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Institute of Chartered Financial Analysts of India (ICFAI) University 2007 C.A Chartered Accountant It-Sm Solved - Question Paper

Friday, 29 March 2013 07:05Web

Solved It Nov 2007


Section A : Information Technology

Attempt all questions.

Quest ion 1

(a) Describe briefly the following terms:

( i) Ser ver

( ii) Data Bus

( iii) Dumb terminal

( iv) WORM Disk

( v) Repeaters.

(5 1 = 5 Marks)

(b) Explain each of the following:

( i) Subroutine

( ii) PROM

( iii) Web casting

( iv) Assembler

( v) Data transformation.

(5 1 = 5 Marks)


(a) ( i) Server: A server is a computer system that provides services to other computing

systems called clients over a networ k. Server operates continuously on a

network and waits for service r equest fr om other computers on the networ k. It

provides better access control and can r educe costs by reducing duplication of

har dware/software.

( ii) Data Bus: The data bus is an electrical path that connects the CPU, memory, and

the other hardware devices on the motherboard. In fact, the bus is a group of

par allel wires. The number of wires in the bus affects the speed at which data can

travel between har dware components.

( iii) Dumb Terminal: It consists of I/O devices for data entry and obtaining r esult but

has no processing capability. It cannot process the data at its own level, instead

the data is processed by the central server. These ter minals ar e used in central

processing envir onment.

( iv) WORM Disk: It refer s to Write Once, Read Many optical laser disks, or WORM

disks. Once the data has been written to the medium, they only can be read, not




updated or changed. Companies generally store their proprietar y information in

WORM disk. These are 3 inch diskette of 200 MB capacity onwards.

( v) Repeaters: Repeaters are devices that solve the snag of signal degradation which

results as data is transmitted along the cables. It boosts or amplifies the signals

befor e passing it through to the next section of cable.

(b) ( i) Subroutine: A subroutine is a subset of instr uctions that appear s over and again in

the program or finds application in sever al programs. A great deal of coding effor t

can be saved through judicious use of subr outines to handle tasks which are

encountered r epetitively.

( ii) PROM: Programmable read only memory is a non- volatile memor y which allows

the user to pr ogram the chip with a PROM wr iter. The chip can be programmed

once, there after, it cannot be altered.

( iii) Web Casting: It is a web based technology, which allows user s to passively

receive broadcast information r ather than actively search the web for infor mation. It

allows user s to choose from a menu of sour ces, specifying what kind of information

is needed. Once selected, the information is automatically forwarded to the user

e.g. Internet news services.

( iv) Assembler: It refers to a computer program that translates programs wr itten in

symbolic coding to produce machine language pr ograms.

( v) Data transformation: The data transformation layer r eceives data fr om the data

sources, cleans and standardizes it, and loads it into data r epository.

Quest ion 2

Answer any two of the following:

(a) Describe salient featur es of Hierarchical Database structure.

(b) Explain value added services being offered by a Data Centre.

(c) What is Supply Chain Management? Discuss the potential problems which can be

addressed through supply chain management. (2 5 = 10 Marks)


(a) Salient features of Hierarchical Database:

In a hier archical database, records are logically or ganized into hierarchy of r elationship.

It is arranged in an inverted tree pattern. The following are salient features:

Database structure is less flexible as relationship between records are relatively fixed

by the structur e.

It requires that hier archy of records must be determined and implemented before a


Ad hoc queries ar e difficult and time consuming to accomplish.

Fr equent management quer ies may not be supported as effectively.



Day to day operational data can be processed r apidly.

Any group of r ecords with natural relation may fit nicely.

Records are logically structured in inver ted tr ee pattern.

It provides the par ent child r elationship amongst the nodes.

It implements one-to- one and one-to-many relationship.

(b) The following value added services are offer ed by a data centre.

( i) Data monit oring: This is done via a database agent, which enables the high

availability of the database through comprehensive automated management.

( ii) Web monitoring: It assesses and monitors website per formance, availability,

integrity and responsiveness from a site visitors perspective. It also reports on

HTTP and FTP service status.

( iii) Backup and Restore: It pr ovides centralized integrated management solution for

enter prise data storage using specialized backup agents for data base, oper ating

system, open files and application.

( iv) Int rusion detection syst em: It helps in detecting inappropriate, incorrect or

anomalous activity. It provides automated network based security assessment and

policy compliance evaluation.

( v) Storage on demand: It provides the backend infrastructure so as to give a robust

and cost effective stor age strategy. It pr ovides infrastructure to access information

at any time with secur ity, reliability and availability needed to meet the requirements

of a company.

(c) Supply Chain Management (SCM): Supply Chain Management (SCM) is the process of

planning, implementing and controlling the operations of the supply chain with the

purpose to satisfy customer requirements as efficiently as possible. It spans all

movement and storage of r aw materials, work-in-pr ocess inventor y, and finished goods

from point-of-origin to point- of-consumption.

A SCM must address the following problems:

( i) Distribution Network Configuration: Number and location of suppliers,

production facilities, distr ibution centres, war ehouse and customers.

( ii) Distribution Strategy: Centralised versus decentr alized, dir ect shipment, cross

docking, pull or push strategies, third party logistics.

( iii) Inf ormation: Integr ate systems and processes through the supply chain to share

valuable information including demand signals, forecasts, inventory and


( iv) Inventory Management: Quantity and location of inventor y including r aw

materials, work- in-process and finished goods.




Quest ion 3

(a) Explain the var ious components of a Decision Support System.

(b) Describe the factor s which have contributed to the growth of Local Ar ea Networ k.

(4 + 6 = 10 Marks)


(a) Components of a DSS: A decision support system has four basic components: (i) The

users, (ii) Database, (iii) Planning language, and (iv) Model base.

( i) The users: The user of a Decision Support System (DSS) is usually a manager

with an unstructur ed or semi-structured pr oblem to solve. In fact, user does not

require a computer background to use a DSS for problem solving. He must have

thorough understanding of the problem and the factors to be considered in finding a


( ii) Database: DSS includes one or more databases. These databases contain both

routine and non-routine data from both inter nal and external sources. The data fr om

external sources include data about economic condition, market demand for goods

and ser vices and industry competition, whereas inter nal data includes data fr om the

financial and managerial accounting system, marketing, production and personnel


( iii) Planning language: Two types of planning languages are commonly used in DSS.

(a) General Purpose: These languages allow user to perform many r outine tasks

viz., retrieving var ious data from a database or perfor ming statistical analysis,

budgeting, forecasting and worksheet or iented problem. The languages used

in most of the spread sheets are the good examples.

(b) Special purpose: Special purpose planning languages are statistical

languages viz., SAS, SPSS and Mini Tab. These languages perform statistical

and mathematical operations.

( iv) Model Base: The model base is the brain of the decision support system because

it performs data manipulation and computations with the data provided to it by the

user and database. Model base is custom developed model that does some types

of mathematical functions viz., cross-tabulation, regression analysis, time series

analysis, linear programming and financial computation. The analysis provided by

the routines in the model base is the key to supporting the users decision.

(b) Growt h of LAN

The following factors have contr ibuted to the gr owth of LAN.

( i) Security: Security for programs and data can be achieved using servers that are

locked through both software and physical means such as diskless nodes.



( ii) Expanded PC Usage: Once a LAN has been set up, it actually costs less to

automate all processes as existing PCs can be easily converted into nodes by

adding networ k interface card.

( iii) Distributed Processing: LAN with inter- user communication and information

exchange helps to develop distributed processing system.

( iv) Elect ronic mail and Message Broadcasting: E-mail allows users to communicate

more easily among themselves through a mail-box on the server.

( v) Organisational Benefit: The information flow becomes a lot smoother with various

departments, having the ability to access or request for information and data

per tinent to them. Besides these, it leads to r eduction in costs of Hardware,

Software, and also in time, and cost of training on manpower to use the system.

( vi) Data Management Benefit: Since data is located centrally on the server , it

becomes much easy to manage it, as well as back it up.

( vii) Software cost and upgradation: Network version software cost is less compared

to single ver sion software. Software upgrade is easy as package is stored centrally

on the server .

Quest ion 4

An electr ic supply company charges the following r ates from its consumers:

No. of unit consumed


( Rs.)

For the first 200 units


For the next 300 units


Over 500 units


Computer database of the company has the following infor mation:

- Consumer Name

- Address

- Unit consumed

- Bill date

- Payment date

If the consumer pays his bill within 15 days fr om the bill date, 10% discount is given. If he

makes the payment after 15 days from the bill date, 5% surchar ge is levied. Draw a Flow

Chart to calculate the net amount of the bill for each consumer and pr int it. (10 Marks)





The required flowchart is given below:







AMT= (UNITS-5 00)*5.00 +

UNITS>5 00

300*3.50+2 00*2 .50




AMT= (UNITS-3 00)*3.50 +

UNITS>3 00

20 0*2.50







P DAYS 1 5


S UR=0


S UR= 0.5

DIS C= 0









Quest ion 5

Write short notes on the following:

(i) TCP/IP

(ii) Intranet.

(2 5 = 10 Marks)


(i) TCP/IP: The pr otocols used on the Internet are called TCP/IP ( Tr ansmission Control

Protocol/Internet Protocol). A TCP/IP protocol has two par ts which cr eate packet

switching network:

( a) TCP deals with exchange of sequential data.

( b) IP handles packet forwarding as is used on the Internet.

TCP/IP has following four layers.

(i) The Application Layer, which provides service directly to the user.

(ii) The Transport Layer, which provides end-to end communication between

applications and ver ifies correct packet arrival.

(iii) The Internet Layer , which pr ovides packet routing for error checking,

addressing and integrity.

(iv) The Network Interface Layer , which pr ovides an interface to the network

hardwar e and device driver s. This can also be called the data link layer.

Some reference books also include a fifth layer namely Physical Layer as part of TCP /

IP which transmits the data from one system to another system in the form of 0s and 1s .

The TCP pr otocol breaks file or message in small packets. Each packet is then given a

header, which contains the destination address. The packets are then sent over the

Inter net. The IP protocol guides the packets so that they ar rive at the destination. Once

there, the TCP protocol resembles the packets into the original message.

(ii) Intranet: The Intr anet is a type of information system that facilitates communication

within the organization, among widely dispersed depar tments, diversions and regional

locations. Intr anets connect people together with Inter net technology using the Web

Browsers, Web Servers and Data warehouses in a single view. With an Intr anet, access

to all infor mation, applications and data can be made available through the same

browser. The objective is to organize each individuals desktop with minimal cost, time

and effort to be more productive, cost- efficient, timely and competitive.

Some of the key benefits of using Intr anet are:

Reduced administrative costs printing, paper , software distribution, mailing, order

processing, telephone.

Easier, faster access to information.

Easier, faster access to remote locations.




Latest, up- to-date research base.

Easier access to customers and partner s.

Collaborative, group working.

SECTIONB : Strat egic Management

Attempt all questions

Quest ion 6

State with r easons which of the following statements is correct/incorrect (attempt any three):

(a) Environmental constituents exist in isolation and do not interact with each other.

(b) Tele-shopping is an instance of direct marketing

(c) A cor e-competence is a unique opportunity of an organisation not shared by other.

(d) Acquisition is a strategy.

(e) Str ategy follows structure.

(3 2 = 6 Mar ks)


(a) INCORRECT: Environmental constituents such as economic, legal, society, technology

and other macro and micro elements are interwoven through complex and haphazard

linkages. These constituents comprise of multitude of forces that are inter -r elated and

inter-dependent. They are termed as environment as they ar e outside the main peripher y

of business but may affect its functioning directly or indirectly.

(b) CORRECT: Direct marketing is done through various advertising media that inter act

directly with customer. Teleshopping is a form of direct marketing which oper ates without

conventional intermediaries and employs television and other IT devices for reaching the

customer. The communication between the marketer and the customer is direct through

third par ty inter faces such as telecom or postal systems.

(c) INCORRECT: Core competencies are unique strengths r ather than opportunities of an

organisation. They are resour ces and capabilities that serve as a sour ce of competitive

advantage over rivals. In comparison with competitors an organisation is in better

position to leverage and take advantage of the core competencies.

(d) CORRECT: An acquisition is a strategy through which one fir m buys a controlling or

complete inter est in another firm. Acquisition of an existing concern is an instant means

of achieving growth through expansion and/or diver sification. Ideally, acquisition strategy

should be used when the acquir ing firm is able to enhance its economic value through

ownership and the use of the assets that are acquired.

(e) INCORRECT: Structures ar e designed to facilitate the str ategic pur suit of a firm and,

therefore, follows strategy. Without a strategy or reasons for being, it will be difficult to

design an effective structure. Str ategic developments may r equire allocation of resources



and there may be a need for adapting the or ganizations structur e to handle new

activities as well as training personnel and devising appropriate systems.

Quest ion 7

Briefly answer any two of the following:

(a) Define T.Q.M.

(b) What is meant by Concentric diversification?

(c) Explain the term star in the context of BCG matrix. (2 2 = 4 Mar ks)


(a) Total Quality Management : TQM or Total Quality Management is a people-focused

management system that aims at continual incr ease in customer satisfaction at

continually lower r eal cost. There is a sustained management commitment to quality and

everyone in the organisation and the supply chain is r esponsible for pr eventing r ather

than detecting defects.

TQM is a total system approach (not a separate area or program) and an integral part of

high- level str ategy. It works horizontally acr oss functions and departments, involves all

employees, top to bottom, and extends backwar d and forward to include the supply chain

and the customer chain. TQM stresses learning and adaptation to continual change as

keys to organizational success.

(b) Concentric diversificat ion: Concentric diversification amounts to related diversification.

In this form of diversification, the new business is linked to the existing businesses

thr ough existing systems such as pr ocess, technology or marketing. The new product is

a spin-off from the existing facilities and products/processes. Ther e are benefits of

syner gy with the current operations. However, concentr ic diversification differs fr om

ver tically integrated diver sification in the nature of the linkage the new pr oduct has with

the existing ones.

While in vertically integrated diversification, the new product falls within the fir m's current

process-product chain, in concentric diver sification, there is a departure from this vertical

linkage. The new product is only connected in a loop-like manner at one or mor e points in

the fir m's existing process/technology/product chain. In concentr ic diversification there

are benefits of synergy with the current operations.

(c) Star in BCG Mat rix: BCG growth-shar e matr ix is a simple way to portray an

organisations por tfolio of investments. Growth share matrix also known for its cow and

dog metaphors is popularly used for resour ce allocation in a diver sified company. The

matrix is based on combinations of relative market share of the pr oducts or SBUs and

their market growth rate.

Stars, a position in the matrix, ar e char acterised by high mar ket share and high growth

r ate. They are products or SBUs that are gr owing rapidly. They also need heavy

investment to maintain their position and finance their rapid growth potential. Business

organisations that enjoy star positions have best opportunities for expansion and gr owth.




Quest ion 8

What is Strategic Management? What benefits accrue by following a strategic approach to


(5 + 5 = 10 Mar ks)


In a highly competitive mar ketplace, companies can operate successfully by creating and

delivering superior value to target customers and als o learning how to adapt to a continuously

changing business environment. So to meet changing conditions in their industries, companies

need to be farsighted and visionary, and must have a system of managing strategically.

Strategic management starts with developing a company mission (to give it direction),

objectives and goals (to give it means and methods for accomplishing its mission), business

por tfolio (to allow management to utilise all facets of the organisation), and functional plans

(plans to car ry out daily operations from the differ ent functional disciplines).

The overall objective of strategic management is two fold:

To create competitive advantage, so that the company can outper form the competitor s in

order to have dominance over the market.

To guide the company successfully through all changes in the environment.

The following are the benefits of strategic approach to managing:

Str ategic management helps organisations to be mor e proactive instead of r eactive in

shaping its futur e. Or ganisations are able to analyse and take actions instead of being

mer e spectator s. Thereby they are able to control there own destiny in a better manner. It

helps them in working within vagar ies of environment and shaping it, instead of getting

car ried away by its turbulence or uncertainties.

Str ategic management provides framework for all the major business decisions of an

enterpr ise such as decisions on businesses, pr oducts, mar kets, manufacturing facilities,

investments and organisational structure. It pr ovides better guidance to entire

organisation on the crucial point - what it is trying to do.

Str ategic management is concerned with ensuring a good future for the firm. It seeks to

prepare the cor poration to face the future and act as pathfinder to var ious business

oppor tunities. Organisations are able to identify the available oppor tunities and identify

ways and means as how to reach them.

Str ategic management serves as a corpor ate defence mechanism against mistakes and

pitfalls. It help organisations to avoid costly mistakes in pr oduct market choices or

investments. Over a period of time strategic management helps organisation to evolve

certain core competencies and competitive advantages that assist in its fight for

survival and gr owth.

Quest ion 9

What is meant by Functional strategies? In term of level where will you put them? Are

functional str ategies really important for business? (4 +2 + 4 = 10 Mar ks)




Once higher level cor porate and business strategies are developed, management need to

formulate and implement str ategies for each functional area. For effective implementation,

str ategists have to provide direction to functional managers r egar ding the plans and policies to

be adopted. In fact, the effectiveness of strategic management depends cr itically on the

manner in which strategies are implemented. Strategy of one functional area can not be

looked at in isolation, because it is the extent to which all the functional tasks are interwoven

that determines the effectiveness of the major strategy.

Functional area strategy such as marketing, financial, pr oduction and Human Resource are

based on the functional capabilities of an organisation. For each functional area, first the

major sub areas are identified and then for each of these sub functional areas, contents of

functional strategies, important factor s, and their importance in the pr ocess of strategy

implementation is identified.

In terms of the levels of strategy formulation, functional strategies operate below the SBU or

business- level strategies. Within functional strategies there might be sever al sub- functional

areas. Functional strategies, are made within the higher level strategies and guidelines ther ein

that are set at higher levels of an organisation. Functional managers need guidance from the

business strategy in order to make decisions. Oper ational plans tell the functional manager s

what has to be done while policies state how the plans are to be implemented.

Major strategies need to be translated to lower levels to give holistic strategic dir ection to an

organisation. Functional strategies provide details to business strategy & gover n as to how

key activities of the business will be managed. Functional strategies play two important roles.

Firstly, they provide suppor t to the overall business str ategy. Secondly, they spell out as to

how functional managers will work so as to ensure better performance in their respective

functional areas. The r easons why functional strategies are really important and needed for

business can be enumer ated as follows:

The development of functional strategies is aimed at making the str ategies-formulated at

the top management level-practically feasible at the functional level.

Functional strategies facilitate flow of strategic decisions to the differ ent parts of an


They act as basis for controlling activities in the different functional areas of business.

The time spent by functional managers in decision- making is reduced as plans lay down

clearly what is to be done and policies provide the discretionary framework within which

decisions need to be taken.

Functional strategies help in br inging harmony and coordination as they remain par t

of major str ategies.

Similar situations occurr ing in different functional ar eas are handled in a consistent

manner by the functional managers.




Quest ion 10

Read the following case and answer the questions at the end:

Dr . Sukumar inherited his fathers Deys Lab in Delhi in 1995. Till 2002, he owned 4 labs in

the National Capital Region (NCR) . His ambition was to turn it into a National chain. The

number increased to 7 in 2003 across the countr y, including the acquisition of Platinum lab in

Mumbai. The number is likely to go to 50 within 2- 3 years from 21 at present. Infusion of Rs.

28 cror es for a 26% stake by Phar ma Capital has its growth str ategy.

The lab with a r evenue of Rs. 75 crores is among top three Pathological labs in India with

Atlantic (Rs. 77 cror es) and Pacific (Rs. 55 crores) . Yet its market share is only 2% of Rs.

3,500 crores market. The top 3 firms command only 6% as against 40- 45% by their

counter parts in the USA.

There ar e about 20,000 to 1,00,000 stand alone labs engaged in routine pathological business

in India, with no system of mandatory licensing and registr ation. That is why Dr. Sukumar has

not gone for acquisition or joint ventur es. He does not find many existing laboratories meeting

quality standards. His six labs have been accredited nationally wher eon many large hospitals

have not thought of accr editation; The College of Amer ican pathologists accreditation of Deys

lab would help it to reach clients outside India.

In Deys Lab, the bio-chemistry and blood testing equipments ar e sanitised every day. The

bar coding and automated registr ation of patients do not allow any identity mix- ups. Even

routine tests are conducted with highly sophisticated systems. Technical expertise enables

them to carry out 1650 variety of tests. Same day reports are available for samples reaching

by 3 p.m. and by 7 a.m. next day for samples from 500 collection centres located acr oss the

country. Their technicians work round the clock, unlike competitors. Home ser vices for

collection and reporting is also available.

There is a huge unutilised capacity. Now it is trying to top other segments. 20% of its total

business comes through its main labor atory which acts as a r eference lab for many leading

hospitals. New mega labs are being built to encash preclinical and multi-centre clinical trials

within India and pr ovide postgr aduate training to the pathologists.


(i) What do you understand by the term Vision? What is the difference between Vision and

Mission? What vision Dr. Sukumar had at the time of inheritance of Deys Lab? Has it

been achieved?

( 2 + 2 + 2 + 2 = 8 Marks)

(ii) For gr owth what business strategy has been adopted by Dr. Sukumar? (2 Marks)

(iii) What is the marketing strategy of Dr. Sukumar to overtake its competitors? ( 6 Mar ks)

(iv) In your opinion what could be the biggest weakness in Dr. Sukumars business strategy?

( 4 Mar ks)



Answer 10

(i) A Strategic vision is a road map of a companys future providing specifics about

technology and customer focus, the geographic and pr oduct markets to be pursued, the

capabilities it plans to develop, and the kind of company that management is tr ying to

create. A strategic vision thus points an organisation in a particular direction, charts a

strategic path for it to follow in preparing for the future, and moulds organisational


A companys Mission statement is typically focused on its present business scope who

we are and what we do. Mission statements broadly describe an organisations present

capabilities, customer focus, activities, and business makeup. Mission is also an

expression of the vision of the corporation. To make the vision come alive and become

r elevant, it needs to be spelt out. It is through the mission that the firm spells out its


Dr. Sukumars vision at the initial stage was to turn his one pathological laboratory firm

into a national chain of pathological laboratories.

He is in the process of achieving the vision as a number of Labs have been opened and

others are in pipeline. However, at the same time the market share is low when

compared with the external benchmark from US market.

(ii) To a large extent Dr. Deys Lab has opted the business str ategy of internal growth r ather

than going in for acquisitions or joint ventur es. The r eason for such a strategy is that Dr .

Sukumar does not find many existing laboratories meeting the quality standards. To fund

its growth and raise funds it has also given a 26% stake to Pharma Capital.

(iii) Dr. Sukumars marketing strategy is superior to its competitor s. Over a per iod of time it

is able to evolve itself as reference lab for many leading hospitals. This is a testimony of

the level of confidence it enjoys among the medical professionals. It provides a high level

of customer services because of the following:

Product mix: It possesses technical expertise to conduct 1650 var iety of tests.

Quality: The labor atories use modern methods to conduct tests. Even routine tests

are conducted with highly sophisticated procedur es. Technology such as bar coding

and automated registration of patients is also used. Thus there are no mistakes in

the identity of samples. There is also daily sanitisation and validation of lab


Speed: Laboratories are working r ound-the- clock. Further, using modern systems

the company is able to deliver test results faster.

Convenience: There are 500 collection centres for the labor atory, thereby the

reach is more. Additionally, system of collection of samples from home also pr ovide

convenience to the patients and others.

(iv) A weakness is an inherent limitation or constraint of the organisation which creates

strategic disadvantage to it. In the case it is given that Dr Sukumar has not gone for




mer gers and acquisition as he does not find many prospective laborator ies meeting the

quality standar ds. Thus its biggest weakness is its inability to capitalise the oppor tunities

thr ough mergers and acquisitions. Acquisitions and par tnerships can help in leveraging

the existing goodwill.

Many of these labs must be enjoying a lot of goodwill in their r egion. In fact, a business in

the medical field such as a pathological laboratory, tr ust and faith ar e im portant. On

account of its size and available resources Deys Lab could have easily acquired some of

these labs and built upon their names. With resour ces it should be feasible to modernise

them to make them compatible with the business ideology and quality systems of the

Deys Lab. However , it appears that the company lacked capability to modernise an

existing laboratory.

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