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Why is 'Interest on Interest' Called Compound Interest? Compound interest refers to the interest earned not only on the initial principal but also on the interest that accumulates over previous periods. In simpler terms, it’s "interest on interest." This compounding effect causes the investment to grow at a faster rate compared to simple interest, which is calculated only on the original principal amount. Example: Compound Interest vs. Simple Interest Let’s take an example to illustrate this. Suppose you invest $100 at an interest rate of 10% per year for 3 years. Compound Interest : In year 1, you earn $10, making your total $110. In year 2, you earn 10% on $110, which gives you $121. In year 3, you earn 10% on $121, which totals $133.1. So, the total amount after 3 years would be $133.1, where the extra $3.1 is the "interest on interest." Simple Interest : If you use simple interest, you earn $10 each year based on the original $100 principal. After 3 year...

gross working capital and networking capital are the most important concepts of working capital.Both are the parts of working capital,in spite of that some differences can be identified.Let us reflect light on this matter. 1.Gross working capital is quantitative concept.It involves the total current assets of a firm.But net working capital in a qualitative concept indicating the liquidity position of the firm. 2.the gross working capital of a firm is always positive.But the net working capital maybe positive,negative and zero. 3.Both concepts of working capital have the functional significance.Gross working capital concept is financial or going concern concept and deals with the problems of managing individual current assets in short term. 4.Both of working capital have their own merits.The gross concept of working capital is suitable to the company form of organization.But the net working capital maybe suitable only for proprietary form of organizations-sole trader and partne...

Working capital : On the managerial point of view capital can be divided into two categories.a)fixed capital b)working capital.Our subject matter is working capital. Working capital maybe regarded as the life blood of a business.It is defined as all the short term assets used in daily operations of the firm.It is the mirror of solvency of a firm that helps to measure the degree of the protection. Cash in hand,cash at bank,B/R ,stock,debtors etc. are the vivid examples of short term assets or as the trading capital and circulating capital. Mainly there are two concepts of working capital: 1.Balance sheet:   This concept is also known as traditional concept that can be classified into four categories. a.Gross profit : Actually working capital is commonly called as gross working capital.It refers to the firm's investment in current assets.Current assets are those assets which are normally converted into cash within one year. b.Net concept : The difference between the fi...

The financial manager in a business organization,especially in a large-scale undertaking,is to perform a number of important functions .His functions are very significant because if the proper planning can not be made of finance ,it may spell the death knell for the business.The functions that the financial manager is to perform are the following: 1.Financial planning :   The financial manger is to plan how much money is needed for carrying out the operations of the business. 2.Raising funds :   The financial manager is to raise the requisite funds to meet the requirements of the business operations. 3.Investment :   Procurement of funds is useless if they can not be invested properly.It is the responsibilities of financial manager to ensure the maximum utilization of money for earning maximum profit. 4.Financial control : Financial planning will have no value if proper control is made of the activities to check any variation . 5.Protection of capital :   ...

Importance of  adequate working capital : A business firm must preserve an adequate level of working capital in order to run its business smoothly.It is worthy to note that both excessive and inadequate working capital positions are harmful.However,out of two,inadequacy of working capital is more dangerous for a firm.No business can run successfully without an adequate amount of working capital in the business.The following are a few advantages of working capital in the business. 1.Cash discount   : Adequate working capital enables a firm to utilize cash discount facilities offered to it by the facilities.The amount of cash discount reduces the cost of purchases. 2.Goodwill :   Adequate working capital enables a firm to make instant payment.Making prompt payment is a base to create and maintain goodwill. 3.Ability to face crisis :   The provision of adequate working capital facilitates to meet situations of crisis and emergencies. 4.Credit-worthiness : ...

Two primary objectives are commonly encountered .One is maximization of profit and another is maximization of wealth. Profit maximization : Profit maximization means maximizing the amount of any currency income from fund.Many businessmen believe that as long as they are earning as much as possible,while holding down costs,they are achieving their goals. It has the benefit of being a simple and straight and straightforward statement of purpose .It is easily understood as a rational goal for a business ,it focuses the firm's effort toward making money. Limitations of profit maximization: Profit maximization is widely professed but in fact this concept has several weakness. 1.It is vague  : The problem is the definition of 'profit' .That is profit maximization objective is unclear.Does it mean short or long term profit?Does it refer to profit before or after tax ?total profit or per share? 2.It ignores timing :It does not make a distinction between returns recei...

Definition of finance : The word finance has originated from the Latin word 'finis' whose lexicographical meaning is collection of money.So from the viewpoint of organization we can say that finance is the money or other liquid resources ,which raises or provides funds or capital.So finance is the act of providing the means of payment.But this is a harrow concept of finance.At present this concept has come to an end and has originated a modern concept.As per modern concept,finance means collection of money,process of collection,use of land,planning and control,everything related to fund. According to E.W.Walker,"Activities of a business concern to financial planning,co-ordination,control and their application is called finance". Classification of finance : Finance may mainly be classified into two broad categories. 1.Private finance and 2.Public finance 1.Private finance : It is subdivided into three categories ,such as- a)personal finance b)business fina...

1.What is index number? An index number is a number that calculates the change in a variable over time relative to the value of the variable during base period. 2.Types of index number? There are 3 types of index number.They are: ***Price index : A price index measures the change in the price on the level of situation with respective time.Price index is indicated by Pon. Pon=Pn/Po*100,where,Pn is current year ,Po is base year and  Pon is the price index at time N. They are further sub-divided into the following classes: (i) Wholesale Price Index Numbers: The wholesale price index numbers reflect the changes in the general price level of a country. (ii) Retail Price Index Numbers: These indices reflect the general changes in the retail prices of various commodities such as consumption goods, stocks and shares, bank deposits, government bonds, etc. (iii) Consumer Price Index: Commonly known as the Cost of living Index, CPI is a specialized kind of retail price index ...

Statistics incorporates a variety of limitations, pertinent among them square measure as follows: (i) There square measure bound phenomena or ideas wherever statistics can't be used. This is as a result of these phenomena or ideas aren't amenable to measure.For example, beauty, intelligence, bravery can't be quantified. Statistics has no place all told such cases wherever quantification isn't doable. (ii) Statistics reveal the typical behaviour, the traditional or the final trend. An application of the 'average' construct if applied to a personal or a specific situation might cause a wrong conclusion and generally is also fatal.For example, one is also misguided once told that the typical depth of a river from one bank to the opposite is four feet, once there is also some points in between wherever its depth is way quite four feet. On this understanding, one may enter those points having bigger depth, which can be unsafe. (iii) Since statistics square mea...

There are 3 major functions in any commerce within which the applied mathematics methods ar helpful. These are as follows: (i) the design of operations: this might relate to either special comes or to the reverent activities of a firm over a mere amount. (ii) The putting in of standards: this might relate to the dimensions of employment,volume of sales, fixation of quality norms for the factory-made product,norms for the daily output, then forth. (iii) The operate of control: This involves comparison of actual production achieved against the norm or target set earlier. just in case the assembly has fallen wanting the target, it provides remedial measures so such a deficiency does not occur once more. LIMITATIONS OF STATISTICS- Statistics incorporates a variety of limitations, pertinent among them square measure as follows: (i) There square measure bound phenomena or ideas wherever statistics can't be used. This is as a result of these phenomena or ideas aren't amenab...

MEANING AND DEFINITIONS OF STATISTICS- A.L. Bowley has defined statistics as: (i) statistics is the science of counting, (ii)Statistics may rightly be called the science of averages, and (iii) statistics is the science of measurement of social organism regarded as a whole in all its manifestations. At the small level, individual companies, howsoever tiny or massive, turn out intensive statistics on their operations. The annual reports of firms contain sort of information on sales, production, expenditure, inventories, capital used, and alternative activities.These information ar usually field information, collected by using scientific survey techniques.Unless often updated, such information are the merchandise of a one-time effort and have limited use on the far side true that will have drawn up their assortment. A student knows statistics a lot of intimately as an issue of study like political economy, arithmetic,chemistry, physics, and others. it's a discipline, that scienti...

The word leadership come from English word 'Lead'. Lead to guide. to conduct and to direct. A leader is one who guides and directs other people. He gives the efforts of his followers a direction and purpose by influencing their behavior. -Therefore, leadership may be defined as the quality of behavior or a person by which he is able to persuade others to seek the goals enthusiastically. It is the force which binds a group together and motivates it towards certain goals. Gcorge R.Terry,   "Leadership is thc activity of influencing people to strive willingly for mutual objectives". Koontz and O'Donne l have defined leadership as "the ability Of managers to induce subordinates to work with confidence and zeal". In the words of Robert Appleby, leadership is "a means of direction.It is theability of managennent to induce subordinates to work towards ideals with confidence and keenness". Keith Davis,   "leadership is the process of en...

various approaches of leadership mainly there are two approaches in leadership.They are: (1) Trait approach (2) Situational approach Trait approach: The trait approach to leadership. based on early leadership research, assumed that a good leader is born and not made. Trait theory is the oldest approach to leadership. trait or combination or trails guarantees that a leader will be successful. Many of the early studies that attempted to summarize the trails of successful leaders were documented. Ono of these summarize concludes that successful leaders tend tend possess of following characteristics: 1.Intelligence including judgement and verbal ability 2.Past achievement in scholarship and athletics 3.Emotional maturity and stability 4.The skill to participate socially and adapt to various groups 5. Dependability persistence and a drive for continuing achievement 6. A desire for status and socio-economic position. Situational approach: Leadership studies have shifted empha...

Features of Leadership- Ans: Leadership is the process of directing the behavior of others towards the  accomplishment of some objectives. So, leadership has some characteristic. They are discussed below- (1) Leadership is a process of influence exercised by the leader on group members. A person is said to have an influence on they are-willing to carry out his wishes and accept his condition. A successful leader is one who influences the behavior altitudes and beliefs of his follows. (2) Leadership is a function of stimulation. It involves motivating people to strive willingly towards organizational goal. A successful leader creates goal congruence so that people enthusiastically work to attain the goal. (3) Leadership gives a feeling of contributing to common objectives. A successful leader creates an environment under which every person feels that he is contributing to the attainment of objectives. (4)Leadership is related to a particular situation at a gives point of ...

Discuss the types of Control? Three types of management control are possible: (1) Pre control (2) Concurrent control (3) Feedback control (1) Pre control: Control that takes place before work is performed is called pre-control or feed forward control. Management using this type of control create policies, procedures and rules aimed—at_ eliminating behavior that will cause undesirable work results. For example, the manager of a small record shop may find that a major factor sales people discuss records with customers. It is aimed at eliminating an anticipated problem. (2) Concurrent control: Concurrent control is control that takes place as some unit of work is being performed. It relates not only to employees performance, but also to such non-human areas as equipment performance and department appearance. For example, most supermarkets have rigid rules about the amount of stock that should be placed on the selling floor. A concurrent control aimed at ensuring that shelves ...

 Power The extent to which an individual is able to influence others so that they respond to orders is called power control. To illustrate after comparing actual performance with planned and determining that corrective action is necessary, a manager usually gives orders to implement this action. Although the orders are issued by virtue of the managers organizational authority, they may or may not be followed precisely, depending on how much power the manager has over the individuals to whom the orders are addressed. The total power a manager is derived from the organizational position a manager holds .Personal power is power derived from a manager's relationship with others. Requirements of an effective controlling? Ans: An effective controlling is must to be succeeded a business. The requirement of an effective controlling is a lot. The requirements are given as follow: (1) Stability Controls must reflect the nature and needs of the activity controlled. A system of con...

Discussion of tho controlling process/steps/stage: Controlling is a process where it is to bring to light the variation between standards and performance and then to take necessary steps to prevent the occurrence of such variations in future, the basic steps of controlling are given below: 1. Establishment of standards 2. Measurement of performance 3. Analysis of variance 4. Correction of deviations 1. Establishments of standards   In the controlling process, the first step is to establish standard. Standard is simply criteria of performance. On the depend on standards this process continue. A standard must be measured by using:- (i) Time (ii) Unit (iii) Value (iv) Quantity (v) Grade etc. Say for example an automobile company determining to produce 20 car in a week it is their standards. 2. Measurement of performance   It is (ho second stop of controlling process although such measurement is not always practicable. The measurement of performance against s...

Controlling is the last and fundamental function Of management. It ensures that resources are utilized economically and efficiently. So control is more important in management, some importance are given below with discussed 1.Achieving goals: A control system ensures the achievement of objectives. It provider, clue how to unitize resources, time. money, personnel etc. and how to reach the organizational goal. 2. Arise responsibility: Control helps manager to discharge their responsibilities. As a result managers give best performance for organization. 3. Corrective action: A good controlling system provides timely information to which is very useful in taking corrective action. control reveals the lacking or deficiency or plan so that suitable action can be taken to improve plan and policies.                                                     ...

Relationship between planning and controlling? Ans: Planning and controlling are two separate functions of management, yet they are closely related. The scope or activities if both are overlapping to each other. without the basis of planning. controlling activities becomes baseless and without controlling, planning became a meaningless exercise. In absence of controlling, no purpose can be served by. Therefore planning and controlling reinforce each other.  According to Billy Goetz , "Relationship between the two can be summarized in the following points. I. Planning precedes controlling and controlling succeeds planning. 2. Planning and controlling are In separable functions of management. 3. Activities are put on rails by planning and they are kept at right place through controlling 4. The process of planning and controlling works on systems approach which is as follows;Planning and controlling are integral parts Of an organization as both are important for smo...

What is MBO MBO means management by object that is a process to achieve organization goal by working together.In broad sense MBO is a process whereby superior and subordinates work together to set objects and to make decision to achieve the goal by Suprime performance. According to pcter dracker "MBO is in which objectives are supplied to every area where performance and results directly and vitally affect the survival and prospcrity of business. According to Batol and martin through which specific goals are setcollaboratively tor the organization as whole and every unit'. Requirements of effective control/what are the role Of controlling/ techniques of controlling / Rules of controlling Controlling is the last and fundamental function of management. Making controlling successful managers should make sure that various facts of control process are appropriate for the specific organizational activity being focused on. Organisation should have many different kinds o...

Wilson and Alexis isolate several basic elements in the decision situation. There are five elements: such as- 1.The decision markers 2.Goals to be served 3.Relevant alternatives 4.Ordering of alternatives 5.Choice of alternatives These elements are discussed in the below: 1. The Decision markers:   Decision markers are the first elements of the decision situation. According to 10 Ernest Dale weak decision-makers usually have one of four orientations— a. Receptive b. Exploitative c. Hoarding d. Marketing a. Receptive:  Decision makers who have a receptive orientation believe that the source of all good is outside themselves and therefore they rely heavily on suggestions from other organization members. b. Exploitative:  Decision makers With an exploitative orientation also believe that the source of all good is outside themselves and they are willing to steal ideas as necessary in order to make good decisions. c. Hoarding:  the hoarding orientation...

A decision is a choice of one alternative from a set 01 available alternatives. The decision-making process comprises the steps the decision maker takes to arrive at this choice. The process a manager user to make decision has a significant on the quality of those decisions. If managers use an organized and systematic process, the probability that their decisions will be sound. The steps of the decision-making process are as follows. 1.identify an existing problem 2.List possible alternatives for solving the problem 3.select the most beneficial of these alternatives                        4.implement the selected alternative 5.Gather feedback to find out if the implemented alternative is solving the identified problem. 1.Identifying an existing problem Decision taking is essentially a problem-solving process that involveseliminating barriers to organizational goal attainment. The first step in this elim...

A decision making is a choice made between two or more available alternatives. Decision making is the process of choosing the best alternative for roaching objectives, This process involves In understanding According the problem, collecting information, developing and evaluating alternatives choice of a solution and its evaluation According to Haynes and Massie—: 'Decision making is a process of selection from a set of alternative courses of action which in . thought to fulfill the objective or the decision problem more satisfactorily that others." Finally we can say that, decision making is a goal-oriented activity. It consists of all the activities that must take place before a'final choice can be made. TYPES OF DECISION MAKING/DECISION Decision making can be categorized according to how much time a manager must spend in making them, what proportion or the organization must be involved in making then and the organizational functions or which they focus. Based...

Manager should continually repeat these steps through repetition, they obtain feed back that will help them improve the existing organization.Imagine a manager direct a restaurant and he or she must follow the following or above five steps of organizing process. 1. Reflect on plans and objectives- This step the restaurant manager would take to initiate the organizing process would be reflect on the restaurant's plans and objectives. Because planning involves with how to attain its objectives and organizing involves with how the resources will be used to activate plans. 2. Establish major tasks - This step of organizing process focuses on tasks to be performed within the restaurant. The manager must designate major tasks or jobs to be done within the restaurant. For example the manager might decide that serving customers include the sub tasks of taking orders and clearing tables. 3. Divide major tasks into sub-tasks-  This is same tasks of step 2 must be performed by a manage...

Definition of organization: A social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations have a management structure that determines relationship between the different activities and the members. and sub-divides and assigns -roles, responsibilities and authorities to carry out different tasks. Organizations are open systems, they  affect and are affected by their environment. • According to Rachman and other, "An organization is a group of 'people whose interactions are structured into goal directed activities". In a IR.W. word, "Organizing involves determining how activities and resourced are to be grouped". According to Donnclly and others,  "Organizing means turning plans into action with the help of leadership and motivation. By analyzing these definition, we find some that are given- 1, Organization is a functional process of management 2. It is possible to accumulate and all eleme...

Definition of motivation Motivation is the inner state that causes an individual to behave in a way that ensures the accomplishment of some goal. In other words, motivation explains why people act as they do. Motivation may be defined as the process at stimulating some to adopt a desired course of action. In brief sense motivation is the drive to achieve a goal. In details sense to attain organizational goal, motivation is a process of making best use of the organization's employees and it is a system to encourage, inspire and to motive the organizational activities. Borolson and Steiner described that, "motivation is an inner state that energizes. activates, or moves and directs or channels behavior toward goals". M.J. Gannon described that "Motivation basically means an individual needs desires and concepts that cause him or her to act in a particular manned'. Heinz Weihrich and Harrold Koontz describe that "Motivation is a general term applying t...

One of the most widely mentioned theories of motivation is the hierarchy of needs theory put forth by psychologist Abraham Maslow. Maslow saw human needs in the form of -a hierarchy ,ascending from lowest to the highest and he concluded that when one set of needs is satisfied? this kind of need causes to be a motivator. Elements of need theory: Elements of needs theory are shown in below- -Physiological needs: At the lowest level of the hierarchy and at the starting point for motivation are the physiological needs for water, air, food, sex, sleep, shelter and clothing. Those needs are vital to life and must be satisfied to maintain life. These are also described as primary needs. But other needs are secondary. -Safety and security needs: After we satisfy our basic physical needs, we then want security. We want to be free from physical danger and free from the loss of job, property, food, clothing and loss of livelihood. -Social needs: we have satisfied safety needs our basic ...