Tag: Elements

  • Critical Thinking Skills PDF Meaning Definition Importance

    Critical Thinking Skills PDF Meaning Definition Importance

    Critical Thinking Skills PDF, their Meaning, Definition, Importance with Examples; What is critical thinking? They refer to the potential to investigate information objectively and make a reasoned judgment. It involves the assessment of assets, consisting of data, statistics, observable phenomena, and research findings. Good vital thinkers can draw reasonable conclusions from a fixed of statistics, strategies for studying and discriminating among beneficial and less beneficial information to remedy troubles or make decisions.

    Here is the article to explain, Critical Thinking Skills PDF, also their Meaning, Definition, and Importance with Examples!

    Critical questioning method making reasoned judgments which are logical and properly-idea-out. It is a way of wondering in which you do not take delivery of all arguments and conclusions you expose to however as a substitute have a mindset related to thinking such arguments and conclusions. It requires looking to look at what proof worries to assist a selected argument or end. People, who use crucial questioning are the ones who say matters including, “How do you know that? Is this end based totally on proof or gut emotions?” and “Are there opportunity opportunities while given new pieces of records?” The following Critical Thinking Skills, Docs PDF, Meaning, Definition, and Importance with Examples below are;

    Meaning and Definition of Critical Thinking Skills;

    People with critical thinking have the consistency of living rationally. He will be able to understand logical connections between ideas. Reasons will rely on instead of emotion. Thinking critically means seeing things from many perspectives in an open-minded way. A critical thinker can understand what happened, use information given to solve problems, besides seeking relevant information which will be able to help him. Also, he can identify, construct and evaluate problems faced. Critical thinking can always use to enhance the process of work and social institutions. Some believe that critical thinking will affect one’s creativity as it depends on rules of logic and rationality, as creativity might require breaking rules. Well, this is not true. Critical thinking is something to do with thinking “out-of-the-box”.

    Critical thinking is the ability to think in an organized and rational manner to understand connections between ideas and/or facts. It helps you decide what to believe in. In other words, it’s “thinking about thinking”—identifying, analyzing, and then fixing flaws in the way we think.

    Critical thinking is an utmost important part of creativity and we often need critical thinking to help us in evaluating and improving our creativity skills. Besides, critical thinking teaches us how to differentiate emotion and reason. No matter how logical we are, when comes to facing problems, we do have emotions and arguments on accepting ideas and solutions. Critical thinking helps us to separate the two, and as a result, we will not easily interfere.

    What is the importance of critical thinking skills?

    With critical thinking skills, one will be able to view and take up as many possibilities as he can. They help people to develop a positive attitude toward learning. If an autistic person feels uncomfortable in the presence of others, the first thing they will be doing is to look for a smaller place in which he will isolate himself from other people. He then will develop a negative attitude about learning in general. With the existence of critical thinking skills, an autistic person will learn how to manage his timetable besides providing materials and activities based on his own needs and interests, ignoring what the others doing.

    Secondly, they help develop problem-solving skills and think critically. If a person is constantly in a state of stress, he will be more inclined of defending himself against perceived threats. When one’s brain is under stress, one cannot be creative anymore in the sense that no new things will absorb into the mind. This is because the mind will shut down the learning capacity and go into ‘classical survival mode’, which is a type of protection to what is still in the mind and ward off the possible new invasion of knowledge. As a result, a better alternative, such as relaxing critical thinking activities, will eventually come to a success.

    What skills help?

    Also, their skills help one to develop independence. Learning is not just about a measure of teaching; it’s a measure of capacity. A person can only learn something if his mind could do so. Students have the chance to think of themselves, to question hypotheses, and to test the alternative hypothesis against known facts. It does not only give students the ability to understand what they have been taught but also to build knowledge without step-by-step guidance. Students will build up their knowledge upon themselves. It is not just about the ability of one’s memorization or lessons’ absorb in a particular time given.

    What are the components or elements of critical thinking?

    Once mastering the use of critical thinking, it is as if like have well mastered many other skills as well. According to my research, there are three important components that we can find from critical thinking: theory, practice, and attitude. The theory is the first main component in critical thinking. To think precisely, definitely we have to follow the rules of concluding.

    Knowledge of theory, which is also known as the basic principles of critical thinking, is one of these rules. If we could deduce the rights and wrongs, it will be a lot better to obtain an answer correctly and this usually means that knowledge has to be learned. Secondly, practice. Well, it will not be enough to only know how to distinguish good and bad. We might know how to swim, but this still needs constant practice to avoid flurrying when we encounter a flood.

    That’s why to be good enough in critical thinking skills means that we have to work hard and apply the principles in our daily life. Attitudes are important in the component of critical thinking too. Knowledge, as well as practice, need in producing good critical thinking. Constant practice will result in improvement only if when one uses the right kind of encouragement and attitude. As to enhance one’s reasoning, he must be good at differentiating the importance of demonstrating reasons for appropriate actions to be made. He must also be willing to involve in debate, making mistakes, and breaking old habits.

    How will you improve critical thinking?

    Recently, critical thinking has become very popular in educational circles. The teaching skill in Malaysia is vogue especially among the content used for higher education. However, it does not inspire students in active learning or critical thinking. Students place in a more passive type of studying compared to the teacher will usually do all the lectures, explaining, and most of the thinking. Critical thinking helps us analyze each selection and choose out of many. We often ask ourselves: what will we do if nothing has divisibility, comparability, and satisfiability? We should understand our purpose and also the intention of which we are going to work.

    So, we should know the alternatives. Work on the research that we should be viewing, criticism can only be done by the standard. Next, learn the logic. Give an example, do study how a case is made, what the things we can do about it, and how the conclusion is working out. We can try learning the critical jargon too. These will in turn help us make our judgment to be more concrete and lead us to which judgment should focus on. Well, don’t be too absolute on anything and yet not be too fearful of criticism. Try avoiding using absolutes such as never and remember to use them only when you have complete trust in something.

    Always ask for others’ opinions because most properly they will offer a new angle of understanding which could change our view. Creative thinking is also a way of improving critical thinking. This exercise can translate into a creative process such as writing. Through practice, we will be able to find the ability to find new ways of challenging ourselves. Many popular games encourage critical thought. Well, games like Sudoku require good focus and critical thinking.

    How will you practice critical thinking in the classroom? Demonstrate a critical thinking example in your own words.

    Well, learning in a pin-drop silence is not a way to support practicing critical thinking that occurs in the classroom. We should do it in a way where thinking and sharing develop along with the class. This kind of practice will in turn approach students without any monotonous moment. This is a type of critical thinking, reasonable and reflective thinking that will lead to sound decisions to be sought. Using the mode of teaching with critical thinking, the class should start with a given topic. Discussions and dialogue can start-up among students, and the lecturer may begin to raise some questions in between, derive the students with different solutions and justify them accordingly.

    I believe that critical thinking is a strategy and deep thinking. It is important not only to know how to use critical thinking in class but also to reflect this area of knowledge as a useful subject. Nowadays, critical thinking helps students to think and develop confidence ultimately. When a lecturer starts to give explanations, critical thinking acts as a process of error detection with reasons. I think critical thinking practices in class are really useful especially when the lecturer seems to be a novice in using questioning, reasoning, and providing thinking times.

    In the Class;

    Also, we can enhance the environment. Critical thinking in class, if facilitated with a physical and intellectual environment, will encourage a spirit of discovery. For example, seats can arrange in a way that students share the ‘stage’ with professors and all can interact with each other. This in turn will help to minimize the passive teaching where many of the students nowadays faced. Visual aids in class can encourage too! Posting signs such as ‘why do I think so?’, ‘is this a fact or opinion?’ or ‘what would happen if?’ will remind students how they should be answering questions. Most importantly, students’ attention will direct to a certain level that it’s periodically to the signs. The signs have the meaning to emphasize the idea of transferring and showing many thinking strategies and skills which apply to different topics and problems.

    UKEssays, November 2018. The Importance of Critical Thinking Skills. Retrieved from https://www.ukessays.com/essays/education/what-is-the-importance-of-critical-thinking-skills-education-essay.php?vref=1

    Examples of the Top Critical Thinking Skills;

    1. Analysis: The potential to acquire and procedure information and know-how.
    2. Interpretation: concluding what the means of processed information is.
    3. Inference: assessing whether or not the know-how you’ve got is enough and dependable.
    4. Evaluation: the ability to make decisions based on the available records.
    5. Explanation: speaking your findings and reasoning.
    6. Self-Regulation: the force to continuously monitor and correct your methods of wondering.
    7. Open-Mindedness: taking into account different possibilities and factors of view.
    8. Problem-Solving: the potential to address surprising issues and resolve conflicts.

    The occasions that call for important thinking range from industry to enterprise. Some examples encompass:

    • A triage nurse analyzes the cases to hand and makes a decision on the order by which the sufferers have to be dealt with.
    • A plumber evaluates the materials that would best shape a particular job.
    • An attorney opinions the proof and devises a strategy to win a case or to determine whether or not to settle out of the court docket.
    • A supervisor analyzes consumer comments bureaucracy and uses this data to develop a customer support training consultation for personnel.
    Critical Thinking Skills PDF Meaning Definition Importance Examples Image
    Critical Thinking Skills PDF Meaning Definition Importance Examples; Image by Biljana Jovanovic from Pixabay.
  • Audit Risk: Meaning, Characteristics, and Elements

    Audit Risk: Meaning, Characteristics, and Elements

    What is Audit Risk? It refers to the risk that the auditor expresses an inappropriate audit opinion on the financial statements containing important errors. This article explains about Audit Risk with its Meaning, Characteristics, and Elements. In simple terms, it is the risk that an auditor will issue an unqualified opinion when the financial statements contain material misstatement. As well as, it is the risk that financial statements are materially incorrect, even though the audit opinion states that the financial reports are free of any material misstatements.

    Here are explain Audit Risk and its Meaning, Definition, Characteristics, and Elements.

    One is that the certified public accountants believe that the fair financial statements are wrong, that is, the verified financial statements do not reflect the changes in the financial status, operating results and financial status of the audited unit by the requirements of accounting standards Or it may indicate that there are important errors in the audited unit or the scope of the review, which may not notice by the CPA;

    The second is the wrong accounting statement that the certified public accountant thinks, but in fact, it is fair. It includes inherent risks, control risks, and inspection risks. Due to the increasingly complex environment of auditing, the tasks facing auditing are becoming more and more arduous; auditing also needs to support the principle of cost-effectiveness. The existence of these reasons determines the existence of audit risks in the audit process. This objectively requires certified public accountants to pay attention to the possibility of risks and take corresponding measures to avoid and control risks as much as possible.

    ISA 200 states that auditors should plan and perform the audit to reduce audit risk to an acceptably low level that is consistent with the objective of an audit. (Auditing and Assurance Standard) AAS-6(Revised), “Risk Assessments and Internal Controls”, identifies the three components of audit risk i.e. inherent risk, control risk, and detection risk.

    Definition of Audit Risk:

    The following definition below are;

    It is the risk that an auditor expresses an inappropriate opinion on financial statements.

    According to Wikipedia;

    “Audit risk (also referred to as residual risk) refers to the risk that an auditor may issue an unqualified report due to the auditor’s failure to detect material misstatement either due to error or fraud.”

    As the definition explains It is the risk that auditors issued the incorrect audit opinion to the audited financial statements. For example, auditors issued an unqualified opinion to the audited financial statements even though the financial statements are materially misstated. In other words, the material misstatements of financial statements fail to identify or detect my auditors.

    Characteristics of Audit Risk:

    The nature of audit risk always shows certain characteristics or features. After discussing the connotation of audit risk; we should continue to elaborate on the characteristics of audit risk; and, explain the unique performance under our socialist market economy.

    The details are as follows;

    Universality:

    Although the audit risk manifests by the deviation from the final audit conclusion and expectations; this deviation caused by many factors, and every link of the audit activity may lead to the generation of risk factors. Therefore, there are audit risks that are suitable for any kind of audit activity, and will ultimately affect the total audit risk.

    Objectivity:

    A significant feature of modern auditing is the method of sampling auditing, which is to infer the characteristics of the population based on the characteristics of a part of the sample in the population, and the characteristics of the sample are more or less in error from the characteristics of the population. But generally difficult to eliminate.

    Therefore, whether it is statistical sampling or judgment sampling, if the population infers based on the sample review results, there will always be a certain degree of error, that is, the auditor must bear a certain degree of risk of making a wrong audit conclusion. Even in the case of detailed audits, due to the complexity of economic operations and the moral quality of managers, there are still cases where the audit results are inconsistent with objective reality.

    Potential:

    The existence of audit responsibility is a basic factor in the formation of audit risk. If the auditors are not subject to any constraints in practice and do not bear any responsibility for their work results, they will not form audit risk, which determines the audit risk for a certain period. Potential, If the auditor deviates from the objective facts, but does not cause undesirable consequences and does not cause the corresponding audit responsibility, then this risk only stays at the potential stage, and does not translate into real risk.

    Contingency:

    It is due to some objective reasons, or subjective reasons that the auditors are not aware of, that is, the auditors did not deliberately act; the auditors unintentionally accepted the audit risk, and inadvertently assumed the seriousness of the audit risk. As a result, It is very important to affirm that the audit risk is unintentional; because only under this premise, the auditors will try to avoid reducing the audit risk, and the control of the audit risk is meaningful.

    Controllability:

    Auditing has long been familiar with taking responsibility for the correctness of its reports. However, the guiding ideology of modern auditing has further evolved from system-based auditing to risk auditing. The audit profession has not been tied up by more and more audit risks. Instead of losing its vitality, it gradually develops in the direction of actively controlling audit risks. It is of great significance to correctly understand the controllability of audit risk.

    On the one hand, we need not afraid of audit risk. Although the responsibility of auditors will lead to audit risk, once it occurs, its possible impact on the audit profession is also significant; but we can By identifying areas of risk and taking appropriate measures to avoid them; there is no need to dare to accept customers because of the existence of risks.

    Audit Risk Model:

    Audit Risk = Inherent Risk * Control Risk * Detection Risk

    It may consider as the product of the various risks which may encounter in the performance of the audit. To keep the overall audit risk of engagements below the acceptable limit; the auditor must assess the level of risk about each component of audit risk. Above these risks of model define three elements or types of audit risks below you’ll understand.

    Audit Risk Meaning Characteristics and Elements Image
    Audit Risk: Meaning, Characteristics, and Elements, Image from Pixabay.

    Elements of Audit Risk:

    The following detail of elements or types of audit risk below are;

    Inherent risk:

    What is Inherent risk? Inherent risk is generally considered to be higher where a high degree of judgment; and, estimation is involved or where transactions of the entity are highly complex. They refer to the possibility of a material misstatement in a certain statement on the financial statements without considering the internal control policies or procedures of the audited entity. It is the risk inherent in the business, whether or not internal control exists. It exists independently of the audit of accounting statements and is a risk that CPAs cannot change their actual level.

    For example, the inherent risk in the audit of a newly formed financial institution that has significant trade and exposure in complex derivative instruments may be considered to be significantly higher as compared to the audit of a well-established manufacturing concern operating in a relatively stable competitive environment.

    Characteristics of inherent risks:

    The inherent risks have the following characteristics:

    • The inherent risk level depends on the sensitivity of accounting statements to errors and frauds in business processing. The more false reports in the business process, the more false the report, the greater the inherent risk, and the lower the inherent risk. The greater the possibility of problems in economic business, the higher the inherent risk level; otherwise, the smaller. That is to say, for different businesses, the inherent risk level is also different;
    • The generation of inherent risks related to the audited unit, but not to the certified public accountant. Accountants cannot reduce inherent risks through their work, but can only analyze and judge the inherent risk level through necessary audit procedures;
    • The inherent risk level indirectly affects the external operating environment of the audited unit. Changes in the external operating environment of the audited unit will cause an increase in inherent risks. For example, due to the advancement of technology, some products of the audited unit will become obsolete; which brings the risk of whether the inventory valuation is correct;
    • Inherent risks exist independently in the audit process and objectively exist in the audit process, and are relatively independent risks. The magnitude of this level of risk needs to certify by certified public accountants.

    Control risk:

    What is Control risk? Control Risk is the risk of a material misstatement in the financial statements arising due to absence or failure in the operation of relevant controls of the entity. It refers to the possibility that the internal control of the audited unit fails to prevent or discover a certain misstatement or omission in its accounting statements in time. As with inherent risks, auditors can only assess their level and cannot affect or reduce its size.

    Control risk or internal control risk is the risk that current internal control could not detect or fail to protect significant error or misstatement in the financial statements. Assessment of control risk may be higher for example in case of a small-sized entity in which segregation of duties is not well defined; and, the financial statements are prepared by individuals who do not have the necessary technical knowledge of accounting and finance.

    Characteristics of Control risk:

    The control risk has the following characteristics:

    • The level of control risk is related to the level of control of the audited unit. If the internal control system of the audited unit has important defects or cannot work effectively; then the mistakes will enter the financial reporting system of the audited unit, resulting in control risks;
    • The control of risks has nothing to do with the work of certified public accountants. As with inherent risks, certified public accountants cannot reduce control risks; but certified public accountants can set a certain level of control risk based on the soundness and effectiveness of the internal control of the relevant part of the audited unit;
    • Controlling risk is an independent risk in the audit process. Control risk exists independently in the audit process. This risk has nothing to do with the inherent risk. It is a function of the effectiveness of the internal control system or degree of the audited unit. Effective internal control will reduce control risk, while ineffective internal control will increase control risk. Since the internal control system cannot fully guarantee the prevention or discovery of all errors and deficiencies, the control risk cannot be zero; and, it will inevitably affect the final its risk.

    Detection risk:

    What is Detection risk or Inspection risk? Detection Risk is the risk that the auditors fail to detect a material misstatement in the financial statements. It refers to the possibility that a certified public accountant fails to discover a major misstatement or omission in the audited unit ’s accounting statements through a predetermined audit degree. Inspection risk is the only risk element that can control and manage by certified public accountants.

    Well, detection risk is the risk that auditor fails to detect the material misstatement in the financial statements and then issued an incorrect opinion to the audited financial statements. Some detection risk is always present due to the inherent limitations of the audit; such as the use of sampling for the selection of transactions.

    Characteristics of Detection risk:

    The detection risk has the following characteristics are:

    • It exists independently in the entire audit process. Not affected by inherent risks and control risks.
    • The inspection risks are directly related to the work of certified public accountants. It is a function of the effectiveness of audit procedures and the effectiveness of certified public accountants in using audit procedures. Its actual level is related to the work of certified public accountants. It directly affects the final risk. In practice, certified public accountants reduce the inspection risk by collecting sufficient evidence to keep the total audit risk at an acceptable level. The level of inspection risk and the importance level together determine the nature, time, and scope of the substantive tests that the auditor needs to perform and the amount of evidence required to be collected.
  • What is Persuasion? Introduction, Meaning, and Steps

    What is Persuasion? Introduction, Meaning, and Steps

    Introduction to Persuasion is an important objective of communication. This article about Persuasion explains with their topics – Introduction, Meaning, Definition, and Steps. It may define as an effort “to influence the attitudes, feelings, or beliefs of others, or to influence actions based on those attitudes, feelings, or beliefs”. Buyers have often to persuade to buy a particular article available with the seller in place of the one they wanted to buy.

    Persuasion: Introduction, Meaning, Definition, Steps, and Elements.

    In the office or the factory, the lazy, the incompetent and the disgruntled workers have to persuade to do their work. It is better to use them than compulsion. But even persuasion seeks to change beliefs and attitudes, which people do not like at all. So to be successful, they have to be indirect and suggestive.

    The buyers and the workers should so manipulate that they change their mind without getting conscious of the change, or if they are conscious, they believe that the change is to their advantage. After introduction, it conforms – Persuasion is an art, which has to learn with great care.

    Meaning of Persuasion:

    Meaning – Persuasion needs conviction on your part. You should genuinely convince that the alternative course of action suggest by you is in the interest of the organization as well as in the receiver’s interest. You must not try to persuade others from a purely selfish motive. Do not impose yourself on the receiver of your communication. Give indirect hints and subtle suggestions.

    Bring yourself to the level of the other person. Try to look at the issue from his point of view and mold your arguments accordingly. They refer to various deliberate methods that people use to change other people’s attitudes and thoughts. This is a technique that is widely used in speech-making and advertising as a means of convincing the listener of the correctness or desirability of the ideas or goods involved. In our everyday lives, we’ve all known people that are very good at convincing others to do things for them. This is persuasion in action.

    Definition of Persuasion:

    There are many definitions of persuasion. Some emphasized the internal motive of the audience more than using logic.

    Birembeck and Howell said,

    “Persuasion is the conscious attempt to modify thought and action by manipulating the motives of men towards predetermined ends.”

    Fotheringham affirmed,

    “Persuasion is that body of effects in receivers that have been caused by persuader’s message.”

    Scheidel began nearer to the type of persuasion we are familiar to, he defined as:

    “The activity in which the speaker and the listener are conjoined and in which the speaker consciously attempts to influence the behavior of the listener by transmitting audible and visible symbolic.”

    Central to this definition is the notions of conscious internet, message transmission, and behavioral change. They also include sender and receiver which make the components of definition resembling the components of communication.

    Persuasion, from this point of view, depends upon two main aspects:

    • Communication.
    • Intending planning of persuader to affect the audience.

    Depending on previous clarification, we can define as:

    “The intended use of communication to form a desired response from receivers to their social environment.”

    Steps of Persuasion:

    The art of persuasion consists of four important steps:

    Analyzing the situation:

    This is the preparatory step. The communicator analyses the situation to find out why they need for persuasion has arisen and what will be the advantages and disadvantages of the new course of action being suggested. He also studies the psychology of the man to persuade to plan a suitable strategy.

    Preparing the receiver:

    It is but natural that people resent being persuaded to change their views or behavior. The receiver has to prepare for it. This can do by putting him in a pleasant frame of mind. He may compliment on some of his outstanding qualities and achievements. An appeal may make to his adaptability and open-mindedness.

    Delivering the message:

    The third step is to deliver the message. The message should deliver stage by stage, with the help of forceful arguments, beginning with those parts of the message, which are easier to accept and delaying the unpleasant parts as much as possible.

    Prompting action:

    If the first steps have been taking carefully, the receiver of the message will easily persuade to adopt a different course of action (or hold a different view).

    What is Persuasion Introduction Meaning and Steps
    What is Persuasion? Introduction, Meaning, and Steps #Pixabay

    Elements of Persuasion:

    We can underline four elements of persuasion:

    Credibility:
    • Credibility is built on trust and expertise, and it must earn.
    • People will believe you have the expertise and are worthy of their trust if you exercise sound judgment and demonstrate a history of success.
    Understand Your Audience:
    • Identify the decision-makers and centers of influence.
    • Determine their likely receptivity and personal agendas.
    Ensure your argument is concrete:

    What is perfectly sensible to you may elude others — especially those who are already opposed to your ideas and prepared to resist.

    You can improve your chances of persuading them when your case:

    • Is logical and consistent with facts and experience.
    • Strikes an emotional cord.
    • Favorably addresses the interests of the parties you hope to persuade.
    • Neutralizes competing alternatives.
    • Recognizes and deals with the politics of the situation.
    • Comes with endorsements from objective and authoritative third parties.
    Successful Communication Skills:
    • Don’t mistakenly think that logic and rationality will win out and persuade people to your side.
    • You may inadvertently trigger confirmation bias, a situation in which people become further entrenched in their ideas.
    • Effective communication appeals to people’s emotions, tapping into universal human values and desires.
    • Appeal to both hearts and minds if you want to build and sustain a commitment to your strategic plans.
  • Production System Introduction Meaning Definition and Elements

    Production System Introduction Meaning Definition and Elements

    What does mean Production System? Introduction; A system is a logical arrangement of components designed to achieve particular objectives according to a plan. A system may have many components and variation in one component is likely to affect the other components of the system e.g. change in the rate of production will affect inventory, overtime hours, etc. A production system is a computer program typically used to provide some form of artificial intelligence. Which consists primarily of a set of rules about behavior but it also includes the mechanism necessary to follow those rules as the system responds to states of the world.

    Here are explain Production System; Introduction, Meaning, Definition, and Elements.

    The production system is the framework within which the production activities of an organization are carrying out. At one end of the system are inputs and at the other end output. Input and output are linking by certain processes or operations or activities imparting value to the inputs. These processes, operations, or activities may call production systems. Also, The nature of the production system may differ from company to company or from plant to plant in the same firm.

    Meaning of Production System:

    The production system is an industrial system that supports manufacturing and logistics. They also involve flows of raw materials, equipment, and event information, as there’s usually paperwork involved. Also, The limits on a production system include its capacity and the quality of the finished product. You may need to know What is the Production Management?

    Meaning of Production:

    Production can explain as an act of either manufacturing or mining or growing of goods (commodities) generally in bulk for trade. Production is a method employing for making or providing essential goods and services for consumers.

    It is a process that puts intangible inputs like ideas, creativity, research, knowledge, wisdom, etc. in use or action. Also, It is a way that transforms (convert) tangible inputs like raw materials, semi-finished goods, and unassembled goods into finished goods or commodities.

    Meaning of System:

    The system is an arrangement or assembly of inter-dependent processes (activities) that are based on some logic and function. Also, It operates as a whole and is designing (build) intending to achieve (fulfill) some objective or do some work. Huge systems are often a collection (assembly) of smaller sub-systems.

    Definition of Production System:

    They may define as,

    “The methods, procedure or arrangement which includes all functions required to accumulate (gather) the inputs, process or reprocess the inputs, and deliver the marketable output (goods).”

    According to Webster,

    “System is a regularly interacting inter-dependent group of items forming a unified whole.”

    The production system utilizes materials, funds, infrastructure, and labor to produce the required output in the form of goods. Also, Do you know what is the History of Production Management?

    Production System Introduction Meaning Definition and Elements
    Production System; Introduction, Meaning, Definition, and Elements. Asia Pottery circle clay #Pixabay.

    Elements of Production System:

    The following elements are below;

    • Inputs: Inputs are the physical and human resources utilized in the production process. Also, They consist of raw materials, parts, capital equipment, human efforts, etc.
    • Conversion Process: It refers to a series of operations that are performing on materials and parts. Operations may be either manual or mechanical or chemical. Also, Operations convert inputs into output. The conversion process also includes supporting activities, which help the process of conversion. The supporting activities include; production planning and control, purchase of raw materials, receipt, storage and issue of materials, an inspection of parts and work-in-progress, testing of products, quality control, warehousing of finished products, etc.
    • Outputs: Outputs are the products or completed parts resulting from the conversion process. The output generates revenue.
    • Storage: Storage takes place after the receipt of inputs, between one operation and the other, and after the output.
    • Transportation: Inputs are transporting from one operation to another in the production process.
    • Information: It provides system control through measurement, comparison, feedback, and corrective action.

    Hence, we can say that the production system is a union or combination of its three main components viz., Inputs, Conversion Process, and Output. In short, everything which is done to produce goods and services or to achieve the production objective is called a production system.

  • Organisational Behaviour: Elements, Nature, and Importance

    Organisational Behaviour: Elements, Nature, and Importance

    Organisational behaviour is generally confused with organisational theory, organisational psychology, and human resource management. This article also explains their Elements, Nature, and Importance. Organisational psychology restricts itself to psychological factors only whereas organizational behavior considers and combines all the branches of study e.g. Science, technology, economics, anthropology, psychology, and so on.

    Organisational Behaviour: Elements, Nature, Need, and Importance.

    It is the basis of human resource management and development. The former is concept-oriented whereas the latter is concerned with the technology of human development. The variables influencing human development are scientifically studied under organisational behaviour.

    Elements of Organisational Behaviour:

    The key elements in organisational behaviour are people, structure, technology, and the environment in which the organization operates.

    1. People: People make up the internal and social systems of the organization. They consist of individuals and groups. Groups are dynamic and they work in the organization to achieve their objectives.
    2. Structure: Structure defines the formal relationships of the people in organizations.
    3. Technology: Technology such as machines and work processes provide the resources with which people work and affect the tasks that they perform.
    4. Environment: All organizations operate within an external environment.

    Nature of Organisational Behaviour:

    Organisational behaviour in the study of human behavior in organizations. Whenever an individual joins an organization he brings with him a unique set of personal characteristics, experiences from other organizations, and a personal background.

    • At the first stage, organizational behavior must look at the unique perspective that each individual brings to the work setting.
    • In the second stage, organizational behavior is to study the dynamics of how incoming individuals interact with the broader organization. No individual can work in isolation.

    He comes into contact with other individuals and the organization in a variety of ways. The individual who joins a new organization has to come into contact with the co-workers, managers, formal policies and procedures of the organization, etc.

    Each individual brings to an organization a unique set of personal characteristics, experiences from other organizations, the environment surrounding the organization and they also possess a personal background. In considering the people working in an organization, organizational behavior must look at the unique perspective that each individual brings to the work setting. But individuals do not work in isolation.

    They come in contact with other individuals and the organization in a variety of ways. Points of contact include managers, co-workers, formal policies and procedures of the organization, and various changes implemented by the organization. Over time, the individual, too, changes, as a function of both the personal experiences and the organization. The organization is also affected by the presence and eventual absence of the individual.

    The study of organisational behaviour must consider how the individual and the organization interact. An organization, characteristically, exists before a particular person joins it and continues to exist after he leaves it. Thus, the organization itself represents a crucial third perspective from which to view organizational behavior.

    Why Need for studying Organisational Behaviour?

    The rules of work are different from the rules of play. The uniqueness of rules and the environment of organizations forces managers to study organisational behaviour to learn about normal and abnormal ranges of behavior.

    Organizational behavior is essentially an interdisciplinary approach to study human behavior at work. It tries to integrate the relevant knowledge drawn from related disciplines like psychology, sociology, and anthropology to make them applicable for studying and analyzing organizational behavior.

    Purposes of Organisational Behaviour:

    More specifically, organisational behaviour serves three purposes:

    1. What causes behaviour?
    2. Why particular antecedents cause behaviour?
    3. Which antecedents of behaviour can be controlled directly and which are beyond the control?

    A more specific and formal course in organizational behavior helps an individual to develop more refined and workable sets of the assumption that is directly relevant to his work interactions. Organizational behavior helps in predicting human behavior in the organizational setting by drawing a clear distinction between individual behavior and group behavior.

    They do not provide solutions to all complex and different behavior puzzles of organizations. It is only the intelligent judgment of the manager in dealing with a specific issue that can try to solve the problem.

    They only assist in making judgments that are derived from tenable assumptions; a judgment that takes into account the important variables underlying the situation; the judgment that is assigned due recognition to the complexity of individual or group behavior; the judgment that explicitly takes into account the managers own goals, motives, hang-ups, blind spots, and weaknesses.

    Organisational Behaviour Elements Nature and Importance
    Organisational Behaviour; Elements, Nature, and Importance, #Pixabay.

    Importance of Organisational Behaviour:

    Organisational behaviour is the analysis of an organization’s structure, func­tions, and the behavior of its people. The behavioral study encompasses both groups as well as individuals. It is an interdisciplinary field and has its roots in sociology and psychology. Organizational behavior is based on sociol­ogy, as the word organization itself represents social collectivity. It is linked to psychology because the subject encompasses the study of people, individu­ally and in groups at the workplace (essentially, an organization).

    Individual and group behaviour is again the function of many factors, which extend to other interdisciplinary fields such as economics, political science, social an­thropology, engineering, and human resource management. The scope of organizational behavior is therefore extensive. An organization needs to manage all these aspects so that it can sustain itself in a competitive market.

    Some importance of OB:

    The following basic importance is below;

    • It builds a better relationship by achieving people’s, organizational, and social objectives.
    • It covers a wide array of human resources like behavior, training and development, change management, leadership, teams, etc.
    • They bring coordination which is the essence of management.
    • It improves the goodwill of the organization.
    • It helps to achieve objectives quickly.
    • They make optimum utilization of resources.
    • It facilitates motivation.
    • It leads to higher efficiency.
    • They improve relations in the organization.
    • It is multidisciplinary, in the sense that it applies different techniques, methods, and theories to evaluate the performances.

    Theoretically, it is difficult for us to draw a line between management and organizational behavior. It can say that one supplements the other. Some organizational behavior issues have their roots in management processes. The study of management began much before the study of organiza­tional behavior. Studies in organizational behavior started in the middle of the twentieth century.

    Organizational behavior studies, therefore, draw from management theories to understand aspects such as organizational structure, the behavior of people in an organization, and the issues concerning external and internal fit. Successful management of organizational behavior largely depends on the management practices that prevail in an organization. Understanding organizational behavior, therefore, requires a clear understanding of the basics of management.

  • Communication: Definition, Principles, and Elements

    Communication: Definition, Principles, and Elements

    Communication Essay: They refer to all behavior, both verbal and non-verbal, which occur in a social context. This article explains about Communication with their topics – Meaning, Definition, Principles, and Elements. Another word for communication could be “Interaction”. The exchange of information or passing of information, ideas, or thoughts from one person to the other or from one end to the other is communication. According to McFarland communication is, “A process of meaningful interaction among human beings. More specifically, it is the process by which meanings are perceived and understandings are reached among human beings.” So, what is the question and topic are going to discuss.

    What does Means of Communication? Definition, Principles, and Elements.

    We are living in a world which is networked with them. With the advent of fast technology, the world has become a global village. The information sharing among various groups in society at national and international levels has become very smooth, effective, and efficient. With the click of the small button on the computer, you can easily get any information according to your needs and choice.

    You cannot just think of a world or situation where there is no exchange of ideas, feelings, emotions, reactions, propositions, facts, and figures. From time immemorial, they have been the most important activities of human lives. The integration of the world economy has been making it possible with a strong and efficient channel of communication.

    The nature of communication has gone a significant change during the last dealers. Now the economic power lies in the hands of the countries having a very sound information technology network. It is important from understanding it in terms of a process, system, interactional base, and structuring. There are various objectives of communication in business organizations.

    Meaning and Definition of Communication:

    There are various definitions and meaning interpreted by different scholars. T.S. Matthews says that Communication is something so difficult that we can never put it in simple words. But we do need a definition to understand the concept. In his book Communication in Business, Peter Little defines communication as the process by which information is transmitted between individuals and/ or organizations so that an understandable response results. W.H. Newman and C.F.

    Summer Jr. defines communication as,

    “Communication is an exchange of facts, ideas, opinions, or emotions by two or more persons.”

    Obviously, “information” is the keyword in the first definition. But this definition does not indicate the objects about which information is to transmit. This is precisely what provides in the second definition. They transmit information not only about tangible facts and determinable ideas and opinions but also about emotions.

    When a communicator passes on or transmits some information, he may also, either intentionally or unconsciously, be communicating his attitude or the frame of his mind. And sometimes the latter may be more relevant to the reality that is communicating.

    The following definition offered by William Scott in his book “Organisation Theory” should appear comprehensive and especially satisfying to the students of “business communication” since it touches all aspects of the communication process:

    “Administrative communication is a process which involves the transmission and accurate replication of ideas ensured by feedback to elicit actions which will accomplish organizational goals.”

    Important points give by their definition:

    This definition emphasizes four important points;

    • The process of communication involves the communication of ideas.
    • Ideas should accurately replicate (reproduce) in the receiver’s mind, i.e., the receiver should get the same ideas as were transmitted. If the process of communication is perfect, there will be no dilution, exaggeration, or distortion of the ideas.
    • The transmitter assures the accurate replication of the ideas by feedback, i.e., by the receiver’s response which is communicated back to the transmitter. Here it suggests that communication is a two-way process including the transmission of feedback.
    • The purpose of all communication is to elicit action.

    It is quite a comprehensive definition and covers almost all aspects of communication. But two comments can make on it:

    • The concept of ideas should adequately enlarge to include emotions also.
    • Even in administrative communication, the purpose may not always be to elicit action. Seeking information or persuading others to a certain point of view can be equally important objectives of communication.

    What does Means of Communication Definition Principles and Elements
    What does Means of Communication? Definition, Principles, and Elements! Image credit from #Pixabay.

    Principles of effective communication:

    The following Principles of communication below are;

    Clarity:

    The idea or message to communicate should spell out. It should word in such a way that the receiver understands the same thing which the sender wants to convey. There should be no ambiguity in the message. A message should be clear, free from distortion and noise. A vague message is not only a barrier to creating effective communication but also causes a delay in the communication process and this is one of the most important principles of effective communication.

    It should be kept in mind that the words do not speak themselves but the speaker gives them the meaning. A clear message will evoke the same response from the other party. It is also essential that the receiver is conversant with the language, inherent assumptions, and the mechanics of communication.

    Brevity:

    They should be brief i.e. just necessary and sufficient. Repetition and over-explanation are likely to destroy the actual meaning and importance of the message. Moreover, the reader may feel disturbed by receiving a long message.

    Simplicity:

    The message should give using simple and familiar words. Vague and technical words should avoid. Simple words are easy to understand and help the receiver to respond quickly.

    Timeliness:

    It is meant to serve a specific purpose. This principle states that communication should be done at a proper time so that it helps in implementing plans. Any delay in communication may not serve any purpose rather decisions become of historical importance only. If they make in time, they become effective. If it makes untimely then it may become useless.

    Compass:

    The communication net should cover the whole organization. The concerned people must know what exactly they need and when they need it. And effective communication will serve such.

    Integrity:

    They should consider the level of people, principles & objectives of an organization to create a network or chain. Such a network will provide a better field of internal and external communications.

    Strategic use of Informal Organization:

    The most effective communication results when managers use the informal organization as complementary to formal communication, e.g. arranging sports, cultural function & dinner for the employees can be informal organization.

    Feedback:

    To provide a message to the receiver is not a complete communication. The principle of feedback is very important to make communication effective. There should be feedback information from the recipient to know whether he has understood the message in the same sense in which the sender has meant it. The response from a receiver is essential. Therefore feedback requires communication to be effective.

    The Alternative:

    Effective listening is important in communication, otherwise, they will be ineffective and useless.

    Language control:

    The sender should be careful in selecting proper words and forming sentences, words and structured sentences are the keys to making effective communications.

    Elements of Communication:

    The communication process involves elements like sender, receiver, encoding, decoding, channel/ media, voice, and feedback.

    The different elements of communication are as under:

    Sender:

    He is the person who sends his ideas to another person. The person who intends to convey the message to pass information and ideas to others knows as the sender or communicator. For example, if a manager wants to inform his subordinates about the introduction of a new product, he is the sender.

    The sender also knows as the encoder decides on the message to be sent, the best/most effective way that it can be sent. All of this is done bearing the receiver in mind. In a word, it is his/her job to conceptualize. The sender may want to ask him/herself questions like: What words will I use? Do I need signs or pictures?

    Message:

    The idea, feeling, suggestion, guidelines, orders, or any content which intends to communicate is the message. This is the subject matter of the communications. This may be an opinion, attitude, feelings, views, orders, or suggestions. For example, the message is the introduction of a new product.

    Encoding:

    It is the process of converting the idea, thinking or any other component of the message into symbols, words, actions, diagrams, etc. Since the subject matter of communicating is theoretical and intangible, its further passing requires the use of certain symbols such as words, actions or pictures, etc. Conversion of subject matter into these symbols is the process of encoding. For example, the message connect in words and actions.

    Media:

    It is the medium, passage, or route through which an encoded message passes by the sender to the receiver. There can be various forms of media-face-to-face communication, letters, radio, television, e-mail, etc. The medium is the immediate form that a message takes. For example, a message may communicate in the form of a letter, in the form of an email, or face to face in the form of a speech.

    Decoding:

    It means translating the encoded message into language understandable by the receiver. The person who receives the message or symbol from the communicator tries to convert the same in such a way so that he may extract its meaning to his complete understanding.

    Receiver:

    If, he is the person to whom the message has been sent. The receiver or the decoder is responsible for extracting/decoding meaning from the message. The receiver is also responsible for providing feedback to the sender. In a word, it is his/her job to INTERPRET. For example, subordinates are receivers.

    Feedback:

    Feedback is the process of ensuring that the receiver has received the message and understood in the same sense as the sender meant it. It is the response by the receiver. It marks the completion of the communication process. This is important as it determines whether or not the decoder grasped the intended meaning and whether the communication was successful.

    Noise:

    It is a hindrance to the process of communication. Noise can take place at any step in the entire process. It reduces the accuracy of communication, e.g. 1) Disturbance in the telephone lines, 2) An inattentive receiver, and 3) Improper Decoding of Message, etc.

    This is any factor that inhibits the conveyance of a message. That is, anything that gets in the way of the message being accurately received, interpreted, and responded to. Noise may be internal or external. A student worrying about an incomplete assignment may not be attentive in class (internal noise) or the sounds of heavy rain on a galvanized roof may inhibit the reading of a storybook to second graders (external noise).

  • Financial Planning: Steps, Elements, Advantages, Limitations

    Financial Planning: Steps, Elements, Advantages, Limitations

    Financial planning is an important part of financial management. It is the process of determining the objectives; policies, procedures, programmes, and budgets to deal with the financial activities of an enterprise. Financial planning reflects the needs of the business and is integrated with the overall business planning. Proper financial planning is necessary to enable the business enterprise to have the right amount of capital to continue its operations efficiently. So, what we discussing is – Financial Planning: Steps, Elements, Advantages, Limitations.

    The Concept of Financial Planning explains their key points into Steps, Elements, Advantages, and Limitations.

    Financial planning involves taking certain important decisions so that funds are continuously available to the company and are used efficiently. In this article we Discuss; Financial Planning: Steps of Financial Planning, Elements of Financial Planning, Advantages and Disadvantages of Financial Planning, Limitations of Financial Planning, and Process of Financial Planning.

    Steps in Financial Planning:

    Financial planning involves the following steps:

    These are:

    • Set-up Financial Objectives.
    • Financial Policies.
    • Procedures, and.
    • Flexibility.

    Now, explain each one;

    Set-up Financial Objectives:

    The financial objectives of a company should be clearly determined. Both short-term and long-term objectives should be carefully prepared. The main purpose of financial planning should be to utilize financial resources in the best possible manner. There should be an optimum utilization of funds. The concern should take advantage of the prevailing economic situation.

    Financial Policies:

    The financial policies of a concern deal with procurement, administration, and distribution of business funds in the best possible way. There should be clear-cut plans of raising required funds and their possible uses. The current and future needs for funds should be considered while formulating financial policies.

    Procedures:

    The procedures are formed to ensure consistency of actions. The procedures follow the formulation of policies. If a policy is to raise short-term funds from banks, then a procedure should be laid to approach the lenders and the persons authorized to initiate such actions.

    Flexibility:

    The financial planning should ensure proper flexibility in objective, policies, and procedures so as to adjust according to changing economic situations. The changing economic environment may offer new opportunities. The business should be able to make use of such situations for the benefit of the concern. A rigid financial planning will not let the business use new opportunities.

    Elements of Financial Planning:

    Financial planning involves the following steps or elements:

    These are:

    • Objectives.
    • Capital Requirements.
    • Kinds of Securities to be issued, and.
    • Policies.

    Now, explain each one;

    Objectives:

    For effective financial planning, it is essential to clearly lay down the financial objectives sought to be achieved. The financial objectives should be based on the overall objectives of the company. The objectives of financial management may be set up in the areas, namely, investment, financing, and dividend.

    Capital Requirements:

    Capital is required for various needs of the business. The separate assessment is to be made of the requirements of fixed and working capital. Fixed capital is needed for acquiring fixed assets such as land and building, plant and machinery, furniture, etc. It is blocked for a long time. Working capital is required for holding current assets like stock, bills receivable, etc. and cash for meeting day-to-day expenses in running the business.

    Kinds of Securities to be issued:

    A company can issue equity shares, preference shares, and debentures to raise long-term funds. The types and proportion of securities to be issued should be properly determined.

    Policies:

    Financial planning leads to the formulation of policies relating to borrowing and lending, cash control and other financial activities. Such policies will help in taking vital decisions for the administration of capital and achieving coordination in financial activities.

    Advantages and Disadvantages of Financial Planning:

    These are the advantages of financial planning; It will set out clearly the money that you need to put together to start the business and then to run it for a period. It will help you to obtain funding if you need it. It will help prevent you from going into a business that will not be successful. Highlight periods where your business may need extra financial help. Inspire confidence in lenders and banks that you may have to approach for finance. It will help you to spot problems early so you can make plans for the necessary solution. For example, it will highlight whether you are holding too much stock or whether your collection is less than it should be or that you will be short of cash at a particular time.

    These are the disadvantages of financial planning; It can be a costly process because you will need the assistance of your accountant or financial adviser. It can take a lot of time, A financial plan merely forecasts and accounting.

    Limitations of Financial Planning:

    Some of the limitations of financial planning are discussed as follows:

    These are:

    • Forecasting.
    • Changes.
    • A Problem of Coordination, and.
    • Rapid Changes.

    Now, explain each one;

    Forecasting:

    Financial plans are prepared by taking into account the expected situations in the future. Since the future is always uncertain and things may not happen as these are expected, so the utility of financial planning is limited. The reliability of financial planning is uncertain and very much doubted.

    Changes:

    Once a financial plan is prepared then it becomes difficult to change it. A changed situation may demand a change in financial plan but managerial personnel may not like it. Even otherwise, assets might have been purchased and raw material and labor costs might have been incurred. It becomes very difficult to change a financial plan under such situations.

    A Problem of Coordination:

    The financial function is the most important of all the functions. Other functions influence a decision about the financial plan. While estimating financial needs, production policy, personnel requirements, marketing possibilities are all taken into account.

    Unless there is a proper-co­ordination among all the functions, the preparation of a financial plan becomes difficult. Often there is a lack of coordination among different functions. Even indecision among personnel disturbs the process of financial planning.

    Rapid Changes:

    The growing mechanization of the industry is bringing rapid changes in the industrial process. The methods of production, marketing devices, consumer preferences create new demands every time. The incorporation of new changes requires a change in financial plan every time.

    Once investments are made in fixed assets then these decisions cannot be reversed. It becomes very difficult to adjust a financial plan for incorporating fast-changing situations. Unless a financial plan helps the adoption of new techniques, its utility becomes limited.

    Understand the Process of Financial Planning:

    Following decisions are included in financial planning or process of financial planning is as under:

    Objectives:

    In the first stage, financial objectives of the organization are determined. Financial objectives of an organization may be of two kinds:

    • Short-term: It includes the maintenance of adequate liquidity in the organization,
    • Long-term: It includes the procurement of adequate finance from different sources so as to increase the efficiency of the organization.
    Policies:

    In the second stage of financial planning, financial policies are determined so that financial objectives could be achieved. It includes capitalization policy, capital structure policy; fixed assets management policy, dividend policy, working capital management policy, credit policy, etc.

    For instance, in respect of capital structure, the policy of the company may be to depend on equity share capital in the initial years; regarding distribution of dividend, the policy may be to keep the rate of dividend low in the initial years, regarding credit sale the policy of the organization may be to sell goods on credit to creditworthy customers alone.

    Procedures:

    In the third stage of financial planning, financial procedures are determined. Procedures are clearer than policies. In case of a procedure, it is laid down in what order a job will be performed. For instance, the decision regarding depending on equity capital in the initial years of the company is a policy but the different steps taken to procure equity capital fall under the category of financial procedure.

    Similarly, credit sale is a policy but prescribing the sequence of action to be taken in case of non-realisation of payment on time, is a financial procedure.

    Financial Planning Steps Elements Advantages Limitations
    Financial Planning: Steps, Elements, Advantages, Limitations. Image credit from #Pixabay.

  • Forecasting: Definition, Elements, and Techniques

    Forecasting: Definition, Elements, and Techniques

    What is the Forecasting? It is a process of predicting or estimating the future based on past and present data. Business Forecasting can be broadly considered as a method or a technique for estimating many future aspects of a business or other operation. Planning for the future is a critical aspect of managing any organization, and small business enterprises are no exception. Forecasting provides information about the potential future events and their consequences for the organization. It may not reduce the complications and uncertainty of the future. However, it increases the confidence of the management to make important decisions.

    The Concept of Planning is explaining Forecasting for Business, in points of Meaning, Definition, Elements, Importance, and Techniques.

    In this article, we will discuss Forecasting for Business Planning: First Meaning of Forecasting, then Definition of Forecasting, after those Elements of Forecasting, Importance of Forecasting, and finally discussing Techniques of Forecasting. Forecasting is the basis of promising. Forecasting uses many statistical techniques. Therefore, it is also called a Statistical Analysis. Indeed, their typically modest capital resources make such planning particularly important.

    In fact, the long-term success of both small and large organizations is closely tied to how well the management of the organization is able to foresee its future and to develop appropriate strategies to deal with likely future scenarios. Intuition, good judgment, and an awareness of how well the industry and national economy is doing may give the manager of a business firm a sense of the future market and economic trends.

    Nevertheless, it is not easy to convert a feeling about the future into a precise and useful number. Such as next year’s sales volume or the raw material cost per unit of output. Forecasting methods can help estimate many such future aspects of a business operation.

    #Meaning and Definition of Forecasting:

    As we know planning is:

    “A systematic economic and rational way of making decisions today that will affect tomorrow.”

    Then forecasting becomes an integral part of the planning process, especially, strategic planning which is long-range in nature.

    Lyndall Unrwick defined forecasting as it is involved to some extent in every conceivable business decision. The man who starts a business is making an assessment of future demand for its products. Also, The man who determines a production programme for the next six months or twelve months is usually also basing it on some calculation of future demand. The man, who engages staff, and particularly Young staff, usually have an eye to future organizational requirements.

    Business forecasting refers to a systematic analysis of past and present conditions with the aim of drawing inferences about the future course of events.

    Louis Allen defines forecasting as,

    “A systematic attempt to probe the future by inference from known facts.”

    Neter and Wasserman have defined forecasting as:

    “Business forecasting refers to the statistical analysis of the past and current movement in the given time series so as to obtain clues about the future pattern of those movements.”

    Perfect accuracy is not obtainable,” warned Richard Brealey and Stewart Myers in Principles of Corporate Finance.

    “If it were, the need for planning would be much less. Still, the firm must do the best it can. Forecasting cannot be reduced to a mechanical exercise. Naive extrapolation or fitting trends to past data are of limited value. It is because the future is not likely to resemble the past that planning is needed. To supplement their judgment, forecasters rely on a variety of data sources and forecasting methods.”

    For example, forecasts of the economic and industry environment may involve the use of econometric models. Which take account of interactions between economic variables. In other cases, the forecaster may employ statistical techniques for analyzing and projecting time series. Forecasts of demand will partly reflect these projections of the economic environment. But they may also be based on formal models that marketing specialists have developed for predicting buyer behavior or on recent consumer surveys to which the firm has access.

    #Elements of the Forecasting:

    The following elements of the forecasting process:

    These are:

    • Prepare the groundwork.
    • Create a future business.
    • Comparing actual with estimated results, and.
    • Refining the forecasts.

    Now, explain each one:

    Prepare the Groundwork:

    The group work preparation requires a thorough study, investigation, and analysis of the company, its products, its market share, its organizational structure, and the industry. The investigation will involve the past performance of all these factors. Their growth over a period of time and the extent of their inter-relationships and inter-dependence. The aim is to build a foundation on which future estimates can be based.

    Create a Future Business:

    The future expectancy of the business can be reasonably computed from the past data as well as the input from the key executives of the organization, sales personnel, and other specialists. This forecast is developed with the participation of the key personnel and is officially communicated to all. Thus all these people assume responsibility for meeting these forecasts and accountability for any deviations from this forecast.

    Comparing Actual with Estimated Results:

    The forecast estimates over the future years provide benchmarks against which the actual growth and results can be measured and compared. If there are significant variations between the two, one way or another, the reasons for such deviations can be investigated and analyzed.

    Refining the Forecasts:

    In the light of any deviations found, the forecast can be refined to be more realistic. If some conditions have changed during the periodic evaluation, then the new values of the variables can be incorporated into the estimates.

    Thus, these constant revisions and refinements and improvements would add to the experience and skill in forecasting, since proficiency in forecasting can only be gained through practice and experience. The above elements indicate a systematic approach to the problem of forecasting. As to materiality, these elements are found in any research procedure.

    #Importance of Forecasting:

    Importance of forecasting involves the following key points:

    • Forecasting provides relevant and reliable information about the past and present events and the likely future events. This is necessary for sound planning.
    • It gives confidence to the managers for making important decisions.
    • It is the basis for making planning premises, and.
    • It keeps managers active and alert to face the challenges of future events and the changes in the environment.

    #Techniques of Forecasting:

    The following Forecasting technique can be classified into two major categories:

    Qualitative Techniques:

    The following techniques three types:

    • Jury or executive opinion
    • Salesforce estimates.
    • Customer expectations.

    Now, Explains:

    Jury or Executive Opinion: 

    The jury of expert opinion sometimes referred to as the Dolphi technique; involves soliciting opinions or estimates from a panel of “experts” who are knowledgeable about the variable being forecasted. In addition to being useful in the creation of a sales or demand forecast, this approach is used to predict future technological developments. This method is fast less expensive and does not depend upon any elaborate statistics and brings in specialized viewpoints.

    Sales Force Estimates: 

    This approach involves the opinion of the sales force and these opinions are primarily taken into consideration for forecasting future sales. The sales people, being closer to consumers, can estimate future sales in their own territories more accurately. Based on these and the opinions of sales managers, a reasonable trend of the future sales can be calculated.

    These forecasts are good for short-range planning since salespeople are not sufficiently sophisticated to predict long-term trends. This method known as the “grassroots” approach lends itself to easy breakdowns of product, territory, customer etc., which makes forecasting more elaborate and comprehensive.

    Customer Expectations: 

    This type of forecasting technique is to go outside the company and seek subjective opinions from customers about their future purchasing plans. Also, Sales representatives may poll their customers or potential customers about the future needs for the goods and services the company supplies. Direct mail questionnaires or telephone surveys may be used to obtain the opinions of existing or potential customers.

    This is also known as the “survey method” or the “marketing research method” where information is obtained concerning. Customer buying preferences, advertising effectiveness and is especially useful where the target market is small such as buyers of industrial products, and where the customers are co-operative.

    Quantitative Techniques:

    Quantitative techniques are based on the analysis of past data and its trends. These techniques use statistical analysis and other mathematical models to predict future events.

    Some of these techniques are:

    • Time series analysis.
    • Economic models.
    • Regression analysis.

    Now, Explains:

    Time Series Analysis: 

    Time series analysis involves decomposition of historical series into its various components, viz., trend, seasonal variations, cyclical variations, and random variations. Also, Time series analysis uses index numbers but it is different from barometric technique. In the barometric technique, the future is predicted from the indicating series, which serve barometers of economic change.

    In time series analysis, the future is taken as some sort of an extension of the past. When the various components of a time series are separated, the variations of a particular phenomenon, the subject under study stay say price, can be known over the period of time and projection can be made about future.

    A trend can be known over the period of time, which may be true for the future also. However, time series analysis should be used as a basis for forecasting when data are available for a long period of time and tendencies disclosed by the trend and seasonal factors are fairly clear and stable.

    Economic Models: 

    Utilize a system of interdependent regression equations that relate certain economic indicators of the firm’s sales, profits etc. Also, Data center or external economic factors and internal business factors interpreted with statistical methods. Often companies use the results of national or regional econometric models as a major portion of a corporate econometric model.

    While such models are useful in forecasting, their major use tends to be in answering “what if”? Questions. These models allow management to investigate and in major segments of the company’s business on the performance and sales of the company.

    Regression Analysis: 

    Regression Analysis is statistical equations designed to estimate some variables such as sales volume, on the basis of one or more ‘independent’ variables believed to have some association with it.

  • Business Forecasting Techniques, Elements, and Steps

    Business Forecasting Techniques, Elements, and Steps

    Discover essential techniques, elements, and steps for effective business forecasting. Enhance your decision-making with our comprehensive insights and resources. Business forecasting is an act of predicting the future economic conditions on the basis of past and present information. Also, It refers to the technique of taking a perspective view of things likely to shape the turn of things in the foreseeable future. As the future is always uncertain, there is a need for an organized system of forecasting in a business.

    The Concept of Accounting explains Business Forecasting in the points of Elements, Techniques, and Steps.

    In this article discussing Business Forecasting: First Essential Elements of Business Forecasting, then the second Techniques of Business Forecasting, and finally Steps of Business Forecasting. Also, Business forecasting reduces the risk associated with business cycles. Prior knowledge of a phase of a trade cycle with its intensity and expected period of happening may help businessmen, industrialist, and economists to plan accordingly to reduce the harmful effects of trade cycle’s statistics is thus needed for the purpose of controlling the business-cycles. So, discussing each point of Business Forecasting.

    Essential Elements of Business Forecasting

    The following Essential Elements below are:

    1. Essential Elements of Business Forecasting:

    The need for forecasting is apparent from the key role it plays in planning. Forecasting has great use in developing plans. The making of forecasts and their review by managers results in thinking ahead, looking to the future, and making provisions for it. Also, the very act of forecasting may disclose areas where necessary control is lacking. Forecasting, especially where widely participated by all in the organization, may help to unify and coordinate plans. By focussing attention on the future, it assists in bringing a singleness of purpose to planning.

    2. Elements of Forecasting:

    Forecasting helps us to know the future. It also helps us to compare, to estimate and to analyze the data to arrive at the estimated results. It leads to the regular investigation of different aspects of production and management within and outside the organization. Forecasting prepares a ground to work together and brings better co-ordination, co-operation, and control in the organization. Under forecasting, future prospects, stability, and the discrepancies are properly weighed and studied. Also, This helps the management to remove any hindrances that may come in the way of management.

    Thus company results are compared with the estimated ones, the other element which is quite conspicuous with forecasting. Whenever the large difference is found, further investigation is undertaken to find out the reasons for such discrepancy. Forecasting, therefore, helps to know the expected profits or losses and just by going through certain reports and records of the company, enables the forecaster to take necessary decisions. Decision-making becomes better and easier when forecasting is undertaken on a scientific basis.

    James W. Redfield has summarized the essential elements as follows:

    • Developing the groundwork: It carries out an orderly investigation of products, company, and industry.
    • Estimating future business: This follows a clear-cut plan for working out future expectancies in the form of natural undertaking with key executives.
    • Comparing actual with estimated results: Checking the attained with anticipated results of the business periodically and tracking down reasons for major differences.
    • Refining the Forecast Process: Once familiarity with estimating the future of the business is gained through practice, sharpening the approach and refining the procedure becomes quite easy.

    Techniques of Business Forecasting:

    The following Techniques of Business Forecasting below are:

    Direct/Bottom-up method:

    Under this method, different departmental heads and their subordinates collect information and data for different aspects of production, sales, purchases, personnel etc. Also, This data, later on, is compiled together as the data for the company as a whole. It means every department/section makes its own forecast which is, later on, clubbed together as an aggregated data for the company.

    Indirect/Top-Down method:

    The requirements of the entire trade or industry are estimated first and then the share of the particular unit is ascertained. The constituent departments, later on, get their share from the company and hence the estimation has been made indirectly without giving any free hand in the compilation of data. In this case, the responsibility of successful forecasting rests with the top executives.

    Empirical Method:

    Under the empirical method, the future is predicted in terms of past experience which is the basis of prediction. The empirical forecasting is based on the method of the sequence which assumes that business follows a pattern that certain indexes anticipate the general business trend. They strive to find out such an index and devote much time to constructing curves.

    Scientific Forecasting:

    Scientific forecasting strives to use scientific methodology in establishing causal relationships. In this case, the businessmen mostly rely upon the past experience in predicting the future. Previous experience properly organized and interpreted in terms of causal relationship is the basis of scientific forecasting. The scientific forecaster may use many of the tools of the empirical forecaster, but he uses them as guides or aids in interpreting causal relationships.

    Historical Method:

    This method mainly deals with the analysis and interpretation of past events as a basis for understanding current problems and forecasting future trends. Here data concerning the past production, sales, purchases, capital needs etc. of the industry as a whole and the particular firm are compiled and tabulated. This method helps the management to know not only the future trend but also effects of trade cycles, and the correlation between different aspects of production.

    Its principal advantages are as follows:

    • It takes into consideration the past records.
    • Such past records can be easily procured, and.
    • Also, The present is also not neglected.

    Some of its disadvantages are:

    • It is not always possible to find the trend or cyclical movements of past data or to develop correlation or mathematical relationship between them and other variables which have bearing upon them, and.
    • It is not possible for firms of average size to afford such a costly investigation.

    Deductive Method:

    This method is just the reverse of the historical method. No past information or data is taken into account under this method for deciding the future trend. Forecasters, under this method, believe that the old data becomes obsolete after the lapse of a certain time and hence give more emphasis on the current data available in the organization. But objective and subjective judgments are given all the importance. The forecaster at his individual discretion analyses the current information and derives certain conclusions, pertaining to the results in the near future.

    Its main advantages are as follows:

    • It takes into account the latest development; hence it is more dynamic in character.
    • It enables the management to get information as to the future without waiting for the past information, and.
    • Delay in forecasting certain events or results is avoided. The main drawback of this method is that it relies more on individual judgment than on the past record.

    Joint-Opinion Method:

    Any work of forecasting under this method is done in consultation with persons who are directly concerned with the problem. The responsibility of exactness is shared by many and the error of judgment is avoided to a greater extent. It is based on the committee type of approach and as such, better understanding and co-operation is expected in arriving at the accurate judgment. The number of experienced experts who are in direct touch with the forecast pools their judgment. The forecasting in this way is likely to be more accurate. This method is a definite improvement on the deductive method and the individual’s discretionary views or monopoly is discarded.

    Its principal advantages are:

    • It is very easy and simple to administer
    • There is no need for detailed statistical study
    • Experience of the experts is properly utilized.

    Some of its disadvantages are:

    • Members of the committee may not take the keen interest in preparing the forecasts as the responsibility is a joint and not several ones
    • Also, It sometimes degenerates into mere guesswork
    • It cannot be applied to the forecast of a section, department or another subordinate unit.

    Steps of Forecasting:

    The process of forecasting consists of the following steps, also described as elements of forecasting:

    Developing the Basis:

    The first step involved in forecasting is developing the basis of the systematic investigation of the economic situation, the position of industry and products. Also, The future estimates of sales and general business operations have to be based on the results of such investigation. The general economic forecast marks as the primary step in the forecasting process.

    Estimating Future Business Operations:

    The second step involves the estimation of conditions and course of future events within the industry. On the basis of information/data collected through investigation, future business operations are estimated. The quantitative estimates for a future scale of operations are made on the basis of certain assumptions.

    Regulating Forecasts:

    The forecasts are compared with actual results so as to determine any deviations. The reasons for his variations are ascertained so that corrective action is taken in future.

    Reviewing the Forecasting Process:

    Once the deviations in forecasts and actual performance are found then improvements can be made in the process of forecasting. The refining of the forecasting process will improve forecasts in the future.

    Sources of Data Used In Business Forecasting:

    Collection of data is the first step in any statistical investigation. It is the basis for any analysis and interpretations. Before the collection of data, many questions shall occupy the mind of the manager. The manager must be able to answer these questions before the task of the collection is started.

    These questions are:

    • Why collect data?
    • What kind of data to be collected?
    • When it is to be collected?
    • Where from it should be collected?
    • Who will collect it?
    • Also, How it shall be collected?

    The answer to these questions is nothing but planning the collection of data. Planning for data collection refers to thinking or preparing before doing the actual task of data collection. The purpose or object of data collection, the scope of the data, the unit of data collection, the technique and sources of data are the important consideration in planning the data collection. Data may be collected from primary or secondary sources depending upon the time, resources, and purpose of the investigation.

    Primary Sources:

    It is a first-hand data collected personally by the investigator. It is costly and time-consuming. Primary data is collected if secondary data is not available. It is collected by personal interviews, questionnaires or observations.

    Secondary Sources:

    These sources of data refer to already published data or data collected by other agencies. It is a secondhand data. Here the task is more of a compilation of data.

    The sources of secondary data are:

    • Official reports of the government.
    • Publications Financial source, Financial institutions etc.
    • Also, Annual reports of companies.
    • Journals, Newspapers, Magazines etc.

    A lot of care and caution is necessary before using the secondary data. Such data is cheaper, quicker and easily available. The essence of all the above Steps and Sources is that business forecasting is a technique to analyze the economic, social and financial forces affecting the business with an object of predicting future events on the basis of past and present information.

  • Explanation of the Major Elements of Operations Management

    Explanation of the Major Elements of Operations Management

    Operations management is the business function that responds to planning, organizing, coordinating and controlling the resources needed to produce a company’s products and services. The operations function can be connected to other functional operations within the organization such as marketing, finance, human resource and etc. The process of changing inputs into outputs thereby adding value to some entity. Right quality, right quantity, right time and right price are the four basic requirements of the customers and as such, they determine the extent of customer satisfaction. Do you study to learn: If Yes? Then read the lot. Let’s Study: Explanation of the Major Elements of Operations Management.

    The concept of Elements Discussing the topic: Explanation of the Major Elements of Operations Management.

    The operations manager is the person who supervised the production, makes the decision on operations processes and regarding connecting into other functional areas. Thus, today every company realized that operations management is important and also agreed that is the main core function to organize their organization. So it can be described that all functional areas undertake operations activities because they all produce the services and goods.

    The Major elements of Operations Management:

    The following elements are below.

    Selection and Design:

    The right kind of products and good designs of the products are crucial for the success of an organizing. A wrong selection of the product and/or poor design of the products can render the company’s operation ineffective and non-competitive. Products/services, therefore, must be chosen after a detailed evaluation of the product/services alternatives in conformity with the organization’s objectives. Techniques like value engineering may be employed in creating alternate designs, which are free from unnecessary features and meet the intended functions at the lowest cost.

    The Process, Selection, and Planning:

    Selection of the optimal “conversion system” is as important as the choice of products/services and their design. Process selection decisions include decisions concerning the choice of technology, equipment, machines, material handling systems, mechanization, and automation. Process planning involves detailing of processes if resource conversion required and their sequence.

    Plant location:

    Plant location decisions are strategic decisions and once the plant is set up at a location, it is comparatively immobile and can be shifted later only at a considerable cost and interruption of production. Although the problem of location choice does not fall within preview the production function and it occurs infrequently, yet it is of crucial importance because of its major effect on the performance of every department including production. Therefore, it is important to choose the right location, which will minimize the total “delivered customer” cost (Production and distribution cost). Locational decisions involve evaluation of locational alternatives against the multiplicity of relevant factors considering their relative importance to the organization and selecting those, which are operationally advantageous to the organization.

    Facilities layout and materials handling:

    Plant layout is concerned with the relative location of one department (Work center) with another in order to facilitate material flow and processing of a product in the most efficient manner through the shortest possible time. A good layout reduces material handling cost, eliminates delays and congestion, improves coordination, provide good housekeeping etc. while a poor layout results in congestion, waste, frustration, inefficiency, and loss of profit.

    The Planning of capacity:

    Capacity planning concerns determination and acquisition of productive resource to ensure that their availability matches the demand. Capacity decisions have a direct influence on the performance of the production system in respect of both resource productivity and customer service (i.e. delivery performance). Excess capacity results in low resource productivity while inadequate capacity leads to poor customer service. Capacity planning decisions can be short-term decisions. Long-term capacity planning decisions concern expansion/contraction of major facilities required in the conversion process, the economics of multiple shift operation, development of vendors for major components etc. Short-term capacity planning decisions concern issues like overtime working, sub-contracting, shift adjustments etc. Break-even analysis is a valuable tool for capacity planning.

    Production, Planning, and Control (PPC):

    Production planning is the system for specifying the production procedure to obtain the desired output in a given time at optimum cost in conformance with the specified standard of quality, and control is essential to ensure that manufacturing takes place in the manner stated in the plan. Also learn, What is Planning?

    Control of Inventory:

    Inventory control deals with the determination of optimal inventory levels of raw materials, components, parts, tools; finished goods, spares, and supplies to ensure their availability with minimum capital lock up. Material requirement planning (MRP) and just in time (JIT) are the latest techniques that can help the firm to reduce inventory.

    Assurance and Control of Quality:

    Quality is an important aspect of the production system and it must ensure that services and products produced by the company conform to the declared quality standards at the minimum cost. A total quality assurance system includes such aspects as setting standards of quality, inspection of purchased and sub-contracted parts, control of quality during manufacture and inspection of finished product including performance testing etc.

    Work-study and Job design:

    Work-study, also called time and motion study, is concerned with the improvement of productivity in the existing jobs and the maximization of productivity in the design of new jobs. Two principal component of work-study is Method study and Work Measurement.

    Maintenance and replacement:

    Maintenance and replacement involve selection of optimal maintenance (preventive and/or breakdown) policy to ensure higher equipment availability at minimum maintenance and repair cost. Preventive maintenance, which includes preventive inspection, planned lubrication, periodic cleaning and upkeep, planned replacement of parts, condition monitoring of the equipment and machines, etc. is most appropriate for critical machines.

    Reduction and Control of Cost:

    Effective production management must ensure the minimum cost of production and in this context cost reduction and cost control acquire significant importance. If you know what is the cost of capital also help for control. There is a large number of tools and techniques available that can help to make a heavy dent on the production cost.

    Explanation of the Major Elements of Operations Management
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