11th OCM Chapter 5 Exercise (Forms of Business Organisation – II) Maharashtra Board – Free Resource

11th OCM Chapter 5 Exercise

11th ocm chapter 5 exercise
11th OCM chapter 5 exercise

Chapter 5 – Forms of Business Organisation – II

Q.1 (A) Select the correct option and rewrite the sentences.

1) Departmental Organisation is financed through ………. appropriations made by the
legislature.

a) annual budget
b) monthly budget
c) quarterly budget

2) A ………. is an autonomous corporate body created by the Special Act of the parliament
or state legislature

a) statutory corporation
b) government company
c) MNC

3) A statutory corporation is answerable to ………. or state assembly whosoever creates it.
a) parliament
b) public
c) employees

4) In government company minimum ……….% paid up capital is held by government.
a) 51
b) 41
c) 31

5) The shares of government company are purchased in the name of ………. .
a) President of India
b) Chief Minister
c) Defense Minister

6) Government on the advice of ………. appoints auditor of government company.
a) Comptroller and Auditor General of India
b) auditor
c) chartered accountant

7) A Government company is a ………. entity separate from the Government.
a) natural
b) legal
c) human

8) ………. Company has public accountability.
a) MNC
b) Private
c) Government

9) MNCs are powerful ………. entities.
a) economical

b) political
c) social

Q.1 (B) Match the following.

Group AGroup B
A) BHEL 1) 51% paid up capital by government
B) Statutory Corporation(2) Special Legislature
C) Departmental Organisation(3) Railway
D) Private Sector(4) Profit motive
E) Public Sector(5) Service Motive

Q.1 (C) Give one word/phrase/term for the following statements.

1) Organisations which are owned by individual or group of individuals.
Answer: Private Sector Organisations

2) Organisations which are owned by government.
Answer: Public Sector Organisations

3) The sector which aims at profit maximization.
Answer: Private Sector Organisations

4) The sector which aims at providing reliable services to customers.
Answer: Public Sector Organisations

5) Organisations which are owned, financed, managed and controlled by government or
combination of governments.
Answer: Public Sector Organisations

6) The organisation which is owned, managed, controlled and financed by government.
Answer: Departmental Organisation

7) The oldest form of business organisation under public sector.
Answer: Departmental Organisation

8) The organisation which performs it’s all activities as an integral part for government only.
Answer: Departmental Organisation

9) The organisation which is financed through annual budget appropriations made by the
legislature.
Answer: Departmental Organisation

10) The organisation in which there is direct and absolute control of government over the
enterprise.
Answer: Departmental Organisation

11) An autonomous corporate body created by the Special act of the parliament or state
legislature with defined powers, functions and duties.
Answer: Statutory Corporation

12) An organisation which is answerable to parliament or state assembly whosoever creates it.
Answer: Statutory Corporation

13) An organisation which is not subject to the budget, accounting and audit controls by the
Govt
Answer: Statutory Corporation

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Q.1 (D) State True or False.

1) Sole trader is the decision maker of the business. (True)

1) Private sector organisations are owned by individual or group of individuals. (True)

2) Public sector organisations are owned by government. (True)

3) Private sector aims at providing reliable services to customers. (False)

4) Public sector was undertaken as a part of Industrial Policy, 1956. (True)

5) Departmental organisations is oldest form of business organisation under public
sector. (True)

6) Departmental Organisation performs its all activities separately from government. (False)

7) The Minister-in-charge of ministry is the head of departmental organisation. (True)

8) There is always problem of Red tapism and bureaucracy in departmental organisation. (True)

9) There is large scope for the initiative and skill in departmental organisation. (False)

10) In Departmental organisation there is flexibility in operations. (False)

Q.1 (E) Find the odd one.

1) Indian Post, Indian Railway, Bank of India, Air India.

2) Life Insurance Corporation, Reserve Bank of India, Bharat Heavy Electricals Limited, ONGC.

3) Pepsi, Cocacola, Dabur, Proctor & Gamble.

4) Tata Motors, Hindustan Aeronautics Limited, Steel Authority of India Limited, Gas
Authority of India Ltd.

Q.1 (F) Complete the sentences.

1) A Government company is a Legal entity separate from the Government.

2) Departmental Organisation is owned, managed, controlled and financed by government.

3) All government companies are registered under Companies Act, 2013.

4) MNCs are powerful economical entities.

Q.1 (G) Answer in one sentence.

1) What is Government Company?
Answer:
The company which is registered under Companies Act, 2013 having minimum 51% of paid-up share capital held by the central government or any state government or partly by central government and partly by one or more state governments is known as Government Company.

2) What is Departmental Organisation?
Answer:
The organisation which is owned, managed, controlled and financed by government is known as Departmental Organisation.

3) What is Statutory Corporation?
Answer:
A Statutory Corporation is an autonomous corporate body created by the Special Act of the parliament or state legislature with defined powers, functions and duties. State helps statutory corporation by subscribing to its capital.

4) What is Multinational Corporation?
Answer: A multinational corporation is a business organisation that operates in many different countries at the same time. In other words, it’s a company that has business activities in more than one country

5) What is Public Sector?
Answer:
Public Sector Organisations are those organisations which are owned, financed, managed and controlled by government or combination of governments.

6) What is Private Sector?
Answer:
Private Sector Organisations are those organisations which are owned, financed, managed and controlled by individual or group of individuals.

Q.1(H) Correct the underlined word and rewrite the following sentences.

1) Statutory Corporation is a natural person created by special Act.
Answer: artificial

2) A Statutory Corporation is not answerable to parliament or state assembly.
Answer: answerable

3) MNC have existence in single country.
Answer: many

4) Departmental Organisation has a separate existence from government.
Answer: no separate

5) Private sector aims at providing essential services to customers.
Answer: public

Q.2 Explain the following terms/concepts.

1) Public Sector Organisation
Answer:
a) It is owned, managed, controlled, and financed by the government.
b) It includes Departmental organisations, Statutory Corporations, and Government Companies.
c) Its main objective is to provide services to society.
d) It is managed by government officials or the Board of Directors. It is large in size and operates on a large scale.

2) Private Sector Organisation
Answer:
a) The Organisation which is owned, managed, controlled and financed by individuals or group of individuals is known as private sector organisation.
b) The private sector organisation includes Sole Trading Concern, Joint Hindu Family, Partnership Firm, Joint Stock Company, Co-Operative Society.
c) The main objective of private sector organisation is to earn profit.
d) The management of private sector organisation remains with owner or their elected representatives.

3) Departmental Organisation
Answer:
a) The organisation which is owned, managed, controlled, financed and operated by government is known as Departmental Organisation.
b) The required funds come from annual budget appropriation of the Government.
c) The departmental undertaking is managed by government officials of the concerned ministry.
d) The Departmental undertaking is controlled by concerned ministry.

4) Statutory Corporation
Answer:
a) The organisation which is formed under a special Act of Parliament or state legislature is known as statutory organisation.
b) The capital is contributed by the Government at the time of establishment. Additional capital if required can be contributed by the Government.
c) Statutory Corporation is managed by board of directors nominated by the Government.
d) The statutory Corporation is controlled by the Act or Statute of the Parliament or state legislature.

5) Government Company
Answer:
a) The company where minimum 51% of the paid up capital is held by central or state Government jointly or individually is known as Government Company.
b) The capital of Government company is contributed by central and state government
and even by general public and financial institutions.
c) Government company is managed by Board of Directors appointed by government and
shareholders.
d) Government companies are controlled by government or shareholders by following the
provisions of Companies Act.

6) Multinational Corporation
Answer:
a) A multinational corporation is a business organisation that operates in many different countries at the same time.
b) In other words, it’s a company that has business activities in more than one country.
c) A multinational corporation (MNC) has facilities and other assets in at least one country other than its home country.
d) Such companies have offices and/or factories in different countries and usually have a centralized head office from where they coordinate global management.

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Q.3 Study the following case/situation and express your opinion.

1) There is X company in which capital contribution by different entities are as follows:
Madhya Pradesh Govt 35%, Maharashtra Government 35% and Government of India
30% of company
.

i) Find out type of this company.
ii) Tell any one features of this company.
iii) Give an example of this type of company.

Solution:
i) Government Company.
ii) Registration Under the Companies Act and Separate Legal Entity are the features of this company.
iii) National Thermal Power Corporation, Bharat Heavy Electricals Limited, Hindustan Machines Tools.

2) There is a company which is having a registered office in Singapore and such company
is having branch offices in Varanasi (India) and Hambantota(Sri Lanka). This company
provides cellular services to host countries through their respective branch offices.

i) Find out type of organisation.
ii) In which country does the company originates?
iii) Name any one country which has a branch office of the company

Solution:
i) Multinational Organization.
ii) Singapore.
iii) India and Sri Lanka.

3) A central government passes a statute in the parliament and forms a business organization which is having autonomy in administration and this organization is answerable to legislature.

i) Which type of organization is this?
ii) Give any one feature of this organization.
iii) Give any one example of this type of organization.

Solution:
i) It is a Statutory Corporation.
ii) A corporate body, Financial Autonomy, and Own staffing system are the features of a Statutory Corporation.
iii) For example, Reserve Bank of India, LIC, etc.

Q.4 Distinguish between

1) Private Sector Organisation and Public Sector Organisation.

Sr.
No.
Point of
difference
Private Sector OrganisationPublic Sector Organisation
1MeaningThe Organisation which is owned, managed, controlled and financed by individuals or group of individuals is known as private sector organisationThe organisation which is owned managed, controlled and financed by government or combination of governments is known as public sector organisation
2ConstituentsThe private sector organisation
includes Sole Trading Concern, Joint Hindu Family, Partnership Firm, Joint Stock Company, Co-Operative Society
The public sector organisation
includes Departmental
Organisation, Statutory
Corporation and Government
Companies.
3Main MotiveThe main objective of private sector organizations is to earn profit.The main objective of public sector organization is to serve society by providing essential services.
4ManagementThe management of private sector organizations remains with the owner or their elected representatives.The management of public sector organization is in the hands of Government officials or Board of Directors (BOD).
5Size of
Entity
The private sector organization firms can be of any size e.g. sole trading concern operates on small scale basis whereas Joint Stock Company operates on large scale basis.The Public sector organization are large in size and operates on large scale basis.
6Capital
provider
Capital is contributed by owner /
private investors from their own
resources or borrowings from
financial institutions
The capital of public sector
organisation is mostly contributed by Government.
7Business
Areas
The private sector organization
operates in industrial and commercial area only.
The public sector organization
operates mostly in utility services such as railways, posts, etc. and also in industrial and commercial undertakings.
8Decision
Making
In private-sector organisations decision making is quick as very few officials are involved in decision making processIn Public sector organisations the decision making is delayed due to bureaucratic hurdles
9EfficiencyThere is a greater efficiency on the part of the private sector due to professional approach in running the organizationThe efficiency of public sector
organization is low due to lack of competitive spirit

2) Departmental Organisation and Statutory Corporation.

Sr.
No.
Point of
difference
Departmental OrganisationStatutory Corporation
1MeaningThe organization which is owned, managed, controlled, financed and operated by government is known as Departmental Organisation.The organisation which is
formed under a special Act of Parliament or state legislature is known as statutory organisation
2CapitalThe required funds come from
annual budget appropriation of the
Government.
The capital is contributed by
the Government at the time of
establishment. Additional capital if required can be contributed by the Government
3ManagementThe departmental undertaking is
managed by government officials of
the concerned ministry
Statutory Corporation is
managed by board of directors nominated by the Government.
4ControlThe Departmental undertaking is
controlled by concerned ministry.
The statutory Corporation is
controlled by the Act or Statute of the Parliament or state legislature.
5AutonomyThe departmental organisation does
not have autonomy in decision
making
Statutory corporation enjoys
autonomy in decision making.
6Legal StatusThe Departmental undertaking has
no separate legal status distinct from
the Government
Statutory Corporation has
seperate status distinct from the Government
7EstablishmentThe Departmental undertaking is
formed under concerned ministry
The Statutory corporation is
established by special Act of the Parliament or state legislature.
8Borrowing
Power
The Departmental undertaking
cannot borrow money from public.
The statutory corporation can
borrow money from public by
way of bonds.
9StaffThe staff of departmental
organisation is government servants
and their services are governed by
civil service rules.
The staff is recruited
independently and their services are governed by service rules of organisations.

3) Government Company and Multinational Corporation.

Sr.
No.
Point of
difference
Government CompanyMultinational Corporation
1MeaningThe company where minimum
51% of the paid up capital is held
by central or state Government
jointly or individually is known
as Government Company.
Multinational Corporation is
a company which is incorporated
in one country and has
business units in several
countries.
2CapitalThe capital of Government
company is contributed by
central and state government
and even by general public and
financial institutions.
The capital is contributed
by the shareholders or financial
institutions in several countries.
3ManagementGovernment company is
managed by Board of Directors
appointed by government and
shareholders
Multinational corporation is
managed by a parent company. It manages affairs of the subsidiary from the respective home country.
4EstablishmentGovernment companies are
formed and registered under
the provisions of Companies
Act 2013.
Multinational corporations have to seek permission from the government and host countries.
5Borrowing
Power
Government Companies can
borrow funds by the way of debt
or issuing shares to the public.
Multinational corporation use resources of different countries.
6Area of OperationsGovernment company operates within the local boundaries of a nation.MNC operates in several countries, having headquarters in one country.
7MotiveGovernment companies are service oriented and hence take interest in the social welfare activities of the country.MNCs are profit motivated rather than service oriented.
8CurrencyThey have to deal with single currency.They have to deal with multiple currencies and exchange rates.
9ExampleSteel Authority of India Ltd., Bharat Petroleum, Indian Oil Corporation, BHEL, HMT, etc.Hindustan Lever Ltd., Colgate Palmolive India Ltd; Coca Cola, KFC, LG, etc.

4) Departmental Organisation and Multinational Corporation

Sr.
No.
Point of
difference
Departmental OrganisationMultinational Corporation
1MeaningThe Organisation which is owned, managed, controlled, financed and operated by government is known as
Departmental Organisation.
Multinational Corporation is
a company which is
incorporated in one country and has business units in several countries.
2CapitalThe required funds come from
annual budget appropriation of the Government.
The capital is contributed by the shareholders or financial institutions in several countries.
3ManagementThe Departmental undertaking is managed by Government officials of the concerned ministry.Multinational corporation is managed by a parent company. It manages affairs of the subsidiary from the respective home country.
4Legal statusThere is no separate legal status distinct from the government.It has separate legal status.
5OwnershipDepartmental undertaking is fully owned by the Government.Ownership of MNC is in hands of shareholder’s of the company.
6 ConcessionsIt receives highest government concessions and privileges.MNC do not have any concessions. They have to pay taxes and duties.
7Borrowing
Power
Departmental undertaking cannot borrow from public. It has to depend on budget allocated by the government.Multinational corporation use resources of different countries.

5) Government Company and Statutory Corporation.

Sr.
No.
Point of
difference
Government CompanyStatutory Corporation
1MeaningThe company where minimum 51% of the paid up capital is held by central or state Government
jointly or individually is known
as Government Company.
The Company which is formed
under a special statute act of parliament or state legislature is known as statutory corporation.
2CapitalThe capital of Government
company is contributed by
central and state government
and even by general public and financial institutions.
The capital is contributed by
the government at the time of
establishment. Additional capital
if required can be contributed by
government as and when required.
3ManagementGovernment company is
managed by Board of Directors
appointed by government and
shareholders
Statutory corporation is managed by Board of Directors nominated by the Government.
4EstablishmentGovernment companies are
formed and registered under
the provisions of Companies
Act 2013.
The statutory corporation is
established by special Act of the
parliament or state legislature.
5Borrowing
Power
Government Companies can
borrow funds by the way of debt or issuing shares to the public.
Statutory corporation can borrow
funds from the public by ways of
bonds.
6ControlGovernment company operates within the local boundaries of a nation.The statutory corporation is
controlled by the Act or the statute of the Parliament or state legislature.

6) Departmental Organisation and Government Company.

Sr.
No.
Point of
difference
Departmental OrganisationGovernment Company
1MeaningAn organization which is owned, managed, controlled, financed and operated by government is known as Departmental Organisation.The company where minimum 51% of the paid up capital is held by central or state Government jointly or individually is known
as Government Company.
2CapitalThe required funds come from
annual budget appropriation of the Government.
The capital of Government
company is contributed by
central and state government
and even by general public and
financial institutions.
3ManagementThe departmental undertaking is
managed by government officials of the concerned ministry
The Government Company is
managed by board of directors
appointed by Government and
shareholders.
4ControlThe Departmental undertaking is
controlled by concerned ministry.
Government companies are
controlled by Government or
shareholders by following the
provision of companies Act.
5AutonomyThe departmental organisation does not have autonomy in decision makingThe Government companies
enjoys autonomy in decision
making.
6Legal StatusThe Departmental undertaking has
no separate legal status distinct from
the Government
The Government company has
separate status distinct from the
Government.
7EstablishmentThe Departmental undertaking is
formed under concerned ministry
Government companies are
formed and registered under the
provision of Companies
Act 2013.
8Borrowing
Power
The Departmental undertaking
cannot borrow money from public.
Government Companies can
borrow Funds by ways of debts
or issuing shares to the public.
9StaffThe staff of departmental
organisation is government servants and their services are governed by civil service rules.
The staff is recruited
independently and their services
are governed by contract of
service rules of organisations.

7) Statutory Corporations and Multinational Corporations.

Sr.
No.
Point of
difference
Statutory CorporationMultinational Corporation
1MeaningThe Company which is formed under a special statute act of parliament or state legislature is known as statutory corporation.Multinational Corporation is
a company which is incorporated
in one country and has
business units in several
countries.
2CapitalThe capital is contributed by the government at the time of establishment. Additional capital if required can be contributed by government as and when required.The capital is contributed
by the shareholders or financial
institutions in several countries.
3ManagementStatutory corporation is managed by Board of Directors nominated by the Government.Multinational corporation is
managed by a parent company. It manages affairs of the subsidiary from the respective home country.
4EstablishmentThe Statutory Corporation is established by Special Act of the parliament or State LegislatureMultinational corporations have to seek permission from the government and host countries.
5Borrowing
Power
Government Companies can
borrow funds by the way of debt or issuing shares to the public.
Multinational corporation use resources of different countries.
6MotiveStatutory Corporations are service oriented and hence take interest in the social welfare activities of the country.MNCs are profit motivated rather than service oriented.
7AccountabilityStatutory corporation has to take its annual reports in the Parliament where its working is discussed and debated.MNC is accountable to the taxation authorities in host countries and have to follow procedures such as Income Tax law procedure, FEMA, EXIM Policy etc. and as such will have to obey the laws of the host countries.
9ExampleLIC, Reserve Bank of India etc.Hindustan Lever Ltd., Colgate Palmolive India Ltd; Coca Cola, KFC, LG, etc.

Q.5 Answer in brief.

1) State any four features of Departmental Organisation

Answer:
For answer refer to Q.8 (1)

2) State any four features of Statutory Corporation

Answer:
For answer refer to Q.8 (3)

3) State any two demerits of Multinational Corporation.

Answer:
For answer refer to Q.8 (8)

4) State any four merits Government Company.

Answer:
For answer refer to Q.8 (1)

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Q.6 Justify the following statements.

1) Departmental Organisations are run for providing public services.

Answer:
a) The organization which is owned, managed, controlled and financed by government is known as Departmental Organisation.
b) Examples of the departmental form of organization are the Post Office, Railways, Defence Industries, Radio, Public Utility Services, etc.
c) It is the oldest form of business organization.
d) Main objective of Departmental Organisations is to provide services to public.
e) Private sector aims at profit maximization while the public sector aims to provide reliable services to customers.
f) Thus, Departmental Organisations are run for providing public services.

2) There is direct control of government on departmental organisation.

Answer:
a) The organization which is owned, managed, controlled and financed by government is known as Departmental Organisation.
b) Departmental Organisation is financed through an annual budget.
c) The revenues of the enterprise directly go to the Government treasury.
d) Departmental organization has no separate existence from government.
e) The staff of enterprises is treated equally with other civil servants.
f) Thus, In a departmental organization there is direct and absolute control of the government over the enterprise.

3) There is no political interference in statutory corporation.

Answer:
a) A Statutory Corporation is an autonomous corporate body created by the Special Act of the parliament or state legislature.
b) A Statutory Corporation comes into existence by following particular act or statute, therefore, there is no political interference in formation, working and administration of a statutory corporation.
c) A statutory corporation enjoys financial autonomy or independence.
d) All statutory corporations are free from political interference.
e) Thus, all statutory corporations are free from political interference.

4) There is professional management in statutory corporation.

Answer:
a) A statutory corporation is relatively free from red tapism, as there is less file work and less formality to be completed before taking decisions.
b) The statutory corporations can have their own rules and regulations regarding remuneration and recruitment of employees.
c) It provides better facilities and attractive terms of service to staff to secure efficient working from its staff.
d) Board of directors of statutory corporation consists of business experts and the representatives of various groups such as labour, consumers, etc. who are nominated by the government.
e) Thus, there is professional management in a statutory corporation.

5) MNC helps to end local monopolies.

Answer:
a) The entry of MNCs leads to competition in the host countries.
b) Local monopolies of host countries either start improving their products or reduce their prices.
c) Thus MNCs put an end to the exploitative practices of local monopolists.
d) As a matter of fact, MNCs compel domestic companies to improve their efficiency and quality.
e) Thus, MNCs helps to end local monopolies.

6) MNCs has worldwide existence.

Answer:
a) As MNCs are operating on a global basis, they have huge physical and financial assets.
b) MNCs have production and marketing operations in several countries operating through a network of branches, subsidiaries, and affiliates in host countries.
c) Advanced Technology and international business operations are done by MNC.
d) It brings in much needed foreign capital for the rapid development.
e) Multinational corporation integrate economies of various nations with the world economy.
f) Thus, MNC has worldwide existence.

7) MNCs has mighty economic powers.

Answer:
a) As MNC is operating on a global basis, they have huge physical and financial assets.
b) In terms of assets and turnover, many MNCs are bigger than national economies of several countries.
c) Multinational corporations are powerful economic entities.
d) Multinational corporations keep on adding to their economic power through constant mergers and acquisitions of companies in host countries.
e) Thus, MNCs has mighty economic powers.

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Q.7 Attempt the following.

1) Merits of Departmental Organisation.

Answer:
For answer refer to Q.8 (2)

2) Demerits of Departmental Organisation.

Answer:
For answer refer to Q.8 (2)

3) Merits of Statutory Corporation.

Answer:
For answer refer to Q.8 (4)

4) Demerits of Statutory Corporation.

Answer:
For answer refer to Q.8 (4)

5) Features of Government Company.

Answer:
For answer refer to Q.8 (5)

6) Demerits of Government Company.

Answer:
For answer refer to Q.8 (6)

7) Features of Multinational Corporation.

Answer:
For answer refer to Q.8 (7)

8) Merits of Multinational Corporation.

Answer:
For answer refer to Q.8 (8)

Q.8 Answer the following.

1) Explain Departmental Organisation and its features.

Answer: The organization which is owned, managed, controlled and financed by government is known as Departmental Organisation.

It is the oldest form of business organization. Departmental Organisation performs its all
activities as an integral part of government only.

The Minister-in-charge of ministry is head of this organization. All departmental organizations
act through officers of the government and all employees are called as government employees.

Examples of the departmental form of organisation are the Post Office, Railways, Defence
Industries, Radio, Public Utility Services etc.

Features of Departmental Organisation:

1) Managed by Government

Departmental Organisation is managed by a concerned government department. Minister at the top is responsible to the Parliament for its operations.

2) Delegation of Authority

The downward delegation of authority is affected from the top executive to every part of the organisation.

3) Financed by the Government

Departmental Organisation is financed through annual budget appropriations made by the legislature and its revenues are directly paid to the government treasury.

4) Run by the Government

Different procedures like budgeting, accounting and auditing are at par with government departments.

5) No Separate Legal Entity

Departmental organisation has no separate existence from government. It is working under concerned ministry.

6) Government Employees

Since it is an integral part of the Government, the staff of the enterprise is treated equally with other civil servants for all purposes with other government employees.

2) Explain merits and demerits of departmental organization.

Answer: The organisation which is owned, managed, controlled and financed by government is known as Departmental Organisation.

It is the oldest form of business organisation. Departmental Organisation performs its all
activities as an integral part of government only.

The Minister-in-charge of ministry is head of this organisation. All departmental organisations
act through officers of the government and all employees are called as government employees.

Examples of the departmental form of organisation are the Post Office, Railways, Defence
Industries, Radio, Public Utility Services etc.

Merits of Departmental Organisation:

1) Direct Control

In departmental organisation there is a direct and absolute control of government over the enterprise.

2) Direct Revenue to the Government

The revenues of the enterprise directly go to the Government treasury in a Departmental Organisation.

3) Less Overheads

As departmental organisations are operated by government themselves, the administrative overhead charges are less.

4) Proper use of Funds

Since these undertakings are subject to strict control and supervision, chances for misuse of funds are less in departmental organisation.98

5) Qualified Staff

These organisations are properly managed and supervised by the qualified staff.

6) Maintains Secrecy

These organisations maintain maximum secrecy on policy matters and also they take care of essential goods and services.

Demerits of Departmental Organisation:

1) Delay in Action

As departmental organisations are controlled by government, there is always centralization of authorities. Such excessive centralization of authority leads to delay in action.

2) Red Tapism and Bureaucracy

There is always problem of Red tapism and bureaucracy in departmental organisation which affects it’s trustworthiness.

3) Less Scope for Initiative

There is no scope for the initiative and skill as the procedures and policies are subject to the criticism in the Parliament.

4) Lack of Flexibility

Departmental organisation always lacks flexibility due to excessive control and supervision by the government.

5) Delayed Decisions

For each and everything, the sanctioning of the Minister or the top executive is essential. The executives at the lower level cannot take any decision.

6) Absence of professionalism

Absence of professionalism, fear of public criticism, frequent transfers of officials and staff affects the efficiency of these organisations.

3) Explain Statutory Corporation and its features.

Answer: A Statutory Corporation is an autonomous corporate body created by the Special Act of the parliament or state legislature with defined powers, functions and duties. State helps statutory corporation by subscribing to its capital.
For example, Reserve Bank of India, LIC etc.

Features of Statutory Corporations:

1) Corporate Body

Statutory corporation is an artificial person created by law and its an independent legal entity. It is managed by the board of directors constituted by the government. A corporation has a right to enter into contracts and can undertake any kind of business under its own name.

2) Answerable to the Legislature

A statutory corporation is answerable to parliament or state assembly whomsoever creates it. Parliament has no right to interfere in the working of statutory corporations. It can only discuss policy matters and overall performance of the corporations.

3) Own Staffing System

Employees are not government servants, even though the government owns and manages a corporation. Employees of various corporations receive balanced or uniform pay and benefits by the government. They are recruited, remunerated and governed as per the rules laid down by the corporation.

4) Financial Autonomy

A statutory corporation enjoys financial autonomy or independence. It is not subject to the budget, accounting and audit controls. After getting the prior permission from the government, it can even borrow money within and outside the country.

5) No Political Interference

A Statutory Corporation comes into existence by following particular act or statute therefore there is no political interference in formation, working and administration of a statutory corporation.

All statutory corporations are free from political interference.

4) Explain merits and demerits of statutory corporation.

Answer: A Statutory Corporation is an autonomous corporate body created by the Special Act of the parliament or state legislature with defined powers, functions and duties. State helps statutory corporation by subscribing to its capital.
For example, Reserve Bank of India, LIC etc.

Merits of Statutory Corporations:

1) Initiative and Flexibility

Operations and management of a statutory corporation is done independently without any government’s interference, with its own initiative and flexibility.

2) Administrative Autonomy

A statutory corporation is able to manage its affairs with independence and flexibility.

3) Quick Decisions

A statutory corporation is relatively free from red tapism, as there is less file work and less formality to be completed before taking decisions.

4) Efficient Staff

The statutory corporations can have their own rules and regulations regarding remuneration and recruitment of employees. It provides better facilities and attractive terms of service to staff to secure efficient working from its staff.

5) Professional Management

Board of directors of statutory corporation consists of business experts and the representatives of various groups such as labour, consumers etc. who are nominated by the government.

6) Easy to raise capital

Such corporations are fully owned by the government, they can easily raise required capital by floating bonds at a low rate of interest. These bonds are safe, the investors also feel comfortable in subscribing such bonds.

Demerits of Statutory Corporations:

1) Autonomy on paper only

The autonomy and flexibility of statutory corporation is only for namesake. Practically, ministers, government officials and political parties often interfere with the working of these corporations.

2) Lack of initiative

Statutory corporations do not have to face any competition and are not guided by a profit motive. So the employees do not take initiative to increase the profit and reduce loss. The losses of the statutory corporation are made good by the government.

3) Rigid structure

The objects and powers of statutory corporations are defined by the Act and these can be amended only by amending the Statute or the Act. Amending the Act is a time-consuming and complicated task.

4) Clashes amongst interests

The government appoints the board of directors and their work is to manage and operate corporations. As there are many members, it is quite possible that their interests may clash. Because of this reason, the smooth functioning of the corporation may be hampered.

5) Unfair practices

The governing board of a statutory corporation may indulge in unfair practices. It may charge an unduly high price to cover up inefficiency.

5) Explain Government Company and its features.

Answer: The company which is registered under Companies Act,2013 having minimum 51% of paid-up share capital held by the central government or any state government or partly by central government and partly by one or more state governments is known as Government Company.
Examples – 1) National Thermal Power Corporation (NTPC)
2) Bharat Heavy Electricals Limited (BHEL)
3) Hindustan Machines Tools (HMT)

Features Government Comapny:

1) Registration Under the Companies Act

A Government company is formed through registration under the Companies Act, 2013 and is subject to the provisions of this Act, like any other company. However, the Central Government may direct that any of the provisions of the Companies Act shall not apply to a Government company or shall apply with certain modifications.

2) Separate Legal Entity

A Government company is a legal entity separate from the Government. It can acquire property; can make contracts and can file suits in its own name.

3) Majority of Government Directors

In Government company major capital is held by Government. So in Board of Directors maximum directors are apppointed by respective Government.

4) Own Staff

A Government company has its own staff except Government officials who are sent on deputation. Its employees are not governed by civil service rules.

5) Free from Procedural Controls

A Government company is free from budgetary, accounting and audit controls which are applicable to Government undertakings.

6) Explain merits and demerits of government company.

Answer: The company which is registered under Companies Act,2013 having minimum 51% of paid-up share capital held by the central government or any state government or partly by central government and partly by one or more state governments is known as Government Company.
Examples – 1) National Thermal Power Corporation (NTPC)
2) Bharat Heavy Electricals Limited (BHEL)
3) Hindustan Machines Tools (HMT)

Merits of Government Company:

1) Easy Formation

A Government company can be easily formed under the Companies Act, just by an executive decision of the government.

2) Internal Autonomy

A government company can manage its affairs independently. It is relatively free from ministerial control and political interference, in its day-to-day functioning.

3) Easy to Alter

Objectives and powers of the Government Company can be changed by simply altering the Memorandum of Association of the company, without seeking the approval of the Parliament.

4) Discipline

The Government Company is subject to the provisions of the Companies Act which keeps the management of the company active, alert and disciplined.

5) Professional Management

A Government company can employ professionally qualified managers because it has its own personnel policies.

6) Public Accountability

The Annual Report of a Government company is presented to the Parliament/ State Legislature. These reports can be discussed and debated there.

Demerits of Government Company:

1) Autonomy only in Name

Independent character of a Government company exists only in name. In reality, politicians, ministers, Government officials, interfere excessively in the day-to-day working of the government company.

2) Fear of Exposure

The annual report of the government company is placed before the Parliament/State Legislature. The working of the company is exposed to press and public criticism. Therefore, management of the Government Company often gets demoralized and may not take initiative to come out with and implement something innovative.

3) Lack of Expertise

The key personnel of a Government company are often deputed from Government departments. Such person generally lack expertise and commitment leading to lower operational efficiency of the government company.

4) Lack of Professional View

Sometimes there is lack of professional view while taking decisions by the board as these companies are more bounded with fullfilment of social objectives of the business.

7) Explain multinational corporation and its features.

Answer: A multinational corporation is a business organisation that operates in many different countries at the same time. In other words, it’s a company that has business activities in more than one country.

Features of MNC’s:

1) Huge Assets and Turnover

As MNC is operating on a global basis, they have huge physical and financial assets. This also results in huge turnover (sales) of MNCs. In fact, in terms of assets and turnover, many MNCs are bigger than national economies of several countries.

2) International Operations

MNCs have production and marketing operations in several countries; operating through a network of branches, subsidiaries and affiliates in host countries.

3) Centralised Control

MNCs are characterized by unity of control. MNCs control business activities of their branches in foreign countries through head office located in the home country. Management of branches operate within the policy framework of the parent corporation.

4) Mighty Economic Power

MNCs are powerful economic entities. They keep on adding to their economic power through constant mergers and acquisitions of companies, in host countries.

5) Advanced and Sophisticated Technology

Generally, a MNC has advanced and sophisticated technology at its command. It employs capital intensive technology in manufacturing and marketing.

6) Professional Management

A MNC employs professionally trained managers to handle huge funds, advanced technology and international business operations.

8) Explain merits and demerits of multinational corporation.

Answer: A multinational corporation is a business organisation that operates in many different countries at the same time. In other words, it’s a company that has business activities in more than one country.

Merits of MNC’s :

1) Employment Generation

MNCs create large scale employment opportunities in host countries. This is a big advantage of MNCs for countries; where there is a lot of unemployment.

2) Inflow of Foreign Capital

MNCs bring in much needed foreign capital for the rapid development of developing countries. This inflow of capital will bring much needed boost for growth of the domestic economy.

3) Proper Use of Idle Resources

MNCs are in a position to utilize idle physical and human resources of the host country properly because of their advanced technical knowledge. This results in an increase in the national income of the host country.

4) Technical Development

MNCs carry the merits of technical development of host countries. In fact, MNCs are a vehicle for transfer of technical development from one country to another. Poor countries also begin to develop technically after hosting MNCs.

5) Managerial Development

MNCs employ latest management techniques. People employed by MNCs do a lot of research in management. In a way, they help to professionalize management along with latest lines of management theory and practice. This leads to managerial development in host countries.

6) End of Local Monopolies

The entry of MNCs leads to competition in the host countries. Local monopolies of host countries either start improving their products or reduce their prices. Thus MNCs put an end to exploitative practices of local monopolists.

7) Improvement in Standard of Living

By providing quality products and services, MNCs help to improve the standard of living of people of host countries.

8) Promotion of International Brotherhood and Culture

MNCs integrate economies of various nations with the world economy. Through their international dealings, MNCs promote international brotherhood and culture; and pave a way for world peace and prosperity.

Demerits of MNC’s:

1) Danger for Domestic Industries

MNC’s, because of their vast economic power, pose a danger to domestic industries which are still in the process of development. Domestic industries cannot face challenges posed by MNCs. Many domestic industries have to wind up, as a result of threat from MNCs.

2) Repatriation of Profits

Repatriation of profits means sending profits to their country. MNCs earn huge profits. Repatriation of profits by MNCs adversely affects the foreign exchange reserves of the host country; which means that a large amount of foreign exchange goes out of the host country.

3) Interference

Initially MNCs help the Government of the host country, in a number of ways; and then gradually start interfering in the political affairs of the host country. There is, then, an implicit danger to the independence of the host country, in the long-run.

4) Disregard of the National Interests of the Host Country

MNCs invest in most profitable sectors and disregard the national goals and priorities of the host country. They do not care for the development of backward regions and never care to solve chronic problems of the host country like unemployment and poverty.

5) Misuse of Mighty Status

MNCs are powerful economic entities. They can afford to bear losses for a long while in the hope of earning huge profits. They have ended local competition and achieved monopoly in a greater extent. This may be the unfair strategy of MNCs to wipe off local competitors from the host country.

6) Exploitation of Natural Resource

MNCs tend to use the natural resources of the host country carelessly. They cause rapid depletion of some of the non-renewable natural resources of the host country. In this way, MNCs cause a permanent damage to the economic development of the host country.

7) Selfish Promotion of Alien Culture

MNCs tend to promote alien culture in host country to sell their products. They make people forget about their own cultural heritage e.g. In India, MNCs have created a taste for synthetic food, soft drinks etc. This promotion of foreign culture by MNCs is injurious to the health of people also.

8) Exploitation of People

MNCs join hands with big business houses of host country and emerge as powerful monopolies. This leads to concentration of economic power only in a few hands. Gradually these monopolies make it their birth right to exploit poor people and enrich themselves at the cost of the poor working class.

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Solution of all Chapters of OCM
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11th OCM Textbook Solutions

Chapter Name Solution Link
1) Introduction of Commerce and BusinessClick Here
2) TradeClick Here
3) Small Scale Industry and BusinessClick Here
4) Forms of Business Organisation – IClick Here
5) Forms of Business Organisation – IIClick Here
6) Institutes Supporting BusinessClick Here
7) Business EnvironmentClick Here
8) Introduction to ManagementClick Here

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