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.