Tamil Nadu HSE Second Year Commerce cheat sheet

Management is defined as the process of planning, organising, directing and controlling resources to achieve stated goals efficiently and effectively.

Taylor's Scientific Management: principles are science not rule of thumb, harmony not discord, cooperation not individualism, development of each person, and maximum output in place of restricted output.

Taylor's techniques: time study, motion study, method study, fatigue study, differential piece-rate wage plan, and functional foremanship with eight specialists.

Fayol's 14 principles include division of work, authority and responsibility, discipline, unity of command, unity of direction, subordination of individual interest, remuneration, centralisation, scalar chain, order, equity, stability of tenure, initiative and esprit de corps.

Fayol's scalar chain may be short-circuited by a 'gang plank' that permits direct communication between equals in emergencies.

Unity of command means one boss per subordinate; unity of direction means one head and one plan per group of activities with the same objective.

Planning is the first function and is continuous, forward-looking and pervasive; it involves setting objectives, developing premises, identifying alternatives, evaluating and selecting, then implementing and following up.

Organisation structures: line (direct authority), functional (specialists), line-and-staff (staff advise, line command), and committee (group decision-making).

Delegation transfers authority and responsibility but accountability cannot be delegated; elements are authority, responsibility and accountability.

Maslow's hierarchy: physiological, safety, social, esteem and self-actualisation needs, satisfied in that order.

Herzberg's two-factor theory: hygiene factors (pay, conditions, policy) prevent dissatisfaction; motivators (achievement, recognition, growth) create satisfaction.

Leadership styles: autocratic (centralised decisions), democratic (participation), laissez-faire (free rein), plus charismatic and transactional/transformational variants.

Controlling steps: establish standards, measure actual performance, compare against standards, analyse deviations, take corrective action; control is forward-looking and ends where planning begins.

Business environment components: economic, social, technological, political, legal, demographic and natural; internal environment covers values, resources and culture.

SWOT analysis classifies internal strengths and weaknesses against external opportunities and threats; PESTLE covers political, economic, social, technological, legal and environmental factors.

Liberalisation (1991 New Economic Policy) reduced licensing, freed interest rates and opened sectors to private and foreign investment.

Globalisation integrates domestic economy with world economy through trade, capital flows, technology transfer and outsourcing.

Forms of business organisation: sole proprietorship, joint Hindu family (HUF), partnership, joint stock company and cooperative society.

Sole proprietorship: single owner, unlimited liability, no separate legal entity, minimal regulation, limited capital.

Partnership under the Indian Partnership Act 1932: 2 to 50 partners, agreement may be oral or written, liability joint and several; registration is optional but unregistered firms cannot sue third parties for claims above Rs 100.

HUF (Hindu Undivided Family) is governed by Hindu law, controlled by the karta, with coparceners having unlimited liability and no separate legal personality.

Company under the Companies Act 2013: separate legal entity, perpetual succession, limited liability, common seal optional, minimum 2 members for private and 7 for public company.

Private company limits: maximum 200 members, minimum paid-up capital requirement removed; public company needs minimum 7 members and 3 directors.

One Person Company (OPC) allows a single member with a nominee; cooperative society follows one member one vote and is regulated by state cooperative laws.

Choice of form depends on liability, capital needs, control, continuity, legal formalities and tax treatment.

Financial market is classified into money market (short-term, up to one year) and capital market (long-term, above one year).

Money market instruments: call money, treasury bills, commercial paper, certificates of deposit and commercial bills.

Capital market has the primary market (new issues: IPO, rights issue, private placement) and secondary market (stock exchanges for existing securities).

SEBI, established 1988 and given statutory powers by the SEBI Act 1992, regulates the securities market and protects investors.

Stock exchange functions: provides liquidity, price discovery, safety of transactions and a market for securities; NSE and BSE are the major Indian exchanges.

Trading settlement in India follows the T+1 rolling settlement cycle.

Depository system: NSDL and CDSL hold securities electronically; a demat account holds shares, a trading account executes orders.

Financial institutions: RBI (central bank, monetary authority), commercial banks, IFCI, IDBI, SIDBI, ICICI, NABARD and EXIM Bank as development financial institutions.

RBI functions: currency issue, banker to government, banker's bank, credit control and custodian of foreign exchange reserves.

Credit control instruments: quantitative (bank rate, repo rate, reverse repo, CRR, SLR, open market operations) and qualitative (margin requirements, moral suasion, direct action).

Commercial banks accept deposits (demand and time) and lend through cash credit, overdraft, loans and discounting of bills.

Mutual funds pool investor money into diversified portfolios; types include equity, debt, balanced and money market schemes.

Financial management deals with procurement of funds and their effective utilisation; objectives are profit maximisation and wealth maximisation, with wealth maximisation preferred for its long-term and risk-aware view.

Capital structure is the mix of debt and equity; the objective is to minimise cost of capital and maximise firm value.

Financial leverage measures the effect of debt on EPS: FL = % change in EPS / % change in EBIT; it is favourable when return on investment exceeds the interest rate on debt.

Trading on equity means using debt to magnify returns to equity shareholders; excessive debt raises financial risk.

Cost of debt = interest (1 - tax rate) / net proceeds; cost of equity may use the dividend price model: Ke = D1/P0 + g.

Working capital = current assets - current liabilities; gross working capital is total current assets, net working capital is the excess of current assets over current liabilities.

Working capital determinants: nature of business, scale of operations, business cycle, credit policy, operating cycle length, seasonal factors and growth prospects.

Operating cycle = raw material holding period + work-in-progress period + finished goods period + receivables collection period - payables deferral period.

Sources of long-term finance: equity shares, preference shares, debentures, term loans from banks and financial institutions, retained earnings and public deposits.

Equity shareholders are owners with voting rights and residual claim; preference shareholders get fixed dividend and priority but normally no voting rights.

Debentures are debt carrying fixed interest and are secured; they rank before equity for payment on winding up.

Short-term sources: trade credit, bank overdraft, cash credit, commercial paper and factoring of receivables.

Financial statement analysis tools: comparative statements, common-size statements, trend analysis, ratio analysis and cash flow analysis.

Liquidity ratios: current ratio = current assets / current liabilities (ideal about 2:1); quick ratio = liquid assets / current liabilities (ideal about 1:1), excluding stock and prepaid expenses.

Solvency ratios: debt-equity ratio = debt / equity; proprietary ratio = shareholders' funds / total assets; interest coverage = EBIT / interest.

Profitability ratios: gross profit ratio = gross profit / net sales x 100; net profit ratio = net profit / net sales x 100; operating ratio = operating cost / net sales x 100.

Return on investment = net profit before interest and tax / capital employed x 100; return on equity = net profit after tax / shareholders' funds x 100.

Activity ratios: stock turnover = cost of goods sold / average stock; debtors turnover = credit sales / average debtors; creditors turnover = credit purchases / average creditors.

Collection period = 365 / debtors turnover; credit period = 365 / creditors turnover.

Earnings per share = net profit after preference dividend / number of equity shares; dividend payout ratio = dividend per share / earnings per share.

Ratios are meaningful only when compared with industry averages, prior years or budgets; a ratio is a relative figure, not an absolute measure of performance.

Window dressing and differing accounting policies distort ratio comparison; price-level changes also limit comparability.

Accounting equation: assets = liabilities + capital; every transaction affects at least two accounts and the equation always balances.

Golden rules: debit the receiver and credit the giver (personal accounts); debit what comes in and credit what goes out (real accounts); debit expenses and losses, credit incomes and gains (nominal accounts).

Journal entries record date, particulars, L.F., debit amount and credit amount with a narration; compound entries involve more than two accounts.

Ledger is the principal book containing all accounts; posting transfers journal entries to the relevant account heads.

Trial balance lists debit and credit balances on a given date; it tests arithmetical accuracy only and does not detect errors of principle or complete omission.

Final accounts: trading account (gross profit), profit and loss account (net profit) and balance sheet (position on a date).

Closing stock appears on the credit of the trading account and on the assets side of the balance sheet; outstanding expenses and prepaid expenses are adjusted in the P&L and balance sheet.

Partnership profit sharing ratio is fixed by agreement; in the absence of a deed profits are shared equally, no interest on capital or drawings is allowed, and interest on loan is 6% per annum.

Partner's current account records drawings, interest on drawings, interest on capital, salary and share of profit; the fixed capital method keeps capital balances undisturbed.

Goodwill on admission is credited to sacrificing partners' capital accounts in the old ratio; revaluation profit or loss is shared by old partners in the old ratio.

Company accounts: share capital is shown as authorised, issued, subscribed and called-up and paid-up; calls in arrears and calls in advance are shown separately.

Securities premium is credited to a separate Securities Premium Account and can be used only for specified purposes such as issuing bonus shares or writing off preliminary expenses.

Depreciation spreads the cost of a fixed asset over its useful life; straight-line method charges an equal amount, written-down value method charges a fixed percentage on the reducing balance.

Cost accounting classifies, records and allocates costs to determine product cost, control costs and aid pricing and decision-making.

Cost sheet format: prime cost = direct material + direct labour + direct expenses; works cost = prime cost + factory overheads + opening WIP - closing WIP.

Cost of production = works cost + administration overheads; cost of sales = cost of production + selling and distribution overheads + opening finished goods - closing finished goods.

Profit = sales - cost of sales; sales = cost of sales + profit.

Classification of costs: by nature (direct/indirect), by behaviour (fixed, variable, semi-variable), by function (production, administration, selling) and by variability.

Fixed costs remain constant in total within a relevant range; variable costs vary in total with output but stay constant per unit.

Job costing accumulates costs for a specific job or customer order; batch costing applies where identical units are produced in batches.

Contract costing is used for large, long-term construction work; retention money is withheld until satisfactory completion.

Process costing averages costs over continuous production; normal loss is absorbed by good units, abnormal loss is charged to the P&L account.

Standard costing compares standard cost with actual cost; variance = standard - actual, and adverse variance occurs when actual cost exceeds standard.

Marginal costing separates fixed and variable costs; contribution = sales - variable cost; break-even point in units = fixed cost / contribution per unit.

Break-even point in value = fixed cost / P/V ratio; P/V ratio = contribution / sales x 100; margin of safety = actual sales - break-even sales.

Entrepreneur is a person who organises factors of production, bears risk and innovates; entrepreneurship is the process of creating an enterprise.

Entrepreneurial functions: idea generation, feasibility study, arranging finance, organising resources, marketing and bearing uncertainty.

Characteristics commonly listed: initiative, risk-bearing, innovation, self-confidence, leadership and hard work; motives include profit, independence and social contribution.

Types of entrepreneurs: innovative, imitative, Fabian and drone (Clarence Danhof); also business, trading, industrial, agricultural and service entrepreneurs.

Small-scale industry classification in India uses investment in plant and machinery or turnover criteria and is supported by MSME registration (Udyam).

Small business advantages: flexibility, personal contact with customers, low overheads, quick decisions and local employment generation.

Small business problems: inadequate finance, poor marketing, obsolete technology, raw material scarcity, competition and managerial inexperience.

Institutional support in Tamil Nadu and India: SIDBI, NSIC, SIPCOT, TIIC, DIC (District Industries Centre), KVIC and MSME Development Institutes.

Business plan components: executive summary, product description, market analysis, marketing strategy, operations plan, management team and financial projections.

Startup India, Standup India and MUDRA loans are government schemes providing finance and facilitation to new and small enterprises.

Project report appraisal covers technical, economic, financial, managerial and market feasibility before sanction of finance.

Indian Contract Act 1872: a contract is an agreement enforceable by law; essentials are offer, acceptance, lawful consideration, capacity, free consent, lawful object and intention to create legal relations.

Offer and acceptance must create a binding agreement; acceptance must be absolute, unqualified and communicated to the offeror.

Consideration means something in return; it may be past, present or future and must be real, lawful and not illusory.

Persons incompetent to contract: minors, persons of unsound mind and persons disqualified by law; a minor's agreement is void ab initio.

Free consent is absent when caused by coercion, undue influence, fraud, misrepresentation or mistake; consent so caused makes the contract voidable.

A contract without consideration is generally void, but exceptions include natural love and affection between near relatives, past voluntary services and agency.

Discharge of contract: performance, agreement, impossibility, lapse of time, operation of law and breach.

Sale of Goods Act 1930: essentials of a contract of sale are two parties, goods, transfer of property and price; conditions are essential to the main purpose, warranties are collateral.

Consumer Protection Act 2019 covers goods and services, defines unfair trade practice and restrictive trade practice, and provides District, State and National Commissions.

Business ethics deals with right and wrong conduct in business; elements include honesty, fairness, transparency and accountability.

Corporate social responsibility is the obligation of business towards society, workers, consumers and the environment beyond legal requirements.

Marketing is the process of identifying customer needs and satisfying them profitably through the marketing mix of product, price, place and promotion (4 Ps); services add people, process and physical evidence.

Marketing versus selling: marketing starts with the customer and is long-term and integrated; selling starts with the product and focuses on volume.

Product life cycle stages: introduction, growth, maturity and decline, each requiring different pricing and promotion strategies.

Pricing methods include cost-plus, penetration, skimming, going-rate and marginal-cost pricing.

Channels of distribution: zero level (direct), one level (retailer), two level (wholesaler-retailer) and three level (agent-wholesaler-retailer).

Promotion mix: advertising, personal selling, sales promotion, publicity and public relations.

Salesmanship is the art of persuading a prospect to buy; steps in the selling process are prospecting, pre-approach, approach, presentation and demonstration, handling objections, closing the sale and follow-up.

Qualities of a good salesman: knowledge of product and customer, courtesy, communication skill, honesty, persistence and empathy.

Advertising is paid, non-personal communication by an identified sponsor; personal selling is face-to-face and allows two-way feedback.

Consumer rights under the Consumer Protection Act 2019 include safety, information, choice, being heard, redressal and consumer education.

Consumer responsibilities: check quality and price, insist on cash memo, read labels, avoid deceptive offers and complain against defective goods.

Redressal machinery: District Commission up to Rs 50 lakh, State Commission above Rs 50 lakh up to Rs 2 crore, and National Commission above Rs 2 crore (pecuniary limits as notified under the 2019 Act).

Marketing is the process of identifying customer needs and satisfying them profitably through the marketing mix of product, price, place and promotion (4 Ps); services add people, process and physical evidence.

Marketing versus selling: marketing starts with the customer and is long-term and integrated; selling starts with the product and focuses on volume.

Product life cycle stages: introduction, growth, maturity and decline, each requiring different pricing and promotion strategies.

Pricing methods include cost-plus, penetration, skimming, going-rate and marginal-cost pricing.

Channels of distribution: zero level (direct), one level (retailer), two level (wholesaler-retailer) and three level (agent-wholesaler-retailer).

Promotion mix: advertising, personal selling, sales promotion, publicity and public relations.

Salesmanship is the art of persuading a prospect to buy; steps in the selling process are prospecting, pre-approach, approach, presentation and demonstration, handling objections, closing the sale and follow-up.

Qualities of a good salesman: knowledge of product and customer, courtesy, communication skill, honesty, persistence and empathy.

Advertising is paid, non-personal communication by an identified sponsor; personal selling is face-to-face and allows two-way feedback.

Consumer rights under the Consumer Protection Act 2019 include safety, information, choice, being heard, redressal and consumer education.

Consumer responsibilities: check quality and price, insist on cash memo, read labels, avoid deceptive offers and complain against defective goods.

Redressal machinery: District Commission up to Rs 50 lakh, State Commission above Rs 50 lakh up to Rs 2 crore, and National Commission above Rs 2 crore (pecuniary limits as notified under the 2019 Act).