
2. Right to information : The consumer protection act lays down that every consumer has the right to be informed about the quality, quantity, potency, purity and standard of goods and services. ,
3. Right to choose : Every consumer has the right to choose the goods of his/her liking. Consumers have right to be assured, wherever possible access to a variety of goods and services at competitive prices.
4. Right to heared : In case a consumer has been exploited, he/she has the right to be heared and be assured that he/she interests would receive due consideration at appropriate forums.
5. Right to seek redressal : The consumers have the right to seek redressal against unfair trade practices or unsecruplous exploitation.
6. Right to consumer education : Consumer can seek information about the existing acts and agencies set up for their protection.

Question 12.
What is meant by ‘Leadership’ ?
Answer:
Leadership may be defined as the ability to exert interpersonal influence by means of communication towards the achievement of a goal.

Question 13.
State any two difference between Advertising and Personal Selling.
Answer:
Advertising :

1. one-way communication.
2. Pull strategy.
3. Mass Media.

Personal Selling :

1. Two-way communication.
2. Push-strategy
3. Sales personnel.

Question 14.
What is meant by-On-the job training ?
Answer:
On the job training : The training of operations is largely undertaken through on the job methods on the other hand managers are trained by taking new courses under both on the job and off the job method.

Question 15.
State two points of importance of Supervision.
Answer:
Following are the two importance of supervision.

1. Optimum utilization of Resoures : Supervision develops work skills which help in optimum utilization of resources.
2. Controlling performance : Supervision insures performance of work as per the targets. Supervisor assumes responsibility for the accomplish ment of task. Undertaken and motivates his fellow workers.

Question 16.
What are the two components of Capital market ?
Answer:
Following are the two componants of capital market.

1. Organised capital market.
2. Unorganised capital market

Question 17.
What is Budgetary control ?
Answer:
Budgetary control refers to how well managers utilize budgets to monitor and control costs and operations in given accounting period. In other words, budgetary control is a process for managers to set financial and performance goals with budgets, compare the actual results, and adjust performance, as it is needed.

Question 18.
State any two features of Scientific Management.
Answer:
Following are the two features of scientific management.

1. Systematic Approach.
2. Brings complete mental change.

Question 19.
What do you mean by Entrepreneurship ?
Answer:
Enterpreneurship is an innovative function. It is a leadership rather than an ownership.

Question 20.
How “scale of operations” affect the requirement of fixed Capital ?
Answer:
The companies which are operating at large scale require mare fixed capital as they need more machineries and other assets where as small scale enterprise need less amount of fixed capital.

Question 21.
“Sales promotion makes advertising effective.” How ?
Answer:
Once the samples of a particular product reach to the consumers through sales promotion the advertisement of the same product gets more effective.

Question 22.
Give two advantages of functional Organisation.
Answer:
Following are the advantages of functional organisation.

1. Benefits of specification.
2. Co-ordination is established.

Question 23.
Give a definition of management.
Answer:
According to George R. Terry and Stephen G. Franklin, “Management is a distinct process, consisting of activities of planning, organizing, actuating and controlling performed to determine and accomplish stated objectives with the use of human beings and other resources.”

Question 24.
Differentiate between time study and motion study.
Answer:
The main points of differences between Time study and Motion study are as follow-

1. Motion study involves the study of motions on operation while the time study notes the time involved in carrying out of each element of operations
2. The main aim of motion study is to reduce wastage of time and material scraping the unnecessary movements whereas the time study aims at fixing the standard time of carrying out a job/work
3. Time study is not suitable for workers where quality is prime consideration. Motion study is suitable for all types of jobs/work.

Question 25.
What is functional organisation ? What are its characteristics ?
Answer:
Functional organisation is developed on the basis of important of functions of the organisation.
Following are the features/Advantages of functional organisations :

1. System in place of haphazardness
2. Effective and easy supervision
3. Better cordination
4. Economical
5. Human development

Long Answer Type Questions

Question no. 26 to 33 are Long answer type questions. Answer any 4 of them. Each question carries 5 marks. (4×5 = 20)

Question 26.
“Training is beneficial both for the Organisation as well as for the employees”. Explain any two benefits of training towards the Organisation and any two towards the employees.
Answer:
Benefits of training : Training is necessary activity all organisation. It plays a large part in determining the efficiency of the organisation. Some of the major benefits of training and development are enumerated below :
(a) Benefits to the organisation :

1. Increases productivity : It helps to improve employee’s knowledge and skills, which in turn increases the quality and quantity of production. Higher productivity means higher profitability for the organisation.
2. Reduced supervision : Training gives employees greater confidence. Trained employees need less supervision. They require freedom to handle their jobs without close supervsion. With reduced supervision, a manager can widen his span of control and spend greater time on more non-routine issues of the department. Properly trained employees are more self- reliant because they are more confident about what do and how to do it. The employees need not learn by trial and error method.

(b) Benefits to the Employees :

1. Acqueisition of new skills : A trained employees acquires new attitude and skills, which enhance his market value. The acquisition of new knowledge increase his prospects within and outside the organisation for higher jobs.
2. Higher Earnings: Trained employees can perform better and thereby earn more.
3. Safety: Trained employees are less prove to accidents as they handle the machines carefully.
4. Self-confidence : Training enables the employee to approach and performs his job with enthusiasm.
5. Promotion : Through training, employees can develop himself and earn quick promotion.
6. Adoptability : Trained employees adopt to changes in work procedures and methods easily.

Question 27.
Every manager has to take three major decisions while performing the final function. Explain.
Answer:
The three main financial decisions which are generally taken by a finance manager are as under:

1. Investment Decision : It refers to the selection of assets in which funds will be invested by the business. Assets which are obtained by the business are of two types, i.e. Long term assets and short-term assets. On this basis, investment decision is also divided into two parts :
   • Long-term Investment decision
   • Short-term Investment decision.
2. Financial Decision: It refers to the determination as to how the total funds required by the sources. Long-term financial sources chiefly include equity share capital, preference share capital, retained earnings, debentures Long-term Loan etc. For taking financial decision, an analysis of the cost and benefits of all the sources is made.
3. Dividend Decision : It refers to the determination of how much part of the earning should be distributed among shareholders by the way of dividend and how much should be retained for meeting future needs as retained earnings.

Question 28.
Explain briefly the factors determining the amount of fixed Capital.
Answer:
Factors affecting the requirement/need of fixed capital:-

1. Nature of Business It has been observed that trading concerns require less fixed capital in comparison to manufacturing enterprises. The reason is that manufacturing enterprises require more machines and tools , where as these may not be required by trading concerns.
2. Size of Business Size of business also determines the amount of fixed capital larger the size of the business, the heavier would be the requirement for fixed capital.
3. System of production Production can take place manually or mechanically. Mechanization requires more amount of fixed capital as compared to manual processes.
4. Owner ship of fixed capital If an enterprises wishes to have its own fixed assets, it will have to arrange a lot of money to buy them, on the other hand, if an enterprises, decline to have the fixed assets on hire, will not be required to arrange for heavy amount of fixed capital.
5. System of marketing An enterprises, doing direct marketing with out the intervention of whole sealers and retailers has to invest heavily on own retail outlets and on suitable supply of vehicles. Therefore, its need will be much more than those that depend on intermediaries for marketing purposes.
6. Range of production An enterprises producing all the parts of a product requires more amount of fixed capital than the one which produces vital parts and gets other parts produced from outside.

Question 29.
How functional structure differs from a divisional structure ?
Answer:
Function Structure :

1. Formation is based on functions.
2. Functional specialization.
3. Difficult to fix on a department
4. Difficult, as each functional manager has to report to the top management.
5. Functions are not duplicated hence economical.
6. Difficult for a multiproduct company.

Divisional structure :

1. Formation is based on product lines and is supported by functions.
2. Product specialization.
3. Easy to fix responsibility for performance.
4. Easier, autonomy as well as the change to perform multiple functions help in managerial development.
5. Duplication of resources in various departments hence costly.
6. Easy, because all functions related to a particular product are integrated in on department.

Question 30.
State the factors affecting the requirements of fixed capital.
Answer:
The factors affecting the requirements of fixed capital are as follows :

1. Nature of business : Some types of business need more capital and some less.Manufacturing industries need more fixed capital than trading concerns.
2. Size of business unit : Fixed capital or requirements depend on the size of business.If the size is big.it will need more fixed capital.For smaller organisation the need will be less.
3. Nature of goods manufactured : The amount of fixed capital also depends on articles to be manufactured. For manufacturing industrial goods or machines the need for capital will be more than the industries engaged in manufacture of consumer goods.
4. Amount of preliminary expenses : If the promoters have to spend more on preliminary expenses like commission on sale of shares or debentures or as underwriting commission etc.there will be more need of fixed capital.
5. Method of production and technology used : If the enterprise uses modern technology like fully automatic plant for production or uses imported , machinery ,the fixed capital needs will be high.
6. Mode of purchase of fixed assets : Fixed capital requirements will be more if fixed assets are purchased in cash and less if purchased on credit or on hire purchase or on installment payment system.

Question 31.
What is meant by ‘Monetary Incentives’ ? State any three types of monetary incentives which contribute to the performance of employees.
Answer:
Financial Motivation : Financial motivation are those which are accociated with money. They include wages and salaries, fringes benefits, bonus, retirement benefits, etc. However, such incentives may not always prove to be motivating. In many cases, management may have to increase the financial incentives to keep the workers with the organisation. This can be appreciated from the practice of making wages and salaires competitive between various enterprises so as to attract and maintain good work force.

Money is a real motivating factor when the physiological and security needs of the workers have not been fully satisfied. Money plays a significant role in satisfying these needs. Therefore, management can use financial incentives for motivation. Money also helps in satisfying the social needs of employees to some extent because money is often recognised as a symbol of status, respect and power.

Besides money is an important means of achieving a ‘minimum standard of living althought this ‘minimum’ has the tendency to go up as people become more affluent. But this should not lead one to conclude that money will always be a motivating factor to all people. To some people, importance of money may be reduced after a certain stage and non-financial rewards may become more important. They are motivated by money only up to the stage they are struggling for satisfying their physiological and security needs.

Money provides for the satisfaction of physiological and safety needs only, which have been called hygienic factors by Herzberg. Hygienic include wages and salaries and other fringe benefits. The presence of these factors at a satisfactory level prevents job dissatisfaction. They do not provide ‘on-the-job satisfaction’ to the employees and therefore, can not be considered as motivational factors. According to Herzberg, in order to motivate the employees, it is necessary to provide for the satisfaction of their ego, social and self-actualisation needs.

But these needs are present, generally, in employees in the higher positions, who get higher monetary rewards and are not motivated by increased monetary benefits. In case of employees at the operative levels, money certainly plays a significant role in motivating them because their survival and safety depends on it.

Following are included in financial incentives :

1. Salaries and wages
2. Bonus (out of firm’s Profit)
3. Premium (share in economics due to increase in production).

Question 32.
Which qualities of a good leader will you like to have as a Manager ?
Answer:
The qualities of good leader are as follows :

1. Physical features : Physical features like height, weight health, appearance determine the physical personality of an individual health and endurance help a leader to work hard which inspires others to work with same tempo.
2. Knowledge : A good leader should have required knowledge and competence. Only such person can instruct subordinates correctly and influence them.
3. Integrity : A leader should posses high level of integrity and honesty. He should be a role model to others regarding the ethics and values.
4. Initiative : A leader should have courage and initiative. He should not wait, for opportunities come to his way, rather he should grab the opportunity and use it to the advantage of organisation.
5. Communication skills : A leader should be a good communicator. He should have the capacity to clearly explain his ideas and make the people to understand his ideas.
6. Motivation skills : A leader should be an effective motivator. He should understand the needs of people and motivate them through satisfying their needs.
7. Self confidence : A leader should have high level of self confidence. He should not loose his confidence even in most difficult times.
8. Decisiveness : Leader should be decisive in managing the work. Once he is convinced about a fact, he should be firm and should not change opinions frequently.
9. Social skills : A leader should be sociable and friendly with his colleagues and followers. He should understand people and maintain good human relations with them.

Question 33.
What is planning ? Which steps are taken by management in the process of planning ?
Answer:
Meaning of Planning – Planning is the selection of the best course of action out of the available alternatives and deciding to achieve the objective through the best course so chosen.

Definition – According to Alfred and Beatty, “Planning is the thinking process, the organised foresight, the vision based on facts and experience that is required for intelligence action.”

Following steps are taken by management in planning :

1. Setting objectives – The first step in planning exercises is setting the objectives, providing the rationale for undertaking various activities as well as indicating the direction of efforts. Moreover, objectives point to the end-result of planning activity. The objectives provide guidelines for many vital decisions relating to resources allocation, schedule of work, nature of actions, etc.

2. Establishing the planning premises – Once goals have been set, the second step involves establishing the planning premises or assumptions. It consists of forecasting future conditions and events which are likely to have bearing on the pursuit of goals like market demand for goods, cost of raw materials, state of technology, intensity of competition, government policies,interest rates, tax rates, etc.

3. Identifying alternative courses of action – When the forecasts are available and premises are established, a number of alternative courses of action have to be considered.

4. Evaluating alternative course – Planning requires that each alternative should be evaluated taking into account the relevant facts and the pros and cons of each alternative. The merits and demerits as well as consequences of each alternative course of action must be examined before a choice is made.

5. Selecting an alternative – After evaluation of various available alternative courses, the time comes for selecting the best plan and to implement it practically. The plan will be justified best in terms of feasibility, profitability and with least adverse outcomes. Sometimes a firm may also go for combination of plans instead of selecting one best course.

6. Formulation of derivative plans – Having decided upon the course of action, it is necessary that detailed plans and programmers should be drawn up including specific plans for different type of activities.These are known as derivative plans.

7. Implement of plan/Securing co-operation – Planning is essentially goal-oriented. Hence,the plans formulated must be implemented effectively. For this purpose, co-operation of all the members of the organisation is required. Accordingly, plans must be of what is proposed to be done and why. Many a time useful suggestions and ideas are received when plans are communicated to the concerned workers. Employees are motivated to execute the plan to the best of their ability.

8. Follow up – As planning is a continuous process, existing plans are received at intervals to ensure their relevance and effectiveness. As the plans are implemented, certain facts often come to light which were not even thought of earlier.