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Sikkim manipal university mba IA solutions for semester 2

MBA Semester 2              Fall 2014


Q1. People's productivity key to Indian manufacturing competitiveness: Boston Consulting Group Namrata Singh, TNN | Mar 14, 2013, 09.34PM IST
MUMBAI: People productivity is the key to Indian manufacturing competitiveness, says a report by the Boston Consulting Group (BCG).
In most global people productivity surveys, not only does people productivity of Indian manufacturing sector lags developed nations such as US and Japan, but also lags in most manufacturing sectors to China. While earlier, many explained this to differences in technology, level of automation, etc., the report suggests such differences are not only rapidly shrinking, but they do not fully explain the significant gaps in productivity that exists.
Skill gap and engagement gap are the two critical factors that explain lower people productivity. Under gap in skill, Indian manufacturing sector faces significant challenges in attracting quality manpower that is 'right' skilled prior to entering the workforce. In addition, continuous skill development efforts are required for the work force, throughout their careers, as processes and technologies evolve.
On the other hand, many manufacturing studies have indicated a direct correlation between workforce engagement and productivity. For most Indian manufacturing companies, the level of engagement and alignment with corporate vision, amongst their union work force and contract labour is extremely low, when compared to their global peers.
"An improvement in people productivity can be beneficial across all levels of an organization. At the employee level, it results in higher wages and enhanced job satisfaction. At company level, the direct correlation between profits and resource productivity has been established through research multiple times. And at industry level, increased people productivity leads to improved skills and better working environment—thus paving the way for higher investments and faster economic growth. Therefore, it is critical for the Indian manufacturing sector to work toward enhancing people productivity to achieve the goals it has set for itself," the report says.
The subject gains importance in the backdrop of a slowdown in western economic countries and China, as well as cost increases in China. Indian manufacturing sector stands at the cusp of a tremendous opportunity.
After reading the case study answer the following questions:

a. What do you think are the reasons for low people productivity in India?
b. Compare and analyze India’s productivity with respect to other countries?
c. What suggestions do you offer to improve the situation?
Answer: a) Skill gap and engagement gap are the two critical factors that explain lower people productivity. Under gap in skill, Indian manufacturing sector faces significant challenges in attracting quality manpower that is 'right' skilled prior to entering the workforce. In addition, continuous skill development efforts are required for the work force, Answers available on

Q2. List the elements of operations strategy. Explain any TWO elements of operations strategy.

Answer: The six elements of operations strategy are:

1) Designing of the production system
2) Facilities for production and services
3) Product or service design and development
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Q3. What are the basic capacity (production) options a company can choose?

Answer: Capacity options: Under this option, the company decides to vary the production output by varying the time, workforce, or by outsourcing. A company can choose from the following basic capacity (production) options:

a) Changing inventory levels: Under this option the inventory is increased during periods of low demand to meet high demand in future periods. If this strategy is selected, costs associated with storage, insurance, handling, Answers available on

Q4. Write short notes on:
a. Qualitative methods of forecasting                              
b. Taguchi’s quality loss function

Answer: a. Qualitative methods of forecasting             

The different qualitative methods of forecasting are as follows:

  • Market surveys
  • Nominal group testing
  • Historical analysis
  • Jury of executive opinion
  • Life cycle analysis
  • Delphi method

Market surveys

Conducting surveys among the prospective buyers or users is a very old method of forecasting. Here, a questionnaire Answers available on

Q5. Describe the process of value analysis.

Answer: Process of Value Analysis

The process of value analysis can be divided into the following four steps:

1. Data gathering
2. Analysis and valuation of functions
3. Idea generation and evaluation of substitutes
4. Implementation and regulation

Step 1: Data gathering

All relevant information concerned with the product and the parts that go to make it are collected. The concerns at Answers available on

Q6. Write short notes on
a. Tools for implementation of operations
b. Fixed position layout

Answer: a. Tools for implementation of operations

All functions in the organisation including administration, finance, materials, purchase, marketing, production, logistics, communication, and others can be considered as operations. The reason is that all of them use some inputs like materials or information either on a person-to-person basis or through a flow line. They are required to use some Answers available on
                                                                                                                                                                              Fall 2014

MBA Semester 2


Q1. Explain the liquidity decisions and its important elements. Write complete information on dividend decisions.

Answer: Liquidity decisions

The liquidity decision is concerned with the management of the current assets, which is a pre-requisite to long-term success of any business firm.This is also called as working capital decision. The main objective of the current assets management is the trade-off between profitability and liquidity, and there is a conflict between these two concepts. If a firm does
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Q2. Explain about the doubling period and present value. Solve the below given problem:
Under the ABC Bank’s Cash Multiplier Scheme, deposits can be made for periods ranging from 3 months to 5 years and for every quarter, interest is added to the principal. The applicable rate of interest is 9% for deposits less than 23 months and 10% for periods more than 24 months. What will be the amount of Rs. 1000 after 2 years?

Answer: Doubling period

A very common question arising in the minds of an investor is “how long will it take for the amount invested to double for a given rate of interest”. There are 2 ways of answering this question:

1. One way is to answer it by a rule known as ‘rule of 72’. This rule states that the period within which the amount doubles is obtained by dividing 72 by the rate of interest. Though it is a crude way of calculating, this rule is Answers available on

Q3. Write short notes on:
a) Operating Leverage
b) Financial leverage
c) Combined leverage

Answer: a) Operating Leverage

Operating leverage arises due to the presence of fixed operating expenses in the firm’s income flows. It has a close relationship to business risk. Operating leverage affects business risk factors, which can be viewed as the uncertainty inherent in estimates of future operating income.

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Q4. Explain the factors affecting Capital Structure. Solve the below given problem:
Given below are two firms, A and B, which are identical in all aspects except the degree of leverage employed by them. What is the average cost of capital of both firms?

Details of Firms A and B

Firm A
Firm B
Net operating income EBIT
Rs 1,00,000
Rs 1,00,000
Interest on debentures I
Rs 25,000
Equity earnings E
Rs. 1, 00, 000
Rs. 75, 000
Cost of equity Ke
Cost of debentures Kd
Market value of equity S = E/Ke
Rs. 6, 66, 667
Rs. 5,00, 000
Market value of debt B
Rs. 2, 50, 000
Total value of firm V
Rs. 6, 66, 667
Rs. 7, 50, 000

Answer: Factors Affecting Capital Structure

Capital structure should be planned at the time a company is promoted. The initial capital structure should be designed very carefully. The management of the company should set a target capital structure, and the subsequent financing decisions should be made with a view to achieve the target capital structure.

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Q5. Explain all the sources of risk in capital budgeting with examples.
Solve the below given problem:
An investment will have an initial outlay of Rs 100,000. It is expected to generate cash inflows. Cash inflow for four years.

Cash Inflow

If the risk free rate and the risk premium is 10%,
a) Compute the NPV using the risk free rate
b) Compute NPV using risk-adjusted discount rate.

Answer: Sources of risk
The five different sources of risk are:

  • Project-specific risk
  • Competitive or competition risk
  • Industry-specific risk
  • International risk
  • Market risk
 Project-specific risk
 Project-specific risk could be traced to something quite specific to the project. Managerial deficiencies or error in estimation of cash flows or discount rate may lead to a situation of actual cash flows realised being less than the Answers available on

Q6. Explain the objectives of Cash Management. Write about the Baumol model with their assumptions.

Answer: Objectives of Cash Management
The major objectives of cash management in a firm are:

  • Meeting payments schedule
  • Minimizing funds held in the form of cash balances

Meeting payments schedule

In the normal course of functioning, a firm has to make various payments by cash to its employees, suppliers and infrastructure bills. Firms will also receive cash through sales of its products and collection of receivables. Both of these do not occur simultaneously.
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