Category: Commerce Notes PPT

Frederick Winslow Taylor laid out a few principles, which show that the implementation of scientific management can increase the overall efficiency of the business. He brought about a revolution in the conventional methods of administration.

 

F.W. Taylor published his principles of scientific management theory through a monograph in 1911. He was one of the intellectual leaders who applied his engineering methods to create a specialised branch of engineering, known as industrial engineering.

 

Taylor’s vision lay in transferring control of work from the worker’s hands to the management. He believed that by adhering to his principles, an organisation could earn substantially higher than from following conventional management practices.

 

The scientific methods helped in creating revolutionary ideas for a business, such as training of employees, proper staffing, etc. 

 

Fun Fact: F.W. Taylor is known as the ‘father of scientific management.

Historical Considerations

Frederick Winslow Taylor was one of the first of these thinkers. He was the founder of the Scientific Management movement, and he and his colleagues were the first to scientifically investigate the work process. They looked at how people did their jobs and how it affected their productivity. Taylor’s theory was based on the idea that forcing individuals to work as hard as they could was inefficient compared to improving the way they worked.

 

Taylor’s book “The Principles of Scientific Management” was published in 1909. He claimed that increasing productivity might be achieved by streamlining and simplifying jobs. He also promoted the idea of workers and managers cooperating with one another. This was a significant departure from how work was normally done in firms in the past.

About Fredrick Taylor

• Frederick Winslow Taylor was born in Philadelphia, Pennsylvania, in 1856 and died in 1915.

• Taylor studied and travelled throughout Europe as a youth before enrolling at Phillips Exeter Academy in New Hampshire in 1872.

• He was admitted into Harvard Law School after graduation but was unable to go owing to bad eyesight.

• Taylor then worked in different manufacturing-related jobs instead of going to university, finally earning a mechanical engineering degree from Stevens Institute of Technology in 1883 and becoming Chief Engineer at Midvale Steel Works in Philadelphia.

• He became General Manager of Manufacturing Investment Company after resigning in 1890 but departed in 1893 to pursue a career in engineering management consultancy. Taylor served as President of the American Society of Mechanical Engineers from 1906 to 1907 and then became a professor at Dartmouth College’s Tuck School of Business.

• Taylor’s book “Principles of Scientific Management,” published in 1911, is his most famous work. He introduced various management concepts based on the scientific method that might improve the efficiency and productivity of industrial settings in this book.

• Taylor is renowned as the “Father of Scientific Management,” sometimes known as “Taylorism,” as a result of his work.

Reason behind Scientific Management

Because of insufficient capacity and/or education, Taylor felt that workers should be focused on labour, while managers should be held accountable for optimising performance. Workers, in particular, would profit from this approach since it would result in higher salaries, shorter working hours, and better work and home conditions. While Taylor’s Theory of Scientific Management has a reputation for being cold and impersonal, this is not the case; his philosophy had good intentions for everyone, and the difficulties stem from inadequate implementation.

What are the Principles of Scientific Management?

In a broader sense, Taylor principles of management is a set of theories that dismisses those traditional ways and rule-of-thumb techniques of managing the workforce. It accepts the application of scientific methods to provide solutions to managerial problems.

It works based on the five principles of management. These include:

1. Scientific ways, instead rule-of-thumb method: Taylor believed that instead of using conventional methods, all industries should adopt the scientific techniques for essential management decisions. According to him, even the smallest activity can be done through proper scientific planning instead of rule-of-thumb.

Now, what is a rule-of-thumb method? It is a principle that provides simple advice that should be followed in almost all situations. This method develops as a result of experience instead of proper technical research.

Under Taylor’s scientific management theory, decisions are made based on the application of these methods to a problem. He believed that management should make decisions based on cause and effect relationships instead of traditional opinions.

2. Harmony without any discord: F.W. Taylor indicated that there should be complete harmony between management and its labourers. He believed that it would increase the workflow in an organisation. A clear understanding can bring efficiency to work and create a harmonious relationship between the two components.

According to him, an organisation can increase its productivity if it reduces disputes with the labourers. Workers should not be over-burdened with the workload, and businesses should understand their requirements.

3. Mental Revolution: Under this principle, both the management and the workers should change their mental approach towards each other. The adoption of scientific methods would bring about a complete shift in the attitude of both the organisation and its employees. He believed that without a mental revolution, there is no scientific management.

The most significant change can take place when an organisation matches their vision with workers. To him, a business can increase its potential when both the top and lower levels of management share similar perspectives.

4. Coordination between management and workers: Under the Taylor scientific management, there should be complete cooperation between the administration and its workers. It can result in optimum output when a business goes hand-in-hand with its employees.

Both the managers and workers should understand each other’s requirements and work in collaboration. Taylor believed that an individual alone could not optimise the efficiency of work. It requires teamwork, and proper coordination between the different layers of management to increase productivity.

5. Optimum output: The principle states that any organisation’s growth depends on the skills of its workers. Thus, the scientific approach believes in proper staffing and employee training to maximise output.

The aim of both the management and its workers should be optimising output. Maximum output results in increasing the profits for any business, and it will ensure benefits to both the administration and its workers.

What is the Importance of Scientific Management?

Taylor’s principles of management are known worldwide due to their undeniable significance in the field of management. Some reasons have been explained below:

• These principles direct businesses to properly allocate their resources and earn maximum profits.

• It ensures quality management and allows a business to strengthen its relations with employees.

• These guidelines ensure that a business can increase its productivity by scientifically directing all employees toward the desired objective.

Conclusion

F.W. Taylor published his principles of scientific management theory through a monograph in 1911. He believed that by adhering to his principles, an organisation could earn substantially higher than from following conventional management practices. Taylor’s theory was based on the idea that forcing individuals to work as hard as they could would be inefficient compared to improving the way they worked.

The story of Palampur deals with a few fundamental concepts regarding production, and that has been depicted through a hypothetical village named Palampur. In the first part, you will get an introduction to the village, all the places that are connected to it, transport system, number of families, etc. 

As this story progresses, you will get a hold of the production part, different concepts regarding that, a few instances excerpted from the villages and also the process of farming.

Details from the Introductory Part of Village Palampur Class 9

In this story, it is mentioned that Palampur has around 450 families and people residing there are from different caste and creeds. Those people are solely dependent on farming, and around 80 families from the upper caste possess the maximum portion of land in that village. 

All the tube wells are connected with electricity and are used in small businesses, different kinds of transports are available as well, there is a health care centre for any sort of primary emergency, houses have sufficient electricity as well.

Since small businesses require electricity on a daily basis, the Government takes enough care of this part to make it convenient for those small business owners. All these instances like sufficient electricity, ease in transportation, health care centre and a private dispensary to help these villagers, etc. have made Palampur quite well-developed. 

Production Stages 

In this story, production requirements have been mentioned along with all the resources. It requires getting the work done. In terms of production requirements, there are four factors that matter, such as land, labour, physical capital, and enterprise, and among them, the most important factor remains land. 

All the natural resources such as water, minerals, forests are also part of the first factor and mandatory to keep the production going. In the case of labour, depending upon the type of work, one may require hard working labourers or highly educated people to finish that specific task. And, the third requirement being physical capital, it includes all kinds of capital such as fixed capitals like tools, buildings, machines, etc., working capital like money and raw materials, etc. 

Apart from all these, this production process also requires proper knowledge, and enterprise to utilise all these resources and make something worthy. In the story of village Palampur Class 9, all of these important factors of production have been elaborated, including the human capital, which is equally vital. 

Farming: Main Production Activity 

In the village of Palampur Class 9, you can find this story revolving around different kinds of production activities, such as farming and non-farming activities. Farming is the main activity one can witness here as the majority of people depend on this for a sustainable living. However, there are some non-farming activities mentioned as well, like small-scale manufacturing (for instance weaving, pottery), transport, dairy, etc.

Changes Required in Farm Activities:

Even though agricultural areas are limited, farmers have managed to make fair use of those small portions, and barren land has been developed for this purpose as well. Over the years, multiple changes have been made in order to improve the concept of farming and that have helped the cultivators to produce crops even in that limited amount of land. From the story of village Palampur images, one can get a hold of all these important aspects of farm activities. 

Some Changes that Have Helped the Farming Process Grow are-

• Multiple-cropping farming which involves growing one crop within a year on a particular agricultural area.

• Inculcating modern farming methods to make it easier for the farmers.

In the later part of the story of village Palampur, one can come across the Green revolution, which was initially considered as a turning point. This phase also made an impact on the agricultural lands due to the excessive use of chemical fertilisers. Soil fertility was hampered due to this, even use of groundwater for tube well irrigation also impacted the water-table and reduced it below the ground. 

Entrepreneurship in a particular field means these two phenomena – Training and Development. Though training is the initial step, development is an ongoing process.

In this subject, we will limit our discussion on the process of entrepreneurship with these two aspects particularly.

Training and Development 

Entrepreneurship development is the basic process of improving the skills that are already set in the initial stage while training. Development of knowledge is quite important for the entrepreneurs while they are focused on the skills. This can be initiated through various methods such as the classroom sessions or arranging of training centres specially designed to enhance the skills and increase the entrepreneurial shrewdness.

The process of modifying the capacity to develop, manage, and organize business conduct while keeping in mind the uncertainties associated with the same. Entrepreneurship Development is nothing but assisting the entrepreneurs to develop their skills through training programmes that instils in them the rich quality decisions in their arena of business.  

Learning and Development

The workforce has been continually striving because of a number of factors. In an increasingly competitive business, the rise of complexity, and the digital revolution are all shaping up the employees. A wide variety of workforce needed with a shorter shelf life for acquiring the knowledge have initiated a need for reskilling and also upskilling. 

Thus, all these have elevated the importance of the learning-and-development function. Learning and Development are better to be understood by strategies formulated, Abbreviated as L&D, the primary responsibilities of L&D is to manage and develop the people. L&D’s strategic role spans five areas –

1. Attract and retain the talent of the people.

2. Develop capabilities among the people.

3. Create a values-based culture.

4. Build an employer brand.

5. Motivate and engage employees.  

Personality Development Course

Personality development course covers various dimensions and importance of effective personality. It helps to understand the personality traits and formation of those personalities. This is a vital contribution to the world of business as this course makes the students aware of the various dynamics of personality development. 

These kinds, of course, aim to cause a basic awareness about the significance of soft skills in professional and interpersonal communications and facilitate the all-round development of the personality of an individual. Soft skills can ensure a person to retain it, climb and reach further to achieve excellence, and this derives fulfilment and joy. Here various communication skills, positive attitude, emotional intelligence, social grace are all dealt within.

Leadership Development Training

Leadership is all about managing the people. Evolving great ideas and a strategic vision is not only the key if the employees aren’t willing to follow the leader. 

Provided in the following are seven key leadership skills which all the entrepreneurs should develop –

1. Develop a Strategic Vision

Passion for a great business idea is not the only ingredient to succeed in business. A strategy for the company is essential to devise. 

2. Communicate with Transparency

Share the success as well as failures stories with the people working in the business. Information transparently transmitted gives a context and also a sense of belonging to the company.

3. Spot and Retain the Best Talent

Business is successful as the people working in it are worth the credit. Successful companies are created by talented, hard-working people. They should be spotted and recognised for their best talent.

4.  Know-How and When to Delegate

Entrepreneurs should maintain a healthy ego. There should be a balance in delegating the responsibilities as well as taking account of the same.

5. Lead by Example

Be honest and ethical in approach and thus lead an example through that.

6. Ask for Advice

Impartial and professional advice is required to seek in order to grow in the business.

7.  Develop Leaders

Leadership should start right from the top of the organization, but leaders not necessarily will come from positions of power.

Professional Development Courses

Professional Development may be used to mean a variety of specialized training, formal education, or advanced professional learning that is intended to help the administrators, teachers, and other educators improve their professional knowledge, their competence level, skill, and effectiveness in the business world. 

This term is also used in education contexts without qualification, without specific examples, or any additional explanation, however, it may be complex to determine what “professional development” is referring to. This can simply be meant how one professes professionally with better skills and knowledge in his own arena.

Entrepreneurial Training and Development is somewhat can be said is required in each step of the business as the business world is ever-changing and ever-evolving.

Definition: Communication is a two-way process in which people exchange information, ideas, opinions, emotions, feelings, and other feelings through symbols and semiotic conventions that are mutually understood (signs and symbols)

Communication is fundamental to the survival of man as well as to an organization. It is a two-way process where a piece of information is coded to form a message and sent by a sender. The message is transmitted through a medium and received and decoded by a recipient. Based on the success of decoding the message, the recipient (or decision-maker) takes an action or sends feedback to the sender.

Effective and efficient communication is a must for any situation or program to be a complete success. If Communication is not clear, the instructions given out may create confusion among the receivers or even worse, the Communication may remain incomplete. Thus, it is important to communicate effectively in order to make a venture successful. 

Importance of Communication Skills

In the case of business operations, communication skills are of utmost importance. One’s Communication skill determines one’s style of communicating with others. There can be several methods or ways to deliver a particular message. The skill of Communication sets apart an individual from others in his way of delivering a message successfully.

Types of Communication

Broadly Communication can be divided into three categories- verbal, non-verbal and visual. The following sections will give details of each of these types and their sub-types.

1. Verbal Communication

This refers to Communication using spoken words of the language. But in the broader sense, the written form of information is also a part of this. The word “verbal Communication” refers to a sort of Communication in which a message is delivered orally, and it encompasses both oral and written Communication. The goal of any Communication is for people to understand what we’re trying to express. The following categories are used to categorize verbal Communication:

• Oral Communication

• Written Communication

1. Oral Communication 

Communication using spoken word through a channel or media in direct or indirect form; the information here is passed only in the form of sound. The conversation is an oral mode of Communication which can take place. face-to-face, over the phone or via voice messages. In oral Communication, spoken words are used. Examples include face-to-face Communication, speech, telephonic Communication, video, radio, television, and voice over the internet. Oral Communication is influenced by pitch, loudness, tempo, and clarity of speech.

2. Written Communication

When information is delivered in the written form; letters, e-mails, texts, research reports, handbooks or posters, even flyers or posts on social media are also considered Communication. In written Communication, written signs or symbols are used to transmit information. A handwritten message might be typed or handwritten. Messages can be sent via email, letter, report, note, and other kinds of written Communication. The message in written Communication is influenced by the vocabulary and grammar used, as well as the writing style, precision, and clarity of the language used. The most popular mode of corporate Communication is written Communication. As a result, it’s considered one of the most valuable commercial talents.

2. Non-Verbal Communication 

Here the Communication is wordless and mainly facilitates verbal Communication. Facial expressions, body language, signs and symbols, gestures, etc fall under this category. Your expression often shows how you associate with the message. If these non-verbal expressions are under control, Communication can be regulated too. There are several types of it. Nonverbal Communication refers to the sending and receiving of nonverbal messages. We can say that Communication other than oral and written, such as gestures, body language, posture, tone of voice or facial expressions, is called nonverbal Communication. The most significant part of nonverbal Communication is the speaker’s body language. The receiver’s interpretation of the message is aided by nonverbal Communication. Nonverbal cues generally represent the situation more accurately than verbal cues. Sometimes nonverbal response contradicts verbal Communication and hence affects the effectiveness of the message 

Nonverbal Communication has the following three elements:

Appearance:The speaker’s appearance includes his or her clothing, hairstyle, neatness, and cosmetic application.

Body Language: facial expressions, gestures, postures

Sounds: Voice Tone, Volume, and Speech rate.

1. Physical Non-Verbal Communication

Anything that is physically observable falls under this head. Body movements, body language, hand gestures, posture, touch and stance, facial expressions etc are its examples. Daily, as researchers

suggest, we use about 55% non-verbal or physical Communication method to convey our message. If one’s shoulders are drooped and he sits with his face in his hand, it can be assumed that he is in despair or distress. Thus, biological reactions and emotional situations are integral.

2. Paralanguage

This is simply to understand the implied meaning in addition to the explicitly stated one. 38% of daily Communication is thus. Style of delivering a message, tonal quality of voice, intonations, emotions and stress all indicate the inner meaning of what is being said and one can thus read between the lines,

3. Aesthetic Communication 

This is how artists convey messages through art. Since historical times, art has been in use as a mode of non-verbal Communication to date.

4. Appearance

Appearance creates the first impression of an individual. One’s choice of attire, the fabric of the cloth, the colour choice all determine what the audience thinks about the deliverer.

3. Visual Communication 

Using tools that involve visual aids like drawing diagrams, graphical representations and illustrations, etc are modes of visual communication. These also aid verbal communication and bring out a greater impact.

Other Types of Communication

There are two more types of Communication- Formal and informal Communication are two types of Communication that might exist inside an organization.

1.  Formal Communication

This occurs when there is a formal relationship between the deliverer(s) and the audience such as in a business setup. Formal Communication in a company refers to Communication that occurs through official channels. Communication between managers or employees in the same cadre, as well as between superior and subordinate and vice versa, occurs.This can again be of three types: 

1. Vertical, where the flow of information is along with the organisational structure (both up and down) 

2. Horizontal, where Communication happens between organisations of similar levels

3. Diagonal, where Communication occurs across the employees of different departments

2.   Informal Communication

The extremely general Communication without any hint of formality among any random people is termed as informal Communication. It is surprising that contrary to the popular belief, it is the non-verbal mode that completes most of the Communication, almost 55% of it. Thus, the flow of information is higher in this mode. Knowing the types and acquiring the right Communication skill can ensure success in any venture one partakes in. This type of Communication spreads swiftly and is difficult to track down the source. Sometimes, such Communication leads to rumors and thus creates confusion in the organization.

Accounting ratios are an important business tool for analyzing financial statements. A ratio is defined as a mathematical number that can be calculated with respect to the relationship of two or more numbers and can be expressed as a ratio, percentage, and fraction. When a ratio is calculated by relating two accounting numbers derived from the financial statements, it is termed as an accounting ratio or financial ratio.

It should be noted that accounting ratios represent the relationship between if any, the accounting numbers derived from the financial statement. Accounting ratios are essentially derived from the financial statements and their efficiency largely depends on the original numbers from which they are calculated. Therefore, if there are any errors found in the financial statements, the derived numbers in relation to the ratio analysis would also present an incorrect imprecise situation. Therefore, the ratios must be calculated using the numbers which are meaningfully associated because a ratio calculated using the two unrelated numbers would hardly serve any purpose. For example, the office furniture is Rs. 5,00,000 and their purchase is 10,00,000. The ratio of office furniture to purchase is 2 (5,00,000/10,00,000) but it hardly served any purpose as there is no relationship between the two aspects.

What are Accounting Ratios?

Accounting ratio, also known as the financial ratio, is the comparison of two or more financial data which are used to evaluate a business condition. It is an effective business tool that is used by shareholders, creditors, and all kinds of stakeholders to understand the profitability, strength, and financial status of a business. Accounting ratios are also widely used to examine business performance and accordingly business decisions can be made.

What are the Different Types of Accounting Ratios?

Ratios are classified into two types namely traditional classification and functional classification. The traditional classification is based on the financial statement to which the determinants belong. Based on the traditional classification, ratios are classified as:

1. Statement of Profit and Loss Ratios:

A ratio of two variables from the profit and loss statements is termed the statement of profit and loss ratio. For example, the ratio of gross profit to revenue generated from business operations is referred to as the gross profit ratio. It is calculated using both the figures derived from the profit and loss statement.

2. Balance Sheet Ratios:

If both the variables of the ratios are from the balance sheet, then it is classified as the balance sheet ratios. For example, the ratio of current assets to current liabilities is termed the current ratio. It is calculated using both the figures derived from the balance sheet.

3. Composite Ratios:

If the ratios are calculated using one variable from the financial statement and another variable from the balance sheet, then it is termed composite ratios. For example, the ratio of credit revenue from business operations to trade receivables is termed the trade receivable turnover ratio. It is calculated using one variable from the profit and loss statement (credit revenue from business operations) and another variable (trade receivables) from the balance sheet statement.

 

On the Basis of Functional Classification, Ratios Are Classified as:

1. Liquidity Ratios: To meet business commitments, the business needs liquid funds. The ability of a business to pay the due amount to stakeholders as to when it is due is known as liquidity; the ratios calculated to measure it are known as liquidity ratios. The liquidity ratios are short-term in nature. They are calculated to measure the short-term solvency of the business i.e. the firm’s ability to meet its current obligations. The most common type of liquidity ratios are:

• Current Ratio

• Quick or Liquid Ratio

2. Solvency Ratio: The business solvency is determined by its ability to meet its contractual obligations towards stakeholders, specifically towards external stakeholders, and the ratios calculated to measure the business solvency positions are known as the solvency ratio. The solvency ratios are long-term in nature. The most common type of solvency ratio for calculating the business solvency are:

3. Activity or Turnover Ratio:  These are the ratios that are calculated for measuring the efficiency of business operations based on the effective utilization of resources. Hence, these are also termed efficiency ratios. A higher turnover ratio means better utilization of assets and signifies improved business efficiency and profitability. The most important types of activity ratios are:

• Activity Turnover Ratio

• Trade Receivable Turnover Ratio

• Trade Payable Turnover Ratio

• Net Asset or Capital Employed Turnover Ratio

• Fixed Asset Turnover Ratio, and

• Working Capital Turnover Ratio

4. Profitability Ratios: Profitability ratios are referred to as analysis of business profits in relation to the revenue generated from the business operations ( or funds) or assets used in the business and the ratios calculated to meet its objectives are termed as profitability ratios. The most common types of profitability ratios that are used to analyze the profitability of the business are:

Accounting Ratio Formulas

Here, we will list the formulas of all the accounting ratios on the basic functional classification discussed above:

Examples of Variable Costs 

With the explanation mentioned above, these can be a few examples of variable cost in an organisation. 

Variable Cost Formula 

The formula for the variable cost is simple as one just needs to add the various kinds of variable expenses made in the organisation. 

For instance, a cupcake company produces 20 units of a cupcake, which requires raw materials worth Rs.500, direct labour costs Rs.1000, and packaging cost Rs.200. In this case, the variable cost will be calculated as a sum of raw materials, labour costs, and packaging cost, i.e. Rs. 1700. That is the variable cost to produce a single kind of product. Further, if the raw material costs, labour costs, and packaging costs are mentioned for one unit, then the sum should be multiplied against the number of products produced by the company. 

Now, this variable cost can be represented into two different ways 

1. Total variable cost 

2. Average variable cost

Total Variable Cost 

To calculate the total variable cost, you need to consider all kinds of products developed or manufactured by the company. First, calculate the variable cost of each unit and multiply it with the quantity of units produced. Repeat the same for all kinds of products and then add the individual variable costs calculated. 

Total Variable Cost Formula = cost of manufacture * number of units of the product

For example, a company produces different types of scented candles. They have three products with the flavours Jasmine, lavender, and lily. Now, the variable cost per unit for Jasmine is Rs.10. Variable cost per unit for lavender is Rs.20, and variable cost per unit for Jasmine is Rs.5. The company produces 50 units of Jasmine, 30 units of lavender, and 20 units of lily candles. 

Then as per TVC formula, it will be = [(10*50) + (20*30) + (5*20)]

Therefore, the total variable cost will be Rs.1200. 

Average Variable Cost 

The average variable cost is an estimation of how much it takes to produce one unit of products. 

Average variable cost = (TVC of 1st product + TVC of 2nd product + … TVC of nth product) / Number of units produced

Break-Even Analysis 

Variable costs play a crucial role in break-even analysis that is useful in the determination of the required revenue, which is sufficient to compensate for all incurred costs (especially fixed cost). 

Break-even point (in units) = Fixed costs / (Sales price per unit – Variable costs per unit) 

Therefore, companies need to reach their break-even point so that they don’t undergo any losses and head towards earning profit. And hence the study of variable and fixed costs is crucial for students. They need to know the formula to find variable cost so that they can determine business conditions better and perform accordingly. 

Since you are now familiar with the concept of variable costs incurred in an organisation, it is about time to test your knowledge. Try answering these questions on your own. 

Questions to Answer 

1. Consider the Variable Cost Per Unit as Rs.25 and the Proportion of Sold Items is 5,000 units. The Calculated Total Variable Cost Will be Equal to 

2. Rs.1,35,000 

3. Rs.1,55,000 

4. Rs.1,25,000

5. Rs.1,50,000 

Answer: c 

2.The Difference Between Fixed Cost and Variable Cost is Known as 

1. Marginal income 

2. Operating income 

3. Unit income 

4. Fixed income 

Answer: b

 3.Variable Costing Can also be Called as 

1. Direct costing 

2. Marginal costing 

3. Indirect costing 

4. Both ‘a’ and ‘b’ 

Answer: d 

Since such concepts are significant from a business perspective, it becomes necessary for students to get in-depth knowledge about the topic. In addition to this, they can acquire comprehensive study material from ’s website or one can download the app to access quality study notes anytime and from anywhere.