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IGNOU ECO 01 Solved Assignment 2022-23
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Important Note – IGNOU ECO 01 Solved Assignment 2022-2023 Download Free You may be aware that you need to submit your assignments before you can appear for the Term End Exams. Please remember to keep a copy of your completed assignment, just in case the one you submitted is lost in transit.
Submission Date :
- 31st March 2033 (if enrolled in the July 2033 Session)
- 30th Sept, 2033 (if enrolled in the January 2033 session).
All questions are compulsory.
1. What are the essential features of business? List different objectives of business.
The basic function of business is to optimize the outcome of economic activities. A business firm is an economic unit with its primary function to transform a set of inputs into an output that includes both goods as well as services. The entire process of creation, mobilization of resources, and utilization of surplus constitutes the business activity. Business is an occupation that is carried on with the acquired set of specialized skills and abilities and enables people to create valuable goods and services.Production of mobile phones, sale of eggs, production of computers, trading of shares, etc., are some examples of business. A person who is engaged in business is called a businessman or entrepreneur. Similarly, a firm formed for the purpose of carrying a business activity is called a business enterprise or a business firm. Any organization or economic system where goods and services are exchanged between one another for a fee or money is also referred to as a business.
Features of Business
Given below are the key characteristics of any business:
Exchange of Goods & Services:
Business deals with goods and services. The goods may be consumer goods such as sweets, bread, cloth, shoes, electronics, etc. They may be producer’s goods such as machinery, equipment, etc. which are used to further produce another set of goods for consumption. The business also deals with services such as accounting, transport, warehousing, banking, insurance, etc., which are intangible and invisible goods.
Production or Exchange:
You can call an economic activity a ‘business’ only when there is production or transfer or exchange or sale of goods or services for the value. If goods are produced for self-consumption or presentation as gifts, such activities shall not be treated as a business. In the business activity, there must be two parties i.e., a buyer and a seller. Such activity should concern with the transfer of goods or exchange of goods between a buyer and a seller. The goods may be bartered or exchanged for money.
Perpetuity in Dealings:
A single transaction shall not be treated as a business. An activity is treated as a business only when it is undertaken continually or at least recurrently. A business is believed to be a going concern. To understand this, assume that you sell your house for profit; it is not considered as business. Only when you start buying houses and selling them to others on a regular basis, this activity can be classified as a business.
Earning profit is the primary motive of business. This is not to undermine the importance of the social objectives or human element in the business activity. In fact, a business will flourish only when it is able to serve its customers to their satisfaction. Profits are essential to enable the business to survive, to grow, expand, and to get recognition. By reinvesting the profits the business increases its capital and contributes to the wealth of the owners.
Usage of Resources:
Any business needs one or many of the four productive factors or resources namely land, labor, capital, and enterprise to earn profit from the business. All the four resources are always in limited supply (scarcity) and the business must use them efficiently and effectively to produce goods and services. These resources allow for the creation of a product and/or service that customers buy for a value/price.
The element of Risk:
This is not true that all businesses make profits from day one, in every business; the possibility of incurring a loss is inherent in the nature of business. This possibility of incurring a loss is termed as risk. The element of risk exists due to a variety of factors that are outside the control of the business enterprise. There are two kinds of risks; one whose probability can be calculated and can be insured like losses due to fire, floods, theft, etc. and the other whose probability cannot be calculated and which cannot be insured against, e.g. changing technology, fall in demand, etc. Any business has to recognize this risk environment, survive within these risk constraints, and need to bear the risk if they happen.
All business activity is self-interested and competitive, and this competition may benefit people and society when it leads resources to be employed in their most profitable use. Business Organizations are economic in nature but they also have human and social aspects associated with them. Some of the main economic of any business enterprise are:
- Earning of satisfactory profits and a fair return on investment for stakeholders
- Creation of new customers and markets to sustain growth
- Making innovations and improvements in goods and services
- Providing employment opportunities
- Supply of quality goods and services at reasonable costs
- Avoidance of profiteering and unfair practices
- Fair deal to employees in terms of wages and incentives
- Providing better working conditions and environment to the employees
- Provide job satisfaction
2. What is capital structure? Describe factors that determine the capital structure.
The capital structure combines financial instruments like shares (equity and preference), debentures, long-term loans, bonds, and retained earnings. These instruments help the company generate funds for its operations with the help of individuals and institutions.
Factors affecting the Capital Structure
Several factors affect a company’s capital structure, and it also determines the composition of debt and equity portions within this structure. Some of these factors are as follows:
- Business Size – The size and scale of a business affect its ability to raise finance. Small-sized companies face difficulty in raising long-term borrowings. Creditors are hesitant to give them loans because of the scale of their business operations. Even if they do get these loans, they have to accept high-interest rates and stringent repayment conditions. It limits their ability to grow their business.
- Earnings – Firms with relatively stable revenues can afford a more significant amount of debt in their capital structure. Since debt repayment is periodical with fixed interest rates, businesses with higher income prospects can bear these fixed financial charges. On the other hand, companies that face higher fluctuations in their sales, like consumer goods, rely more on equity shares to finance their operations.
- Competition: If a company operates in a business environment with more competition, it should have more equity shares in its capital structure. Their earnings are prone to more fluctuation compared to businesses facing lesser competition.
- Stage of the life cycle: A business in the early stage of its life cycle is more susceptible to failure. In that case, they should use a more significant proportion of ordinary share capital to finance their operations. Debt comes with a fixed interest rate, and it is more suitable for companies with stable growth prospects.
- Creditworthiness: Any company that has a reputation for paying back its loans on time will be able to raise funds on less stringent terms and at lower interest rates. It allows them to pay back their loans on time. The opposite is true for firms that don’t have a good credit standing in the market.
- Risk Aptitude of the Management: The attitude of a company’s management also affects the proportion of debt and equity in the capital structure. Some managers prefer to follow a low-risk strategy and opt for equity shares to raise finances. Other managers are confident of the company’s ability to repay big loans, and they prefer to undertake a higher proportion of long term debt instruments.
- Control: A management that wants outside interference in its operations may not raise funds through equity shares. Equity shareholders have the right to appoint directors, and they also dilute the stake of owners in the company. Some companies may prefer debt instruments to raise funds. If the creditors get their instalments on loans and interest on time, they will not be able to interfere in the workings of the business. But if the company defaults on their credit, the creditors can remove the present management and take control of the business.
- State of Capital Market: The tendencies of investors and creditors determine whether a company uses more debt or equity to finance their operations. Sometimes a company wants to issue ordinary shares, but no one is willing to invest due to the high-risk nature of their business. In that case, the management has to raise funds from other sources like debt markets.
- Taxation Policy: The government’s monetary policies in terms of taxation on debt and equity instruments are also crucial. If a government levies more tax on gains from investing in the share market, investors may move out of equities. Similarly, if the interest rate on bonds and other long-term instruments is affected due to the government’s policy, it will also influence companies’ decisions.
- Cost of Capital: The cost of raising funds depends on the expected rate of return for the suppliers. This rate depends on the risk borne by investors. Ordinary shareholders face the maximum risk as they don’t get a fixed rate of dividend. They get paid after preference shareholders receive their dividends. The company has to pay interest on debentures under all circumstances. It attracts more investors to opt for debentures and bonds.
The proportion of debt and equity funds in a company is dependent on both internal and external forces. Businesses need to keep this in mind while deciding on the ratio of debt and equity instruments within their capital structure.
3 Discuss various arguments in support of and against advertising.
4. Discuss the pervasiveness of risk in business. Describe briefly the management of
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IGNOU ECO 01 Solved Assignment 2022-2023 We provide handwritten PDF and Hardcopy to our IGNOU and other university students. There are several types of handwritten assignment we provide all Over India. ECO 01 BUSINESS ORGANISATION Solved Assignment 2022-23 Download Free We are genuinely work in this field for so many time. You can get your assignment done – 8130208920
IGNOU ECO 01 Solved Assignment 2022-23
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5 Comment briefly on the following statements:
(a) An entrepreneur is a good judge of which products will sell.
(b) Stock exchange plays a very important role in the economic development of a country.
(c) There are various reasons of the government participating in business.
(d) The government company form of organization suffers from certain limitations.
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IGNOU ECO 01 Solved Assignment 2022-2023 Download Free Before attempting the assignment, please read the following instructions carefully.
- Read the detailed instructions about the assignment given in the Handbook and Programme Guide.
- Write your enrolment number, name, full address and date on the top right corner of the first page of your response sheet(s).
- Write the course title, assignment number and the name of the study centre you are attached to in the centre of the first page of your response sheet(s).
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- Write the relevant question number with each answer.
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IGNOU ECO 01 Solved Assignment 2022-23 You will find it useful to keep the following points in mind:
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