AUTUMN 2015 Course: Fundamental of Business Code: 463 Level- BA/ B. Com Assignment No 2

BA aiou solved assignment 2 for code 463 fundamental of Business for the students of semester autumn 2015 of Open University. The fundamental of Business explains the principles of business that how a person can handle the business nicely.

Q Nol: Discuss the role of training in the development of employees of an organization.



Training is very necessary for the growth of the organization. Man. Machine and material are the main capital of the organization. Men are most valuable resources of the organization. The effectiveness of the organization depends on competence of the employees. Training and career development are very vital in any company or organization that aims at progressing. Training simply refers to the process of acquiring the essential skills required for a certain job. It targets specific goals. For instance understanding a process and operating a certain machine or system. Career development. On the other side, puts emphasis on broader skills, which are applicable in a wide range of situations. This includes decision making, thinking creatively and managing people. Despite the potential drawbacks, training and development provides both the company as a whole and the individual employees with benefits that make the cost and time a worthwhile investment.

Need of Training

Training of employees has a significant role in modern business era. Not just to equip them with latest tools your company has implemented, there is a lot more to it. I have sorted down them in a list. This is a must read if you employ or mean to employ in future at least one person.

Training for the Job

This type of training is given before the new worker starts on the job. It is used where the jobs are rather complex and where inexperienced operators cannot he permitted to function without seriously interfering with production flow.

Many firms operate so-called Company Schools or Training Sections to which new employees are sent after they are hired but before they are assigned to their jobs. In these schools they are given the requisite instruction for handling their jobs and they are tested tor the proficiency that they acquire. These Schools or Section are staffed by special instructors who frequently devote their entire time to teaching. Obviously this sort of school is useful only where many workers are to be trained and where the training period is of more than brief duration. The apprenticeship system is one in which inexperienced workers are apprenticed to master craftsmen for a period of years, during which time they are supposed to become thoroughly grounded in their trades or skills.

The role of training in the development of Employees of Organization

Training presents a prime opportunity to expand the knowledge base of all employees, but many employers find the development opportunities expensive. Despite the potential drawbacks. Training and development provides both the company as a whole and the individual employees with benefits that make the cost and time a worthwhile investment.

Overcoming Weaknesses

Most employees have sonic weaknesses in their workplace skills. A training program allows you to strengthen those skills that each employee needs to improve. A development program brings all employees to a higher level so they all have similar skills and knowledge.

Employee Performance Improvement

An employee who receives the necessary training is better able to perform his/her job. Ile/she becomes more aware of safety practices and proper procedures for basic tasks. The training may also build the employees confidence because she has a stronger understanding of the industry and the responsibilities of her job.


A structured training and development program ensures that employees have a consistent experience and background knowledge. The consistency is particularly relevant for the company’s basic policies and procedures. All employees need to be aware of the expectations and procedures within the company. This includes safety. Discrimination and administrative tasks.

Job Satisfaction

Employees with access to training and development programs have the advantage over employees in other companies who are left to seek out training opportunities on their own. The investment in training that a company makes shows the employees they are valued. The training creates a supportive workplace. Employees may gain access to training they wouldn’t have otherwise known about or sought out themselves. Employees who feel appreciated and challenged through training opportunities may feel more satisfaction toward their jobs. Training programs increases communication between different levels of an organization. Any deficiency in processes and jobs are eliminated and those close to production processes become involve in the management. Staff empowerment is a recent trend in management; such empowerment will only be successful when proper training is provided to those empowered.

Increased productivity

Through training and development the employee acquires all the knowledge and skills needed in their day to day tasks. Workers can perform at a taste’ rate and with efficiency thus increasing overall productivity of the company. They also gain new tactics of overcoming challenges when they face them.

Improved quality of services and products

 Employees gain standard methods to use in their tasks. They are also able to maintain uniformity in the output they give. This results with a company that gives satisfying services or goods.

Reduced cost

Training and development results with optimal utilization of resources in a company or organization. There is no wastage of resources, which may cause extra expenses. Accidents are also reduced during working. All the machines and resources are used economically, reducing expenditure.

Reduction in supervision

The moment they gain the necessary skills and knowledge, employees will become more confident. They will become self-reliant and require only little guidance as they perform their tasks. ‘the supervisor can depend on the employee’s decision to give quality output. This relieves supervisors the burden of constantly having to give directives on what should be done.

Necessity for Training

All new employees require a certain amount of training before they can give their best efforts to their jobs. This training is of two types: training on the job anti training for the job. This is described below.

Importance of Training

Training the employees is important because:

  1. Rapid technological innovations impacting the workplace have made it necessary for people to consistently update their knowledge and skills
  2. People have to work in multidimensional areas, which usually demand far more from their area of specialization.
  3. Change in the style of management.
  4. Due to non-practical college education.
  5. Lack of proper and scientific selection procedure.
  6. for career advancement.
  7. For higher motivation and productivity.
  8. To make the job challenging and interesting
  9. For self and development
  10. For employee motivation and retention
  11. To improve organizational climate
  12. Prevention of obsolescence
  13. To help an organization to fulfill its future manpower needs.
  14. To keep in pace with times
  15. To bridge gap between skills requirement and skills availability 16. For survival and growth of organization and nation.

Q No 02.What is meant by the finance? Explain the functions of finance department of an organization. Answer:- What is Finance? Finance can be defined as efficient allocation of scarce resources within the firm” Financing involves, planning. control, raising funds and using funds. Finance is the area of business concerned with collecting and using funds in most efficient way for obtaining the objectives of firm within the policies of the organization. It has become an important part of the management of the organization.

It involves the identification of financial needs, development of financial plans, identification of alternative sources of funds, obtaining and maintaining the funds and evaluating the financial performance of the company. Hence finance is the life of the company.

Financial planning is done by financial needs, which includes making projection of sales, income, and assets based on alternative production and marketing strategies and then deciding how to meet this financial requirements business firms seeking to enhance earnings for the owners, employ a combination of short term and long term capital.

To protect the firm resources a financial manager must think ways to avoid and reduce the risks. Insurance companies play a major role in risk shifting for firms. Almost all firms face financial problems. Therefore a finance manager should be aware at all the alternatives to overcome financial problems.


Financial function involves making projections of sales, income and assets based on alternative production marketing strategies and then deciding how to meet the financial requirements. If the initial projected results are not satisfactory, the financial manager should seek to identify potential changes in operations that will produce satisfactory results.

Financial manager’s first task is financial planning i.e. identifying the firms’ basic financial needs for working capital and for long-term capital.

Secondly his duty is to evaluate & select from several sources of funds. And thirdly to protect the owners resources while helping to maximize their return.


The financial function has become an increasing by important part of the firms’ general management. It is the life blood of an organization modern business whether sole proprietorship, partnership or corporation is formed with the hope that it will make a profit for its owners. To do this, it must endow with inputs of management, labor, land and capital. Capital represents the financial resources the corporal ion devotes to making a profit. It is the wealth turned over to the corporation by it owners and others to enable management to carry to the propose of the corporation

Financial Function include following factors

  1. Identify financial needs
  2. Develops a financial plan
  3. Identify alternative sources of fund
  4. Obtain the funds
  5. Manage the assets

The first step in obtaining and using funds efficiently is identifying the financial needs of firm. This task involves assessing the business goals of the firms which in many cases is to maximize the wealth of owners of the business. The second task of the financial manager is to seek profitable uses of funds, for this purpose return on investment is determined with the help of quantitative techniques. The business should focus on activities with high returns. Timing s of financial needs must he determined because it greatly effects the investment decisions seeking to adjust borrowing needs to the periods when interest rates are low and when returns on investment are at their highest.


Financial plan is a strategy for obtaining financial resources in adequate amounts and on favorable terms. A businessman must devote considerable tone and thought to develop a financial plan. Financial plan has two major aspects

  1. Financial Structure

Suited to the firm’s long-term needs that can serve as a guide in day to day financial decisions a financial structure reflects the proportions in which funds are obtained from various sources and involves decision in three key areas.

  1. internal and external financing

The two main sources of internal financing are retained earnings after taxes and dividends paid and money made available through depreciation. External financing is secured through contribution to the firms by existing or new owners or through borrowing form financial institutions and banks.

  1. Equity and debt financing

External finance can take the form of either equity or debt. Equity includes ownership interests in sole proprietorships and partnerships. Proceeds from the sale of stock I companies and past retained earnings. Sources of debit financing include bonds, notes. Mortgage, loans bank overdrafts and trade acceptances.


After developing a financial plan, the financial manager must identify the alternative sources of funds available to him. These sources may be divided into three categories on the basis of the time period for which the funds are required. (more than ten years), intermediate-term (one to ten years), and short term (less than one year). Long-term finances are generated through common shares preferred shares and bonds. Intermediate financings provided through terms loans, equipment loans and government loans.

Short – term funds are generated through trade credit, commercial papers, financial institutions, installment papers ET. Short – term funds are needed for temporary financial needs.


Once a business man has developed a financial plan and identified the sources of funds available to him, he obtains the actual financial resources he needs. Selecting preferred sources that a business man ultimately selects, reflect his financial plan and the interest rates, maturities, and other conditions. The businessman may deviate from his financial plan whenever funds available from an unexpected source at favorable terms.


Once the preferred source is selected the nest thing to be done is conducting negotiation with one lender or with competing lenders. Both small and large businesses can benefit from negotiating with several lenders, since one source may be able to offer a large amount of capital on more favorable terms


Once the funds are acquired by a business, they are used to purchase assets. The efficient use of business funds is often described as the management of assets. Managing assets are divided into two categories:- Working capital management refers to decisions about current assets and short term debt. Current assets include cash items, account receivable, and inventories all of which are normal concerted into cash by a firm within a year of their acquisition. Capital betting involves the use of financial resources to purchase assets that are typically not converted to cash in less than a year. These resources include fixed assets and long term investment in research and development, new products, or new system of distribution.


Financial Statements Projected Financial Statements is summary of various component projections of revenues and expenses for the budget period. They indicate the expected net income for the period. Projected Financial Statements are an important tool in determining the overall performance of a company. They include the balance sheet, income statement and cash flow statements to indicate the company performance.

The Balance Sheet shows your assets, liabilities and equity at a particular point in time. It is basically a snapshot in your financial position. The basic accounting formula is assets equal liabilities plus owner’s equity. The asset section of the balance sheet should be presented in order of liquidity starting with the most liquid assets such as cash, accounts receivable and inventory. The liabilities section should be presented in order of maturity starting with liabilities that are payable over the next year such as a demand note payable and accounts payable.

The Income Statement captures profit performance, demonstrates immediate capability to service debt for banks or real potential for growth in returns for venture capital. This is often expressed in terms of sales volume, or compared to industry benchmarks.

The Statement of Cash Flows is the most critical forecast since it reflects viability rather than profitability. It can also be the most uncertain statement as projections extend into the future. Therefore, monthly cash flow is a key statement since it enables calculation of “coverage” at any given point. Preparing projected financial statements can he very time consuming and it requires a careful analysis of the company’s past and present financial health. Projected financial statements project or forecast a company’s performance in the near future. An analyst uses the following points to evaluate the position of the company:

  • Whether the company’s operational activities are up to the mark
  • If the company is well equipped financially
  • Condition of the market• if the market is in the process of growth, is at equilibrium or shriveling up.
  • The status of the company in relation to the other companies in the industry.
  • Strengths, weaknesses prevailing in the management of the company, type of product produced by the company, economic cycle of the company, accompanying hazards in the production of goods.
  • Role of the management’s performance in company growth • Risks associated with operational activities • Company’s past performance records.

By carefully studying the various trends in the company’s past performances, the analyst tries to predict the company’s performance in future. Even if the financial health of a company has remained fairly stable over the years and the projected financial statements forecast a still better growth trend in the financial statement, any unforeseen event may change the course, in the projected financial statement.

The unforeseen events may occur in any part of the globe thereby impacting global economy in an adverse manner. An analyst keeps provision for such events and prepares details of a contingency fund, which can be made use of, if the above mentioned circumstances are encountered by any company.

Q_NO 3: Explain the concept of budgeting. Also discuss the benefits of budgeting for decision making in a business?


Budgeting Definition: Budgeting or Budgetary control is a technique whereby the actual results are compared with budgets. The differences are then made the responsibility of key individuals and they have a choice of either revising the original budgets or exercise control action.

Budget is referred to a statement of plans and expected results expressed in numerical, Budgetary Control is a budgeting approach used primarily by government agencies, emphasizing goals, the programmes to achieve them and budgets are allocation designed to support such programmes.

Control encompasses the procedures designed to ensure the conformity of actual operations with management’s plans. Preparation of budgets is a cooperative function embracing all the areas and levels of management. On the basis of pre-set objectives, detailed budgets for following areas are prepared.

  • Sales
  • Materials & Purchases
  • Factory Overheads
  • Selling & Distribution expenses
  • Financial Expenses
  • Production
  • labour
  • Administrative Expenses
  • Capital Expenditure
  • Cash Budget
  • Capital Budget.

The financial manager plays a pivotal role in the budgetary process. All functional budgets are scrutinized and correlated by him, in the project profit & loss Account and projected balance sheet. After approval of the coordinated detailed and overall budget by the budget committee, and the top level management the budget becomes Master Budget.


A good budget control is characterized by the following:

  • Participation: involve as many people as possible in drawing up a budget
  • Comprehensiveness: embrace the whole organization.
  • Standards: base it on established standards of performance.
  • Flexibility: allow for changing circumstances.
  • Feedback: constantly monitor performance.
  • Analysis of costs and revenues: this can be done on the basis of product lines, departments or cost centers.


Forecasting plays a major role in decision making because forecasts are useful in improving the efficiency of the decision-making process. Businessmen use various qualitative and quantitative demand forecasting techniques to predict future demand for products and accordingly take business decisions. Qualitative techniques include expert opinion, survey and market experiments, whereas quantitative techniques include time series analysis and barometric method.

Nevertheless, businessmen attempt to reduce the risk involved in such conditions (uncertain conditions) by using certain quantitative methods. Since huge investment decisions have to be made by businessmen. decision making should be done with utmost care because such decisions are irreversible. Companies therefore use capital budgeting as a tool to effectively plan and control such huge investment decisions.

The purpose of budgeting and forecasting includes the following three aspects:

  • A forecast of income and expenditure (and thereby profitability)
  • A tool for decision making
  • A means to monitor business performance The budget has greater impact on your deCiSi011•making ability when paired with a forecast. Think of a budget as the target that you are shooting for, while a forecast is your reasonable prediction of what will happen. If budgetary controls are to work well, manger must remember that budgets are designed as tools and not as replacement for managing. They have limitation and they must be tailored to each job, Mover over they are tools for all mangers and not only for the budgetary directors or the controllers. They only person that can administer budget is the manager responsible for budget programmes.

Real Budgeting for a business or industry means to ensure success. It is believed that the best budget is to provide allowable expenditure for a period of time into a single amount and give them complete freedom regarding how these funds are to be spent in accomplishing the company’s goals.

Effectiveness of the budgetary control system of a business or industry depends upon reliable and timely management information system. Through which the actual position of business is always remain in careful review. The weak areas are highlighted and decisions about remedial measures are taken in time before the situation going to worse. The analysis of monthly and annual financial statements helps in spotting the good and bad areas of the business operations and thus enabling the management with useful information on the basis of which necessary action for improvement can be taken for future.

One of the most important tools for decision making is budgetary control. Most careful and realistic forecast for marketing, production, income and expenses are prepared immediately. ‘These forecasts in quantitative terms are duly priced and valued and on that basis budget is prepared. Finance is the blood of every organization. Accordingly any defective circulation, stoppage or improper pumping and also pressure arc liable to make the organization unsuccessful.

Budgeting is the formulation of plans for a given future period in numerical terms, since budgets are statements of anticipated results. Budgeting controls planning and allows authority to be allocated and delegated without loss of control. In the other words reducing plans to numbers, forces, a kind of orderliness, that permits the manager to see clearly what capital will be spent by whom and where. What expenses, revenue, or units of physical input and output the plan will involve. By this a manager can delegate authority more freely to affect the plan within the limits of the budget.




Many countries impose corporate tax or company tax on the income or capital of some types of legal entities. A similar tax may be imposed at province or lower levels. The taxes may also be referred to as income tax or capital tax. Entities treated as partnerships are generally not taxed at the entity level. Most countries tax all corporations doing business in the country on income from that country. Many countries tax all income of corporations organized in the country.

Pakistan Taxation System for Companies Pakistan’s taxation system for companies is based upon two basis i.e. Direct Taxation and Indirect ‘taxation. Effective rate of tax may differ for company’s depending upon their size, allowances and exemption to particular company/industry, location, exports and so forth. As a general guide companies are taxed as follows on their net income directly: Corporate Tax Rates ‘I’ax Year 2010 (running from 1st of July, 2009 to 30th of June, 2010)

Public Companies 35%

Private Ltd. Companies 35%

Banking Companies 35%

Small company 20% up to 35%

Indirect Taxation include deduction at source which may be payment on supplies, services, imports, exports, dividends and so forth. Rates of deduction may vary from a meagre I% up to as high as 30%.


Pakistan’s Current Taxation system is defined by Income Tax Ordinance 2001, promulgated on 13 September 2001, which became effective from 1 July 2002 Federal taxes in Pakistan like most of the taxation systems in the world are classified into two broad categories, viz., direct and indirect taxes. A broad description regarding the nature of administration of these taxes is explained below:


Direct taxes primarily comprise income tax, along with supplementary role of wealth tax. For the purpose of the charge of tax and the computation of total income, all income is classified under the following heads:

  • Salaries
  • Interest on securities;
  • Income from property;
  • Income from business or professions Capital gains; and
  • Income from other sources.


All individuals, unregistered firms, associations of persons, etc., are liable to tax, at the rates rending from 10 to 35 per cent.


All public companies (other than banking companies) incorporated in Pakistan are assessed for tax at corporate rate of 39%. However, the effective rate is likely to differ on account of allowances and exemptions related to industry, location, exports, etc.


Tax on the dividends received by a public company from a Pakistan company is payable at the rate of 5% and at the rate of 15% in case dividends are received by a foreign company. Inert corporate dividends declared or distributed by power generation companies is subject to reduced rate of tax i.e., 7.S%. Other companies are taxed at the rate of 20%. Dividends paid to all non-company shareholders by the companies are subject to withholding tax of 10% which is treated as a full and final discharge of tax liability in respect of this source of income.


Goods imported and exported from Pakistan are liable to rates of Customs duties as prescribed in Pakistan Customs Tariff. Customs duties in the form of import duties and export duties constitute about 37% of the total tax receipts. The rate structure of customs duty is determined by a large number of socio-economic factors. However, the general scheme envisages higher rates on luxury items as well as on less essential goods. The import tariff has been given an industrial bias by keeping the duties on industrial plants and machinery and raw material lower than those on consumer goods.


Central Excise duties are leviable on a limited number of goods produced or manufactured, and services provided or rendered in Pakistan. On most of the items. Central Excise duty is charged on the basis of value or retail price. Some items are, however, chargeable to duty on the basis of weight or quantity. Classification of goods is done in accordance with the Harmonized Commodity Description and Coding system which is being used all over the world. All exports are exempted from Central Excise Duty.


Sales Tax is levied at various stages of economic activity at the rate of I5 per cent on:

  • All goods imported into Pakistan, payable by the importers;
  • All supplies made in Pakistan by a registered person in the course of furtherance of any business carried on by him;
  • There is an in-built system of input tax adjustment and a registered person can make adjustment of tax paid at earlier stages against
  • The tax payable by him on his supplies. Thus the tax paid at any stage does not exceed 15% of the total sales price of the supplies;


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1 Comment
  1. Reply
    hamza ali khan August 2, 2016 at 12:04 pm

    Sir g mujy 463 444 460 ka assignment chaheye spring 2016 ka

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