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
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.
“Stock exchanges are market places where securities that have been listed thereon, may be bought and sold for either investment or speculation.” In the light of this statement, explain any two features of stock exchange.
Answer:
Following are the two features of stock exchange
(i) Organised Market Stock exchange is an organised market. Every stock exchange has a management committee which has all the rights related to management and control of exchange. All the transactions taking place in the stock exchange are done as per the prescribed procedure under the guidance of management committee.
(ii) Dealing in Securities Issued by Various Concerns Only those securities are traded in the stock exchange which are listed there. After fulfiling certain terms and conditions, a company can get its securities listed on stock exchange.
Question 2.
Explain the concept of capital structure.
Answer:
Capital structure refers to the proportion of debt and equity used for financing the operations of business. It refers to the mix between owner’s fund (equity) and borrowed funds (debts).
It can be calculated as debt-equity ratio \(\left(\frac{\text { Debt }}{\text { Equity }}\right)\) or as the proportion of debt in total capital known as financial leverage \(\left(\frac{\text { Debt }}{\text { Debt +Equity }}\right)\) Capital structure of a business affects both the profitability and the financial risk.
Question 3.
“Our assets walk out of the door every evening, we have to make sure that they come back the next morning”. This statement relates to one of the functions of management. State its importance.
Answer:
This statement relates to ‘staffing’. It is important because
(i) It ensures the availability of the most suitable and capable persons for various jobs.
(ii) By placing right person on the right job, it ensures better performance.
Question 4.
Isha Machines was a renowned name for quality sewing machines since 1960.
Mr. Suresh, the owner of Isha Machines, was worried as the production had declined during the last three months. He directed the Production Manager to find out the reason. The Production Manager ordered the different supervisors to prepare a performance report of the workers working under them. Identify and explain the step taken by the production manager in the controlling function of management.
Answer:
The step taken by the production manager is ‘measurement of actual performance’ in the controlling function of management. This step is conducted by the managers to analyse the overall efficiency level of the employees. While measuring the performance, objective and reliable methods should be used, such as sample checking, preparing reports, personal observation, etc.
Short Answer (SA) Type II Questions (3 Marks)
Question 5.
Explain how controlling helps in
(i) accomplishing organisational goals.
(ii) judging accuracy of standards.
Or
Blue Pharmacy is a company engaged in the production of life saving drugs.
The company has no internal system of performance appraisal and for the past two years, it has not declared any incentives or bonus to its employees, inspite of enormous profits.
One of its employee, Mr. Sangeet has discovered a new medication for dengue during in-house research. The company has got patent on it in its own name and no reward or compensation was given to Sangeet.
All these factors have de-motivated the employees and the company started facing the problem of high employee turnover rate, increased absenteeism, falling levels of productivity, etc
Due to a combined result of all these factors, Blue Pharmacy was not able to meet its organisational objectives. Design a control plan, suggesting measures to Blue Pharmacy to be able to achieve its objectives.
Answer:
(i) Accomplishing Organisational Goals The controlling function measures the accomplishment against the standards and corrects deviations. This helps in ensuring that organisation is moving on tire right track to achieve organisational goals.
(ii) Judging Accuracy of Standards A sound controlling system helps the management to verify whether the standards set are accurate and relevant or not. It keeps a careful check on the changes, which are taking place in the organisation.
Jr Under such circumstances, Blue Pharmacy should implement a control plan covering following points
- Performance based appraisal system should be introduced.
- Employees like Mr. Sangeet should be given due acknowledgement for their achievements.
- Proper communication of tasks should be made and feedback should be collected from time-to- time.
Question 6.
“Directing is the least important function of management.” Do you agree with this statement? Give any two reasons in support of your answer.
Answer:
No, the statement is incorrect. Directing is of great importance for management. Its importance is as follows (any two):
(i) Initiates Action Directing is executing function of converting plans into action. It initiates action in the organisation for the achievement of predetermined goals.
(ii) Introduces Changes Employees are generally reluctant towards changes. Manager through effective directions helps the employees to adopt to such changes.
(iii) Provides Leadership Through direction, manager provides motivation and leadership to employees which helps them to identify their potentials, leading to growth.
Question 7.
Dividends declared by the companies are taken as a positive note by the investors. Stock markets react positively to such decisions and share prices tend to show an upward trend. But, at the same time, it is restricted to certain extent by the Companies Act as well as the financial condition of the concern. Franco, the financial manager of Sunlight Ltd. declared in the Annual General Meeting (AGM) that “It is costly to reinvest the retained earnings.” After considering his statement, what decision is taken by the board?
Answer:
Company’s net earnings are divided into two parts i.e., retained earnings and dividend. If the company has profitable investment options then, it would like to retain the earnings and reinvest rather than distribute it as dividend.
But in the given case, the condition is not favourable for reinvesting. Thus, the board may take the residual decision which means the company will pay dividends to the shareholders as the reinvestment is not profitable.
Question 8.
Calculate the Debt Service Coverage Ratio of Murari Ltd. from the information given below
Profit After Tax (PAT) ₹ 3,75,000 Depreciation for the Year ₹ 52,000 Interest Payments ₹ 65,000 Dividend paid to Preference Shareholders ₹ 20,000 Repayment of Loan ₹ 15,000.
Answer:
Debt Service Coverage Ratio
Long Answer (LA) Type Questions (5 Marks)
Question 9.
Ela is running a successful business of providing high-end beauty services to the upper section of society. Her parlour boasts innovative beauty products. She has an in-house training programme for new employees. Also, she believes in high standards of performance and shares her profits with her employees. She also gives them yearly bonus and salary hikes. But still she feels that her employees are not as motivated as she wants them to be.
(i) Are financial incentives the only way to motivate employees?
(ii) What are non-monetary incentives?
(iii) State and explain any three non-monetary incentives which contribute to better performance of employees.
Or
Staffing is one of the most complex and crucial step which ensures success of any business organisation. Staffing requires a lot of time and efforts. Briefly explain first five steps involved in the process of staffing.
Answer:
(i) No, finandal incentives are not the only way to motivate employees. Employees can also be motivated with the help of non-monetary incentives.
(ii) Non-monetary Incentives These are not directly related with money. These incentives help in the satisfaction of top hierarchy needs like respect, self-actualisation, etc.
(iii) Following are the important types of non-monetary incentives (any three)
(a) Status It means the position or rank of a person in the organisation. It can be high or low.
The rank of an employee is diredly linked with his authority, responsibility and other fadlities
(e.g., A separate cabin, costly furniture, car, peon, PA, etc).
Everybody has a wish for a higher status. Therefore, the employees can be motivated by raising their rank or position. The attainment of a higher status fulfils the psychological, sodal and esteem needs.
(b) Career Advancement Opportunity Every employee of the organisation wants to advance in his life. Promotion is an important example of advancement. When the avenues for promotion are available, the employees certainly get motivated.
(c) Employee Recognition Programmes Every employee wishes to be considered as an important part of the organisation. It means that he should have his own identity and he should appear to be distinctive. The manager should distribute work among the employees in such a manner which gives a feeling to every employee that his work is spedal and he alone is capable of doing it. By getting such kind of importance, they are motivated and work harder in a more responsible manner.
(d) Employee Participation Employees get encouraged if they are allowed to participate in managerial works. Therefore, they offer their full cooperation in making successful the policies prepared with their help.
Or
First five steps in the process of staffing are as follows
(i) Estimating Manpower Requirements It refers to finding out the number of persons or employees and type of employees needed in the organisation in the near future. As both overstaffing and understaffing are undesirable, the manager tries to find out the manpower requirement by equating workload analysis to workforce analysis.
(ii) Recruitment It refers to the process of inducing people to apply for the job in the organisation. After assessing the number and type of required employees, the manager tries to get greater number of applicants for the job, so that the organisation can select better candidates.
(iii) Selection It refers to the choosing of most suitable candidate to fill the vacant job position. Selection is done through a process, which involves tests, interviews, etc.
(iv) Placement and Orientation In this step, employee occupies the position or is placed, for which he/she has been selected. After this, a brief presentation about the company is given and employee is introduced to his superiors, subordinates and colleagues.
(v) Training and Development In this step, training is imparted to the selected candidate, by which he/she can enhance his/her skills, knowledge and through this, one can also explore the opportunities for future growth.
Question 10.
Nirjhar is the production head of a leading jewellery house. He oversees the work of the whole factory which employs about 100 workers. Since, the raw material used are costly metals and stones like gold, silver, kadium, diamonds, rubies, etc, he has to exercise extreme control and diligence.
Many a times he feels overburdened by his work. Also, there are frequent cases of theft and spoilage.
All this has led him to the conclusion that an attempt to control everything results in controlling nothing. So, he decided to follow the managerial principle of control by exception.
(i) What do you understand by control by exception?
(ii) Give its merits also.
Or
HR manager of Diva Ltd. has sent a notice to Abhipriya that she is now promoted to senior accountant position due to her dedication and perseverance.
Identify the type of communication held between HR Manager and Abhipriya.
Also write its two advantages and two disadvantages.
Answer:
(i) Control by exception suggests that managers should first handle the deviations, which are beyond the specific range and he should not waste time and energy in finding solutions of minor deviations.
(ii) Merits of management by exception are
(a) It saves time and effort of managers as they deal with major deviations only.
(b) There is better utilisation of managerial talent.
(c) Timely action helps to keep the organisation on right track.
(d) It facilitates delegation of authority and increases morale when routine problems are left to subordinates.
Or
The type of communication held between HR Manager and Abhipriya is formal communication. Advantages of formal communication are as follows (any two)
(i) The source of information can be easily traced.
(ii) It is very systematic and there is orderly flow of information.
(iii) Responsibilities can be easily fixed as source of information is known.
Disadvantages of formal communication are as follows (any two)
(i) Information may not be transmitted accurately to avoid unfavourable effect of communication.
(ii) The information is usually passed in impersonal manner.
(iii) Managers cannot get true and accurate response of subordinates.
Question 11.
The role of financial management cannot be underestimated, since it has a direct bearing on the financial health of a business. The importance of financial decisions can be judged by the fact, that almost all items of financial statements disaffected by them. In the light of the above, explain any two functions of financial management.
Answer:
The functions of financial management related to three major decisions which every finance manager has to take. The essential functions of financial management are (any two).
(i) Investment Decision : This decision relates to careful selection of assets in which funds will be invested by the firms. A firm has many options to invest their funds but firm has to select the most appropriate investment which will bring maximum benefit for the firm and deciding or selecting most appropriate proposal is investment decision.
(ii) Financing Decision : Finance manager has to take this decision by deciding the source of finance. A company can raise finance from various sources i.e., by issue of shares, debentures or by taking loans and advances. Deciding how much to raise from which source is the concern of financing decision. The main sources of finance can be divided into two categories which are given below.
- Owner’s fund
- Borrowed fund
(iii) Dividend Decision : This decision is concerned with distribution of surplus funds. The profit of the firm is distributed among various parties, such as creditors, employees, debenture holders, shareholders, etc. The surplus profit is either distributed to equity shareholders in the form of dividend or kept aside in the form of retained earnings. Under dividend decision, the finance manager decides, how much to be distributed in the form of dividend and how much to keep aside as retained earnings.
Question 12.
Shreyam purchased gold bangles for ₹ 3,00,000 without cash memo, from one of their relatives Ravi on occasion of her daughter’s wedding.
Ravi also guaranteed her about the purity of gold but after 8 months when her daughter Ritika went to PC Jewellers to sell her jewellery due to financial crunch, she discovered that gold has lot of zinc, copper and silver. They also told her that bangles don’t have any hallmark. When she approached her relative Ravi, he refused to change her bangles.
(i) Name the mark one should look for while purchasing gold jewellery.
(ii) Name the redressal agency under the Consumer Protection Act where Ritika can file the complaint.
(iii) State the responsibilities that should have been exercised by Shreyam while purchasing gold bangles.
All this has led him to the conclusion that an attempt to control everything results in controlling nothing. So, he decided to follow the managerial principle of control by exception.
(i) What do you understand by control by exception?
(ii) Give its merits also.
Or
HR manager of Diva Ltd. has sent a notice to Abhipriya that she is now promoted to senior accountant position due to her dedication and perseverance.
Identify the type of communication held between HR Manager and Abhipriya.
Also write its two advantages and two disadvantages.
Answer:
- While purchasing gold jewellery, one should look for Hallmark.
- She cannot file a complaint as her mother did not take cash memo while purchasing gold bangles.
- Following responsibilities should have been exercised by Shreyam
(a) Shreyam should have insisted on cash memo as it is the evidence or proof that consumer has paid for the goods or services.
(b) Shreyam should not blindly believe on the words of Ravi. She must insist on getting full information on the quality, quantity, utility, etc of the goods or services.
(c) Shreyam should have look for ISI mark. Thus, choosing only quality goods which can discourage black-marketing and adulteration done by sellers like Ravi.