In business undertaking, the manager needs to take different types of a decision to support their duties and responsibilities. Decisions are taken at various levels of management.
In business undertaking, the manager needs to take different types of a decision to support their duties and responsibilities. Decisions are taken at various levels of management.
Things to Remember
The decisions which are normally repetitive in nature are known as programmed decisions.
The decisions, which are non-repetitive in nature is known as non-programmed decisions.
The decisions, which are relatively more important, are known as major decision.
The decisions, which are less important, are known as minor decisions.
The decisions which are frequently taken to achieve a high degree of efficiency in the ongoing activities are known as routine decisions.
Decisions which are related to the policy of the business and affect the organizational functions directly is known as organizational decisions.
Decisions taken in the consent of more than one person is known as group decisions.
If an individual is involved in taking the decision, it is called individual decision.
Policy decisions are taken by the top level management with the involvement of high-ranking officers and legal advisor to change the organizational rules, regulation, event, and producers.
MCQs
No MCQs found.
Subjective Questions
Q1:
Describe the characteristics of joint stock company.
Answer: <p>The characteristics of joint stock company are:<br /><br /></p>
<p><strong>An artificial person:</strong><br />A joint stock company is an artificial person which is created by the law. It has no physical shape as a natural person but has almost all the rights of a natural person. It can enter into contact, sell, hold and buy the properties. </p>
<p><strong>Perpetual existence</strong>:<br /><strong> </strong>A joint stock company is established by the law and the law brings it to an end. It is a corporate body. So, many shareholders may transfer their share and the new person may come place in their place but is does not affect the existence of the company.<br /><br /><strong>Limited liability:</strong><br />The limited liability is another important feature of the company. The liability of the shareholder is limited to the extent of the value of shares held or the amount guaranteed by them. If the company is unable to pay the creditors then the shareholder won't pay anything more than what is to be paid to the company.</p>
<p><strong>Common seal:</strong><br />A joint stock company is an artificial person. So, it cannot sign any contract in its name. Any document bearing the common seal of the company, a signed by two directors, legally binds the company.</p>
<p><strong>Democratic management:</strong><br />A joint stock company is a democratic organisation. The important decisions are taken by following the principles of democracy in the annual general meeting and the board director meeting.</p>
<p><strong>Transferability of shares:</strong><br /><strong> </strong>The shares of the joint stock company can be transferable from one person to another without prior permission of the company management. This transfer of shares changes the ownership but does not affect the regular functioning of the company.</p>
<p><strong>Capital is divided into shares:<br /> </strong>A joint stock company divides its capital into a large number of parts with each value where each part of capital is called share. These shares are purchased by the general public as well as the promoters to be the shareholders of the company.</p>
<p><strong>Publication of financial statements:<br /></strong>Financial statement of the companies have to be published on a regular basis for public information. A joint stock company should publish the audited financial statements yearly in a renowned national newspaper. These statement helps to provide information to general public and other stakeholders.<br /><strong><br />Separate legal entity:</strong>A joint stock company is an artificial company so it has its own separate legal entity from its members. It can own assets, property, enter into contacts, sue or can be sued by anyone in the court by the law. Its shareholders cannot be held liable for any conduct of the company.</p>
Answer: <p>The advantages of joint stock company are:</p>
<p><strong>Huge capital:</strong><br />A company has the ability to collect huge financial resources. It has merits of huge capital because different member invests huge capital. When there is a lack of capital in a joint stock company. Business activities that require more capital are best organized in the form of a country.</p>
<p><strong>Limited liability:</strong><br />Limited liability is the significance of joint stock company. The shareholders should not pay the excess debt of the company by selling their private/personal property. This facility attracts the general people for investment in the company.</p>
<p><strong>Perpetual existence</strong>:<br />It is another important advantage of the joint stock company. The life of a joint stock company is not affected by death, lunacy, and insolvency of the members. Therefore, a joint stock company has a long term life, which is beneficial, both to the company and its shareholders.</p>
<p><strong>Transferability of shares:</strong><br />Shareholders have the right to sell the shares of a joint stock company to those who are interested to buy. No one is compelled to join and leave the company. Transferability of shares encourages the people to purchase and sales shares through stock exchanges.</p>
<p><strong>Democratic system:</strong><br />Joint stock company has democratic management. It is managed by the majority of shareholders who elect the board of directors. They are responsible for managing the activities of a joint stock company. </p>
<p><strong>Public faith: <br /></strong>People have faith in a joint stock company. It has an obligation to disclose the financial documents to annual General Meeting. The banks and the financial institutions believe in a joint stock company because of the accounts disclosed.</p>
<p><strong>Large scale operation: <br /></strong>Joint stock company has an association of different managerial skill because different members are associated with it. Due to the sufficient capital and competency of the members (directors)Joint-stock company has the possibility of large scale operation. Hence, a joint stock company has a large-scale operation.</p>
<p><strong>Social importance: <br /></strong>Joint stock company is also a social creature. So, it invests amount for the betterment of society. It invests its capital in various sectors such as health, education, sports and so on. Hence, a joint stock company has a responsibility to society.</p>
<p> </p>
Answer: <p>The disadvantages of joint stock company are:</p>
<p><strong>Difficult legal formalities:</strong><br />Joint stock company has demerits of difficult legal formalities. It is difficult to establish and run. It has to follow difficult legal formalities in comparison to sole trading and partnership firm. The legal formality also cost some amount of money.</p>
<p><strong>Lack of secrecy:</strong><br />A company must provide each shareholder with an annual report. The planned policies and strategies of the joint stock company are transparent because they are discussed in Annual General Meeting. The company has to publish its statements of financial affairs every year. So, it has demerits of lack of secrecy.</p>
<p><strong>Delay in decision making:</strong><br />Sometimes business organization has to take the quick decision but the quick decision is not possible in a joint stock company. The major decision of the company must be passed from Annual General Meeting. so, long time is required to pass the decision. Thus, business delays grabbing the opportunities of an external environment.</p>
<p><strong>Speculation of share:</strong><br />There is the possibility of speculation of share in a joint stock company. Some shareholders have inside approach with directors. Those shareholders can take undue advantage when they misuse the inside approach with directors.</p>
<p><strong>Management of oligarchy:</strong><br /> Management oligarchy means the rule of the minority. The shareholders elect few directors in annual general meeting. Those few directors rule/control over the activities of a large number of shareholders. This is known as of oligarchy.</p>
<p><strong>Lack of interest:</strong><br />There are main shareholders, creditors/bankers, and employees. Different parties have different interest. If the interest of one party is addressed, it negatively impacts the interest of others. Therefore, a joint stock company has demerits of conflict of interest.</p>
<p><strong>Groupism: </strong>Unhealthy groupism can is seen in the joint stock company in the period of election. Constructivegroupismis fruitful but destructive groupism is harmful to the company. Unhealthygroupismleads to the failure of the company. So, a joint stock company should be able to minimize unhealthy groupism.</p>
<p> </p>
Q4:
Explain advantages and disadvantages of joint stock company.
Answer: <p>The advantages of joint stock company are described below:</p>
<p><strong>Huge capital:</strong><br />A company has the ability to collect huge financial resources. It has merits of huge capital because different member invests huge capital. When there is a lack of capital in a joint stock company. Business activities that require more capital are best organized in the form of a country.</p>
<p><strong>Limited liability:</strong><br />Limited liability is the significance of joint stock company. The shareholders should not pay the excess debt of the company by selling their private/personal property. This facility attracts the general people for investment in the company.</p>
<p><strong>Perpetual existence</strong>:<br />It is another important advantage of the joint stock company. The life of a joint stock company is not affected by death, lunacy, and insolvency of the members. Therefore, a joint stock company has a long term life, which is beneficial, both to the company and its shareholders.</p>
<p><strong>Transferability of shares:</strong><br />Shareholders have the right to sell the shares of a joint stock company to those who are interested to buy. No one is compelled to join and leave the company. Transferability of shares encourages the people to purchase and sales shares through stock exchanges.</p>
<p><strong>Democratic system:</strong><br />Joint stock company has democratic management. It is managed by the majority of shareholders who elect the board of directors. They are responsible for managing the activities of a joint stock company. </p>
<p><strong>Public faith: <br /></strong>People have faith in a joint stock company. It has an obligation to disclose the financial documents to annual General Meeting. The banks and the financial institutions believe in a joint stock company because of the accounts disclosed.</p>
<p><strong>Large scale operation: <br /></strong>Joint stock company has an association of different managerial skill because different members are associated with it. Due to the sufficient capital and competency of the members (directors)Joint-stock company has the possibility of large scale operation. Hence, a joint stock company has a large-scale operation.</p>
<p><strong>Social importance: <br /></strong>Joint stock company is also a social creature. So, it invests amount for the betterment of society. It invests its capital in various sectors such as health, education, sports and so on. Hence, a joint stock company has a responsibility to society.</p>
<p>The disadvantages of joint stock company are:</p>
<p><strong>Difficult legal formalities:</strong><br />Joint stock company has demerits of difficult legal formalities. It is difficult to establish and run. It has to follow difficult legal formalities in comparison to sole trading and partnership firm. The legal formality also cost some amount of money.</p>
<p><strong>Lack of secrecy:</strong><br />A company must provide each shareholder with an annual report. The planned policies and strategies of the joint stock company are transparent because they are discussed in Annual General Meeting. The company has to publish its statements of financial affairs every year. So, it has demerits of lack of secrecy.</p>
<p><strong>Delay in decision making:</strong><br />Sometimes business organization has to take the quick decision but the quick decision is not possible in a joint stock company. The major decision of the company must be passed from Annual General Meeting. so, long time is required to pass the decision. Thus, business delays grabbing the opportunities of an external environment.</p>
<p><strong>Speculation of share:</strong><br />There is the possibility of speculation of share in a joint stock company. Some shareholders have inside approach with directors. Those shareholders can take undue advantage when they misuse the inside approach with directors.</p>
<p><strong>Management of oligarchy:</strong><br /> Management oligarchy means the rule of the minority. The shareholders elect few directors in annual general meeting. Those few directors rule/control over the activities of a large number of shareholders. This is known as of oligarchy.</p>
<p><strong>Lack of interest:</strong><br />There are main shareholders, creditors/bankers, and employees. Different parties have different interest. If the interest of one party is addressed, it negatively impacts the interest of others. Therefore, a joint stock company has demerits of conflict of interest.</p>
<p><strong>Groupism: </strong>Unhealthy groupism can is seen in the joint stock company in the period of election. Constructivegroupismis fruitful but destructive groupism is harmful to the company. Unhealthygroupismleads to the failure of the company. So, a joint stock company should be able to minimize unhealthy groupism.</p>
<p> </p>
<p> </p>
Q5:
What are the merits and demerits of joint stock company?
Answer: <p>The characteristics of joint stock company are:<br /><br /></p>
<p><strong>An artificial person:</strong><br />A joint stock company is an artificial person which is created by the law. It has no physical shape as a natural person but has almost all the rights of a natural person. It can enter into contact, sell, hold and buy the properties. </p>
<p><strong>Perpetual existence</strong>:<br /><strong> </strong>A joint stock company is established by the law and the law brings it to an end. It is a corporate body. So, many shareholders may transfer their share and the new person may come place in their place but is does not affect the existence of the company.<br /><br /><strong>Limited liability:</strong><br />The limited liability is another important feature of the company. The liability of the shareholder is limited to the extent of the value of shares held or the amount guaranteed by them. If the company is unable to pay the creditors then the shareholder won't pay anything more than what is to be paid to the company.</p>
<p><strong>Common seal:</strong><br />A joint stock company is an artificial person. So, it cannot sign any contract in its name. Any document bearing the common seal of the company, a signed by two directors, legally binds the company.</p>
<p><strong>Democratic management:</strong><br />A joint stock company is a democratic organisation. The important decisions are taken by following the principles of democracy in the annual general meeting and the board director meeting.</p>
<p><strong>Transferability of shares:</strong><br /><strong> </strong>The shares of the joint stock company can be transferable from one person to another without prior permission of the company management. This transfer of shares changes the ownership but does not affect the regular functioning of the company.</p>
<p><strong>Capital is divided into shares:<br /></strong>A joint stock company divides its capital into a large number of parts with each value where each part of capital is called share. These shares are purchased by the general public as well as the promoters to be the shareholders of the company.</p>
<p><strong>Publication of financial statements:<br /></strong>Financial statement of the companies have to be published on a regular basis for public information. A joint stock company should publish the audited financial statements yearly in a renowned national newspaper. These statement helps to provide information to general public and other stakeholders.<br /><strong><br />Separate legal entity:</strong>A joint stock company is an artificial company so it has its own separate legal entity from its members. It can own assets, property, enter into contacts, sue or can be sued by anyone in the court by the law. Its shareholders cannot be held liable for any conduct of the company.</p>
<p>The advantages of joint stock company are:</p>
<p><strong>Huge capital:</strong><br />A company has the ability to collect huge financial resources. It has merits of huge capital because different member invests huge capital. When there is a lack of capital in a joint stock company. Business activities that require more capital are best organized in the form of a country.</p>
<p><strong>Limited liability:</strong><br />Limited liability is the significance of joint stock company. The shareholders should not pay the excess debt of the company by selling their private/personal property. This facility attracts the general people for investment in the company.</p>
<p><strong>Perpetual existence</strong>:<br />It is another important advantage of the joint stock company. The life of a joint stock company is not affected by death, lunacy, and insolvency of the members. Therefore, a joint stock company has a long term life, which is beneficial, both to the company and its shareholders.</p>
<p><strong>Transferability of shares:</strong><br />Shareholders have the right to sell the shares of a joint stock company to those who are interested to buy. No one is compelled to join and leave the company. Transferability of shares encourages the people to purchase and sales shares through stock exchanges.</p>
<p><strong>Democratic system:</strong><br />Joint stock company has democratic management. It is managed by the majority of shareholders who elect the board of directors. They are responsible for managing the activities of a joint stock company. </p>
<p><strong>Public faith: <br /></strong>People have faith in a joint stock company. It has an obligation to disclose the financial documents to annual General Meeting. The banks and the financial institutions believe in a joint stock company because of the accounts disclosed.</p>
<p><strong>Large scale operation: <br /></strong>Joint stock company has an association of different managerial skill because different members are associated with it. Due to the sufficient capital and competency of the members (directors)Joint-stock company has the possibility of large scale operation. Hence, a joint stock company has a large-scale operation.</p>
<p><strong>Social importance: <br /></strong>Joint stock company is also a social creature. So, it invests amount for the betterment of society. It invests its capital in various sectors such as health, education, sports and so on. Hence, a joint stock company has a responsibility to society</p>
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Types of Managerial Decision
In business undertaking, the manager needs to take different types of decision to support their duties and responsibilities. Decisions are taken at various levels of management. Some of the important types of managerial decisions are as follows:
Programmed and Non-programmed Decisions
www.slideshare.net The decisions which are normally repetitive in nature are known as programmed decisions. Normally, these types of decision are taken by the middle and lower level managers. Programmed decisions have very short-term impact. Granting leave to an employee, pricing ordinary customers’ orders, recording office supplies, purchase of materials required in the daily course of action, etc. are some of the examples of programmed decisions. Therefore, we can say that they are related to policy and the rules of the management.
Non-programmed decisions are opposite of programmed decisions. Decisions, which are non-repetitive in nature is known as non-programmed decisions. These kinds of decisions are taken by top executives. Non-programmed decisions don’t have ready-made course of actions. They have to collect data, analyze them, forecast and prepare strategic plans.
In conclusion, taking non-programmed decisions are much tougher and challenging than taking programmed decisions.
Major and Minor Decisions
The decisions, which are relatively more important, are known as major and which are less important, are known as minor decisions. The major decisions have long term impact like replacement of men by machine, diversification of existing product line, change the basis of overhead allocation in preparing departmental profit and loss account and so many others which are rare and have no precedents as guides.
Just opposite of major decisions, minor decisions are those decisions which do not have long range impact. For example, minor decisions are related to storing raw materials.
Routine (tactical) and Basic (strategic) Decisions
Source: www.slideshare.net The decisions which are frequently taken to achieve a high degree of efficiency in the ongoing activities are known as routine decisions. These types of decisions are also known as tactical decisions. For example, parking facilities, cafeteria services, deputing employees, etc.
Basic and strategic decisions are prepared by the top level of management for the formulation of the organizational rules, regulations, programs, etc. It has long term impact in the management. Therefore, much analysis is needed. A small mistake in the basic decisions may be the cause of business failure.
Organizational and Personal Decisions
Source: www.slideshare.net Decisions which are related to the policy of the business and affect the organizational functions directly is known as organizational decisions. These types of decisions are taken by the top level management. It has long term impact in the management.
Personal decisions are taken by an individual for the personal benefits rather than an organizational benefit. It has short term impact. Therefore, much analysis is not needed.
Individual and Group Decisions
If an individual is involved in taking the decision, it is called individual decision. Generally, individual decisions are taken in small business organizations. Similarly, it is also taken when and where the problem is of a routine nature, where the analysis of variable is simple and where definite procedures to deal with the problem already exist.
Decisions taken in the consent of more than one person is known as group decisions. Decisions taken by the board of directors, shareholders, etc. are some of the examples of a group decision.
Policy and Operating Decisions
Policy decisions are taken by the top level management with the involvement of high-ranking officers and legal advisor to change the organizational rules, regulation, event, and producers. Policy decisions are most important decisions. On the other hand, operating decisions are taken by the operating level of management to perform the day to day activities efficiently and effectively. This type of decisions is taken by a middle or lower level of management. It has short term impact. Therefore, much analysis is not needed.
References:
Pokhrel, Dhurb Raj et.al., Business Studies-XII, Asmita Book Publication, Kathmandu
Poudyal, Santosh Raj et.al., Business Studies-XII, Asmita Book Publication, Kathmandu
Bhandari, Kedar Prasad, Business Studies-XII, Bundipuran Prakashan, Kathmandu
