Category: Commerce Notes PPT

Communication through a Telephone plays a significant role in any Business organization. The modernization and digitalization of Businesses have to lead to various channels of communication, such as automated answering machines, texting, emails, etc. However, some people still prefer Telephone communication. It always gives a personal touch, more clarity, and a positive impression when Telephone communication takes place.

What is Telephone Etiquette?

Telephone etiquette implies the manners of using Telephone communication including the way you represent your Business and yourself, greeting the receiver, the tone of voice, the choice of words, listening skills, the closure to the call, etc.

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Importance of Telephone Etiquette

Telephone etiquette is essential when you communicate on the Telephone. The customer analyses you and your Business according to your communication. Following point shows how important it is to have Telephone etiquette while talking on the Telephone:

Communicating with Telephone manners always shows your professionalism. It makes the customers believe that their work is in good and safe hands. Most likely they would repeat the deal.

The impression that you create on Telephone communication has a lasting effect. The Telephone etiquette you follow makes the receiver feel respected.

Telephone etiquette builds the trust of your potential customers. It makes them loyal to you and purchases the products and services from you frequently.

When the customers get satisfied with the Telephone conversation, they are sure that their needs and requirements will be satisfied in-person also. It gives them a consistent and well-rounded experience.

Telephone Etiquette Elements

Every caller has their way of talking on the phone. However, there are some set of rules and Telephone etiquette guidelines that should be followed whenever you have Telephone communication. These are briefly discussed as follows:

The way you greet your caller must be warm and pleasant. The call should get a feel that you are alert and attentive to his call. The cheerful and positive greeting will get back the same enthusiasm. Start with a proper salutation, thank you for calling, a brief introduction of yourself and the Business and then enquire about the reason for calling.

Gestures, facial expressions, body language also have an impact while you communicate on the Telephone. While you talk on the phone, a cheerful voice and a bright tone give the feeling to the receiver that you are relaxed and at ease. Thus, body language has its communication even when you talk on the phone. Professional body language gives a good impression.

The attitude on the phone gives customers opinions about your Business. Also, the attitude is conveyed through the tone you adopt to talk. The tone of your voice should be confident as well as respectful towards the caller. A pleasant pitch of voice gives a sweet note to the ears.

Sometimes it becomes inadvertent to inform unpleasant, upsetting and sensitive information on the phone. At such times, it becomes imperative to handle the situation tactfully. The choice of words should be soft yet stern and should not at all offend the caller.

An important point that office phone etiquette considers is active listening. You should provide undivided attention to your caller with the least possible disturbances. It gives the impression that you care about the customer and his needs.

While bidding goodbye, always thank your customer and ensure that all that he wants to convey is completed. This ensures the customer that your Business is a customer-driven one. Also, try that the customer hangs up the call. This ensures there are no accidental hang-ups.

Business Phone Etiquette Tips

Let us discuss some of the Business phone etiquette tips:

• Try answering the calls in the first two or three rings. This gives the feeling of being valued

• The call should start with giving identification of yourself and your business to avoid any confusion

• A positive tone of voice always has a better response back and helps to build a good rapport

• A friendly and cheerful body language is always preferred

• Always have minimum possible interruptions and distractions when you are on a phone call

• Active listening and taking notes in parallel is beneficial for giving periodic affirmation of understanding the customer

• Any customer always prefers a polite and sympathetic honest message

• Before placing the call on hold for any reason, seek permission from the caller

• Ensure all the requirements and queries of the caller are solved before you appropriately close the call

Golden Rules for talking on the Phone

Some Golden rules for people when they are in a call are-

• Answering the Call- How one manages the calls they receive will determine the impression of the brand they represent. The first words the person speaks will give the caller an idea of how one is. Nobody likes to handle a call with a lazy customer service representative of a company. While attending a Business or work-related call, professionalism must be the priority in mind throughout the call. Knowing the Business and its guidelines is a crucial aspect of determining any issues the caller might be experiencing.

• Putting Someone on Hold- No one likes to be put on hold. Especially during a Business call when the client or customer has some questions regarding the service, putting it on hold can be a task that is necessary. The person should know before they’ll be put on hold and should not be left on hold for a very long time. This will annoy the customer and they might not wish to call again or buy again from one’s organization.

• Every Call is Important- One should never answer according to their mood and always stay calm while talking to clients or customers. No problem is a small problem when it comes to customers and it should always be kept in mind. Making every client feel important will build trust and loyalty within them and is very important for the general belief in the organization.

Different Types of Etiquettes

Etiquettes are rules that one should always follow. The different types of Etiquettes are-

• Social Etiquette- Social etiquette is a set of rules that one should follow in society. 

• Eating Etiquette- Eating Etiquette is the set of rules one should follow while eating in a public place. One should not make sounds while eating.

• Business Etiquette- Business Etiquette is the set of rules that one should follow while they are in any Business. One should never cheat on their customers.

• Wedding Etiquette- Wedding Etiquette is the set of rules one should follow while attending someone’s wedding.

• Meeting Etiquette- Meeting Etiquette is the collection of rules that one needs to follow, when they are attending any kind of meeting, presentation, etc. One should always listen to what the other people have to say and not interrupt any speaker. 

• Bathroom Etiquette- Bathroom etiquette is the set of rules that an individual is required to follow while using public toilets. The restroom should be left neat and clean for the next person to come.

• Corporate Etiquette- Corporate Etiquette is the manner an individual should behave while they are at work. Everyone must maintain the decency of the organization and avoid loitering around or peeping into others’ cubicles.

Conclusion

Appropriate telephone etiquette is essential as usually, communication on the Telephone is the first contact point for your Business. Thus it becomes critical to leave a positive lasting impression on all the customers to build up a distant relationship.

Demand is defined as the quantity of a commodity that a Consumer is capable of buying and is willing to pay the given price for it at the given time. The Theory of Demand is a Law that states the relationship between the quantity Demanded of a product and its price, assuming that all the other factors affecting the Demand are constant. According to the Law of Demand Theory, the quantity Demanded of a commodity is inversely related to its price in the market. Through this article, we will try to comprehend the Theory of derived Demand, the factors affecting Demand, the Demand curve and the application of Demand Theory.

 

Theory of Derived Demand

We have got an idea about “what is the Theory of Demand”. So now let us try to understand the Theory of derived Demand with the help of an example: a Consumer Demands a piece of clothing, let’s say a shirt, which is a finished product that came into existence after undergoing various processes. First, the land for building the plant was acquired by the manufacturing Company and then the labour was employed by the entrepreneur using the Company’s Capital. The Demand for all these resources (factors of production) was indirectly created when the Consumer posed a Demand for the shirt. This is called the Theory of derived Demand.

 

Factors Affecting Demand

After having discussed the Theory of Demand economics and the Theory of derived Demand, we will now talk about the various factors affecting the quantity Demanded of a product.

1. Price of the Commodity: As stated in the Law of Demand Theory, the price of a commodity shows an inverse relationship with its quantity Demanded. As the price of the product falls, its Demand increases.

2. The Number of Consumers: It is directly related to the quantity Demanded of a commodity. The more the number of Consumers, the more is the Demand for that product.

3. Price of Related Goods: There are two types of related goods: Substitutes and Complementary goods. For example, for milk, the juice is a substitute whereas biscuits are complementary products. If the prices of milk fall, the Demand for juice (substitute) will increase and that for biscuits (complementary goods) will lessen.

4. Income: With the increment in a Consumer’s income, he will become capable of buying more of a particular commodity, and thereby, his Demand will also rise.

5. Consumer Expectation: If a Consumer expects that the price of a certain commodity will go up in the future, he will buy more of that product at present, which will lead to a hike in its Demand.

6. Tastes and Preferences: It has a direct relation with the quantity Demanded.

 

Solved Example

Q. Explain the Demand Curve.

Ans: We now know “what is the Theory of Demand” and the factors that determine the quantity Demanded. Let us move on to the characteristics of a Demand curve. On the x-axis, we have taken the price of the commodity, and on the y-axis, the quantity Demanded.

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The first graph here shows the movement along the same Demand curve. This downward-sloping curve is in accordance with the Law of Demand Theory as when the price falls from P1 to P2, the quantity Demanded increases from Q1 to Q2.

 

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In this graph, we can see that there is a shift in the Demand curve from D to D1 at the same price P. For the curve D, the quantity Demanded is Q which is lesser than Q1 (for D1 curve). This right-shift in the Demand curve is due to all the factors affecting the Demand except the price of the commodity (which is responsible for movement along the curve). These are the same factors that are kept constant while explaining “what is the Theory of Demand”.

 

Application of Demand Theory

After having learned about “what is the Theory of Demand” and how a Demand curve looks like, we will now become familiar with the application of Demand Theory in real life. The Theory of Demand is useful in determining the force of various determinants or factors that affect the quantity Demanded. The application of Demand Theory for estimating the ups and downs in the equilibrium prices of various commodities is important for investors and entrepreneurs.

 

Fun Fact

Named after Sir Robert Giffen, Giffen goods are considered inferior goods that do not obey the Law of Demand Theory. According to the Theory of Demand, the Demand for a particular commodity diminishes with an increase in its price, but for Giffen goods, it increases with the rise in price. A historical example of the Giffen goods concept is the Irish Potato Famine of the 19th century. When the price of potatoes (Giffen goods) inflated, people cut their expenses by buying fewer luxury goods like meat and bought more potatoes.

The term reserves mean the profit amount, which is set aside with a purpose to utilise in need. In Accounting terms, this has been referred to as appropriation. Every reserve account carries a name which indicates its purpose or its use. Reserve account is a part of the net worth of the company. Thus, this can be said that reserve is an amount that is positioned on the liability side of the financial statement. 

To sum up, a reserve is the part of the profit that is not distributed among the partners but retained in the business for further use. Treatment of the reserves is also done accordingly, which is the fundamental of this chapter.

What are the Reserves?

Retained earnings are known as the reserves. They are the portions of a business’s profits that have been set aside to strengthen the business’s financial position and its work performance.

The reserves majorly used to purchase the fixed assets, to repay the debts, or to even expand the business, to pay bonuses and to repay dividends. This may be confusing for the students that the IFRS Standards call provisions a ‘reserve’, though they are not the same thing. 

What are the Revenue Reserves?

Revenue reserves are the portions of profits that are earned by a company’s normal operations which are later set aside. Revenue reserves are divided into two types. These are:

• General Reserves: These reserves, as suggested by their name, are not kept aside for any particular or destined purpose, they are for the general financial strengthening of the company.

• Specific Reserves: While specific reserves are set aside for a specific purpose which cannot be used for any other reason. Specific reserves are also known as the special reserves. Take, for example, a bad debt reserve, which is an amount set aside in case a customer fails to pay and bad debt happens in the company.

Reserves in Accounting

In accounting, the reserves are recorded by debiting the retained earnings account and then crediting the same amount to the reserve account. After the activity which caused the reserve to be created has been completed, the entry is to be reversed by shifting the balance back to the retained earnings account.  

For example, a business which wants to set aside the reserves to fund the purchase of a new office in another outlet. They need to credit the Office Reserve fund for Rs. 10,000 and debit the retained earnings account with the same amount. Once the sale is finalised, the original reserve entry is to be reversed with Rs. 10,000 debited into the Office Reserve fund and Rs.10,000 credited to the retained earnings account.

Reserve accounts are recorded as liabilities on the balance sheet under the heading ‘Reserves and Surplus’. While if a company makes losses, then no reserves are created as there will be no such need.

Need for Reserve in Business

If we credit the entire profits to the partner’s current account, then the partners become entitled to withdraw it, in cash or other kinds. This shows that all earnings by the firm are related to the partners. This situation can seriously affect the firm’s operations. One should understand that making a profit and having the surplus cash are two different things, which must be limited in the hands of the partner. This may lead to a situation where a firm may make a decent profit and may still not have the adequate cash to payout to the partner, as surplus being utilised beforehand.

A business re-invests its profits by acquiring the assets, which may be current assets like the stocks and receivables or any other fixed assets. Where a firm allows all the partners to withdraw the entire profit from the firm, there is no possibility of any growth prospect in the volume of business.

Therefore, this is very crucial not to distribute the entire amount of profit made in a year among the partners. The business needs to retain some part of the profit in the business for its growth and its continued successful existence in future.

Coordination refers to the synthesis and integration of all the operations involved in a business to reach a predefined goal. In an organization, coordination is achieved through proper management and synchronization of the various departments directing the process as a whole towards set objectives. Effective coordination in an organization includes coordination of the internal as well as the external factors. There are various types of coordination in management and techniques of coordination. 

Coordination increases the productivity and efficiency in an organization, brings organizational dynamics at both the micro as well as macro levels to defined synchrony, and ensures that the intra-organizational and inter-organizational groups have their roles connected effectively while developing trustworthiness within competing groups at the same time. This also ensures the organizational objectives and tasks to get clarified and established. The main types of coordination in management are discussed below.

Types of Coordination in Management

Broadly, coordination in management can be divided into two types- internal and external coordination. 

Internal Coordination

Internal Coordination is aimed at building a strong bond between the executives, the managers, the departments, the divisions, all the branches and the workers or the employees. This establishes an integration of organizational activities. Coordination examples or types for internal coordination are as follows:

Vertical Coordination: Vertical coordination includes the coordination of tasks from superiors to the subordinates and vice versa. A coordination example can be stated as the coordination of a particular task from a sales manager to his supervisors. This will also facilitate ensured work synchrony from the supervisors with the manager.

Horizontal Coordination: Horizontal coordination builds strong relationships among same rank holding employees. This ensures better performance with increased productivity. Coordination examples can include those among the managers, the supervisors or the co-employees.

External Coordination

External coordination is aimed at establishing connections between the employees in a business organization with people outside of the organization. Such relationships provide a better comprehension of the outside world, in the process providing an analysis of the marketing agencies, the public, the customers at various levels, the competing organizations, the agencies of the government and the financial institutions. Public Relations Officers (PROs) play the most significant role in such cases building relationships between the organizations and the people outside of it.

It can thus be noted that as a part of internal coordination, employees report vertically to the supervisors as well as the subordinates, and horizontally with the coworkers or colleagues. As a part of external coordination, relationships are established between the organization and the outsiders. Both internal and external coordination is equally important for the successful running of an organization. 

Coordination in Various Managerial Operations

Coordination in various managerial operations can be achieved through the following strategic actions: 

• Planning: Coordination in planning makes managers frame plans in the most effective order, analyzing what to include and what not to. Planning with coordination eases the procedure with the help of mutual discussion and constant exchange of ideas building productivity.

• Organizing: Immense coordination is required as a part of organizing for the performance of business operations, directed towards a synchronized approach towards the fulfilment of organizational objectives.

• Staffing: Coordination in staffing ensures the placement of the right people in the right jobs. It specifies the staff requirements helping the management to recruit skilled employees with the required qualifications.

• Directing: Subordinates on receiving orders and instructions work accordingly, only with proper coordination and integration. As a part of coordination in directing, managers are focused on building a coordinating environment in the organization.

• Controlling: Coordination ensures a controlled working structure in an organization. It makes the management ensure that the established standards are recognized and met with the actual performance.

Therefore, these are the types of coordination, explained with the help of appropriate coordination examples. Coordination is an important tool for establishing a healthy work environment in an organization. The management should aim for it and train its officials accordingly.

The stake of ownership of a shareholder in a company is represented by shares. A shareholder’s portion of the interest is equally proportional to the portion of the sum paid towards the entire capital owed to the company.

It could be segregated under two broad classifications-

1. Ordinary Equity Shares

2. Preference Shares

Shares

The term ‘Share’ represents a share in the company’s capital, including the stock capital. According to subsection 84 of section 2 of the Companies Act, 2013, it is an instrument to gauge the shareholder’s interest in the assets of a company. Here we will understand the two major types such as the ordinary share and the preferential share. 

We shall further take up some of the statements and statutes that drawn up around them.

The privileges and the responsibilities of a shareholder are dictated by the Memorandum and Articles of Association of a company. According to the provisions of the Companies Act 2013, a shareholder must also possess some contractual privileges and some other privileges.

The share or debenture or any other entitlements of any of the associates of the company is declared to be transferable by Section 44 of the Companies Act, 2013. They are movable in the way specified in the Articles of the company. The numbering of each share is ratified by Section 45. Every share possesses a unique number. However, the rule is not applicable in case of individual holding rights to receive benefits on a share held by a third party. 

Kinds of Share Capital

The share capital of a company is classified into two types broadly, as per Section 43 of the Companies Act, 2013.

1. Equity Share Capital

2. Preferential Share Capital

Equity Share Capital

Equity share capital constitutes the total sum of money pitched in by the investors and owners of a company for the capital of the company. The other names for it are simply ‘equity’ or ‘share capital’ or ‘equity share’. The equity share capital of a company is calculated by multiplying the number of equity with the face-value of each share. They are of two types:

1. Equity share with rights to vote.

2. Equity share with differential rights to dividends, voting and the likes, according to the regulations.

Tata Motors launched equity with differential voting rights in 2008 called the ‘A’ equity share. The regulation said-

1. There was only one voting right with every 10 ‘A’ equity.

2. It had more dividend than the ordinary share by 5 percentage points.

The ‘A’ equity traded at a discounted price to ordinary shares with total rights to vote, due to the difference in the rights to vote.

Preferential Share Capital

Preference or Preferential Share Capital raised through issuing preference shares carry preferential rights for:

1. Payment of Dividend: Calculated at a fixed rate of dividend which might or might not be subjected to the payment of income taxes.

2. Repayment of Capital: Comes with preferential rights to claim assets and avail profits of any fixed premium or premium on any fixed scale during liquidation or repayment of the paid-up capital, regulated by The Memorandum or Articles of the company.

Deeming of Share Capital as Preference Capital

A deeming provision of the share capital is created by an explanation under section 43, according to which, share capital shall be deemed to be preference capital if it has both or either of the following two characteristics:

1. Along with the preferential rights in the Dividend, the share capital has the right to fully or partially participate with capital that doesn’t have any right to participate in the preferential rights in the Dividend.

2. If getting liquidated, in addition to the preference rights in repayment, the share capital is entitled to fully or partially participate with other capital which doesn’t have any preferential rights in the remaining surplus amount after having repaid the total capital.

However, the Memorandum or Articles of Associates of private companies could dictate if Section 43 is pertinent.

A financial institution is a type of a company doing business that deals with all sorts of monetary and financial transactions such as currency exchange, loans, deposits and investments. There is a wide spectrum of financial services actually held and that is trust companies, brokerage firms, insurance companies, investment dealers and banks. Everybody who lives in a developed economy is a dire need for these financial services. 

In this article, we will go over the 

• definition of financial institution

• the types of financial institution

•  the features of  financial institution 

• GIC Definition 

• The GIC functions

Types of Financial Institutions 

1. Commercial Bank 

A financial institution that offers different checking account services, takes official business, personal, helps to mortgage loans, accepts deposits and offers some financial instruments like certificates of deposits and saving accounts for business and for individuals is known as a Commercial Bank. Unlike an investment Bank, a commercial bank is where people do their banking activities. Commercial Banks are commonly known for helping its account holder with Savings account, loans, mortgages and loans for commercial customers like retail. These banks also help in creating different methods of payments like wire transfer, currency exchange and credit facilities.

2. Investment Banks

Investment banks are much different from commercial banks as they provide a whole host of services that cater to facilitate different business operations like equity offering and capital expenditure financing that offer Initial public offerings. Most of the services provided are for investors in brokerage services that help facilitate trading exchanges, acquisitions, help manage mergers and various other corporate structuring services.

3. Insurance Companies 

There are different non-banking financial institutions and one the most common and familiar is insurance companies. These companies offer services to different corporations or individuals by providing insurance. They can use this insurance to protect themselves against financial risk in an unexpected accident through these secured insurance products. It is essential for corporations and individuals to protect their assets to help in their economic growth in the long run.

4. Brokerage Firms 

These firms specialize in various investment services that include mainly two things that are financial advisory and wealth management. These firms also provide ways to invest in assets such as bonds and stocks that can help individuals grow their wealth and help them diversify their portfolios, such as private equity investments and hedge funds.  These firms include Investment companies and brokerages that deal in the exchange-traded fund and mutual funds.

 Features of  Financial Institutions 

1. The licensing framework is usually 90 days( 3 months)

2. Companies issue shares to get more investments and financial institutions help with that by providing collection services and underwritings.

3. Providing guarantee is a key element when it comes to business and these financial institutions help them guarantee that. 

4. After the year 2000, a lot of financial institutions started offering its payments through offline and online mode.

5. Financial Institutions are a major contributor to financial leasing 

6. They also provide a lot of financial lending services like financing of commercial transactions or helping with personal credits

7. Financial Institutions aren’t allowed to take loans from the general public by using their palpable funds or deposits.

GIC Definition 

The General Insurance Corporation is a government-funded Financial Institution. Its main speciality is that it is the only company in India that deals with sole reinsurance before the Indian market has opened in 2016 for foreign participation. After the year  2016, a lot of the foreign participants came from countries like France, Germany and Switzerland. Under the GINA (General Insurance Business Act ) of 1972, it existed under that.

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A lot of companies have started to invest in debentures and shares from the corporate sector under GIC. But there was a restriction where the investment could not exceed five per cent of the total subscribed capital from a single company. The GIC also provides facilities such as underwriting of new debenture and shares.

GIC Functions 

1. The financial asset cannot be purchased under GIC but only the service can be bought. 

2. Some of its major services include providing insurance against certain calamities like personal sickness, loss of a physical asset and any accident. 

3. Since the nationalisation of the GIC, there were around 100 companies in the market.