UGC NET Management Previous Year Solved Papers - June 2019
31. The DuPont approach breaks down the earnings power on the shareholders’ book value (RoE) as:
- Option : A
- Explanation : DuPont analysis is a way to view how a company manages the profit margin, total asset turnover, and the equity multiplier to generate the ROA and ROE. DuPont Analysis was first developed by the management team of the DuPont Corporation, hence the name. The benefit of this approach is that it gives greater detail by showing which key areas impact ROA and ROE and helps the management team analyze different ways to improve the performance of the corporation. In its bask form the DuPont equation is as
ROA = Net Profit Margin × Total Asset Turnover follows:
To get ROE from ROA we need an equity multiplier. This multiplier is equal to the ratio of total assets to common equity. Then the product of ROA and this multiplier give ROE:
ROE = ROA × Equity Multiplier
=ROA×Total Assets ⁄ Common Equity
We can further combine the last two formulas to obtain an extended version of the DuPont equation: ROE = Profit Margin × Total Assets Turnover × Equity Multiplier
= Net Income ⁄ Sales×Sales ⁄ Total Assets×Total Assets ⁄ Common Equity
- Option : C
- Explanation : Career development plays an important role in engaging and retaining employees. A comprehensive career development policy helps boost
employee engagement and increases retention. Career refers to the occupational positions a person holds over the years. Career development is a series of activities (training, development, and promotion) that contribute to a person’s career success and fulfillment. Career planning is the deliberate process of identifying an employee’s skills, interests, knowledge, and other characteristics; setting career-related goals; and establishing action plans to attain those goals. Career management is a process of enabling employees to better understand and develop their career skills and interests and to use these skills and interests most effectively both within the company and after they leave the firm.
Career planning and development require a more comprehensive strategy than training. It necessitates honing capabilities that go beyond those required by the current job. Development efforts concentrate on how to prepare employees for future jobs in the company. A planned system of development for all employees can help expand the overall level of capabilities in an organization.
- Option : A
- Explanation : There is no certainty that a monopoly firm will always earn an economic or abnormal profit. Whether a monopoly firm earns an abnormal profit or normal profit or incurs loss depends on
(i) its cost and revenue conditions;
(ii) threat from potential competitors: and
(iii) government policy in respect of monopoly.
If a monopoly firm operates at the level of output where MR = MC, its profit depends on the relative levels of AR and AC. Given the level of output, there are three possibilities.
(i) if AR > AC, there is abnormal profit for the firm.
(ii) if AR = AC, the firm earns only a normal profit, and
(iii) if AR < AC, though only a theoretical possibility, the firm makes losses.
- Option : C
- Explanation : HRM refers to the application of management principles to the management of people in an organization. This is too simple a statement and fails to capture the essence of HRM.
In its essence, HRM comprises the following:- HRM consists of people-related functions as hiring, training and development, performance review, compensation, safety and health, welfare, industrial relations and the like. These are typically the functions of ‘Personnel Management’ and are administrative and supportive in nature. Appropriately called ‘doables’, these activities are highly routinized and have been often outsourced.
More important functions of HRM are the building of human capital. Human capital refers to the stock of employee skills, knowledge, and capabilities that may not show up in a balance sheet but have a significant impact on a firm’s performance.
As stated earlier, human capital (also known as ‘deliverables’) lends a competitive advantage to a firm. Obviously, building human capital is the major function of an HR professional. These activities (routine as well as capital building initiatives) are not carried out in isolation. They are interdependent.- HRM necessitates alignment of HR policies and practices with the organization’s strategies—both corporate as well as functional. By meshing HR practices and policies with strategies, the HR executive helps formulate and implement business strategies. The HR manager then assumes the mantle of a strategist. In fact, as will be stated later, the very concept of HRM signifies that the role of the HR executive is elevated, from an administrative level to that of the board. He or she becomes a member of the board and thus takes part in decision making.
