Organizational Behavior II

1)What is noise in communication?

• Communication is the process of transmitting information from one person to

another. Noise is any type of disruption that interferes with the transmission or
interpretation of information from the sender to the receiver.
• The four types of noise are physical, physiological, psychological, and semantic.

2)Semantic barrier

The Semantic Barriers refers to the misunderstanding between the sender and receiver
arising due to the different meanings of words, signs and other symbols used in
the communication.

3)What is Channel richness?

Channel richness refers to the amount of information that can be transmitted from one
person to another during any given communication. The more information that can be passed, the
richer the channel. For example, a telephone call is much more personal than formal report even
if they convey the same information.
4)What is medium?

In the communication process, a medium is a channel or system of communication,

means by which information (the message) is transmitted between a speaker or writer (the
sender) and an audience (the receiver). The plural form is media, and the term is also known as a
channel. Two types: Physical media, Example-meetings, conferences, etc.., Mechanical media,
Example-letters, mails, etc..,

5)What is cohesiveness?

• Cohesion can be more specifically defined as the tendency for a group to be in unity
while working towards a goal or to satisfy the emotional needs of its members.
• This definition includes important aspects of cohesiveness, including its
multidimensionality, dynamic nature, instrumental basis, and emotional dimension.
• Being a cohesive team means that not only group goals met but everyone feels like they
have contributed to the overall success of the group.

6)Punctuated equilibrium model?

Punctuated equilibrium model (PEM) is an important model of organizational change in

which change is relatively stable but experiences short bursts of fundamental change. Groups
that are similar, stable, small, supportive, and satisfied tend to be more cohesive than groups that
are not. It was first proposed by Stephen Jay Gould and Niles Eldredge in 1972.
7)Group development process.

The forming–storming–norming–performing model of group development was first

proposed by Bruce Tuckman in 1965, who said that these phases are all necessary and inevitable
in order for a team to grow, face up to challenges, tackle problems, find solutions, plan work, and
deliver results
8)What is meant by functional and dysfunctional conflict?

• Functional conflict is healthy, constructive disagreement between groups or individuals.

This can increase the result of outcome.
• Dysfunctional conflict is unhealthy disagreement that occurs between groups or
individuals. This conflict leads to decrease in the result of outcome.

9)Techniques of conflict stimulation in an organization

• Use of Communication: Communication encourages and discourages the conflict

• Bringing in Outsider: Conflict also can be created by entering members with different
background, value, view and managerial skill.
• Restructuring the Organization: By changing current design of organization,
functional conflict can be created.
• Appointing Devil’s advocate: a person who advocates an opposing or unpopular cause for
the sake of argument or to expose it to a thorough examination

10)Most desirable conflict resolution technique?

• Avoiding-Someone who uses a strategy of "avoiding" mostly tries to ignore or sidestep

the conflict, hoping it will resolve itself or dissipate.
• Accommodating-Using the strategy of "accommodating" to resolve conflict essentially
involves taking steps to satisfy the other party's concerns or demands at the expense of
your own needs or desires.
• Compromising-The strategy of "compromising" involves finding an acceptable
resolution that will partly, but not entirely, satisfy the concerns of all parties involved.
• Competing-Someone who uses the conflict resolution strategy of "competing" tries to
satisfy their own desires at the expense of the other parties involved.
• Collaborating-Using "collaborating" involves finding a solution that entirely satisfies the
concerns of all involved parties.

11)Various form of power?

There are five forms of power. They are Coercive, Reward, Legitimate, Referent, Expert,
and Informational.

12)Expert power?

Expert power is the perception that a certain person has an elevated level of knowledge
or a specific skill set that others in an organization don't have. This perception leads to more
influence within the expert's place of work.
13)Referent power?

Referent power is a form of reverence gained by a leader who has strong interpersonal
relationship skills. Referent power is the ability of a leader to effectively model behavior to her
employees in a manner that provides a point of reference for employees' own behavior in work
situations. This modeling can occur even without employee knowledge.

14)Zone of tolerance (ZOT) is defined as “the difference between desired service and the level
of service considered adequate”. As may be noted in this definition, the ZOT model recognizes
that customers enter service encounters with different expectation levels.

15)What is politics?

Politics- Power in action

• Political behavior in organizations consists of activities that are not required as part of an
individual’s formal role but that influence, or attempt to influence, the distribution of
advantages and disadvantages within the organization.
• Political behavior includes efforts to influence the goals, criteria, or processes used for
decision making.
• Political behaviors also includes actions such as withholding key information from
decision makers, joining a coalition, whistleblowing, spreading rumors, leaking
confidential information to the media, exchanging favors with others in the organization
for mutual benefit, and lobbying on behalf of or against a particular individual or decision
alternative.

16)Impression management techniques

Impression Management, the process by which people control the impressions others form of
them, plays an important role in inter-personal behavior.

• Self-Promotion- whereby individuals point out their abilities or accomplishments in

order to seen as competent by observers.
• Ingratiation-whereby individuals do favors or use flattery to elicit an attribution of
likability from observers.
• Exemplification- whereby people self-sacrifice or go above and beyond the call of duty
in order to gain the attribution of dedication from observers.
• Intimidation- where people signal their power or potential to punish in order to be seen
as dangerous by observers
• Supplication- where individuals advertise their weaknesses or shortcomings in order to
elicit an attribution of being needy from observers.
17)Kurt Lewin model of Change management

Kurt Lewin developed a change model involving three steps: unfreezing, changing and
refreezing. For Lewin, the process of change entails creating the perception that a change is
needed, then moving toward the new, desired level of behavior and finally, solidifying that new
behavior as the norm.

18)How to handle resistance in change process?

• Do change management right the first time.

• Expect resistance to change.
• Address resistance formally.
• Identify the root causes of resistance.
• Engage the “right” resistance managers.
19)What is process intervention?

Human process interventions are geared towards improving interaction among

individuals working together and resolve conflict. Human process interventions include
interpersonal and group process approaches such as process consultation, third-
party interventions, and team building.
20)What is structural intervention.

Structural intervention sometimes called techno structural intervention.

Organizational development stresses carefully planned approaches to changing or improving
organizational structures and processes, in an attempt to minimize negative side effects and
maximize organizational effectiveness. Types of structural intervention are,
 Human resource Management
1)Difference between recruitment and selection

• Recruitment refers to the process where potential applicants are searched for, and then
encouraged to apply for an actual or anticipated vacancy.
• Selection is the process of hiring employees among the shortlisted candidates and
providing them a job in the organization.

2)Difference between job specification and job description

3)When is training required?

• Training allows employees to acquire new skills, sharpen existing ones, perform better,
increase productivity and be better leaders. Since a company is the sum total of what
employees achieve individually, organizations should do everything in their power to
ensure that employees perform at their peak.
• A development program brings all employees to a higher level so they all have similar
skills and knowledge. This helps reduce any weak links within the company who rely
heavily on others to complete basic work tasks.

4)What is needs analysis in training?

Training Need Analysis (TNA) is the process of identifying the gap between
employee training and needs of training. Training needs analysis is the first stage in the training
process and involves a series of steps that reveal whether training will help to solve problem
which has been identified.

5) What are the different training methods?

6) What are the four levels in training evaluation?

7) What are the different methods of performance management?

Performance management is the process of ensuring that a set of activities and outputs
meets an organization's goals in an effective and efficient manner. Performance management can
focus on the performance of an organization, a department, an employee, or the processes in
place to manage particular tasks.
8)What is 360-degree performance appraisal?

• A 360-degree feedback (also known as multi-rater feedback, multi-source feedback, or

multi source assessment) is a process through which feedback from
an employee's subordinates, colleagues, and supervisor(s), as well as a self-
evaluation by the employee themselves is gathered.
• The most important aspect of 360 reviews is that they give individuals a starting point
for the development of new skills and behaviors. This includes building on current
strengths and developing new skills. ... This encourages individual accountability and
gives employees control over their career paths.

9)What is vertical and horizontal alignment in HR?

A core focus in creating human resource policies and practices (HRPP) is the degree to
which HR goals and objectives align with the strategic objectives of the organization (vertical
alignment) and how the HR goals and objectives align with each other (horizontal alignment)
10)How attrition rate is calculated?

A common attrition rate definition refers to employee or staff turnover, but in a broader
sense, attrition rate is a calculation of the number of individuals or items that vacate or move out
of a larger, collective group over a specified time frame. Attrition rate is also commonly referred
to as churn rate.

11) What are the different way to improve employee engagement?

Engaging employees is critical for retaining valuable talent and is an important piece of
the employee satisfaction puzzle; as disengaged employees are more likely to leave their jobs.
According to Forbes, employees who are engaged in their work are more likely to be motivated
and remain committed to their employer.
12) What is HR Planning? What information is required for HR planning?

Human Resource Planning or Manpower Planning (HRP) is the process of systematically

reviewing HR requirements to ensure that the required number of employees with the
required skills is available when they are needed. Getting the right number of qualified people
into the right job is the crux of the problem here.

13)Mention some of the employment laws

These laws have many provisions to safe the interests of workers of organised and unorganised
sectors in India.

• Minimum Wages Act, 1948.

• Factories Act, 1948.
• Maternity Benefits Act, 1961.
• Payment of Bonus Act, 1965.
14) What is centralization and formalization

Fundamental Elements of Organizational Structure.

• Formalization refers to the extent to which organizational policies, practices, and ways
of completing tasks are standardized for the individual employees, organizational units,
groups, teams and the organization as a whole, which leads to the development of
processes, relationships, and operating procedures.
• Centralization refers to the distribution of decision-making authority, information, and
power throughout an organization.

15) You are leading a team of 5 salesmen. Suddenly you find that the number of customer
complaints have increased. What will you do now?

Analyze the complaints

• Has this happened before?

• Have the complaints been recorded?
• How often does the same compliant arise?
• Is there a pattern to this complaint in how it was received?

After this analysis have a discussion with salesmen about what is the cause for the complaints.
Then find a solution for this problem. Keenly monitor the salesmen performance and get to know
their response rate towards each customer.
 MARKETING
1) What is the difference between need, want and demand? Explain with examples.
In short, needs are things that satisfy the basic requirement. Wants are requests directed
to specific types of items. Demands are requests for specific products that the buyer is willing to
and able to pay for.

2)What is customer life time value (CLTV)?

Customer lifetime value (CLV) is one of the key stats likely to be tracked as part of
a customer experience program. CLV is a measurement of how valuable a customer is to your
company with an unlimited time span as opposed to just the first purchase. This metric helps you
understand a reasonable cost per acquisition.

3)What is crowd sourcing? Any example.

Crowdsourcing involves obtaining work, information, or opinions from a large group of people
who submit their data via the Internet, social media, and smartphone apps. People involved
in crowdsourcing sometimes work as paid freelancers, while others perform small tasks on a
voluntary basis.

Example- Lego. Toy company, Lego is responsible for probably one of the best examples of
Crowdsourcing we've seen. The company allows users to design new products, and at the same
time, test the demand. ... Just like McDonalds, creators take it upon themselves to promote their
idea, and in doing so promote Lego as a company, too.
4)What is the difference between product positioning and brand positioning?
Product positioning is the process used to determine how to communicate product attributes to
the target customers based on customer needs.

Brand positioning refers to the rank the company's brand possess in relation to the competition.
5)What is inbound marketing?
Inbound marketing is a marketing methodology that is designed to draw visitors and
potential customers in, rather than outwardly pushing a brand, product or service onto prospects
in the hope of lead generation or customers.

6)What is the difference between publicity and public relations?

Publicity concerns presence in the media. It creates public awareness for a brand. It is
promotion, used to attract attention. Public relations involves a whole host of strategies to
accomplish an organization's goals by sending messages to appropriate audiences.
7)What is permission marketing?
Permission marketing refers to a form of advertising where the intended audience is given the
choice of opting in to receive promotional messages. The concept of permission marketing has
been popularized by Seth Godin, an entrepreneur and author.

Examples. Facebook is a prime example – whether it is to post, share, or amplify, the marketer
would have to send a friend request (or a permission) to the potential prospects. Opt-in email is
an example of permission marketing, where Internet users request to receive information about
a certain product or a service.

8)What is de-marketing and re-marketing? Any example.

• Remarketing tries to encourage you to buy/consume something

Examples: Airbnb, Madewell uses Facebook remarketing ads to re-engage site visitors
and encourage them to purchase. Madewell customizes remarketing ads on social media
based on your activity on their site. This ad, for example, allows Facebook users to
browse and shop a selection of curated items.
• Demarketing to discourage of buying a product. Advertising that urges the public to
limit the consumption of a product, as at a time of shortage.
Example: the efforts made by the TATA group to discourage consumers from buying
Tata Nano. Since the demand for Tata Nano far outweighed the supply, Tata Group
completely stopped the promotion of Tata Nano and rather started promoting other
products by the Tata group

9)What are above the line and below the line media?

• Above the line advertising – ATL is used when the focus is on mass media promotion to
reach a large audience. e.g. television, radio, or billboards.
• BTL includes marketing activities such as brochures, direct mail, flyers, sponsorships
and email campaigns.
10)What is a meta-market?

• The combination of an intangible market such as the internet, promoting closely related
tangible or intangible products is known as a Meta market. For understanding
meta markets lets first outline two definitions.

• Market Places – Markets of physical goods and products is known as Market places.
The market places has presence of companies which manufacture their own products.

• Market space – The online market space with websites such as Ebay, Amazon and
others is known as Market spaces. These sites do not have offline products. They only
sell others products online.
11) What is Porter’s 3 generic strategies?
A firm's relative position within its industry determines whether a firm's profitability is
above or below the industry average. The fundamental basis of above average profitability in the
long run is sustainable competitive advantage. There are two basic types of competitive
advantage a firm can possess: low cost or differentiation. The two basic types of competitive
advantage combined with the scope of activities for which a firm seeks to achieve them, lead to
three generic strategies for achieving above average performance in an industry: cost leadership,
differentiation, and focus. The focus strategy has two variants, cost focus and differentiation
focus.

1. Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of
cost advantage are varied and depend on the structure of the industry. They may include the
pursuit of economies of scale, proprietary technology, preferential access to raw materials and
other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm
can achieve and sustain overall cost leadership, then it will be an above average performer in its
industry, provided it can command prices at or near the industry average.

2. Differentiation

In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that
are widely valued by buyers. It selects one or more attributes that many buyers in an industry
perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its
uniqueness with a premium price.

3. Focus

The generic strategy of focus rests on the choice of a narrow competitive scope within an
industry. The focuser selects a segment or group of segments in the industry and tailors its
strategy to serving them to the exclusion of others.

The focus strategy has two variants.

(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation
focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on
differences between a focuser's target segment and other segments in the industry. The target
segments must either have buyers with unusual needs or else the production and delivery system
that best serves the target segment must differ from that of other industry segments. Cost focus
exploits differences in cost behavior in some segments, while differentiation focus exploits the
special needs of buyers in certain segments.

12) What is the difference between cross-selling and up-selling?

Cross-selling occurs when you sell customers offerings that complement or supplement
the purchases they’ve already made. For example, if you encourage a customer who just bought
a new phone to get a protective case at the same time, that’s a cross-selling win.

Upselling occurs when you increase a customer’s value by encouraging them to add on
services or purchase a more expensive model. For example, if someone comes into your furniture
store looking for a bedside table and you sell them a whole bedroom set instead, that’s an upsell.

13) What is buzz marketing?

Buzz marketing refers to marketing strategies used to capture the attention of the
customers and other influencers to amplify the marketing message to an extent where talking
about the brand, product, or service becomes entertaining, fascinating, and newsworthy.

Buzz marketing is a viral marketing technique that is focused on maximizing the word-
of-mouth potential of a particular campaign or product, whether that is through conversations
among consumers' family and friends or larger scale discussions on social media platforms. By
getting consumers talking about their products and services, companies that employ buzz
marketing hope to grow their awareness through the growth of online traffic and increase sales
and profits. A buzz marketing example would be if a company decides to promote a product
through some type of event centered around a show or stunt of some kind where consumers can
try the product and are encouraged to share their experiences through everyday conversation or
online. Another term for buzz marketing is astroturfing.

Online buzz marketing is typically driven by "influencers," or early adopters of a product,

that are eager to share their thoughts on the product and proactively start conversations about it.
These people typically have established online presences and large followings on social media
platforms such as Facebook and Twitter and possess power and influence over their follower
base. Influencers' opinions get noticed more readily and can have a positive effect on the sales
and awareness of the product. Marketers aim to rally these influencers to build buzz for their
products. Some marketers target people known as "connectors," or big-name personalities and
celebrities who can lend instant credibility and exposure to a product. Marketers looking for a
large jump in awareness for a product will seek out connectors, aiming for an instant jolt of
societal relevance.

14) What are the main challenges in marketing communication these days

1. Generating Traffic and Leads

Generating enough traffic and leads was the top global marketing issue, according to
the 2017 and 2018 State of Inbound reports.

A 2019 survey from Vital shows that more than 35% of marketers face challenges related to
leads and/or traffic, showing that this trend still continues.

In fact, the top priority for marketers in 2020 is generating leads.

Why It's a Challenge

Clearly, marketers are struggling with producing enough demand for their content. And
as the years progress and competition stiffens, this will only become truer. With so many options
of platforms for marketers to publish their content and even more ways to promote it, it's hard to
know where to focus your efforts.

What Can You Do?

When it comes to creating content that produces enough traffic and leads, marketers
should ask themselves two questions: Are you truly creating high-quality content -- the type of
content people would pay for? And, do you know the type of content your audience actually
wants?

In 2020, the most common customer marketing tactic is creating exclusive content for customers.

For example, HubSpot Research has found that 53% of consumers want to see more video from
marketers in the future, while only 14% want to see more blog posts. To learn more about how
the way people are reading and interacting with content is changing, check out this HubSpot
Research report.

Once you know you're creating the type of content your audience wants, the focus shifts to
promoting it in a way that makes your audience take notice. More than ever before, people are
being flooded with content. Consumers don't have to use a search engine to find answers.
Instead, articles fill their news feed or buzz in their pocket via mobile notification.
2. Providing the ROI of Your Marketing Activities

Measuring the ROI (return on investment) of your marketing activities has remained a
top marketing challenge globally year-over-year.

In fact, only 53.85% of marketers surveyed say they even measure Customer Acquisition costs.

It continues to be a vital way for marketers to understand the effectiveness of each particular
marketing campaign or piece of content.

Plus, proving ROI often goes hand-in-hand with making an argument to increase budget: No
ROI tracking, no demonstrable ROI. No ROI, no budget.

Why It's a Challenge

Although return on investment is a crucial stat that shows your campaigns success or
progress, tracking the ROI of every single marketing activity isn't always easy, especially if you
don't have two-way communication between your marketing activities and sales reports.

What Can You Do?

When it comes to providing ROI, there's a strong case to be made for dedicating time and
resources to establishing links between marketing activities and sales results. This means using
both marketing software (like HubSpot) and a CRM solution (like HubSpot's free CRM), and
then tying them together to close the loop between your marketing and sales efforts with
a service-level agreement (SLA). That way, you can directly see how many leads and customers
are generated through your marketing activities.

We've found there's no better combination than having an SLA and doing inbound
marketing. According to the 2018 report, inbound organizations with SLAs had twice the ROI of
misaligned organizations.

(Use this ROI calculator to simulate the potential ROI you could realize by conducting inbound
marketing.)

3. Securing Enough Budget

How can you create a winning marketing campaign without a budget? The truth is, it's
pretty hard. But, even when you have a great, revenue-generating idea, you still usually need to
get your budget approved by a higher-up.

For 2020, 64% of marketers said their marketing budget has increased
Why It’s a Challenge

Securing more budget is a pressing challenge for marketing globally. And often, getting
more budget is easier said than done -- especially for smaller organizations that aren't working
with sizable nor flexible marketing spend.

But the key to securing more money for your team might not be that complex. Here's what you
can do.

What Can You Do?

The key to unlocking budget lies in being able to prove the ROI of your marketing
efforts. According to our report, organizations that can calculate ROI are more likely to receive
higher budgets.

Again, success with inbound marketing also plays a large role in driving higher budgets.
Effective strategies obviously produce results, and our data shows those who feel confident in
their marketing strategy are more than 2X as likely to get higher budgets for their marketing
teams. But remember, inbound marketing is a long game. If you get off to a slow start, you
shouldn’t back off -- in fact, you might consider doubling down.

To learn more about how to understand and leverage marketing ROI.

15) Customer relationship management (CRM) is suitable for what type of companies?

Before reviewing Customer Relationship Management examples, it is essential to define

the notion of Customer Relationship Management.

Customer Relationship Management or CRM consists of strategies, processes, and software that
manages your company’s interactions with customers and potential clients.

CRM can be used in marketing, sales, and operations, to monitor and improve relationships, and
upsell clients.

Why is Customer Relationship Management important?

Customer Relationship Management provides you with insights on

your customers, prospects and suppliers. You can use this information to identify pain points,
improve processes, sell more and build customer loyalty.

The goal of using CRM is to improve and expand a customer lifecycle, by enhancing
relationships, adapting customer retention strategies and driving sales growth.

Managing this cycle can mean the difference between customer retention and customer churn.
1. Apple CRM

Customer Relationship Management plays a pivotal role in Apple’s growth strategy.

If you’ve ever used an Apple device, you probably had to register it using an Apple ID. An
Apple ID is an account you use to access Apple services like the App Store, Apple Music,
iCloud, iMessage, FaceTime, and more.

These unique IDs synchronize across devices, save music and film preferences, and
provide bespoke recommendations based on what you like. For users, this is convenient. For
Apple, it’s a tool that provides insights on what customers like and it can be used for
effortless, targeted marketing.

2. Coca-Cola CRM

Coca-Cola uses CRM to promote collaboration and deal with customer issues quickly and
efficiently.

By using CRM software, every member of a Coca-Cola team can identify issues, monitor
customer behaviour and social media to promote offers and promotions.

Moreover, team members can use mobile apps on the go to access customer history anytime and
anywhere, create and update work orders, and send out field technicians in real-time.

17) What are the latest trends in marketing?

Shoppable Posts

It’s highly unlikely that you know anyone who doesn’t use some form of social media.
Given its ubiquitous nature, social media has understandably become an integral part of online
marketing. What may not be as obvious is just how many users shop on social media networks.

This represents a tremendous opportunity for businesses, given that 72% of Instagram users have
purchased a product on the app. Even more impressive, a survey of more than 4,000 Pinterest
users found that 70% use Pinterest to find new and interesting products.

Fortunately for merchants, these platforms have made it easier for them to use the power of
social media to reach their customers. Whether you use Facebook, Pinterest or Instagram, there
are now ways for e-commerce stores to create shoppable posts, making it easy for users to shop
directly from your post.

Social media offers you the ability to reach new customers quickly and easily, shortening the
sales funnel and making it easier for users to shop.

By 2020, shoppable posts are expected to be the norm.

Virtual and Augmented Reality

In recent years, both augmented reality (AR) and virtual reality (VR) have become
massively popular and are emerging as top trends in marketing. In 2020, AR is expected to
surpass VR in popularity, despite VR’s early lead.

Already, many major companies are making use of AR. Ikea, for example, has an app that allows
users to visualize what a piece of furniture would look like in their home before making a
purchase.

Interactive Content

Today’s buyers are looking for new experiences when they go online, and for many, that means
greater interactivity. In fact, a whopping 91% are seeking more visual and interactive content.
There are several reasons for this:

• Interactive content is different and new, and as such, it stands out more.

• This type of content serves to keep visitors on your page longer.

• Interactive content is immensely shareable, and when users share this content, it helps to grow
awareness of your brand.

• Simply put, interactive content is more engaging. Users enjoy it more than other content.

Personalization

2020 is going to be the year of personalized marketing. Consumers are quite adept at
tuning out generic ads that have no real connection to them. Accordingly, traditional means of
advertising are becoming much less effective. So, what can be done? Personalize it!

In a survey of 1,000 people, 90% remarked that they found personalization appealing. More
important for your business is the fact that 80% admitted they’d be more likely to give their
business to a company that offered them a personalized experience.

Email lists are an old standby of marketers, and they lend themselves well to personalization.
Segmented lists with personalized email blasts have been shown to perform than generic emails
sent to an entire list. Don’t miss this opportunity to connect with your audience in a meaningful
way.

Google Ads Smart Bidding

Those involved in digital marketing are already familiar with automation, but now
Google has announced Google Ads updates that will likely lead to automation and smart bidding
becoming the new normal.
Google Ads makes use of machine learning in order to optimize your bids. This gives you
several new abilities to help you maximize your conversion, including:

• The ability to choose conversion action at the campaign level

• The ability to set your bids to change automatically when sales start or stop

• The ability to optimize bids over multiple campaigns with a chosen set of conversion actions

While there are a variety of new trends to keep your eye on, that doesn’t mean that all the old
methods have become outdated. In fact, there are several marketing trends that have been big in
the past and are expected to continue into 2020.

18) Does marketing meet needs or create needs?

Marketing is an organizational function and a set of processes for creating, communicating,

and delivering value to customers and for managing customer relationships in ways that benefit
the organization and its stakeholders. Marketers are skilled at managing demand, and they
operate in four different market place: customer, business, global, and nonprofit. Marketing is
not done only by marketing department. Marketers should think like executives, and executives
should think like marketers. Needs are the basic human requirements like food, water, air,
shelter, etc… These needs become wants when they are directed to specific objects that satisfy
the need, and demands are wants for specific products backed by an ability to pay. The
marketing function is to search needs and then satisfy it, but the issue that some companies
create needs, so we should not call it “marketing” because none of the marketing function is
creating needs. The marketing philosopher Philip Kotler says” Marketers do not create needs,
needs pre-exist marketers along with other societal factors, and influence wants. Marketers might
promote idea that Mercedes would satisfy a person’s need for social status. They do no, however,
create the need for social status”. But nowadays companies do more. They educate people and
give them reason to buy their products and this is what people might call it “creation of needs”
people purchase something when they need it, if they think they do not need the product they
may not purchase it.

For example, how many people in Pakistan need I-pad? Or why do people really need to go
to space? They don’t need it at all, but they go. Creation of need is not the function of marketing.
Marketing is how the products create value to the customer and receive it by needs and wants.
Marketing does both, it creates and satisfies needs of customers. Marketers must use the
marketing development’s term to create needs. They must learn how to change in knowledge,
behavior, attitudes, or creativity. Then, it helps customers to be motivated to learn and make a
decision, helps the customers effectively handle the information and experience, or helps the
customers understand the product application and influences the buying behavior. Marketing also
satisfy needs. Marketing creates a transaction for exchanging the product for a value and thus
create a satisfaction to the buyer’s needs. Marketing is based on identifying and satisfying
customers’ needs profitability.

19) What you do, when you face a lower price competitor?

20) What makes a great brand?

▪ has a clear focus,
▪ knows their target audience,
▪ has a defined mission,
▪ knows their competition and USP,
▪ can identify their key values,
▪ can tell their story,
▪ has a defined brand identity.
21) Who coined the term “positioning” in marketing? What does it mean?
• It was introduced by Al Ries and Jack Trout around 45 years ago.
• Market positioning refers to the process of establishing the image or identity of a brand
or product so that consumers perceive it in a certain way.
• For example, a car maker may position itself as a luxury status symbol.

22) What is style, fashion and fad lifecycle? Draw the graph for them.

• Style goes along with plc cycle with growth and decline.
• Fashion decline at the mature stage. Ifetime is upto maturity stage. It have steep decline
once they reach highest stage.
• Fad ends in the introduction stage.

23) What are the characteristics of service that differentiates it from a product?
Services are unique and four characteristics separate them from goods,
namely intangibility, variability, inseparability, and perishability.

• Intangibility. Most services cannot be experienced or consumed until the purchase is

made.
o Example: taste of the food
• Inseparability: Haircut – we can witness and feel at the same time.
• Perishability: the service cant be stored for future use
o Example: food
 • Variability: the quality of the good u buy in any of the store wont vary, only the quality
of service varies.
o Example: buying XL in any store is same, while its service varies from one
service station to another. Better one is at kochadai.
24) What is the RATER model? What are the various dimensions?
The RATER Model is a tool for evaluating the quality of your company's services.

25) What is the difference between logistics and supply chain management?
The basic difference between Logistics and Supply Chain Management is
that Logistics management is the process of integration and maintenance (flow and storage) of
goods in an organization whereas Supply Chain Management is the coordination
and management (movement) of supply chains of an organization.
Logistics management is a part of supply chain management.
26) What is yield management in pricing strategy? Give example.
Yield management is a variable pricing strategy, based on understanding, anticipating
and influencing consumer behavior in order to maximize revenue or profits from a fixed, time-
limited resource (such as airline seats or hotel room reservations or advertising inventory)
To generate more money with the allocated resources, we will price the goods and services
like booking tickets at theatre for RS120 and buying snacks starting at RS.70.

27) What is the difference between social marketing and social media marketing?
Social marketing – First, understanding the audience, then building a campaign specifically
around them. alter or maintain how people behave.

Social media marketing – Introducing a new or existing audience to a product or idea. increase
awareness, clickthroughs or perceptions.

28) What are the functions of distribution channels?

• Transactional functions: buying, selling, and risk assumption

• Logistical functions: assembly, storage, sorting, and transportation
• Facilitating functions: post-purchase service and maintenance, financing, information
dissemination, and channel coordination or leadership

29) What is guerrilla marketing?

Guerrilla marketing is a marketing tactic in which a company uses surprise and/or
unconventional interactions in order to promote a product or service.
30) What are unsought products?
An unsought product is a product of which consumers are unaware or are not that
interested in actively pursuing for purchase.
31) What is product line pricing or price lining strategy?
• A business prices its products according to quality, features and attributes in order to
differentiate them from similar products.
• Take Coca-Cola for example, Fanta, Sprite, Tropicana, etc. each price varies based on its
attributes, taste, etc.
32) What are consumer sweepstakes in promotion?
A sweepstake is a type of contest where a prize or prizes may be awarded to
a winner or winners.
33) What are the various steps in the selling process? Explain.
STEPS IN SELLING PROCESS
1 Prospecting
2 Pre-Approach
3 Approach
4 Presentation and Demonstration
5 Meeting or Handling Objections
6 Closing the Sales
7 Follow – Up

• PROSPECTING is the 1st and the foremost stage of the selling process.  Prospecting 
Prospecting means identifying and locating Potential buyers.
• PRE-APPROACH  Pre-approach is the 2nd stage of the selling process.  The salesman
is to acquire enough information about such prospects in order to approach each one in
the most effective manner.
• APPROACH  Approach is the 3rd stage of the selling process.  When the salesman
comes in actual contact with the prospect or likely customer.
• PRESENTATION AND DEMONSTRATION  It is the 4th stage of the selling process. 
In this step, the salesman demonstrates to the customer the need-satisfying characteristics
of the products being offered for sale.
• MEETING OR HANDLING OBJECTIONS  It is the 5th step in the selling process. 
Under this step the salesman is required to handle and over come objections arising
during or as a result of presentation and demonstration, it is just natural for the customer
to ask questions, raise objections and seek explanation.
• CLOSING THE SALES  It is the 6th stage of the selling process.  After having
answered and overcome objections, it is the right time for the salesman to clinch the deal
by closing the demonstration
 • FOLLOW - UP  It is the 7th and last stage of the selling process.  After closing, it is
important for the salesman to follow up the order booked so as to ensure that the order is
properly executed.
34) What is digital marketing and why it is important in current market?
• Digital marketing is the best approach to reach target audience in cost effective manner
and is easier to scale the business on faster rate.
• In current scenario average user with internet spends 3 h on internet platform daily and it
makes it biggest platform to promote any brands to eye catch user or buyer
35) What are the objectives of market segmentation?
• A key objective for market segmentation is determining what price different groups of
consumers are willing to pay for your product.
• When you have divided your market into segments based on what people can afford to
pay, you can focus on segments that can pay the lowest or the higher prices
36) Explain the new product development process.
37) Who gave the idea of 4P’S in marketing?
first expressed in 1960 by E J McCarthy.
38) Draw the ANSOFF Matrix.

39) Who coined the term, Bottom of Pyramid (BOP)?

U.S. president Franklin D. Roosevelt used the term in his April 7, 1932
40) What is POP and POD in marketing?
POP are the generic features and benefits that all the players, brands, products (competitors) are
giving, and POD are the differential effects that no one else gives in the market.
 DEFINITIONS (MARKETING)
1) Define Marketing.
Marketing is a set of activities that helps to meet the needs of the customers. Also, it
involves the process for creating, communicating, delivering, and exchanging
offerings that have value for customers.
2) Explain service blueprint.
• It is a tool for simultaneous depicting of service processes; the point of contacts and
the evidence of the services.
• It has four components:
◊ Customer actions (line of interaction)
◊ On-stage employee actions (line of visibility)
◊ Back-stage employee actions (line of internal interaction)
◊ Support-process.
3) Give examples for pure service and pure goods?
• Pure services --- Consulting firms, banks, airlines
• Pure goods --- Mobile phones (Electronic items), Tooth brush, Nestle products.
4) Explain the different components of price.
• Demand
• Cost
• Competition
5) Define Segmentation
• It is the activity of dividing consumer market into several segments.
• It creates subsets of a market based on demographics, needs, priorities, common
interests, and other psychographic or behavioral criteria used to better understand the
target audience.
6) Define Targeting
• Targeting is set of activity that breaks a large market into smaller segments to
concentrate on a specific group of customers
• It imposes the group of people for whom the product is to be sold.
7) What do you mean by Positioning?
• It is concerned with the perception among the customers holding towards a
product/company.
• It relates the marketing decisions undertaken to get the customers to think about the
product in certain way as compared to competitors.
8) What do you mean by Value Proposition?
• Value proposition should describe how your product or service solves problems, what
benefits customers can expect, and why customers should buy from you over your
competitors.
• It is a statement that paints a clear picture of what your brand has to offer for
prospects.
9) Define Marketing Mix
• It is a set of marketing tools that firm uses to pursue its marketing objectives in the
target market and achieving their goals.
• It involves 4 P’s (Product, Price, Place and Promotion)
10) Define Market Share
• The portion of the whole market that a particular company controls.
• Market share is calculated by taking the company's sales over the period and dividing
it by the total sales of the industry over the same period.
 STRATEGIC MANAGEMENT
1) What is sustainable competitive advantage? How can a firm acquire competitive
advantage?

An advantage that allows a business to be more successful than its competitors over a
long period of time. A firm can acquire it by having good quality, price, location, selection,
service and speed/turnaround than the competitor.
2) Which are the potential new entrants to be assessed as threat for the hotel industry?

Substitutes such as Airbnb which is lesser cost. Location of the hotel and the area
enhances demand and the ratings that the hotels receive from customers. Travelers decide on
where to choose to stay when traveling based on ratings, reviews and convenience. Some
competitors lack the expectations of the customer. Branding and image are also factors

3) What are the elements of strategy of a firm?

• Define your vision
• Create your mission
• Set your objectives
• Develop your strategy
• Outline your approach
• Get down to tactics
4) What is Value Chain?

A value chain is a business model that describes the full range of activities needed to
create a product or service. For companies that produce goods, a value chain comprises the steps
that involve bringing a product from conception to distribution, and everything in between—
such as procuring raw materials, manufacturing functions, and marketing activities.
5) Are vision and mission part of strategy or do they stand apart?
Part of strategy
6) How a business model is developed by a company?

A good business model uses its resources to improve its market position, adding new
products, features and customers or expanding into new applications For instance, direct sales,
franchising, advertising-based, and brick-and-mortar stores are all examples of traditional
business models.
7) How does the strategy of a first mover and a later entrant differ?
A first mover is a service or product that gains a competitive advantage by being the first
to market with a product or service. Being first typically enables a company to establish strong
brand recognition and customer loyalty before competitors enter the arena. Amazon created the
first online bookstore. If the market responds unfavorably, then later entrants could capitalize on
the first mover's failure to produce a product that aligns with consumer interests
8) What is a defensive strategy?

Blockbuster was one of the biggest and recognized DVD rental company around the
world. When Netflix appeared in the industry, Blockbuster had to take a defensive strategy to
fight against that strong competitor. So they also introduced on demand video, helps companies
to retain valuable customers that can be taken away by competitors

9) What is Strategic Intent?

Strategic intent is the term used to describe the aspirational plans, overarching purpose or
intended direction of travel needed to reach an organizational vision.

10) What will be strategic direction for a NGO?

Guides the organization to move towards the same mission and objectives for which it
was developed One of the frequently used tools for developing the strategy plan is SWOT.

11) How can a market be redefined?

Market redefinition refers to changes in the offering demanded by buyers or promoted by
competitors to enhance its perception and associated sales

12) What is Return on assets?

Return on assets (ROA) is an indicator of how profitable a company is relative to its total
assets an idea as to how efficient a company's management is at using its assets to generate
earnings. Return on assets is displayed as a percentage.

13) What are the risks in unrelated diversification?

As a rule, the implementation of unrelated diversification strategy requires allocation of
significant financial and human resources and there is always the risk of harming the main
company business.
14) SBU level strategy will be a top-down or bottom-up strategy?
Elements of strategic plans can be dictated from the top to the relevant SBUs, or the
strategy can be molded around the individual SBU strategies. Achieving the appropriate balance
between corporate and SBU.
15) What is Green Washing effect in organizations?
Greenwashing is when a company or organization spends more time and money on
marketing themselves as environmentally friendly than on minimizing their environmental
impact advertising gimmick
16) Will you downsize the workforce Or retrain and refresh the workforce as a strategic
asset? All the above based on situation

17) What can be the purpose of building cash reserves?

Cash reserves are vital to companies. The reserve holds money that a business can use
when unexpected costs come up or when revenues are down.

18) What should be done to follow a cost-leadership strategy?

• Increasing profits by reducing costs, while charging industry-average prices.
• Increasing market share by charging lower prices, while still making a reasonable
profit on each sale because you've reduced costs.

19) What is ‘managing change’?

Managing change is when you proactively make the most of changes to benefit your
organization.

20) Why are teams important in implementing strategy?

They provide lot of new ideas which can be implemented different opinions matter.
 DAM
1) DIFFERENCE BETWEEN MEAN, MEDIAN AND MODE

Sl. Mean Median Mode

No.
1. The average was taken for The middle value in the The number that occurs the most in a
a set of numbers is called a data set is called given list of numbers is called a
mean. Median. mode.
2. Add all of the numbers Place all the given It shows the frequency of
together and divide this numbers in an occurrence.
sum of all numbers by a ascending order
total number of numbers.
3. The result is the mean or The next step is to find We can have more than one mode or
average score. the middle number on no mode at all.
the list. It is called as
the median.
4. Example: To find the Example: If the given Example: In the given series
average of the four list is 4, 2, 8, 10, 19. 3,3,5,6,7,7,8,1,1,1,4,5,6
numbers 2, 4, 6, 8, we Arrange the numbers in Find the frequency of each number.
need to add the number ascending order i .e 2, For number 3 it’s 2, for 5 it’s 2, for 6
first. 4, 8, 10, 19. it’s 2, for 7 it’s 2, for 8 it’s one, for 1
2 + 4 + 6+ 8 = 20 As the total numbers it’s 3, for 4 it’s 1.
Divide the sum by the total are 5, so the middle The number with the highest
number of numbers, i. e 4. number 8 is the median frequency is the mode.
20/4 = 5 is the average or here.
mean

2) STANDARD DEVIATION

Standard deviation is the measure of dispersion of a set of data from its mean. It measures the
absolute variability of a distribution; the higher the dispersion or variability, the greater is the
standard deviation and greater will be the magnitude of the deviation of the value from their
mean.
3) SKEWNESS:

Skewness is a measure of symmetry, or more precisely, the lack of symmetry. A distribution, or

data set, is symmetric if it looks the same to the left and right of the center point.

Example: India has more than 50% of its population below the age of 25 and more than 65%
below the age of 35. If you’ll plot the distribution of the age of the population of India, you will
find that there is a hump on the left side of distribution and the right side is comparatively planar

4) KURTOSIS

Kurtosis is a measure of whether the data are heavy-tailed or light-tailed relative to a normal
distribution. That is, data sets with high kurtosis tend to have heavy tails, or outliers. Data sets
with low kurtosis tend to have light tails, or lack of outliers. A uniform distribution would be the
extreme case

A distribution having a relatively high peak is called leptokurtic. A distribution which is flat-
topped is called platykurtic. The normal distribution which is neither very peaked nor very flat-
topped is also called mesokurtic.
5) IQR:

The interquartile range (IQR) is a measure of variability, based on dividing a data set into
quartiles. Quartiles divide a rank-ordered data set into four equal parts. The values that divide
each part are called the first, second, and third quartiles; and they are denoted by Q1, Q2, and
Q3, respectively.

Q1 is the "middle" value in the first half of the rank-ordered data set.

Q2 is the median value in the set.

Q3 is the "middle" value in the second half of the rank-ordered data set.

The interquartile range is equal to Q3 minus Q1.

For example, consider the following numbers: 1, 3, 4, 5, 5, 6, 7, 11. Q1 is the middle value in the
first half of the data set. Since there are an even number of data points in the first half of the data
set, the middle value is the average of the two middle values; that is, Q1 = (3 + 4)/2 or Q1 = 3.5.
Q3 is the middle value in the second half of the data set. Again, since the second half of the data
set has an even number of observations, the middle value is the average of the two middle
values; that is, Q3 = (6 + 7)/2 or Q3 = 6.5. The interquartile range is Q3 minus Q1, so IQR = 6.5
- 3.5 = 3.

6) HOW DO YOU PROVE STATISTICALLY THAT A DATA POINT IS AN OUTLIER

Outliers are data points that are far from other data points. In other words, they’re unusual values
in a dataset. Outliers are problematic for many statistical analyses because they can cause tests to
either miss significant findings or distort real results.
7) HYPOTHESIS TESTING

The purpose of hypothesis testing is to determine whether there is enough statistical evidence in
favor of a certain belief, or hypothesis, about a parameter.

Example: Is a new drug effective in curing a certain disease? A sample of patients is randomly
selected. Half of them are given the drug while the other half are given a placebo. The conditions
of the patients are then measured and compared

8 & 9) WHEN DO YOU USE T-TEST AND F – TEST?

T-test and F-test are completely two different things.

1. T-test is used to estimate population parameter, i.e. population mean, and is also used for
hypothesis testing for population mean. Though, it can only be used when we are not aware of
population standard deviation. If we know the population standard deviation, we will use Z-test.

For eg. Suppose a data suggests that the average height of boys between 10-16 years in city X is
6 Feet. So, we want to test this hypothesis,whether the height of boys between 10-16 years in city
X is less than, more than, or equal to 6 Feet. For doing so, we will take some samples, say 2000,
and find out the height of boys between age 10 to 16 years. We will calculate the standard
deviation of the 2000 boys, and calculate the t-statistic=

X bar = sample mean

u= pop mean

S= sample standard deviation

n= sample size

df= n-1

Once we calculate t-statistic, we will compare it with the critical value. Suppose, we take α=.05,
as it is two tailed test, α/2= .025, we then look at the table value for t, with degrees of
freedom =n-1, 2000-1, and α/2=0.25 which is=±1.96.

Once we get the t-value, we will compare whether our t-statistic is greater than +1.96 or less than
-1.96. . If it is greater than +1.96 or less than -1.96, we reject the null hypothesis, which means,
that the average height of boys in city X is not equal to 6 feet. If our t-statistic is between ±1.96,
we fail to reject the null hypothesis, which means, that the average height of boys in city X is
equal to 6 feet. This is when we conduct hypothesis testing.

2. We can also use t-statistic to estimate population mean:

Eg. Suppose,a large conglomerate like TCS(Indian IT company) which has employees more than
300,000. So, TCS wants to estimate average over time an employee works for the company, in a
week. So, it might not be possible to get required data(hypothetical situation, though these days it
might be possible) from all employees. Therefore, the company takes a sample, say 3000, and
finds the number of extra hours of work employees have done in week. With the help of the
sample mean and sample standard deviation; for the entire population- one can estimate the
range of average number of extra hours of work, employees have done in week.

Confidence interval to find out the range= x̅±tα/2,n-1 *S/√n ≤Ų≤ x̅±tα/2,n-1* S/√n.

3. t-statistic is also used for finding out the difference in two population mean with the help
of sample means.

For eg, suppose, if we want to understand buying behaviour of customers from two cities for a
particular product. We want to understand whether there is any difference in buying behaviour in
these cities,or is it similar.

F-statistic

Z statistic or t-statistic is used to estimate population parameters- population mean & proportion.
It is also used for testing hypothesis for population mean or population proportion.

Unlike Z-statistic or t-statistic, where we deal with mean & proportion, Chi-square or F-test is
used for finding out whether there is any variance within the samples. F-test is the ratio of
variance of two samples.

Eg. Suppose, in a manufacturing plant there are 2 machines producing same products, and the
management wants to understand, whether there is any variability among the products produced
by these two machines. Researcher will take samples from both the machines and find out the
variability, and test it against the null hypothesis, i.e. the prescribed limit.

F-statistic also forms the basis for ANNOVA.

10) WHEN DO YOU USE CHI-SQUARED TEST

The Chi-Square test is a statistical procedure used by researchers to examine the differences
between categorical variables in the same population. For example, imagine that a research
group is interested in whether or not education level and marital status are related for all people
in the U.S. After collecting a simple random sample of 500 U.S. citizens, and administering a
survey to this sample, the researchers could first manually observe the frequency distribution of
marital status and education category within their sample. The researchers could then perform a
Chi-Square test to validate or provide additional context for these observed frequencies

11) WHAT IS THE CENTRAL LIMIT THEOREM AND WHY IS IT IMPORTANT?

The Central Limit Theorem states that the sampling distribution of the sample means approaches
a normal distribution as the sample size gets larger — no matter what the shape of the population
distribution. This fact holds especially true for sample sizes over 30.

The central limit theorem tells us that no matter what the distribution of the population is, the
shape of the sampling distribution will approach normality as the sample size (N) increases.

This is useful, as the research never knows which mean in the sampling distribution is the same
as the population mean, but by selecting many random samples from a population the sample
means will cluster together, allowing the research to make a very good estimate of the population
mean.

12) WHAT IS SAMPLING? HOW MANY SAMPLING METHODS DO YOU KNOW?

A sample is a subset of individuals from a larger population. Sampling means selecting the group
that you will actually collect data from in your research. For example, if you are researching the
opinions of students in your university, you could survey a sample of 100 students.

There are two types of sampling methods:

Probability sampling involves random selection, allowing you to make statistical inferences
about the whole group.
Non-probability sampling involves non-random selection based on convenience or other criteria,
allowing you to easily collect initial data.

The population is the entire group that you want to draw conclusions about.

The sample is the specific group of individuals that you will collect data from

The population can be defined in terms of geographical location, age, income, and many other
characteristics.

It can be very broad or quite narrow: maybe you want to make inferences about the whole adult
population of your country; maybe your research focuses on customers of a certain company,
patients with a specific health condition, or students in a single school.

It is important to carefully define your target population according to the purpose and
practicalities of your project.

If the population is very large, demographically mixed, and geographically dispersed, it might be
difficult to gain access to a representative sample.

Sampling frame

The sampling frame is the actual list of individuals that the sample will be drawn from. Ideally, it
should include the entire target population (and nobody who is not part of that population).

Example

You are doing research on working conditions at Company X. Your population is all 1000
employees of the company. Your sampling frame is the company’s HR database which lists the
names and contact details of every employee.

Sample size

The number of individuals in your sample depends on the size of the population, and on how
precisely you want the results to represent the population as a whole.
You can use a sample size calculator to determine how big your sample should be. In general,
the larger the sample size, the more accurately and confidently you can make inferences about
the whole population.

Probability sampling methods

Probability sampling means that every member of the population has a chance of being selected.
It is mainly used in quantitative research. If you want to produce results that are representative of
the whole population, you need to use a probability sampling technique.

There are four main types of probability sample.

1. Simple random sampling

In a simple random sample, every member of the population has an equal chance of being
selected. Your sampling frame should include the whole population.

To conduct this type of sampling, you can use tools like random number generators or other
techniques that are based entirely on chance.

Example

You want to select a simple random sample of 100 employees of Company X. You assign a
number to every employee in the company database from 1 to 1000, and use a random number
generator to select 100 numbers.
2. Systematic sampling

Systematic sampling is similar to simple random sampling, but it is usually slightly easier to
conduct. Every member of the population is listed with a number, but instead of randomly
generating numbers, individuals are chosen at regular intervals.

Example

All employees of the company are listed in alphabetical order. From the first 10 numbers, you
randomly select a starting point: number 6. From number 6 onwards, every 10th person on the
list is selected (6, 16, 26, 36, and so on), and you end up with a sample of 100 people.

If you use this technique, it is important to make sure that there is no hidden pattern in the list
that might skew the sample. For example, if the HR database groups employees by team, and
team members are listed in order of seniority, there is a risk that your interval might skip over
people in junior roles, resulting in a sample that is skewed towards senior employees.

3. Stratified sampling

This sampling method is appropriate when the population has mixed characteristics, and you
want to ensure that every characteristic is proportionally represented in the sample.

You divide the population into subgroups (called strata) based on the relevant characteristic (e.g.
gender, age range, income bracket, job role).

From the overall proportions of the population, you calculate how many people should be
sampled from each subgroup. Then you use random or systematic sampling to select a sample
from each subgroup.

Example

The company has 800 female employees and 200 male employees. You want to ensure that the
sample reflects the gender balance of the company, so you sort the population into two strata
based on gender. Then you use random sampling on each group, selecting 80 women and 20
men, which gives you a representative sample of 100 people.

4. Cluster sampling

Cluster sampling also involves dividing the population into subgroups, but each subgroup should
have similar characteristics to the whole sample. Instead of sampling individuals from each
subgroup, you randomly select entire subgroups.

If it is practically possible, you might include every individual from each sampled cluster. If the
clusters themselves are large, you can also sample individuals from within each cluster using one
of the techniques above.
This method is good for dealing with large and dispersed populations, but there is more risk of
error in the sample, as there could be substantial differences between clusters. It’s difficult to
guarantee that the sampled clusters are really representative of the whole population.

Example

The company has offices in 10 cities across the country (all with roughly the same number of
employees in similar roles). You don’t have the capacity to travel to every office to collect your
data, so you use random sampling to select 3 offices – these are your clusters.

Non-probability sampling methods

In a non-probability sample, individuals are selected based on non-random criteria, and not every
individual has a chance of being included.

This type of sample is easier and cheaper to access, but it has a higher risk of sampling bias, and
you can’t use it to make valid statistical inferences about the whole population.

Non-probability sampling techniques are often appropriate for exploratory and qualitative
research. In these types of research, the aim is not to test a hypothesis about a broad population,
but to develop an initial understanding of a small or under-researched population.

1. Convenience sampling

A convenience sample simply includes the individuals who happen to be most accessible to the
researcher.

This is an easy and inexpensive way to gather initial data, but there is no way to tell if the sample
is representative of the population, so it can’t produce generalizable results.
Example

You are researching opinions about student support services in your university, so after each of
your classes, you ask your fellow students to complete a survey on the topic. This is a convenient
way to gather data, but as you only surveyed students taking the same classes as you at the same
level, the sample is not representative of all the students at your university.

2. Voluntary response sampling

Similar to a convenience sample, a voluntary response sample is mainly based on ease of access.
Instead of the researcher choosing participants and directly contacting them, people volunteer
themselves (e.g. by responding to a public online survey).

Voluntary response samples are always at least somewhat biased, as some people will inherently
be more likely to volunteer than others.

Example

You send out the survey to all students at your university and a lot of students decide to complete
it. This can certainly give you some insight into the topic, but the people who responded are
more likely to be those who have strong opinions about the student support services, so you can’t
be sure that their opinions are representative of all students.

3. Purposive sampling

This type of sampling involves the researcher using their judgement to select a sample that is
most useful to the purposes of the research.

It is often used in qualitative research, where the researcher wants to gain detailed knowledge
about a specific phenomenon rather than make statistical inferences. An effective purposive
sample must have clear criteria and rationale for inclusion.

Example

You want to know more about the opinions and experiences of disabled students at your
university, so you purposefully select a number of students with different support needs in order
to gather a varied range of data on their experiences with student services.

4. Snowball sampling

If the population is hard to access, snowball sampling can be used to recruit participants via other
participants. The number of people you have access to “snowballs” as you get in contact with
more people.

Example
You are researching experiences of homelessness in your city. Since there is no list of all
homeless people in the city, probability sampling isn’t possible. You meet one person who
agrees to participate in the research, and she puts you in contact with other homeless people that
she knows in the area.

13) WHAT IS THE DIFFERENCE BETWEEN TYPE I VS TYPE II ERROR?

Type 1 error, in statistical hypothesis testing, is the error caused by rejecting a null
hypothesis when it is true. Type 1 error is caused when the hypothesis that should have been
accepted is rejected. Type I error is denoted by α (alpha) known as an error, also called the level
of significance of the test. This type of error is a false negative error where the null hypothesis is
rejected based on some error during the testing. If Type I error is fixed at 5 percent, it means that
there are about 5 chances in 100 that the null hypothesis, H0, will be rejected when it is true. For
this, let us take a hypothesis where a player is trying to find the relationship between him
wearing new shoes and the number of wins for his team. Here, if the number of wins for his team
is more when he was wearing his new shoes is more than the number of wins for his team
otherwise, he might accept the alternative hypothesis and determine that there is a relationship.
However, the winning of his team might be influenced by just chance rather than his shoes which
results in type 1 error. In this case, he should’ve accepted the null hypothesis because the
winning of a team might happen due to chance or luck.

Type II error is the error that occurs when the null hypothesis is accepted when it is not true.
In simple words, Type II error means accepting the hypothesis when it should not have been
accepted. The type II error results in a false negative result. In other words, type II is the error of
failing to accept an alternative hypothesis when the researcher doesn’t have adequate power. The
Type II error is denoted by β (beta) and is also termed as the beta error .If Type II error is fixed
at 2 percent, it means that there are about two chances in 100 that the null hypothesis, H0, will be
accepted when it is not true. For this, let us take a hypothesis where a shepherd thinks there is no
wolf in the village and he wakes up all night for five nights to determine the existence of the
wolf. If he sees no wolf for five nights, he might assume that there is no wolf in the village where
the wolf might exist and attack on the sixth night. In this case, when the shepherd accepts that no
wolf exists, a type II error results where he agrees with the null hypothesis even when it is not
true.
14) WHAT IS LINEAR REGRESSION?

Linear regression is a basic and commonly used type of predictive analysis. The overall idea of
regression is to examine two things: (1) does a set of predictor variables do a good job in
predicting an outcome (dependent) variable? (2) Which variables in particular are significant
predictors of the outcome variable, and in what way do they–indicated by the magnitude and sign
of the beta estimates–impact the outcome variable? These regression estimates are used to
explain the relationship between one dependent variable and one or more independent variables.
The simplest form of the regression equation with one dependent and one independent variable
is defined by the formula y = c + b*x, where y = estimated dependent variable score, c =
constant, b = regression coefficient, and x = score on the independent variable.

Naming the Variables. There are many names for a regression’s dependent variable. It may be
called an outcome variable, criterion variable, endogenous variable, or regress and. The
independent variables can be called exogenous variables, predictor variables, or regressors.

Three major uses for regression analysis are (1) determining the strength of predictors, (2)
forecasting an effect, and (3) trend forecasting.

15) P-VALUE <0.05 WHAT DOES IT MEAN? A p-value less than 0.05 (typically ≤ 0.05) is
statistically significant. It indicates strong evidence against the null hypothesis, as there is less
than a 5% probability the null is correct (and the results are random). Therefore, we reject the
null hypothesis, and accept the alternative hypothesis.

16) R-SQUARED VALUE? R-squared is a statistical measure of how close the data are to the
fitted regression line. It is also known as the coefficient of determination, or the coefficient of
multiple determination for multiple regression. 0% indicates that the model explains none of the
variability of the response data around its mean.

17) SIMPLE LINEAR REGRESSION VS MULTIPLE REGRESSION?

Simple linear regression 1 dependent variable (interval or ratio), 1 independent variable

(interval or ratio or dichotomous)

Multiple linear regression 1 dependent variable (interval or ratio), 2+ independent variables

(interval or ratio or dichotomous)

18) HOW DO YOU TEST THE SIGNIFICANCE OF A VARIABLE IN REGRESSION?

P value less than 0.05 of independent variables can also be used to determine the significance
19) HOW DO YOU TEST WHETHER THE REGRESSION MODEL IS SIGNIFICANT?

If your regression model contains independent variables that are statistically significant, a
reasonably high R-squared value makes sense. The statistical significance indicates that changes
in the independent variables correlate with shifts in the dependent variable. Correspondingly, the
good R-squared value signifies that your model explains a good proportion of the variability in
the dependent variable.

20) CORRELATION VS REGRESSION?

Correlation measures the degree of relationship between two variables. Regression analysis is
about how one variable affects another or what changes it triggers in the other.

21) WHAT IS AUTOCORRELATION?

Auto correlation is a characteristic of data which shows the degree of similarity between the
values of the same variables over successive time intervals

The autocorrelation function can be used for the following two purposes:

• To detect non-randomness in data.

• To identify an appropriate time series model if the data are not random.

22) MULTICOLLINEARITY?

Multicollinearity occurs when independent variables in a regression model are correlated.

This correlation is a problem because independent variables should be independent. If the degree
of correlation between variables is high enough, it can cause problems when you fit the model
and interpret the results.

Multicollinearity causes the following two basic types of problems:

o The coefficient estimates can swing wildly based on which other independent variables are
in the model. The coefficients become very sensitive to small changes in the model.
o Multicollinearity reduces the precision of the estimate coefficients, which weakens the
statistical power of your regression model. You might not be able to trust the p-values to
identify independent variables that are statistically significant.
Multicollinearity could occur due to the following problems:

• Multicollinearity could exist because of the problems in the dataset at the time of
creation. These problems could be because of poorly designed experiments, highly
observational data, or the inability to manipulate the data:
o For example, determining the electricity consumption of a household from the
household income and the number of electrical appliances. Here, we know that
the number of electrical appliances in a household will increase with household
income. However, this cannot be removed from the dataset

• Multicollinearity could also occur when new variables are created which are dependent
on other variables:
o For example, creating a variable for BMI from the height and weight variables
would include redundant information in the model

• Including identical variables in the dataset:

o For example, including variables for temperature in Fahrenheit and temperature in
Celsius

• Inaccurate use of dummy variables can also cause a multicollinearity problem. This is
called the Dummy variable trap:
o For example, in a dataset containing the status of marriage variable with two
unique values: ‘married’, ’single’. Creating dummy variables for both of them
would include redundant information. We can make do with only one variable
containing 0/1 for ‘married’/’single’ status.

• Insufficient data in some cases can also cause multicollinearity problems

VIF determines the strength of the correlation between the independent variables. It is predicted
by taking a variable and regressing it against every other variable.

R^2 value is determined to find out how well an independent variable is described by the other
independent variables. A high value of R^2 means that the variable is highly correlated with the
other variables. This is captured by the VIF which is denoted below:

So, the closer the R^2 value to 1, the higher the value of VIF and the higher the multicollinearity
with the particular independent variable.
 DMOT

(DECISION MAKING WITH OPTIMISATION TECHNIQUES)

1) What is the theme of DMOT course? Science of optimality – getting best optimal solutions.

2) What is a LPP? Linear Programming Problems is a method of considering relationship

between decision variables to get “optimal” function of the variables.

3) What does Objective Function mean?

• It is the function of decision variables whose major objective is to either minimize

or maximize the desired objective.
• Types – (i) Cost minimization/time minimization
(ii) Sales maximization/profit maximization.

4) What is a Decision Variable? The variables whose values determines the solution of the
objective function is known as decision variables.

5) What is a Surplus Variable? A variable that is subtracted in the LHS of constraints (of ≥
type) to transform the inequality to equality.

6) What is an Artificial Variable? A variable that is added in order to obtain the IBFS (basic
feasible solution) it is to be added only in greater than or equal to inequality.

7) What are the limitations of graphical method of solving LPP? Graphical method is limited
to linear programming models with only two decision variables.

8) What is the need for Simplex Method?

• Simplex method is the method of finding optimal solution to an LPP by adding

slack or surplus variables. It is an iterative method to find optimal solution.
• Criteria: The LPP should be in a standard form and of maximization type.

9) Define the Duality Principle in LPP. For every LPP there is a unique associated LPP with
same optimal solution, the original problem is primal and the another is Dual.

10) How will you solve a LPP when it has more number of constraints and fewer number
of decision variables? Convert the primal into Dual ---- and solve using simplex method.

11) What is the Primal – Dual relationship?

• The dual of the dual is primal.

• If the primal contains “m” constraints and “n” variables, then the dual will contain
“n” constraints and “m” variables.
 • The transpose of the body matrix of primal gives dual and vice versa.

12) What is a shadow price? Its significance?

• The value of dual variables is shadow price.

• Shadow price of a resource is the unit price that is equal to the increase in profit to
be realized by one additional unit of resource.

13) What do you mean by Unbalanced Transportation Problem? When total supply is not
equal to the total demand, then it is said to be unbalanced transportation problem.

14) Give any two applications of Transportation Model in Business.

• Travelling salesman problem

• Vehicle routing problems.

15) State any two methods of finding a feasible solution in a Transportation Problem.

• Northwest corner rule.

• Least cost method.

16) How will you check the optimality of the solution in a Transportation Problem? Modi
(u-v) method.

17) When a transportation problem is said to be degenerating. When the number of basic
cells is less than “m+n-1”.

18) What do you mean by Traveling Salesman Problem? TSP is a special type of assignment
problem, in which the major objective is to minimize the travelling cost of the sales person by
assigning the locations (order of visiting)

19) If a salesman has to visit n cities, what is the possible number of round trips? (n-1)!

20) What is an Unbalanced Assignment problem? An assignment problem is said to be

unbalanced, when the number of persons(machines) is not equal to the number of jobs.

21) Give any two applications of Assignment Model in Business.

• Assigning sales peoples to sales territories.

• Assigning projects to peoples.

22) How will you check the optimal solution in an Assignment Problem?

Hungarian method.
 BRM

1) What is research? Process of research?

Business research is the systematic and objective
• identification
• collection
• analysis
• dissemination
• and use of information
For the purpose of improving decision making related to the identification and
solution of problems and opportunities in business.
2) Research Design?
A research design is a framework or blueprint for conducting the marketing research
project. It details the procedures necessary for obtaining the information needed to structure or
solve business research problems.
Components of a Research Design
• Information needed
• Primary and secondary data sources
• Qualitative research, Quantitative research
• Measurement and scaling techniques
• Questionnaire design
• Sampling plans
• Data analysis plans

3) Range for Correlation?

The range of the correlation coefficient ranges from -1 to +1. Here, -1 denotes a perfect
negative correlation while +1 denotes a perfect positive correlation.

4) Constant in regression equation?

The constant term in regression analysis is the value at which the regression line crosses the y-
axis. The constant is also known as the y-intercept.

5) Difference between population and sample?

A population is the entire group that you want to draw conclusions about. A sample is the
specific group that you will collect data from. The size of the sample is always less than the total
size of the population.
 6) Likert’s scale vs Semantic Differential Scale?
With the Likert scale, people state how much they agree or disagree with a particular statement;
with the semantic differential scale, people filling in the questionnaire decide how much of a trait
or quality the item has.

7) Validity vs reliability?
Validity is how close is your observed score to the true score while reliability is the extent to
which a scale produces consistent results if repeated measurements are made.

8) Threshold for Reliability Value?

A general accepted rule is that α of 0.6-0.7 indicates an acceptable level of reliability, and 0.8 or
greater a very good level. However, values higher than 0.95 are not necessarily good, since they
might be an indication of redundance

9) Types of reliability and validity?

RELIABILITY TYPES
Test/retest- respondents are administered identical sets of scale items at two different times and
the degree of similarity between the two measurements is determined.
Alternative forms- the same respondents are measured at two different times with two alternate
forms of the scale to measure the same thing.
Internal consistency- is used to assess the reliability of a summated scale.
Validity types
Content validity- consists of a systematic evaluation of the representativeness of the content of a
scale among experts.
Criterion validity- examines whether the measurement scale performs as expected in relation to
some other variables/criteria already established.

10) Extraneous variables?

Extraneous variables are any variables that you are not intentionally studying in your
experiment or test. When you run an experiment, you're looking to see if one variable (the
independent variable) has an effect on another variable (the dependent variable).These variables
are not the independent variable, but could affect the results of the experiment These undesirable
variables are called extraneous variables.

11) Different types of measurement scales? (Nominal, Ordinal, Interval and Ratio)
Nominal scale
• The numbers serve only as labels or tags for identifying and classifying objects.
• The numbers do not reflect the amount of the characteristic possessed by the objects.
• The only permissible operation on the numbers in a nominal scale is counting.
• Only a limited number of statistics, all of which are based on frequency counts, are
permissible, e.g., percentages, and mode.
• Ex of nominal scale: Student id, Players jersey number, buy/did not buy
Ordinal scale
• A ranking scale in which numbers are assigned to objects to indicate the relative
extent to which the objects possess some characteristic.
• Can determine whether an object has more or less of a characteristic than some other
object, but not how much more or less.
• In addition to the counting operation allowable for nominal scale data, ordinal scales
permit the use of statistics, e.g., mode, median, range.
• Ex: Rank brands from most admired to least admired (1 to 3 or 1 to 5)
Rank your three favorite movies
Interval Scale
• Numerically equal distances on the scale represent equal values in the characteristic being
measured.
• The location of the zero point is not fixed. Both the zero point and the units of
measurement are arbitrary.
• Statistical techniques that may be used include all of those that can be applied to nominal
and ordinal data, and in addition the arithmetic mean, standard deviation, correlations,
ANOVA, t tests, regressions.
• Ex: On a scale of 1 to 10, how you will rate your boss? (1= very bad, 10=excellent)
Ratio Scale
• Possesses all the properties of the nominal, ordinal, and interval scales.
• It has an absolute zero point.
• All statistical techniques can be applied to ratio data.
Ex: Sales, revenue, market share, Amount spent on last purchase (Any data which can be a
zero)

12) Hypothesis?
A hypothesis (plural hypotheses) is a precise, testable statement of what the researcher
predict will be the outcome of the study. The basic idea of a hypothesis is that there is no pre-
determined outcome.
A null hypothesis is a statement of the status quo, one of no difference or no effect. If the
null hypothesis is not rejected, no changes will be made.
An alternative hypothesis is one in which some difference or effect is expected. Accepting the
alternative hypothesis will lead to changes in opinions or actions.

13) Your understanding on Factor Analysis?

• It is a class of technique primarily used for data reduction and summarization.
• It statistically identifies a reduced number of factors from a larger number of measured
variables.
• Factor is an underlying dimension that explains the correlation among a set of variables.

14) Probabilistic vs Non-probabilistic sampling?

Probability sampling- Probability sampling is defined as a sampling technique in which the
researcher chooses samples from a larger population using a method based on the theory of
probability.
Non-Probability Sampling- Non-probability sampling is a sampling technique where the odds
of any member being selected for a sample cannot be calculated.

15) Difference between convenience vs simple random sampling?

Convenience sampling is a type of non-probability sampling which attempts to obtain a sample
of convenient elements. Often, respondents are selected because they happen to be in the right
place at the right time.
Simple random sampling is a probability sampling which says each element in the population
has a known and equal probability of selection. This implies that every element is selected
independently of every other element.

16) Best sampling method? Sample Size?

The best sampling method for a research depends on the research goals and nature of the
population. Based on that we can identify the potential sampling methods which can be tested to
achieve the research goals.
Sample size determination is the act of choosing the number of observations or replicates to
include in a statistical sample.
The number of individuals in your sample depends on the size of the population, and on how
precisely you want the results to represent the population as a whole.

17) Cross-sectional vs Longitudinal study?

Cross sectional- Involve the collection of information from any given sample of population
elements only once.

• In single cross-sectional designs, there is only one sample of respondents and information
is obtained from this sample only once.
• In multiple cross sectional designs there are two or more samples of respondents, and
information from each sample is obtained only once.
Often, information from different samples is obtained at different times.

Longitudinal Study - A fixed sample (or samples) of population elements is measured

repeatedly on the same variables. A longitudinal design differs from a cross sectional design in
that the sample or samples remain the same over time.
 MANAGERIAL COST ACCOUNTING

1) How will the Normal Loss be treated in Cost Accounting?

Normal loss means that loss which is inherent in the processing operations. It can be expected or
anticipated in advance i.e. at the time of estimation.

The cost of normal loss is considered as part of the cost of production in which it occurs. If
normal loss units have any realisable scrap value, the process account is f credited by that
amount. If there is no abnormal gain, then there is no necessity to maintain a separate account for
normal loss.

2)What are the elements of Costing?

3)What is meant by Cost Unit?

A unit cost is a total expenditure incurred by a company to produce, store, and sell one unit of a
particular product or service. Unit costs are synonymous with the cost of goods sold and the cost
of sales.
This accounting measure includes all of the fixed and variable costs associated with the
production of a good or service.

4)Beauty Parlour can follow _________ Costing ?

5)Uniform given to worker will be considered as ____overhead

PRODUCTION Overhead
6)Break Even Point ?
Break-even point is the point at which total revenue equals total costs or expenses. At
this point there is no profit or loss. Minimum
Break-Even Volume (units) = Fixed Costs ÷ (Sales price per unit – Variable costs per unit)
Break-Even (in rupees) = Fixed Costs ÷ Contribution Margin.

7)What is mean by Margin of Safety?

In break-even analysis, the term margin of safety indicates the amount of sales that are above
the break-even point. The margin of safety or safety margin, refers to the difference between
actual sales and break-even sales. Let's assume that a company currently sells 3,000 units of its
only product. The company has estimated that its break-even point is 2,800 units. Therefore, the
company's margin of safety is 200 units.

8)When there is deficit in Cash Budget

• A budget deficit is when spending exceeds income.
• A deficit must be paid. If it isn't, then it creates debt. Each year's deficit adds to the debt.
As the debt grows, it increases the deficit in two ways. First, the interest on the debt must
be paid each year. Second, higher debt levels can make it more difficult to raise funds. A
planned budget deficit can help a company in a variety of ways. If you have a slow
period that won’t provide work for all of your employees, keeping those employees on
your payroll -- even at a loss-- will help ensure they are available when you need after
business picks up.

9)The source for preparation of Production Budget will be?

The production budget calculates the number of units of products that must be manufactured
and is derived from a combination of the sales forecast and the planned amount of finished goods
inventory to have on hand. In order to estimate this, you have to begin first with a sales budget,
a per debt projection of how many units you'll probably sell given the budget period.

10)Overheads are Non Controllable

11)Overheads are ignored under Marginal Costing – True

12)Increase in Prime Cost can be passed on to the Customer – True

13)Selling at Margin of Safety can bring Profit - True

14)What are the unique features of Industries where Process Costing is followed?
Industries likely to use process cost systems are those in which the units produced are identical.
• The production is continuous

• The product is homogeneous

• The process is standardized

• The output of one process becomes the raw material of another process

• The output of the last process is transferred to finished stock

• Costs are collected process-wise

• Both direct and indirect costs are accumulated in each process

• If there is a stock of semi-finished goods, it is expressed in terms of equivalent units

• The total cost of each process is divided by the normal output of that process to find out
the cost per unit of that process

The following are examples of industries where process costing is practices-

• Industries involved in chemical works, textile, weaving, spinning, etc.

• Industries are producing gas, electricity, water, ice, steel, paper, cement, rubber, bread,
etc.

• Industries are producing bakeries, confectionery, flour mills, canners, manufacturers of

medicine, fabricators, etc.

• Industries involved in foundries, laundries, dyers, cleaners, etc.

• Industries are producing spare parts, fittings, equipment, fertilizer industries, etc.

• Industries involved in box making, paper mills, biscuit factories, oil refining, milk dairy,
meat product factory.
15)What is the purpose of Overhead Absorption Rate?

Overhead absorption rate is a rate charged to cost unit intended to account for the overhead at
a predetermined level of activity. On the basis of direct labour hours, direct labour cost or
machine hours, overhead is attributed to a product or service.
Purpose: They enables overheads to be absorbed immediately after production. They make it
easier to estimate total and per unit product or job cost.

16)What is meant by Equivalent Units under Process Costing?

An equivalent unit of production is an expression of the amount of work done by a
manufacturer on units of output that are partially completed at the end of an accounting period.
For the measure of output for the period. Ex: 2 units 50% complete = 1 unit fully complete.
 FINANCIAL ACCOUNTING & REPORTING
1) Any Benefit to be received in future will be considered as DISCOUNT RATE or RATE OF
RETURN.
2)Fixed Asset purchased on loan will be shown in INVESTING activity of Cash Flow
Statement
3)What are called as Financial Statements?
Financial statements are reports prepared by a company’s management to present the financial
performance and position at a point in time. A general-purpose set of financial statements usually
includes a balance sheet, income statements, statement of owner’s equity, and statement of cash
flows. These statements are prepared to give users outside of the company, like investors and
creditors, more information about the company’s financial positions.

• Financial statements are written records that convey the business activities and the
financial performance of a company.
• The balance sheet provides an overview of assets, liabilities, and stockholders' equity as a
snapshot in time.
• The income statement primarily focuses on a company’s revenues and expenses during a
particular period. Once expenses are subtracted from revenues, the statement produces a
company's profit figure called net income.
• The cash flow statement (CFS) measures how well a company generates cash to pay
its debt obligations, fund its operating expenses, and fund investments.

4)Explain any two concepts in Financial Accounting with example?

• Money Measurement Concept
• Business Entity Concept
• Going Concern Concept
• Cost Concept
• Dual Aspect Concept (Accounting Equation Concept)
• Accounting Period Concept
• Matching Concept
• Realisation Concept
• Objectivity concept
• Accrual Concept
Accruals concept. Revenue is recognized when earned, and expenses are recognized when
assets are consumed. This concept means that a business may recognize revenue, profits and
losses in amounts that vary from what would be recognized based on the cash received from
customers or when cash is paid to suppliers and employees. Auditors will only certify the
financial statements of a business that have been prepared under the accruals concept. the
revenue is recognized on its realisation and not on its actual receipt. Similarly, the costs are
recognized when they are incurred and not when payment is made. This assumption makes it
necessary to give certain adjustments in the preparation of income statement regarding revenues
and costs.
Going concern concept. Financial statements are prepared on the assumption that the
business will remain in operation in future periods. Under this assumption, revenue and
expense recognition may be deferred to a future period, when the company is still operating.
Otherwise, all expense recognition in particular would be accelerated into the current
period. This concept relates with the long life of the business. A business is intended to continue
for an indefinitely long period. All firms that continue to operate on a profitable footing are
treated as going concerns.
5)Amount contributed by the Owner to Business is considered as shareholder’s equity section
6))Higher the Inventory Turnover Ratio represents ?
• Inventory turnover shows how many times a company has sold and
replaced inventory during a given period.
• The higher the inventory turnover, the better, since high inventory turnover typically
means a company is selling goods quickly, and there is considerable demand for their
products.
• Inventory Turnover Ratio = COGS / Avg. Inventory
7) Lower the Debtors Turnover Ratio represents, low amount of dues from Customer – False
• Receivables turnover ratio = net credit sales / average accounts receivable
• The receivables turnover ratio is an accounting measure used to quantify a company's
effectiveness in collecting its receivables or money owed by clients. A low receivables
turnover ratio might be due to a company having a poor collection process, bad credit
policies, or customers that are not financially viable or creditworthy.
8) Lower the Current Ratio will affect Short Term solvency
• Cash and assets that are regularly converted into cash within the fiscal year are
called current assets.
• Current ratio = current assets / current liabilities.
• The ability of your company to pay off current creditors out of current assets becomes
greater as the ratio becomes higher.
9) Dividend paid to Shareholders will be considered as financing activity in Cash Flow
Statement
10)What is meant by Amortisation?
Amortization is the process of incrementally charging the cost of an asset to expense
over its expected period of use, which shifts the asset from the balance sheet to the income
statement. It essentially reflects the consumption of an intangible asset over its useful life.
Amortization is most commonly used for the gradual write-down of the cost of those
intangible assets that have a specific useful life. Examples of intangible assets are patents,
copyrights, taxi licenses, and trademarks. The concept also applies to such items as the
discount on notes receivable and deferred charges. The amortization concept is also used in
lending, where an amortization schedule itemizes the beginning balance of a loan, less the
interest and principal due for payment in each period, and the ending loan balance.

11) Depreciation will be provided on the Assets, even when Asset is not used - True

12) Security Deposit received from a Building Contractor engaged for Constructing our Building
will be considered as Non Current Asset

13)Balance in Saving Account will be LIABILITY for a Bank*

Banks don’t do anything with the money in savings accounts, because to the banks, “money in
savings accounts” is a liability, not an asset. They lend the amount as short term loans in the
form of overdrafts so that the funds are utilised and they also earn interest from such overdraft
accounts.

14)Owner’s personal expenses met by business will be considered as Business Expense

15)The base amount for Vertical Analysis of Income Statement will be Net Sales

DEFINITIONS

1)Why balance sheet should always tally

a balance sheet should always balance. The name "balance sheet" is based on the fact that assets
will equal liabilities and equity every time. The assets on the balance sheet consist of things of
value that the company owns or will receive in the future and which are measurable. Debit what
goes out ,credit what comes in. Debit the receiver and credit the giver. Debit all expense
accounts and credit all incomes and gains like Sales, Govt. incentives on exports and sale of
scrap and miscellaneous incomes like interest record or earned and profit on sale of fixed assets
etc.
2)Why profit is not the right indicator to measure the performance of a company?
profits are not the only way or even the best way to measure business performance. There are
many other elements to consider that may be even more important than profit.

Profit is a short sighted gauge of success. What is more important is sustainability. Sustainability
is the characteristic of being able to exist indefinitely. This includes employees, availability of
raw materials, machinery and other value-adding elements.

There are generally six steps to developing an effective analysis of financial statements.

• Identify the industry economic characteristics

• Identify company strategies
• Assess the quality of the firm's financial statements
• Analyze current profitability and risk
• Prepare forecasted financial statements
• Value the firm
3)Explain Payable Turnover Ratio
Accounts payable turnover ratio is an accounting liquidity metric that evaluates how fast a
company pays off its creditors (suppliers) and the creditworthiness of the company. An accounts
payable turnover ratio measures the number of times a company pays its suppliers during a
specific accounting period. A high ratio indicates prompt payment is being made to suppliers for
purchases on credit. A high number may be due to suppliers demanding quick payments, or it
may indicate that the company is seeking to take advantage of early payment discounts or
actively working to improve its credit rating.
Accounts payable turnover ratio = Total purchases / Average accounts payable

4)What is IFRS

• International Financial Reporting Standards (IFRS) were established to bring consistency

to accounting standards and practices, regardless of the company or the country.
• They are issued by the Accounting Standards Board (IASB) and address record keeping,
account reporting and other aspects of financial reporting.
• IFRS benefit companies and individuals alike in fostering greater corporate transparency.
• The downside of IFRS are that they are not universal, with the United States using GAAP
accounting, and a number of other countries using other methods.

5)What do you mean by Deferred Tax Asset

Items on a company's balance sheet that may be used to reduce taxable income in the
future are called deferred tax assets. The situation can happen when a business overpaid taxes or
paid taxes in advance on its balance sheet. These taxes are eventually returned to the business in
the form of tax relief. Therefore, overpayment is considered an asset to the company. A deferred
tax asset is the opposite of a deferred tax liability, which can increase the amount of income tax
owed by a company. Deferred tax assets are often created due to taxes paid or carried forward
but not yet recognized on the income statement. For example, deferred tax assets can be created
due to the tax authorities recognizing revenue or expenses at different times than that of
an accounting standard. This asset helps in reducing the company’s future tax liability.

6)What do you mean by order of permanence ?

where fixed assets are entered in the balance sheet in descending order of
permanence (i.e. land first, then buildings, then equipment). Order of Permanence is an
economical statement that displays assets in order of how everlasting they are, with the most
everlasting listed first. Order of performanence is the arrangement of assets in descending order
in balance sheet. Order of Permanence includes the assets as land in first, buildings in second and
then equipment etc.

7)Describe the two methods of preparing cash flow statement

Two methods are available to prepare a statement of cash flows: the indirect and direct methods.
The Financial Accounting Standards Board (FASB) prefers the direct method, while many
businesses prefer the indirect method. Regardless of which method you use, the bottom-line cash
balance is the same, and it has to equal the amount of cash you show on the balance sheet.
Three Sections of the Statement of Cash Flows:
Operating Activities: The principal revenue-generating activities of an organization and other
activities that are not investing or financing; any cash flows from current assets and current
liabilities. (Direct and Indirect Method
Investing Activities: Any cash flows from the acquisition and disposal of long-term assets and
other investments not included in cash equivalents
Financing Activities: Any cash flows that result in changes in the size and composition of the
contributed equity capital or borrowings of the entity (i.e., bonds, stock, dividends)
Classification by activities provides information that allows users to assess the impact of
those activities on the financial position of the enterprise. This information also helps in
evaluating the inter-relationships between these activities.

8)What are the key ratios a lender should notice?

• Current Ratio
• Quick Ratio
• Operation Cash flow Ratio
• Debt to Equity Ratio
9)What does Minority Interest mean?
A minority interest is ownership or interest of less than 50% of an enterprise. The term can refer
to either stock ownership or a partnership interest in a company. The minority interest of a
company is held by an investor or another organization other than the parent company. Minority
interests generally come with some rights for the stakeholder such as the participation in sales
and certain audit rights. A minority interest shows up as a noncurrent liability on the balance
sheet of companies with a majority interest in a company. This represents the proportion of its
subsidiaries owned by minority shareholders.

10)State the order of preparing financial statements ?

Financial statements are prepared in the following order:
• Trial Balance
• Adjusted Trial Balance
• Income Statement
• Statement of Retained Earnings – also called Statement of Owners’ Equity
• The Balance Sheet
• The Statement of Cash Flows
11)What does negative reserve in balance sheet indicate?
Negative shareholders' equity could be a warning sign that a company is in financial
distress or it could mean that a company has spent its retained earnings and any funds from
its stock issuance on reinvesting in the company by purchasing costly property, plant, and
equipment. A negative balance in shareholders' equity, also called stockholders' equity,
means that liabilities exceed assets
But losses accumulated become negative Reserves and will erode the net-worth of the
Company and accumulated losses when exceed the reserves held it becomes negative and is
deducted from Capital and at one stage it fully erodes the capital with the net-worth resulting
into negative position and speaks of bad state of the Company.

12)When revenue will be recognised?

Revenue is recorded in the accounting records and reported on the income statement when
goods are sold and delivered to a customer. Revenue recognition is a generally accepted
accounting principle (GAAP) that stipulates how and when revenue is to be recognized. The
revenue recognition principle using accrual accounting requires that revenues are recognized
when realized and earned–not when cash is received. Revenue accounting is straightforward
when a product is sold, and the revenue is recognized when the customer pays for the
product. However, accounting for revenue can get complicated when a company takes a long
time to produce a product.
14)State the steps involved in Multi-step Income Statement ?
• Sales
(less) COGS
• =Gross Profit
(less) Operating Expense
• =Operation Profit
(add) Non operating Revenues and Expense
• =Net Income

• To calculate gross profit on your income statement, you use the formula:
Gross Profit = Net Sales – Cost of Goods Sold
• To calculate operating income, you use the formula:
Operating Income = Gross Profit – Operating Expense
• To calculate net income, you use the formula:
Net Income = Operating Income + Non-Operating Items

15)State the basic difference between Horizontal and Vertical analysis?

In order to arrive at conclusions regarding the performance of the current financial year as well
as to assist planning the upcoming financial year’s budget.

Horizontal and vertical analysis are two main types of analysis methods used for this purpose.
The key difference between horizontal and vertical analysis is that horizontal analysis is a
procedure in financial analysis in which the amounts in financial statements over a certain period
of time is compared line by line in order to make related decisions whereas vertical analysis is
the method of analysis of financial statements where each line item is listed as a percentage of
another item.

A horizontal analysis, also referred to as ‘trend analysis’, is a procedure in the financial analysis
where the amounts of financial information over a certain period of time is compared line by line
in order to make related decisions.

Horizontal analysis = (Current Year – Previous Year) * 100 / Previous Year

Vertical analysis is the method of analysis of financial statements where each line item is listed
as a percentage of another item to conduct useful decision making. Here, each line item on the
income statement is expressed as a percentage of sales revenue and each line item on the balance
sheet is expressed as a percentage of total assets.
Vertical Analysis Formula (Income Statement) = Income Statement Item / Total Sales *
100
Vertical Analysis Formula (Balance Sheet) = Balance Sheet Item / Total Assets
(Liabilities) * 100
 CORPORATE FINANCE

1)ANNUITY DUE: It is the series of regular payments at equal time interval at beginning of
each period. EG: Monthly rent payment

ORDINARY ANNUITY: It is the series of regular payments at equal time interval at end of
each period. Eg: Interest payment for loan

2)EXAMPLES OF PERPETUITY: (endless cash flow)

• It is regular income/ payment of money for infinite period of time.

• Consol – UK government bond
• RENTALS FROM REAL ESTATE

3)What kind of stock generally have a beta of over 1.5?

• Beta is measurement of volatility of the stocks with respect to the market.

• beta >1 high volatile than the market (higher risk and higher returns)
• beta = 1 same as market
• beta < 1 less volatile than the market (low risk and low returns)
• For Beta 1.5, the stock is 50% more volatile than the market.

6) WHAT DOES IT MEAN CURRENT RATIO IS LESS THAN 1:

• CURRENT RATIO= CURRENT ASSETS/CURRENT LIABILITIES

• Current ratio is less than 1 means current assets is less than current liabilities, it shows the
company inability in meeting its short term obligations
• Current ratio is greater than 1 means current assets is greater than current liabilities, the
company can able to manage its short term obligations.
• current assets- cash and cash equivalents, accounts receivables, prepaid expenses,
inventory, advances to employees/suppliers
• current liabilities – short term debt, accounts payable, accrued interest, current matruity
in long term debt

7) PURPOSE OF CAPM: (CAPITAL ASSET PRICING MODEL)

• It is used to identify the relationship between the expected returns and risk of the security.
• expected return= risk free rate+beta*(market return- risk free rate)
• market risk premium= market return- risk free rate
ASSUMPTIONS IN CAPM:

Markets are ideal—no transaction fees, taxes, inflation, or short selling restrictions. All investors
are averse to risk. Markets are highly efficient.

8)REAL RETURN

Real return is the return an investor receives after considering the inflation.

real return = nominal return- inflation

9) RIGHTS ISSUE VS BONUS ISSUE

RIGHTS ISSUE BONUS ISSUE

shares is given to existing shareholders at shares is given to existing shareholders for
discounted price. free.
used to raise fresh capital shared when company has good profit

rights issue at 1:2 means for every 2 share u can get 1 share

10)WHAT IS MEANT BY INDEX FUND:

A group of securities forming the index. These securities can be either bond instruments
or equity instruments. An index fund is a portfolio of stocks or bonds designed to mimic the
composition and performance of a financial market index. Index funds have lower expenses and
fees than actively managed funds. Index funds follow a passive investment strategy.

Eg: NIFTY 50, NIFTY BANK, S&P BSE INDIA BOND

11)MARKET RISK PREMIUM

MARKET RISK PREMIUM= MARKET RETURN- RISK FREE RATE

It is the additional return expected by the investor for holding the risky assets instead of risk free
assets.

12) How would you construct your portfolio in a best possible way?

Optimum portfolio should minimize the risk and maximize the returns.

Portfolio should be well diversified with bonds and stocks. Based on individual securities risk,
investments should be made.
13) what are the ways to mitigate the systematic risk?

Systematic risk is the risk due to external factors like politics, economy etc. Unsystematic risk is
the risk due to company internal factors.

• Systematic risk can be mitigated using asset allocation strategy.

Eg: allocating portion of amount in real estate, fixed deposits, bonds and stocks etc.

• Unsystematic risk can be mitigated with diversification.

Eg: investment in different companies than one company

14)Loan amortization

An amortized loan is a type of loan that requires the borrower to make scheduled,
periodic payments that are applied to both the principal and interest. An amortized loan payment
first pays off the interest expense for the period; any remaining amount is put towards reducing
the principal amount

1)what is corporate finance?

• Corporate finance is the area of finance that deals with providing money for
businesses and the sources that provide them. These sources provide capital to
corporations to pay for structural improvements, expansion, and other value-
added projects and enterprises.
• Corporate finance mainly tells the investments decision in a business and also
sources for funding to maximize the shareholders’ value.

2)Goal of corporate finance

• Wealth maximization – It is increasing the shareholders’ value.

• Capital appreciation

3)SHORTCOMINGS OF PROFIT MAXIMIZATION

Profit maximization is the short term goal in the business. So it may lead to poor product
quality and there may be possibility of losing customers.
Poor product quality may affect brand image.
To avoid this short term profit maximization should be in align with the company long
term goals.

4)MAIN FINANCIAL MANAGEMENT DECISIONS:

• Investment decisions – capital budgeting techniques

• Financing decisions- capital structure
 • Dividend decisions
• Working capital decisions

5) AGENCY PROBLEM

Conflict of interest between the managers and shareholders. Managers needs to achieve the
organization goal and also look for personal gain. Shareholders look for profit and dividends.

REASONS:

• Information asymmetry
• Managers put their personal interest rather than company goal.

INTERNAL MEASURES TO AVOID AGENCY PROBLEM:

• Internal audit
• Changes in salaries & payments of managers.
• Good corporate governance

EXTERNAL MEASURES:

• External audit can be conducted.

6)CAPITAL BUDGETING DECISIONS:

• It is also called as investment decisions. Capital budgeting techniques give the decisions
made by the top level management with respect to amount of funds deployed to the long
term projects.
• This decision can be made with Net present value, Internal rate of return, Profitability
index, payback period, discounted payback period, accounting rate of return.
• Net present value = Present value of cash inflow- present value of cash outflow
• If NPV >1, then company can invest in those projects, If NPV< 1, then company should
not invest in those projects.
• If IRR> COST OF CAPITAL, then company can invest in those projects, If IRR< Cost of
capital, then company should not invest in those projects.
• COST OF CAPITAL IS COST INCURRED TO RAISE THE FUNDS FOR
INVESTMENT
• DPB, PB should be less. DPB, PB tells the time period for the return of our investment.
7) SOME OF CURRENT ASSETS AND CURRENT LIABILITIES:

• current assets- cash and cash equivalents, accounts receivables, prepaid expenses,
inventory, advances to employees/suppliers
• current liabilities – short term debt, accounts payable, accrued interest, current matruity
in long term debt

8)WHAT IS LIQUIDITY? HOW WILL YOU MEASURE?

Liquidity tells the how the company can quickly convert its assets into cash.

Liquidity for companies typically refers to a company's ability to use its current assets to meet its
current or short-term liabilities. The current ratio (also known as working capital
ratio) measures the liquidity of a company and is calculated by dividing its current assets by its
current liabilities.

9)NET WORKING CAPITAL

net working capital= current assets – current liablities

• if nwc is +ve, then company can able to manage its short term obligations.
• if nwc is –ve, it shows the company inability to meet its short term obligations

10)ECONOMIC VALUE ADDED:

EVA is the company performance measure that compares the net operating profit to the total cost
of capital.

EVA= NOPAT- (COST OF CAPITAL * CAPITAL INVESTED)

NOPAT Net operating profit after tax.

COST OF CAPITAL IS COST INCURRED TO RAISE THE FUNDS FOR INVESTMENT

11)Deferred annuity vs Annuity due

Annuity due is when the first payment is received / paid today and Deferred Annuity is when the
same is done at the end of one unit time (may be a day , month or year , as per the scenario

ANNUITY DUE- PAYMENT RECEIVED AT BEGINNING OF PERIOD- HOUSE RENT

DEFFERED ANNUITY- PAYMENT RECEIVED AT END OF PERIOD – INSURANCE

12) ANNUITY:

Annuity is the series of equal payments at equal time interval.

EG: PENSION SCHEME

13)PERPETUITY:

It is the stream of cash flow for infinite period of time. Eg: CONSOL

14) FORMULA FOR PV OF PERPETUITY

PV= CASH FLOW/ DISCOUNT RATE=C/r

15)SYSTEMATIC RISK VS UNSYSTEMATIC RISK:

Systematic risk is the risk due to external factors like politics, economy etc. Unsystematic risk is
the risk due to company internal factors.

• Systematic risk can be mitigated using asset allocation strategy.

Eg: allocating portion of amount in real estate, fixed deposits, bonds and stocks etc.

• Unsystematic risk can be mitigated with diversification.

Eg: investment in different companies than one company

16) CAPM REGRESSION EQUATION:

• expected return= risk free rate+beta*(market return- risk free rate)

Beta is the measure of volatility of stocks with respect to market.

17) OPERATING LEVERAGE:

It is the firm ability to use fixed operating costs to magnify the effect of changes in sales on
EBIT.

Degree of operating leverage= Changes in EBIT/ changes in sales

dol should be greater than 1

18)FINANCIAL LEVERAGE

It indicates how much business is dependent on the debt that it has issued.

Measures the financial risk

dfl= changes in eps/ changes in ebit

dfl should be greater than 1

19)HOLDING PERIOD RETURN

hpr= (current price- previous price)/previous price

20)BETA ESTIMATION USES:

Beta is the measure of volatility or systematic risk of stocks with respect to market.

Beta > 1 highly volatile

21) SOME MONEY MARKET INSTRUMENTS:

Treasury bills, commercial papers, certificate of deposits, bills of exchange

23) REGULATORY BODY OF INSURANCE COMPANIES

IRDAI- INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA

24)IPO AND FPO

IPO- INITIAL PUBLIC OFFERING

Company issuing the shares for public in stock exchange for the first time.

FPO- FURTHER PUBLIC OFFERING

Issuing company shares in stock exchange after first time is FPO.

25) WHAT INFORMATION DOES BALANCE SHEET PROVIDES?

Balance Sheet is the financial statement of a company which includes assets, liabilities,
equity capital, total debt, etc. at a point in time. Balance sheet includes assets on one side, and
liabilities on the other.

26)CURRENT RATIO

• CURRENT RATIO= CURRENT ASSETS/CURRENT LIABILITIES

• Current ratio is less than 1 means current assets is less than current liabilities, it shows the
company inability in meeting its short term obligations
• Current ratio is greater than 1 means current assets is greater than current liabilities, the
company can able to manage its short term obligations.

27)ACID TEST OR QUICK RATIO:

It compares a company's most short-term assets to its most short-term liabilities to see if a
company has enough cash to pay its immediate liabilities, such as short-term debt. The acid-test
ratio disregards current assets that are difficult to liquidate quickly such as inventory.

QUICK RATIO= Current assets excluding inventories/ Current liabilities

28)ROA AND ROE

ROA= NET INCOME/ AVERAGE TOTAL ASSETS

ROE= NET INCOME/ AVERAGE SHAREHOLDERS EQUITY

ROA tells that how well the company generating profit from its assets.

ROE tells how well the company generating profit from its equity investment.

29)DISCOUNTING AND COMPOUNDING

Discounting gives the present value of future cash flows while compounding is give the future
value of the investment.

30)RISK PREMIUM

Risk premium is the minimum amount of money by which the expected return on a risky asset
(such as stock) must exceed the known return on a risk- free asset

MRP= MARKET RETURN – RISK FREE RATE

31)SML- SECURITY MARKET LINE

Stocks above the security market line is undervalued

Stocks below the security market line is overvalued.

CAPM graph is drawn between the beta and expected returns. Beta in X axis and Excepted
return in Y axis.

32)EPS- EARNINGS PER SHARE

EPS= NET PROFIT/ TOTAL OUTSTANDING SHARES

33)MARKET CAPITALIZATION:

Market capitalization is the total market value of the company outstanding shares.

MARKET CAPITALIZATION= CURRENT STOCK PRICE *TOTAL OUTSTANDING

SHARES

34)LISTING

It is the listing of company shares in any official stock exchange such as NSE OR BSE.

It is regulated by SEBI
35)MUTUAL FUNDS

A mutual fund is a company that pools money from many investors and invests the money in
securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual
fund are known as its portfolio. Investors buy shares in mutual funds.

CATEGORIES OF MUTUAL FUNDS- equity funds, fixed income funds, hybrid funds

36)GILT EDGED FUNDS:

Gilt-edged securities are high-grade investment bonds offered by governments and large
corporations as a method of borrowing funds. The issuing institutions typically boast strong track
records of consistent earnings that can cover dividend or interest payments.

37)TREASURY BILLS

Treasury bills or T-bills, which are money market instruments, are short term debt instruments
issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182
day and 364 day. Treasury bills are zero coupon securities and pay no interest.

government securities maturity over 1 years is bond

government securities maturity less than 1 years is t-bills

38)SEBI

SECURITY EXCHANGE BOARD OF INDIA- regulatory body of capital markets in india

It protects the investors interest.

39) If you deposit 2000 rupees with 8% interest expectations, in how many years it can be
doubled (approx..)

• PER YEAR INTEREST IS 160

• FOR 10 YEARS =1600
• SO APPROXIMATELY IN 14 YEARS THE DEPOSIT WILL REACH 4000

40)SEBI IS THE REGULATORY BODY OF CAPITAL MARKETS

41)Individual security risk can be measured with beta, standard deviation.

42) DIFFERENCE BETWEEN PUBLIC AND PRIVATE COMPANY

India’s stock exchange regulator is SEBI.

In private company, minimum no of shareholders should not exceed 200.

43) PRIMARY AND SECONDARY MARKET:
 MICRO ECONOMICS
1) What is law of demand?
• The law of demand states that other factors being constant, price and
quantity demand of any good and service are inversely related to each other. When
the price of a product increases, the demand for the same product will fall.
• An example of this is ice cream. You can easily get a different dessert if the price
rises too high. If the amount bought changes a lot when the price does, then it's called
elastic demand.

2) What is price elasticity of demand?

Price elasticity of demand is an economic measure of the change in the quantity demanded or
purchased of a product in relation to its price change. Expressed mathematically, it is:

Price Elasticity of Demand = % Change in Quantity Demanded / % Change in Price.

3) Why do we calculate cross price elasticity of demand?

(briefly)

For businesses it is an important strategic tool. This elasticity measure can help determine
whether or not it is a good move to increase or decrease selling prices, or to substitute one
product for another to generate greater revenues

Cross (price) elasticity of demand (XED) measures the responsiveness of quantity demanded for
one good to a change in the price of another good

(if asked to explain in detail during viva)

The cross elasticity of demand is an economic concept that measures the responsiveness in the
quantity demanded of one good when the price for another good changes. Also called cross-price
elasticity of demand, this measurement is calculated by taking the percentage change in the
quantity demanded of one good and dividing it by the percentage change in the price of the other
good.

• The cross elasticity of demand is an economic concept that measures the responsiveness
in the quantity demanded of one good when the price for another good changes.
• The cross elasticity of demand for substitute goods is always positive because the
demand for one good increase when the price for the substitute good increases.
• Alternatively, the cross elasticity of demand for complementary goods is negative.

In economics, the elasticity of demand refers to how sensitive the demand for a product is to
changes in price of another product.
4) What is the difference between short-run and long-run production function?

SHORT RUN PRODUCTION LONG RUN PRODUCTION

FUNCTION FUNCTION

The short run production function can be Long run production function indicates the
understood as the time period over which time period, over which the firm can change
the firm is not able to change the quantities the quantities of all the inputs.
of all inputs

In the short run: at least one input is fixed

In the long run: the firm is able to vary all
its inputs, adopt new technology, & change
the size of its physical plant.
The short run is defined as the period of Anything longer than that is considered
time in which at least one input is fixed the long run.

5) In which market we can see the phenomenon of price discrimination?

• In a competitive market, price discrimination occurs when identical goods and services
are sold at different prices by the same provider.
• In pure price discrimination, the seller will charge the buyer the absolute
maximum price that he is willing to pay.
• One example of price discrimination can be seen in the airline industry. Consumers
buying airline tickets several months in advance typically pay less than consumers
purchasing at the last minute. When demand for a particular flight is high, airlines raise
ticket prices in response

6) What is supernormal profit? How much supernormal profit a competitive firm earns in
the long-run?

• Supernormal profit is all the excess profit a firm makes above the minimum return
necessary to keep a firm in business.

• Supernormal profit is calculated by Total Revenue – Total Costs (where total cost
includes all fixed and variable costs, plus minimum income necessary for the owner to be
happy in that business.

• Normal profit is defined as the minimum level of profit necessary to keep a firm in that
line of business. This level of normal profit enables the firm to pay a reasonable salary to
 its workers and managers. The definition of normal profit occurs when AR=ATC
(average revenue = average total cost)
• Supernormal profit is defined as extra profit above that level of normal profit.
• Supernormal profit is also known as abnormal profit.

EXAMPLES OF HOW MUCH SUPERNORMAL PROFIT A COMPANY CAN MAKE?

1. Apple. In 2015, Apple was the world’s most profitable company with profits of $53.4
billion. It also had cash reserves of $216bn. This is accumulated profit saved in their bank
accounts. The supernormal profit of Apple comes from its very strong brand loyalty and
products which have sold well, despite high prices.

2. JP Morgan Chase & Co. In 2015, J P Morgan Chase made profits of $24.4 billion.

7) How price elasticity is related with price discrimination in the monopoly market?

How Price Discrimination Works. ... The markets cannot overlap so that consumers who
purchase at a lower price in the elastic sub-market could resell at a higher price in
the inelastic sub-market. The company must also have monopoly power to make price
discrimination more effective.

Price discrimination is a selling strategy that charges customers different prices for the same
product or service based on what the seller thinks they can get the customer to agree to.

Price Elasticity is a measure of the effect of a price change or a change in the quantity supplied
on the demand for a product or service.monopoly market: A market structure characterized by a
single seller, selling a unique product in the market. In a monopoly market, the seller faces no
competition, as he is the sole seller of goods with no close substitute. He enjoys the power of
setting the price for his goods. ...)

8) What is predatory price cutting?

predatory price cutting, the practice has been defined as temporary selling, at prices below its
costs, by a firm (or concerted group of firms) to drive out or crush a competitor. For
convenience, the two firms will be called aggressor and rival, or predator and victim.

Example : drug price war between Walmart and Target in Minnesota

9) What is dead-weight loss?

Deadweight loss occurs when supply and demand are not in equilibrium, which leads to market
inefficiency. Market inefficiency occurs when goods within the market are either overvalued or
undervalued. While certain members of society may benefit from the imbalance, others will be
negatively impacted by a shift from equilibrium.

When consumers do not feel the price of a good or service is justified when compared to the
perceived utility, they are less likely to purchase the item.

For example,

overvalued prices may lead to higher profit margins for a company, but it negatively affects
consumers of the product.

For inelastic goods — meaning demand does not change for that particular good or service when
the price goes up or down—the increased cost may prevent consumers from making purchases in
other market sectors. In addition, some consumers may purchase a lower quantity of the item
when possible. For elastic goods —meaning sellers and buyers quickly adjust their demand for
that good or service if the price changes — consumers may reduce spending in that market sector
to compensate or be priced out of the market entirely.

10) When a firm shuts down its business?

If the market price is below average cost at the profit-maximizing quantity of output, then the
firm is making losses. If the market price that a perfectly competitive firm faces is below average
variable cost at the profit-maximizing quantity of output, then the firm should shut down
operations immediately.

Just for understanding

 MACROECONOMICS

1) How GDP is different than GNP?

GDP measures the value of goods and services produced within a country's borders, by
citizens and non-citizens alike. GNP measures the value of goods and services produced
by only a country's citizens but both domestically and abroad.

2) What is the difference between accounting and economists’ calculation of

depreciation?

In accounting depreciation, a tangible asset's value decreases over time based on a

set depreciation schedule.

economic depreciation an asset's decreases in value are not necessarily uniform or

scheduled but rather based on influential economic factors.

3) What is the impact of increase in proportional tax on marginal propensity to

consume?

In addition to tax policy, interest rate policy is also believed to have a significant impact
on the MPC, specifically whether credit is readily available or more tightly restricted.
Readily available credit and lower interest rates are believed to increase the MPC since
this makes it easier for consumers to finance purchases and to obtain financing at
attractive rates.

4) What is multiplier?
In economics, a multiplier broadly refers to an economic factor that, when increased or changed,
causes increases or changes in many other related economic variables. ... The term multiplier is
usually used in reference to the relationship between government spending and total national
income.

The formula for the simple spending multiplier is 1 divided by the MPS.

5) What is the difference between progressive and proportional tax rate?

progressive tax—A tax that takes a larger percentage of income from high-income groups than
from low-income groups.

proportional tax—A tax that takes the same percentage of income from all income groups.
 6) Why GST was introduced in India?
One of the main reasons for GST being introduced in India is the tax burden that falls both on
companies and consumers. With the current tax system, there are multiple taxes added at each
stage of the supply chain, without taking credit for taxes paid at previous stages.

7) Who controls the money supply in India?

In India, money supply is regulated by the Reserve bank of India which is the central
bank through various fiscal and monetary policies of the government.

8) What is the difference between bank rate and repo rate?

repo rate is the rate at which the RBI lends to commercial banks by purchasing securities
while bank rate is the lending rate at which commercial banks can borrow from the RBI
without providing any security.

9) What is the impact on price level if RBI decides to increase the Cash Reserve Ratio?

The reserve ratio is the amount of reserves - or cash deposits - that a bank must hold on to
and not lend out. The greater the reserve requirement, the less money that a bank can
potentially lend - but this excess cash also staves off a banking failure and shores up its
balance sheet. Still, when the reserve ratio increases, it is
considered contractionary monetary policy, and when it decreases expansionary.

10) What are the problems in measuring CPI?

The first problem with the CPI is the substitution bias. As the prices of goods and
services change from one year to the next, they do not all change by the same
amount. The number of specific items that consumers purchase changes depending
upon the relative prices of items in the fixed basket.
 OM
1. Why should one study operations management?

set of activities that creates value in the form of goods and services by transforming
inputs into outputs.

2. What operations managers do?

Operations managers are responsible for managing activities that are part of the production
of goods and services. Their direct responsibilities include managing both the operations process,
embracing design, planning, control, performance improvement, and operations strategy.

3. What is product life cycle?

It is the period of time over which an item/product is developed, brought to market and
eventually removed from the market.
4STAGES OF PLC – Introduction , growth, maturity, decline

4. Differences between product and services?

Product service
Products are Tangible i.e product one can services are Intangible i.e. service we can
touch, smell, see and wish to buy Example: experience. Example: flying to a particular
aircraft is product destination is service

We can store product for future We cannot store service for future
Quality of products is homogeneous i.e. While quality of services is heterogeneous.
Quality of product can not vary with time i.e. Quality of service can vary with time and
person.

The consumer can access the product (a car, A consumer will never know how good the
washing machine, etc.) and see/test it. service is until after he gets it.

Product has some resale value Reselling is unusual

5. Define productivity
Productivity is the quantitative relation between what we produce and what we use
as a resource to produce them.
Productivity = output / input
6. What is a qualitative forecasting model, and when is its use appropriate?
These types of forecasting methods are based on judgments, opinions, intuition,
emotions, or personal experiences of expert.
They are usually applied to intermediate- or long-range decisions.

METHODS
*Jury of Executive Opinion
*Delphi Method
*Sales Force Composite
*Market Survey

7. What is the basic difference between a simple moving average and weighted moving average?
simple moving average weighted moving average
A moving-average forecast uses a specific Weights based on experience and decision of
number of historical actual data values to expert
generate a forecast.

We consider only latest data for Weighted moving averages assign a heavier weighting
forecasting to more current data points since they are more
relevant than data points in the distant past.
Moving average method is useful if The forecast for next period (t+1) will be equal
market to a weighted average of a specified number of
demand will stay fairly steady over time. the most recent observations.

8. What are the methods used to determine the accuracy of any given forecasting method?
 Moving Average
 Weighted moving average
 Mean Absolute Percent Error (MAPE)
 Mean Average Deviation (MAD)
 Mean squared error (MSE)

9. Explain Delphi method of forecasting?

Approach in which consensus agreement is reached among a group of
experts based on questionnaires.
Automobile manufacturer uses this method.
10. What is the Difference between trend projection and linear regression?
trend projection linear regression

Trend projection always have positive slope linear regression can also have a negative slope.

In trend projection the independent variable in linear regression the independent variable
is always time need not be time, can be any variable.

11. What is Inventory? Describe the four types of inventory?

Inventory is list of tangible goods or items.
Inventory refers to the goods and materials that a business entities holds for
ultimate purpose of resale.
Turnover of inventory is one of the primary source of revenue generation.
TYPES
• Raw material inventory
• Components and Parts
• Work-in-process (WIP) inventory
• Finished goods
• Transit Inventory
• Buffer Inventory

12. Define Inventory Management

Inventory Management is the management of inventory in stock. (i.e) To
determine the amount of inventory to keep in stock, how much to order and when to order.

13. What are the reasons companies maintain inventories?

 To meet an unexpected increase in demand.
 Taking advantage of quantity discounts for ordering raw materials/ finished product in
bulk.
 To minimize idle time due to component and material shortages.
 Using buffer stock to assure smooth production flow.

14. What are the two basic questions that deal with inventory management?
 how much to order.
 when to order.

15. What is ABC analysis?

ABC analysis is an inventory categorization technique based on annual consumption
value.
A-items
B-items
C-items
 16. What is VED analysis?
 VED analysis is the another method for inventory categorization.
 This categorization technique is based on criticality of inventory.
 Criticality means without these inventory your business will operate or not.

 Vital Inventory
 Essential Inventory
 Desirable Inventory
• Vital inventory: Inventory that consistently need to be kept in stock.
• Essential inventory: Keeping minimum stock of these inventory is enough.
• Desirable inventory: Operations can run with or without these inventories i.e. it is optional.

17. Describe the difference between a fixed-quantity (Q) and a fixed-period (P) inventory control system.

Fixed-quantity (Q) inventory control system. fixed-period (P) inventory control system

This is also called continuous review system. orders are placed after a fixed interval of time.
The material is ordered every time when
inventory drops to a certain level.
That certain level is called the reorder point.
The reorder point (ROP) depends on the lead Inventory is reviewed at periodic intervals
time for delivery and usage rate. Ie the ordering irrespective of the levels to which inventory
cost and the holding cost. drops.
In this system the maximum and minimum The order quantity is different at each time.
inventory levels are fixed.
e.g pharmaceuticals and grocery stores.
18. What is Kanban System?
 Kanban is inventory control system to control the supply of inventory.
 It is Japanese word which means visual signal or card.
 When raw materials or stocked items runs low during the manufacturing process, an
employee takes item’s reorder card to manager, who order the needed amount of
materials.
 The new supplies arrived before stock has run out and production continue without
hindrance

19. What are the major assumptions of the basic EOQ model?
 Demand for an item is known and constant over time.
 Lead time is known and constant.Lead Time: The time between placement and receipt
of theorder.
 Quantity discounts are not considered.
 Stock-outs are not allowed.
 The quantity ordered arrives at once.
 Ordering cost and holding cost are variable cost.
 Inventory level is zero when new order is just received

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