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Section II - Preface to Management Articles
1.0 Introduction:
1.1 Whenever I read the word ‘Management’, I remember my college days. We were proud
to learn this subject and all the students would get excited with the lecture. It is only
after joining the Industry, we really understood the subject in right spirit and were
shocked to know the deviation in applying management principles studied earlier.
This first impression of ‘Management’ prompted me to compile ‘Management Articles’
for the benefit of Entrepreneurs, Professionals, Students, Staff and layman.
1.2 There is a general impression that the Management Technique is useful only in Office.
But friends you will agree that it is not so. In every sphere of Life, we need to take the
help of ‘Management Principles’. Typically the picture of ‘BOSS and Subordinate’
comes before our eyes with this word ‘Management’.
1.3 The word ‘Management’ was nicely explained by one of the Authors of Management
books. The word was broken into 3 parts namely MANAGE / MEN/ T. Among all the
factors, managing people / staff/ work force efficiently and effectively assumes highest
importance. One who acquires this technique can become a good ‘Manager.’
1.4 Managing & Leading are not mutually exclusive. Leadership is a quality, which every
Manager must possess to achieve results through assistants. Leadership can be learned.
Effective leadership is the result of concern for the TASK, Individual & TEAM.
1.5 Peter Drucker has defined the word Leader as some one who has followers.
Sir John Harvey-Jones says Leadership is the Art of enabling ordinary people to turn in
extraordinary performance.
1.6 You are aware that experts in managing politicians, government officials, vendors,
customers, union etc. are in great demand all over the world.
1.7 Whenever you think of practically any activity (social, religious, official, entertainment,
function etc.) the word management has a role to play.
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1.8 Management principles are equally applicable at Home, NGO, any Function, Sports,
any Event and Office.
1.9 For becoming a ‘Good Manager’ it is necessary to acquire special skills. Hence I have
compiled these Management Articles to give you bird’s eye view of road map towards
becoming a ‘Good Manager’. It is quite likely that the entrepreneur may be technically
qualified and experienced but unless he has the overall knowledge of Management
Principles, he would face difficulties in successfully carrying out his business, dealing
with staff, consultants, bankers etc. These Management Articles were specially
compiled for the entrepreneur as aid for taking the business to new height. It is quite
likely that every technocrat might not have taken formal management education and
he would learn the subject more from the interaction with his Mangers, consultants and
his experience. With this purpose, I have decided to include a separate section on
Management Articles in this book on Management Information System.
1.10 I will now explain in brief the various Management Articles.
1.11 I sincerely feel that every ‘Management student’ will learn some thing from these
Articles.
2.0 Brief introduction of Management Handouts:
2.1 Analysis of our Behaviour: It is necessary to analyze and correct our own behaviour
before we try to manage people.
2.2 Communication skills: It has been already been mentioned above that Management is
nothing but mange / men / better and hence for the purpose of managing people, It is
also necessary to get acquainted with communication skills.
2.3 SWOT Analysis is very useful analytical tool for analyzing your current situation or for
planning future activities.
2.4 SWOT: Before we make an attempt to comment on anybody’s qualities or defects, it is
necessary to know where we stand. This handout will help you to carry out your
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SWOT Analysis and will also try to discover your personality. Ascertain SWOT in
respect of every point and then make a plan to (1) convert weakness into Strength, (2)
convert Threats in to Opportunities, (3) to convert opportunities in to Strengths.
2.5 Goal Setting-Staff: In the light of SWOT, Staff should be motivated to set proportionate
Goals with time frame. This exercise will benefit the organization in long run.
2.6 Goal Setting-Organization: In the light of SWOT analysis of the Entrepreneur and his
Organization, it is necessary to set proportionate Goals.
2.7 Time frame should be fixed for achieving various Organizational Goals set.
2.8 Planning Cycle will explain the inter relationship between Objectives, SWOT, Plan,
implementation and control.
2.9 Leadership Grid: Every Leader has a concern for his staff and the TASK he has to
achieve. One should analyze his style and make deliberate efforts to move towards
Balanced approach.
2.10 Staff Motivation: The word ‘Motivation’ is combination of 2 words namely ‘Motive’
and ‘Action.’ Motivation is nothing but Goal directed action. These tips can help
mangers to motivate their staff to a large extent. This handout will acquaint you with
various models of dealing with people around you and will also give number of
practical tips to motivate them.
2.11 Team Work: Any organization can not achieve long term success without TEAM
WORK. This fact should be borne in mind by every Manager. Any activity can not be
carried out successfully without ‘Team Work’. This has been nicely explained by one
picture.
2.12 Interpretation of Body Language: This knowledge will give every Manger the
necessary EDGE in dealing with staff, union, customers, vendors, government officials.
2.13 Handwriting & Personality: This analysis along with body language, personal
interview can give useful clue and support the observations about the person.
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2.14 Process of Problem solving: Every Manger would face variety problems day in day
out. You should have firm belief that every problem has a solution. One should go the
root cause of the problem. It is necessary that whenever there is a problem, Manager
should go to “Gemba.” Gemba is a Japanese word, which means “the Real place”.
In other words, it means shop floor /Office or wherever the problem exists.
2.15 Time Management: Time is Money. One has to Save both for achieving success in Life.
Time can’t be stored. Time used judiciously can help you to meet goals set in Life. Time
should be spent proportionately on various activities. Every Manager should set the
example of Time Management before the Staff and the same culture will be followed by
the staff. Time management is the backbone of Success.
2.16 Success Management: Every Manger and his organization will have to decide as to
what is success? What is important is to achieve overall proportionate success.
This handout will explain as to how success can be planned in any activity.
2.17 Failure Management: Success and failure are two sides of same coin. Manager should
not get disheartened with any failure. Failure is the other side of success and it is
equally important to know the real meaning of Failure. One should develop the right
approach to interpret the failure. If it is done in right earnest, then the success is not far
off.
2.18 Marketing: Success of any business largely depends upon Marketing a product.
Various methods of Marketing have been explained in a humorous way.
2.19 Project Report: This handout explains the various issues to be considered in case of a
New Project.
2.20 Project Appraisal: The prime objective of capital investment is to make profit by
way of investing in various capital assets. Similarly the prime objective of the
financier to finance for capital investment is to see that his finance gets proper
return and at end of the contracted period the loan amount is repaid. The Article
covers the various techniques, which are employed to carry out Project
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Appraisal.
2.21 PERT-CPM: For success of any activity, it is necessary to know the various
sub- activities and their inter dependence. This handout will explain the basic
principles of PERT & CPM.
2.22 PERT-CPM Chart: The said technique has been explained with the help of an example.
2.23 Ratio Analysis: A financial ratio is a relationship of two values of financial statements.
Ratios offer help in intra firm comparisons, industry comparison and also for inter-firm
comparison. Financial position of the entity can be studied. This Article will enable the
Manager to keep track of Financial status of the business.
2.24 Funds Flow Statement: One of the most fundamental objectives of business is to make
a profit. Long run survival requires that the business must be able to deal with any
possible liquidity problems which arise in the short term. Basically any business must
be concerned with making a profit and maintaining a solvent financial position.
A full understanding of a business's affairs requires the identification of the changes or
movements in assets, liabilities and capital for a year, and the resultant effect on liquid
resources. A profit & loss account or balance sheet does not specifically disclose this
information. To show the manner in which the operations have been financed, and how
the financial resources have been used.
2.25 Cost of Capital: This concept plays vital role in Project Appraisal. The project which
gives rate of return higher than cost of capital is selected.
2.26 Internal Generation: This concept also plays vital role in Project Appraisal. Internal
Generation is required for appraising the Project irrespective of the fact whether
method of appraisal is Traditional or Time Adjusted method. This figure is also
required for working out Funds Flow Statement. Financial Stability of the business
depends on internal generation.
2.27 Break Even Analysis: Break-even analysis is used to plan the profit & production.
Break-even analysis evaluates and compares the fixed costs and variable costs. Uses of
Break even analysis are many such as knowing the effect of changes in sales mix, to
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determine the volume of sales to earn targeted profits, to decide enhancement of
production of profitable products or to reduce /discontinue the production of low
profitable or loss making products etc.
2.28 Change: We must realize that ‘Change’ is part of Life and also inevitable. Change
should be anticipated and we should mould ourselves for the change and there after
change should be accepted whole heartedly. Then again get ready to ‘Change’.
2.29 Present: Every organization should learn Three ways to use present moments for
success.
2.30 Interesting aspects of life - Warren Buffet: Every Manager must read & follow advice
given by Warren Buffet in an interview on CNBC.
2.31 The success of any organization depends on Human resources. It is in the interest of
any organization to retain sincere, loyal, and efficient employees. Shri Azim Premji, of
Wipro has nicely analyzed this issue of WHY EMPLOYEES LEAVE
ORGANISATIONS? Every Manager must read this handout.
2.32 Vanilla ice-cream!!!: For any business, customer is nothing less than GOD and hence
Never underestimate your Clients' Complaint, no matter how funny it might seem.
Even crazy looking problems are sometimes real and all problems seem to be
Simple only when we find the solution, with cool thinking. Don't just say it is
“IMPOSSIBLE" without putting a sincere effort. Observe the word "IMPOSSIBLE"
carefully. Looking closer you will see, "I'M POSSIBLE". What really matters is your
attitude and your perception.
2.33 Sholay: You are aware that ‘Sholay’ film was super hit probably because of existence of
various principles of management. This handout summarizes the various Principles of
Management in a lucid way.
2.34 Delegation: No Manager can perform without the active support of his staff. Every
Manager must acquire the Art of delegation. Delegation is essential for successful
completion of any job. The Article will show the road map to Delegation.
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2.35 List of Books worth Reading: Reading is indispensable for updating the core
knowledge and to gain out of experience of others. In fact it is the duty of every
professional and businessman to devote some time for reading. With this intention,
I have compiled this list of books worth reading, keeping in mind the availability of
time with the busy businessman and executive. You can also refer to my website
www.spandane.com for abundant material for reading and relaxation. You may also
visit www.feleminds.com for good articles shared by Professionals.
With best wishes.
Spandane
21-07-2010
9. www.spandane.com
Index - Section II - Management Articles
Para No. Subject
1 Analysis of our Behaviour
2 Communication Skills
3 SWOT Analysis
4 SWOT - Self Analysis
5 Goal Setting - Staff
6 Goal Setting – Organization
7 Goal Setting – Organization Term wise
8 Planning Cycle
9 The Leadership Grid
10 Tips – Staff Motivation
11 Team Work
12 Interpretation of Body Language
13 Handwriting & Personality
14 Process of Problem solving
15 Time Management
16 Success Management
17 Failure Management
18 Marketing
19 Project Report
20 Project Appraisal
21 PERT & CPM
22 PERT & CPM Chart
23 Ratio Analysis
24 Funds Flow Statement
25 Cost of Capital
26 Internal Generation: Profit After Tax +Depreciation
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27 Break Even Analysis
28 Management Story – Change
29 Management Story – The Present
30 Management Story - Interesting aspects of life - Warren Buffet... Very Good.
31 Management Story – Managing People
32 Management Story – Vanilla Ice cream
33 Management Story – Sholay
34 Delegation
35 List of Books worth Reading
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01 / Analysis of our Behaviour
1.0 Early Conditioning:
1.1 We all have born under same circumstances with no control on our parents,
place of birth, financial condition. We were neither pessimistic nor
optimistic. We were born with neither good qualities nor bad qualities.
Through exposure to our environment, our parents, teachers, friends and
society in general, we developed mental pictures of ourselves.
Circumstances exert greater influence on our daily conscious activities & us.
1.2 Kindly analyze your behavior while dealing with others. In which slot you
generally find yourself.
I am OK, You are OK I am not OK, You are OK
I am OK, You are Not OK I am not OK, You are Not OK
Blame Self
Youare
OK
Co-operative
I am not OK I am OK
Blame Both
Youare
NotOK
Blame Staff
1.3 You should note down your behavior and try to work in I am OK /
You are OK zone.
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2.0 Transactional Analysis Approach of analyzing our behavior.
2.1 (attitude, opinion) Child (feelings,We all inherit 3 ego status such as Parent
emotions) and adult (thoughts, learning)
2.2 All these egos are essential and play vital role in balancing our behavior.
2.3 move in and out of these egos in response to what is going on aroundWe
us.
2.4 , Adult ego makes the decision and Parent
okays the decision of adult.
Child ego wants something
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02 / Communication Skills
1. GOD has given us Eyes & Ears in pair but has given only one mouth. Indirectly
GOD has suggested us that we should observe and listen more but talk less.
Whether we listen to this advice?
2. Communication can be achieved by various means such as facial expression & eye
movements. This is undoubtedly the area of Actors. Never the less we use these
inadvertently in day in day out even without going to any Acting school.
3. However for today’s discussion, I wish to discuss the communication by spoken
words.
4. Can we compare GOD & Communication? The answer is YES.
G stands for Generation (Lord Brahma’s responsibility)
O stands for Observation (Lord Vishnu’s responsibility)
D stands for Destroy (Lord Shiva’s responsibility)
Similarly Communication creates & strengthens relationship and also breaks
relationship.
5. Major part of communication revolves around asking questions to others.
Misunderstanding is unnecessarily created if question is framed incorrectly.
Question should not include expected reply.
Question should not include alternatives.
Generally question should not be framed closed ended. In fact it should be
framed open ended.
6. Communication plays vital role in dealing with customers.
7. We should mean what we say. However we need not say what we mean unless
called for.
8. Communication should express love, empathy, and affection towards others.
9. Communication should not be artificial.
10. Geographical zones should be observed in communication.
11. Let us discuss the following statement.
‘I saw a child playing with Dog.’
Whether the said statement conveys complete information?
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11..00 Communication Style:
11..11 The communication at work place takes place at two levels namely ‘Routine’ and
‘Promotional.’
11..22 The Manager who masters Routine Communication is regarded as ‘efficient’.
11..33 The Manager, who is able to go beyond that, and use communication in a
proactive way, will be ‘effective’.
22..00 Steps to getting your Message across:
Following questions should be addressed before starting process of
communication.
22..11 Which Precise objective to be achieved?
22..22 What action is expected?
22..33 Who should get communication?
22..44 What do they know already?
22..55 What do they now need to know?
22..66 What is the best medium of communication?
22..77 Is the time right?
33..00 Following questions should be addressed before starting process of
communication:
33..11 Will every one receiving the communication have a chance for clarification or
discussion with you?
33..22 Do you have all the information you need?
33..33 How are you prepared for the expected follow up before sending communication?
44..00 Preparing the communication:
44..11 Preparation means writing irrespective of any medium chosen say report,
meeting, memo, discussion, letter etc.
44..22 Form of communication should be simple and free from unnecessary /irrelevant
material/jargons.
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44..33 It should be accurate and correct in all details.
44..44 It should be clear and should not give any scope for misunderstanding.
55..00 Receiving communication:
55..11 It is needless to say that receiving is also part of communication process.
66..00 Listening:
66..11 Listening is not the same as hearing.
66..22 Listening is about what we do with the things we hear.
66..33 Listening is an active process.
77..00 Reading:
77..11 Reading a report or letter is not enough, understanding requires conscious effort.
77..22 Misunderstanding written communication is one of the most costly of all human
errors in Organizational life.
88..00 Written Communication:
88..11 Keep it short and simple. (KISS)
88..22 A Report that is well written and easy to read reflects well on the writer.
88..33 Every person should acquire basic writing skills.
88..44 Follow Report structure: Introduction, Objective, Background, Findings,
Conclusion and Recommendations.
99..00 Stages in writing report:
99..11 Objective should be clear.
99..22 Collect all relevant information.
99..33 Decide the structure.
99..44 Fit the material in to the Plan.
99..55 Test the plan that it confirms to Logic.
99..66 Prepare the first draft.
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99..77 Check the draft and make corrections / additions if any etc.
99..88 Repeat the process till you are satisfied.
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03 / SWOT Analysis
SWOT Analysis is very useful analytical tool for analyzing your current situation or for
planning future activities.
SWOT stands for:
Your Strength
Your Weakness
The Opportunities offered in the market.
The Threats posed in the market.
There are two types of Strengths and Weaknesses.
Visible: The ones other people are aware.
Hidden: the ones other people are not aware of.
SWOT works best when applied to a specific issue rather than in a global, unfocussed
manner.
Use SWOT analysis as a general-purpose tool to attack the problem.
1. Strengths: What are your strengths relevant to the problem? Do others know
them? How can you reveal your hidden strengths?
2. Weaknesses: What are your weaknesses relevant to the problem? Do others
know them? How can you improve them?
3. Opportunities: What opportunities are there?
4. Threats: What threats are there?
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SWOT Plan:
Use the above SWOT analysis to develop a Plan as outlined below:
1. Match the opportunities to your strengths.
2. Make hidden strengths visible.
3. Minimize the threats or turn them into opportunities.
4. Improve visible weaknesses, turn them into strengths.
5. Improve your hidden weaknesses.
Strengths Weaknesses
Opportunities Threats
SWOT Self Analysis Chart has been given. Various aspects have been listed in detail.
Kindly ascertain SWOT in respect of every point and then make a plan to (1) convert
weakness into Strength, (2) convert Threats in to Opportunities, (3) to convert
opportunities in to Strengths.
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04 / SWOT - Self Analysis
Name: DOB: Date of Review:
A) PHYSICAL SWOT B) MENTAL SWOT
1 My health 1 Intelligence
2 Height 2 Memory
3 Weight 3 Analytical power
4 Eye sight 4 Understanding power
5 Hearing capacity 5 Grasping power
6 Built 6 Adaptability
7 Any handicap / defect 7 Imagination
8 Personality 8 Interest
9 Well groomed/ dressed 9 Reading habits
10 Do exercise/Yoga daily 10 Relaxation
11 Eat nutritious meal
12 Play sports
13 Get adequate rest
C) EMOTIONAL SWOT D) COMMUNICATION
SKILLS
SWOT
1 Temperament 1 Languages known
2 Sensitiveness 2 Vocabulary
3 Emotions stronger than
head
3 Able to hold attention
4 Getting angry soon 4 Able to maintain eye
contact
5 Can analyze emotions 5 Can face any audience
6 Emotional strength 6 Can write well
7 Emotionally growing 7 Can be witty &
humorous
8 Restless? 8 Able to empathy
9 Feel insecure often 9 Able to establish
rapport
10 Can accept a failure?
11 Can accept a mistake?
12 Can bear a catastrophe?
13 Defensive
14 Able to love others
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E) SOCIAL STRENGTHS SWOT F) FINANCIAL SWOT
1 Getting along well with
others
1 My financial position
2 Friends circle 2 Income
3 Social contacts 3 Savings
4 Social Acceptability 4 Financial credibility
5 Social respect 5 Financial support-
existing
6 Social interests 6 Financial support -
possibilities
7 Good natured 7 Debts
8 Smiling 8 Finance a hindrance
9 Well mannered
10 Helpful
11 Family life
12 Married life
13 Family support /
encouragement
14 Social support
G) MORALS SWOT H) EDUCATION SWOT
1 Habits 1 Present studies
2 Ethics (in material life) 2 Planning to change
3 Moral values
(in personal life)
3 Enjoy my studies
4 Honest? 4 My strengths
5 General norms / standards 5 My knowledge
6 Spiritual growth 6 My teachers
7 Vices 7 Supports / guidance
from others
8 Results
9 Time I spent
10 Desire to study
further
11 Distractions
12 Frustration
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I) ORGANISING CAPACITY SWOT J) OTHER
IMPORTANT TRAITS
SWOT
1 Good Administrator? 1 Self- confident?
2 Able to lead? 2 Self respecting?
3 Able to take initiative? 3 Shy / Introvert?
4 Able to guide? 4 Feel governed by
others/ Circumstances?
5 Able to decide fast? 5 Negative thinker?
6 Able to act fast? 6 Ambitious?
7 Bold / Fearless? 7 Have dreams?
8 Over cautious? 8 Have ideals?
9 Take risks? 9 Talents fully
utilized?
10 Accept challenges? 10 Need to be pushed?
11 Dependable? 11 Open minded?
12 Well organized? 12 Believe in self-
development?
13 Punctual / managing time
well?
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05 / Goal Setting - Staff
EDUCATIONAL HEALTH FINANCIAL
FAMILY
CAREER SPIRITUAL SOCIAL
One should set GOALS on above 7 fronts to bring about peace of mind &
happiness in life.
You should set above GOALS on two levels namely Long-range & Short-range.
Your Goal should be like a ‘WHITE’ object, which combines & represents 7 colors
of the RAINBOW.
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06 / Goal Setting - Organization
Research &
Development /
Quality Control
Customer
Satisfaction
Financial
Modernization Professional
Management
Suppliers /
Vendors
Expansion Human
Resources
Social
Obligations
One should set GOALS on above 9 fronts for organization’s success.
You should set above GOALS on two levels namely Long-range & Short-range.
Your Goal should be like a ‘WHITE’ object, which combines & represents colors of
The RAINBOW.
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07 / Goal Setting – Organization Term wise
Sr.
No.
Goal Short Term Medium Term Long Term
1.0 Professional Management:
1.1
1.2
1.3
1.4
1.5
Sr.
No.
Goal Short Term Medium Term Long Term
2.0 Financial:
2.1
2.2
2.3
2.4
2.5
Sr.
No.
Goal Short Term Medium Term Long Term
3.0 Expansion:
3.1
3.2
3.3
3.4
3.5
Sr.
No.
Goal Short Term Medium Term Long Term
4.0 Modernization:
4.1
4.2
4.3
4.4
4.5
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Sr.
No.
Goal Short Term Medium Term Long Term
5.0 Research & Development
/ Quality Control:
5.1
5.2
5.3
5.4
5.5
Sr.
No.
Goal Short Term Medium Term Long Term
6.0 Customer Satisfaction:
6.1
6.2
6.3
6.4
6.5
Sr.
No.
Goal Short Term Medium Term Long Term
7.0 Human Resources:
7.1
7.2
7.3
7.4
7.5
Sr.
No.
Goal Short Term Medium Term Long Term
8.0 Suppliers / Vendors:
8.1
8.2
8.3
8.4
8.5
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Sr.
No.
Goal Short Term Medium Term Long Term
9.0 Social Obligations:
9.1
9.2
9.3
9.4
9.5
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Sr.
No.
Goal Short Term Medium Term Long Term
9.0 Social Obligations:
9.1
9.2
9.3
9.4
9.5
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08 / Planning Cycle
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09 / The Leadership Grid
Accommodating Sound
Balance &
Compromise
Indifferent Controlling
X Axis
Y Axis
Y Axis Concern for People
X Axis Concern for results (TASK)
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Y Axis Concern for People
X Axis Concern for results (TASK)
Controlling Accommodating
Balance &
Compromise
Indifferent
Sound
What is Leadership?
Peter Drucker:
The only definition of a leader is some one who has followers.
Sir John Harvey-Jones:
Leadership is the Art of enabling ordinary people to turn in extraordinary performance.
Managers & Leaders.
Managing & Leading are not mutually exclusive.
Leadership is a quality, which every Manager must possess to achieve results through
assistants.
Leadership can be learned.
Effective leadership is the result of concern for the TASK, Individual & TEAM.
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10 / Tips – Staff Motivation
The word ‘Motivation’ is combination of 2 words namely ‘Motive’ and ‘Action.’
Motivation is nothing but Goal directed action. Motive without action is of no use.
Similarly action without motive makes no sense.
I have made an attempt to give few tips for staff Motivation based on my experience in
this field. I do not claim that this is the exhaustive study of the subject. However I am
confident that these tips can help mangers to motivate their staff to a large extent.
1.0 Know your Self:
1.1 Unless you know your self it is not possible to judge others.
1.2 Carry out SWOT analysis of your self.
1.3 Analyze your behavior.
Blame Self
Youare
OK
Co-operative
I am not OK I am OK
Blame Both
Youare
NotOK
Blame Staff
1.4 You should note down your behavior and try to work in I am OK / You are OK
zone.
2.0 Know your Staff:
2.1 Our life is nothing but interaction of various circles. We know each other only to
the extent of intersection of these circles.
2.2 Carry out SWOT analysis of your staff.
2.3 Also relevant data of each staff such as first name, birthday, marriage
anniversary, hobbies, family background, children, likes & dislikes, capabilities,
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talent etc. should be noted.
2.4 People like to be called by first name.
3.0 Match People & Job:
3.1 We have all played toy game of putting round pegs in round holes and square
pegs in square slot. We should now recapitulate this game.
3.2 Every person has a specific role to play in the organization and each role carries
equal importance in relevant category.
3.3 This is possible only if we know our staff as outlined above.
3.4 This factor also plays important role in success of any film, drama or winning of
cricket match.
4.0 Learn how people learn:
4.1 We all learn from our experience as well as experience of others simply by
observation or by listening / reading.
4.2 Encourage staff to learn from experience. They should be motivated to analyze &
learn from the job.
5.0 Communicate effectively:
5.1 Listener should understand the same thing what you intend to inform.
5.2 Just read this statement. “I saw a child playing with the dog.” Whether it
conveys complete information.
5.3 Attention should be given to choice of words, pronunciation, non-verbal signals
of the listener.
5.4 We all inherit 3 ego status such as Parent (attitude, opinion) Child (feelings,
emotions) and adult (thoughts, learning)
5.5 All these egos are essential and play vital role in balancing our behavior.
5.6 We move in and out of these egos in response to what is going on around us.
6.0 Induct New Recruits:
6.1 In Today’s era new recruitment is greatly reduced. Staff whether newly recruited
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or transferred from other branch, office etc. should be given adequate orientation
and job should be allotted considering his previous experience and his long-term
career.
7.0 Pay attention to your Staff:
7.1 Psychologists call this as ‘stroking.’
7.2 Establish face-to-face contact.
7.3 Greet the staff.
7.4 Practice MBWA. (Management by walking about)
8.0 Delegate for development:
8.1 Delegate the job and necessary authority but not accountability.
8.2 Decide what is to be delegated? Complete job or part of it?
8.3 To whom it should be delegated? (Remember SWOT)
9.0 Coach:
9.1 Help people to learn by asking constructive questions.
10.0 Give Credit:
10.1 Every one likes appreciation.
10.2 Credit should be given at all levels.
10.3 It should be kept personal but made public.
11.0 Give feedback:
11.1 Feedback – positive or negative should be given personally.
11.2 Motive of giving feedback should be clear. It should benefit the recipient.
12.0 Mentoring / Sponsorship:
12.1 Senior members of the staff or managers of other department can do counseling
of junior staff for their long-term career development.
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13.0 Prepare for Promotion:
13.1 Generally people are promoted because they perform well in the job they do now
instead of assessing potential for the job they are being considered for.
13.2 During leave, transfer staff can be given temporary promotion to gain
experience.
14.0 Stretch Abilities:
14.1 Many persons have various hidden qualities and likings such as writing skills,
photography, teaching etc. Locate these qualities and give them an opportunity
to use these qualities for the organization.
15.0 Take calculated Risks:
15.1 There is an inherent tendency on the part of many executives to over supervise
because failure / mistakes of the staff are feared to reflect badly on supervisor.
15.2 Develop positive attitude towards mistakes by using them as learning
opportunity for giving feedback and coaching.
15.3 Fear of staff committing mistakes is many times due to poor level of instructions
and leadership on the part of Manager.
16.0 Be Flexible:
16.1 Once you explain the job to be done and given guidance on how to go about
doing it, do not insist to follow the same in Toto. Allow flexibility & freedom for
executing the job.
16.2 Nevertheless watch and review the progress so that end results will be of
expected quality.
16.3 Flexible working hours, removing petty restrictions etc. may be considered.
17.0 Be an Example:
17.1 You should act like a role model. Staff should get motivation by your action &
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behavior.
17.2 You should be particular about Time management, attendance, keeping touch
with office even during vacation, sharing your mistakes and demonstrate how to
learn etc.
Motivation:
1.0 Introduction:
1.1 The word Management means manage /men / better.
1.2 No job can be done without active support of others and hence for successful
completion of any job people need to be motivated at every level and is a continuous
process.
1.3 Motivation is largely about people’s attitude to work.
1.4 Every manager should develop personal style of leadership & motivation.
2.0 Theories of Motivation:
2.1 Abraham Maslow:
Abraham Maslow laid down 5 levels of needs:
i Physiological: Food. Air, water
ii Safety: Shelter, security.
iii Social: being part of a friendly, supporting group.
iv Esteem: having the respect of others, independence, status, pride.
v Self-fulfillment: realizing one’s potential, doing what one does best and loves doing.
2.2 Douglas MacGregor:
He has suggested two approaches to getting results from groups of people.
i Theory X is based on the belief that people have a natural dislike of work and have to
be coerced, controlled and directed before they will make any efforts.
ii Theory Y suggests that work is a natural part of life and people do not have to be
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forced or threatened in order to work.
iii However, they need to be:
a Committed to what they are doing.
b Given recognition for the contribution they make.
c Allowed to retain their dignity and self-respect.
d Given the maximum freedom possible to get on with the job as they see best.
2.3 Frederick Herzberg:
i Hygiene factors: These factors create serious motivational problems when not dealt
properly.
ii The organization's policy and administration.
iii Supervision and control.
iv Working conditions, pay and status.
2.4 Motivators are series of things that have a positive and ever lasting effect on
motivation.
2.5 Achievement: most people get considerable pleasure and satisfaction from knowing
that they have made a useful contribution.
2.6 Recognition: It is natural that people to expect recognition for their achievement and
good work done by them.
2.7 The Job itself: Use of knowledge, intelligence and skill to do a good job.
2.8 Advancement: People welcome challenge and want to move on to new things.
2.9 Responsibility: Most people like to shoulder responsibility and grow well if given.
3.0 GGeettttiinngg rreessuullttss ffrroomm ppeeooppllee // Practical thoughts on Motivation:
3.1 Make sure that staff knows in clear terms as to what is expected of them.
3.2 Goals and objectives should be set covering following 4 elements:
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Measurable: Quality and quantity vis-à-vis standards / Achievable / Challenging /
Time bound.
3.3 Goals should be reduced to ‘writing’.
3.4 Set the required Standards.
3.5 Proper allocation of work. If not done properly will generate de-motivating effect.
3.6 Invite suggestions.
3.7 Discipline.
3.8 Employment Laws.
3.9 Decision-making.
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12 / Interpretation of Body Language
A Introduction:
1 GOD has given us Eyes & Ears in pair but has given only one mouth.
Indirectly GOD has suggested us that we should observe and listen more but
talk less. Whether we listen to this advice?
2 Communication can be achieved by various means such as facial expression,
eye movements and body language. This is undoubtedly the area of Actors.
Never the less we use these forms of expression inadvertently in day in day
out even without going to any Acting school. It may please be noted that
Body Language by itself tells only part of the story. You should co-relate
the observations with other signals before drawing firm conclusion.
3 If we observe body language at the time of listening, one can judge the
sincerity of the speaker.
4 Incidentally can we compare GOD & Communication? The answer is YES.
G stands for Generation (Lord Brahma’s responsibility)
O stands for Observation (Lord Vishnu’s responsibility)
D stands for Destroy (Lord Shiva’s responsibility)
Similarly Communication in any form creates & strengthens relationship
and also breaks relationship.
5 Communication with proper body language plays vital role in dealing with
officials, customers, family members, superiors, younger generation etc.
In private, public and professional life, body language is a major means of
human communication.
6 Our body language and communication should convey same meaning for
better results.
7 Geographical zones should be observed in body language.
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8 In order to understand the person, it is necessary to listen to him carefully.
At the same time his body language should be observed. This should be
supported by analyzing hand writing (Graphology).
9 The said subject is very complex but at the same time very interesting.
You will agree that we all observe body postures but rarely try to analyze the
same further. Some how I formed this habit since my young age. I call this
habit as ‘reading into it, out of it and in between.’
10 I have outlined few Tips for your perusal. I expect you to read the same
carefully and start observing people and make your own observation sheet.
However be cautious, self critical and modest in judging others. In fact
start this exercise from yourself. Start observing your own body signals
while talking with others and interpret them. Initially start observing
various parts individually.
11 What is the meaning of Body Language?
It is nothing but the language of signals. A person expresses his feelings,
thoughts etc. not only in written and spoken words but also by gestures,
movements. A person is not even aware when he conveys by body signals.
12 You have to be both observer and interpreter for understanding your own
and other person’s body language.
13 One can hide his emotions, thoughts or say lie but it is impossible to do this
with body language.
14 Postures also depend on physical factors. e.g. Shoe biting, pain in the legs,
bone fracture, muscle pain etc.
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B Different parts of the body which give signals are listed below:
Part of the body
1.0 Eyes: Interpretation
1.1 Normal Receive all incoming images.
1.2 Wide open eyes Joy, fright, surprises.
1.3 Veiled eyes Boredom, disinterest
1.4 Slit eyes Extreme mental concentration, narrow minded,
overcritical etc
1.5 Closed eyes Protective if only for a movement. Other wise no outer
impressions are wanted. Such position is also observed
at the time of listening music or enjoying food.
1.6 Wink Unreliable, distrust, Pushy or dishonest person winks
excessively.
1.7 Screwed up eyes Fear, reluctance, displeasure.
1.8 Blinking This is rapid and repetitive involuntary movement of
the eyelids. It conveys embarrassment, insecurity or
tension.
2.0 Look: Interpretation
2.1 Looking away
when speaking
Not sure of their opinion.
2.2 Looking at others Support the validity of what they say, competent.
2.3 Direct Look Undivided attention
2.4 Vacant Look He talks round about other people and the subject.
2.5 Look from below Subordination.
2.6 Look from above Superiority, pride and arrogance.
2.7 Sidelong Glance Reserve, distrust.
2.8 Look towards the
sky
Desire to avoid uncomfortable situation, request for
help, payer, devotion, complete self abandon.
3.0 Nose & Mouth: Interpretation
3.1 Wrinkling your
nose
Reluctance, displeasure, aversion, person has already
agreed to suffer something.
3.2 Pouting Highly perceptive and very sensitive. Protesting spout
conveys dislike of situation.
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4.0 Lips: Interpretation
4.1 Pressed Lips Disagreement. Raised chin simultaneously signals
aggression. A lowered forehead shows the other person
is a total enemy.
4.2 Pursed Lips Fixed views, arrogance.
4.3 Biting your Lips Lack of self confidence, embarrassment.
4.4 Raised Mouth Optimistic
4.5 Straight Mouth Such face is put if someone does not want to show
ignorance.
4.6 Turned down
Mouth
Negative tendency, lack of spontaneity, low mental
state.
4.7 Asymmetrical
Mouth
Disapproval and reluctant acceptance of a situation.
5.0 Laugh & Smile: Interpretation
5.1 HA - HA Free, open and hearty
5.2 HE - HE Laugh about somebody, something.
5.3 HEE - HEE Irony
5.4 HO - HO Surprise,
5.5 Smirk Smirk is a form of laughter with lips pressed together.
The person holds himself back and is not willing to give
his unconditional affection.
6.0 Hands: Interpretation
6.1 Open Hands Trust others and interested in their opinions.
6.2 Covered Hands Concealing feelings, covering insecurity
6.3 Clinging Hands Confused and insecure persons cling to files, tables,
chairs, bag etc.
6.4 Twisted Hands Complex personality, difficult emotional life.
7.0 Fingers: Interpretation
7.1 Thumb Powerful action
7.2 Clenched Fists The fist is always forceful, a positive or negative
meaning.
7.3 Upward Thumb Sign of authority, encouragement to others.
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7.4 Upward Index
finger
Self opinionated, strictness.
7.5 Lowered Index
finger
Tapping vigorously on the table is dominating. Wants to
emphasize something.
7.6 Pointed Index
finger
Pointed forward indicates aggression.
7.7 Index finger on
Lips
Conceal, helplessness, to overcome insecurity.
7.8 Index finger across
mouth
Wants to shut his mouth.
7.9 Rubbing Lips with
Index fingers
This is a sign of a very big lie.
7.10 Index finger in
mouth
Simplicity, ignorance, stupidity
7.11 Index fingertips
meeting
Self confidence, tendency towards arrogance.
7.12 Rubbing fingertips Fear of confrontation.
8.0 Legs: Interpretation
8.1 Slightly spread
apart
Self confidence
8.2 Wide apart Eagerness to impress
8.3 Very close together Fear and tension
8.4 Crossed Legs Several contradictory feelings, defensive attitude but
readiness to contact, newcomer.
9.0 Feet: Interpretation
9.1 Parallel Attentiveness
9.2 Turned inwards Insecurity
9.3 Turned outwards Self confidence
10.0 Seated Person: Interpretation
Women sit differently from men.
Seated person can show more about his inner feelings
against his mind control.
10.1 Closed Legs, Legs parallel, knees & ankles touching, clasping the armrest of a
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chair, sitting on edge of a chair, looking down to the floor, resting your hands
on your knees.
Anxiety, tense, defensive, lack of self-confidence.
10.2 Crossed Legs Natural self confidence, demonstrates equality.
10.3 Wrapping around
the chair
Strong inner tension, feel uncomfortable or even
helpless in the presence of others.
10.4 Sitting on only half of the chair as a result of active movements during
discussion.
Impression is positive.
10.5 Sitting on the whole chair with one leg moved forward and a bent torso.
Open minded ness & understanding.
10.6 Sitting on the whole chair with the torso leaning backwards.
Inflated self confidence, lack of decorum.
11.0 Geographic zone:
11.1 All of us need space. Keeping our distance plays an important role in our
everyday relations and dealings with others.
11.2 Closed regions Approx. Distance to be kept from the person.
Intimate 0 to maximum 2 ft.
Personal 2 ft to 5 ft.
11.3 Distant regions
Social 5 ft to 10 ft
Public 10 ft to 25 ft
C Tips –Understanding body language and identifying the type of person?
1.0 How to identify Openness attitude of a person?
1.1 He will generally talk with open hands.
1.2 He keeps his arms gently crossed lower body.
1.3 He generally moves closer with the other counterpart while talking.
1.4 He generally leans forward.
1.5 He would keep uncrossed legs.
1.6 He would take his coat off at the time of discussion.
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2.0 How to identify as to whether a person is Enthusiastic?
2.1 He would have erect body stance.
2.2 He would throw his hands open & arms extended while talking.
2.3 His eyes would be wide open & alert.
2.4 He would be lively & bouncy in his behaviour.
2.5 His voice culture would be lively & well modulated.
3.0 How to identify as to whether a person is Defensiveness?
3.1 A person with rigid body.
3.2 A person who likes to keep his arms & legs crossed tightly.
3.3 A person who offers minimal eye contact with the other party.
3.4 He likes to lean back in chair.
3.5 He usually keeps his head down with chin depressed towards chest.
3.6 He will have clenched fists.
3.7 He would have pursed lips.
3.8 He would clench crossed arms with fingers.
4.0 How to identify as to whether a person is of Angry nature?
4.1 A person with rigid body.
4.2 He keeps his lips closed.
4.3 He has the habit of squinting eyes.
4.4 He does shallow breathing.
4.5 He keeps continued eye contact with dilation of pupils.
4.6 He will have clenched fists.
5.0 How to identify as to whether a person has readiness attitude?
5.1 He leans forward while sitting.
5.2 He would place his hands high.
5.3 He would be relaxed.
5.4 He would stand with hands on hips and feet slightly spread.
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6.0 How to identify as to whether a person is of Evaluating type?
6.1 He would keep his head slightly tilted.
6.2 He would have hand to cheek gesture.
6.3 He would sit in front portion of chair with upper torso forward.
6.4 He would like to stroke his chin.
7.0 How to identify Nervousness of a person?
7.1 He would try to clear his throat.
7.2 He would do hand to mouth movements.
7.3 He would cover his mouth while speaking.
7.4 He would start playing with some objects.
7.5 He would do tugging at ear.
7.6 He would look with darting eyes.
7.7 He would twitch lips or face.
7.8 His mouth would be slightly open.
7.9 He would shift weights while standing.
7.10 He would tap his fingers.
7.11 He would wave his foot.
7.12 He would whistle.
8.0 How to identify Suspicion / Secrecy?
8.1 He would glance sideways at you.
8.2 He would fail to make eye contact or resisting your glances
8.3 He would rub or touch his nose.
9.0 How to identify Rejection / Doubt?
9.1 He would resort to hand rubbing or ear-tugging.
9.2 He would rub eyes.
9.3 He would touch & rub his nose.
9.4 He would try clear his throat.
9.5 He would raise eyebrows.
9.6 He would keep arms & legs crossed.
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10.0 How to identify Confidence / Authority?
10.1 He would keep his hands higher while discussion.
10.2 He would lean back with hands laced behind head.
10.3 He would rest his feet on the desk.
10.4 He would display proud erect body stance with chin forward.
10.5 He would maintain continuous eye contact with little blinking.
11.0 How to identify Reassurance?
11.1 A person would gently rub or caress some personal object-ring, watch.
12.0 How to identify Frustration of a person?
12.1 He would have tightly clenched hands or shaking fists.
12.2 He would rub back of neck.
12.3 He would do controlled short breathing.
12.4 He would stare blindly.
12.5 He would run his hands through hair.
12.6 He would stamp his foot.
13.0 How to identify as to whether a person is Bored / Indifferent?
13.1 He would keep his head in hand.
13.2 He would have drooping eyelids.
13.3 He would have relaxed postures.
13.4 He would start tapping foot, fingers.
13.5 He would offer blank stares and do little eye contact.
14.0 How to identify Acceptance of a person?
14.1 He would move closer to other person.
14.2 He would spread hands held to chest.
It may please be noted that Body Language by itself only tells part of the story. You
should co-relate this with other signals before drawing firm conclusion.
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13 / Handwriting & Personality
No.
1.0 The various observations should be read in the light of following facts.
1.1 Communication can be achieved by various means such as facial expressions,
eye movements and body language along with speech and writing.
1.2 You will be surprised that even our writing reveals our personalities,
sincerity and outlook. However our hand writing by itself tells only part of
the story. You should co-relate this with other signals before drawing firm
conclusions.
1.3 Communication through letters play vital role in dealing with customers.
1.4 We should always mean what we write. However we need not write what we
mean unless called for.
1.5 Our handwriting varies according to age, education, mental moods,
experience in life and hence observations will also vary from time to time.
Hence Observations based on single sample may not bring out all
characteristics of the writer.
1.6 This exercise should preferably be done before meeting the writer.
1.7 Nevertheless the qualities or otherwise observed in personal meetings do get
confirmation from the handwriting.
1.8 Interpretations should be recorded against each and every aspect of hand
writing described below and then overall conclusion about personality can be
attempted.
1.9 Handwriting reflects the genuine attitude of the Author.
1.10 Signature reflects what he wants the outside world to think of him.
It is a declaration of the writer’s personality-self image.
1.11 This subject is very complex and needs continuous practice. But still the
subject is very interesting and useful to understand the person. This analysis
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along with body language, personal interview can give useful clue and
support the observations about the person. With this objective in mind, I have
compiled Interpretation Tips for you to try. My experience in interpretation is
quite encouraging.
1.12 Writer should be asked to write on blank paper and as per his usual speed.
1.13 This technique is widely abroad for recruitment, prolonged illness, treating
mental sickness, Police investigations etc.
1.14 You will agree that we all come across good and bad hand writing but rarely
try to analyze the same further. The Topic is very interesting. Some how
I formed this habit since my young age. I call this habit as ‘reading into it, out
of it and in between the lines.’
2.0 Size: Interpretation
2.1 Large writing Sign of ambition; desire to think big, such writer is
usually successful.
2.2 Small writing Sense of reality, concentration, self confidence, tends
to be modest, writer does not like publicity.
2.3 Round Flexibility & adaptability to situation.
2.4 Narrow Economic outlook, self control, narrow vision and
aims.
2.5 Full Active in imagination, likes freedom.
2.6 Wide Good tolerance, initiative, spontaneous.
3.0 Line direction: Interpretation
3.1 Upward Optimist outlook, do not allow external factors to
affect the mood & hopes.
3.2 Downward Pessimist outlook, overworked, feeling of dragged
down.
4.0 Spacing: Interpretation
4.1 Line spacing:
Narrow Line spacing Writer is not well organized, lack of clarity of
thoughts.
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4.2 Word spacing:
Wide word spacing Clear mind, do not mix easily
Narrow word spacing Writer likes people around him.
5.0 Slant: Interpretation
5.1 Vertical Writer is ruled by the head, self controlled, lives in
the present, neutral attitude towards life, calm
personality.
5.2 Right Lives in future, natural personality, extrovert, like to
mix with people, take active part in life.
5.3 Left Introvert, lives in the past, writer likes to stay in his
own shell, hides emotions.
5.4 Varying Unpredictable person, swinging moods, experiments
with all thoughts and ideas.
6.0 Regularity &
irregularity
Interpretation
6.1 Regularity means maintenance of a constant slant, height & pressure in letters.
Regularity Good will power, control on emotions, thoughts,
requires calm & orderly life.
6.2 Irregularity is noted by the fluctuations in height, slant and pressure in letters.
Irregularity Poor will power, lacks control on emotions,
thoughts, lack of discipline, unable to decide the
goal.
7.0 Connective Forms: Interpretation
7.1 Connective form is the manner in which the letters are connected to each
other. There are 4 connectives namely garland, arcade, angularity and thread.
7.2 Garland Friendly, receptive, kind, lack aggression.
7.3 Arcade Does not disclose the mind, offers formal face, takes
his own decision.
7.4 Angles Firmness of mind, strong mind, tense,
uncompromising attitude.
7.5 Thread Do not possess ability to take decisions, uncertain,
insecure.
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8.0 Tempo: Interpretation
8.1 Speedy writing Fast action, speedy thoughts, speedy decisions.
8.2 Slow writing Caution, slow in action and decision making.
9.0 Pressure: Interpretation
9.1 Uneven Poor physical and mental health, inner conflicts.
9.2 Sharp @ Cold nature, good critic etc.
9.3 Light Sensitive nature, spiritual interests, dislike
unpleasant things of life, stamina could be low.
9.4 Heavy @ Forceful personality, originality, frustration, writer is
full of energy.
@ Interpretation depends upon its combination with other factors.
Hand writing specimen paper should be reviewed from back side to judge the
pressure.
10.0 Zones: Interpretation
10.1 Handwriting is divided into 3 zones namely Upper, Middle and Lower.
10.2 Upper Zone It includes upper loops of the small letters b, d, f, h,
k, l and t, i dots and t bars.
It indicates intelligence, imagination, spiritual
interests.
i dots Attention towards details.
t bars Vitality, enthusiasm, domination, will power.
10.3 Middle Zone It includes small letters which have no upper loops
such as a, c, e, i, m, n, o, r, s, u, v, w and x.
Ego expression, social relationships,
10.4 Lower Zone It includes lower loops of f, g, j, p, q, y and z.
Material desire, instincts etc.
10.5 All zones equal Good sense of proportion.
10.6 Upper zone large,
middle & lower zones
small
Writer usually aims high and hard working.
Social confidence and business sense is generally
little.
10.7 Upper and lower zones
large, middle zone
small
Writer’s high ambition is also matched by physical
stamina and good business sense, not happy with
success and always on look out for something more.
10.8 Lower zone large,
middle zone average,
upper zone small
Writer is generally down to earth, good business
sense.
10.9 Middle and lower Writer is socially self confident, good business sense.
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zones large, upper zone
small
Acts according to instincts.
10.10 Upper and middle
zones large, lower zone
small.
Writer’s personality can be shallow, sign of great
ambition and self confidence.
10.11 Middle zone large,
upper and lower zones
small.
Writer lives in the present, enjoy gossip, not over
interested in making money.
11.0 Margins: Interpretation
11.1 Left margin
No left margin Lacks self confidence, writer likes to remain in past
memories.
Large left margin He has overcome his background and can be
successful on his own.
11.2 Right
No right margin Writer is involved with everyone and everything
around him.
Wide right margin Writer fears the future and does not want to face up
to it.
11.3 Wide margin all
around
Artistic nature.
11.4 No margins Writer could be economical, no artistic sense.
11.3 Top margin Degree of respect to the addressee.
Narrow upper margin Writer does not keep distance from superiors; dislike
formality, lack of respect for others, high ambition.
Large upper margin Writer may have low self opinion, pessimist.
11.4 Bottom Writer’s instincts and material demands.
12.0 Width: Interpretation
12.1 Narrow Holds restricted views, well disciplines, shyness,
economical in approach
12.2 Broad Likes elbow room to think and move freely, prefers
to travel.
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13.0 Connections: Interpretation
13.1 Connected letters Writer mixes well with other people, conversation
flows easily.
13.2 Disconnected letters Writer concentrates on detail; writer can be brilliant
and can come up with original ideas.
14.0 Signature: Interpretation
14.1 Signature smaller than
text writing
Writer wishes to be thought more modest.
14.2 Signature larger than
text writing
Writer pretends to be bigger personality than he
thinks he really is.
14.3 Signature and text
looks different
Writer wants to protect himself.
14.4 Placement Writer’s mood.
15.0 Rhythm: Interpretation
15.1 Rhythm in handwriting is the total display of the script. It reveals the degree of
the writer’s integration.
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14 / Few Points to ponder in respect of Problem Solving:
1. Have a firm belief that every problem has a solution.
2. Define the problem precisely.
3. Using ‘Brain’ rather than ‘heart’ should solve problem.
4. Generally solution to the Problem lies in the Problem itself.
5. Collection of unbiased data is a prerequisite to Problem solving.
6. Analyze the data.
7. Study cause & effect relationship. Pinpoint absence of relationship if any.
8. Analyze every factor without relying on any prior knowledge / facts.
9. Try to reach grass root of the problem.
10. Look at the problem from different angles.
11. It is necessary that whenever there is a problem, you should go to
“Gemba” Gemba is a Japanese word, which means “the real place”.
In other words, it means shop floor.
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15 / Time Management
Preface
Time is Money. Save both for achieving success in life. Time can’t be stored. Time
used judiciously can help you to meet goals set in life. Time should be spent
proportionately on various activities. It is unfortunate that younger generation is
not very serious about Time Management.
At every stage one must realize what is the call of the day? What are his priorities in
life? What are his duties and responsibilities? What are his social obligations? How
he is spending TIME at present?
In the light of above background, we will proceed towards easy steps for doing
Effective Time Management.
Set your Goals
It is necessary that one must set his destination / goals in life based on his
capabilities, family background, and mental frame.
In short one must do what is called SWOT analysis.
How TIME is spent now?
It is necessary to undergo self analysis of how time is spent.
Keep a diary to note down how time was spent daily for at least one fortnight /
month.
Analyze and draw conclusion about future course of action.
Prepare Time Table
Prepare Time Table after allotting Time for every activity in the light of goal setting
done earlier.
Develop Time consciousness.
Non-Essential Activities.
Based on current time utilization and goal to be achieved, decide on non-essential
activities.
One must acquire the knowledge of ‘What not to do.’
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Delegate
One must know:
What to delegate?
&
Whom to delegate?
Decide Priorities
Postpone / defer the activities which can wait.
Differentiate between important and urgent activities.
Try to spend TIME according to Priorities set.
Set deadlines on daily basis
Planning should be done on daily basis.
Divide your Day with deadlines.
Action
Now is the Time for action.
Decide and do it.
Speed
Set your own Speed Limit.
Try to do everything rapidly.
Understand ‘Peter’s principle.’
Skills
Develop personal and Managerial skills.
Self discipline
Get well organized.
Discipline yourself.
Efforts should be persistent, disciplined and organized.
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Goal
One should always set a noble goal in life & make an all out efforts to achieve it.
Magic
Every one is bestowed with magic stick realization of which is essential for success
in life.
Self realization
Your success in life depends on realization of one’s limitations.
Punctuality
Your success in life depends on doing RIGHT thing at a right TIME.
Speed Limit
We should select our own speed limit for reaching our goals in life.
Race
Slow and steady approach wins the race.
Work Ethics
One should concentrate on one matter at a time.
QUIT
One should know when to stop.
Relaxation
One should know the art of relaxation.
Balance
We must remember that there are few things beyond cost and benefit.
Pack up
Nobody knows as to when you will get the invitation to visit the heaven.
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Expectations from Readers:
You will appreciate that GOD has given 24 hours to everyone. It is the Time
Management that decides as to who will succeed in Life.
Time management is an ART which can be mastered by anyone based on his
inclination.
You have one thing in common with all Successful People “1440 minutes a Day.”
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16 / Success Management
Preface
What is success?
Reply will vary from person to person.
What is important is to achieve overall proportionate success.
Lopsided success in any one or two matters can’t bring happiness & peace of mind.
Success Formula
Success = Basic intelligence x Hard work x Luck.
Basic intelligence can be found out as well as it can be measured / estimated.
Luck element is known within few years of birth.
Ability to do hard work lies with everyone, what is required is desire.
Life goal / objective
One should set goal to be achieved based on his family background, qualities,
limitations, luck etc.
It is needless to say that even in spite of any adverse factors, one should try to set
lofty goal and should make all out efforts to achieve the same.
Magic stick
Everyone is bestowed with magic stick and his success depends on realization of
same.
Once you realize your true potential, you should use the same in right direction.
Discriminate
One should learn to differentiate between:
Important & unimportant matters.
What is good for him and otherwise?
Priority and non-priority matters.
Sincerity & devotion
Any work should be done with utmost sincerity and devotion.
Material reward should take a back seat.
Enjoy the joy of sincere work.
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Skill
To become expert in any field of human activity requires dedicated practice…
practice… practice.
Even after achieving expertise, one must constantly sharpen our knowledge &
skills.
Overcome difficulties
Don’t be afraid of problems.
Please remember that this world is not made for your enjoyment but for giving you
experience.
Success can’t be achieved without encountering problems.
Meditation
Believe in the power of Almighty God by whatever name called.
Say to yourself that Today was better than yesterday.
In case of any difficulty pray to God to give courage & will power to fight with
adversity.
Open approach
Open approach helps in life.
Try to look at the world with correct perspective.
Positive Attitude
Try to develop positive attitude in life.
Remove negatives from your mental dictionary.
Instead of saying ‘I cannot’, say ‘I can’ and experience the difference.
Action
Now is the Time to Act.
Do not postpone / put it off. Do it Now.
What can be done Today should be done Today only.
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17 / Failure Management
Preface –Failure
Failure -seven letter word, everyone is afraid of because:
F means frustration.
A means agony.
I means insults.
L means loss of initiative.
U means more inputs.
R means restless feeling.
E means energy loss.
After all success and failure are two sides of same coin.
If any viewer gets inspiration to fight back, I will feel that my efforts are rewarded.
-------------------------------------------------------
Failure doesn’t mean---
You are a failure,
Failure means--
You have not succeeded.
------------------------------------------------------
Failure doesn’t mean---
You accomplished nothing,
Failure means--
You have learned something.
------------------------------------------------------
Failure doesn’t mean---
You have been a fool,
Failure means--
You had a lot of faith.
------------------------------------------------------
Failure doesn’t mean---
You’ve been disgraced,
Failure means--
You were willing to try.
-----------------------------------------------------
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Failure doesn’t mean---
You don’t have it,
Failure means--
You have to do something in a different way.
-------------------------------------------------------------------
Failure doesn’t mean---
You are inferior,
Failure means--
You are not perfect.
-------------------------------------------------------------------
Failure doesn’t mean---
You have wasted your life,
Failure means--
You have a reason to start afresh.
----------------------------------------------------------------------
Failure doesn’t mean---
You should give up,
Failure means--
You must try harder.
----------------------------------------------------------------------
Failure doesn’t mean---
You will never make it,
Failure means--
It will take a litter longer.
----------------------------------------------------------------------
Failure doesn’t mean---
God has abandoned you,
Failure means--
God has a better way for you.
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63.
64.
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19 / Project Report
Sr. No. Introduction:
1.1 Purpose for compiling Project Report:
Banks and Financial Institutions grant Term loans to the Industrial units for
acquisition of fixed assets for the purpose of running the organization.
The Bank tries to ensure the safety of their funds by careful analysis of the project
with special reference to successful completion and continued ability of the unit to
earn a surplus to meet the repayment obligations.
1.2 Banks / Financial Institutions try to ascertain the following:
a Technical feasibility
b Economic viability
c Financial viability
d Managerial competence
2.0 Project Report should give information about the company:
2.01 Name
2.02 Constitution
2.03 Date /Year of establishment
2.04 Telephone no./ Fax no.
2.05 Office
2.06 Factory
2.07 Godown
2.08 Existing Bankers and limit enjoyed.
2.09 Reason for change to Bank.
2.10 Term Loan / CC limit required
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3.0 Technical feasibility:
A Infrastructure:
1 Location advantages.
2 Transport facility
3 Nearness to market
4 Availability of raw material
5 Availability of power / fuel
6 Availability of water
7 Availability of skilled labour
8 Government incentives
9 Availability of communication network
B Land & Building:
1 Type of accommodation- ownership / rental
2 Area requirement
3 Whether Land or Factory Shed has been purchased / taken on rental.
4 If not, Status of negotiations with land owners to be given.
C Raw Material:
1 Whether to be produced or Purchased?
2 Who are the main suppliers?
3 Availability at reasonable cost
4 Whether RM is indigenous / imported / controlled?
5 Main items of RM
6 Whether RM is available throughout the year or seasonal?
7 Availability: Existing & Future
8 Storage facility requirement
9 Stock holding
10 What is the minimum order quantity?
11 What is the lead-time? (Time between order booking and receipt of material)
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12 Credit allowed by suppliers.
13 Discount policy of suppliers.
D Plant & Machinery:
1 Whether P&M are imported or indigenous?
2 List of machinery to be installed / to be purchased.
3 Whether machinery is readily available or to be fabricated?
4 Details of quotations, delivery period, cost, life, spares, service, guarantee etc.
5 Production capacity: to be Installed / to be utilized
E Technology & Production:
1 Manufacturing process
2 Technical know how: Foreign / Local
3 By-products
4 Advantages of alternate technologies
5 Technology: Stable / fast changing
6 Factory will work in-------shifts.
7 Length of production cycle
8 Whether material will be sent out for processing?
F Personnel:
1 Availability of key personnel
2 Training facility
3 Accommodation facility for staff, Staff quarters.
G Government permissions, licenses
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4.0 Economic viability
A Product:
1 Products proposed to be manufactured.
2 Whether production will be seasonal or throughout the year?
3 Whether demand will be seasonal or throughout the year?
4 Features of the product and plus points over other products.
5 Who are the main competitors?
6 Who are the main customers?
7 What is the Demand & Supply position?
8 ----Existing
9 ----Future
10 Market share: Existing & Future
11 Location of market
12 Export prospects
13 Whether Indian / Foreign standards have been specified?
14 Whether your product meets the said standard?
15 Quality control
16 Is it a standard product or to be produced against order booking?
17 Marketing arrangement
18 Direct marketing/ through distributors, agents
19 Credit period to be allowed to customers.
20 Discount policy
21 Life of the product
22 Storage facility requirement
23 Stock holding
24 Cost of production, margin
25 Gross margin on sales
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5.0 Financial viability:
5.01 Project cost & Means of Finance
5.02 Projected profitability statements
5.03 Projected Balance Sheet
5.04 Notes, assumptions and working notes for projected P& L, B/S
5.05 Funds Flow statements
5.06 Ratio Analysis
5.07 Break even analysis & margin of safety, capacity utilization.
5.08 Interest Coverage Ratio
5.09 Debt service coverage ratio
5.10 Sensitivity analysis
6.0 Managerial competence:
6.01 List of directors, partners, proprietor
6.02 Qualification, experience, family reputation in the market
6.03 Credit worthiness report from their Bankers.
6.04 Copy of I.T. return, WT return
6.05 Details of sister / associate concerns
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20 / Project Appraisal
The prime objective of capital investment is to make profit by way of investing in
various capital assets.
Similarly the prime objective of the financier to finance for capital investment is to
see that his finance gets proper return and at end of the contracted period the loan
amount is repaid.
There are various techniques, which can be employed to carry out project appraisal.
Traditional Methods:
Pay back period.
Profitability index (post pay back)
Rate of return method.
Time Adjusted methods:
Net present value method
Internal rate of return method.
Profitability Index method.
Pay back Period
This indicates the period during which the entire capital investment is recovered.
Yearly cash inflow should be added up till the total is equal to initial capital
investment / project cost.
Financier prefers a unit having lower payback period.
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Limitations:
It does not consider time value of money.
It ignores all cash flows after the payback period.
Merits:
It is easy to calculate.
It emphasizes short and medium term liquidity.
It tends to eliminate high-risk projects.
Post Pay-back Profitability Index
Post payback cash inflows x 100 divided by capital investment = Post payback
profitability index.
Cash in flows after reaching payback period are considered to ascertain safety
margin in recovery of capital outlay.
Rate of Return Method.
Return per investment =
Total cash in flow x 100 divided by capital investment.
Average rate of return =
Average cash in flows x 100 divided by capital investment.
Net Present Value (NPV)
A bird in hand is equal to two birds in bush.
Time value of money is considered.
Any project, which gives big return in the shortest possible time, is more important.
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Steps involved in computing NPV:
Decide rate of return expected from the project. It should be at least equal to
‘cost of capital’.
Find out present value of capital outlay.
Find out present value of cash inflows.
If NPV is 0 or positive, the project should be accepted.
In case of multiple projects, the one with maximum NPV should be accepted.
Internal rate return (IRR)
In case of NPV method, the net present value is found out by discounting cash
flows at pre-determined rate. i.e. Cost of capital.
Under IRR method, the cash flow is discounted at a suitable rate, which equates the
present value.
If IRR is > Cost of Capital, the project may be accepted. In case of multiple projects,
the one with maximum IRR should be accepted.
Profitability Index method
Profitability Index= Present value of cash in flows divided by present value of cash
out flow.
Net Profitability Index = Net present value divided by initial capital
investment/project cost.
If profitability index is > 1, the project should be accepted.
Refer Article – 25 & 26 for explanation of Cost of Capital, Internal Generation
respectively.
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Project Appraisal Examples.
Cash in flows = PAT less dividend + depreciation Rs ’000
Year Project A Project B
P.A. Cum. P.A. Cum.
0 Cash out flow-
1000
Cash out flow-
2000
1 200 200 400 400
2 300 500 400 800
3 300 800 400 1200
4 400 1200 500 1700
5 400 1600 600 2300
Total outflow 1000 2000
Total Inflow 1600 2300
Net 600 300
Project A Project B
Pay back period 3.5 years 4.5 years
Post payback profitability index 600 x 100 divided by
1000 = 60 %
300 x 100 divided by
2000 = 15 %
Return per investment 1600 divided by 1000 =
160 %
2300 divided by 2000 =
115 %
Average rate of return 320 divided by 1000 =
32 %
460 divided by 2000 =
23 %
Net Present value (NPV) Rs ’000
Cost of capital say 10 %
Year Discounting
factor
@ 10 %
Cashflows Present
value
Cashflows Present
value
0 1.00000 1000 1000 2000 2000
1 0.90909 200 182 400 364
2 0.82654 300 248 400 331
3 0.75131 300 225 400 301
4 0.68301 400 273 500 341
5 0.62092 400 248 600 373
Total PV of cash inflows 1600 1176 2300 1710
Total PV of cash out flows 1000 1000 2000 2000
Net Present Value 600 176 300 (290)
Profitability Index 1176 divided by 1000
=1.18
1710 divided by 2000 =
0.86
Conclusion Accept Reject
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21 / PERT & CPM
PERT
P: Project
E: Evaluation
R: Review
T: Technique
CPM
C: Critical
P: Path
M: Method
PERT
PERT is one of most important management tool to monitor and control any
Project.
The said technique is also of use in day-to-day life for better time management.
Introduction to PERT
Every project / activity involves number of sub-activities/jobs.
These sub-activities are interrelated.
Hence these sub-activities need to be monitored closely for timely completing the
Project.
e.g. Construction of a building involves number of activities such as:
Plinth
Slab
Walls
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Windows & doors
Plastering
Piping
Electrical
Painting
Drainage
You can observe that some activities are interrelated. i.e. unless the previous job is
Completed, the next job cannot be undertaken. Plinth & Slab.
Once two slabs are ready, brickwork, fitting of windows/doors can be undertaken.
Unless plastering is done, electrical work cannot be undertaken.
Steps involved in PERT
List the various sub-activities.
Decide the interrelation / dependence of jobs.
Work out early completion / late completion chart.
To Exercise strict control on activities, for which float is not available.
Timely completion of a Project depends on these critical jobs.
CPM
The jobs on the Critical Path decide the timely completion of the project.
Any delay in any of these activities will delay the project.
Optimum utilization of resources is possible.
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22 / Project Evaluation & Review Technique (PERT) and
Critical Path Method (CPM)
Activity Time Completion Dependence
Months Early Latest Float On
0-1 1 1 4 3 I
0-2 2 2 2 --- I
2-1 2 4 4 --- D 0-2
2-3 3 5 6 1 D 0-2
1-3 2 6 6 --- D 0-1, 2-1
3-4 2 8 8 --- D All
CPM 0-2 2-1 1-3 3-4
Path Path Time
1 0-1-3-4 5
2 0-2-3-4 7
3 0-2-1-3-4 8 CPM
Activities which can be delayed
Activity Months
0-1 3
2-3 1
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23 / Ratio Analysis
A financial ratio is a relationship of two values of financial statements. Ratios basically
are mathematical expressions, which are calculated to derive certain conclusion. The
ratio may be expressed as number of times, proportion or percentage. There are
number of ratios, but which to consider for a particular type of analysis is left to the
personal judgement of the analyst. As a matter of fact, all the ratios are for different
purposes and have different objectives.
Uses of Ratios.
Sr. No.
1 Ratios offer help in intra firm comparisons, industry comparison and also
for inter-firm comparison.
2 Financial position of the entity can be studied.
Limitations & problems of Ratio analysis:
Sr. No. Limitations
1 Ratios are based on financial statements, so contain almost all of the
deficiencies of those accounts.
2 Some ratios are open for manipulation and need to be interpreted with care.
E.g. stock levels may be kept artificially low at year-end, creating an
impression of high efficiency in this area.
3 Inter-firm comparisons are faced with the problem that different
organizations might use rather different accounting policies. E.g.
depreciation methods etc.
4 Detailed knowledge of a company’s markets is seldom obtainable from the
published accounts, but is extremely important for assessing future
profitability.
5 Ratios are useful when comparing similar organizations operating under
similar conditions. Comparisons with different types of organizations can
be misleading.
6 There is a real danger that ratio analysis can lead to conclusions, which are
over-simplified. e.g. high current ratio.
Types of Ratios.
Sr. No. Type of Ratio Various ratios
1 Turnover Ratios Debtors, Creditors, Inventory
2 Liquidity Ratios Current, Acid test
3 Profitability Ratios Gross profit, Net profit
4 Solvency Ratios Debt Equity, Interest coverage, DSCR
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Sr. No. Ratios Formula / Interpretation
1.0 Turnover Ratios:
1.1 Debtors Turnover
Ratio
Average Debtors x 365 divided by Sales.
Average Collection period.
1.2 Creditors Turnover
Ratio.
Average Creditors x 365 divided by Credit purchases.
Average payment period.
1.3 Inventory Turnover
Ratio.
Average inventory x 365 divided by material cost
Holding period of stock
Sr. No. Ratios Formula / Interpretation
2.0 Liquidity Ratios:
2.1 Current Ratio Current Assets / Current Liabilities.
2.2 Acid Test Ratio Quick Assets / Quick liabilities.
Sr. No. Ratios Formula / Interpretation
3.0 Profitability Ratios:
3.1 Gross Profit Ratio Gross profit / Net sales x 100
3.2 Net Profit Ratio Net profit / Net sales x 100
3.3 Material cost ratio Material cost / Net sales x 100
3.4 Expenses Ratios Expenses / Net sales x 100
3.5 Return on Capital PBIT / Capital employed x 100
3.6 Return on
Proprietor’s Funds
PAT / Proprietor’s Funds
Sr. No. Ratios Formula / Interpretation
4.0 Solvency Ratios:
4.1 Debt Equity Ratio Total outside debt / Equity or Shareholders’ funds.
4.2 Proprietary Ratio Proprietor’s funds /Total Assets x 100
4.3 Interest coverage
Ratio
PBIT / Fixed interest charges
4.4 Debt coverage Ratio PATID / (Interest + Repayment installments)
Notes Ratio Components
1 Average debtors Opening debtors + Closing debtors divided by 2
2 Current assets Stock + debtors + cash & bank balance + loans &
advances + Prepaid expenses
3 Current liabilities Creditors + BP + O/S expenses + IT payable +
Dividend payable + Bank overdraft ( not if
permanent)
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4 Quick Assets Current Assets less ( Stock + prepaid expenses)
5 Quick Liabilities. Current liabilities less Bank overdraft
6 Gross Profit Sales less material cost.
7 Net Profit Sales less all expenses + any other income.
8 Debt Long term loans + debentures + Bank overdraft
9 Equity Equity share capital + Preference share capital +Free
Reserves – (Accumulated losses + deferred revenue
expenditure) = Net worth = Proprietor’s funds.
10 PBIT Profit before Tax + interest.
11 PATID Profit after Tax + Interest + Depreciation. = Annual
cash flow.
12 PAT Profit less I. Tax.
13 Capital employed Net Fixed Assets + Current assets less Current
liabilities.
Interpretation of various Ratios:
Sr. no. Ratio
1.0 Turnover Ratios:
1.1 Debtors Turnover Ratio: This ratio measures the average number of day’s
credit given to debtors. It helps to assess the efficiency of the debt collection
department. Debt collection period should be kept as low as possible,
consistent with maintaining customer goodwill and market trend.
1.2 Creditors Turnover Ratio: This ratio measures the average number of days
credit is exploited from suppliers. Credit given by suppliers depends on
various factors such as demand & supply position of material, industry
trends, competition etc.
1.3 Inventory Turnover Ratio: This ratio measures the average number of days
for which stock is held. It helps to assess the efficiency of stock utilization.
Various factors affect the stock level held by the organization such as
product, production-seasonal or otherwise, demand pattern, competition,
funds availability etc.
2.0 Liquidity Ratios:
2.1 Current Ratio: This ratio is concerned with the assessment of an
organization's ability to meet its short-term obligations. The ratio must be
high enough for safety. However, high current assets do not normally lead to
high profits in themselves, so the usual trade-off between risk and return
exists. Industry norm is 2:1
2.2 Acid Test Ratio: This ratio is also concerned with short-term liquidity. In a
sense it is more appropriate measure since liquid assets represent the source
of funds from which current liabilities will probably be met.
Industry norm is 1:1
3.0 Profitability Ratios:
3.1 Gross Profit Ratio: GP / Margin on sales
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3.2 Net Profit Ratio: Net profit on sales. It indicates organization's ability to
generate profits from sales.
3.3 Material cost ratio: Material cost to sales
3.4 Expenses Ratios: Expenses to sales.
3.5 Return on Capital: This ratio is expressed as a percentage. Generally higher
the return the better.
3.6 Return on Proprietor’s Funds: This ratio provides a measure of the
percentage return on the investment made by the owners.
4.0 Solvency Ratios:
4.1 Debt Equity Ratio: This ratio is concerned with establishing the relationship
between external and internal long-term financing. The use of long-term debt
in the capital structure has both advantages and disadvantages, and in
practice the level of debt actually existing is the result of a balancing process.
The main advantage of debt is that it provides an opportunity for greater
returns to shareholders. Industry norm is 2:1
4.2 Proprietary Ratio: It measures the owner's contribution of funds.
4.3 Interest coverage Ratio: This ratio measures the safety available to Bank for
recovery of interest. Industry norm is 2:1
4.4 Debt coverage Ratio: This ratio measures the safety available to Bank for
recovery of interest & loan installment. Industry norm is 2.5 : 1
Other Ratios:
6.1 Employees Ratios:
Sales per employee: Sales / staff strength
Sales generation: Sales / salaries & wages
Profit per employee: PBT / staff strength
Profit generation: PBT / salaries & wages
Remuneration level: Salaries & wages / staff strength
6.2 Shareholder's Ratios:
Earnings per share: PAT less Pref. Dividend / number of shares
Dividend per share: Dividend / Number of shares
Dividend pay out ratio: Dividend / Earnings per share
Dividend yield: Dividend per share / Market price per share
Book value per share: Ordinary shareholder's equity / number of
shares
Price-earnings ratio: Market price per share / Earnings per share.
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24 / Funds Flow Statement
One of the most fundamental objectives of business is to make a profit. Long run survival
requires that the business must be able to deal with any possible liquidity problems which
arise in the short term. Basically any business must be concerned with making a profit and
maintaining a solvent financial position.
Objectives of Funds Flow statement:
1. An analysis of the flow of liquid funds can be very useful in making decisions concerning
liquidity.
2. A full understanding of a business's affairs requires the identification of the changes or
movements in assets, liabilities and capital for a year, and the resultant effect on liquid
resources. A profit & loss account or balance sheet does not specifically disclose this
information.
3. To show the manner in which the operations have been financed, and how the financial
resources have been used.
4. They provide useful guide to creditors & lenders.
5. Various ways to improve the net working capital position can be decided.
6. It focuses attention on resources available for capital investment.
7. It is useful in deciding how fixed assets should be financed.
8. It is useful in planning the retirement of debt.
It is now necessary to understand the Balance Sheet in a different way. E.g. Long term
and short term Funds and its application.
Liabilities Assets
Long Term Long Term
Equity Share Capital
Pref. Share Capital
Reserves & Surplus
Debentures
Term Loan
Long term unsecured loans
Fixed Assets
Investments
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Short Term Short Term
Bank CC
Creditors
Provisions
Stock
Debtors
Cash & Bank balances
Loans & Advances
Ideally Funds Flow statement should reveal transfer of Long Term Funds to Short Term
Use.
If Short-Term Funds are transferred to Long Term Use, it will indicate that Bank's funds
have been diverted for Long Term Use. This is not the healthy financial practice, as the
firm will always face the liquidity crises.
The effect of increase / decrease in current assets and current liabilities on working
capital is shown below:
1. Working capital means difference between current assets and current liabilities.
2. Increase in current assets leads to increase in working capital.
3. Decrease in current assets leads to decrease in working capital.
4. Increase in current liabilities leads to decrease in working capital.
5. Decrease in current liabilities leads to increase in working capital.
The various stages in preparing Funds Flow statement are listed below.
1. To prepare statement of increase / decrease in Balance sheet figures.
2. To prepare statement of changes in working capital statement.
3. To prepare Fund Flow Statement.
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25 / Cost of Capital
Rs’000 % Before Tax After Tax Weighted
Avg. Cost
% % %
1 2 3 4 5=4
Less 30%
6=3x5
Capital 6000 30 20.0 6.00
Loans 14000 70 15 10.5 7.35
Total 20000 100 13.35
Before Tax = 13.35 divided by 0.70 = 19.07 % (IT @ 30 %)
Rs’000
PBIT 19.07 % of 20000 3814
Less: Interest 15 % on 14000 2100
PBT 1714
Less: Income Tax 30 % on 17.14 514
PAT 1200
Dividend 20 % on 6000 1200
Retained earnings -------
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26 / Internal Generation: Profit after Tax +Depreciation
Balance Sheet
31-03-2008 Liabilities 31-03-2009 31-03-2008 Assets 31-03-2009
2000 Capital 2000 1000 Machinery 900
----- Profit 400 ---- Debtors ---
1000 Bank bal. 1500
2000 Total 2400 2000 Total 2400
Profit & Loss A/C
31-03-2008 Expenditure 31-03-2009 31-03-2008 Income 31-03-2009
------ Purchases 800 ----- Sales 1500
------ Expenses 200
------- Depreciation 100
----- Profit 400
----- Total 1500 ------ Total 1500
Bank A/C
Capital 2000 Machinery 1000
Balance as on 31-03-2008 1000
Total 2000 Total 2000
Opening balance 1000 Purchases 800
Debtors 1500 Expenses 200
Balance as on 31-03-2009 1500
Total 2500 Total 2500
Note: Creditors & Debtors ---Nil
Funds Flow Statement for the year 2008-09
Profit 400 Increase in Bank balance 500
Add: Depreciation 100
Internal Generation 500
Total 500 Total 500
Note: Internal Generation = PAT +Depreciation. In other words cash is generated in the
business to the extent of Internal Generation. This example was compiled to demonstrate this
fact. In actual situation this surplus cash gets utilized for addition to Fixed Assets, increase in
working capital, repayment of loans etc.
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27 / Break Even Analysis
Introduction
Break-even analysis is used to plan the profit & production.
Break-even analysis evaluates and compares the fixed costs and variable costs.
This is no profit or no loss situation.
Use of Break even analysis
To study the effect of CVP ratio.
To know the effect of changes in sales mix.
To determine the volume of sales to earn targeted profits.
To decide to enhance the production of profitable products or to reduce /discontinue the
production of low profitable or loss making products.
Assumptions on Break-even point.
The following assumptions are such which are true and valid in certain set of circumstances
up to a certain level.
All costs are divisible into fixed and variable.
All fixed costs remain constant at all levels of output within the installed capacity.
The variable costs vary along with production.
The selling price is assumed to be constant.
The volume of production influences the cost.
There is synchronization between production and sales, which would help deciding the
break-even point.
Break even point
The break-even point may be termed as that point of sales volume at which the total income
is equal to total costs.
It is a point of sale and production where there is no profit no loss.
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75
BEP can be decided in terms of units and as well as in monetary terms.
Any production or sales below this point results into loss or any production or sales beyond
this, yields profit.
Definitions
Variable Costs:
(Direct materials, direct labor and variable overheads) will be incurred in direct proportion to
the level of production.
Fixed Costs:
Most overheads are time-based and remain constant, or fixed, regardless of the level of
production.
Total Costs:
Total costs at any level pf production are obtained by adding the fixed costs to the variable
costs.
Formula of BEP
BEP in units = Total fixed costs
---------------------------------------------
Sales price less variable cost per unit
= Total fixed costs divided by contribution per unit.
Formula of BEP
BEP in Sales value= Fixed costs x Sales
---------------------------
Sales Less Variable cost
Example
Sales 6000 units
Sales price per unit Rs. 60=00
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Variable cost per unit Rs.40=00
Fixed costs Rs. 40000=00
BEP in units
Fixed costs Rs.40000=00
Contribution per unit Rs. 20=00 (Rs.60=00 less Rs.40=00)
BEP in units 40000 divided by 20 = 2000 units.
2000 x Rs. 60=00 = Rs. 120,000
BEP in Sales Value
Fixed costs Rs. 40000=00
Sales Rs. 360,000=00
Variable costs Rs. 240,000=00
BEP in sales value 40000 x 360,000 divided by 120,000=Rs.120000/-
Margin of safety
Margin of safety = Sales less Breakeven Sales.
MOS=6000 – 2000 = 4000 / 66.7 %
Conclusion: Even if Sales decrease by 66.7 %, unit will not incur loss.
Conclusion
BEP Analysis will help the Banker in appraisal of actual / projected
performance of the borrower. It also acts as sensitivity analysis tool to judge the
projected performance. It will play supporting role to DSCR.
89. 29 / The Present
Three ways to use your present moments.
Be in the Present
When you want to be Happy and Successful:
• Focus on what is Right Now.
• Use your Purpose to respond to what is important now.
Learn From The Past
When you want to make The Present better than
The Past:
• Look at what Happened in The Past.
• Learn something Valuable from it.
• Do things Differently in The Present.
Plan for The Future
When you want to make the Future better than The
Present:
• See what a wonderful future would look like.
• Make plans to help it happen.
• Put your Plan in to Action in The Present.
Spencer Johnson
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From: "CA. JAYESH SHETH" <jmshethca@gmail.com>
To: "CA.PARAS SAVLA FOR CVO CA" <paras@psaindia.net>; "vandu_ca
Moderator" <vandu_ca-owner@yahoogroups.com>; "DAHISAR CPE STUDY
CIRCLE" <dahisarcas@yahoogroups.co.in>; "BORIVLI CCPE STUDY CIRCLE"
<bcsccpe@yahoogroups.com>
Subject: [bcsccpe] Fw: Interesting Aspects of Life-Warren Buffet
Date: Wednesday, July 18, 2007 03:28 PM
30 / Interesting aspects of life - Warren Buffet... Very Good.
There was a one hour interview on CNBC with Warren Buffet, the second
richest man who has donated $31 billion to charity. Here are some very
interesting aspects of his life:
1. He bought his first share at age 11 and he now regrets that he started too late!
2. He bought a small farm at age 14 with savings from delivering newspapers.
3. He still lives in the same small 3-bedroom house in mid-town Omaha that he
bought after he got married 50 years ago. He says that he has everything he needs
in that house. His house does not have a wall or a fence.
4. He drives his own car everywhere and does not have a driver or security people
around him.
5. He never travels by private jet, although he owns the world's largest private jet
company.
6. His company, Berkshire Hathaway, owns 63 companies. He writes only one
letter each year to the CEOs of these companies, giving them goals for the year.
He never holds meetings or calls them on a regular basis. He has given his CEO's
only two rules. Rule number 1: do not lose any of your share holder's money.
Rule number 2: Do not forget rule number 1.
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7. He does not socialize with the high society crowd. His past time after he gets
home is to make himself some pop corn and watch Television.
8. Bill Gates, the world's richest man met him for the first time only 5 years ago.
Bill Gates did not think he had anything in common with Warren Buffet. So he had
scheduled his meeting only for half hour. But when Gates met him, the meeting
lasted for ten hours and Bill Gates became a devotee of Warren Buffet.
9. Warren Buffet does not carry a cell phone, nor has a computer on his desk.
His advice to young people: "Stay away from credit cards and invest in yourself
and
Remember:
A. Money doesn't create man but it is the man who created money.
B. Live your life as simple as you are.
C. Don't do what others say, just listen them, but do what you feel good.
D. Don't go on brand name; just wear those things in which u feel comfortable.
E. Don't waste your money on unnecessary things; just spend on them who really
in need rather.
F. After all it's your life then why give chance to others to rule our life."