IGNOU ECO-01 Solved Free Assignment 2022-23- Helpfirst

Course Title: Business Organization

ECO-01 Solved Free Assignment

Q1. What are the essential features of business? List different objectives of business.

Ans:- The essential features of business are as follow:

(a) Deals in goods and services.
(b) Sale or exchange of goods and services.
(c) Regular exchange of goods and services.
(d) Requires investment.
(e) Aims at earning profit.
(f) Involves risk and uncertainty of income.

We shall discuss each of these characteristics:

(a) Deals in Goods and Services:

People in business are engaged in production and distribution of goods and services. The goods may be consumer goods like bread, butter, milk, tea, etc. or capital goods like plant, machinery, equipment, etc.The services may be in the form of transportation, banking, insurance, warehousing, advertising and so on.

(b) Sale or Exchange of Goods and Services:

If a person produces or buys a product for self consumption or for gifting it to another, he is not engaged in business. But when he produces or buys goods to sell it to somebody, he is engaged in business.

Thus, in business the goods and services produced or purchased must be exchanged for money or for goods (under barter system) between the buyers and sellers. Without sale or exchange of goods the activities cannot be treated as business.

ECO-01 Solved Free Assignment

(c) Regular Exchange of Goods and Services:

The production or buying and selling activities must be carried out on a regular basis. Normally, an isolated transaction is not treated as business.

For example, it Raja sold his old Maruti car to Harish it is not considered as business, unless he continues to carry on buying and selling of cars on a regular basis. ECO-01 Solved Free Assignment

(d) Requires Investment:

Every business activity requires some amount of investment in terms of land, labour or capital. These resources are utilised to produce a variety of goods and services for distribution and consumption.

(e) Aims at Earning Profit:

Business activities are performed with the primary objective of earning income by the way of profit. Without profit it is not possible to survive for a long period. Earning of profit is also required to grow and expand the business.

(f) Involves Risk and Uncertainty of Income:

The business normally aims at earning profit. The businessman who invests in various resources expects a fair amount of return. But, in spite of his/her best effort, the reward he/she gets is always uncertain.

Most common types business objectives

  1. Increase your product or service’s market share
  • Improving the number of products or services you sell to customers involves increasing overall market share. ECO-01 Solved Free Assignment

Create and use your list of clients and contacts to find even more prospective customers. The more customers using the products, the higher your market share.

  1. Provide opportunities for teams to improve their leadership skills

Strong leaders motivate and encourage their teams to improve. Whether leadership training opportunities are offered to lower-level employees or executive staff members, an organization can greatly benefit from these skills.

  1. Reduce employee turnover and increase satisfaction

Employees are typically more likely to contribute valuable projects and ideas if they enjoy working at a company. So, to reduce employee turnover, your business objective should focus on improving employee satisfaction.

  1. Reach out to more community members

Being active and engaged in the community is a great way to connect with potential local customers and can help you establish stronger relationships, build trust and boost brand recognition. with potential customers.

  1. Maintain or increase profits

Especially with start-up businesses, maintaining a steady profit can be challenging over the first few years. ECO-01 Solved Free Assignment

Setting an objective with supporting goals for maintaining profits is an effective way to ensure a business remains financially stable.

  1. Strengthen customer service

To ensure customers and clients have a positive experience with your team, create an objective that motivates by offering incentives to both your employees and your customers.

Also, communicate how important an outstanding customer experience is every time you interact with customers.

Q2. What is capital structure? Describe factors that determine the capital structure.

Ans- Capital structure refers to the specific mix of debt and equity used to finance a company’s assets and operations.

From a corporate perspective, equity represents a more expensive, permanent source of capital with greater financial flexibility.

Factors Determining Capital Structure :

  1. Trading on Equity- The word “equity” denotes the ownership of the company. Trading on equity means taking advantage of equity share capital to borrowed funds on reasonable basis. ECO-01 Solved Free Assignment 2023

It refers to additional profits that equity shareholders earn because of issuance of debentures and preference shares.

It is based on the thought that if the rate of dividend on preference capital and the rate of interest on borrowed capital is lower than the general rate of company’s earnings, equity shareholders are at advantage which means a company should go for a judicious blend of preference shares, equity shares as well as debentures.

Trading on equity becomes more important when expectations of shareholders are high.

  1. Degree of control- In a company, it is the directors who are so called elected representatives of equity shareholders. These members have got maximum voting rights in a concern as compared to the preference shareholders and debenture holders.

Preference shareholders have reasonably less voting rights while debenture holders have no voting rights.

If the company’s management policies are such that they want to retain their voting rights in their hands, the capital structure consists of debenture holders and loans rather than equity shares.

  1. Flexibility of financial plan- In an enterprise, the capital structure should be such that there is both contractions as well as relaxation in plans.

Debentures and loans can be refunded back as the time requires. While equity capital cannot be refunded at any point which provides rigidity to plans.

Therefore, in order to make the capital structure possible, the company should go for issue of debentures and other loans. ECO-01 Solved Free Assignment 2023

  1. Choice of investors- The company’s policy generally is to have different categories of investors for securities. Therefore, a capital structure should give enough choice to all kind of investors to invest.

Bold and adventurous investors generally go for equity shares and loans and debentures are generally raised keeping into mind conscious investors.

  1. Capital market condition- In the lifetime of the company, the market price of the shares has got an important influence.

During the depression period, the company’s capital structure generally consists of debentures and loans. While in period of boons and inflation, the company’s capital should consist of share capital generally equity shares.

6. Period of financing- When company wants to raise finance for short period, it goes for loans from banks and other institutions; while for long period it goes for issue of shares and debentures.

7. Cost of financing- In a capital structure, the company has to look to the factor of cost when securities are raised.

It is seen that debentures at the time of profit earning of company prove to be a cheaper source of finance as compared to equity shares where equity shareholders demand an extra share in profits.

  1. Stability of sales- An established business which has a growing market and high sales turnover, the company is in position to meet fixed commitments. Interest on debentures has to be paid regardless of profit.

Therefore, when sales are high, thereby the profits are high and company is in better position to meet such fixed commitments like interest on debentures and dividends on preference shares. ECO-01 Solved Free Assignment

If company is having unstable sales, then the company is not in position to meet fixed obligations. So, equity capital proves to be safe in such cases.

  1. Sizes of a company- Small size business firms capital structure generally consists of loans from banks and retained profits.

While on the other hand, big companies having goodwill, stability and an established profit can easily go for issuance of shares and debentures as well as loans and borrowings from financial institutions. The bigger the size, the wider is total capitalization.

Q3. Discuss various arguments in support of and against advertising.


  1. Stimulate Production:

Advertising has positive impact on demand. Demand for products can be increased. Naturally, an increased demand stimulates production. More production means more prosperity.

  1. Stimulate National Income:

Advertising can contribute to national income by generating more consumptions, demand, and production.

  1. Employment Opportunities:

It can ease unemployment problems by generating more employment opportunities. ECO-01 Solved Free Assignment 2023

  1. Commercialization of Inventions:

Advertising is useful to commercialize or materialize new useful inventions. New inventions benefit the society.

  1. Public Acceptance:

Advertising prepares people to accept and use new and standard products.

  1. Informative:

Advertisement is a good source of information. It can increase awareness about different products and special offers related to products. Availability of adequate information can help customers select the most suitable products/brands.

Arguments Against Advertising :

  1. Advertising leads to higher prices: Many hold the view that advertising leads to higher prices of goods. Advertising involves considerable expenditure.

If that, expenditure is avoided, the cost of goods may be reduced and the consumer can get the product at a cheaper price.

If the money spent on advertising is used for improving the quality of the product, consumers may get a better product for the same price.

  1. Advertising leads to monopoly: It is well known that large business firms establish brand image through advertising. Consumers develop brand loyalty. Then it becomes difficult for new producers to enter the market.

In other words, advertising enables the existing large producers to block new competitors from entering the market. Thus, advertising acts as a barrier to entry and thereby leads to monopoly.

Moreover, increased advertising often results in increased sales. Due to this possibility, established firms spend more and more on advertising and increase their sales. ECO-01 Solved Free Assignment 2023

In this process they earn larger profits which enable them to spend even more on advertising.Thus, new entrants who do not have large financial resources find it difficult to compete with such established firms.

  1. Advertising results in inefficient resource allocation: Advertisements are intended not so much for the benefit of consumers. They are mainly directed to influence the consumer demand to fit whatever has been produced.

In other words, advertisements are aimed mainly to change the tastes of people so that they will buy whatever is manufactured.

This leads to distortion in consumption expenditure and increases the producers’ market power. Thus, advertising indirectly determines what people should consume.

In this process productive resources i.e., land, labour and capital, may not be used in the best interest of the society.

  1. Advertising causes undesirable social effects: There are certain other criticisms about the social effects and cultural impact of advertising.

a) Objectionable appeals like sex, horror, etc., are used in advertisements to attract the customers’ attention.

b) Consumers are exposed to hundreds and thousands of product appeals which they may not be able to buy and enjoy. This may create frustration and disappointment in many cases.

c) Advertising is used for promoting objectionable and harmful goods like cigarettes, liquors, etc. ECO-01 Solved Free Assignment 2023

d) It influences the values and life styles of people in society. Often it is used topromote products that satisfy the materialistic requirements of consumers Advertising is, thus, accused of promoting materialistic values in the society.

e) Advertisements occasionally portray certain things objectionable to some sections of the society creating tensions between different groups of people.

  1. Advertising may act against the freedom of press: Mass media earn huge income from advertisements. If the media are dependent on income from advertisements sponsored by a few large business firms, it may be difficult to disseminate information in public interest when it is unfavourable to those big business firms.

Big sponsoring firms can threaten the media owners by refusing their advertisements and dictating what the media have to do. Thus, the financial dependence of media on advertisements may act against the freedom of press.

  1. Advertising encourages unnecessary competition: There is a distinction between informative advertising and competitive advertising
ECO-01 Solved Free Assignment
ECO-01 Solved Free Assignment

Q4. Discuss the pervasiveness of risk in business. Describe briefly the management of business risks

Ans- The pervasiveness of risk in business This statement talks about the operation and functioning of the business among certain quality standards as well as in certain geographical areas of working.

Pervasiveness is the universal effect in the business world related to a certain method or procedure of working.

Business risk is the possibility a company will have lower than anticipated profits or experience a loss rather than taking a profit.

Business risk is influenced by numerous factors, including sales volume, per-unit price, input costs, competition, and the overall economic climate and government regulations. ECO-01 Solved Free Assignment

Risk pervasiveness brings in business –

• It brings the stagnant flow of working in the business.

• Sometimes, aid brought in the effect to prevent the loss can have the worst effects due to change in the environment of elements involved.

• This brings rigidness to the business working in the changing trends and methodologies of the firms.

Management risk :

Running a business comes with many types of risk. Some of these potential hazards can destroy a business, while others can cause serious damage that is costly and time-consuming to repair.

Despite the risks implicit in doing business, CEOs and risk management officers can anticipate and prepare, regardless of the size of their business.

Identifying Risks :

If and when a risk becomes a reality, a well-prepared business can minimize the impact on earnings, lost time and productivity, and negative impact on customers.

For startups and established businesses, the ability to identify risks is a key part of strategic business planning. Risks are identified through a number of ways.

Physical Risks :

Building risks are the most common type of physical risk. Think fires or explosions. To manage building risk, and the risk to employees, it is important that organizations do the following:

 Make sure all employees know the exact street address of the building to give to a 911 operator in case of emergency. ECO-01 Solved Free Assignment 2023

 Make sure all employees know the location of all exits.

 Install fire alarms and smoke detectors.Hazardous material risk is present where spills or accidents are
possible. The risk from hazardous materials can include:

 Acid

 Gas

 Toxic fumes

 Toxic dust or filings

 Poisonous liquids or waste

Location Risks :

Among the location hazards facing a business are nearby fires, storm damage, floods, hurricanes or tornados, earthquakes, and other natural disasters.

Employees should be familiar with the streets leading in and out of the neighborhood on all sides of the place of business.

Human Risks :

Alcohol and drug abuse are major risks to personnel in the workforce. Employees suffering from alcohol or drug abuse should be urged to seek treatment, counseling, and rehabilitation if necessary.

Some insurance policies may provide partial coverage for the cost of treatment.

Technology Risks : ECO-01 Solved Free Assignment

A power outage is perhaps the most common technology risk. Auxiliary gas-driven power generators are a reliable back-up system to provide electricity for lighting and other functions

Strategic Risks :

Strategy risks are not altogether undesirable. Financial institutions such as banks or credit unions take on strategy risk when lending to consumers, while pharmaceutical companies are exposed to strategy risk through research and development for a new drug

Q5. Comment briefly on the following statements:

a) An entrepreneur is a good judge of which products will sell.

Ans– Entrepreneurship is about helping people see the benefit of a new way of doing things; it’s about having an idea and having the passion and perseverance to make it come alive. ECO-01 Solved Free Assignment

What sets an entrepreneur apart from any other businessperson is that fact that she is willing to assume risk to make a profit. So with that in mind, let’s look at the six types of products or services and the pros and cons of each.

Business type 1: Apps (tools)

Business Type 2: Products.

Business type 3: Done for you (DFY)

Business type 4: Teach a skill.

Business Type 5: Consulting

Business Type 6: Coaching ECO-01 Solved Free Assignment

b) Stock exchange plays a very important role in the economic development of a country.

Ans- Role of stock exchange in economic development of a country

The Stock exchange has an important role in the world economy by serving as the anchor of the modern national economic system.

Stock exchanges enable companies to raise funds for expansion. They also give people a chance to make investments in corporations.

Facilitates liquidity: The most important role of the stock exchange is in ensuring a ready platform for the sale and purchase of securities.

This gives investors the confidence that the existing investments can be converted into cash, or in other words, stock exchange offers liquidity in terms of investment.

Well-functioning exchanges enable economic growth and development by facilitating the mo- bilisation of financial resources – by bringing together

c)There are various reasons of the government participating in business.

Ans. Explanation :

Reasons, why government participates in business enterprises, are:

(i) To provide essential services: The government prefers to handle the provision of essential services in order to reduce costs. …

(ii)To prevent monopoly: Government participates in business to prevent the exploitation of the people.

(iv)To prevent foreign control of the economy: The management of some corporations must be handled by the government to avoid them falling into the
hands of foreigners. ECO-01 Solved Free Assignment

(v) Strategic reasons: Some corporations e.g. airport, seaports, etc are strategically important to the economy, hence private hands cannot be allowed

(vi) Revenue generation: Government participates in order to generate revenue from them.

(vii) Employment opportunities: Government embarks on business in order to create employment opportunities

(viii)To monitor the industry: Government may like to co-operate with private bodies in such ventures like insurance and banking to enable government monitor the activities of such business.

d)The government company form of organization suffers from certain limitations.

Ans- Limited Liability: ECO-01 Solved Free Assignment

The liability of members in a company form of organisation is limited to the nominal value of the shares they have acquired. If a person has purchased a share of Rs. 100, his liability is limited to Rs. 100 only.

Limitations of a Government Company :

These companies face a lot of government interference and involvement of government officials, ministers, and politicians.

As these companies are financed by the government, so these companies evade all constitutional responsibilities of not answering to the parliament.

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