CBSE Sample Papers for Class 12 Business Studies Term 2 Set 3 with Solutions

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 3 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Term 2 Set 3 with Solutions

Maximum Marks : 40
Time : 2 Hours

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.

Short Answer (SA) Type I Questions (2 Marks)

Question 1.
Enlist any two importance of the process which helps in estimating the future finance requirements of an organisation.
Answer:
Financial planning is the process of estimating the future finance requirements of an organisation. Importance of financial planning are (any two)

• By forecasting what may happen in future, company prepares plans for future through financial planning.
• It helps in avoiding business shocks and surprises by preparing a blueprint of organisation’s future preparations.
• Financial planning helps in linking the present with the future.

Question 2.
“Without an efficient system of communication, it is impossible to carry out the managerial functions effectively.” Do you agree with this statement? Give any one reason in support of your answer.
Answer:
Yes, I agree with the given statement. Communication is the process of exchanging ideas and information between two or more persons to create mutual understanding. It is required to carry out all managerial functions effectively because of the following reasons (any one)

(i) Acts as a Basis of Coordination Communication acts as a basis of coordination. It provides coordination among departments, activities and persons in the organisation. Such coordination is provided for explaining about organisational goals, the mode to their achievement and inter-relationships between different individuals, etc.

(ii) Increases Managerial Efficiency The employees must know clearly about their responsibilities and authority, who will report to whom, what part of total job they are expected to perform and what are their decision-making powers. This leads to smooth flow of communication.

Question 3.
Name and state the ‘on-the-job method of training’ that is used to give training to the electricians.
Answer:
Apprenticeship Programme It is on-the-job training method. Under this, a master worker as a trainer is appointed, who guides the workers regarding the skill of job. Often electricians require this type of training.

Question 4.
In the paint industry, various raw materials are mixed in different proportions with petroleum for manufacturing different kinds of paints. One specific raw material is not readily and regularly available to the paint manufacturing companies. Maxy Paints Company is also facing this problem and because of this there is a time lag between placing the order and the actual receipt of the material. But, once it receives the raw materials, it takes less time in converting it into finished goods. Identify and explain the factor affecting the working capital requirements of this industry.
Answer:
The factor affecting working capital referred here is ‘availability of raw materials’. If the raw materials are easily and readily available, lower stocks will have to be maintained whereas, when the raw materials are scarce or not readily available, higher stock levels have to be maintained, thus increasing the need for working capital requirement.

Short Answer (SA) Type II Questions (3 Marks)

Question 5.
“Expenses on training is an investment and not a wastage.” Clarify. Also give any two advantages of training for the organisation.
Or
A car manufacturing company sets a goal that in future they will expand their production by 15%. After measuring the performance, they noticed that the production has declined by 10% and the raw material is wasted by the production department. Can you find out, to which concept of controlling does it relate? Also explain it.
Answer:
Expenses on training is an investment and not a wastage, as expenses incurred on training today will provide benefit to the organisation for a long-term in the form of increased efficiency of the employees. The benefits of training and development to an organisation are as follows;

• Training is a systematic learning, always better than hit and trial methods which leads to wastage of efforts and money.
• It enhances employees’ productivity both in terms of quantity and quality, leading to higher profits.

Or
The concept of controlling which is being quoted is comparing actual performance with standards. After measuring the actual performance, it is being compared with the standards. In this case, the standard set is to increase production by 15% but actually it has declined by 10%. Infact the next step, i.e., analysing deviations has also been undertaken and it is found out that raw materials have been wasted by the production department.

Question 6.
Riya and Jiya are working in different departments, but are very close friends. During lunch time, Riya informs Jiya that due to the impact of COVID-19 on business organisations, many people have lost their jobs.Identify the type of communication highlighted in the above said case. Also, state any two advantages and disadvantages of this type of communication.
Answer:
Communication between Riya and Jiya is informal communication. Advantages of informal communication are:
(i) It helps individuals to communicate on matters, which cannot be transmitted through the formal communication.
(ii) It enables the employees to develop friendly relations and get social satisfaction. It satisfies their urge to know, what is happening in the organisation.

Disadvantages of informal communication are

• It tends to be unsystematic, irregular and untimely. It is neither reliable nor predictable.
• It is not easy to fix responsibility for actions taken on the basis of informal communication. The origin of such communication in not easily traceable.

Question 7.
Explain any three factors affecting capital budgeting decisions.
Answer:
Following are the three factors affecting capital budgeting decision
(i) Cash Flows of the Project When a company takes an investment decision involving huge amount, it expects to generate some cash flows over a period. The amount of these cash flows should be carefully analysed before considering a capital budgeting decision.

(ii) The Rate of Return It is the most important criteria to decide the investment proposal, as a higher rate of return would induce more investment and vice-versa.

(iii) Investment Criteria The manager must compare and analyse the amount of investment, cash flows, interest rate, etc of various proposals and then take a decision.

Question 8.
Explain the following money market instruments
(i) Call money
(ii) Treasury bills
Answer:
(i) Call Money It is a method used by commercial banks to borrow funds from each other in order to
maintain the cash reserve ratio. Whenever a bank faces cash crunch, then the bank with surplus cash lends to the bank in shortage for 1-2 days. It is therefore, also known as interbank call money. Insurance and mutual fund companies also deal in call money. Maturity of call money is 1-15 days.

The interest paid on call money is called call rate. This rate is highly fluctuating which varies from day-to-day or even hour-to-hour basis. There is an inverse relationship between call rates and return on other short-term money market instruments.

(ii) Treasury Bills These are short-term borrowing instruments issued by RBI on the behalf of
Government of India. It is also known as zero coupon bonds and has maturity of less than one year.
They are available in denominations of ₹ 25,000 and its multiples there of.

These are issued at discount and repaid at par, the difference being interest. These bills are negotiable and freely transferable. They are regarded as safest investment as these are issued by RBI.

Long Answer (LA) Type Questions (5 Marks)

Question 9.
Sawaj Ltd. is a manufacturer of wrist watches and the company is opting a good control system in order to achieve the targets on time. In context of this, give some points of importance of controlling.
Or
Give the various sources of recruitment and differentiate between transfers and promotions.
Answer:
Importance of controlling are as follows (any five)
(i) Accomplishing Organisational Goals It measures the accomplishment of work against the standards and corrects deviations. This helps in ensuring that organisation is moving on right track to achieve the organisational goals.

(ii) Judging Accuracy of Standards A sound controlling system helps the management to verify whether the standards set are accurate and objective. It keeps a careful check on the changes, which are taking place in the organisation and in the environment, thereby helping to review and raise the standards in the 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, which helps in effective and efficient utilisation of resources.

(iv) Improving Employees Motivation It helps employees in realising, what they are expected to do and what are the standards of performance, on the basis of which they are appraised. This motivates them to perform better.

(v) Ensuring Order and Discipline By keeping a check on the activities of the workers, controlling creates an atmosphere of order and discipline among them. It also helps to keep a check on the dishonest behaviour of employees.

(vi) Facilitating Coordination in Action It provides direction to all activities and each department and employee is governed by predetermined standards, which helps in establishing coordination among them.
Or
The sources of recruitment can be broadly classified as follows

(i) Internal Sources These sources refer to recruitment within the organisation, from the existing staff and employees. Two internal sources of recruitment are as follows

• Transfers
• Promotions

(ii) External Sources These sources refer to recruitment from outside the organisation.

The differences between transfers and promotions 

The differences between transfers and promotions are

Basis	Transfers	Promotions
Meaning	It means shifting an employee from one job to another job, one department to another department or one shift to another shift.	It means shifting an employee to a higher job position.
Movement	It causes a horizontal movement of employees.	It causes a vertical movement of employees.
Effect	It leads to a change in duties and working conditions but not necessarily status and salary.	It leads to a change in authority, responsibilities, duties, salary and status.

Question 10.
Identity the type of incentive highlighted in each of the following statements
(i) Displaying on the notice board about the achievement of employee.
(ii) There is an negative aspect of this incentive that at times, it makes the employees complacent and lazy.
(iii) Benefits like medical aid, car allowance, etc are provided to employees.
(iv) It refers to involving employees in decision-making.
(v) It means giving more autonomy to the employees.
Answer:
(i) Employee Recognition Programme It refers to giving special reward, regard or respect to satisfy the ego of the employees. It includes displaying the achievement of employees, distributing momentoes, etc.

(ii) Job Security It refers to giving permanent or confirmation letter. It means life time bonding between employees and organisation.

(iii) Perquisites It refers to giving special benefits to the employees such as medical facility, free education for children, housing facility, etc.

(iv) Employee Participation It refers to involving employee in decision-making process. Employees work diligently to follow decision more sincerely, if these are taken in consultation with them.

(v) Employee Empowement It means giving more freedom to subordinates. This develops confidence in employees.

Question 11.
Name the decision, a financial manager takes keeping in view the overall objective of maximising shareholders’ wealth. Also, explain any four factors affecting the decision.
Or
On the basis of maturity of financial instruments traded, financial markets can be classified into two segments. Identify these segments and compare them on any four basis.
Answer:
The above-said decision is financing decision. It is concerned with the decisions about how much funds are to be raised from which long-term source, i.e. by means of shareholders funds or borrowed funds.

The factors affecting financing decisions are (any four)
(i) Cost The cost of raising funds from different sources are different. A wise finance manager opts for the cheapest source of finance.

(ii) Risk The risk associated with each of the source is different. The source which involves least risk should be preferred.

(iii) Cash Flow Position of the Company A stronger cash flow position may make debt financing more viable than funding through equity.

(iv) Control Considerations Issue of more equity may dilute shareholders’ control over the business. Therefore, a company afraid of a takeover bid may prefer debt to equity.

(v) State of Capital Market If the stock market is rising, then it is easy to sell equity shares. But in a depressed capital market, the company has to opt for debt financing.
Or
On the basis of maturity of financial instruments traded, financial markets can be classified into
money market and capital market.

Basis	Capital Market	Money Market
Meaning	It refers to the whole network of organisations, institutions and instruments that deal in medium and long-term funds.	Money market is a market for short-term funds which deals in monetary assets whose period of maturity is upto one year.
Liquidity	Only actively traded securities have ready market.	In this market, the a formal arrangement of creating liquidity.

Basis	Capital Market	Money Market
Safety	In this market, securities of every company are bought and sold. Hence, there is more risk involved.	The transaction are made in the instruments issued by the financial institutions and financially strong companies. Thus, it involves relatively low risk.
Expected Return	The expected returns are high as there is scope of earning capital gains and long-term prosperity is also shared by the company in form of high dividends and bonus issues.	The expected return is less due to short duration and lower risk.
Duration	Period of maturity is more than one year.	Period of maturity ranges from one day to one year.

Question 12.
Millenium is a reputed B-school of Jaipur. It is offering lots of management degree programmes in the fields of finance, marketing, human resource, rural development, hospitality and information technology. The institute advertises that it has a 100% placement records, with many of its students being placed in top MNCs across the globe.

The highest salary package to a student of the institute was ₹12.5 lakh per annum. The advertisement also shows the campus to be well infrastructured. Influenced by this advertisement, hundred of students take admission in this institute.

On taking admissions, the students learn that the campus shown in the advertisements was not the one that they were studying in and also that the institute is running only diploma and certificate courses, as it is not recognised by AICTE and therefore, cannot issue degrees. The placement statistics were also misleading. What steps should be taken by the students against these frauds?
Answer:
Following steps should be taken by the students

• Students should boycott against this and provide all information of cheating and fraud to the local print media.
• Students should not blindly believe on the words of counsellors. They should collect all relevant information from different possible sources.
• They should ask for redressal against unfair practices of the institute and can also ask for the compensation under the right to seek redressal.
• They should also form societies to educate other students about such fraud schools and colleges.
• Students should not be carried away by advertisements. Before taking admission, they should visit the institute themselves to see the campus and to gather other relevant information.