Raju

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 5 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Term 2 Set 5 with Solutions

Time allowed: 2 Hours
Maximum Marks: 40

General Instructions:

• This is a Subjective Question Paper containing 12 questions.
• This paper contains 4 questions of 2 marks each, 4 questions of 3 marks each and 4 questions of 5 marks each.
• 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
• 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
• This question paper contains Case/Source Based Questions.

Question 1.
State the steps in selection procedure, after the employment interview but before the medical examination. (2)
Answer:
The steps in selection procedure, involved after the employment interview but before the medical examination are as follows:

(1) Reference and Background Checks: Many employers request names, addresses, and telephone numbers of references for the purpose of verifying information and, gaining additional information on an applicant. Previous employers, known persons, teachers and university professors can act as references.

(2) Selection Decision: The final decision has to be made from among the candidates who pass the tests, interviews and reference checks. The views of the concerned manager will be generally considered in the final selection because it is he/she who is responsible for the performance of the new employee.

Question 2.
Training is considered as an important part of the staffing process. Explain. (2)
Answer:
Training is an attempt to improve the current or future employee performance by increasing an employee’s ability to perform through learning, usually by changing the employee’s attitude or increasing his or her skills and knowledge.

Question 3.
You are a management guru. You have been asked by a business firm to make its managers understand the importance of controlling. Give any two arguments. (2)
Answer:
Controlling is an indispensable function of management. Without control, the best of plans may go awry. The importance of controlling is as follows. (any two)

(1) Accomplishing organisational goals: The controlling function measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action. It, thus, guides the organisation and keeps it on the right track so that organisational goals might be achieved.

(2) Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate and objective. A good control system keeps a careful check on the changes taking place in the organisation and in the environment and helps to review and revise the standards in light of such changes.

(3) Making efficient use of resources: By exercising control, a manager seeks to reduce wastage and spoilage of resources.

(4) Improving employee motivation: A good control system ensures that employees
know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be appraised. It, thus, motivates them and helps them to give better performance.

Question 4.
Mr. Rohit is into transport business. His buses are hired by schools for transportation of students. He is willing to expand and diversify his business to inter-state transportation purposes. State any two factors that will affect his fixed capital requirements. (2)
Answer:
The factors affecting fixed capital requirements are: (any two)

• Scale of operations
• Financing alternatives
• Growth prospects
• Nature of Business
• Diversification
• Level of Collaboration
• Technology Upgradation
• Financing Alternatives

Question 5.
What is the meaning of Directing? State any two points of importance of Directing as a function of management.
OR
The workers of‘Glory Ltd.’ are unable to work on new computerised machines imported by the company to fulfill the increased demand. Therefore, the workers are seeking extra guidance from the supervisor and the supervisor is overburdened with the frequent calls of workers.
Suggest how the supervisor, by increasing the skills and knowledge of workers, can make them handle their work independently. Also state any two benefits that the workers will derive by the decision of the supervisor. (3)
Answer:
The process of acquiring human resources and physical assets and placing them under suitable roles and responsibilities should be directed towards achieving organisational goals. Directing or direction is the essence of all operations in an organisation that involves leading human and physical resources together through motivation, collaboration, coordination and delegation.

The points of importance of directing as a function of management are: (any two)
(1) Initiates action: Direction initiates action based on the preconditions set under planning, organising and staffing. This implies that managers stimulate actions by supervising, motivating and leading their subordinates in the right way. Direction activates employees to work for achieving organisational goals.

(2) Integrates employees’ efforts: The work and activities of employees across all levels are interrelated and direction attempts to integrate all individual efforts. Individual efforts are integrated through coordination between plans, resources and human efforts and through guidance, supervision and counselling.

(3) Means of motivation: Organisational goals can be achieved by motivated employees who work willingly and perform to their best of their abilities. Directing helps in motivating employees to contribute their maximum efforts towards achieving organisational goals.

(4) Facilitates changes: Direction enables an organisation to adapt to changing conditions through better leadership and communication.
OR
The supervisor can provide ‘technical training’ to the workers regarding the use of machines. With increased and improved knowledge, the workers will be able to work independently.
The benefits that the workers will derive by the decision of the supervisor are as follows:

• Career growth: Training helps employees to improve their skills and knowledge.
• Increased earnings: Training helps to improve the performance and productivity of workers and with improved performance workers can earn higher wages and incentives.

Question 6.
How are the terms “motive”, “motivation” or “motivator” related to each other. (3)
Answer:
The term ‘motive’ means a need or desire that causes a person to work, while motivation is the condition of being motivated by a motivator and ‘motivator’ gives a person the reasons to work. In other words we can say that “motivation is the process by which a motivator gives a motive to other person to work hard.

Question 7.
“The overall objective of SEBI is to protect the interest of investors and to promote the development of, and regulate the securities market.” In light of the given statement, state any three objectives of SEBI. (3)
Answer:
The objectives of SEBI are: (any three)

• To regulate stock exchanges and the securities industry to promote their orderly functioning.
• To protect the rights and interests of investors, particularly individual investors and to guide and educate them.
• To prevent trading malpractices and achieve a balance between self-regulation by the securities industry and its statutory regulation.
• To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers etc., with a view to making them competitive and professional

Question 8.
“Comparing the actual performance with laid standard, finding out deviations and taking corrective action is an important process of a function of management.” Name and explain the process. (3)
Answer:
The name of this function of management is “controlling”. The steps involved in the controlling process are as following:

(1) Step 1: Setting performance standards: The first step in the controlling process is setting up performance standards. Standards serve as benchmark towards which an organisation strives to work.

(2) Step 2: Measurement of actual performance: Once performance standards are set, the next step is measurement of actual performance. Performance should be measured in an objective and reliable manner.

(3) Step 3: Comparing actual performance with standards: This step involves comparison of actual performance with the standards. Such comparison wilL reveal the deviation between actual and desired results.

(4) Step 4: Analysing deviations: Some deviation in performance can be expected in all activities. It is, therefore, important to determine the acceptable range of deviations.

(5) Step 5: Taking corrective action: The final step in controlling process is taking corrective action. No corrective action is required when the deviation are within acceptable limits.

Question 9.
‘In an interview with a leading news channel, Mr. Rakesh Kwatra, CEO of ‘Get My Job’ has suggested that the companies which want more and more people to apply for jobs in their organisation should make the process for applying for jobs easier and candidate friendly.’
Name and explain the next two steps which follow the step, in the process of the function of management being discussed above. (5)
OR
Horizon Shoes Ltd. has received on order for manufacturing and supply of 5,000 pairs of shoes. The supply was to be completed within 90 days. The production manager made all the production schedules accordingly. After 60 days, he assessed that the production was not running according to schedule and the completion of the order may be delayed by a substantial period. He decided to reassess the situation and completed the order within the schedule time. Identify the function of management discussed here and discuss two steps taken by the production manager. (5)
Answer:
Selection is the step in the process of staff ing discussed here. Selection is the process of choosing from among the pool of the prospective job condidates developed at the stage of recruitment. Even in case of highly specialised jobs where the choice space is very narrow, the regour of the selection process serves two important purposes:

(1) It ensures that the organisation gets the best among the available;

(2) It enhances the self-esteem and prestige of those selected and conveys to them the seriousness with which the things are done in the organisation. The rigour involves a host of tests and interviews. Those who are able to successfully negotiate the test and the inverviews are offered an employment contract, a written document containing the offer of employment, the terms and conditions and the date of joining.

The next two steps following the step of selection in the process of staffing are as follows:
(i) Orientation: Joining a job marks the beginning of socialisation of the employee at the work place. Orientation is introducing the selected employee to other employees and familiarising him with the rules and policies of the organisation.

Placement: Placement refers to the employee occupying the position or post for which the person has been selected.
OR
The function of management which enable the management to assess whether the set standards are followed is called controlling. Controlling means ensuring that activities in an organisation are performed as per the plans. Thus, it is a goal oriented function.
The two steps of controlling process taken by production manager in this case are:

(i) Analysing deviations: It is important for a manager to determine the acceptable range of deviations. If the deviations are significant, critical point control and management by exception should be used by the manager. In this case, the delay in completion of order by substantial period is a matter of concern.

(ii) Taking corrective action: The final step in controlling process is taking corrective action. No corrective action is required when the deviations are within acceptable limits. In this case, the delay is expected to be substantial period. The production manager take corrective action which might involve additional workers and equipment to the project and overtime work.

Question 10.
Name and define the activity which essentially involves preparation of financial blue print of an enterprise’s future operations. Also state any two reasons why this activity is important?
Answer:
Financial planning is the blue print of an enterprise’s future operations. It can be defined as the process and function of estimating capital requirements of a business, determining the forms and proportion of sources or capital for use and formulating policies for administration of funds. Financial planning is important because of following reasons:

• Adequate funds: Financial planning aims to plan adequate and sufficient funds to carry out daily business operations that cater to short-term, medium-term and long-term goals.
• Minimum cost of capital: Financial planning involves determining an appropriate mix of equity and debt, which makes capital available at minimum cost.

Question 11.
The issue of equity shares involves huge floatation cost To meet the expenses of floatation companies may decide to tap the money market
(A) Name and explain the money-market instrument the companies can use for the above purpose.
(B) What is the duration for which the companies can get funds through this instrument?
(C) State any other purpose for which this instrument can be used. (5)
Answer:
(A) Commercial Papers can be used for Bridge financing by the company as they are issued by large and credit worthy companies. Bridge financing is the funds raised to meet the floatation costs. The instrument is in the form of an unsecured promissory note and is freely transferable by endorsement It is sold at discount and redeemed at par.
(B) Its maturity period may range from a fortnight to a year.
(C) It is also used to meet the short-term seasonal and working capital requirements of a business enterprise.

Question 12.
State any 5 responsibilities that a consumer should discharge while purchasing, using and consuming goods and services.
OR
How does cost of debt and cost of equity affect the capital structure of an organisation? (5)
Answer:
A consumer should keep in mind the following responsibilities while purchasing, using and consuming goods and services.

(1) Be aware about various goods and services available in the market so that an intelligent and wise choice can be made.

(2) Buy only standardised goods as they provide quality assurance. Thus, look for ISI mark on electrical goods, FPO mark on food products, Hallmark on jewelry etc.

(3) Learn about the risks associated with products and services, follow manufacturer’s instructions and use the products safely.

(4) Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.

(5) Assert yourself to ensure that you get a fair deal

(6) Be honest in your dealings. Choose only from legal goods and services and discourage unscrupulous practices like black-marketing, hoarding etc.

(7) Ask for a cash memo on purchase of goods or services. This would serve as a proof of the purchase made.

(8) File a complaint in an appropriate consumer forum in case of a shortcoming in the quality of goods purchased or services availed. Do not fail to take an action even when the amount involved is small

(9) Form consumer societies which would play an active part in educating consumers and safeguarding their interests.

(10) Respect the environment. Avoid waste, littering and contributing to pollution, (any five)
OR
Cost of debt: A firm’s ability to borrow at a lower rate increases its capacity to employ higher debt. Thus, more debt can be used if debt can be raised at a lower rate.

Cost of Equity: Stock owners expect a rate of return from the equity which is commensurate with the risk they are assuming. When a company increases debt, the financial risk faced by the equity holders, increases. Consequently, their desired rate of return may increase. It is for this reason that a company cannot use debt beyond a point.

If debt is used beyond that point cost of equity may go up sharply and share price may decrease inspite of increased EPS. Consequently, for maximisation of shareholders’ wealth, debt can be used only upto a level.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 4 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Term 2 Set 4 with Solutions

Time allowed: 2 Hours
Maximum Marks: 40

General Instructions:

• This is a Subjective Question Paper containing 12 questions.
• This paper contains 4 questions of 2 marks each, 4 questions of 3 marks each and 4 questions of 5 marks each.
• 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
• 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
• This question paper contains Case/Source Based Questions.

Question 1.
Why employees become lethargic when the organisation uses internal source of recruitment? Also state one other limitation of internal source of recruitment. (2)
Answer:
The employees may become lethargic if they are sure of timebound promotions.
The limitations of using internal sources of recruitment are as follows: (any one)

• When vacancies are filled through internal promotions, the scope for induction of fresh talent is reduced. Hence, complete reliance on internal recruitment involves danger of ‘inbreeding’ by stopping the infusion of new blood’ into the organisation.
• A new enterprise cannot use internal sources of recruitment No organisation can fill all its vacancies from internal sources.
• The spirit of competition among the employees may be hampered; and
• Frequent transfers of employees may often reduce the productivity of the organisation.

Question 2.
External sources of recruitment are better than internal sources of recruitment. Give any two reasons in support of this answer. (2)
Answer:
The reasons of external sources of recruitment being better than internal sources of recruitment are: (any two)

(1) Qualified Personnel: By using external sources of recruitment, the management can attract qualified and trained people to apply for vacant jobs in the organisation.

(2) Wider Choice: When vacancies are advertised widely, a large number of applicants from outside the organisation apply. The management has a wider choice while selecting the people for employment

(3) Competitive Spirit: If a company taps external sources, the extisting staff will have to compete with the outsiders. They will work harder to show better performance.

Question 3.
“If anything goes wrong with the performance of key activities, the entire organisation suffers. Therefore, the organisation should focus on them.” Explain the statement. (2)
Answer:
The given statement refers to the importance of ‘Critical point control’ in order to ensure effective performance of key activities.

It may not be either easy nor economical to monitor each and every activity in the organisation. Therefore, every organisation identifies and states its specific Key Result Areas (KRAs) or critical points which require tight control and are likely to have a significant effect on the working of the business.

Any deviations on these points are attended to urgently by the management. For example, if in an organisation, the expenditure on stationery goes up by 10%, it can be ignored but if the production cost goes up by 5%, it may call for managerial action.

Question 4.
‘Cost of equity’ affect the choice of capital structure of a company. Explain. (2)
Answer:
Stock owners expect a rate of return from the equity which is commensurate with the risk they are assuming. When a company increases debt, the financial risk faced by the equity holders, increases. Consequently, their desired rate of return may increase.

It is for this reason that a company can not use debt beyond a point. If debt is used beyond that point, cost of equity may go up sharply and share price may decrease inspite of increased EPS. Consequently, for maximisation of shareholders’ wealth, debt can be used only upto a level

Question 5.
“Leadership indicates the ability of an individual to motivate its followers to contribute for achieving organisational objectives.” Discuss. (3)
Answer:
Leadership is the process of influencing the behaviour of people by making them strive voluntarily towards achievement of organisational goals. The important features of leadership are as follows:

• Leadership indicates ability of an individual to influence others;
• Leadership tries to bring change in the behaviour of others;
• Leadership indicates interpersonal relations between leaders and followers;
• Leadership is exercised to achieve common goals of the organisation;

Question 6.
“Motivation means incitement or inducement to act or move”. Explain the features of motivation. (3)
Answer:
Motivation is the act or process of giving someone a reason to act towards a desired goal. It is a psychological factor that stimulates people to act in a desired manner. The features of motivation are as follows:

(1) Internal feeling: Motivation is an inner psychological force which compels employees to behave in a particular manner originating from personal needs, recognition, power, sense of recognition, etc.

(2) Goal directed behaviour: Motivation is a process of stimulating and channelising individuals’ energies towards achieving certain goals.

(3) Positive or negative motivation: Motivation, however, can be positive or negative wherein positive includes incentives rewards or bonuses and negative includes punishment, fear, use of force, etc.

(4) Complex process: The process of motivation requires analysing and understanding of human behaviour that can determine factors which lead to desirable working behaviour which can be complex and challenging.

Question 7.
“It is generally believed that measurement of performance should be done after the task is completed.” Identify and explain the step in the process of the function of management being discussed above and the step followed by the same in the process. (3)
Answer:
The step discussed here is the process of controlling function of managment. Measurement of Actual performance: Performance should be measured in an objective and reliable manner. There are several techniques for measurement of performance. Wherever possible measurement of work should be done during the performance.

The step followed in the process is:
Comparing actual performance with standards: This step involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired results. Standards become easier when standards are set in quantitative terms.

Question 8.
“Financial markets play an important role in the allocation of scarce resources in an economy by performing important functions.” In light of the given statement, state any three functions performed by Financial Market.
OR
Apex Ltd. a reputed automobile manufacturer needs ? ten crores as additional capital to expand its business. Atul Sharma, the CEO of the company wanted to raise funds through equity. On the other hand the Finance Manager, Nimi Sahdev said that the public issue may be expensive on account of various mandatory and non-mandatory expenses. Therefore, it was decided to allot the securities to institutional investors.
Name the method through which the company decided to raise additional capital (3)
Answer:
The functions of Financial Market are: (any three)

• Financial markets mobilise savings of households and channelize them into the most productive uses.
• It facilitates price discovery of a financial asset through interaction between supply and demand of funds.
• Financial markets provide liquidity to financial assets, so that they can be easily converted into cash whenever required.
• Financial markets provide valuable information about securities being traded in the market and thereby, help to reduce cost of transaction in terms of time, effort and money.

OR
Private placement is method through which the company decided to raise additional capital. Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue.

Access to the primary market can be expensive on account of various mandatory and nonmandatory expenses. Some companies, therefore, cannot afford a public issue and choose to use private placement.

Question 9.
“Internal sources of recruitment are more economical for an organisation but it has some drawbacks too”. Discuss.
OR
How does recruitment take place through employment exchange and labour contractor. (5)
Answer:
Staffing is putting people to jobs. Staffing is that part of the process of management which is concerned with obtaining, utilising and maintaining a satisfactory and satisfied workforce. Proper staffing ensures the following benefits to the organisation:

• It helps in discovering and obtaining competent personnel for various jobs.
• It makes for higher performance, by putting right person on the right job.
• It ensures the continuous survival and growth of the enterprise through the succession planning for managers.
• It improves job satisfaction and morale of employers through objective assessment and fair rewarding for their contribution.

OR
Employment Exchange: Employment exchanges run by the Government are regarded as a good source of recruitment for unskilled and skilled operative jobs. In some cases, compulsory notification of vacancies to employment exchange is required by law.

Thus, employment exchanges help to match personnel demand and supply by serving as link between job-seekers and employers. Unfortunately, the records of employment exchange are often not up to date and many of the candidates referred by them may not be found suitable.

Labour Contractors: Labour contractors maintain close contacts with labourers and they can provide the required number of unskilled workers at short notice. Workers are recruited through labour contractors who are themselves employees of the organisation.

The disadvantages of this system are that if the contractor himself decides to leave the organisation, all the workers employed through him will follow him.

Question 10.
“Financial planning is an important part of overall planning of any business enterprise.” Explain. (5)
Answer:
Financial planning aims at enabling the company to tackle the uncertainty in respect of the availability and timing of the funds and helps in smooth functioning of an organisation. The importance of financial planning can be explained as follows: (any four)

• It tries to forecast what may happen in future under different business situations. By doing so, it helps the firms to face the eventual situation in a better way. In other words, it makes the firm better prepared to face the future.
• It helps in avoiding business shocks and surprises and helps the company in preparing for the future.
• It helps in coordinating various business functions e.g. sales and production functions, by providing clear policies and procedures.
• Detailed plans of action prepared under financial planning reduce waste, duplication of efforts, and gaps in planning.
• It tries to link the present with the future.
• It provides a link between investment and financing decisions on a continuous process.
• By spelling out detailed objectives for various segments, it makes the evaluation of actual performance easier.

Question 11.
State the differences between Primary market and Secondary Market. (5)
Answer:

Basis	Primary market	Secondary market
(1) Meaning	It means the market where corporate 1 sector, government and public bodies issue securities to raise funds from the public.	It means the market where listed shares, debentures and other secu­rities are traded for investment and speculative purposes.
(2) Also Known as	New issues market.	Stock Exchange
(3) Capital Formation	It promotes capital fomation directly l as funds flow directly from savers to  investors.	It promotes capital formation indi­rectly.
(4) Pricing	Prices are determined and decided by the management of the company.	Prices are determined by demand and supply for the security.
(5) Nature of securities dealt in	New securities are traded.	Already existing securities in market are traded.

Question 12.
State any five responsibilities that a consumer must keep in mind while purchasing gold jewellery.
OR
Elite private Limited deals in the automobiles. It has a share capital of ₹10,00,000 divided into shares of ₹100 each. The company wants to expand its business. For this purpose, it requires additional funds of ₹5,00,000 . The management is considering the following alternatives for raising funds :
Alternative 1: Issue of 5000 Equity shares of ₹ 100 each
Alternative 2: Issue of 10% Debentures of ₹ 5,00,000
The company’s present Earnings Before Interest and Tax ( EBIT) is ₹4,00,000 p.a. Assuming that the rate of Return of Investment remains the same after expansion, which alternative should be used by the company in order to maximise the returns to the equity shareholders. The Tax rate is 50%. Show the working. (5)
Answer:
The responsibilities that a consumer must keep in mind while purchasing gold jewellery are: (any three)
(1) Be aware about various goods(types of jewellery) available in the market so that an intelligent and wise choice can be made.
(2) Buy only standardized jewellery as they provide quality assurance. Thus, look for Hallmark on jewellery.
(3) Learn about risks associated with the product, follow the manufacturer’s instructions.
(4) Read labels carefully so as to have information about prices, net weight, etc.
(5) Assert yourself to ensure a fair deal.
(6) Be honest in your dealings.
OR
Rate of Return of Investment is
4,00,000/10,00,000 x 100 = 40%
EBIT after expansion = 40% x 15,00,000 = 6,00,000

Working:
Alternative I
EBIT — 6,00,000
(-) intrest ——–
= EBT 6.00.000
(-) Tax 3,00,000 (@50%)
= EAT 3,00,000
No. of shares 15000
EPS = EAT/no. of shares
= 3,00,000/15000
= 20

Alternative II
EBIT 6,00,000
(-) interest 50,000
= EBT 550,000
(-) Tax 2,75,000 (@50%)
=EAT 275,000
No.of shares 10000
EPS = EAT/no. of shares
= 2 75,000/10000
= 27.5
In atternative PI, Compnay’s EPS is higher than
Alternative I
Hence, company shouLd use Plan 2 in order to increase the return to the equity shareholders.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 2 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Term 2 Set 2 with Solutions

Time allowed: 2 Hours
Maximum Marks: 40

General Instructions:

• This is a Subjective Question Paper containing 12 questions.
• This paper contains 4 questions of 2 marks each, 4 questions of 3 marks each and 4 questions of 5 marks each.
• 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
• 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
• This question paper contains Case/Source Based Questions.

Question 1.
Name and explain the method of training in which trainees learn on the equipments they will be using. (2)
Answer:
Vestibule training: Employees learn their jobs on the equipment they will be using, but the training is conducted away from the actual work floor. Actual work environments are created in a classroom and employees use the same material, files and equipment. This is usually done when employees are required to handle sophisticated machinery and equipment. Vestibule training can be classified as off-the-job method of training.

Question 2.
“Our assets walk out of the door each evening. We have to make sure that they come back the next morning”. Name and explain any two advantages of the function of management. (2)
Answer:
This statement relates to staffing function of management. Staffing is the process of determining the man’s power needed to meet the company’s objective and recruiting, selecting, training and developing the new and existing staff.
The advantages of staffing are: (Any two)

• Growth of enterprise: By appointing efficient staff, staffing ensures continuous survival and growth of the enterprise.
• Placing right person at the right job: It ensures higher performance by placing right person on the right job by proper recruitment and selection.
• Optimum utilisation of human resources: Through manpower planning and job analysis we can find out the number of employees and type of employees required in the organisation.

Question 3.
Why is it said that controlling is looking back? (2)
Answer:
Controlling is looking back as it is like a post-mortem of past activities to find out deviations from the standards established. Controlling is done with an aim to check the factors responsible for poor performance or deviation in the actual performance, so that such mistakes are not repeated in future and the organisation can achieve its predetermined objectives.

Question 4.
“Money market is essentially a market for short term funds” State any two money market instruments. (2)
Answer:
The money market instruments are: (Any two)
(1) Treasury Bill: Treasury Bill is basically an instrument of short-term borrowing by the Government of India maturing in less than one year.

(2) Commercial Paper: Commercial paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period.

(3) Call money: Call money is short term finance repayable on demand, with a maturity period of one day to fifteen days used for inter bank transactions.

(4) Certificate of Deposit: Certificate of deposit are unsecured, negotiable, short term instruments in bearer form, issued by commercial banks and development financial institutions.

(5) Commercial Bill: Commercial bill is a bill of exchange used to finance the working capital requirements of business firms.

Question 5.
How does directing facilitate introduction of needed changes in the organisation? (3)
Answer:
Directing facilitates introduction of needed changes in the organisation. Generally, people have a tendency to resist changes in the organisation. Effective directing through motivation, communication and leadership helps to reduce such resistance and develop required cooperation in introducing changes in the organisation.

For example, if a manager wants to introduce new system of accounting, there may be initial resistance from accounting staff But, if manager explains the purpose, provides training and motivates with additional rewards, the employees may accept change and cooperate with manager.

Question 6.
“Directing techniques must help every individual in the organisation to contribute to his maximum potential for achievement of organisational objectives.” Explain.
OR
“Training is used to indicate the process by which attitudes, skills and abilities of employees to perform specific jobs are increased.” Explain the benefits of training to employees. (3)
Answer:
This principle emphasises that directing techniques must help every individual in the organisation to contribute to his maximum potential for achievement of organisational objectives. It should bring out untapped energies of employees for the efficiency of organisation.

For example, a good motivation plan with suitable monetary and non-monetary rewards can motivate an employee to contribute his maximum efforts for the organisation as he or she may feel that their efforts will bring them suitable rewards.
OR
The benefits of training activity to the employees are as follows:
(1) Improved skills and knowledge due to training lead to better career of the individual.
(2) Increased performance by the individual help him to earn more.
(3) Training makes the employee more efficient to handle machines. Thus, less prone to accidents.
(4) Training increases the satisfaction and morale of employees.

Question 7.
Why is it said that controlling is a continuous activity? (3)
Answer:
Controlling is a continuous activity. It is a function that brings back the management cycle back to the planning function. The controlling function finds out how far actual performance deviates from standards, analyses the causes of such deviations and attempts to take corrective actions based on the same.

This process helps in formulation of future plans in the light of the problems that were identified and, thus, helps in better planning in the future periods. Thus, controlling only completes one cycle of management process and improves planning in the next cycle.

Question 8.
Dheeraj wants to start a business of selling N-95 masks after the outbreak of the global pandemic of COVID-19. Due to the uncertain market conditions he wants to make a low investment in fixed capital. Suggest how the decisions related to the choice of technique and financing alternatives can help Dheeraj in ensuring a low investment in fixed capital requirements. (3)
Answer:
Choice of Technique: As Dheeraj wishes to stick to a low investment model, we may suggest him to go with the labour-intensive approach to manufacture N-95 masks. Since better technology would cost him much and his risk appetite is not conducive for capital intensive techniques of production.

Financial Alternatives: As Dheeraj wishes to stick to a low investment model, we may suggest him to go with the lease option for fixed assets like building, heavy machinery etc. as this may reduce his investments requirement in the business.

Explanation:
Choice of Technique: Some organisations are capital intensive whereas others are labour intensive. A capital intensive organisation requires higher investment in plant and machinery as it relies less on manual labour. Labour intensive organisations, on the other hand, require less investment in fixed assets. Here, in this case, Deeraj can choose labour intensive option as it will require low investment.

Financing Alternatives: A developed financial market may offer leasing facilities as an alternative to outright purchase. As Dheeraj wants to make low investment in fixed capital he can take fixed asset i.e. land and building and plant and machinery on lease. When an asset is taken on lease, the firm pays lease rentals and uses it. By doing so, it avoids huge sums required to purchase it

Question 9.
Zenith Ltd. is a highly reputed company and many people wanted to join this company. The employees of this organisation are very happy and they discuss how they came in contact with this organisation.

Aman said that he was introduced by the present Sales Manager, Mr. John. Benu said that he had applied through the newspaper and was appointed as the H.R. Manager. Vaibhav said that he was neither related to any employee of the organisation nor was there any advertisement in the newspaper, even then, he was directly called from IIM Ahmedabad from where he was about to complete his MBA.

(A) The above discussion is indicating an important function of management. Name the function of management.
(B) The management function identified in part (A) follows a particular process. Explain the step of this process which is being discussed in the above paragraph.
OR
Prateekis working in a multinational company in Noida. He was running a temperature for the last many days. When his blood was tested, he was found to be positive for malaria. He was admitted in a hospital and a blood transfusion was advised by the doctors as his condition was very serious.

One of his colleagues sent a text message to his superior, Mr. B. Chatterjee. Mr. B. Chatterjee immediately sent a text message to the employees of the organisation requesting them to donate blood for Prateek. When the General Manager came to know about it, he ordered for fumigation in the company premises and cleaning the surroundings. From the above paragraph, quote lines that indicate formal and informal communication. State different types of informal communication. (5)
Answer:
(A) The function of management discussed above is staffing. Staffing is ‘putting people to jobs’. It begins with workforce planning and includes different other function like recruitment, selection, training, development, promotion, compensation and performance appraisal of work force. In other words, staffing is that part of the process of management which is concerned with obtaining, utilising and maintaining a satisfactory and satisfied work force.

(B) The step of this process which is being discussed in the above paragraph is recruitment. Recruitment refers to the process of finding possible candidates for a job or a function. It has been defined as ‘the process of searching for prospective employees and stimulating them to apply for jobs in an organisation.’ Advertising is commonly part of the recruitment process, and can occur through several means, through newspapers, using newspaper dedicated to job advertisement, through professional publication, using advertisements placed in windows, through a job center, through campus interviews, etc.
OR
Formal communication: Formal communication flows through official channels designed in the organisation chart. This communication may take place between a superior and subordinate, a subordinate and superior or among same cadre employees or managers
“When the general manger came to know about it, he ordered for fumigation in the company premises and cleaning surroundings.”

Informal communication: Communication that takes place without following the formal lines of communication is said to be informal communication. “One of his colleagues sent a text message to his superior, Mr. B. Chatterjee. Mr. B. Chatterjee immediately sent a text message to the employees of the organisation requesting them to donate blood for Prateek.”

Types of informal communication:

Grapevine Network: Grapevine communication may follow different types of network. In single strand network, each person communicates to the other in sequence. In gossip network, each person communicates with all on non-selective basis.

In probability network, the individual communicates randomly with other individual. In cluster, the individual communicates with only those people whom he trusts. Of these four types of networks, cluster is the most popular in organisations.

Question 10.
Shyam wanted to start a business of selling handicrafts by getting in touch with the craftsmen in the rural areas of Bengal. He wants to make a low investment in fixed Capital. Advise him in taking suitable decisions regarding the Nature of Business, Scale of operations and Financing Alternatives in a developed financial market) that he needs to take for the purpose. (5)
Answer:
(A) The function of management discussed above is staffing. Staffing is ‘putting people to jobs’. It begins with workforce planning and includes different other function like recruitment, selection, training, development, promotion, compensation and performance appraisal of work force. In other words, staffing is that part of the process of management which is concerned with obtaining, utilising and maintaining a satisfactory and satisfied work force.

(B) The step of this process which is being discussed in the above paragraph is recruitment. Recruitment refers to the process of finding possible candidates for a job or a function. It has been defined as ‘the process of searching for prospective employees and stimulating them to apply for jobs in an organisation.’

Advertising is commonly part of the recruitment process, and can occur through several means, through newspapers, using newspaper dedicated to job advertisement, through professional publication, using advertisements placed in windows, through a job center, through campus interviews, etc.

Question 11.
Stock exchange acts as a regulator of the securities market, it creates a continuous market where the securities are bought and sold. It gives investors the chance to disinvest and reinvest. Through this process of disinvestment and reinvestment, savings get channelised into their most productive investment avenues. To ensure that the investing public gets a safe and fair deal in the market, the membership of the stock exchange is well regulated and its dealings are well defined according to the existing legal framework.
It also ensures wider share ownership by regulating new issues, better trading practices and taking effective steps in educating the public about investments, various functions performed by the Stock. Exchange are discussed in the above para. By quoting the lines from the above para, state any four functions of stock exchange. (5)
Answer:
The various functions performed by the Stock Exchange are:
(1) Providing liquidity and marketability to existing securities as the stock exchange creates a continuous market where the securities are bought and sold. It gives investors the chance to disinvest and reinvest

(2) Contributes to economic growth as through process of disinvestment and reinvestment, savings get channelised into their most productive investment avenues.

(3) Safety of transactions as the membership of the stock exchange is well regulated and its dealings are well defined according to the existing legal framework. This ensures that the investing public gets a safe and fair deal on the market.

(4) Spreading of equity cult as the stock exchange ensures wider share ownership by regulating new issues, better trading practices and taking effective steps in educating the public about investments.

Question 12.
‘RO Youth Club’ organised a visit of its members to an Old Age Home to inculcate the habit of social work among them. The visit revealed that the living conditions of the inmates of the Old Age Home were not hygienic. So, the RO Youth Club members decided to clean the premises. During their cleanliness drive, they realised that the Old Age Home also required pest control. (5)

But some of the inmates of the Old Age Home were reluctant for it because they believed that the pest control may create health problems for them. RO Youth Club, therefore, decided to provide ethical, safe and odourless pest control. They showed to the inmates of the Old Age Home a pamphlet of the proposed pest control product which promised easy, inexpensive and long-lasting pest controL The inmates happily agreed and the pest control was carried out. The effect of the pest control started wearing off after a fortnight.

RO Youth Club contracted the pest control company which kept on postponing their visit. After waiting fbr a month, RO Youth Club filed a case in the consumer court. The consumer court was satisfied about the genuineness of the complaint and issued necessary directions to the pest control company. State any eight directions that might have been issued by the court.
OR
Aman, a degree holder in Entrepreneurship came to know about Piplantri Village located in Rajasthan, where in 2006 an initiative was started, in which 111 trees are planted every time a girl child is born. To keep termites away from the trees the villagers have planted 2.5 million. Aloe Vera plants around the trees. This has turned the village into an oasis, as the planting of trees led to higher water levels.
OR
Aman decided to visit the village to start a business unit, for the processing and marketing of Aloe Vera into juices, gels and other products. However, on visiting village Aman found that the villagers were suffering exploitation at the hands of local merchants who were engaged in unscruplous, exploitative trade practices like hoarding and black marketing of food product sand also selling unsafe, adulterated products to the villagers. After looking at their plight instead of a business organisation he decided to set up an organisation for the protection and promotion of the consumer interest of the villagers. State the functions that the organisation established by Aman will be performing (Any five points). (5)
Answer:
The directions that might have been issued by the court:
(1) To remove the deficiency in service.
(2) To refund the price paid for the service provided.
(3) To pay a reasonable amount of compensation for any loss suffered by the inmates of old age home.
(4) To pay punitive damages.
(5) To discontinue the unfair/ restrictive trade practice and not to repeat the same in future.
(6) To pay any amount (not less than 5% of the value of the service provided) to be credited to the Consumer Welfare Fund or any other organisation/person, to be utilised in the prescribed manner.
(7) To issue corrective advertisement to neutralize the effect of misleading pamphlet.
(8) To pay adequate costs to RO Youth Club.

OR
The organisation established by Aman will be performing the following functions.(any five)
(1) Educating the general public about consumer rights by organising training programmes, seminars and workshops.
(2) Publishing periodicals and other publications to impart knowledge about consumer problems, legal reporting, reliefs available and other matters of interest.
(3) Encouraging consumers to strongly protest and take an action against unscrupulous, exploitative and unfair trade practices of sellers.
(4) Carrying out comparative testing of consumer products in accredited laboratories to test relative qualities of competing brands and publishing the test results for the benefit of consumers.
(5) Providing legal assistance to consumers by way of providing aid, legal advice etc. in seeking legal remedy.
(6) Filing complaints in appropriate consumer courts on behalf of the consumers.
(7) Taking an initiative in filing cases in consumer courts in the interest of the general public, not for any individual.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 1 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Term 2 Set 1 with Solutions

Time allowed: 2 Hours
Maximum Marks: 40

General Instructions:

• This is a Subjective Question Paper containing 12 questions.
• This paper contains 4 questions of 2 marks each, 4 questions of 3 marks each and 4 questions of 5 marks each.
• 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
• 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
• This question paper contains Case/Source Based Questions.

Question 1.
Identify and explain the two sources of the source of recruitment which cannot be used when the existing staff is either insufficient or does not fulfill the eligibility criteria of the jobs to be filled. (2)
Answer:
Two sources of internal recruitment
(i) Promotion refers to shifting of an employee to a higher position, carrying higher responsibilities, facilities, status and pay. Transfer involves shifting of an employee from one job to another, one department to another, without substantive change in the responsibilities and status of the employee.

Explanation: The two sources of recruitment which cannot be used when the existing staff is either insufficient or does not fulfill the eligibility criteria of the jobs to be filled are promotion and transfer.

• Promotion: Shifting of an employee to a higher position is termed as promotion. It involves carrying higher responsibilities, facilities, status and pay.
• Transfer: The horizontal movement of an employees from one job to another, one department to another or from one shift to another, without a substantive change in the responsibilities and status is called transfer.

Question 2.
‘MYKAA Limited ‘is dealing in all types of cosmetic products. It is enjoying increased demand for its product during the last few years. For the purpose of expansion the company needs  100 crores as additional capital. The company decides to raise funds through equity shares.
Chirag Kapoor, the finance manager of the company recommended that the shares may be sold through issuing houses or brokers. Identify and explain the method recommended by Mr. Kapoor through which the company can raise additional funds for expansion purposes. (2)
Answer:
Offer for Sale: Under this method securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers. In this case, a company sells securities embolic at an agreed price to brokers who, in turn, resell them to the investing public.

Explanation: The method recommended by Mr. Kapoor is Offer for Sale. Intermediaries play essential role in this type of issue of securities. Companies approach intermediaries like issuing houses or stock brokers for issue of securities.

Question 3.
Explain the two concepts which are part of the exercise which would reveal whether a company is understaffed, overstaffed or optimally staffed. (2)
Answer:

• Workload analysis: This would enable an assessment of the number and types of human resources necessary for the performance of various jobs and accomplishment of organisational objectives.
• Workforce analysis: This would reveal the number and type available.

Explanation: The two concepts which are part of the exercise which would reveal whether a company is understaffed, overstaffed or optimally staffed is workload analysis and workforce analysis.

The assessment of number and type of human resource available for performing a task in an organisation is called workforce analysis and the assessment of number and type of human resource required for performing a task in an organisation is called workload analysis.

Question 4.
“Measurement of a company’s progress may involve calculation of certain ratios like gross profit ratio, net profit ratio, and return on investment etc. at periodic intervals”. Identify the function of management involved in the above context. Also briefly explain the step in the process of the identified function discussed above. (2)
Answer:
(A) Controlling
(B) Measurement of actual performance Once performance standards are set, the next step is measurement of actual performance. Performance should be measured in an objective and reliable manner. There are several techniques for measurement of performance. These include personal observation, sample checking, performance reports, etc.

Explanation: The above context is related to controlling function of management and the step of controlling function discussed above is measurement of actual performance. Measurement of actual performance is done when performance standard are set. This step become easier when performance standards are set in quantitative term.

Question 5.
Mr. Pawan Kumar, the CEO of an E-Commerce startup, which was facing the problem of huge employee turnover, decided to hold a meeting with the managers to discuss the issue. While addressing the managers in the meeting, he advised them to take certain measures which focus on psychological, social and emotional factors, in order to motivate employees.

Explain any two such measures discussed by him, when he suggested that job should be made interesting so that the job itself becomes a source of motivation, employees should be congratulated for good performance, also, stability regarding future income and work should be provided to employees, in order to develop a positive attitude among the subordinates(3)
Answer:
Non monetary incentives: (Any two)
(i) Job enrichment: It is concerned with designing jobs that include greater variety of work content, require higher level of knowledge and skill, etc,.

(ii) Employee recognition programmes: Recognition means acknowledgment with a show of appreciation.

(iii) Job security: Employees want their job to be secure. They want certain stability about income and work so that they do not feel worried about these aspects and work with greater zeal.

Explanation: Non monetary incentives:

• Job enrichment: “Employees should be congratulated for good performance”.
• Motivation: When jobs are enriched and made interesting, the job itself becomes a source of motivation to the individual.
• Job security: “Stability regarding future income”. Every employee wants security and stability regarding his/her job. When they are assured of their job it works as a motivation for them.

Question 6.
State any three points of importance of Directing.
Answer:
Importance of Directing: (Any three)
(i) Directing helps to initiate action by people in the organisation towards attainment of desired objectives.

(ii) Directing integrates employees’ efforts in the organisation in such a way that every individual effort contributes to the organisational performance.

(iii) Directing guides employees to fully realise their potential and capabilities by motivating and providing effective leadership.

(iv) Directing facilitates introduction of needed changes in the organisation.

(v) Effective directing helps to bring stability and balance in the organisation since it fosters cooperation and commitment among the people and helps to achieve balance among various groups, activities and the departments.

Explanation: Importance of directing can be seen by the following points:

• Directing integrates employeesefforts in the organisation in such a way that every individual effort contributes to the organisational performance.
• Directing facilitates introduction of needed changes in the organisation.
• Directing helps to initiate action by people in the organisation towards attainment of desired objectives.

OR

Define leadership as an element of Directing. Enumerate any two styles of Leadership. (3)
Answer:
Leadership indicates the ability of an individual to maintain good interpersonal relations with followers and motivate them to contribute for achieving organisational objectives, (or any other correct definition)

Styles of leadership (Any two):

• Autocratic or Authoritarian leader gives orders and expects his subordinates to obey those orders.
• Democratic or Participative leaders will develop action plans and make decisions in consultation with their subordinates.
• Laissez faire or Free-rein leader does not believe in the use of power unless it is absolutely essential.

OR

Leadership is the art or process of influencing people so that they will strive willingly and enthusiastically towards the achievement of group goals.

The two styles of leadership are:
(i) Autocratic: In this style of leadership subordinates are suppose to obey the orders from their superiors. In autocratic leadership communication is only one-way with the subordinate only acting according to the command given by the manager.

Democratic In this style of leadership leader make plan with the consultation of his followers. He will encourage them to participate in decision making. Democratic In this style of leadership leader make plan with the consultation of his followers. He will encourage them to participate in decision making.

Question 7.
List any three factors affecting the Working Capital requirement of a company. (3)
Answer:
Factors affecting working capital requirement of the company (Any three):
(i) Nature of Business influences working capital requirements in a trading organisation which usually needs a smaller amount of working capital compared to a manufacturing organisation, while service industries which usually do not have to maintain inventory require less working capital.

(ii) Scale of operations influences working capital requirements in large organisations which require a large amount of working capital as compared to the organisations which operate on a lower scale.

(iii) Business cycle affects the requirement of working capital by a firm, as in case of a boom a larger amount of working capital is required as compared to the period of depression.

(iv) Seasonal Factors affect the working capital requirement, as in peak season large amounts of working capital is required and lower amount is required in the lean season.

(v) Production cycle affects the working capital requirement, as it is higher in firms with longer processing cycles and lower in firms with shorter processing cycles.

(vi) Credit allowed in a firm with liberal credit policy results in a higher amount of debtors, increasing the requirement of working capital

(vii)Credit availed by a firm, to the extent to which the firm avails the credit on purchases the working capital requirement is reduced.

(viii) Operating efficiency may reduce the level of raw materials, finished goods and debtors resulting in lower requirement of working capital

(ix) Availability of raw material influences the working capital requirement as larger the lead time, larger the quantity of material to be stored and larger shall be the amount of working capital required.

(x) If the growth potential of a concern is perceived to be higher, it will require a larger amount of working capital.

(xi) Higher level of competitiveness may necessitate larger stocks and increases working capital requirement.

(xii) The working capital requirement of a business becomes higher with higher rate of marks inflation.

Explanation: The factors affecting working capital requirement are: (any three)

(i) Nature of Business: The basic nature of a business influences the amount of working capital required. A trading organisation usually needs a smaller amount of working capital compared to a manufacturing organisation.

This is because there is usually no processing. Therefore, there is no distinction between raw materials and finished goods. Sales can be effected immediately upon the receipt of materials, sometimes even before that.

In a manufacturing business, however, raw material needs to be converted into finished goods before any sales become possible. Other factors remaining the same, a trading business requires less working capital.

(ii) Scale of Operations: For organisations which operate on a higher scale of operation, the quantum of inventory and debtors required is generally high. Such organisations, therefore, require large amount of working capital as compared to the organisations which operate on a lower scale.

(iii) Business Cycle: Different phases of business cycles affect the requirement of working capital by a firm. In case of a boom, the sales as well as production are likely to be larger and, therefore, larger amount of working capital is required. As against this, the requirement for working capital will be lower during the period of depression as the sales as well as production will be small.

(iv) Seasonal Factors: Most business have some seasonality in their operations. In peak season, because of higher level of activity, larger amount of working capital is required. As against this, the level of activity as well as the requirement for working capital will be lower during the lean season.

(v) Production Cycle: Production cycle is the time span between the receipt of raw material and their conversion into finished goods. Some businesses have a longer production cycle while some have a shorter one.

Duration and the length of production cycle, affects the amount of funds required for raw materials and expenses. Consequently, working capital requirement is higher in firms with longer processing cycle and lower in firms with shorter processing cycle.

(vi) Credit Allowed: Different firms allow different credit terms to their customers. These depend upon the level of competition that a firm faces as well as the credit worthiness of their clientele. A liberal credit policy results in higher amount of debtors, increasing the requirement of working capital.

(vii) Credit Availed: Just as a firm allows credit to its customers it also may get credit from its suppliers. To the extent it avails the credit on purchases, the working capital requirement is reduced.

(viii) Operating efficiency may reduce the level of raw materials, finished goods and debtors resulting in tower requirement of working capital

(ix) Availability of Raw Material: If the raw materials and other required materials are available freely and continuously, lower stock levels may suffice. If, however, raw materials do not have a record of un-interrupted availability, higher stock levels may be required.

In addition, the time lag between the placement of order and the actual receipt of the materials (also called lead time) is also relevant. Larger the lead time, larger the quantity of material to be stored and larger shall be the amount of working capital required.

(x) Growth Prospects: If the growth potential of a concern is perceived to be higher, it will require Larger amount of working capital so that it is able to meet higher production and sales target whenever required.

(xi) Level of Competition: Higher level of competitiveness may necessitate larger stocks of finished goods to meet urgent orders from customers. This increases the working capital requirement. Competition may also force the firm to extend liberal credit terms discussed earlier.

(xii) Inflation: With rising prices, larger amounts are required even to maintain a constant volume of production and sales. The working capital requirement of a business thus, become higher with higher rate of inflation.

It must, however, be noted that an inflation rate of 5%, does not mean that every component of working capital will change by the same percentage. The actual requirement shall depend upon the rates of price change of different components (e.g., raw material, finished goods, labour cost,) Finished goods as well as their proportion in the total requirement.

Question 8.
Priya is a regional manager of XYZ. Ltd. She is a hardworking employee and is trying to reduce wastage of resources in her company. She has set standards for performance of different activities and is ensuring that targets are met according to these standards with minimal wastage of resources. She has set up CCTV cameras which helps her to keep a close check on the activities of the subordinates and know how the employees are performing.

She also rewards the employees with a bonus when these standards are met. She is trying her best to ensure a good performance of her team this year through the application of an important function of management. Explain any two benefits of the function of management highlighted above. (3)
Answer:
Importance of controlling (Any two):
(i) Accomplishing organisational goals: The controlling function measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action.

(ii) Ensuring Order and discipline: Controlling creates an atmosphere of order and discipline in the organisation. It helps to minimise dishonest behaviour by keeping a close check on their activities.

(iii) Making efficient use of resources: Each activity is performed in accordance with predetermined standards and norms. This ensures that resources are used in the most effective and effcient manner.

(vi) Improving employee motivation: A good control system ensures that employees know welt in advance what they are expected to do and what are the standards of performance on the basis of which they will be appraised. It, thus, motivates them and helps them to give better performance.

Explanation: The function of management highlighted here is Controlling.

The importance of controlling is as follows: (any two)

(i) Accomplishing organisational goals: The controlling function measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action. It, thus, guides the organisation and keeps it on the right track so that organisational goals might be achieved.

(ii) Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate and objective. An efficient control system keeps a careful check on the changes taking place in the organisation and in the environment and helps to review and revise the standards in light of such changes.

(iii) Making efficient use of resources. By exercising control, a manager seeks to reduce wastage and spoilage of resources. Each activity is performed in accordance with predetermined standards and norms. This ensures that resources are used in the most effective and efficient manner.

(iv) Improving employee motivation: A good control system ensures that employees know well in advance what they are expected to do and what are the standards of performance on the basis of which they will be appraised. It, thus, motivates them and helps them to give better performance.

(v) Ensuring order and discipline: Controlling creates an atmosphere of order and discipline in the organisation. It helps to minimise dishonest behaviour on the part of the employees by keeping a close check on their activities. The box explains how an importexport company was able to track dishonest employees by using computer monitoring as a part of their control system.

(vi) Facilitating coordination in action: Controlling provides direction to all activities and efforts for achieving organisational goals. Each department and employee is governed by predetermined standards which are well coordinated with one another. This ensures that overall organisational objectives are accomplished.

Question 9.
Enumerate any five rights of a consumer under the Consumer Protection Act, 2019.
Answer:
Rights of a Consumer under the Consumer Protection Act, 2019 (Any five):
(i) Right to safety: The consumer has a right to be protected against goods and services which are hazardous to life, health and property.

(ii) Right to be informed: The consumer has a right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use, etc.

(iii) Right to be assured: The consumer has the freedom to assess a variety of products at competitive prices.

(iv) Right to be heard: The consumer has a right to file a complaint and to be heard in case of dissatisfaction with a good or a service.

(v) Right to seek redressal: The consumer has a right to get relief against unfair trade practice of restrictive trade practices or unscrupulous exploitation in case the product or a service falls short of his expectation.

(vi) Right to consumer education: The consumer has a right to acquire knowledge and to be a well informed consumer throughout life.

Explanation: The Rights of a Consumer under the Consumer Protection Act, 2019: (any five)

(i) Right to Safety: The consumer has a right to be protected against goods and services which are hazardous to life, health and property. For example, electrical appliances which are manufactured with substandard products or do not conform to the safety norms might cause serious injury. Thus, consumers are educated that they should use electrical appliances which are ISI marked as this would be an assurance of such products meeting quality specifications.

(ii) Right to be informed: The consumer has a right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use, etc. It is because of this reason that the legal framework in India requires the manufactures to provide such information on the package and Label of the product.

(iii) Right to be assured: The consumer has the freedom to access variety of products at competitive prices. This implies that the marketers should offer a wide variety of products in terms of quality, brand, prices, size, etc. and allow the consumer to make a choice from amongst these.

(iv) Right to be heard: The consumer has a right to file a complaint and to be heard in case of dissatisfaction with a good or a service. It is because of this reason that many enlightened business firms have set up their own consumer service and grievance cells. Many consumer organisations are also working towards this direction and helping consumers in redressal of their grievances.

(v) Right to seek redressal: The consumer has a right to get relief against unfair trade practice of restrictive trade practices or unscrupulous exploitation in case the product or a service falls short of his expectations. The Consumer Protection Act 2019 provides for redressal to the consumers including replacement of the product, removal of defect in the product, compensation paid for any loss or injury suffered by the consumer, etc.

(vi) Right to Consumer Education: The consumer has a right to acquire knowledge and to be a well informed consumer throughout life. He should be aware about his rights and the reliefs available to him in case of a product or service falling short of his expectations. Many consumer organisations and some enlightened businesses are taking an active part in educating consumers in this respect.
OR
Enumerate any five responsibilities of a Consumer Protection Act, 2019. (5)
Answer:
Responsibilities of a Consumer under the Consumer Protection Act, 2019 (Any five):
(i) Be aware of various goods and services available in the market so that an intelligent and wise choice can be made.

(ii) Buy only standardised goods as they provide quality assurance.

(iii) Learn about the risks associated with products and services, follow manufacturer’s instructions and use the products safely.

(iv) Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.

(v) Assert yourself to ensure that you get a fair deal.

(vi) Be honest in your dealings. Choose only from legal goods and services and discourage unscrupulous practices.

(vii) Ask for a cash memo on purchase of goods or services.

(viii) File a complaint in an appropriate consumer forum in case of a shortcoming in the quality of goods purchased or services availed.

(ix) Form consumer societies which would play an active part in educating consumers and safeguarding their interests.

Explanation: The responsibilities of a Consumer under the Consumer Protection Act, 2019 are: (Any five)

(i) Be aware about various goods and services available in the market so that an intelligent and wise choice can be made.

(ii) Buy only standardised goods as they provide quality assurance. Thus, look for ISI mark on electrical goods, FPO mark on food products, Hallmark on jewelry, etc.

(iii) Learn about the risks associated with products and services, follow manufacturer’s instructions and use the products safely.

(iv) Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.

(v) Assert yourself to ensure that you get a fair deal.

(vi) Be honest in your dealings. Choose only from legal goods and services and discourage unscrupulous practices like black-marketing, hoarding, etc.

(vii) Ask for a cash memo on purchase of goods or services. This would serve as a proof of the purchase made.

(viii) File a complaint in an appropriate consumer forum in case of a shortcoming in the quality of goods purchased or services availed. Do not fail to take an action even when the amount involved is small.

(ix) Form consumer societies which would play an active part in educating consumers and safeguarding their interests.

(x) Respect the environment. Avoid waste, littering and contributing to pollution.

Question 10.
State any five regulatory functions of the Securities and Exchange Board of India. (5)
Answer:
Regulatory Functions of Securities and Exchange Board of India (Any five)

• Registration of brokers and sub-brokers and other players in the market.
• Registration of collective investment schemes and Mutual Funds.
• Regulation of stock brokers, portfolio exchanges, underwriters and merchant bankers and the business in stock exchanges and any other securities market.
• Regulation of takeover bids by companies.
• Calling for information by under-taking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
• Levying fee or other charges for carrying out the purposes of the Act.
• Performing and exercising such power under Securities Contracts (Regulation) Act 1956, as may be delegated by the Government of India.

Explanation: Regulatory Functions of Securities and Exchange Board of India are: (any five)

• Registration of brokers and subbrokers and other players in the market.
• Registration of collective investment schemes and Mutual Funds.
• Regulation of stock brokers, portfolio exchanges, underwriters and merchant bankers and the business in stock exchanges and any other securities market.
• Regulation of takeover bids by companies.
• Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
• Levying fee or other charges for carrying out the purposes of the Act.
• Performing and exercising such power under Securities Contracts (Regulation) Act 1956, as may be delegated by the Government of India.

Question 11.
In an interview with a leading news channel, Mr. Rakesh Kwatra, CEO of‘Get My Job” has suggested that the Companies which want more and more people to apply for jobs in their organisation should make the process of applying for jobs easier and candidate friendly.

It is for this reason, he said, that most progressive companies today have a short application process. He also said that the application form filled by the candidate is very important as it is the information supplied in the application forms, which helps the manager in eliminating unqualified or unfit job seekers.

The company can create a mechanism that attempts to measure certain characteristics of individuals like aptitude, manual dexterity, and intelligence to personality. The candidate may then be called for an in-depth conversation to evaluate their suitability for the job.

(A) Name the process and steps in the process of identifying and choosing the best person out of a number of prospective candidates for a job discussed above.
(B) Also explain the next three steps in the process which can be subsequently performed by the company. (5)
Answer:
(A) Selection: Steps in the process of selection discussed:

• Preliminary Screening.
• Selection Tests.
• Employment interview

(B) Next two steps:

(i) Reference and background checks:
Many employers request names, addresses and telephone numbers of references for the purpose of verifying information and gaining additional information on an applicant. Previous employers, known persons, teachers and university professors can act as references.

(ii) Selection Decision: The final decision has to be made from among the candidates who passed the tests, interviews and reference checks. The views of the concerned manager will be generally considered in the final selection.

(iii) Medical Examination: After the selection decision and before the job offer is made, the candidate is required to undergo a medical fitness test. The job offer is given to the candidate being declared fit after the medical examination.

Explanation:

(A) The process discussed here is Selection. The steps in the process of selection discussed are:

• Preliminary Screening.
• Selection Tests.
• Employment interview

(B) The next three steps in the process are:

(i) Reference and Background Checks:
Many employers request names, addresses, and telephone numbers of references for the purpose of verifying information and, gaining additional information on an applicant. Previous employers, known persons, teachers and university professors can act as references.

(ii) Selection Decision: The final decision has to be made from among the candidates who pass the tests, interviews and reference checks. The views of the concerned manager will be generally considered in the final selection because it is he/she who is responsible for the performance of the new employee.

(iii) Medical Examination: After the selection decision and before the job offer is made, the candidate is required to undergo a medical fitness test. The job offer is given to the candidate being declared fit after the medical examination.

Question 12.
Vansh Limited is a large and reputed company which manufactures ventilators. After the outbreak of ‘COVID-19’ in 2020 the company witnessed an increase in revenue by 40%. It has plans to further increase its production capacity and also start production of PPE kits, sanitisers and masks in 2022.

The Finance manager of the Company Mr. Rajiv feels confident about the future of the company and its liquidity position. Discuss the meaning of Dividend Decision and in the light of the above statement explain any two factors which should be considered by ‘Vansh Limited’ while formulating the dividend policy of the company.
Answer:
Dividend decision: The decision involved here is how much of the profit earned by the company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business.

Factors affecting Dividend decision: (Any two)

(i) Amount of Earnings: Dividends are paid out of current and past earnings. Therefore, earnings are a major determinant of the decision about dividend.

(ii) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. The dividend in growth companies is, therefore, smaller, than that in the non-growth companies.

(iii) Cash Flow Position: The payment of dividend involves an outflow of cash. A company may be earning profit but may be short on cash. Availability of enough cash in the company is necessary for declaration of dividend.

(iv) Access to Capital Market: Large and reputed companies generally have easy access to the capital market and, therefore, may depend less on retained earnings to finance their growth. These companies tend to pay higher dividends than the smaller companies which have relatively low access to the market

Explanation: Dividend decision: Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business. While the dividend constitutes the current income re-investment as retained earning increases the firm’s future earning capacity.

The extent of retained earnings also influences the financing decision of the firm. Since the firm does not require funds to the extent of re-invested retained earnings, the decision regarding dividend should be taken keeping in view the overall objective of maximising shareholder’s wealth.

The factors affecting Dividend decision are:

(i) Amount of Earnings: Dividends are paid out of current and past earning. Therefore, earnings is a major determinant of the decision about dividend.

(ii) Stability Earnings: Other things remaining the same, a company having stable earning is in a better position to declare higher dividends. As against this, a company having unstable earnings is likely to pay smaller dividend.

(iii) Stability of Dividends: Companies generally follow a policy of stabilising dividend per share. The increase in dividends is generally made when there is confidence that their earning potential has gone up and not just the earnings of the current year. In other words, dividend per share is not altered if the change in earnings is small or seen to be temporary in nature.

(iv) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. The dividend in growth companies is, therefore, smaller, than that in the non-growth companies.

(v) Cash Flow Position: The payment of dividend involves an outflow of cash. A company may be earning profit but may be short on cash. Availability of enough cash in the company is necessary for declaration of dividend.

(vi) Shareholders’ Preference: While declaring dividends, managements must keep in mind the preferences of the shareholders in this regard. If the shareholders in general desire that at least a certain amount is paid as dividend, the companies are likely to declare the same. There are always some shareholders who depend upon a regular income from their investments.

(vii) Taxation Policy: The choice between the payment of dividend and retaining the earnings is, to some extent, affected by the difference in the tax treatment of dividends and capital gains. If tax on dividend is higher, it is better to pay less by way of dividends.

As compared to this, higher dividends may be declared if tax rates are relatively lower. Though the dividends are free of tax in the hands of shareholders a dividend distribution tax is levied on companies. Thus, under the present tax policy, shareholders are likely to prefer higher dividends.

(viii) Stock Market Reaction: Investors, in general, view an increase in dividend as a good news and stock prices react positively to it. Similarly, a decrease in dividend may have a negative impact on the share prices in the stock market. Thus, the possible impact of dividend policy on the equity share price is one of the important factors considered by the management while taking a decision about it.

(ix) Access to Capital Market: Large and reputed companies generally have easy access to the capital market and, therefore, may depend less on retained earning to finance their growth. These companies tend to pay higher dividends than the smaller companies which have relatively low access to the market.

(x) Legal Constraints: Certain provisions of the Companies Act place restrictions on payouts as dividend. Such provisions must be adhered to while declaring the dividend, (k) Contractual Constraints: While granting loans to a company, sometimes the lender may impose certain restrictions on the payment of dividends in future. The companies are required to ensure that the dividend does not violate the terms of the loan agreement in this regard

OR

Vedansh Limited has a share capital of ₹ 10,00,000 divided into shares of ₹100 each. For expansion purpose ,the company requires additional funds of ₹ 5,00,000. The management is considering the following alternatives for raising funds :
Alternative 1: Issue of 5000 Equity shares of ₹ 100 each
Alternative 2: Issue of 10% Debentures of ₹5,00,000 The company’s present Earnings Before Interest and Tax (EBIT) is ₹4,00,000 p.a. Assuming that the rate of Return of investment remains the same after expansion, which alternative should be used by the company in order to maximise the returns to the equity shareholders. The Tax rate is 50%. Show the working. (5)
Answer:
Rate of Return of Investment is 4,00,000/10,00,000 x 100 = 40%
EBIT after expansion = 40% x 15,00,000 = 6,00,000
Calculation of EPS

	Plan I	Plan II
EBIT	600000	600000
(-) Interest	——	50000
EBT	600000	550000
(-) Tax @50%	300000	275000
EAT	300000	275000
No. of shares	15000	10,000
EPS	20	27.5

The company should use Plan 2 in order to increase the return to the equity shareholders.

Explanation: Rate of Return of Investment is 4,00,000/10,00,000 x 100 = 40%EBIT after expansion = 40% x 15,00,000 = 6,00,000
Calculation of EPS

Calculation of EPS
	Plan I	Plan II
EBIT	600000	600000
(-) Interest	—–	50000
EBT	600000	550000
(-) Tax @50%	300000	275000
EAT	300000	275000
No. of shares	15000	10,000
EPS	20	27.5

The company should use Plan 2 in order to increase the return to the equity