Benefits Of Human Resource Management (HRM)

Business , Education
Main benefits or advantages of human resource management (HRM) can be expressed as follows:

1. Improves Performance

Human resource management is concerned with the proper utilization of human resource in the organization. It follows the principle of "the right man for the right job" according to the skill and knowledge of employees. It helps to increase employee performance.

2. Reduces Employee Turnover

Human resource management helps to reduce employee turnover rate in the organization by providing growth opportunities and maintaining good working environment in the organization. 

3. Training And Development

Human resource management helps to enhance employee's skills and qualities by providing training programs and organizing development campaigns. Training and development programs helps to develop potentiality of the human resources in the organization.

4. Conflict Management 

Human resource management helps to manage conflict between the employees and the company. HRM plays the role of mediator and takes the appropriate step to handle the misunderstanding or conflict in the organization.

Human resource management (HRM) provides career development opportunities to the employees. It helps to enhance potentiality and provide growth opportunity through training and development programs. HRM helps to address employees' dissatisfaction by solving their problems. 

6. High Employee Moral

Human resource management helps to maintain high employee moral by creating healthy working condition, proper work design and motivating them towards their job. 
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Advantages Of Cost Volume Profit Analysis

Accounting , Business
Main benefits or advantages of cost volume profit (CVP) analysis can be studied as follows:

1. Decision Making

CVP analysis helps the management to make sound decision regarding distribution channel, make or buy decision, pricing, production method etc. by showing the relationship between cost, volume and profit.

2. Fair Pricing

Cost volume profit (CVP) analysis helps to fix optimum price of the product and services by comparing the competitor's product price. 

3. Determination Of Break Even Point

CVP analysis helps to calculate the break even point at which total revenues are equal to total costs.

4. Determination Of Margin Of Safety

CVP analysis helps to determine the margin of safety (position above the break even point).

5. Profit Planning

CVP analysis assists management in profit planning by estimating the profit at different output levels.
advantages of cpv analysis
6. Cost Control

CVP analysis is an effective tool to control unnecessary production and distribution costs.

7. Budgeting

Management can prepare budget on the basis of CVP analysis because it provides relevant data and information about cost, volume and profit.

8. Product Selection

Cost volume profit analysis helps to select the most profitable product by analyzing the relationship between revenues and costs.
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Advantages And Disadvantages Of Absorption Costing

Accounting , Business
Benefits Or Advantages Of Absorption Costing System

The main advantages of absorption costing system can be studied as follows:

1. Fair Pricing

Absorption costing covers both variable costs and fixed costs while determining the cost of unit of a product. So, it is suitable method to determine the fair price of product and services.

2. Importance Of Fixed Cost

Absorption costing system  recognizes the importance of fixed manufacturing costs and treats them as product cost.

3. Easy To Operate

Absorption costing system of product costing is simple method which can be installed and operate easily without any complication. It consumes less time and costs to operate.

4. Accurate Profitability

Absorption costing system helps to determine accurate profitability in the case of seasonal production and sales.

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5. No Separation Of Costs

There is no need to separate costs into variable costs and fixed costs in this system.
advantages disadvantages absorption costing

6. Preparing Final Accounts

Absorption costing helps to prepare income statement and final account of the company.

Drawbacks Or Disadvantages Of Absorption Costing

Main disadvantages of absorption costing system can be expressed as follows:

1. Not Suitable For Decision Making

Absorption costing does not provide detailed information about fixed and variable costs. Therefore, it may not be useful for management for planning and decision making purpose.

2. Not Suitable For Flexible Budget

Flexible budget cannot be prepared with the help of absorption costing because it does not make distinction between fixed and variable costs.

3. Artificial Profitability

In absorption costing, more profit can be shown by moving fixed manufacturing costs from income statement. It misleads the users.
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Disadvantages Of Inadequate Working Capital

Business , Finance
Major drawbacks or disadvantages of inadequate working capital can be highlighted as follows:

1. Lack Of Solvency

Inadequate working capital creates problem for making payment of salary, wages and short-term liabilities of a firm. It weakens the solvency position of the company.

2. Liquidity Problem

A firm cannot maintain proper liquidity because of the shortage of working capital.

3. Opportunity Loss

A business firm may lose new opportunities due to insufficient amount of working capital. Business expansion is also impossible.

4. Damage Goodwill

A firm fails to meet its financial obligations due to inadequate working capital. It affects or damages the goodwill of the firm. 

5. Inefficiency

A firm cannot utilize its fixed assets and other production facilities effectively because of the shortage of fund. So, production process will be disturbed and leads to inefficiency.
disadvantages inadequate working capital
6. No Discount

It is impossible to purchase raw materials and other requirements in bulk quantity because of poor liquidity. So, opportunity of trade discount and cash discount cannot be availed.

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7. No Attraction Of Investors

A firm cannot attract investors and lenders due to poor liquidity and solvency position.

8. Low Rate Of Return

Due to inadequate amount of working capital, a firm cannot function properly. It leads to low rate of return on investment.
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Advantages Of Adequate Working Capital

Business , Finance
Main benefits or advantages of maintaining adequate level of working capital can be explained as follows:

1. Maintains Solvency

Adequate working capital ensures smooth operation of business activities without interruption. Because enough working capital strengthens the solvency position of the firm.

2. Maintains Goodwill

Maintaining adequate working capital facilitates prompt payment of short-term liabilities. Timely payment of raw materials, salary and other overheads helps to maintain the goodwill of the company.

3. Discount Facility

Bulk purchase of raw materials is possible because of sufficient working capital. Because of large volume purchase and prompt payment, the firm can avail of the discount facility.

4. Maintains Liquidity

Sufficient working helps to maintain proper liquidity in the business. 

5. Regular Supply

Regular supply of raw materials and accessories is possible due to adequate working capital. It ensures regular production without a break.
advantages adequate working capital


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6. Loan Facility

Adequate working capital helps the company to obtain loan from financial institutions. Banks and other financial institutions provide loan on the basis of solvency, liquidity and goodwill of the company.

7. Face Crisis

Maintaining adequate level of working capital helps the business firm to survive at the time of crisis and emergencies. 

8. Increase Efficiency

Sufficient working capital ensures smooth operation, maintains solvency and increases the goodwill. These factors create high morale which helps to increase efficiency of the firm.
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Advantages And Disadvantages Of Internal Rate Of Return

Accounting , Business
Advantages Of Internal Rate Of Return (IRR)

Main benefits or advantages of internal rate of return (IRR) method of evaluating investment proposals can be expressed as follows:

1. Use Of Time Value Of Money

One of the main advantages of IRR is that, it considers time value or future earning capacity of money. Therefore it is a scientific method of capital budgeting.

2. Rate Of Return

Internal rate of return (IRR) method determines exact rate of return of the capital project.

3. Easy To Make Decision

It is easy to select appropriate investment alternative with the help of IRR technique. The project with higher IRR will be selected and others will be ignored.

4. Importance To Cashflow

IRR method treats equally to the cashflows of every years.

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5. Focus On Profitability

IRR selects most profitable project only. So, it is beneficial to the shareholders and the owners.

6. No Cost Of Capital

Cost of capital is not required while calculating IRR.

advantages disadvantages IRR

Disadvantages Of Internal Rate Of Return (IRR)

Main drawbacks or disadvantages of IRR can be expressed as follows:

1. Complexity

It is difficult to calculate and understand IRR method of capital budgeting. Trial and error method makes it more complicated.

2. Different Result

Results of NPV and IRR may not be matched because of size and life of the projects. Results also may differ due to the timings of cashflows also.

3. Unsuitable

IRR is not suitable for the comparison of mutually exclusive projects.
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