Q4. Write a note on: (a) Capital Rationing (b) CAPM Q4. Critically evaluate the M & M approach of capital structure. Q5.

Discuss significance of Mergers and Takeovers highlighting its regulatory framework in India.
10.2 Meaning of Capital Rationing:
Because of the limited financial resources, firms may have to make a choice from among profitable investment opportunities. Capital rationing refers to a situation in which the firm is under a constraint of funds, limiting its capacity to take up and execute all the profitable projects. Such a situation may be due to external factors or due to the need to impose internal constraints, keeping in view of the need to exercise better financial control. Why Capital Rationing Reasons for Capital Rationing: Capital Rationing may be due to a. External factors b. b. Internal constraints imposed by management External Capital Rationing: External Capital Rationing is due to the imperfections of capital markets Imperfection may be caused by:a. Deficiencies in market information b. Rigidities that hamper the force flow of Capital between firms. When capital markets are not favourable to the company the firm cannot tap the capital market for executing new projects even though the projects have positive net present values. The following reasons attribute to the external capital rationing:1. Inability of the firm to procure required funds from Capital market because the firm does not command the required investor’s confidence. 2. National and international economic factors may make the market highly volatile and instable. 3. Inability of the firm to satisfy the regularity norms for issue of instruments for tapping the market for funds. 4. High Cost of issue of Securities I,e High floatation cost. Smaller firms smaller firms may have to incur high costs of issue of securities. This discourages small firms from tapping the capital markets for funds. Internal Capital Rationing: Impositions of restrictions by a firm on the funds allocated for fresh investment is called internal capital rationing. This decision may be the result of a conservative policy pursued by a firm. Restriction may be imposed on divisional heads on the total amount that they can commit on new projects. Another internal restriction for Capital budgeting decision may be imposed by a firm based on the need to generate a minimum rate of return. Under this criterion only projects capable of generating the management’s expectation on the rate of return will be cleared. Generally internal capital rationing is used by a firm as a means of financial control.

explaining why it has remained popular for more than 40 years: It considers only systematic risk. Capital rationing technique is used when company has limited fund for investing in profitable investment proposals. In other words Capital rationing is a strategy employed by companies to make investments based on the current relevant circumstances of the company. The linear relationship between the return required on an investment (whether in stock market securities or in business operations) and its systematic risk is represented by the CAPM formula. Using this measure of risk can theoretically allow investors to improve their portfolios and managers to find their required rate of return.CAPM' Introduction The Capital Asset Pricing Model. scientific discipline’ when William Sharpe published his derivation of the CAPM in 1986 ADVANTAGES OF THE CAPM The CAPM has several advantages over other methods of calculating required return. Formulae Sheet: E(ri) = Rf + βi(E(rm) . It is generally seen as a much better method of calculating the cost of equity than the dividend growth model (DGM) in that it explicitly takes into account a company’s level of systematic risk relative to the stock market as a whole. In this paper. which was developed in the mid 1960's. . In fact. It is clearly superior to the WACC in providing discount rates for use in investment appraisal. Definition of 'Capital Asset Pricing Model . It generates a theoretically-derived relationship between required return and systematic risk which has been subject to frequent empirical research and testing. reflecting a reality in which most investors have diversified portfolios from which unsystematic risk has been essentially eliminated.Capital rationing is technique which is used with capital budgeting techniques. The CAPM uses a measure of systematic risk that can be compared with other assets in the market.Rf) E(ri) = return required on financial asset i Rf = risk-free rate of return βi = beta value for financial asset i E(rm) = average return on the capital market The CAPM is an important area of financial management. Critically evaluate the M & M approach of capital structure . uses various assumptions about markets and investor behavior to give a set of equilibrium conditions that allow us to predict the return of an asset for its level of systematic (or nondiversifiable) risk. Q4. it has even been suggested that finance only became ‘a fully-fledged. an empirical test is conducted using data from the S&P 500 to determine if the CAPM is valid.

Therefore. It does not matter what the firm's dividend policy is.[1] It does not matter if the firm's capital is raised by issuing stock or selling debt. The basic theorem states that. owners of the profit). along with Harry Markowitz and William Sharpe. the value of a firm is unaffected by how that firm is financed. the Modigliani–Miller theorem is also often called the capital structure irrelevance principle. preferred stock or retained earnings. and asymmetric information.Definition of 'Capital Structure' A mix of a company's long-term debt. which provides insight into how risky a company is. as this firm is relatively highly levered. When people refer to capital structure they are most likely referring to a firm's debt-toequity ratio. This assumption has been refuted by legal scholars since Berle and Means (1932). Merton Miller) forms the basis for modern thinking on capital structure.e." with Miller specifically cited for "fundamental contributions to the theory of corporate finance. A company's proportion of short and long-term debt is considered when analyzing capital structure. or the investors as 99. which calculates the value based on E + D. specific short-term debt. Modigliani and Miller are equating . Modigliani was awarded the 1985 Nobel Prize in Economics for this and other contributions. M & M approach of capital structure The Modigliani–Miller theorem (of Franco Modigliani. for their "work in the theory of financial economics. Usually a company more heavily financed by debt poses greater risk. in the absence of taxes. The capital structure is how a firm finances its overall operations and growth by using different sources of funds." Criticisms The main problem with the Modigliani and Miller (1958) is that they assume shareholders are the owners of the public corporations. Miller was a professor at the University of Chicago when he was awarded the 1990 Nobel Prize in Economics. Shareholders are neither the owners. common equity and preferred equity. while equity is classified as common stock. The formula's use of EBIT / Cost of Capital to calculate a company's value is extremely limiting. Debt comes in the form of bond issues or long-term notes payable. residual claimants (i. under a certain market price process (the classical random walk). where E = the value of equity and D = the value of debt.9% are in the secondary market. and in an efficient market. bankruptcy costs. It also uses the weighted average cost of capital formula. Short-term debt such as working capital requirements is also considered to be part of the capital structure. agency costs.

two different formulas to arrive at a number which maximizes a firm's value. Modigliani and Miller equate E + D = EBIT / Cost of Capital. build marketing campaign by using four P’s of marketing mix and keeping in view newer shifts in marketing trends which are taking place now-a-days for the following: (a) Document photo copying. As a consumer. The formula essentially says a firm's value is maximized when a company has earnings * the discount rate multiple = book value. Q5. product types. new product development phases and new product adoption phases in detail. Q4. (c) Evaluation of alternatives. . Also explain internet marketing. This seems to over-simplify the firm's valuation. product differentiation. OR (a) New touch screen mobile phone/ 3D High definition TV. MBA (OC) – 309 (Marketing Management) Section – A Attempt any one question: 10 × 1 = 10 Marks Q1. Explain advertising. shoes and perfumes). Duplex and Bunglows offered by globally known builder in your city. Explain product. product mix. It is inappropriate to say that a firm's value is maximized when these two different formulas cross each other because of their striking differences. (b) Newly built Posh Apartments. product line. (ii) Services of Dentist/ Coaching Institute/ Diner Restaurant/ Beauty salon. printing solution. (any one) Section – B Attempt any two questions: 5 × 2 = 10 Marks Q3. (i) Your dress (choose any one among Garments. effects of internet on markets. (any one) (b) New diesel fuel efficient small size car/ Aeroplane or taxi operating service in your city. Q2. personal selling. (b) Search for alternative solution and information. product positioning. product life cycle. internet surfing and Coffee day shop. Brand and its significance. Describe market segmentation. marketing strategy and the internet. As a marketer. salesmanship in detail. (d) Purchase and cognitive Dissonance. publicity and liaison. using examples from your own experience explain how the following have affected your purchasing behavior of below mentioned products and services: (a) Extensive problem solving. sales promotion. Branding strategy in detail.

radio advertisement. freebies. Nonprofit organizations may rely on free modes of persuasion. prizes. interest groups.. corporate image and exhibitions. although political and ideological advertising is also common. Commercial advertisers often seek to generate increased consumption of their products or services through "Branding.g. direct marketing.g. Non-commercial advertisers who spend money to advertise items other than a consumer product or service include political parties. Advertising messages are usually paid for by sponsors and viewed via various traditional media.. sales staff. product samples. Sales promotion is one of the seven aspects of the promotional mix. coupons. magazines. salesperson) uses skills and techniques for building personal relationships with another party (e. or distribution channel members (such as retailers).Q5. religious organizations and governmental agencies. personal selling. limited time to increase consumer demand. readers or listeners) to continue or take some new action. Explain advertising. In most cases the "value" for the . premiums. outdoor advertising or direct mail. publicity and liaison. and rebates Sales promotions can be directed at either the customer. Sales promotions targeted at the consumer are called consumer sales promotions. sales promotion. the desired result is to drive consumer behavior with respect to a commercial offering. Examples include contests. publicity/public relations. The purpose of advertising may also be to reassure employees or shareholders that a company is viable or successful. Advertising is a form of communication used to encourage or persuade an audience (viewers. are considered gimmicks by many. Personal selling is a promotional method in which one party (e. those involved in a purchase decision) that results in both parties obtaining value. Sales promotions targeted at retailers and wholesale are called trade sales promotions. salesmanship in detail. television commercial. such as a public service announcement (PSA). including mass media such as newspaper. particularly ones with unusual methods. or new media such as websites and text messages. stimulate market demand or improve product availability. Some sale promotions. point of purchase displays. (The other six parts of the promotional mix are advertising. loss leaders." which involves the repetition of an image or product name in an effort to associate certain qualities with the brand in the minds of consumers. Modern advertising developed with the rise of mass production in the late 19th and early 20th centuries. Most commonly. personal selling.) Media and non-media marketing communication are employed for a pre-determined.

products are purchased as raw materials and sold as finished goods. most written word-final consonants are no longer pronounced and are known as latent or mute. In general. product types. The subjects of publicity include people (for example. Thus. organizations of all kinds. dead and phonologically null). In marketing.z‿a. In manufacturing. the product is defined as a "thing produced by labor or effort"[1] or the "result of an act or a process" In economics and commerce. in others. Publicity is the deliberate attempt to manage the public's perception of a subject. but it is pronounced /z/ in the combination les amis /le. However. selling may be used for the purpose of simply delivering information. 'the'. Salesmanship is just persona selling .. liaison is impossible. this promotional method often occurs through face-toface meetings or via a telephone conversation.. Brand and its significance." Today salesmanship is ot only an effort to induce the people to buy. though newer technologies allow contact to take place over the Internet including using video conferencing or text messaging (e. emphasizing inducing and making the prospective buyer to take a decision in favor of going for the product being offered to him. Promotion But the publicist cannot wait around for the news to present opportunities. product mix. a product is anything that can be offered to a market that might satisfy a want or need. Because selling involves personal contact.e. Q4. it is obligatory. product life cycle. Explain product. online chat).salesperson is realized through the financial rewards of the sale while the customer’s "value" is realized from the benefits obtained by consuming the product. Liaison is the pronunciation of a latent word-final consonant immediately before a following vowel sound.mi/. the letter s in the word les. In certain syntactic environments. direct marketing and personal selling. Salesmanship is an art of winning over the buyer's confidence so that a permanent goodwill may be built and a lasting satisfaction may be given to him when he goes the product offered to him. products are called merchandise. product line. In French. goods and services. Carter. The other elements of the promotional mix are advertising. it is possible but not obligatory and its realization is subject to wide stylistic variation. In the words of W. From a marketing perspective. and works of art or entertainment. is generally silent (i.g. 'the friends'. For example.negotiating. "salesmanship is an attempt to induce people to buy goods. politicians and performing artists). getting a customer to purchase a product is not always the objective of personal selling. in others still. .[5] In retailing. Branding strategy in detail.G. products belong to a broader category of goods. sales promotion. For instance. publicity is one component of promotion which is one component of marketing. They must also try to create their own news.

are marketed through the same types of outlets. or any other feature that identifies one seller's good or service as distinct from those of other sellers. term. price. either because they function in a similar manner. For example. A new product progresses through a sequence of stages from introduction to growth. symbol. This sequence is known as the product life cycle and is associated with changes in the marketing situation. appearance. and the basic marketing course is a product item. which is generally defined as the total composite of products offered by a particular organization. The product revenue and profits can be plotted as a function of the life-cycle stages as shown in the graph below: Product Life Cycle Diagram Brand and its significance The American Marketing Association defines a brand as a "Name.The product mix of a company. A product line is a group of products within the product mix that are closely related. A product is a distinct unit within the product line that is distinguishable by size. design. all the courses a university offers constitute its product mix. consists of both product lines and individual products. Product decisions at these three levels are generally of two types: those that involve width (variety) and depth (assortment) of the product line and those that involve changes in the product mix occur over time. or fall within given price ranges. and decline. thus impacting the marketing strategy and the marketing mix. courses in the marketing department constitute a product line. are sold to the same customer groups." [1] A brand is thus a product or service whose dimensions differentiate it in some ways from other products or . or some other attribute. maturity.

Distinguish between training and development. What are new challenges for the executives? Q2.           Economies of scale (production and distribution) Lower marketing costs Laying the groundwork for future extensions worldwide Maintaining consistent brand imagery Quicker identification. Write on recruitment and selection process in a business organization. Also explain limitations of appraisal system. Q4. Q5. It is application of knowledge. Section – B Attempt any two questions: 5× 2 = 10 Marks Q3. Training is a process of learning a sequence of programmed behavior. help individuals in the progress towards maturity and actualization of . It covers not only those activities. sign. including a name. Give its objectives and methods.services designed to satisfy the same need. Explain its functions and importance in corporate world. but also those which bring about growth of the personality. Write a note on Collective Bargaining as a tool of industrial relations Q4. It gives people an awareness of the rules and procedures to guide their behavior. Distinguish between training and development. and cohesive company culture MBA (OC) – 307 (Human Resource Management and Industrial Relations) Section – A Attempt any one question: 10 × 1 = 10 Marks Q1. Define HRM. Explain the concept of performance appraisal. symbol. A brand can take many forms. which improve job performance. It attempts to improve their performance on the currents job or prepare them for an intended job. Development is a related process. recognition and integration of innovations (discovered worldwide) Preempting international competitors from entering domestic markets or locking you out of other geographic markets Increasing international media reach (especially with the explosion of the Internet) is an enabler Increases in international business and tourism are also enablers Possibility to charge premium prices Internal company benefits such as attracting and retaining good employees. color combination or slogan.

fulfill long term needs of any company. it is intended to equip persons to earn promotion and hold greater responsibility. negotiation about working conditions and terms of employment between an employer and a group of employees or one or more employee. Q5. In organisational terms. It is a technique adopted by two parties to reach an understanding acceptable to both through the process of discussion and negotiation. It is the process of negotiation between firm’s and workers’ representatives for the purpose of establishing mutually agreeable conditions of employment. is a continuous process which aims at establishing stable relationships between the parties involved. Collective bargaining involves discussions and negotiations between two groups as to the terms and conditions of employment. Write a note on Collective Bargaining as a tool of industrial relations.their potential capacities so that they become not only good employees but better men and woman. ILO has defined collective bargaining as. offers and counter offers and other negotiations.e. Development is a long term educational process utilizing a systematic and organised procedure by which managerial personnel learn conceptual and theoretical knowledge for general purpose.e. Training is short term process utilizing a systematic and organised procedure by which non managerial personal learn technical knowledge and skills for a definite purpose. It is called ‘collective’ because both the employer and the employee act as a group rather than as individuals. Thus collective bargaining:  is a collective process in which representatives of both the management and employees participate. And this may well include not only imparting specific skills and knowledge but also inculcating certain personality and mental attitudes. Collective bargaining is process of joint decision making and basically represents a democratic way of life in industry. fulfill short term needs of any company but development helps to improve the overall personality dimensions of an employee to take up any future assignments if any and better equipped to handle any critical situations might occur i. organization with a view to reaching an agreement wherein the terms serve as a code of defining the rights and obligations of each party in their employment/industrial relations with one another. It is known as ‘bargaining’ because the method of reaching an agreement involves proposals and counter proposals. Training helps to make the employee of a company to be more effective and efficient in the present role and responsibilities of the job i. Training a person for higher and bigger job is development.  .

HRM can also be performed by line managers. safety. In many businesses. administration. Reducing absenteeism is an important feature of human resource management.Human resources account for a large proportion of many businesses costs and it is the people that invariably drive a business. wellness. Human resources are one of the most important features of many businesses. HRM is also a strategic and comprehensive approach to managing people and the workplace culture and environment. The main aim of this unit is to develop an understanding of how management functions can affect the performance of business. HRM is the organizational function that deals with issues related to people such as compensation. Define HRM. Motivate the staff : motivation is an important part in reducing staff turnover and minimizing . hiring. but also involves the implementation of such an agreement. Reduce absenteeism : if staff are absent from work they are not able to carry out the function for which they have been employed. Effective HRM enables employees to contribute effectively and productively to the overall company direction and the accomplishment of the organization's goals and objectives. benefits. The measure role of human resource management are as follows : 1. communication. as the parties involved have to adopt a flexible attitude towards negotiations. performance management. Q1. employee motivation. Explain its functions and importance in corporate world.   attempts in achieving discipline in the industry is a flexible approach.if not. What are new challenges for the executives? Human Resource Management (HRM) is the function within an organization that focuses on recruitment of. organization development. these functions have to be taken on by someone else. not only involves the bargaining agreement. the customer could suffer. Management of these resources therefore is an integral part of business success. and training. management of. and providing direction for the people who work in the organization. especially in an economy where there is an increasing shift towards service-based industries. 2.

e ability test. After shortlisting their is psychometric tests conducted. abilities and characters. Psychometric tests means 3 types of tests i. personality test and interest test. Recruitment and Selection : when candidate apply for a job. Finally the selection is conducted. Motivation can be done by work environment and work atmosphere.staff absenteeism. Team work : many business places gives more importance to team work. a business will have to make a shortlist and draw up plans for the interview process. Providing training programmes for the staff : the main role of human resource management is to provide its staff with training programmes on the current topics with which they can develop themselves with the present situation. 3. 4. 5. and giving out some gifts for best suggestion will definitely motivate the staff. A good team consists of people with different skills. Motivation is done by creating interest in the job of the staff by taking suggestion schemes. .

Globalisation:Many Indian firms are compelled to think globally. something which is .

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