i UNIT - 1 SYLLABUS OSMANIA UNIVERSITY (HYDERABAD) INDUSTRIAL ORGANIZATION Types of Various Business Organizations, Organization Structures and their Relative Merits and Demerits, Functions of Management. Plant Location and Layouts : Factors Affecting the Location of Plant and Layout, Types of Layouts and their Merits and Demerits. UNIT - 2 WORK STUDY Definitions, Objectives of Method Study and Time Study, Steps in Conducting Method Study, Symbols and Charts used in Method Study, Principles of Motion Economy, Calculation of Standard Time by Time Study and Work Sampling, Performance Rating Factor, Types of Ratings, Jobs Evaluation and Performance Appraisal, Wages, Incentives, Bonus, Wage Payment Plans. UNIT - 3 INSPECTION AND QUALITY CONTROL Types and Objectives of Inspection S.Q.C its Principles, Quality Control by Chart and Sampling Plans, Quality Circles, Introduction to ISO. UNIT - 4 OPTIMIZATION Introduction to linear programming and its graphical solutions, Assignment Problems. Project Management : Introduction to CPM and PERT, Determination of Critical Path.
ii Material Management : Classification and Materials, Materials Planning, Duties of Purchase Manager, Determination of Economic Ordering Quantities, Types of Materials Purchase. UNIT - 5 COST ACCOUNTING Elements of Cost, Various Costs, Types of Overheads, Breakeven Analysis and its Applications, Depreciation, Methods of Calculating Depreciation Fund, Nature of Financial Management, Time value of Money, Techniques of Capital Budgeting and Methods, Cost of Capital, Financial Leverage.
iii CONTENTS UNIT - 1 [INDUSTRIAL ORGANIZATION]... 1.1-1.68 1.1 INDUSTRIAL ORGANIZATION (IO)... 1.2 1.1.1 Meaning and Definition of IO... 1.2 1.1.2 Characteristics / Features of IO... 1.2 1.1.3 Types of IO... 1.2 1.2 BUSINESS ORGANIZATION / UNIT / UNDERTAKING... 1.2 1.2.1 Meaning and Definition of Business Organization... 1.2 1.2.2 Characteristics / Features of Business Organization... 1.3 1.2.3 Types / Forms of Various Business Organization... 1.3 1.2.4 Sole Proprietorship / Trader... 1.3 1.2.4.1 Meaning and Definition of Sole Proprietorship... 1.3 1.2.4.2 Features / Characteristics of Sole Proprietorship... 1.4 1.2.4.3 Merits / Advantages of Sole Proprietorship... 1.4 1.2.4.4 Demerits / Disadvantages of Sole Proprietorship... 1.5 1.2.5 Joint Hindu Family Business... 1.5 1.2.5.1 Meaning and Definition of Joint Hindu Family Business... 1.5 1.2.5.2 Merits / Advantages of Joint Hindue Family Business... 1.5 1.2.5.3 Demerits / Disadvantages of Joint Hindu Family Business... 1.6 1.2.6 Partnership... 1.6 1.2.6.1 Meaning and Definition of Partnership... 1.6 1.2.6.2 Features / Characteristics of Partnership... 1.6 1.2.6.3 Kinds / Types of Partners... 1.7 1.2.6.4 Registration of the Firm... 1.8
iv 1.2.6.5 Partnership Deed... 1.8 1.2.6.6 Rights, Obligations and Liabilities of Partners... 1.9 1.2.6.7 Merits / Advantages of Partnership... 1.10 1.2.6.8 Demerits/ Disadvantages of Partnership... 1.10 1.2.6.9 Difference between Sole Proprietorship and Partnership... 1.11 1.2.7 Joint Stock Company... 1.11 1.2.7.1 Meaning and Definition of Joint Stock... 1.11 1.2.7.2 Features / Characteristics of Joint Stock Company... 1.12 1.2.7.3 Kinds / Types of Companies... 1.12 1.2.7.3.1 Distinguish between Public and Private Limited Company... 1.14 1.2.7.4 Merits / Advantages of Joint Stock Company... 1.14 1.2.7.5 Demerits / Disadvantages of Joint Stock Company... 1.15 1.2.7.6 Difference between Partnership and Joint Stock Company... 1.15 1.2.8 Cooperative Societies... 1.16 1.2.8.1 Meaning and Definition of Cooperative Society... 1.16 1.2.8.2 Features / Characteristics of Cooperative Society...... 1.16 1.2.8.3 Merits / Advantages of Cooperative Society... 1.16 1.2.8.4 Demerits / Disadvantages of Cooperative Society... 1.17 1.2.9 Public / State Enterprises... 1.17 1.2.9.1 Meaning and Definition of Public Enterprise... 1.17 1.2.9.2 Features / Characteristics of Public Enterprises... 1.17 1.2.9.3 Needs / Objectives of Public Enterprises... 1.18 1.2.9.4 Achievements of Public Enterprises... 1.18
v 1.2.9.5 Forms / Types of Public Enterprises... 1.18 1.2.9.5.1 Departmental Undertaking... 1.19 1.2.9.5.1.1 Meaning of Departmental Undertaking... 1.19 1.2.9.5.1.2 Features of a Departmental Undertaking... 1.19 1.2.9.5.1.3 Merits / Advantages of a Departmental Undertaking... 1.19 1.2.9.5.1.4 Demerits / Disadvantages of a Departmental Undertaking... 1.20 1.2.9.5.2 Public Corporation / Enterprises... 1.20 1.2.9.5.2.1 Meaning and Definition of Public Corporation... 1.20 1.2.9.5.2.2 Features / Characteristics of a Public Corporation... 1.21 1.2.9.5.2.3 Merits / Advantages of a Public Corporation... 1.21 1.2.9.5.2.4 Demerits / Disadvantages of Public Corporation...... 1.21 1.2.9.5.3 Government Company... 1.22 1.2.9.5.3.1 Definition of Government Company... 1.22 1.2.9.5.3.2 Features of a Government Company... 1.22 1.2.9.5.3.3 Merits / Advantages of Government Company... 1.22 1.2.9.5.3.4 Demerits / Disadvantages of a Government Company... 1.23 1.2.9.5.4 Difference between Department Undertaking, Public Corporation and Government Company... 1.23 1.2.9.6 Merits / Advantages of Public Enterprises... 1.24 1.2.9.7 Demerits / Disadvantages of Public Enterprises... 1.24 1.3 ORGANIZATION TION... 1.25 1.3.1 Meaning and Definition of Organization... 1.25 1.3.2 Nature / Characteristics / Features of Organization... 1.25 1.3.3 Process / Steps Involved in Organizing... 1.26
vi 1.3.4 Types / Forms of Organization... 1.27 1.3.4.1 Formal Organization... 1.27 1.3.4.2 Informal Organization... 1.28 1.3.4.3 Distinguish between Formal and Informal Organization... 1.29 1.3.5 Advantages / Significance of Organization... 1.30 1.3.6 Organization Structure / Chart... 1.30 1.3.6.1 Meaning of Organizational Structure... 1.30 1.3.6.2 Needs of Organizational Structure... 1.30 1.3.6.3 Importance of Organizational Structure... 1.31 1.3.6.4 Role of Organization Structure... 1.31 1.4 TYPES OF ORGANIZATION STRUCTURE AND THEIR RELATIVE MERITS AND DEMERITS... 1.32 1.4.1 Flat / Line Organization... 1.32 1.4.1.1 Merits / Advantages of Line Organization... 1.33 1.4.1.2 Demerits / Disadvantages of Line Organization... 1.33 1.4.2 Line and Staff Organization... 1.34 1.4.2.1 Meaning and Definition of Staff Organization... 1.34 1.4.2.2 Functions of Staff Organization... 1.34 1.4.2.3 Line and Staff Concept... 1.34 1.4.2.4 Merits / Advantages of Line and Staff Organization... 1.35 1.4.2.5 Demerits / Disadvantages of Line and Staff Organization... 1.35 1.4.3 Functional Organization... 1.36 1.4.3.1 Merits / Advantages of Functional Organization... 1.37 1.4.3.2 Demerits / Disadvantages of Functional Organization... 1.38 1.4.3.3 Difference between Line and Functional Organization... 1.38
vii 1.4.4 Committee Organization... 1.39 1.4.4.1 Types of Committee... 1.39 1.4.4.2 Merits / Advantages of Committee Organization... 1.40 1.4.4.3 Demerits / Disadvantages of Committee Organization... 1.40 1.4.5 Matrix Organization... 1.41 1.4.5.1 Merits / Advantages of Matrix Organization... 1.42 1.4.5.2 Demerits / Disadvantages of Matrix Organization... 1.42 1.5 MANAGEMENT... 1.42 1.5.1 Meaning and Definition of Management... 1.42 1.5.2 Nature / Feature / Characteristics of Management... 1.43 1.5.3 Management : Science or Art... 1.43 1.5.4 Importance / Significance / Advantages of Management... 1.44 1.5.5 Functions of Management... 1.45 1.5.6 Challenges / Limitations / Disadvantages of Management... 1.48 1.5.7 Henry Fayols Principles of Management... 1.48 1.6 PLANT LOCATION / FACILITY LOCATION... 1.49 1.6.1 Meaning and Definition of Plant Location... 1.49 1.6.2 Needs / Reasons for Plant Location... 1.49 1.6.3 Steps in Facilitating Location Selection / Location Decision Process... 1.50 1.6.4 Factors Affecting Plant Location... 1.50 1.7 PLANT LAYOUT... 1.51 1.7.1 Meaning and Definition of Plant Layout... 1.51 1.7.2 Objectives of Good Layout... 1.51 1.7.3 Principles of Plant Layout... 1.52 1.7.4 Steps / Procedure for Plant Layout... 1.52 1.7.5 Symptoms of Poor / Bad Layout... 1.53 1.7.6 Importance / Merits / Advantages of Plant Layout... 1.53 1.7.7 Factors Affecting Plant Layout... 1.53
viii 1.7.8 Types / Methods / Techniques of Plant Layout ayout... 1.54 1.7.8.1 Product / Line Based Layout... 1.54 1.7.8.1.1 Merits / Advantages of Product Layout... 1.55 1.7.8.1.2 Demerits / Disadvantages of Product Layout... 1.56 1.7.8.2 Process / Functional Based Layout... 1.56 1.7.8.2.1 Merits / Advantages of Process Layout... 1.57 1.7.8.2.2 Demerits / Disadvantages of Process Layout... 1.57 1.7.8.2.3 Difference between Product and Process Layout... 1.58 1.7.8.3 Fixed / Static Layout... 1.58 1.7.8.3.1 Merits / Advantages of Fixed Layout... 1.59 1.7.8.3.2 Demerits / Disadvantages of Fixed Layout... 1.59 1.7.8.4 Combined / Hybrid Layout... 1.59 1.7.8.4.1 Merits / Advantages of Combined Layout... 1.60 1.7.8.4.2 Demerits / Disadvantages of Combined Layout... 1.60 Short Questions and Answers... 1.61-1.68 UNIT - 2 [WORK STUDY]... 2.1-2.50 2.1 WORK / TIME STUDY... 2.2 2.1.1 Meaning and Definition of Work ork Study... 2.2 2.1.2 Nature / Characteristics of Work ork Study... 2.2 2.1.3 Objectives / Aims of Work ork Study... 2.2 2.1.4 Basic Procedure of Work ork Study... 2.3 2.1.5 Benefits / Advantages of Work ork Study... 2.3 2.1.6 Factors Contributing Work Study... 2.3 2.1.7 Techniques / Methods of Work Study... 2.4 2.2 METHOD STUDY / WORK SIMPLIFICATION TION... 2.4 2.2.1 Meaning and Definition of Method Study... 2.4 2.2.2 Objectives / Aim of Method Study... 2.4 2.2.3 Applications of Method Study... 2.5
ix 2.2.4 Steps in Conducting Method Study... 2.5 2.2.5 Symbols and Charts Used in Method Study... 2.8 2.3 TIME STUDY / STOP WATCH / WORK MEASUREMENT... 2.10 2.3.1 Meaning and Definition of Time Study... 2.10 2.3.2 Objectives / Aims of Time Study... 2.10 2.3.3 Steps / Procedure Conducted in Time Study... 2.11 2.3.4 Advantages / Importance of Time Study... 2.11 2.3.5 Disadvantages / Limitations of Time Study... 2.11 2.3.6 Difference between Work Simplification and Work Measurement... 2.12 2.4 PRINCIPLE OF MOTION ECONOMY... 2.12 2.5 WORK / ACTIVITY SAMPLING... 2.15 2.5.1 Meaning and Definition of Work ork Sampling... 2.15 2.5.2 Calculation of Standard Time by Time Study and Work ork Sampling... 2.15 2.5.3 Advantages / Uses of Work ork Sampling... 2.16 2.5.4 Disadvantages / Limitations of Work ork Sampling... 2.16 2.5.5 Performance Rating... 2.17 2.5.5.1 Types of Ratings... 2.17 2.5.5.2 Performance Rating Factors actors... 2.20 2.5.6 Illustrated Problems... 2.21 2.6 JOB EVAL ALUATION... 2.25 2.6.1 Meaning and Definition of Job Evaluation... 2.25 2.6.2 Objectives / Aim of Job Evaluation... 2.25 2.6.3 Methods / Techniques of Job Evaluation... 2.26 2.6.4 Steps / Process of Job Evaluation... 2.27 2.6.5 Advantages / Benefits of Job Evaluation... 2.27 2.6.6 Disadvantages / Limitations of Job Evaluation... 2.28 2.6.7 Difference between Job Evaluation and Merit Rating... 2.28
x 2.7 PERFORMANCE APPRAISAL... 2.29 2.7.1 Meaning and Definition of Performance Appraisal... 2.29 2.7.2 Nature / Characteristics of Performance Appraisal... 2.29 2.7.3 Objectives / Purpose of Performance Appraisal... 2.29 2.7.4 Process / Steps in Performance Appraisal... 2.30 2.7.5 Methods / Techniques of Performance Appraisal... 2.31 2.7.6 Advantages / Benefits of Performance Appraisal... 2.33 2.7.7 Disadvantages / Problems of Performance Appraisal... 2.34 2.8 WAGES... 2.34 2.8.1 Meaning and Definition of Wages... 2.34 2.8.2 Characteristics / Features of Wages... 2.35 2.8.3 Objectives / Aims of Wage... 2.35 2.8.4 Types of Wages / Wage Structure... 2.35 2.8.5 Methods / Determination of Payments of Wages ages... 2.36 2.9 INCENTIVES... 2.38 2.9.1 Meaning and Definition of Incentives... 2.38 2.9.2 Methods / Types of Incentive Payment ayment... 2.38 2.10 BONUS... 2.41 2.10.1 Meaning of Bonus... 2.41 2.10.2 Types of Bonus... 2.41 2.11 WAGE GE PAYMENT PLANS... 2.44 Short Questions and Answers... 2.45-2.50 UNIT - 3 [INSPECTION AND QUALITY CONTROL]... 3.1-3.38 3.1 INSPECTION... 3.2 3.1.1 Meaning and Definition of Inspection... 3.2 3.1.2 Objectives of Inspection... 3.2 3.1.3 Functions of Inspection... 3.2
xi 3.1.4 Steps in Inspections... 3.2 3.1.5 Inspection Methods / Types / Tools ools... 3.3 3.2 QUALITY CONTROL... 3.4 3.2.1 Meaning and Definition of Quality Control... 3.4 3.2.2 Objectives of Quality Control... 3.5 3.3 STATISTICAL TISTICAL QUALITY CONTROL (SQC)... 3.5 3.3.1 Introduction to SQC... 3.5 3.3.2 Meaning and Definition of SQC... 3.5 3.3.3 Types of SQC... 3.6 3.3.4 Advantages of SQC... 3.6 3.3.5 Disadvantages of SQC... 3.6 3.3.6 Principles for an Effective SQC... 3.6 3.4 CONTROL CHART... 3.7 3.4.1 Statistical Basis of Control Charts... 3.7 3.4.2 Quality Control Chart and Sampling Plan / Types of Control Chart... 3.8 3.4.3 Control Chart for Variables... 3.9 3.4.3.1 X - Chart... 3.9 3.4.3.2 R Chart... 3.10 3.4.3.3 σ Chart... 3.11 3.4.3.4 Illustrated Problems on Control Charts of Variable ariable... 3.11 3.4.4 Control Chart for Attributes... 3.17 3.4.4.1 p Chart (Control Chart for Fraction Defective)... 3.17 3.4.4.2 np Chart (Control Chart for Number of Defective)... 3.18 3.4.4.3 c-chart (Control Chart for Number of Defective Per Unit)... 3.19 3.4.4.4 Illustrated Problems on Control Chart of Attributes... 3.19
xii 3.4.5 Acceptance Sampling (Sampling Plan)... 3.25 3.4.5.1 Meaning of Acceptance Sampling... 3.25 3.4.5.2 Situations used by Acceptance Sampling... 3.25 3.4.5.3 Objectives / Purpose of Acceptance Sampling... 3.25 3.4.5.4 Operating Characteristics (OC) Curve... 3.25 3.4.5.4.1 Parameters of an OC Curve... 3.27 3.4.5.5 Types of Acceptance Sampling Plan... 3.27 3.4.5.6 Advantages of Acceptance Sampling... 3.28 3.4.5.7 Disadvantages of Acceptance Sampling... 3.28 3.5 QUALITY CIRCLE... 3.29 3.5.1 Meaning and Definition of Quality Circle... 3.29 3.5.2 Characteristics / Features of Quality Circle... 3.29 3.5.3 Objectives / Aims of Quality Circle... 3.29 3.5.4 Steps / Process in Quality Circle... 3.30 3.5.5 Advantages / Benefits of Quality Circle... 3.30 3.5.6 Disadvantages / Limitations of Quality Circle... 3.30 3.6 INTERNATIONAL TIONAL ORGANIZATION FOR STAND ANDARDIZA ARDIZATION (ISO)... 3.31 3.6.1 Introduction to ISO... 3.31 3.6.2 ISO 9000 Series Standards... 3.31 3.6.3 Different Areas of ISO Series... 3.31 3.6.4 Procedure for ISO Registration... 3.32 3.6.5 Advantages of ISO Standard... 3.32 3.6.6 Disadvantages of ISO Standard... 3.33 Short Questions and Answers... 3.34-3.38
xiii UNIT - 4 [OPTIMIZATION]... 4.1-4.86 4.1 LINEAR PROGRAMMING... 4.2 4.1.1 Introduction to Linear Programming... 4.2 4.1.2 Different Terms Involved in Linear Programming... 4.2 4.1.3 Assumptions of Linear Programming... 4.3 4.1.4 Application Areas of Linear Programming... 4.3 4.1.5 Advantages of Linear Programming... 4.3 4.1.6 Disadvantages of Linear Programming... 4.4 4.1.7 Mathematical Model of LPP... 4.4 4.1.8 Algorithm for Formulation of LPP... 4.5 4.1.9 Illustrated Problems on LPP... 4.5 4.2 GRAPHICAL SOLUTIONS / METHODS... 4.8 4.2.1 Basic Terms Used in Graphical Method... 4.8 4.2.2 Algorithm for Graphical Method of LPP... 4.10 4.2.3 Illustrated Problems on Graphical Solutions... 4.11 4.3 THE ASSIGNMENT PROBLEM MODEL... 4.17 4.3.1 Meaning of Assignment Problem... 4.17 4.3.2 Formulation of an Assignment Problem... 4.17 4.3.3 Assignment Model (Comparison with Transportation Model)... 4.18 4.3.4 Hungarian Method... 4.20 4.3.4.1 Illustrated Problems on Hungarian Method... 4.21 4.3.5 Special Cases in Assignment Problem... 4.26 4.3.5.1 Illustrated Problems on Assignment Problem... 4.27 4.4 PROJECT MANAGEMENT... 4.39 4.4.1 Network Analysis... 4.39 4.4.2 Basic Terms in Network Analysis... 4.39
xiv 4.4.3 Developing / Drawing a Network... 4.40 4.4.4 Errors in Network Diagram... 4.41 4.4.5 Network Logic... 4.41 4.5 CRITICAL PATH METHOD (CPM)... 4.42 4.5.1 Introduction to CPM... 4.42 4.5.2 Objectives of CPM... 4.43 4.5.3 Situation where CPM can be Effective... 4.43 4.5.4 Notations for Calculating Various Times or Events and Activities... 4.43 4.5.5 Float and its Types ypes... 4.44 4.5.6 Determination of Critical Path ath... 4.45 4.5.7 Illustrated Problems on CPM... 4.45 4.6 PROGRAMME EVAL ALUATION AND REVIEW TECHNIQUE (PERT) T)... 4.52 4.6.1 Introduction to PERT... 4.52 4.6.2 Time Estimation of PERT... 4.52 4.6.3 Algorithm / Procedure / Steps in PERT... 4.53 4.6.4 Probability of Completing the Project within given Time... 4.53 4.6.5 Difference between PERT and CPM... 4.54 4.6.6 Illustrated Problems on PERT... 4.55 4.7 MATERIAL MANAGEMENT... 4.66 4.7.1 Meaning and Definition of Materials... 4.66 4.7.1.1 Classifications / Types of Materials... 4.66 4.7.2 Meaning and Definition of Materials Management... 4.66 4.7.3 Needs / Objectives of Materials Management... 4.67 4.7.4 Functions of Materials Management... 4.67 4.7.5 Importance / Advantages of Materials Management... 4.67 4.8 MATERIALS PLANNING... 4.68 4.8.1 Meaning of Materials Planning... 4.68 4.8.2 Objectives of Materials Planning... 4.68
xv 4.8.3 Process / Flowchart of Materials Planning... 4.68 4.8.4 Methods / Techniques of Materials Planning... 4.69 4.8.5 Post Consumption Analysis... 4.69 4.8.5.1 Illustrated Problem on Post Consumption Analysis... 4.70 4.8.6 Materials Requirements Planing... 4.71 4.8.6.1 Illustrated Problems on MRP... 4.72 4.9 PURCHASING... 4.74 4.9.1 Meaning and Definition of Purchasing... 4.74 4.9.2 Objectives of Purchasing... 4.74 4.9.3 Types of Materials Purchasing urchasing... 4.74 4.9.3.1 Centralized Purchasing... 4.74 4.9.3.2 Decentralized / Localized Purchasing... 4.75 4.9.3.3 Difference between Centralized and Decentralized Purchasing... 4.76 4.9.4 Duties / Functions of Purchase Manager... 4.76 4.10 ECONOMIC UNDER QUANTITY (EOQ)... 4.76 4.10.1 Assumptions of EOQ... 4.77 4.10.2 Determination of Economic Order Quantities (EOQ)... 4.78 4.10.3 Extensions to EOQ Model... 4.78 4.10.4 Illustrated Problems on EOQ... 4.78 Short Questions and Answers... 4.83-4.86 UNIT - 5 [COST ACCOUNTING]... 5.1-5.146 5.1 COST ACCOUNTING... 5.2 5.1.1 Meaning and Definition of Cost Accounting... 5.2 5.1.2 Objectives / Necessities of Cost Accounting... 5.2 5.1.3 Advantages / Importance of Cost Accounting... 5.2 5.1.4 Disadvantages of Cost Accounting... 5.4
xvi 5.2 COST... 5.4 5.2.1 Meaning and Definition of Cost... 5.4 5.2.2 Element of Cost... 5.4 5.2.3 Various Cost / Types / Classification of Cost... 5.5 5.3 OVERHEAD... 5.8 5.3.1 Meaning and Definition of Overhead... 5.8 5.3.2 Types / Classification of Overhead... 5.8 5.3.2.1 Function Classification... 5.9 5.3.2.2 Behavioural Classification... 5.11 5.3.2.3 Elementwise Classification... 5.12 5.3.3 Allocation of Overhead... 5.12 5.3.3.1 Illustrated Problem on Allocation of Overhead... 5.13 5.3.4 Apportionment of Overhead (Primary Distribution)... 5.13 5.3.4.1 Illustrated Problems on Apportionment... 5.14 5.3.5 Reapportionment of Service Department (Secondary Distribution)... 5.17 5.3.5.1 Illustrated Problem on Reapportionment... 5.18 5.3.6 Overhead Absorption... 5.24 5.3.6.1 Illustrated Problems on Overhead Absorption... 5.26 5.4 BREAKEVEN ANALYSIS (BEA)... 5.32 5.4.1 Meaning and Definition of BEA... 5.32 5.4.2 Key ey Terms in BEA... 5.32 5.4.3 Assumptions of BEA... 5.32 5.4.4 Break-Even Point (BEP)... 5.33 5.4.4.1 Meaning and Definition of BEP... 5.33 5.4.4.2 Assumptions of BEP... 5.33 5.4.4.3 Determination / Computation of BEP... 5.33 5.4.5 Margin of Safety... 5.35 5.4.5.1 Meaning of Margin of Safety... 5.35 5.4.5.2 Determination of Margin of Safety... 5.35
xvii 5.4.6 Angle of Incidence... 5.36 5.4.7 Advantages / Uses of BEA... 5.36 5.4.7.1 Applications / Significance on Break-even even Analysis... 5.36 5.4.8 Disadvantages / Limitations of BEA... 5.37 5.4.9 Solved Problems on BEA... 5.37 5.5 DEPRECIATION TION... 5.44 5.5.1 Meaning and Definition of Depreciation... 5.44 5.5.2 Causes of Depreciation... 5.44 5.5.3 Methods of Calculating Depreciation Fund... 5.45 5.5.4 Fixed Installment / Equal / Straight Line Methods... 5.45 5.5.4.1 Illustrated Problems on Fixed Installment Method...... 5.45 5.5.5 Diminishing / Reducing / Written Down Value Method... 5.48 5.5.5.1 Illustrated Problems on Diminishing Balance Method... 5.49 5.5.6 Sum of the Years Digits Method... 5.53 5.5.6.1 Illustrated Problem on Sum of the Years Digits Method... 5.53 5.5.7 Machine Hours Rate Method... 5.54 5.5.7.1 Illustrated Problems on Machine Hours Rate... 5.54 5.5.8 Sinking Fund Method / Depreciation Fund Method... 5.56 5.5.8.1 Illustrated Problem on Sinking Fund... 5.56 5.5.9 Annuity Method... 5.58 5.5.9.1 Illustrated Problems on Annuity Method... 5.58 5.5.10 Insurance Policy Method... 5.62 5.5.10.1 Illustrated Problem on Insurance Policy Method... 5.62 5.5.11 Revaluation Method... 5.64 5.5.11.1 Illustrated Problem on Revaluation Method... 5.64
xviii 5.5.12 Depletion Method... 5.65 5.5.12.1 Illustrated Problem on Depletion Method... 5.66 5.5.13 Compound Interest Method... 5.68 5.5.13.1 Illustrated Problem on Compound Interest Method... 5.68 5.6 FINANCIAL MANAGEMENT... 5.68 5.6.1 Meaning and Definition of Financial Management... 5.68 5.6.2 Nature of Financial Management... 5.69 5.6.3 Functions of Financial Management... 5.69 5.6.4 Objectives of Financial Functions... 5.70 5.6.4.1 Profit / EPS Maximization... 5.71 5.6.4.2 Wealth Maximization... 5.72 5.7 TIME VALUE OF MONEY... 5.73 5.7.1 Meaning of Time Value of Money... 5.73 5.7.2 Objectives of Time Value of Money... 5.73 5.7.3 Methods / Techniques for Calculating Time Value of Money... 5.74 5.7.4 Future / Compounded Value of Money... 5.74 5.7.4.1 Illustrated Problems on Future Value of Money... 5.76 5.7.5 Present / Discounting Value of Money... 5.81 5.7.5.1 Illustrated Problems on Present Value of Money... 5.82 5.8 CAPITAL AL BUDGETING... 5.85 5.8.1 Meaning and Definition of Capital Budgeting... 5.85 5.8.2 Objectives / Needs of Capital Budgeting... 5.85 5.8.3 Process of Capital Budgeting... 5.85 5.8.4 Factors Influencing Capital Budgeting Decisions... 5.86 5.8.5 Techniques / Methods of Capital Budgeting... 5.87 5.8.6 Payback Method... 5.87 5.8.6.1 Illustrated Problems on Payback Method... 5.88
xix 5.8.7 Average/Accounting Rate of Return (ARR)... 5.92 5.8.7.1 Illustrated Problems on ARR... 5.93 5.8.8 Time ime-adjusted Methods/Discount Cashflow Techniques echniques... 5.96 5.8.9 Net Present Value (NPV)... 5.97 5.8.9.1 Illustrated Problems of NPV... 5.98 5.8.10 Internal Rate of Return (IRR)... 5.102 5.8.10.1 IRR and NPV... 5.103 5.8.10.2 Illustrated Problems of IRR... 5.104 5.8.11 Terminal Value... 5.107 5.8.11.1 Illustrated Problems on Terminal Value alue... 5.108 5.8.12 Profitability Index... 5.110 5.8.12.1 Illustrated Problems on Profitability Index... 5.111 5.8.13 Excess Present Value... 5.114 5.8.13.1 Illustrated Problem on Excess Present Value alue... 5.114 5.9 COST OF CAPITAL AL... 5.114 5.9.1 Meaning and Definition of Cost of Capital... 5.114 5.9.2 Determination of Cost of Capital... 5.115 5.9.3 Classification of Cost of Capital... 5.115 5.9.4 Measurement / Techniques of Cost of Capital... 5.116 5.9.5 Cost of Long ong-term Debt... 5.116 5.9.5.1 Illustrated Problems on Cost of Long ong-term Debt...... 5.118 5.9.6 Preference Share Capital... 5.121 5.9.6.1 Illustrated Problems on Cost of Preference Capital... 5.122 5.9.7 Cost of Equity/Equity Capital... 5.123 5.9.7.1 Illustrated Problems on Equity Capital... 5.126 5.9.8 Retained Earnings... 5.129 5.9.8.1 Illustrated Problems on Retained Earning... 5.129
xx 5.10 FINANCIAL LEVERAGES... 5.130 5.10.1 Meaning and Definition of Financial Leverages... 5.130 5.10.2 Types of Leverages... 5.131 5.10.3 Operating Leverages... 5.131 5.10.3.1 Meaning and Definition of Operating Leverages... 5.131 5.10.3.2 Computation of Operating Leverages... 5.131 5.10.3.3 Degree / Behaviour of Operating Leverages... 5.132 5.10.3.4 Illustrated Problems on Operating Leverages... 5.132 5.10.4 Financial Leverages... 5.134 5.10.4.1 Meaning of Financial Leverages... 5.134 5.10.4.2 Computation of Financial Leverages... 5.135 5.10.4.3 Degree / Behaviour of Financial Leverages... 5.135 5.10.4.4 Illustrated Problems on Financial Leverages... 5.136 5.10.5 Composite / Combined / Total Leverages... 5.138 5.10.5.1 Illustrated Problems on Combined Financial Leverages... 5.138 Short Questions and Answers... 5.143-5.146 EXPECTED UNIVERSITY QUESTIONS Expected University Questions with Solutions... E.1 - E.12