Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 6 will help students in understanding the difficulty level of the exam.
CBSE Sample Papers for Class 12 Business Studies Term 2 Set 6 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.
Timely Ltd. is a manufacturer of premium wall clocks. The company has been doing extremely well and has been able to carve a niche in the market. The company recently decided to go global. To achieve the above objective, the company decided to increase its production to 30.0 units per month. But, after two months, the management observed that only 45.0 units were manufactured. Company is opting for a good control system in order to achieve the targets on time. In context to this, give some of the advantages of controlling.
Answer:
Some advantages of good control system are as follows (any two)
(i) Accomplishing Organisational Goals Controlling function measures progress towards the organisational goals and involves taking corrective actions in case of any deviation. It helps to keep the activities on right track, so that goals could be achieved efficiently and effectively.
(ii) Motivation to the Employees It is a source of motivation to the employees, who knows the standards against which their performance will be evaluated.
(iii) Optimum Utilisation of Resources By allocating the resources according to the requirements of the different departments, it helps in optimum utilisation of resources.
Question 2.
“Nature of money market can be well explained with the help of its features”. In the light of this statement, state any two such features of money market.
Answer:
Features of money market are as follows (any two)
(i) It deals in short-term monetary assets, whose period of maturity is upto one year.
(ii) It is a market where low risk, unsecured and short-term debt instruments are issued and actively traded everyday.
(iii) Liquidity is provided by the Discount and Finance House of India, specially formed for this purpose.
Question 3.
Formal communication is the communication which flows through scalar chain, i.e., official channels designed in the organisation chart. It may be oral or written and may be upward, downward or even horizontal. With reference to this, write two major merits of formal communication.
Answer:
Merits of formal communication are (any two)
(i) It helps in easy fixation of responsibility and exercising control over subordinates.
(ii) The information passed in formal channel is authentic.
(iii) There are very less chances of distortion of information.
Question 4.
Discuss in detail the type of market which deals in previously issued securities.
Answer:
Secondary market means market for purchase and sale of previously issued securities. Once a company has sold its shares and debentures to the public, these securities are traded on the stock exchange where they are listed. It is also known as the stock market or stock exchange. It provides liquidity and marketability to existing securities.
Short Answer (SA) Type II Questions (3 Marks)
Question 5.
You are a management guru. In your opinion, is controlling the last function or the beginning of the process of management?
Or
A company X Ltd. is setting up a new plant in India, for manufacturing auto components. India has a highly competitive and cost effective production base in this sector. Many reputed car manufacturers source their auto components from here.
X Ltd. is planning to capture about 40% of the market share in India and also export to the tune of atleast $ 5 million in about 2 years of its planned operations. To achieve these targets, it requires a highly trained and motivated work force. You have been asked by the company to advise it in this matter. Which function of management helps in obtaining right people and putting them on the right place/jobs? Explain any two benefits of this function.
Answer:
Controlling should not be misunderstood as the last function of management. It is a function that brings the management cycle back to the planning function.
In general, the process of management begins with planning and ends at controlling, but when a manager performs the function or steps of controlling, it is observed that the first step of controlling is setting standards. The controlling function finds out how far actual performance deviates from standards and analyses the corrective actions to be taken.
This process helps in formulation of future plans, thus becomes the premise of setting plans. Therefore, we can say that it is the beginning of management process. Thus, it can be stated that, controlling function is both the beginning as well as the end of the management process.
Or
Staffing is that function of management which helps in obtaining right people and putting them on the right jobs. Proper staffing ensures the following benefits to the organisation (any two)
- Obtaining Competent Personnel It helps in discovering and obtaining competent personnel for various job positions in an organisation.
- Higher Performance Staffing ensures high performance by putting right person on the right job.
- Continuous Survival and Growth Proper staffing ensures continuous survival and growth of the enterprise through succession planning of managers.
Question 6.
Differentiate between formal and informal communication on any three basis.
Answer:
Differences between formal and informal communication are (any three)
| Basis | Formal Communication | Informal Communication |
| Nature | Systematic and orderly. | Unsystematic and irregular. |
| Speed of Communication | It is slow and time consuming. | It is fast and time saving. |
| Authenticity | Official and well planned messages are authentic. | Unofficial and unplanned messages may not be authentic. |
| Contents or Subject Matter | Work related matters, e.g., orders and instructions are communicated. | Personal matters are discussed. |
| Objectives | To achieve organisational objectives. | To meet personal needs and interests. |
Question 7.
Bishnoi Ltd. recently proposed to issue commercial paper of ₹10,00,000 and equity shares of ₹140 each for meeting its capital requirements of diversification.
(i) Quoting the lines, identify the markets from where they would procure the necessary funds.
(ii) Distinguish between the markets identified in (i), on the basis of duration and investment outlay.
Answer:
(i) Money Market “Bishnoi Ltd. recently proposed to issue commercial paper of 10,00,000.”
Capital Market “Equity shares of ₹ 140 each for meeting its capital requirements of diversification.”
(ii) Differences between money market and capital market are
| Basis | Money Market | Capital Market |
| Duration | It deals in securities in short-term i.e., for a period of less than 1 year. | It deals in medium and long-term securities i.e., period of more than 1 year. |
| Investment Outlay |
It requires huge investment outlay as instruments are quite expensive. | It does not require huge financial outlay as value of securities is low. |
Question 8.
A decision in financial management is basically concerned about how much to raise and from which source. Name the type of decision. Also, explain two vital factors to be kept in mind while taking such decisions.
Answer:
The decision highlighted is ‘Financing decision’.
Factors affecting financing decision are
(i) Cost Cost of raising funds from different sources is different management opts the cheapest source of funds.
(ii) Risk The risk associated with each of the source is different. The source which involves least risk should be preferred.
Long Answer (LA) Type Questions (5 Marks)
Question 9.
Motivation refers to the way in which urges, desires, aspirations, strivings or needs direct, control and explain the behaviour of human beings. It is something which moves the person to action and continues him in the course of action already initiated. With reference to this, explain the process of motivation.
Answer:
Motivation process is based on unsatisfied human needs. It is as follows
- An unsatisfied need of an individual creates tension which stimulates his or her drives.
- These drives generate a search behaviour to satisfy such need.
- When such need is satisfied, the individual is relieved from tension.
e.g., An employee has a need for promotion to a higher position. If this need is strong, it creates tension for the employee which stimulates his or her drives. Finally, he/she will fix it as his/her goal and search behaviour to reach the goal. If he/she succeeds in getting promotion (goal achievement), his/her need for promotion would be satisfied. This reduces his/her tension. This process is explained with the help of a flow chart given below
Question 10.
“Comparing the actual performance with the laid standards, finding out the deviations and taking corrective action is an important function of management.” Name and explain the function. Enlist the steps in this process. Also, mention two principles that a manager must consider while dealing with deviation.
Answer:
The function of management indicated is controlling. Controlling is defined as the process of measurement of performance according to standards, measuring deviations and taking corrective action to achieve predetermined goals.
The steps in the process of controlling are
- Setting performance standards
- Measurement of actual performance
- Comparing actual performance with standards
- Analysing deviations
- Taking corrective action
Principles that a manager must consider while dealing with deviation are as follows
- Critical point control
- Control by exception
Question 11.
Dev Ltd. is a company engaged in the production and distribution of films. The company is an established name in Bollywood. Now, the company wants to enter in the regional cinemas also and for this, they are now targeting the South Indian Film Industry.
They have launched three films in South with leading actors and actresses and even managed to sign Rajnikanth. To fund its projects, the management takes a decision to raise money for long-term capital needs of business from certain sources.
(i) State the different sources of long-term capital.
(ii) Decision to raise money for long-term capital needs is affected by several factors. Discuss any three such factors.
Or
KAY Ltd. is a company manufacturing textiles. It has a share capital of ₹ 60 lakh. In the previous year, its earning per share was ₹ 0.50. For diversification, the company requires additional capital of ₹ 40 lakh. The company raised funds by issuing 10% debentures for the same. During the year, the company earned profit of ₹ 8 lakh on capital employed. It paid tax @ 40%.
(i) State whether the shareholders gained or lost, in respect of earning per share on diversification. Show your calculations clearly.
(ii) Also, state any two factors that favour the issue of debentures by the company as part of its capital structure.
Answer:
(i) Sources of long-term capital are as follows
- Equity shares
- Preference shares
- Debentures
- Long-term loans and advances
- Retained earnings
(ii) The following factors affect the financing decision (any three)
(a) Cost The cost of all the sources of finance is different. The rate of interest on debt, fixed rate of dividend to be paid on preference share capital and the expectations of the shareholders on the equity share capital are in the form of costs. If the situations happen to be favourable, the benefit of cheap finance can be availed of by choosing debt capital.
(b) Flotation Cost From the point of view of floating costs, retained profit is the most appropriate source. Therefore, its use should be made.
(c) Cash Flow Position If the cash flow position of the company is good, the payment of interest on the debt and the refund of capital can be easily made. Therefore, in order to take advantage of cheap finance, debt can be given priority.
(d) Level of Fixed Operating Costs In business, there are mainly two types of costs which are as follows
- Fixed Operating Cost For example Rent of the building, payment of salary, insurance premium, etc.
- Fixed Financial Cost For example Interest on debt, etc.
If the level of fixed operating costs is in excess, it is better to keep the fixed financial costs at the minimum. Therefore, debt capital should not be used. On the contrary, if the level of fixed operating cost is low, the use of debt capital is more profitable.
Or
Since, earning per share has fallen from 0.50 to 0.40, therefore the shareholders stand to lose on diversification.
Note: In the absence of any information, shares are assumed to be of ₹ 10 each.
So, Number of Shares \(=\frac{\text { Share Capital }}{\text { Face Value Per Share }}=\frac{60,00,000}{10}\) = 6,00,000 Shares.
(ii) Factors that favour issue of debentures by the company as part of its capital structure are (any two)
- Debenture interest payable is a charge to the profits. Hence, a company stands to gain in terms of tax benefits.
- Issue of debentures help the shareholders of the company to gain through ‘Trading on Equity’.
- Debenture is a cheaper source of finance as compared to equity.
Question 12.
Khushi purchased some household goods from a general store. After reaching home, she found a face cream in her merchandise, for which she has not been billed. After checking the date of expiry and other details, she started using it. Her face burnt due to the use of cream.
(i) Can Khushi file a complaint? Justify your answer.
(ii) Under Consumer Protection Act, 2019, who can file a complaint?
(iii) Also, state against whom a complaint can be filed?
Or
Shreya, recently moved to her new house in GK, Delhi. To bought electronics, she went to Alphine Electronics, Darya Ganj.
The owner of the shop forced her to buy Lillitop AC out of various brands, irrespective of her willingness. Due to his convincing power, she ended up buying Lillitop AC worth ₹ 50,000 but after 2 months of its usage, it stopped working. She approached the shopkeeper who asked her to contact to the company.
She immediately reported this to company. But company didn’t take any action. After this, she moved to redressal agency to ask for compensation from the company.
Identify the rights exercised by her and which consumer right is violated.
Also, name the redressal agency under Consumer Protection Act where Shreya have filed the complaint.
Answer:
Khushi purchased some household goods from a general store. After reaching home, she found a face cream in her merchandise, for which she has not been billed. After checking the date of expiry and other details, she started using it. Her face burnt due to the use of cream.
(i) Can Khushi file a complaint? Justify your answer.
(ii) Under Consumer Protection Act, 2019, who can file a complaint?
(iii) Also, state against whom a complaint can be filed?
Or
Shreya, recently moved to her new house in GK, Delhi. To bought electronics, she went to Alphine Electronics, Darya Ganj. The owner of the shop forced her to buy Lillitop AC out of various brands, irrespective of her willingness.
Due to his convincing power, she ended up buying Lillitop AC worth ₹ 50,000 but after 2 months of its usage, it stopped working. She approached the shopkeeper who asked her to contact to the company.
She immediately reported this to company.
But company didn’t take any action. After this, she moved to redressal agency to ask for compensation from the company. Identify the rights exercised by her and which consumer right is violated. Also, name the redressal agency under Consumer Protection Act where Shreya have filed the complaint.