 B.

COM- 401 (COMPANY LAW)

Q-1 What are liabilities and rights of certain persons
fraudulently preferred?
Ans:-
Liabilities and rights of certain persons
fraudulently preferred.

Where a company is being wound up and anything made,

taken or done after the
commencement of this Act is invalid under section 328 as
a fraudulent preference of a person
interested in property mortgaged or charged to secure
the company’s debt, then, without prejudice
to any rights or liabilities arising, apart from this
provision, the person preferred shall be subject to
the same liabilities, and shall have the same rights, as if
he had undertaken to be personally liable as
a surety for the debt, to the extent of the mortgage or
charge on the property or the value of his
interest, whichever is less.
(2) The value of the interest of the person preferred
under sub-section (1) shall be determined as at
the date of the transaction constituting the fraudulent
preference, as if the interest were free of all
encumbrances other than those to which the mortgage or
charge for the debt of the company was
then subject.
 (3) On an application made to the Tribunal with respect
to any payment on the ground that the
payment was a fraudulent preference of a surety or
guarantor, the Tribunal shall have jurisdiction to
determine any questions with respect to the payment
arising between the person to whom the
payment was made and the surety or guarantor and to
grant relief in respect thereof,
notwithstanding that it is not necessary so to do for the
purposes of the winding up, and for that
purpose, may give leave to bring in the surety or
guarantor as a third party as in the case of a suit
for the recovery of the sum paid.
(4) The provisions of sub-section (3) shall apply mutatis
mutandis in relation to transactions other
than payment of money.

Introduction:
In the world of business, forming a company is a common
practice to engage in commercial activities. A company
comprises various individuals who become members and play a
crucial role in its functioning. Understanding the rights and
liabilities of members is essential for anyone involved in a
company. This blog aims to shed light on the key rights and
liabilities that members possess within a company, providing a
comprehensive overview for better comprehension and
decision-making.
I. Definition and Types of Members:
Definition of Members: A member refers to an individual or
entity that has joined a company and holds certain rights and
obligations.
Types of Members: Different types of members include
shareholders, partners, subscribers, directors, and designated
partners, depending on the type of company and its legal
structure.

II. Rights of Members:

Voting Rights: Members typically have the right to vote on
matters of importance within the company, such as electing
directors, approving company policies, and major business
decisions.
Dividend Rights: Shareholders, in particular, have the right to
receive dividends if the company generates profits and declares
dividends.
Right to Information: Members have the right to access
company information, including financial statements, annual
reports, and other relevant documents.
Right to Transfer Shares: Depending on the company’s
constitution, members may have the right to transfer their
shares to others, subject to certain restrictions and compliance
with legal provisions.
Right to Participate in Meetings: Members can attend and
participate in general meetings, annual general meetings, and
extraordinary general meetings to express their views and
contribute to decision-making processes.
III. Liabilities of Members:
Liability for Shareholders: Shareholders generally have limited
liability, meaning their personal assets are not at risk beyond
the value of their investment in the company.
Liability for Partners: In a partnership, partners may have
unlimited liability, meaning their personal assets can be used to
settle the company’s debts.
Fiduciary Duties: Members, particularly directors, owe fiduciary
duties to the company and its shareholders, requiring them to
act in good faith, exercise due care, and prioritize the
company’s interests.
Liability for Misconduct: Members can be held personally liable
if they engage in fraudulent activities, misrepresentation, or
any illegal actions that cause harm to the company or its
stakeholders.
Liability for Unpaid Contributions: Members may have an
obligation to contribute capital or resources to the company as
agreed upon during the formation or subsequent fundraising
activities. Failure to fulfill these obligations can result in liability.

IV. Additional Rights of Members:

Right to Inspect Books and Records: Members often have the
right to inspect the company’s books, records, and accounts to
ensure transparency and accountability.
Pre-emption Rights: Shareholders may have pre-emption
rights, which allow them to maintain their proportional
ownership by having the first opportunity to purchase newly
issued shares.
Right to Remove Directors: Members, especially shareholders,
may have the right to remove directors from their positions if
they believe their actions are detrimental to the company’s
interests.

V. Additional Liabilities of Members:

Liability for Unlawful Distributions: Members, particularly
directors and officers, can be held personally liable if they
authorize unlawful distributions of company assets, such as
paying dividends when the company is insolvent or unable to
meet its obligations.
Liability for Breach of Duty: Members who breach their duties,
such as confidentiality, loyalty, or non-compete agreements,
may face legal consequences and be held accountable for any
damages caused to the company.
Joint and Several Liability: In certain circumstances, members
may have joint and several liability, meaning they can be
individually or collectively responsible for the company’s debts
and obligations. This often applies to partnerships or situations
where members have provided personal guarantees.

VI. Alteration of Rights and Liabilities:

Change in Rights: The rights of members can be modified
through the amendment of the company’s articles of
association, subject to compliance with legal requirements and
obtaining the necessary approvals.
Alteration of Liabilities: Members’ liabilities can be affected by
changes in the company’s structure, such as converting from a
partnership to a limited liability company, thereby limiting the
personal liability of members.

VII. Dispute Resolution and Enforcement:

Internal Dispute Resolution: Companies often establish
mechanisms for resolving disputes among members, such as
mediation or arbitration, as outlined in their governing
documents.
Legal Remedies: If members believe their rights have been
violated or they have incurred losses due to the actions of other
members or the company, they can seek legal remedies
through litigation or other legal proceedings.

VIII. Importance of Shareholder Agreements:

Shareholder agreements are crucial documents that outline the
rights, obligations, and responsibilities of shareholders in
private companies. These agreements often address matters
such as transfer restrictions, rights of first refusal, and dispute
resolution mechanisms, providing clarity and protection for
members.

Conclusion:
Understanding the rights and liabilities of members in a
company is essential for effective governance, transparency,
and accountability. Members should be aware of their rights to
participate in decision-making processes, access information,
and receive dividends, while also understanding their liabilities,
such as fiduciary duties and potential personal liability. By being
well-informed and adhering to their obligations, members can
contribute to the growth and success of the company while
protecting their interests and minimizing legal risks.

Q-2 Describe the procedure for board

meetings and processes?
Ans:-
STEPS INVOLVED IN BOARD MEETINGS PROCEDURES
1. Overview
It is an undisputed fact that a meeting of the Board of Directors
is important. Company Formation in Gurgaon Delhi India under
Companies Act, 2013 specifies some guidelines that make sure
that the Board decisions are in accordance with the interests of
the company, and that they also convey a fiduciary nature of
director duties.
2. Periodicity of the Board Meetings
According to the Section 173 of the Act all public and private
companies need to have. There need to be four meetings in a
calendar year. However, if a company is registered under
section 8 of the Companies Act, it has the choice of having a
meeting of the Board or the Governing Body at least once in six
calendar months vide Notification F. No. 1 /2/2014-CL.I dated
5th June 2015. A One Person Company, small company and
dormant company shall have at least one meeting of the Board
of Directors in each half of a calendar year.
3. Interval between two Board Meetings
According to the terms of section 173, maximum gap between
two consecutive meetings cannot be more than 120 days in a
calendar year. In case of One Person Company, small company
and dormant company, the gap between the two meetings
cannot be not less than ninety days.
4. Notice of Board Meeting
A meeting of the Board of directors should be held after giving
notice, according to the Section 173 of the Companies Act. A
meeting of the Board shall be called by giving not less than
seven days’ notice in writing to every director at his address
registered with the company and such notice shall be sent by
hand delivery or by post or by electronic means Provided that a
meeting of the Board may be called at shorter notice to
transact urgent business subject to the condition that at least
one independent director, if any, shall be present at the
meeting.
5. Day of holding meeting
Board meetings are normally held during business hours and on
a day, which is not a public holiday. However, a Board meeting
may validly be held on public holiday. Department has clarified
vide Letter No. 8/11(285)/63-PR, dated 2-5- 1963 that it would
not raise any objection if an original Board meeting is not held
on a working day for the convenience of the directors although
it states that an original Board Meeting should be held on a
working day.
6. Time of holding Board meetings
Board meetings can be held during non-business hours also.
There is no restriction that only business hours have to be used.
7. Place for holding Board Meeting
A company’s registered office or head office or any other
campus can be used to have the meeting, irrespective of the
fact whether or not it is within the same city, town, village or
state which houses the registered office. Meetings can also take
place in another country. Participation of the directors by video
conferencing or by other audio visual means shall also be valid.
8. Quorum of the Board Meeting
According to the Section 174 of the Companies Act, 2013, the
quorum for a board meeting needs to be either two directors,
or one-third of the total number of directors who are in office
at that point, the higher of the two numbers. If the value of
one-third obtained is a fraction, then it has to be rounded off to
one. If a Company’s Board has 7 Directors, there will be three
directors needed. If the number of interested directors is more
than or equal to two-thirds of total number of directors, the
disinterested directors present in the board, provided that the
number is not less than two, deemed the quorum. Private
companies also fall under this stipulation. For section 8
companies, the quorum for a board meeting needs to be either
eight members or twenty five per cent, of its total strength
whichever is less.
9. Time, day and place for holding adjourned Board Meetings
According to the section 174, where a meeting of the Board
could not be held for want of quorum, then, unless the articles
of the company otherwise provide, the meeting shall
automatically stand adjourned to the same day at the same
time and place in the next week or if that day is a national
holiday, till the next succeeding day, which is not a national
holiday, at the same time and place.
10. Directors cannot appoint a Proxy for Board Meetings
The continuing directors may act notwithstanding any vacancy
in the Board; but, if and so long as their number is reduced
below the quorum fixed by the Act for a meeting of the Board,
the continuing directors or director may act for the purpose of
increasing the number of directors to that fixed for the quorum,
or of summoning a general meeting of the company and for no
other purpose.

RULES AND PROCEDURES OF BOARD OF DIRECTORS

MEETINGS
Article 1 (Scope of the Rules and Procedures)
Unless relevant laws and regulations or the Company’s
Articles of Incorporation provide otherwise, the Company’s
Board of Directors meetings (“Board Meetings”) shall be
conducted in accordance with the Rules and Procedures of
Board of Directors Meetings (the “Rules and Procedures”).
Article 2 (Convention and Chairman of Board Meetings)
 Board Meetings shall be held at least once every quarter
but may be held at any time in case of urgent
circumstances.
Board Meetings shall be convened and presided over by the
Chairman of the Board of Directors. However, the first
meeting of every term of the newly elected Board of
Directors shall be convened and presided over by the
Director who has received the largest number of votes after
such election; if there are two or more persons with such
convening rights, they shall elect from amongst themselves
one person to convene and preside over the meeting.
In case the Chairman of the Board of Directors is on leave
or unable to exercise his powers for any cause, the Vice
Chairman of the Board of Directors shall act on his behalf. If
the Vice Chairman is also on leave or unable to exercise his
powers for any cause, the Chairman shall appoint a Director
to act on his behalf. In the absence of such an appointee,
the Directors shall elect from amongst themselves one
person to act on the behalf of the Chairman.
Article 3 (Place and Time of Board Meetings)
Board Meetings shall be held at the head office and during
the office hours of the Company or at any other
appropriate place and time convenient for the Directors to
attend.

-1-
Article 4 (Designated Secretariat, Meeting Notices, and
Meeting Materials)
The subject matters of Board Meetings shall be decided by
the Chairman of the Board of Directors. The Board
secretariat shall conduct the drafting of meeting agendas
and minutes, and handle other administrative matters
related to Board Meetings, and reports to the Chairman of
the Board of Directors. The Company’s Board secretariat
shall be appointed by the Chairman of the Board of
Directors.
Board Meetings shall be convened upon written notices
sent to all Directors fourteen days prior to the date of the
meeting, specifying the date and place of the meeting and
attaching the meeting agenda and related materials.
Notices shall be written in both the Chinese language and
the English language. However, Board Meetings may be
convened at any time without such prescribed notices in
case of urgent circumstances. Any Director attending the
meeting in person shall be deemed to have received such
meeting notice.
If the Directors consider meeting materials to be
insufficient, they may request the Board secretariat to
provide supplemental materials in advance. If the Directors
consider meeting materials to be insufficient during the
meeting, the meeting may be postponed upon a resolution
of the Board of Directors.
Except for any urgent circumstances or legitimate reasons,
the material matters listed below should be included in the
 meeting agenda in advance and may not be presented as
special motions:

1. The Company’s business plans;

2. Annual financial statements;

3. Adoption or amendment of an internal control system;

4. Adoption or amendment of procedures for acquisition or

disposal of assets, financial derivatives transactions,
lending funds to other parties, or providing endorsement
or guarantees for other parties;

5. Material transactions of assets or financial derivatives;

material monetary loans, endorsements or guarantees;

6. Offering, issuance, or private placement of any equity-type

securities;

7. Appointment or discharge of CFO, Controller, or head of

internal auditor;

8. Donations to related parties or material donations to non-

related parties. For emergency donations made for the
 public welfare for material disasters relief, the Board may
ratify such donations in its next Board Meeting; and

-2-

9. Any other matters that shall be resolved by the

Shareholders’ Meeting or Board Meeting as required by
relevant laws and regulations or the Company’s Articles of
Incorporation, or that are deemed to be material by the
regulatory authorities.
For purposes of Item 8 above, “material donation to a non-
related party” shall mean donations made, individually or in
the aggregate, to any single recipient within an one-year
period, that equals or exceeds NT$100 million or 1% of
revenue or 5% of paid-in capital as reflected in the audited
financial statements for the most current fiscal year.
Article 5 (Subject Matters of Board Meetings)
The agenda of regular Board Meetings shall include at least
the following items:

1. Report items:

(1) The meeting minutes of the preceding meeting;

(2) Material business and financial reports;

 (3) Internal audit matters reports; and

(4) Other important matters report, including the report

on implementation status of previous resolutions.

2. Discussion items:

(1) Discussion items reserved by the preceding meeting;

and

(2) Discussion items of the current meeting.

3. Special motions

Article 6 (Attendance Signing Booklet and Proxies)

A signing booklet shall be provided at every Board Meeting
for the attending Directors to sign in. The Directors shall
attend Board Meetings in person. If unable to attend, a
Director may appoint another Director to attend on his
behalf by proxy which specifies the scope of authorization;
any appointee shall not act as proxy for more than one
Director. Any Director attending the meeting via video
conference shall be deemed to have attended the meeting
in person but shall sign an attendance card and send it to
the Board secretariat via facsimile in lieu of signing on the
attendance signing booklet.
 With respect to the discussion of matters specified under
Article 14-3 of the Securities and Exchange Act,
Independent Directors shall attend the Board Meetings in
person; if an Independent Director is unable to attend a
Board Meeting in person and wishes to delegate his/her
rights, he/she can only delegate another Independent
Director to attend on his/her behalf. Any dissenting opinion
or abstention by Independent Directors shall be recorded in
the Board Meetings minutes. If Independent Directors are
unable to attend Board Meetings in person to express their
dissenting opinion or abstention, except for legitimate
reasons, they shall submit a written statement in advance
to be recorded in the Board Meetings minutes.

-3-

Article 7 (Convention of Board Meetings)

If half or more of the Directors are not yet present at the
scheduled time for a Board Meeting, the Chairman may
postpone the time of the meeting. The postponements
shall be limited to twice at the most. If after two
postponements no quorum can yet be constituted, the
Chairman may reconvene the meeting pursuant to the
procedures under Article 4 of the Rules and Procedures.
Article 8 (Other Attendants)
Depending on the subject matters of proposed resolutions,
relevant managerial personnel may be invited to present at
Board Meetings to assist the Directors in understanding the
 Company’s current conditions so that they can make
appropriate resolutions. In addition, CPAs, legal counsels, or
other professional personnel may be invited to the
meetings to provide professional opinions for the Board of
Directors’ reference, but shall excuse themselves and
vacate the meeting when the proposed resolution will be
discussed and resolved.
Article 9 (Discussion of Proposed Resolutions)
In principle, the discussion of proposed resolutions at a
Board Meeting shall proceed in accordance with the agenda
attached to the meeting notice. However, if no objection is
voiced by any Director present at the meeting or with more
than half of the attending Directors’ consent, the Chairman
may make changes. Unless otherwise resolved at the
meeting, the Chairman cannot announce adjournment of
the meeting before all the discussion items (including
special motions) listed in the above agenda are resolved.
In the process of a Board Meeting, if the number of
Directors present at the meeting become fewer than half of
the Directors originally attending the meeting, the
Chairman shall announce a temporary adjournment of the
meeting upon a motion made by any Director present at
the meeting, and Article 7 of the Rules and Procedures
applies mutatis mutandis to such case.
During a meeting, the Chairman may, at his discretion, set
time for intermission or negotiation.

-4-
Article 10 (Voting)
The Chairman may announce to end the discussion of any
resolution and go into voting if the Chairman deems it
appropriate for voting.
Resolutions shall be deemed adopted if no objection is
voiced by any of the attending Directors after solicitation by
the Chairman. If objection is voiced after solicitation by the
Chairman, such resolution shall be voted. Except otherwise
specified in applicable laws and regulations, a resolution
shall be adopted by a majority of those Directors present at
a meeting attended by a majority of all Directors. If there is
an amendment to or substitute for a proposed resolution,
the Chairman shall decide the sequence of voting for such
proposed resolution and the amendment or substitute. If
any one of them has been adopted, the others shall be
deemed vetoed and no further voting is required. The
result of voting shall be announced at the meeting and
placed on record.
The method of voting shall be one of the following as
determined by the Chairman:

1. By showing of hands;

2. By voicing votes; or

3. By casting ballots. The Chairman shall appoint person(s) to

 monitor the voting process and person(s) to count the
ballots; and the person(s) appointed to monitor the voting
process should be a Director.

Article 11 (The Recusal of Conflict-Interested Directors)

If a Director or the judicial person the Director represents
has a personal interest in the matter under discussion at
the meeting, the relevant Director shall disclose the nature
of such personal interest. If such interest may impair the
interest of the Company, the relevant Director shall not join
the discussion and voting of such matter, and shall recuse
himself/herself when the matter is being discussed and
resolved; nor shall the relevant Director exercise voting
right on behalf of another Director.
Article 12 (Meeting Items to be Recorded and Signed)
The resolutions of every Board Meeting shall be recorded in
the meeting minutes. The meeting minutes shall accurately
record the following items:

1. The term (or year), place, and time of the meeting;

-5-

2. The name of the chairman;

3. The attendance situation of the Directors, including the

names and numbers of those who are present, on leave,
 and absent;

4. The names and titles of the other attendants;

5. The name of the recorder;

6. Report items;

7. Discussion items: the voting method and the result of each

proposed resolution; the summary of opinion by the
Directors, experts, and other personnel; the names of the
Directors that disclosed a conflict of interest under Article
11 of the Rules and Procedures, summary of the nature of
the conflict of interest, the reasons for recusal or non-
recusal, and the circumstances of recusal; any dissenting
opinion or abstention with a written statement; any
written statement provided by the Independent Directors
pursuant to Paragraph 2 of Articles 6 of the Rules and
Procedures;

8. Special motions: the names of the persons proposing the

special motions; the voting method and the result of each
proposed resolution; the summary of opinion by the
Directors, experts, and other personnel; any dissenting
opinion or abstention with a written statement; and
 9. Other items that shall be recorded.
Meeting minutes shall be signed or chopped by the
chairman of the meeting and the recorder, distributed to
each Director within twenty days after the meeting, and
carefully kept as the Company’s important file throughout
the life of the Company. The attendance signing booklet of
a Board Meeting shall be part of the meeting minutes and
be permanently retained throughout the life of the
Company. The recording and distribution of meeting
minutes may be performed by means of electronic
transmission.
Article 13 (Tape-recording of Board Meeting Process)
The process of a Board Meeting regarding the subject
matters specified in Article 5 of the Rules and Procedures
shall be fully tape-recorded and retained for five years in a
method that may be encrypted. If litigation occurs
regarding any matter resolved by the Board of Directors
before the above retention period expires, the relevant
recording tapes shall continue to be retained until the
litigation is concluded, and the above mentioned five-year
rule shall not be applicable.
If a Board Meeting is held via video conference, the video
and recording tapes shall be part of the meeting minutes
and be permanently retained throughout the life of the
Company.
 -6-

Article 14 (Cancellation of Board Meetings)

In the case of special circumstances where a scheduled
Board Meeting of the Company must be cancelled after
meeting notices have been sent to the Directors, the
meeting may be cancelled if the person with convening
right notifies the Directors in writing at least three days
prior to the scheduled meeting date. In the case of urgent
circumstances where the scheduled Board Meeting must be
cancelled and it is impossible to notify the Directors prior to
the time specified above, the meeting may be cancelled if
the person with convening right notifies the Directors by
telephone or other means at least three hours prior to the
scheduled meeting time and confirms that each Director
has received such notice.
Article 15 (Delegation of the Board of Directors)
The Chairman of the Board of Directors shall act on behalf
of the Board of Directors pursuant to the Company’s
objectives when the Board of Directors is not in session. In
case the Chairman of the Board of Directors is unable to
exercise his powers for any cause, the Vice Chairman of the
Board of Directors or another Director shall act for him
according to the Company’s Articles of Incorporation and
Article 208 of the Company Law.
Article 16 (Effective Date and Amendment)
 These Rules and Procedures shall be effective from
January 1, 2007. Any amendment to these Rules and
Procedures shall be approved by the Board of Directors.

-7–

Q-3 What is irregular allotment? When an

allotment is said to be irregular?
Ans-: Allotment Of Shares
In the realm of corporate finance and business expansion, the
of shares plays a pivotal role. When businesses choose to raise
money or distribute ownership stakes, one of the most
important steps they take is the allotment of shares. When a
firm distributes its shares to the candidates following an IPO,
then it is known as

the allotment of shares. It is important in raising capital,

assessing the firm’s paid-up and subscribed capital in
accordance with demand from investors and regulatory
compliance.
In this article, we will be discussing more in-depth about the
allotment of shares and the various type of it. So, without any
additional delay, lets begin with it.

Concept Of Allotment of Shares

Before getting deeper into the details, we must help you in

understanding the actual meaning of allotment. So, to put it
simply, during the IPO; Initial Public Offering, a small section of
shares is given to an underwriting structure. This is termed
allocation. After some shares are given to the underwriting
structure, the rest of the shares are given to other structures
that take part in it.

Allotment of shares is the process of appropriating a specific

number of shares and distributing them to those who have
submitted share returns. The allotment of shares is the process
through which the organization generates and issues fresh
shares to either current or past shareholders. The allocation of
fresh shares is done to attract fresh partners for the company.

Return Of Allotment Of Shares

Return of allotment of shares, is the process of adding new

shares into a company. Technically, with an eForm PAS-3, which
contains the whereabouts of the shareholders and the details
of the share and is filed with the registrar of companies within
30 days.

Allocation of shares is the procedure of appropriating a

specified amount of shares as well as distributing them among
persons who have filed share return requests. It is nothing but a
firm filing and developing new shares to submit them to its
existing or new stakeholders. By allotment of shares, a firm can
easily attract new corporate partners.

Types Of Allotment Of Shares

As per sections 42 and 62 of The Companies Act, 2013, a
company can proceed with the process of share allotment in a
few ways,
Right issue

With the board’s permission, a company can allot shares to the

existing shareholders about their previous shareholdings.
However, the offer to the shareholders shall remain open for
more than 15 days but less than 30 days. Apart from this, they
must also get an option for renunciation, i.e., to offer it to
someone else. In the case of allotment of shares in a private
company, this time limit can be reduced if more than 90% of
the shareholders agree.
Private placement

private placement means the allotment of shares to a specific

set of people instead of the general public. Unlike the right
issue, they do not carry any right for renunciation of shares. For
a company to allot shares via private placement, they must
pass an SR in a general meeting and get the assent of
shareholders.

Public placement

Public placement is one where the general public applies for

shares, and out of them, shares are allotted to the public as per
the company’s preference. Public placement is an option
available only to public companies and not private companies.

Preferential allotment

Preferential allotment is a scheme of allotting shares in a

company to existing shareholders or outsiders at a price that is
lower than the market price. This quota of a company can be
allotted to its existing shareholders for cash or some other
consideration, like shares in other companies, debentures, etc.
The preferential allotment is also known as the reservation
issue and bonus issue.
These were the few types of allotment of shares. After securing
how a company wants its shares allotment to be done, the next
step is the process of allocating shares.

Process Of Allotment of Shares

Here’s a complete guide as to how a company can start the

process of allotment of shares.

Step 1– Before you begin the process of onboarding new

shareholders, it is important to take note of your existing
shareholders and their shareholdings. Now move on to the next
step of finding out how many new shares you want to
introduce, how they will be introduced, and the resulting
capital structure.

Step 2– Next step is to discuss the same in a board meeting

with all the existing shareholders and get their opinions and
assent. Also, as per the Companies Act, 2013, you are required
to keep a detailed note of the meeting. After the discussion and
finalization of shares, you should get the details of all the
prospects that have applied for.

Step 3- After the second step, the company is required to file

the form MGT- 14 with the registrar of companies along with
the SR passed. The details of the meeting held and the SR
passed by the shareholders regarding the new issue must be
registered with the registrar of companies in the form MGT- 14
to initiate the process.

Step 4– Registering the new certificates of new shareholders or

existing shareholders for the new capital structure the
shareholders have agreed for. And with this step, the new
shareholders are finally a part of the company.

With this, you’ve finally completed the procedure for the

allotment of new shares.

Later on, calls are made by the company to its shareholders

either in full or in installments, depending on the terms of
allotment. The calls are made by the company at times when it
requires funds for any special purpose or wants to raise
additional capital for further growth.

Called-up shares can be paid in cash, or otherwise partly in cash

and partly in any other form.

So there also can be a clause of call where all the shares of a

participant are called for redemption, either wholly or partly
before the due date, if he is unable to pay all the installments
due on them or fails to pay any installment with interest.

As we are done with the process, certain provisions in respect

to the allotment that the company should take care of will be
discussed in the next section.
Provisions Regarding Allotment Of Shares

1. In case a public company is issuing shares through public

allotment, then it must issue a prospectus before
registering it with the registrar.
2. After the prospectus is released, the interested public then
applies for the shares. The company can set its terms of
money, such as asking for the full money at the time of
application, or can later ask it in installments. However,
the application money should be more than 5% of the
nominal value in order to proceed with the application
process.
3. The minimum subscription that is there in the prospectus
should be received if the company wants to move further
with the application.
4. All the money should be deposited in a separate bank
which should not be used for any other purpose other
than that for shares.
5. If the company has not received 90% of the issued amount
within 60 days, then the company has to refund all of the
money back to its shareholders. There is an 18-day
relaxing period. If the company delays it for 78 days, then
it has to pay an interest of 6% per annum.
6. As far as the calls are concerned, no calls should be made
beyond 25% of the total value.
 7. There should be a minimum gap of 1 month between two
calls.

Calls should be made in the same manner for everyone, and no

preferential treatment should be given to any shareholder of
the same class.

Why is the allotment of shares crucial for companies?

1. When a company offers new shares, it does so to increase

the capital. The most common method is to offer its stock
for sale to the public through an initial public offering
(IPO). A company thinks of issuing new shares when it
wishes to increase its capital structure for business
expansion or to finance its operations. A company that
chooses this option will issue new shares to investors, and
then the investors can buy and sell those shares on a stock
exchange.
2. A company can also offer new shares to repay its existing
loans. When a company releases down its debts using
funds received from shares, it can significantly enhance
various financial ratios like the debt-to-asset ratio and the
debt-to-equity ratio.
3. If a company is burdened with too much debt, it needs
fresh capital to keep operating because companies rely on
fresh capital as well as assets and equity to fund their
 operations. However, issuing more debt may be counter-
productive if the company’s credit rating has been
negatively affected by its previous level of debt.
4. The process of issuing new shares is called equity
financing, stock financing or just plain equity. Equity refers
to ownership of the business in question, so issuing new
shares represents an increase in ownership of the business
by existing shareholders and/or by new investors.
5. The function of issuing shares is not just to fund the
company. It is also to raise capital from the public and to
reward stakeholders in the company.
6. A company can issue new shares to investors or existing
stakeholders. In most cases, investors are given the option
of purchasing new shares in proportion to the value of
cash they would receive as dividends in a certain time
frame. Investors who purchase more new shares at this
stage will have a higher stake in the company.
7. Shareholders may choose not to purchase new shares
when they are issued by the company. If a shareholder
chooses not to purchase any new shares, then his or her
stake in the company will be diluted. This occurs in two
ways: first, there will be more shareholders, increasing the
number of people sharing profits; second, each
shareholder’s investment will be divided by the number of
 new shares issued during that period, thus reducing their
share in the profits.

Usually, companies may choose to issue new shares to existing

shareholders as a reward or a token of gratitude for their
support and loyalty for their services rendered to the company.

Certain principles to note during allotment of shares

1. The allotment of shares must be communicated within a

stipulated time.
2. Allotment of shares must be done with the requirements
such as minimum subscription, board resolution, etc.
3. As per the law, the reasonable time is 6 months which
means there should not be more than a duration of 6
months between application and allotment of shares.
4. The allotment of shares should not contain any condition
precedent to it. It should be absolute and unconditional.
5. The bank account used for application money should not
be used for any other purpose.

Conclusion

When a company raises money by issuing new shares to the

public, the company and the shareholders are in a win-win
situation. The shareholders derive maximum benefits because
they have more avenues to earn profits from the investment. In
this process, the company has achieved its immediate target of
expansion and is also able to establish a stronghold over the
market. This is because when there is an increase in demand
for the share, it will naturally rise in value. Thus, both parties
have much to gain from this process or issue shares.

Thus, a company that is planning to raise funds through the

allotment of shares must take into account all the aspects
mentioned above to ensure a successful share allotment.

Q-4 What are the salient features of the

Companies Act?
Ans:-

Indian Companies Act 1956 was repealed in favour of

the Companies Act 2013. All public and unlisted firms in the
nation are governed by the complete provisions of the
Company Act 2013. Numerous new parts were added by this
act, whereas the corresponding sections of the Act of 1956
were abolished. This groundbreaking legislation will have a
significant impact on all Indian-incorporated enterprises. The
Companies Act 2013 partially superseded the Act of 1956. In
September 2013, it ultimately became law after becoming an
act.

The Companies (Amendment) Bill 2020 was passed by the

Indian Parliament in 2020 to further reform the Companies
Act, decriminalise a number of offences that can be committed
more than once, and facilitate conducting business in the
nation. Other proposed changes include easing corporate social
responsibility (CSR) compliance requirements, making different
chambers at the National Company Law Appellate Tribunal
(NCLAT), and reducing penalties for some offences and the
timeframe for rights concerns.

Companies Act 2013

The establishment and operation of corporations or companies

in India are governed under the Companies Act 2013. In the
post-independence period, referring to the Bhabha
Committee’s suggestions, the country’s first-ever company act
to regulate the functioning of corporate enterprises was
formed in 1956. After that, in the year 2013, there felt a need
to make amendments and revisions to this act to include
several new provisions. That’s how the Companies Act 2013
came into the picture. India was the first nation to make
corporate social responsibility (CSR) spending a legal
requirement by Section 135 of the 2013 Act.

The following Central government Acts are currently under the

administration of the Ministry of Corporate Affairs:

 Companies Act 2013

 1956 Companies Act
 2002 Competition Act
 2016 Insolvency and Bankruptcy Code
 1949’s Chartered Accountant Act
The 1956 Act has been replaced by the Company act 2013.

Highlights of Companies Act 2013

The following list includes the main highlights of the

Companies Act 2013:

 For private enterprises, the maximum number of

stockholders has been set at 200, up from 50 previously.
 The idea of a one-person business has been developed.
 There are now two tribunals that are required. Which are:
o Court of Appeals for Company Law

o CSR for Company Law Tribunal

Definition of Company in Companies Act 2013

The definition of ‘Company’ in the Companies Act 2013 is as

follows:- “Company means an entity incorporated under this
Act or under any previous company law”. In layman’s language,
a company can be defined as an artificially created entity based
on law, which has all rights, obligations and power similar to a
human being.

As per the Companies Act 2013, a company is a separate legal

entity which can have various bank accounts or properties
under its name. It can own and dispose of a property as and
when required just like any other human being. A company has
liabilities but it can either be limited or unlimited liability.
Salient Features of Companies Act 2013

The Companies Act 2013 is credited with the introduction of

many significant concepts and organizations. It also provides
power to the shareholders and supports women’s
empowerment. The Companies Act 2013 lays down certain
guidelines and also clearly identifies the role and duties of
higher authorities.

Some salient features of the Companies Act 2013 are as

follows:-

 The Companies Act is credited with the formation of the

National Company Law Tribunal which is a quasi-judicial
body.
 The Act also introduced the ‘Dormant Companies’
concept. According to the concept, a company that has not
been in business for at least 2 years are considered
dormant.
 All the documentation needs to be saved electronically as
per the Companies Act.
 As per the Act, a notice of seven days is required to be
sent prior to any board meeting.
 It also lays down the guidelines for a specific amount to be
set aside by the companies for the purpose of ‘Corporate
Social Responsibility’.
 This new class of privately owned companies may only
have one stakeholder and one director. According to the
1956 Act, a private business needed at least two
shareholders and executive members.
  Every company must have at least one director who has
lived in India for at least 182 days during the previous
calendar year.
 The Act allows for the perpetuation of the articles of
incorporation (the application of extrajudicial protections).
 The responsibilities of a Director have been specified in
this Act. The roles of “Key Managerial Personnel” and
“Promoter” have also been described.
 The Act also forbids auditors from offering the corporation
anything other than audits. There is significant civil and
criminal liability for an auditor in the event of non-
compliance.
 One director should represent small owners in listed
businesses.
 During an inquiry, it is possible to search and seize papers
without a magistrate’s permission.
 Strict guidelines have been established for taking public
deposits.
 The National Financial Reporting Authority (NFRA)
establishment has been planned for. It establishes and
upholds accounting and auditing standards and controls
the activities of auditors. India is now qualified to join the
International Forum of Independent Audit Regulators
(IFIAR) as a result of the NFRA’s notification.

Difference Between Companies Act 2013 and 1956

There were a number of differences between the companies

act 2013 and 1956. The primary difference between both acts
was that there were 26 chapters in Act of 1956 and 29 chapters
in the 2013 Act. Another difference is on the basis of the
number of sections in the acts where the 1956 Act had 658
sections and the Companies Act 2013 had 470 sections. Also,
the number of schedules has been reduced in the 2013 act,
which was formerly 15 in the 1956 act.

Details Companies Act 1956 Companies A

Parts 13 NA

Chapters 26 29

Section 658 470

Schedules 15 7

Important Keywords related to Indian Companies Act

Indian Company Act 2013 is a purely business-oriented act that

has some terminologies. The following list of terms from the
Companies Act 2013 that every aspirant should be familiar
with:

 Appellate Tribunal – Questions about the National

Company Law Appellate Tribunal may be submitted to the
appellate tribunal.
 Associate Company – You might inquire about what
constitutes an associate company.
  Called-Up Capital – Concerns about the distinction
between nominal capital, authorised capital, and called-up
capital may be raised.
 Company Liquidator – It’s crucial to understand what a
company liquidator is.
 The distinctions between debt securities, deposits, and
contracts are up for discussion.

Company Act Amendment 2019

All the existing acts in the Constitution of India have undergone

some kind of amendments as required. In March 2020, the
Parliament approved this Act. The most recent update to the
Companies Act suggests the following changes:

 The proposed law grants the government the power to

permit specific public businesses to list securities in other
countries (as determined by the government).
 The Bill grants the national government the power to
exclude companies that issue specific assets from the
definition of “listed company” in consultation with
the Securities and Exchange Board of India.
 If business earnings are inadequate or absent in a
particular year, the Company Act establishes special
mechanisms for paying compensation to its executive
directors (including the managing director and other full-
time directors).
Unlimited Company in India under the Companies Act

A private company that can be created without shareholding is

known as an unlimited corporation. However, the shareholders’
members’ liability is unlimited. That implies that in the event of
the firm’s insolvency, the owners would be jointly liable for all
debts of the company in any amount. This is in contrast to a
limited corporation, where investors only have access to their
own assets and the assets of the firm and are not directly liable
to creditors.

Provisions of Companies Act 2013 – Amendments

During the winter session of Parliament, the Ministry of

Corporate Affairs plans to introduce changes to the Companies
Act 2013.

Professionals and experts have provided the ministry with

comments on these suggestions given by the Company Law
Committee, which presented its Recommendations to the
Ministry of Finance and Corporate Affairs in April 2022.

As per the main suggestions,

 It is anticipated to raise the bar for corporate governance,

particularly in terms of selecting candidates for board
positions and managing resignations of top executives and
auditors.
 The most important recommendations to the Companies
Act 2013 aim to guarantee that independent directors
are actually independent and that businesses are more
 transparent about instances of statutory auditors
objecting to the income statement, putting conditions on
them, or even ceasing their auditing assignment.
 By altering the law in a number of ways, including making
certain types of joint audits necessary, it aims to safeguard
the independence of statutory auditors.
 The government is considering these adjustments in light
of some recent company bankruptcies, notably those
involving sizable non-bank financial firms with major
financial issues.

Q-5 What are powers and functions of

official liquidator?
Ans:-

Even though the process is straightforward, company

liquidation can present a number of issues that must be
addressed to ensure that the process is carried out correctly.

Here’s what you need to know to make that important decision

for your company, prepare for the process, avoid any
unnecessary stress and, finally, move on.

What is a Liquidator?

A liquidator or an official receiver manages the entire

liquidation process. He or she is appointed when a company
goes into liquidation or is wound up by the Court in
a compulsory liquidation process, which is brought about by a
disgruntled creditor.

What Powers Does a Liquidator Have?

The liquidator has a wide range of powers that enable him or

her to realise or sell the company’s assets and use the proceeds
to settle debts. The liquidator takes control of the business,
meets deadlines for paperwork, keeps the authorities
informed, settles all claims against the company, interviews the
directors and reports on the reasons for the liquidation. He or
she will also dissolve the company in other words remove the
company from the public register at Companies House.

What’s the Aim of Liquidation?

Liquidation marks the end for most businesses as it results in

the company’s closure when its assets are sold and the
proceeds are used to settle creditor claims. The liquidation
process recovers funds for creditors and ends all legal action
against the company and its directors. However, company
closure typically sees little return for directors/shareholders.

What Happens When a Liquidator is Appointed?

A liquidator can be appointed in one of a number of insolvency

procedures, such as a Creditors’ Voluntary Liquidation (CVL),
which occurs when the decision to liquidate the company is
taken voluntarily by directors faced with an insolvent company
that is unable to pay its creditors in full. The directors take the
decision to close down the business and start afresh. In this
scenario, the process is initiated by the directors and not the
company’s creditors.

The CVL process involves calling meetings of shareholders and

creditors to pass the appropriate resolutions and to appoint a
liquidator who is a licensed Insolvency Practitioner (IP). The
liquidator is appointed to close the company in a professional
manner, making sure a fair distribution of the company’s assets
takes place amongst creditors. Neither the Court or the official
receiver are involved in a CVL procedure.

Liquidators are also appointed in Members Voluntary

Liquidation (MVL). This is where the company is solvent and is
able to pay all of its creditors in full. Directors frequently take
the decision to go down the MVL route for tax purposes or to
restructure the company. In this scenario, the appropriate
resolutions must be passed at a general meeting to wind up the
company and appoint a liquidator.

Who Appoints Official Receiver (Liquidator)

In contrast, an official receiver is typically appointed when a

company is forced into liquidation by irate creditors and a
winding up order is issued by the Court. His or her role in this
situation is to investigate the reasons behind the company’s
failure and to deal with its assets and liabilities.

What is the Difference Between a Liquidator and a Receiver?

The main differences between a liquidator and an official

receiver are not the roles themselves, but the insolvency
procedures that they administer and manage. A liquidator is
appointed by the directors in a MVA or a CVL, which allows the
directors to retain an element of control over the process. An
official receiver is appointed as liquidator by the Court when a
winding-up order has been granted as a result of a creditor(s)
forcing a company into compulsory liquidation.

That said, the official receiver may seek the appointment of

liquidator if he or she believes that the complexity of the case
requires and IP appointment.

What are the Rights and Duties of the Liquidator?

The liquidator has a host of powers, depending on the type of

liquidation that he or she is administering. Their main
responsibility is to convert any remaining assets or property of
the company into cash to repay as many creditors as possible.
In addition to a wide range of admin tasks, such as paperwork,
he or she will have to investigate director conduct and schedule
meetings with creditors and directors. The specific duties of the
liquidator will also include the following:

 To assess all debts and decide which should be repaid in

full or in part. In some cases, claims can be rejected
 Bring to an end any outstanding contracts or legal disputes
 Seek valuations for company assets to maximise returns
for creditors
 Closely inspect the restoration of property that may have
been sold at undervalue
  Keep creditors informed and involved in the decision-
making process where appropriate.
 Communicate how creditor claims are progressing, the
reasons why the company failed as well as details about
the redistribution of assets
 Distribute funds to creditors fairly, taking into account the
repayment structure which begins with the fees and
expenses of the liquidation process itself
 Interview and report on the factors that led to the
company’s demise and liquidation. Report to the Secretary
of State if he or she identifies director misconduct or fraud
 Dissolve the company.
What are their Fees and how do they get Paid?

Following the official hierarchy of repayment, which is laid

down by the Insolvency Act 1986, the liquidator’s fees and
expenses are always first to be paid. These are followed by
payments to secured creditors with a fixed charge, such as a
bank, preferential creditors and unsecured creditors and,
finally, shareholders. When a company becomes insolvent and
begins a formal insolvency procedure, each class of creditors is
paid in full before funds are allocated to the next tier or to an
inferior debt.

Are the Fees tax Deductible?

The old accounting period ends the day before the

appointment of the liquidator and a new one begins on the day
of the appointment. Once a liquidator is in place, the new
accounting period will end once the winding up has concluded
or after 12 months, if it’s earlier.
Fees and expenses relating to the liquidation are not tax
deductible as once a company stops trading it can no longer
receive a trading deduction for expenses. This means that the
cost of liquidation should be taken into account when valuing
assets at company closure and expenses accrued.

Can a Liquidator Disclaim a Contract or Lease?

When an insolvent company goes into liquidation, the

liquidator’s main duty is to realise the assets and property of
the company and use the proceeds to pay off the company’s
debts and liabilities. That said, one of the liquidator’s key
powers is the right to disclaim “onerous property”. Put simply,
this means that any contract that is unprofitable or company
property that is unsaleable or produces liabilities can be
disclaimed by the liquidator. For instance, a commercial lease is
typically “onerous” as there’s a liability to pay rent and other
sums to maintain the property.

What is the Liquidator’s Final Statement of Account?

During every liquidation procedure, the liquidator must prepare

a final statement of account, which shows how much he or she
realised for assets and property and how that amount was
redistributed. The final statement of account shows receipts
and payment of cash. In line with legislation, payments are
made to creditors following the official hierarchy of repayment.
When does a Liquidator Vacate Office?

Once the company’s affairs are fully wound up, the liquidator
will give notice to the company’s directors, creditors, and the
Court. At this time, creditors have the right to request further
information from the liquidator, challenge his or her fees and
expenses or even object to his or her release from office.
However, this must be done in writing up to eight weeks after
the liquidator has given notice, according to protocol.

If everything is fully wound up and in order, the liquidator, once

he or she has delivered the final statement of account to
Companies House and given notice to the Court, stating that no
creditor has objected to his or her release, will be released and
vacate office.

In voluntary winding up, when a company decides to close

down its operations, a liquidator is appointed to oversee the
process. But what exactly does a liquidator do? The liquidator
holds significant powers, including gathering and selling
company assets, settling debts, and distributing remaining
funds to shareholders. Moreover, they bear the responsibility
of ensuring fair treatment to all parties involved and conducting
investigations if any misconduct is suspected. Let us discuss
the powers and duties of liquidator.

Table of Contents
 Who is a Liquidator in Voluntary
Winding Up?
 Role of Liquidator
 Appointment and Qualifications
of a Liquidator
 Powers of the Liquidator
 Duties of the Liquidator
 Final Words

Who is a Liquidator in Voluntary Winding Up?

In voluntary winding up, a liquidator is an individual appointed
by the shareholders or members of a company to oversee the
winding-up process and manage the affairs of the company
during the period of its dissolution. The main purpose of the
liquidator is to ensure the orderly and efficient realization of
the company’s assets, settlement of its liabilities, and fair
distribution of any remaining funds to the shareholders or
members.
The liquidator can be either:
Role of Liquidator
The role of liquidator of a company is to oversee the winding-
up process and manage the affairs of the company during its
dissolution. When a company goes into liquidation, either
through voluntary or compulsory winding up, the liquidator is
appointed to act as an independent and impartial
representative of the company and its stakeholders.

Appointment and Qualifications of a Liquidator

In a voluntary winding-up, the company’s shareholders must
pass a special resolution to appoint a liquidator. The liquidator
may be a qualified insolvency practitioner, a licensed individual,
or even a shareholder or director of the company. However,
some jurisdictions may require specific qualifications and
restrictions for the appointment of a liquidator.
Now let us discuss some powers and duties of
liquidator under Companies Act 2013.
Powers of the Liquidator
The powers of a liquidator include-
 Gathering and Realization of Assets: One of the
primary duties of the liquidator is to identify and gather
all the assets of the company. This includes tangible
assets such as property, equipment, and inventory, as
well as intangible assets like patents, trademarks, and
intellectual property rights. The liquidator is then
responsible for selling or disposing of these assets to
convert them into cash.
 Settling Liabilities: The liquidator must also identify
and settle all the outstanding debts and liabilities of the
company. This includes payments to creditors,
employees, and other stakeholders. The liquidator
must follow a strict order of priority while making these
settlements, as defined by the relevant laws.
 Distribution of Funds: Once the liabilities are settled,
the liquidator distributes the remaining funds, if any, to
the shareholders under their shareholdings. The order
of distribution may also be specified by law, ensuring
fair treatment to all shareholders.
 Investigations: The liquidator has the power to
conduct investigations into the company’s affairs to
ascertain any wrongful trading or fraudulent activities
that may have contributed to the company’s
insolvency. If any misconduct is discovered, the
 liquidator can take legal action against those
responsible.
 Summoning Meetings: The liquidator can call for
meetings with the creditors, contributors, or
shareholders as required during the winding-up
process. These meetings may be for obtaining approval
for certain actions or to keep stakeholders informed
about the progress of the winding-up process.
 Legal Action: The liquidator has the authority to
initiate legal proceedings on behalf of the company to
recover assets, challenge voidable transactions, or
defend the company’s interests.
Duties of the Liquidator
The liquidator has following duties namely-
 Fiduciary Duty: The liquidator acts as a fiduciary for
the company and its stakeholders. They are required to
act honestly, impartially, and in the best interests of all
parties involved.
 Reporting: The liquidator must provide regular
reports on the progress of the winding-up process to
the relevant authorities and stakeholders. These
reports may include financial statements, details of
asset realization, and other relevant information.
Compliance with Laws: The liquidator must comply
with all relevant laws and regulations governing the
winding-up process. They must ensure that the
 distribution of assets and settlement of liabilities follow
the prescribed legal procedures.
 Impartiality: The liquidator must remain neutral and
unbiased throughout the winding-up process, avoiding
favoritism towards any stakeholder.

Final Words
The role of a liquidator in voluntary winding up is of paramount
importance to ensure a smooth and fair distribution of the
company’s assets among its stakeholders. This checklist of
powers and duties serves as a guide for liquidators to discharge
their responsibilities effectively and in compliance with the
applicable legal framework. Engaging a qualified and
experienced liquidator can significantly contribute to a
successful and expeditious winding-up process, benefiting all
parties involved.
B.COM- 402 (INFORMATION
TECHNOLOGY)
 Q-1 What is database? What are the
characteristics of database system?

Ans:- Characteristics of DBMS

DBMS stands for Data Base Management System. It is a set of

computer programs that are used for the creation and
modification of a database. It is a software integrity package.
The Data Base Management System also acts as an
intermediate between the end user and the Database. It also
establishes an environment for multiuser to create, access, and
manipulate the data in the Database.

Characteristics of DBMS

Some well-known characteristics are present in the DBMS

(Database Management System). These are explained below.

1. Real World Entity

o The reality of DBMS (Database Management System) is

one of the most important and easily understandable
characteristics. The DBMS (Database Management
System) is developed in such a way that it can manage
huge business organizations and store their business data
with security.
 o The Database can store information such as the cost of
vegetables, milk, bread, etc. In DBMS (Database
Management System), the entities look like real-world
entities.
o For example, if we want to create a student database, we
need some entity. Any student stores their data.
o In the Database, then, it should be the real-world entity.
The most commonly used properties in the student
database are name, age, gender, roll number, etc.

2. Self-explaining nature
o In DBMS (Database Management System), the Database

contains another database, and another database also

contains metadata.
o Here the term metadata means data about data.

o For example, in a school database, the total number of

rows and the table's name are examples of metadata.

o So the self-explaining nature means the Database explains

all the information automatically itself. This is because, in

the Database, all the data are stored in a structured
format.

3. Atomicity of Operations (Transactions)

o Here, atomicity means either the operation should be

performed or not performed. i.e., it should complete the

operation on 0% or 100%.
o Here DBMS (Database Management System) provides

atomicity as a characteristic. This is the most important

and useful characteristic of the DBMS (Database
 Management System). You can completely understand the
atomicity with the help of the below example.
o For example, every bank has its own Database, and the
Database contains all the information about its customers.
Let transaction is the most common atomic operation of
the bank. If Sona wants to transfer 1000 rupees to the
Archita account, it is possible with the help of the
atomicity feature of the Database. If there is a problem in
the Archita account, if there is a problem in the atomicity
of the Database, then the money will be deducted from
the Sona account but not credited to the Archita account.
o The Database has the feature of atomicity then; such
transactions have not occurred at all, and if the transaction
fails, then the money will automatically return to the
sender account.
o Basically, for a successful transaction, the total operation
depends on the Database. If the Database works perfectly,
the transaction will be successful, and if the Database fails,
the whole banking server will be down.

4. Concurrent Access without Anomalies

o Here the term anomalies mean multiuser can access the

Database and fetch the information without any problem.

o For a better understanding, let's take the example of a

bank again. Let Sonu give his ATM card to his sister Archita
and tell her to withdraw 5000 from the ATM. At the same
time, Sonu transferred 2000 rupees to his brother Monu.
At the same time, both operations perform successfully.
Initially, Sonu had 10000 rupees in his bank account. After
 both transactions, i.e., transfer and withdraw, when Sonu
checks his bank balance, it shows 3000 rupees. This error-
free updation of bank balance is possible with the help of
the concurrent feature of the Database.
o Thus here we see that concurrent is a great feature of the
Database.

5. Stores Any Kind of Structured Data

o The Database has the ability to store the data in a

structured format.
o In most of the websites, we see that only student database

examples are given for a better understanding, but the

important fact is that the Database has the ability to store
an unlimited amount of data.
o DBMS has the ability to store any type of data that exists

in the real world, and these data are structured way. It is

another type of very important characteristic of DBMS.

6. Integrity
o Here the term integrity means the data should be correct

and consistent in nature. Let's understand this by taking an

example.
o Let's say there is a bank named ABC bank, and ABC bank

has its own Database for the storage of its customer data.
If we try to enter the account details of ABC bank and the
account details are not available in the bank, then the
Database gives the incorrect output. However, if a
customer changes their address but the new address is not
updated in the Database, it is called data inconsistency.
 o So the data available in the Database should be correct as
well as consistent.
o If someone's account has zero balance and later the
customer deposits 6000 rupees in his account, if the new
account balance is not updated in the Database, it creates
a problem for the customer.

7. Ease of Access (The DBMS Queries)

o The file and folder system was used to store the data

before the DBMS came to the market.

o Searching for the student's name was a very difficult task

at that time. This is because every search operation is

done manually in the file and folder system. But when
DBMS comes into the market, it is very easy to access the
Database.
o In DBMS, we can search any kind of stored data by

applying a simple search operation query. It is so much

faster than manual searching.
o In DBMS, there is a CRUD operation ( here CRUD means

Create, Read, Update & Delete) by which we can

implement all the types of query in the Database.

8. SQL and No-SQL Databases

o There are two types of databases (not DBMS): SQL and No-

SQL.
o The SQL databases store the data in the form of Tables,

i.e., rows and columns. The No-SQL databases can store

data in any form other than a table. For instance: the very
 popular MongoDB stores the data in the form of JSON
(JavaScript Object Notation).
o The availability of SQL and No-SQL databases allows us to
choose the method of storing the data as well.
o There should not be any debate between SQL and No-SQL
databases. The one that we require for a particular project
is better for that project, while the other might be better
for some other use.
o This is a characteristic of DBMS because DBMS allows us to
perform operations on both kinds of databases. So, we can
run queries and operations on SQL as well as No-SQL
databases.

9. ACID Properties
o The DBMS follows certain properties to maintain
consistency in the Database. These properties are usually
termed ACID Properties.
o However, we have already talked about some of these

properties, but it is very important to mention the ACID

properties as a whole.
o ACID stands for Atomicity, Consistency, Isolation, and

Durability.
o We have already talked about atomicity and consistency.

Atomicity means the transaction should either be 0% or

100% completed, and consistencymeans that the change
in data should be reflected everywhere in a database.
 o Isolation means that multiple transactions can occur
independently without the interference of some other
transactions.
o Durability means that the chances of a successful atomic
transaction, i.e., a transaction that has been 100%
completed, should reflect in the Database.

10. Security
o The Database should be accessible to the users in a limited

way.
o The access to make changes to a database by the user

should be limited, and the users must not be given

complete access to the entire Database.
o Unauthorized users should not be allowed to access the

Database.
o Authentication: The DBMS has authentication for various

users that directly refers to the limit to which the user can
access the Database. Authentication means the process of
laughing in of the user only with the rights that he/she has
been authorized to. For instance, in any organization, the
admin has access to make changes to the Database of the
organization as some new employee might have joined the
organization or someone might have left it. However, the
employees have access only to their personal profiles and
can make changes to them only. They cannot access the
Database of any other employee or the organization as a
whole.
Components of DBMS

DBMS stands for DataBase Management System. DBMS is a type of softw

save and retrieve the user's data with the security process. DBMS can man
with the help of a group of programs. The DBMS can accept the reques
system to supply the data. The DBMS also can accept the request to retrie
data through the user and third-party software.

DBMS also give permission to the user to use the data according to th
"DBMS" contains information regarding the database program and the u
an interface between the user and the software. In this topic, we are
various types of DBMS.
Components of DBMS
There are many components available in the DBMS. Each component ha
the DBMS. A database environment is a collection of components that
data, management, and a group of data. These components consist of peo
Handel the database, data, hardware, software, etc. there are several com
the DBMS. We are going to explain five main topics of the database below
1. Hardware
o Here the hardware means the physical part of the DBMS. Here th

output devices like a printer, monitor, etc., and storage devices like a
o In DBMS, information hardware is the most important visible part. T

is used for the visibility of the data is the printer, computer, scanner
is used to capture the data and present the output to the user.
o With the help of hardware, the DBMS can access and update the data

o The server can store a large amount of data, which can be shared

user's own system.

o The database can be run in any system that ranges from microcom

computers. And this database also provides an interface between th

database.
o When we try to run any database software like MySQL, we can type
 the help of our keyboards, and RAM, ROM, and processor are p
system.

2. Software
o Software is the main component of the DBMS.

o Software is defined as the collection of programs that are used to in

about its work. The software consists of a set of procedures, pro

associated with the computer system's operation and performance.
computer software is a set of instructions that is used to instruct the
for the operation of the computers.
o The software includes so many software like network software and

The database software is used to access the database, and the

performs the task.
o This software has the ability to understand the database accessin

convert these languages to real database commands and then execut

o This is the main component as the total database operation wor

application. We can also be called as database software the wrapper

database, which provides an easy interface for the user to store, up
data from the database.
o Some examples of DBMS software include MySQL, Oracle, SQL Serv

Clipper, Foxpro, Microsoft Access, etc.

3. Data
o The term data means the collection of any raw fact stored in the dat

are any type of raw material from which meaningful information is ge

o The database can store any form of data, such as structural data, non

logical data.
o The structured data are highly specific in the database and have a st
 in the case of non-structural data, it is a collection of different type
data are stored in their native format.
o We also call the database the structure of the DBMS. With the help
can create and construct the DBMS. After the creation of the data
access, and update that database.
o The main reason behind discovering the database is to create and ma
the database.
o Data is the most important part of the DBMS. Here the database con
and metadata. Here metadata means data about data.
o For example, when the user stores the data in a database, some dat
the data, the name of the data, and some data related to the user,
database. These data are called metadata.

4. Procedures
o The procedure is a type of general instruction or guidelines for th

instruction includes how to set up the database, how to install the da

and log out of the database, how to manage the database, how to
database, and how to generate the report of the database.
o In DBMS, with the help of procedure, we can validate the data, co

reduce the traffic between the server and the clients. The DBM
performance to extensive or complex business logic when the
procedures correctly.
o The main purpose of the procedure is to guide the user during th

operation of the database.

o The procedure of the databases is so similar to the function of the

difference between the database procedure and database function

function acts the same as the SQL statement. In contrast, the da
invoked using the CALL statement of the DBMS.
 o Database procedures can be created in two ways in enterprise arc
ways are as below.
o The individual object or the default object.
o The operations in a container.

1. CREATE [OR REPLACE] PROCEDURE procedure_name (<Argument> {IN

2. <Datatype>,...)
3. IS
4. Declaration section<variable, constant> ;
5. BEGIN
6. Execution section
7. EXCEPTION
8. Exception section
9. END
5. Database Access Language
o Database Access Language is a simple language that allows users to

perform the desired operations on the data that is stored in the datab
o Database Access Language is a language used to write commands t

delete data stored in a database.

o Users can write commands or query the database using Database Ac

submitting them to the database for execution.

o Through utilizing the language, users can create new databases and t

delete data.
o Examples of database languages are SQL (structured query language

etc. A database language is comprised of two languages.

1. Data Definition Language(DDL):It is used to construct a database. DDL

schema at the physical, logical, and external levels.
The following commands serve as the base for all DDL commands:

o ALTER<object>
o COMMENT
o CREATE<object>
o DESCRIBE<object>
o DROP<object>
o SHOW<object>
o USE<object>

2. Data Manipulation Language(DML): It is used to access a database. T

statements to retrieve, modify, insert and delete the data from the databa

The following commands serve as the base for all DML commands:
o INSERT
o UPDATE
o DELETE
o LOCK
o CALL
o EXPLAIN PLAN

6. People
o The people who control and manage the databases and perform

operations on the database in the DBMS.

o The people include database administrator, software developer, and

o Database administrator-database administrator is the one who ma

database management system. DBA takes care of the security of the

 managing the license keys, managing user accounts and access, etc.
o Software developer- theThis user group is involved in developing an
of DBMS. They can handle massive quantities of data, modify and e
and develop new databases, and troubleshoot database issues.
o End user - These days, all modern web or mobile applications store u
think they do it? Yes, applications are programmed in such a way t
data and store the data on a DBMS system running on their server. En
who store, retrieve, update and delete data.
o The users of the database can be classified into different groups.
i. Native Users
ii. Online Users
iii. Sophisticated Users
iv. Specialized Users
v. Application Users
vi. DBA - Database Administrator

Disadvantages of DBMS
Introduction

DBMS stands for Data Base Management System. It is a set of

computer programs that are used for the creation and
modification of a database. It is a software integrity package.
The Data Base Management System also acts as an
intermediate between the end user and the Database. It also
establishes an environment for multiuser to create, access, and
manipulate the data in the Database.

Disadvantages of DBMS

The disadvantages of DBMS are all the actions or activities that

create the problem or provide errors to the Database. Although
DBMS is used worldwide, there are some cons and pros of
DBMS. The most common disadvantages of the DBMS are cost,
complexity, size, maintenance, security, performance, etc.

1. Increased cost

There are various types of costs. These are explained below.

o Cost of hardware and software:This is the first

disadvantage of DBMS. This is because to run the DBMS,
there is must need for high-speed processors and large
memory size. Nowadays, in every field, a large amount of
data needs to be stored safely with security. But
nowadays, the cost of a high-speed processor and large
memory storage is very expensive in hardware and
software.

So we need to upgrade our hardware and software for the

smooth running of DBMS, which will be very expensive. Also,
the maintenance cost for both hardware and software is very
expensive. All the operations, regulatory compliance, and
training (like programming, application development, and
database administration) are very expensive.
 o Cost of staff training:There is a need for application
programmers, database administrators, and data entry
operators in the large amount. We also need the database
system designer and the application programmer. So there
is a need for huge money to establish a software house to
develop software.
o Cost of data conversion:We need to change our Database
to DBMS. There is also a need for a lot of money to shift
the Database to the DBMS. This is because we need the
database designer to shift the Database to DBMS. We have
to pay lots of money for the software houses. Also, we
have a high investment in the software, hardware, and
staff training for the DBMS.

2. Complexity

In today's world, all companies have a DBMS to store their

important data securely. For this, the company has to fulfill all
the requirements and the problems. But the functionality of
DBMS requires extremely required software.

To handle this problem, all companies need employees with the

proper knowledge of designers, developers, DBA, and end
users. This is because if any employee does not have the proper
knowledge, there might be a chance of big data loss.

3. Currency Maintenance

This is necessary to keep your system current because

efficiency, one of the biggest factors that need to be
overlooked, must be maximized. That is, we need to maximize
the efficiency of the database system to keep our system
current.

For this, frequent updation must be performed on all the

components as new threats come daily. DBMS should be
updated according to the current scenario. Also, security
measures must be implemented. Due to advancement in
database technology, training cost tends to be significant.

4. Performance

The traditional file system is written for small organizations and

for some specific applications, due to which performance is
generally very good. But for small-scale firms, DBMS does not
perform well as its speed is very slow. As a result, some
applications will not run as fast as they could. Hence it is not
good to use DBMS for small firms. Because performance is a
factor that everyone overlooks, if performance is good, then
everyone (developers, designers, end-users) will use it easily,
and it will be user-friendly too. The system's speed depends on
the performance, so performance needs to be good.

5. Frequency Upgrade/Replacement Cycles

Nowadays, we need to stay up-to-date about the latest

technologies and developments in the market. The DBMS
vendors frequently upgrade the products to add new
functionality to the systems. New upgrade versions of the
software often come bundled.
Sometimes these updates also need hardware upgrades.
Sometimes these changes and updates are so fast that the
users find it difficult to work with that system because it is not
easy to learn new commands and understand them again when
the new upgrades are done. All these upgrades also cost money
to train users, designers, etc., to use the new features.

Database Applications

Nowadays, any business that has small or large amounts of data

needs a database to store and manage the information. The
database is an easy, reliable, secure, and efficient way to
maintain business information. There are many applications
where databases are used.

In this article, we will discuss some of the applications of

databases, which are mentioned below:
1. Universities:

It is an undeniable application of the database. Universities

have so much data which can be stored in the database, such as
student information, teacher information, non-teaching staff
information, course information, section information, grade
report information, and many more. University information is
kept safe and secure in the database.

Anyone who needs information about the student, teacher, or

course can easily retrieve it from the database. Everything
needs to be maintained because even after ten years,
information may be required, and the information may be
useful, so maintaining complete information is the primary
responsibility of any university or educational institution.

2. Banking:

It is one of the major applications of databases. Banks have a

huge amount of data as millions of people have accounts that
need to be maintained properly. The database keeps the record
of each user in a systematic manner. Banking databases store a
lot of information about account holders. It stores customer
details, asset details, banking transactions, balance sheets,
credit card and debit card details, loans, fixed deposits, and
much more. Everything is maintained with the help of a
database.
3. Railway Reservation System:

It is an inevitable area of application of databases. They store

information such as passenger name, mobile number, booking
status, reservation details, train schedule, employee
information, account details, seating arrangement, route &
alternate route details, etc. All the information needs to be
maintained, so railways use a database management system for
their efficient storage and retrieval purpose.

4. Social Media Sites:

Nowadays, everyone has a smartphone and accounts on

various social media sites like Facebook, LinkedIn, Pinterest,
Twitter, Instagram, etc. People can chat with their friends and
family and make new friends from all over the world. Social
media has millions of accounts, which means they have a huge
amount of data that needs to be stored and maintained. Social
media sites use databases to store information about users,
images, videos, chats, etc.

5. Library Management System:

There are hundreds and thousands of books in the library, so it

is not easy to maintain the records of the books in a register or
diary, so a database management system is used which
maintains the information of the library efficiently. The library
database stores information like book name, issue date, author
name, book availability, book issuer name, book return details,
etc.
6. E-commerce Websites:

E-commerce websites are one of the prominent applications of

the database. Websites such as Flipkart, Myntra, Amazon,
Nykaa, Snapdeal, Shopify, and many more, are online shopping
websites where people buy items online. These websites have
so much data. These websites use databases to securely store
and maintain customer details, product details, dealer details,
purchase details, bank & card details, transactions details,
invoice details, etc. You can analyze the sales and maintain the
inventory with the help of a database.

7. Medical:

There is a lot of important data collection in the medical field,

so it is necessary to use the database to store data related to
the medical field, such as patient details, medicine details,
practitioner details, surgeon details, appointment details,
doctor schedule, patient discharge details, payment detail,
invoices, and other medical records. The database management
system is a boon for the medical field because it helps doctors
to monitor their patients and provide better care.

8. Accounting and Finance:

When there is big data regarding accounting and finance, there

is a need to maintain a large amount of data, which is done
with the help of a database. The database stores data such as
accounting details, bank details, purchases of stocks, invoice
details, sales records, asset details, etc. Accounting and finance
database helps in maintaining and analyzing historical data.
9. Industries:

The database management system is the main priority of

industries because they need to store huge amounts of data.
The industry database stores customer details, sales records,
product lists, transactions, etc. All the information is kept
secure and maintained by the database.

10. Airline Reservation System:

It is one of the applications of database management systems

that contain data such as passenger name, passenger check-in,
passenger departure, flight schedule, number of flights,
distance from source to destination, reservation information,
pilot details, accounting detail, route detail, etc. The database
provides maintenance and security to airline data.

11. Telecommunication:

We cannot deny that telecommunication has brought a

remarkable revolution worldwide. The Telecom field has huge
data, and it is very difficult to manage big data without a
database; that is why a telecom database is required, which
stores data such as customer names, phone numbers, calling
details, prepaid & post-paid connection records, network
usage, bill details, balance details, etc.

12. Manufacturing:

In the manufacturing field, a lot of data needs to be maintained

regarding supply chain management, so the database maintains
the data such as product details, customer information, order
details, purchase details, payment info, worker's details,
invoice, etc. Manufacturing companies produce and supply
products every day, so it is important to use a database.

13. Human Resource Management:

Any organization will definitely have employees, and if there

are a large number of employees, then it becomes essential to
store data in a database as it maintains and securely saves the
data, which can be retrieved and accessed when required. The
human resource database stores data such as employee name,
joining details, designation, salary details, tax information,
benefits & goodies details, etc.

14. Broadcasting:

Broadcasting is distributing video and audio content to a

dispersed audience by television, radio, or other means.
Broadcasting database stores data such as subscriber
information, event recordings, event schedules, etc., so it
becomes important to store broadcasting data in the database.

15. Insurance:

An insurance company needs a database to store large

amounts of data. Insurance database stores data such as policy
details, user details, buyer details, payment details, nominee
details, address details, etc.
Conclusion:

You have read several real-life database applications in this

article. In today's time, there is a lot of data that needs to be
maintained and protected which can be done only with the
help of a database; hence database management system has
become necessary for almost every business, industry, or
organization.

Q-2 What do you mean by “Cache Memory”?

Explain its basic functions.
Ans:-
DEFINITION
cache memory

Cache memory is a chip-based computer component that

makes retrieving data from the computer's memory more
efficient. It acts as a temporary storage area that the
computer's processor can retrieve data from easily. This
temporary storage area, known as a cache, is more readily
available to the processor than the computer's main memory
source, typically some form of DRAM.

Cache memory is sometimes called CPU (central processing

unit) memory because it is typically integrated directly into the
CPU chip or placed on a separate chip that has a
separate bus interconnect with the CPU. Therefore, it is more
accessible to the processor, and able to increase efficiency,
because it's physically close to the processor.

In order to be close to the processor, cache memory needs to

be much smaller than main memory. Consequently, it has less
storage space. It is also more expensive than main memory, as
it is a more complex chip that yields higher performance.

What it sacrifices in size and price, it makes up for in speed.

Cache memory operates between 10 to 100 times faster than
RAM, requiring only a few nanoseconds to respond to a CPU
request.

The name of the actual hardware that is used for cache

memory is high-speed static random access memory (SRAM).
The name of the hardware that is used in a computer's main
memory is dynamic random access memory (DRAM).

Cache memory is not to be confused with the broader term

cache. Caches are temporary stores of data that can exist in
both hardware and software. Cache memory refers to the
specific hardware component that allows computers to create
caches at various levels of the network.

Types of cache memory

Cache memory is fast and expensive. Traditionally, it is
categorized as "levels" that describe its closeness and
accessibility to the microprocessor. There are three general
cache levels:
L1 cache, or primary cache, is extremely fast but relatively
small, and is usually embedded in the processor chip as CPU
cache.

L2 cache, or secondary cache, is often more capacious than L1.

L2 cache may be embedded on the CPU, or it can be on a
separate chip or coprocessor and have a high-speed alternative
system bus connecting the cache and CPU. That way it doesn't
get slowed by traffic on the main system bus.

Level 3 (L3) cache is specialized memory developed to improve

the performance of L1 and L2. L1 or L2 can be significantly
faster than L3, though L3 is usually double the speed of DRAM.
With multicore processors, each core can have dedicated L1
and L2 cache, but they can share an L3 cache. If an L3 cache
references an instruction, it is usually elevated to a higher level
of cache.

In the past, L1, L2 and L3 caches have been created using

combined processor and motherboard components. Recently,
the trend has been toward consolidating all three levels of
memory caching on the CPU itself. That's why the primary
means for increasing cache size has begun to shift from the
acquisition of a specific motherboard with
different chipsets and bus architectures to buying a CPU with
the right amount of integrated L1, L2 and L3 cache.

Contrary to popular belief, implementing flash or more dynamic

RAM (DRAM) on a system won't increase cache memory. This
can be confusing since the terms memory caching (hard disk
buffering) and cache memory are often used interchangeably.
Memory caching, using DRAM or flash to buffer disk reads, is
meant to improve storage I/O by caching data that is frequently
referenced in a buffer ahead of slower magnetic disk or tape.
Cache memory, on the other hand, provides read buffering for
the CPU.

A
diagram of the architecture and data flow of a typical cache
memory unit.
Cache memory mapping
Caching configurations continue to evolve, but cache memory
traditionally works under three different configurations:

 Direct mapped cache has each block mapped to exactly

one cache memory location. Conceptually, a direct
mapped cache is like rows in a table with three
 columns: the cache block that contains the actual data
fetched and stored, a tag with all or part of the address
of the data that was fetched, and a flag bit that shows
the presence in the row entry of a valid bit of data.
 Fully associative cache mapping is similar to direct
mapping in structure but allows a memory block to be
mapped to any cache location rather than to a
prespecified cache memory location as is the case with
direct mapping.
 Set associative cache mapping can be viewed as a
compromise between direct mapping and fully
associative mapping in which each block is mapped to a
subset of cache locations. It is sometimes called N-way
set associative mapping, which provides for a location in
main memory to be cached to any of "N" locations in
the L1 cache.
Data writing policies
Data can be written to memory using a variety of techniques,
but the two main ones involving cache memory are:

 Write-through. Data is written to both the cache and

main memory at the same time.
 Write-back. Data is only written to the cache initially.
Data may then be written to main memory, but this
does not need to happen and does not inhibit the
interaction from taking place.
The way data is written to the cache impacts data consistency
and efficiency. For example, when using write-through, more
writing needs to happen, which causes latency upfront. When
using write-back, operations may be more efficient, but data
may not be consistent between the main and cache memories.

One way a computer determines data consistency is by

examining the dirty bit in memory. The dirty bit is an extra bit
included in memory blocks that indicates whether the
information has been modified. If data reaches the processor's
register file with an active dirty bit, it means that it is not up to
date and there are more recent versions elsewhere. This
scenario is more likely to happen in a write-back scenario,
because the data is written to the two storage areas
asynchronously.

Specialization and functionality

In addition to instruction and data caches, other caches are
designed to provide specialized system functions. According to
some definitions, the L3 cache's shared design makes it a
specialized cache. Other definitions keep the instruction cache
and the data cache separate and refer to each as a specialized
cache.

Translation lookaside buffers (TLBs) are also specialized

memory caches whose function is to record virtual address to
physical address translations.
Still other caches are not, technically speaking, memory caches
at all. Disk caches, for instance, can use DRAM or flash
memory to provide data caching similar to what memory
caches do with CPU instructions. If data is frequently accessed
from the disk, it is cached into DRAM or flash-based silicon
storage technology for faster access time and response.

Specialized caches are also available for applications such as

web browsers, databases, network address binding and client-
side Network File System protocol support. These types of
caches might be distributed across multiple networked hosts to
provide greater scalability or performance to an application
that uses them.

A
depiction of the memory hierarchy and how it functions
Locality
The ability of cache memory to improve a computer's
performance relies on the concept of locality of reference.
Locality describes various situations that make a system more
predictable. Cache memory takes advantage of these situations
to create a pattern of memory access that it can rely upon.

There are several types of locality. Two key ones for cache are:

 Temporal locality. This is when the same resources are

accessed repeatedly in a short amount of time.
 Spatial locality. This refers to accessing various data or
resources that are near each other.
Performance
Cache memory is important because it improves the efficiency
of data retrieval. It stores program instructions and data that
are used repeatedly in the operation of programs or
information that the CPU is likely to need next. The computer
processor can access this information more quickly from the
cache than from the main memory. Fast access to these
instructions increases the overall speed of the program.

Aside from its main function of improving performance, cache

memory is a valuable resource for evaluating a computer's
overall performance. Users can do this by looking at cache's hit-
to-miss ratio. Cache hits are instances in which the system
successfully retrieves data from the cache. A cache miss is
when the system looks for the data in the cache, can't find it,
and looks somewhere else instead. In some cases, users can
improve the hit-miss ratio by adjusting the cache memory block
size -- the size of data units stored.

Improved performance and ability to monitor performance are

not just about improving general convenience for the user. As
technology advances and is increasingly relied upon in mission-
critical scenarios, having speed and reliability becomes crucial.
Even a few milliseconds of latency could potentially lead to
enormous expenses, depending on the situation.

A
chart comparing cache memory to other memory types
Cache vs. main memory
DRAM serves as a computer's main memory, performing
calculations on data retrieved from storage. Both DRAM and
cache memory are volatile memories that lose their contents
when the power is turned off. DRAM is installed on the
motherboard, and the CPU accesses it through a bus
connection.

DRAM is usually about half as fast as L1, L2 or L3 cache

memory, and much less expensive. It provides faster data
access than flash storage, hard disk drives (HDD) and tape
storage. It came into use in the last few decades to provide a
place to store frequently accessed disk data to improve I/O
performance.

DRAM must be refreshed every few milliseconds. Cache

memory, which also is a type of random access memory, does
not need to be refreshed. It is built directly into the CPU to give
the processor the fastest possible access to memory locations
and provides nanosecond speed access time to frequently
referenced instructions and data. SRAM is faster than DRAM,
but because it's a more complex chip, it's also more expensive
to make.

Cache vs. virtual memory

A computer has a limited amount of DRAM and even less cache
memory. When a large program or multiple programs are
running, it's possible for memory to be fully used. To
compensate for a shortage of physical memory, the computer's
operating system (OS) can create virtual memory.

To do this, the OS temporarily transfers inactive data from

DRAM to disk storage. This approach increases virtual address
space by using active memory in DRAM and inactive memory in
HDDs to form contiguous addresses that hold both an
application and its data. Virtual memory lets a computer run
larger programs or multiple programs simultaneously, and each
program operates as though it has unlimited memory.

In order to copy virtual memory into physical memory, the OS

divides memory into page files or swap files that contain a
certain number of addresses. Those pages are stored on a disk
and when they're needed, the OS copies them from the disk to
main memory and translates the virtual memory address into a
physical one. These translations are handled by a memory
management unit (MMU).

Implementation and history

Mainframes used an early version of cache memory, but the
technology as it is known today began to be developed with the
advent of microcomputers. With early PCs, processor
performance increased much faster than memory performance,
and memory became a bottleneck, slowing systems.

In the 1980s, the idea took hold that a small amount of more
expensive, faster SRAM could be used to improve the
performance of the less expensive, slower main memory.
Initially, the memory cache was separate from the system
processor and not always included in the chipset. Early PCs
typically had from 16 KB to 128 KB of cache memory.

With 486 processors, Intel added 8 KB of memory to the CPU as

Level 1 (L1) memory. As much as 256 KB of external Level 2 (L2)
cache memory was used in these systems. Pentium processors
saw the external cache memory double again to 512 KB on the
high end. They also split the internal cache memory into two
caches: one for instructions and the other for data.

Processors based on Intel's P6 microarchitecture, introduced in

1995, were the first to incorporate L2 cache memory into the
CPU and enable all of a system's cache memory to run at the
same clock speed as the processor. Prior to the P6, L2 memory
external to the CPU was accessed at a much slower clock speed
than the rate at which the processor ran and slowed system
performance considerably.

Early memory cache controllers used a write-through cache

architecture, where data written into cache was also
immediately updated in RAM. This approached minimized data
loss, but also slowed operations. With later 486-based PCs, the
write-back cache architecture was developed, where RAM isn't
updated immediately. Instead, data is stored on cache and
RAM is updated only at specific intervals or under certain
circumstances where data is missing or old.

Q-3 Define data models.

Ans:- Data Model Definition
The term “data model” refers to the way data is organized,
documented, and defined within a database. The data model
definition also describes the elements used to standardize the
system, such as associations, entities and requirements.

Similarly, the practice of documenting software design is called

“data modeling.” The data modeling process involves using
visual elements to represent the flow of data through a
software or system architecture.

[Access our masterclass on NoSQL data modeling strategies–

free and on-demand]

Data Model FAQs

A Data Model
A data model determines the structure of data elements within
an information system. A data model documents the
relationships between data elements and how data is retrieved
and stored. Data models often display the flow of data through
a graph or data model diagram. This visual representation helps
facilitate communication between software and business
teams: business teams can identify the data and data formats
needed for business functions, and software teams can build
the responses needed for those requests.

To answer the question “what is a data model,” it’s helpful to

understand a few key terms used in the data model definition.

A data model identifies:

 Entities: the data components, including associated

metadata, raw data and processed data
 Associations: the relationships between data components
 Requirements: the anticipated uses of the data, especially
future uses
 Technology assessment: the strengths and weaknesses of
the hardware and software used in the project
Types of Data Models
Conceptual Data Model
A conceptual data model identifies the entities that describe
the data and relationships between them. Conceptual data
models only show the highest-level relationships between
entities, not attributes or primary keys within the data model.

Physical Data Model

A physical data model identifies the table structures that will be
built in the database, including all tables, columns, primary keys
and foreign keys used to identify the relationships between
tables.

Relational Data Model

A relational data model is the basis for SQL databases.
Relational data models have a fixed schema and deal with
structured data. In a relational database management system,
or RDBMS, the database is the outermost container that has
data associated with an application.

Non-relational Data Model

A non-relational data model offers a flexible schema design and
can handle unstructured data—its storage model can be
optimized to meet the requirements of the type of data being
stored. Non-relational data models are used in non-relational
databases, also called NoSQL databases.

Dimensional Data Model

A dimensional data model is used in data warehouse design.
Dimensional data models analyze numeric information (such as
balances or values) in a data warehouse. By contrast, relational
data models update, add or delete data in real-time
information systems.

Enterprise Data Model

An enterprise data model incorporates an industry perspective
to give an unbiased view of how data is stored, sourced and
used across an organization. Enterprise data models are useful
for addressing the specific business needs of an enterprise.

Data Modelling Techniques

While data modelling techniques will vary depending on the
type of database your organization uses, there are a few data
modeling best practices to keep in mind in the data modelling
process:

8. Start with the data modelling basics: ask business teams

what results they need from the data, and organize the
data model around those requirements
 9. Build a draft data model with entities and relations, and
test the model with best-case and worst-case scenarios
10. Take database queries into account: you should know
what your data looks like and what it contains, but also
how you intend to query it
11. Assess hardware requirements since servers working
with huge datasets can soon run into problems of
computer memory and input-output speed.
12. Validate the data model: verify each action (such as
your choice of primary key) before moving on to the next
step

What are Some Data Modeling Tools?

There are a number of data modeling tools available. Popular
data modeling software includes:

8. Toad Data Modeler

9. MySQL Workbench
10. MagicDraw
11. ERwin
12. Enterprise Architect
13. ER/Studio
14. PowerDesigner
15. Oracle SQL Developer
16. IBM InfoSphere Data Architect
Data Modeling for Big Data
IT organizations that need to manage huge numbers of users
and data often rely on NoSQL databases. NoSQL databases are
non-relational, distributed databases designed for high
availability and big data workloads. NoSQL databases are the
ideal database for data modelling for big data because they
allow big data applications to archive massive volumes of any
types of data, to easily scale horizontally to handle influxes of
new users (such as a social media app) and to evaluate and
respond to data instantly (such as in advertising).

What is the purpose of a data

model?
Data models play a key role in bringing together all segments of
an enterprise – IT, business analysts, management and others –
to cooperatively design information systems (and the databases
they rely on).

These systems require properly defined and formatted data,

and models shine a clear light on what data is required and how
it must be structured to support the desired business
processes.

By explicitly determining the structure of your data, these

models support a variety of use cases, including database
modeling, information system design, and process
development in support of a consistent, clean exchange of
data.

It’s also important to understand the three different types of

data models. Each will serve a different purpose as you work
through the data modeling process.

What are the different types of data models?

Depending on where you are in the data modeling process, you

are likely to use one of three types of data models. We typically
find that enterprises benefit from all three, depending on the
problems they are trying to solve. Therefore, we like to view
each as a “stage” of the data modeling process, rather than a
distinct “type” of data model.
Conceptual data models

Also known as domain models, conceptual data models explore

and detail your high-level, static business structures and
concepts. They are most frequently used during the beginning
of a new project, when high-level concepts and initial
requirements are hashed out. Often, they are created as
precursors or alternatives to the next stage: logical data
models.

Logical data models

After your problem domain and initial concepts become more

clear through conceptual data modeling, it’s time to get more
specific with a logical data model. Whether you’re looking
through the lens of a single project or your entire enterprise,
these models clarify the various logical entities (types or classes
of data) you’ll be working with, the data attributes that define
those entities, and the relationships between them.
Physical data models

When you get to the physical data modeling stage, it’s truly
time to get down to the nitty-gritty. These models are used to
design the internal schema of a database. That includes all of
the various tables, the columns on those tables and the
relationships between them. These models will be directly
translated into production database design, which will support
further development of information systems. Physical data
models generally are used to design three types of databases:
relational for traditional operational databases, document for
NoSQL and JSON databases, and dimensional for aggregation
and business intelligence data stores such as data warehouses
and data marts.

Ultimately, all three models can and should work

independently of each other. But as your project matures, the
best results will come from a natural progression through all
three models. Of course, consistency must be maintained
across the models on a structural level. Adjusting the
table/column format on a physical model, for example, should
not change the initial conceptual model in any meaningful way.

By leveraging all three models, organizations can ensure their

projects do not lose sight of initial objectives – but still maintain
the flexibility to address unexpected changes in requirements
or parameters.
Conceptual data models
They are also referred to as domain models and offer a big-
picture view of what the system will contain, how it will be
organized, and which business rules are involved. Conceptual
models are usually created as part of the process of gathering
initial project requirements. Typically, they include entity
classes (defining the types of things that are important for the
business to represent in the data model), their characteristics
and constraints, the relationships between them and relevant
security and data integrity requirements. Any notation is
typically simple.
Physical data models
They provide a schema for how the data will be physically
stored within a database. As such, they’re the least abstract of
all. They offer a finalized design that can be implemented as
a relational database, including associative tables that illustrate
the relationships among entities as well as the primary keys and
foreign keys that will be used to maintain those relationships.
Physical data models can include database management system
(DBMS)-specific properties, including performance tuning.

Benefits of data modeling

Data modeling makes it easier for developers, data architects,
business analysts, and other stakeholders to view and
understand relationships among the data in a database or data
warehouse. In addition, it can:
 Reduce errors in software and database development.
 Increase consistency in documentation and system design
across the enterprise.
 Improve application and database performance.
 Ease data mapping throughout the organization.
 Improve communication between developers and
business intelligence teams.
 Ease and speed the process of database design at the
conceptual, logical and physical levels.
Data modeling tools
Numerous commercial and open source computer-aided
software engineering (CASE) solutions are widely used today,
including multiple data modeling, diagramming and
visualization tools. Here are several examples:
13. erwin Data Modeler is a data modeling tool based on
the Integration DEFinition for information modeling
(IDEF1X) data modeling language that now supports other
notation methodologies, including a dimensional
approach.
 14. Enterprise Architect is a visual modeling and design
tool that supports the modeling of enterprise information
systems and architectures as well as software applications
and databases. It’s based on object-oriented languages
and standards.
15. ER/Studio is database design software that’s
compatible with several of today’s most popular database
management systems. It supports both relational and
dimensional data modeling.
16. Free data modeling tools include open source
solutions such as Open ModelSphere.

Q-4 What are the different functions of an

information system? Clearly explain.
Ans:-
Features and functions of information
systems.

The features and functions of information systems play a key

role in helping businesses to make better, more informed
decisions. Information systems aren’t merely computers,
instead they involve a combination of data, technology and
people.
Features of information systems
Data
When data is entered in to an information system, it has to be
entered in a way that can be managed and processed. When
the data is processed it turns data into information which is
then output to end users of the system. The data is generated
from various sources such as different departments of a
business as well as external sources. The data must be accurate
or else the information output can be inaccurate or misleading.
People
Getting data and processing it involves the use of people in
order to create information for specific uses or purposes that
are relevant to a business. Staff training and skills in relation to
information systems are important so that a business can get
the most out of its information system.
Hardware
The hardware that IT systems use has to be capable of running
the software required by the business and also be capable of
handling a large amount of data and information processing.
The hardware should be kept up to date which enables the fast
capture, storage and use of data.
Software
The software that is used by businesses and the staff has to
have the necessary features and functionality so that it can
produce and use the information created by a business. The
software should also have the features necessary for staff to
carry out their work efficiently, for example: to analyse and
process data and reports.
Telecommunications
The information that is produced by various departments in a
business needs to be shared around a business as it will be used
for different purposes. For doing this the telecommunications
in a business needs to be effective so that the information
shared and distributed goes to the correct destination after
being processed.
Functions of information systems
There are various functions of information systems like the
collection of input data, storage, processing, and producing the
output information. The functions also control the information
flow as well as the feedback loop. The systems can be also open
and closed systems.

Input
The input in an information system has two types:
 Output is created with detailed data which is stored
and processed
 The specification of what type of analysis is done must
be specified by the user
Storage
The storage of Data should be done at the most detailed level
possible. Regular backups and various summaries should be
completed to avoid losing any important data due to
errors. The backups should also be stored in a geographically
different location to avoid any major disasters such as flooding
or fires etc.. which could impact on both the original data
storage and the backup data storage.
Processing
A process is a function which transforms data into
information. A simple process would be adding up a number of
items that is sold by a business by a variable such as the
location of a store or the product or the time and date. More
complex processes are the functions that perform calculations
and can make assumptions about missing data in order to
create information from the data available.
Feedback / control loops
A feedback / control loop is what happens to output when it is
processed and produced. The system continuously repeats the
same processes depending on the output of the last loop which
can then impact on the input of the next data in to the loop. For
example if a business might want to buy stock from a supplier if
the stock level reaches 10. The system might check stock levels
every hour (in a loop) and if the stock level is above 10, the loop
continues without action until the point it hits 10 or under at
which stage the command gets executed and new stock is
ordered.
Output
There are two types of output in this context, graphical and
textual:
 17. Graphical output is usually used to look at
information on a larger scale which is then presented as
charts, graphs, diagrams and pictures.
18. Textual output is information on a smaller scale which
is presented as charters, text or numbers.
Open and closed systems
The type of information systems can be defined as open or
closed systems depending on how they react and interact with
their environments:
17. An open system will interact fully with its
environment and is capable of handling any unexpected
event as it monitors the environment which means that
it can adapt the output depending on the
circumstances.
18. A closed system is separated and secluded from the
environment which means they do not interact with it
much. A closed system only interacts with the
environment when it is planned and predicted
beforehand or as a part of an automated process. It
works when it is triggered and only acts according to
events. Closed systems do not have any effect on
external environments. An automatic payroll calculator
would be triggered by an event such as payroll day.
Information systems examples

Information systems can improve nearly any business

operation, but here are a few valuable ways you can put them
to work.

 Expert systems: AI is becoming more advanced every day,

and it's leveraged in information systems to simulate
human problem-solving (think Siri!). Expert systems use
knowledge that would otherwise need to be provided by
a subject matter expert to tackle problems and make
decisions. In a business context, it can solve accounting
problems or identify malware.
 Office automation systems: Automation saves countless
hours that would otherwise be spent doing simple tasks.
Office automation systems combine computer and
communication technology with human resources to
enact more efficient procedures. For example, a COO may
schedule monthly company-wide email updates that
include AI-generated reports on the company's status.
 Process control systems: If you're looking for a way to
apply information systems to product manufacturing,
process control systems are your solution. They rely on
inputs from sensors to generate specific outputs and are
frequently used to ensure a product meets specific
criteria. A simple example is a thermostat—when the
temperature dips below a certain level, the heat turns on.
If you produce a physical product that's regularly
 criticized by customers, you may want to tweak your
process controls.

5 components of information systems

So what goes into information systems? Nearly everything you

need for a functional modern office: hardware, software, data,
communication, and people. Virtually every information system
includes these components in some capacity.

Hardware

Computers are the physical hardware that make up information

systems. Nowadays, this doesn't just mean your cubicle's
desktop or laptop computer—we have computers at our
fingertips much of the time we aren't typing away at our
keyboards. Smartphones, tablets, and even smart watches all
have the power to collect, store, access, and manage huge
amounts of data.

You can break hardware down by its components as well: hard

drives for storage, microprocessors for processing power,
graphics cards for generating graphics, monitors for displaying
them, and so on.

Software

Computers are just shiny black mirrors without the programs

running behind the scenes telling the hardware what to do.
Software can be broken down into two types:

19. System software, which allows you to manage the

computer's files and overall interface (think operating
systems like Windows 10).
20. Application software, the programs that take care of
specific tasks (think Google Sheets and Microsoft
Outlook). System software creates a starting point from
which application software can build.

Software can either be open-source or closed-source. Open-

source software invites collaboration—users can modify its
code to change how it operates. Closed-source software is
proprietary, meaning the owner restricts the user's ability to
modify it.
Data sources

Data puts the "information" in information

systems. Databases and data warehouses store the qualitative
and quantitative information (data) that users and software
then retrieve, analyze, and manipulate.

Databases hold the information that the user regularly retrieves

to complete essential operations, like saving a file's contents
and accessing them. Data warehouses, on the other hand, store
data collected from multiple sources over time to
be analyzed and used to inform decisions. For example, a data
warehouse could include customer data consolidated from your
point-of-sale system, mailing list, and cookies.

Telecommunications

Telecommunications is how computers share information with

each other. The first thing that may come to mind is the
internet, and you're correct. But telecommunications can be
broken down further.

Some connections are physical: coaxial and fiber-optic cables

are physical wires used by telephone, internet, and cable
providers to carry data. Others are wireless: think networks like
local area networks (LANs) and wide area networks (WANs).
Microwaves and radio waves are also invisible channels that
transmit data across devices.
Telecommunications makes it possible to access data via the
cloud—without these systems in place, all data would have to
be stored on one device.

Human resources

Automation is replacing a lot of tedious tasks with robots, but

we haven't quite reached a Westworld-esque android takeover.
Human experts capable of understanding and manipulating
data are essential to any information systems strategy.

For example, business analysts use data to develop strategies

for improving a business's operations—think efficiency and
resource allocation. Likewise, information security analysts look
out for security vulnerabilities to reduce the likelihood of
cyberattacks.

Of course, analysts don't have to do all of this work by hand—

they can rely on other technologies like business intelligence to
assist with the process of using data to make concrete strategic
decisions.
How to build an information system strategy

Curating a cohesive information system strategy can't be done

with the click of a mouse—it takes time and effort.

1. Determine your business's objectives and information needs

You should build your strategy around your goals. When in

doubt, turn to your KPIs. Which benchmarks are you failing to
hit? For example, maybe you actively market yourself as a
customer-friendly solution, but a survey shows customer
satisfaction falling 20% below your benchmark.

Once you identify an objective like this, evaluate what

information you need. Have you been collecting customer data
in a database or data warehouse? If so, do you have enough to
develop a customer retention and satisfaction strategy? If not,
it's time to start from scratch and begin actively collecting
customer data.

2. Plan how you'll improve your existing system

There's a good chance you already have some information

systems infrastructure in place—you just need to refine it. For
example, you may have plenty of customer data in a data
warehouse but lack customer relationship management (CRM)
software.

This presents an opportunity to select and customize CRM

software based on existing data. When deciding how to
improve your system, remember to always keep budget and
other resources in mind. Not all plans are affordable.

3. Design and implement your new system

During this phase, you'll create a list of specifications and

requirements that your system will have to meet, which will
vary depending on your company's needs. For example, you
may consider the following questions:

19. How will you collect, consolidate, and access data?

20. What software do you need, and how will you
customize it?
21. Should hardware be updated to accommodate new
software?
22. How will your applications integrate?
23. What parts of your system will be automated vs.
managed by human resources?
24. Who will head your information systems? The CIO,
CTO, or another role?

Your team should then build the functions that will bring your
system to life. Once you've designed everything, it's time to
purchase and install your new mechanisms. This process can be
expensive and time-consuming—after all, you're supplanting
your entire organization's status quo. Be sure to test that the
system is functioning as planned before rolling it out across
your organization.

As you implement your updated system, remember

to document every change and keep these records secure. Your
developers should also spend plenty of time learning about the
needs of the users who will be using the system most.
Otherwise, their time may be wasted creating functions that
aren't helpful.
Q-5 WHAT DO YOU MEAN BY SYESTEM
ANS:-
Examples of information systems

Information systems have gained immense popularity in

business operations over the years. The future of information
systems and their importance depends on automation and the
implementation of AI technology.

Information technology can be used for specialised and

generalised purposes. A generalised information system
provides a general service like a database management system
where software helps organise the general form of data. For
example, various data sets are obtained using a formula,
providing insights into the buying trends in a certain time
frame.

On the contrary, a specialised information system is built to

perform a specific function for a business. For example, an
expert system that solves complex problems. These problems
are focused on a specific area of study like the medical system.
The main aim is to offer faster and more accurate service than
an individual might be able to do on his own.

Types of information systems

There are various information systems, and the type of
information system a business uses depends on its goal and
objective. Here are the four main types of information systems:

1. Operations support systems – The first type of information

system is the operation support system. Such type of
information system mainly supports a specific type of
operation in a business. An example is the transaction
processing system used in all banks worldwide. This type
of information system enables the service provider to
assess a specific process of business.
2. Management information systems – This is the second
category of information systems, consisting of hardware
and software integration allowing the organisation to
perform its core functions. They help in obtaining data
from various online systems. The data thus obtained is not
stored by the system; rather, it is analysed in a productive
manner to help in the management of an organisation.
3. Decision support systems – An organisation can make an
informed decision about its operations using decision
support systems. It analyses the rapidly changing
information that cannot be determined in advance. It can
be used in completely automated systems and human-
operated systems. However, for maximum efficiency
combination of human and computer-operated systems is
recommended.
4. Executive information systems – EIS or executive support
system is the last category that serves as management
 support systems. They help in making senior-level
decisions for an organisation.

Environment and boundaries

Systems theory views the world as a complex system of

interconnected parts. One scopes a system by defining
its boundary; this means choosing which entities are inside the
system and which are outside—part of the environment. One
can make simplified representations (models) of the system in
order to understand it and to predict or impact its future
behavior. These models may define the structure and behavior
of the system.
Natural and human-made systems[edit]
There are natural and human-made (designed) systems.
Natural systems may not have an apparent objective but their
behavior can be interpreted as purposeful by an observer.
Human-made systems are made with various purposes that are
achieved by some action performed by or with the system. The
parts of a system must be related; they must be "designed to
work as a coherent entity" — otherwise they would be two or
more distinct systems.
 Open systems have input and output
flows, representing exchanges of matter, energy or information
with their surroundings.
Theoretical framework[edit]
Most systems are open systems, exchanging matter and energy
with their respective surroundings; like a car, a coffeemaker,
or Earth. A closed system exchanges energy, but not matter,
with its environment; like a computer or the project Biosphere
2. An isolated system exchanges neither matter nor energy with
its environment. A theoretical example of such a system is
the Universe.
Process and transformation process
An open system can also be viewed as a bounded
transformation process, that is, a black box that is a process or
collection of processes that transform inputs into outputs.
Inputs are consumed; outputs are produced. The concept of
input and output here is very broad. For example, an output of
a passenger ship is the movement of people from departure to
destination.
System model
Main article: Systems model
A system comprises multiple views. Human-made systems may
have such views as concept, analysis, design, implementation,
deployment, structure, behavior, input data, and output data
views. A system model is required to describe and represent all
these views.
Systems architecture
Main article: Systems architecture
A systems architecture, using one single integrated model for
the description of multiple views, is a kind of system model.
Subsystem
A subsystem is a set of elements, which is a system itself, and a
component of a larger system. The IBM Mainframe Job Entry
Subsystem family (JES1, JES2, JES3, and
their HASP/ASP predecessors) are examples. The
main elements they have in common are the components that
handle input, scheduling, spooling and output; they also have
the ability to interact with local and remote operators.
A subsystem description is a system object that contains
information defining the characteristics of an operating
environment controlled by the system.[8] The data tests are
performed to verify the correctness of the individual subsystem
configuration data (e.g. MA Length, Static Speed Profile, …) and
they are related to a single subsystem in order to test its
Specific Application (SA).[9]
Analysis
There are many kinds of systems that can be analyzed
both quantitatively and qualitatively. For example, in an
analysis of urban systems dynamics, A .W. Steiss defined five
intersecting systems, including the physical subsystem and
behavioral system. For sociological models influenced by
systems theory,[10] Kenneth D. Bailey defined systems in terms
of conceptual, concrete, and abstract systems,
either isolated, closed, or open.[11] Walter F. Buckley defined
systems in sociology in terms of mechanical, organic,
and process models.[12] Bela H. Banathy cautioned that for any
inquiry into a system understanding its kind is crucial, and
defined natural and designed, i. e. artificial, systems.[13] For
example, natural systems include subatomic systems, living
systems, the Solar System, galaxies, and the Universe, while
artificial systems include man-made physical structures, hybrids
of natural and artificial systems, and conceptual knowledge.
The human elements of organization and functions are
emphasized with their relevant abstract systems and
representations.
Artificial systems inherently have a major defect: they must be
premised on one or more fundamental assumptions upon
which additional knowledge is built. This is in strict alignment
with Gödel's incompleteness theorems. The Artificial system
can be defined as a "consistent formalized system which
contains elementary arithmetic".[14] These fundamental
assumptions are not inherently deleterious, but they must by
definition be assumed as true, and if they are actually false
then the system is not as structurally integral as is assumed (i.e.
it is evident that if the initial expression is false, then the
artificial system is not a "consistent formalized system"). For
example, in geometry this is very evident in the postulation
of theorems and extrapolation of proofs from them.
George J. Klir maintained that no "classification is complete and
perfect for all purposes", and defined systems as abstract, real,
and conceptual physical systems, bounded and unbounded
systems, discrete to continuous, pulse to hybrid systems, etc.
The interactions between systems and their environments are
categorized as relatively closed and open systems.[15] Important
distinctions have also been made between hard systems –
technical in nature and amenable to methods such as systems
engineering, operations research, and quantitative systems
analysis – and soft systems that involve people and
organizations, commonly associated with concepts developed
by Peter Checkland and Brian Wilson through Soft Systems
Methodology (SSM) involving methods such as action
research and emphasis of participatory designs.[16] Where hard
systems might be identified as more scientific, the distinction
between them is often elusive.
Economic system[edit]
Main article: Economic system
An economic system is a social institution which deals with
the production, distribution and consumption of goods and serv
ices in a particular society. The economic system is composed
of people, institutions and their relationships to resources, such
as the convention of property. It addresses the problems
of economics, like the allocation and scarcity of resources.
The international sphere of interacting states is described and
analyzed in systems terms by several international relations
scholars, most notably in the neorealist school. This systems
mode of international analysis has however been challenged by
other schools of international relations thought, most notably
the constructivist school, which argues that an over-large focus
on systems and structures can obscure the role of individual
agency in social interactions. Systems-based models of
international relations also underlie the vision of the
international sphere held by the liberal institutionalist school of
thought, which places more emphasis on systems generated by
rules and interaction governance, particularly economic
governance.
Information and computer science[edit]
In computer science and information science, a system is a
hardware system, software system, or combination, which
has components as its structure and observable inter-process
communications as its behavior.
There are systems of counting, as with Roman numerals, and
various systems for filing papers, or catalogs, and various library
systems, of which the Dewey Decimal Classification is an
example. This still fits with the definition of components that
are connected together (in this case to facilitate the flow of
information).
System can also refer to a framework, aka platform, be
it software or hardware, designed to allow software programs
to run. A flaw in a component or system can cause the
component itself or an entire system to fail to perform its
required function, e.g., an incorrect statement or data
definition.[17]
Engineering and physics[edit]
In engineering and physics, a physical system is the portion of
the universe that is being studied (of which a thermodynamic
system is one major example). Engineering also has the concept
of a system referring to all of the parts and interactions
between parts of a complex project. Systems engineering is the
branch of engineering that studies how this type of system
should be planned, designed, implemented, built, and
maintained.[17]
Sociology, cognitive science and management research[edit]
Social and cognitive sciences recognize systems in models of
individual humans and in human societies. They include human
brain functions and mental processes as well as normative
ethics systems and social and cultural behavioral patterns.
In management science, operations research and organizational
development, human organizations are viewed as conceptual
systems of interacting components such as subsystems or
system aggregates, which are carriers of numerous
complex business processes (organizational behaviors) and
organizational structures. Organizational development
theorist Peter Senge developed the notion of organizations as
systems in his book The Fifth Discipline.[18]
Organizational theorists such as Margaret Wheatley have also
described the workings of organizational systems in new
metaphoric contexts, such as quantum physics, chaos theory,
and the self-organization of systems.[19]
Pure logic
There is also such a thing as a logical system. An obvious
example is the calculus developed simultaneously
by Leibniz and Isaac Newton. Another example is George
Boole's Boolean operators. Other examples relate specifically to
philosophy, biology, or cognitive science. Maslow's hierarchy of
needs applies psychology to biology by using pure logic.
Numerous psychologists, including Carl Jung and Sigmund
Freud developed systems that logically organize psychological
domains, such as personalities, motivations, or intellect and
desire.
Strategic thinking
In 1988, military strategist, John A. Warden III introduced
the Five Ring System model in his book, The Air Campaign,
contending that any complex system could be broken down
into five concentric rings. Each ring—Leadership, Processes,
Infrastructure, Population and Action Units—could be used to
isolate key elements of any system that needed change. The
model was used effectively by Air Force planners in the First
Gulf War.[20][21][22] In the late 1990s, Warden applied his model to
business strategy.
Facts of information systems

The products of information technology are part of our daily

lives. Here are some of the facts about information systems.

• Necessary for businesses to grow

Every organisation has computer-related operations that are
critical to getting the job done. In a business, there may be a
need for computer software, implementation of network
architecture to achieve the company’s objectives or designing
apps, websites, or games. So, any company that is looking to
secure its future needs to integrate a well-designed information
system.

• Better data storage and access

Such a system is also useful for storing operational data,
documents, communication records, and histories. As manual
data may cost a lot of time, information systems can be very
helpful in it. Information system stores data in a sophisticated
manner, making the process of finding the data much easier.

• Better decision making

Information system helps a business in its decision-making
process. With an information system, delivering all the
important information is easier to make better decisions. In
addition, an information system allows employees to
communicate effectively. As the documents are stored in
folders, it is easier to share and access them with the
employees.

Since you have been reading about information systems, a

career in information technology (IT) could interest you. We
have collated some information to give you an idea about the
field of IT.

Building a career in IT

It should be no surprise that a career in IT will help one grow

significantly in the coming years. It is considered one of the
most highly paid industries. There’s a constant need for skilled
and qualified professionals to meet the IT industry
requirement, a great opportunity for ambitious and hard-
working people.

But ambition and hard work alone is not enough. Having strong
fundamentals, a creative mindset, and the ability to
communicate effectively is highly important to become
successful in such a technical field.

Attaining certifications is another way to get a competitive

advantage in this field. Employers are always looking for people
who never stop learning, so having a few certifications shows
that you are always up for new learning. Getting a certification
from a reputed institute offers a better understanding of the
field, and a chance to interact with industry experts and is
considered more valuable during growth assessment.
B.COM- 403 (FINANCIAL MANAGEMENT)
Q-1 Discuss the importance of financial
management.
ANS-:
Financial management is one of the most important aspects of
business. To start up or even run a successful business, you will
need excellent knowledge of financial management. So, what
exactly is this form of management and why is it important?
Read on to find out more.

financial management

Financial management refers to the strategic planning,

organising, directing, and controlling of financial undertakings
in an organisation or institute. It also includes applying
management principles to the financial assets of an
organisation, while also playing an important part in fiscal
management. Here are some of the objectives involved:

 Maintaining enough supply of funds for the organisation

 Ensuring shareholders of the organisation get good returns
on their investment
 Optimum and efficient utilisation of funds
 Creating real and safe investment opportunities

Financial management is also made up of certain elements.

These include:

 Financial planning: This is the process of calculating the

amount of capital that is required by an organisation and
 then determining its allocation. A financial plan includes
certain key objectives which are:
o Determining the amount of capital required

o Determining the capital organisation and structure

o Framing of the organisation’s financial policies and

regulations
o Financial control: This is one of the key activities in

financial management. Its main role is to assess

whether an organisation is meeting its objectives or
not. Financial control answers the following
questions:
 Are the organisation’s assets being used

competently?
 Are the organisation’s assets secure?

 Is management acting in the best financial

interests of the organisation and the key

stakeholders?
 Financial decision-making: This involves

investment and financing with regard to the

organisation. This department makes decisions
about how the organisation should raise
finances, whether they should sell new shares,
or how the profit should be distributed.

The financial management department of any firm is handled

by a financial manager. This department has numerous
functions such as:

 Calculating the capital required: The financial manager

has to calculate the amount of funds an organisation
 requires. This depends on the policies of the firm with
regard to expected expenses and profits. The amount
required has to be estimated in such a way that the
earning capability of the organisation increases.
 Formation of capital structure: Once the amount of
capital the firm requires has been estimated, a capital
structure needs to be formed. This involves debt-equity
analysis in the short and long term. This depends on the
amount of capital the firm owns and the amount that
needs to be raised via external sources.
 Investing capital: Every organisation or firm needs to
invest money in order to raise more capital and gain
regular returns. Hence, the financial manager needs to
invest the organisation’s funds in safe and profitable
ventures.
 Allocation of profits: Once the organisation has earned a
good amount of net profit, it is the financial manager’s
duty to efficiently allocate it. This could involve keeping a
part of the net profit for contingency, innovation, or
expansion purposes, while another part of the profit can
be used to provide dividends to the shareholders.
 Effective management of money: This department is also
responsible for effectively managing the firm’s money.
Money is required for various purposes in the firm such as
payment of salaries and bills, maintaining stock, meeting
liabilities, and the purchase of any materials or equipment.
 Financial control: Not only does the financial manager
have to plan, organise, and obtain funds, but they also
have to control and analyse the firm’s finances in the short
 and long term. This can be done using financial tools such
as financial forecasting, ratio analysis, risk management,
and profit and cost control.

Why is financial management important?

This form of management is important for various reasons such
as:

 Helps organisations in financial planning

 Assists organisations in the planning and acquisition of
funds
 Helps organisations in effectively utilising and allocating
the funds received or acquired
 Assists organisations in making critical financial decisions
 Helps in improving the profitability of organisations
 Increases the overall value of firms or organisations
 Provides economic stability
 Encourages employees to save money, which helps them
in personal financial planning

Examples of financial management

Example 1: Suppose you decide to start your own business
along with seven partners. You choose to rent a small office in
New York, USA. You may ask the following questions:

 Is New York best suited for my office location?

 Should I opt for an independent office or a co-working
space?
 What is the office rent in New York per annum?
  What if I buy the office property? What return on
investment can I get from such a deal 15 years from now?

A financial manager and real estate specialist would be able to

solve these issues with ease. They would provide you with the
clarity you need to understand where your funds must go and
what your business goals should look like for increased
profitability.

Example 2: Let’s assume that you are a small bookstore

business that has received funding to take your business online.

Given the new financial disposition, your new areas of interest

would be:

 What should I do to achieve my business goals?

 What investments should I make to take the business
online?
 What is my current market value proposition and how can
I increase that?
 What is my finance strategy for doubling the capital I have
right now?
 Where do I see myself in the next five years as a business?
 How do I repay my business loans and meet the business
goals to receive my next funding?

A financial manager would answer all these questions and point

you in the right direction in each case through their business
and financial expertise.
Why study financial management?

 Diverse career opportunities: Studying financial

management opens up a lot of diverse career
opportunities. It could be in the private or public sector.
Some of the career options include investment banking,
entrepreneurship, financial analysis, financial and
managerial accounting, and strategic financial
management. It is also beneficial for those people who are
interested in starting their own business. Doing a financial
management course or obtaining a finance degree can
help people get promotions or better accounting jobs.

 Improve interpersonal skills: Doing a course in this field

will allow you to build better communication and
teamwork skills through developing relationships with
your colleagues.

 Builds personality: Doing a course in this field will also

improve your soft skills. People who wish to work in this
sector should be excited to talk about finance for hours on
end, showing that they’re passionate about their careers.
This makes them appear more personable and more
knowledgeable in their field.
 Greater job prospects: According to the USA’s Bureau of
Labour Statistics (BLS), there has been a spike in demand
for finance manager jobs in the US due to a “growing
range of financial products and the need for in-depth
knowledge of geographic regions”. This is further proven
by the fact that the demand for careers in financial
 management has increased by 14%, careers in financial
advising by 32%, and careers in financial analysis by 23%.

 Higher salary packages: People working in this sector are

usually paid very well, whether it is at entry or
management level. This is a highly skilled job role that is
always in demand, even during recessions.

 Career growth: There is always an opportunity to develop

your professional skills and climb the career ladder. You
can quickly acquire in-depth knowledge of financial
management systems and financial management software
once in this field. If you possess this knowledge and great
aptitude skills, this field is perfect for you.

Objectives of Financial Management

Building on those pillars, financial managers help their

companies in a variety of ways, including but not limited to:

 Maximizing profits: Provide insights on, for example, rising

costs of raw materials that might trigger an increase in the
cost of goods sold.
 Tracking liquidity and cash flow: Ensure the company has
enough money on hand to meet its obligations.
 Ensuring compliance: Keep up with state, federal and
industry-specific regulations.
  Developing financial scenarios: These are based on the
business’ current state and forecasts that assume a wide
range of outcomes based on possible market conditions.
 Manage relationships: Dealing effectively
with investors and the boards of directors.

Scope of Financial Management

Financial management encompasses four major areas:

1. Planning
The financial manager projects how much money the
company will need in order to maintain positive cash flow,
allocate funds to grow or add new products or services
and cope with unexpected events, and shares that
information with business colleagues.

Planning may be broken down into categories including

capital expenses, T&E and workforce and indirect and
operational expenses.

2. Budgeting
The financial manager allocates the company’s available
funds to meet costs, such as mortgages or rents, salaries,
raw materials, employee T&E and other obligations. Ideally
there will be some left to put aside for emergencies and to
fund new business opportunities.
 Companies generally have a master budget and may have
separate sub documents covering, for example, cash flow
and operation.

1. Static vs. Flexible Budgeting

Static Flexible

Remains the same even if there are Adjusts based on changes in

significant changes from the the assumptions used in the
assumptions made during planning. planning process.

2. Managing and assessing risk

Line-of-business executives look to their financial
managers to assess and provide compensating controls for
a variety of risks, including:

 Market risk
Affects the business’ investments as well as, for public
companies, reporting and stock performance. May
also reflect financial risk particular to the industry,
such as a pandemic affecting restaurants or the shift
of retail to a direct-to-consumer model.

 Credit risk
The effects of, for example, customers not paying
their invoices on time and thus the business not
having funds to meet obligations, which may
 adversely affect creditworthiness and valuation,
which dictates ability to borrow at favorable rates.

 Liquidity risk
Finance teams must track current cash flow, estimate
future cash needs and be prepared to free up working
capital as needed.

 Operational risk
This is a catch-all category, and one new to some
finance teams. It may include, for example, the risk of
a cyber-attack and whether to purchase cybersecurity
insurance, what disaster recovery and business
continuity plans are in place and what crisis
management practices are triggered if a senior
executive is accused of fraud or misconduct.

3. Procedures
The financial manager sets procedures regarding how the
finance team will process and distribute financial data, like
invoices, payments and reports, with security and
accuracy. These written procedures also outline who is
responsible for making financial decisions at the company
— and who signs off on those decisions.

Companies don’t need to start from scratch; there are

policy and procedure templates available for a variety of
organization types, such as this one for nonprofits.
Functions of Financial Management

More practically, a financial manager’s activities in the above

areas revolve around planning and forecasting and controlling
expenditures.

The FP&A function includes issuing P&L statements, analyzing

which product lines or services have the highest profit margin
or contribute the most to net profitability, maintaining the
budget and forecasting the company’s future financial
performance and scenario planning.

Managing cash flow is also key. The financial manager must

make sure there’s enough cash on hand for day-to-day
operations, like paying workers and purchasing raw materials
for production. This involves overseeing cash as it flows both in
and out of the business, a practice called cash management.

Along with cash management, financial management includes

revenue recognition, or reporting the company’s revenue
according to standard accounting principles. Balancing accounts
receivable turnover ratios is a key part of strategic cash
conservation and management. This may sound simple, but it
isn’t always: At some companies, customers might pay months
after receiving your service. At what point do you consider that
money “yours” — and report the good news to investors?

5 Tips to Improve Your Accounts Receivable Turnover Ratio

1. Invoice regularly and accurately. If invoices don’t go out on

5 Tips to Improve Your Accounts Receivable Turnover Ratio

time, money will not come in on time.

2. Always state payment terms. You can’t enforce policies

that you haven’t communicated to clients. If you make
changes, call them out.

3. Offer multiple ways to pay. New B2B options are coming

online. Have you considered a payment gateway?

4. Set follow-up reminders. Don’t wait until customers are in

arrears to start collection procedures. Be proactive, but not
annoying, with reminders.

5. Consider offering discounts for cash and

prepayments. Cash(less) is king in retail, and you can
reduce AR costs by encouraging customers to pay ahead
rather than on your normal customer credit terms.
Q-2 What is financial statement analysis?
Ans:- Financial Statement Analysis:
Financial statement analysis is the process of analyzing a
company’s financial statements for decision-making purposes.
External stakeholders use it to understand the overall health of
an organization and to evaluate financial performance and
business value. Internal constituents use it as a monitoring tool
for managing the finances.

KEY TAKEAWAYS

 Financial statement analysis is used by internal and

external stakeholders to evaluate business performance
and value.
 Financial accounting calls for all companies to create a
balance sheet, income statement, and cash flow
statement, which form the basis for financial statement
analysis.
 Horizontal, vertical, and ratio analysis are three
techniques that analysts use when analyzing financial
statements.

How to Analyze Financial Statements

The financial statements of a company record important
financial data on every aspect of a business’s activities. As
such, they can be evaluated on the basis of past, current, and
projected performance.
In general, financial statements are centered around generally
accepted accounting principles (GAAP) in the United States.
These principles require a company to create and maintain
three main financial statements: the balance sheet, the income
statement, and the cash flow statement. Public companies
have stricter standards for financial statement reporting. Public
companies must follow GAAP, which requires accrual
accounting.1 Private companies have greater flexibility in their
financial statement preparation and have the option to use
either accrual or cash accounting.2

Several techniques are commonly used as part of financial

statement analysis. Three of the most important techniques
are horizontal analysis, vertical analysis, and ratio analysis.
Horizontal analysis compares data horizontally, by analyzing
values of line items across two or more years. Vertical analysis
looks at the vertical effects that line items have on other parts
of the business and the business’s proportions. Ratio analysis
uses important ratio metrics to calculate statistical
relationships.

Types of Financial Statements

Companies use the balance sheet, income statement, and cash
flow statement to manage the operations of their business and
to provide transparency to their stakeholders. All three
statements are interconnected and create different views of a
company’s activities and performance.
Balance Sheet
The balance sheet is a report of a company’s financial worth in
terms of book value. It is broken into three parts to include a
company’s assets, liabilities, and shareholder equity. Short-
term assets such as cash and accounts receivable can tell a lot
about a company’s operational efficiency; liabilities include the
company’s expense arrangements and the debt capital it is
paying off; and shareholder equity includes details on equity
capital investments and retained earnings from periodic net
income. The balance sheet must balance assets and liabilities
to equal shareholder equity. This figure is considered a
company’s book value and serves as an important performance
metric that increases or decreases with the financial activities
of a company.

Income Statement
The income statement breaks down the revenue that a
company earns against the expenses involved in its business to
provide a bottom line, meaning the net profit or loss. The
income statement is broken into three parts that help to
analyze business efficiency at three different points. It begins
with revenue and the direct costs associated with revenue to
identify gross profit. It then moves to operating profit, which
subtracts indirect expenses like marketing costs, general costs,
and depreciation. Finally, after deducting interest and taxes,
the net income is reached.

Basic analysis of the income statement usually involves the

calculation of gross profit margin, operating profit margin, and
net profit margin, which each divide profit by revenue. Profit
margin helps to show where company costs are low or high at
different points of the operations.

Cash Flow Statement

The cash flow statement provides an overview of the
company’s cash flows from operating activities, investing
activities, and financing activities. Net income is carried over to
the cash flow statement, where it is included as the top line
item for operating activities. Like its title, investing activities
include cash flows involved with firm-wide investments. The
financing activities section includes cash flow from both debt
and equity financing. The bottom line shows how much cash a
company has available.

Free Cash Flow and Other Valuation Statements

Companies and analysts also use free cash flow statements and
other valuation statements to analyze the value of a company .
Free cash flow statements arrive at a net present value by
discounting the free cash flow that a company is estimated to
generate over time. Private companies may keep a valuation
statement as they progress toward potentially going public.

Financial Performance
Financial statements are maintained by companies daily and
used internally for business management. In general, both
internal and external stakeholders use the same corporate
finance methodologies for maintaining business activities and
evaluating overall financial performance.
When doing comprehensive financial statement analysis,
analysts typically use multiple years of data to facilitate
horizontal analysis. Each financial statement is also analyzed
with vertical analysis to understand how different categories of
the statement are influencing results. Finally, ratio analysis can
be used to isolate some performance metrics in each
statement and bring together data points across statements
collectively.

Below is a breakdown of some of the most common ratio

metrics:

 Balance sheet: This includes asset turnover, quick ratio,

receivables turnover, days to sales, debt to assets, and
debt to equity.
 Income statement: This includes gross profit margin,
operating profit margin, net profit margin, tax ratio
efficiency, and interest coverage.
 Cash flow: This includes cash and earnings before interest,
taxes, depreciation, and amortization (EBITDA) . These
metrics may be shown on a per-share basis.
 Comprehensive: This includes return on assets
(ROA) and return on equity (ROE), along with DuPont
analysis.

What are the advantages of financial statement analysis?

The main point of financial statement analysis is to evaluate a
company’s performance or value through a company’s balance
sheet, income statement, or statement of cash flows. By using
a number of techniques, such as horizontal, vertical, or ratio
analysis, investors may develop a more nuanced picture of a
company’s financial profile.

What are the different types of financial statement analysis?

Most often, analysts will use three main techniques for
analyzing a company’s financial statements.

First, horizontal analysis involves comparing historical data.

Usually, the purpose of horizontal analysis is to detect growth
trends across different time periods.

Second, vertical analysis compares items on a financial

statement in relation to each other. For instance, an expense
item could be expressed as a percentage of company sales.

Finally, ratio analysis, a central part of fundamental equity

analysis, compares line-item data. Price-to-earnings (P/E)
ratios, earnings per share, or dividend yield are examples of
ratio analysis.

What is an example of financial statement analysis?

An analyst may first look at a number of ratios on a company’s
income statement to determine how efficiently it generates
profits and shareholder value. For instance, gross profit margin
will show the difference between revenues and the cost of
goods sold. If the company has a higher gross profit margin
than its competitors, this may indicate a positive sign for the
company. At the same time, the analyst may observe that the
gross profit margin has been increasing over nine fiscal periods,
applying a horizontal analysis to the company’s operating
trends.