What is Management? Is Management Art or Science? What is Future Value of Money?

Question: What is management?

Answer: Management is a process of utilizing business resources to achieve the organizational goals effectively and efficiently. It consists of human, financial, physical, and information resources.

Question: Is management art or science?

Answer: Management is both art and science. There are several principles to prove management as art and science.

Management as Science

Management behaves as Science in several parameters that contain general facts which explain a phenomenon. Moreover, management principles developed through the scientific method of observation and verification through testing.

The identical features of management and science are:

1. Universally acceptance principles: Management principles can be applied universally.
2. Experimentation & Observation: The principles are based on logics.
3. Cause & Effect Relationship: It can have “cause and effect” relationship between various variables.
4. Test of Validity & Predictability: The principles can be tested several times.

Management as Art

Management acts as an Art by application of knowledge & skill to trying about desired results. The definition of art is the application of general theoretical principles to attain optimum results.

The identical features of management and art are:

1. Practical Knowledge: There is practical application of theoretical principles.
2. Personal Skill: Each one has its own style of work.
3. Creativity: It is a combination of human & non-human resources to obtain optimum results.
4. Perfection through practice: Application of management principles can train managers to become perfect in their jobs.
5. Goal-Oriented: Accomplishment of desired goals through various resources.
6. Work by effectively: Handle every problem of organization in every environment.

Management as Art & Science

Yes, management indeed beholds the characteristics of both art and science. There is an old saying: “Managers are born”, which is regarded as outdated as a new expression has come into existence: “Managers are Made”. Many management scholars admit that management is the oldest of art and the youngest of science.

Question: Explain forecasting with help of an example?

Answer: Forecasting is a technique used to generate predictions from the past and present data for the future. Everyone uses forecasting according to their requirements. Several businesses use it to set a limit for budgets and anticipated expenses to incur in the future. Forecasting acts as a relevant benchmark for businesses, which need a long-term perspective of operations. Furthermore, investors utilize it to check several events surrounding a company; for example, how much sales would this company make? What are the expansion plans of this company? So, forecasting assists the investor in deciding whether they want to stay invested in the company or not.

Example of forecasting

Forecasting is helpful when a manufacturer decides the appropriate time to purchase raw material for the production team. The manufacturer has two choices in this situation: he can buy the raw material and store it, or buy the raw material when there is an actual requirement of it.

Forecasting has two approaches:

Qualitative Models: These models are for short-term predictions, where the scope of the forecast has a limit. This approach requires precision as it is based on the market with an informed consensus, so it is developed by experts. It assists in generating predictive results for the short-term of companies, products, and services. The main setback of this approach is its reliance on opinion over measurable data.

Qualitative models include:

1. Market Research
2. Delphi Method

Quantitative Models: These models do not include expert opinions; and are used for long term planning, such as months or years. It is majorly used in predicting variables such as sales, gross domestic product, housing prices, and share price, etc.

Quantitative models include:

1. The Indicator Approach
2. Econometric Modelling
3. Time Series

Question: Time Value of Money with example

The time value of money dictates that money received today has more value than money received in the future due to its potential earning capacity. Furthermore, this concept holds that provided money can earn interest; any amount of money is worth more the sooner it is received. In simpler terms, your yesterday money was more valuable than today, and your today money is more valuable than tomorrow.

Quick Fact: The other name of Time Value of Money is Present Discounted Value.

For example, you have two options with you. The first option is to receive Rs 10,000 now and the other option is to receive Rs 10,000 in two years. A rational mind would go with receiving Rs 10,000 now, because it has more value, and you can earn more interest on it by investing it.

Question: Future Value of Money with example

Future Value of Money is a projection of the value of an asset at a particular date. It is based on an assumed rate of growth. It is relevant for investors and financial planners as they are pertinent stakeholders in the company. They want to know the real value of the asset at a specified date. And then make sound investment decisions based on their anticipated requirements. However, inflation can adversely deteriorate the future value of the asset by eroding its value.

For example, the money accumulated in a savings account with a fixed interest rate enables to calculate the future value accurately. However, money invested in share prices with the volatile rate of return can present greater difficulty.