1-Makes the organisation goal oriented.

2. Creates a motivated workforce.

3. Ensures conformity and facilitates Controlling and Coordination.

4. Initiates action.

5. It create adaptability.

6. Ensure employ discipline.

Improves Understanding: 1. Direction for Training of Managers. 2. Role of Management. 3. Guide to Research in Management. 4. Improves Understanding: From the knowledge of principles, managers gets an indication of how to manage an organization. The principles enable managers to decide what should be done to accomplish given tasks and to handle situations which may arise in management. These principles make managers more efficient. Direction for Training of Managers - Principles of management provides an understanding of management process what managers would do to accomplish what. Thus, these are helpful in identifying the areas of management in which existing & future managers should be trained. 5. Role of Management: Management principles makes the role of managers concrete. Therefore these principles act as a ready reference to the managers to check whether their decisions are appropriate. Besides these principles define managerial activities in practical terms. They tell what a manager is expected to do in the specific situation. 6. Guide to Research in Management: The body of management principles indicate lines along which research should be undertaken to make management practical and more effective. The principles guide managers in decision making and action. The researchers can examine whether the guidelines are useful or not.

Cost in this context refers to the cost of obtaining capital. In the case of debt, the cost is interest whereas in the case of equity share capital, it is the share in the profits of the company. Suppose, a company has a profit of Rs 6,00,000 and Equity capital of Rs 50,00,000, requires funds has to choose between taking a debt of Rs 10,00,000 carrying interest at 10% or giving out a equity stake of 20%. If the debt option is chosen, the cost of the debt will be 10% of Rs 10,00,000 which is 1,00,000 and that leaves Rs 5,00,000 to the equity shareholder. If the equity financing choice is opted then new shareholder will get 20% of the profits which is Rs1,20,000 which is clearly higher than the cost of the debt. Additionally, interest on debt is a tax deductible expense, whereas, dividend paid to shareholders is charged under corporate tax. A company cannot work only with debt because of the risk that a company may fail to generate enough cash flows to pay interest and repay debt.