Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 8 will help students in understanding the difficulty level of the exam.
CBSE Sample Papers for Class 12 Business Studies Term 2 Set 8 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.
“Investment decision relates to how the firm’s funds are invested in different assets so that the firm is able to earn highest possible returns on investment.” In the light of this statement, state why this decision is crucial for a business.
Answer:
Investment decisions are crucial because (any two)
(i) They affect the overall earning capacity of firm in long-run.
(ii) These decisions normally involve huge outflow of funds.
(iii) These decisions are irreversible or can be reversed at times at a huge cost.
(iv) These decisions affect profitability, growth and competitiveness of the firm.
Question 2.
In the backdrop of growing crimes against women, Sudhakar has just floated a private company by the name of ‘Suraksha’ to provide female bodyguards for women, while travelling or commuting between work and home. Being new to business, he appointed Mr. Bokade as his finance manager and asked him to assess the working capital needs of his company. Explain any two factors that Mr. Bokade have to consider while determining the working capital requirement for the company.
Answer:
The main factors that Mr. Bokade have to consider while determining the working capital requirement of a company are (any two)
(i) Nature of Business The basic nature of a business influences the amount of working capital. A trading organisation and a service industry firm usually needs a smaller amount of working capital as compared to a manufacturing organisation.
(ii) Seasonal Factors Some of the businesses have seasonal operations. During peak season, larger amount of working capital is required because of higher level of activity. As against this, the level of activity as well as the requirement for working capital will be lower during the lean season.
(iii) 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 length of production cycle affect the amount of funds required for raw materials and expenses.
Question 3.
Suggest whether a small enterprise can afford to install an expensive control system or not.
Answer:
Controlling is an expensive and time taking process. Considerable time and huge expenditure is required to install a control system. Thus, it is suggestive that small enterprises should not install it, as it may not justify the expenses involved. Personal observation method can be adopted for this purpose, since it is a less expensive way to monitor the progress of tasks and behaviour of employees.
Question 4.
“There is no need of staffing as many people are available in the market these days”. Do you agree? Give reasons.
Answer:
No, I don’t agree with this statement because
(i) Organisations need human resource planning to meet the demands of changing job requirements due to changes in technology.
(ii) All the people available in the market are not equally eligible and may not be suited to the requirements of a given job position.
Short Answer (SA) Type II Questions (3 Marks)
Question 5.
State any six factors influencing the recruitment, selection and training of employees.
Answer:
Factors influencing recruitment, selection and training of employees are
(i) Supply and demand of specific skills
(ii) Company’s vision and policy
(iii) Technological advancements
(iv) Legal and political considerations
(v) Human resource planning cost
(vi) Unemployment rate
Question 6.
XYZ Co is a newly established company. Company is not having the adequate finance to recruit the persons from outside. In this situation, which source of recruitment would be beneficial and why?
Or
Explain how controlling helps in
(i) Making efficient use of resources
(ii) Improving employee’s motivation
Answer:
Internal source of recruitment will be beneficial. There are two important sources of internal recruitment, i.e., transfers and promotions and both are economical and fast. It is beneficial because of the following reasons (any two):
(i) Transfer is the tool of training the employees to prepare them for higher jobs. Also, people recruited from within the organisation do not need induction training.
(ii) Transfer has the benefit of shifting workforce from the surplus department to those departments, where there is shortage of staff.
(iii) Employees are motivated to improve their performance. A promotion at higher level motivates the employees to improve their performance through learning and practice.
Or
(i) 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 pre-determined standards and norms. This ensures that resources are used in the most effective and efficient manner.
(ii) Improving Employees Motivation A good control system ensures that employees knows 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. Thus, it motivates them and helps them to give better performance.
Question 7.
Surya Ltd. is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7% to 8% and the demand for steel is growing. Therefore, it is planning to set-up a new steel plant to take benefit of such trends in demand. It is estimated that such an expansion will require about ₹ 5,000 crore to set-up and about ₹ 500 crore of working capital. As the finance manager of the company, state any three factors that would be considered while determining the capital structure for the new venture.
Answer:
In this case, the various factors that are considered in determining the capital structure for the new
venture will be
- Cost of Debt If the rate of interest on debt is high, the company should use less debt in its capital structure, and vice-versa.
- Cost of Equity When a company increases debt, the financial risk faced by equity shareholders increases. Thus, debt can be used upto a limit. Beyond that point, cost of equity may go up and share prices may decrease.
- Interest Coverage Ratio ICR refers to the number of times earnings before interest and tax covers the interest obligation. Higher the ICR, the company can borrow more funds and vice-versa.
Question 8.
Write the importance of financial planning.
Answer:
Importance of financial planning is as follows
(i) It helps in forecasting, i.e., what may happen in future under different business situations.
(ii) It helps in avoiding business shocks and surprises and helps the company in preparing for the future.
(iii) It helps in reducing waste, duplication of efforts and gaps in planning.
Long Answer (LA) Type Questions (5 Marks)
Question 9.
Explain the various networks of formal communication.
Or
An organisation suffers from high rate of employee turnover. Which element of directing is lacking in the organisation? Explain any four types of incentives which satisfy the esteem needs of the employees.
Answer:
The pattern through which communication flows within the organisation is indicated by
communication network.
Some popular formal communication networks are as follows
(i) Single Chain In this network, communication flows from every superior to his subordinates in a single chain.
As shown in the diagram, communication flows from A to B, from B to C and so on.
(ii) Wheel Network In this network, all subordinates working under a superior communicates through him only. The superior is at the ‘hub’ of the wheel, communicating with all at the same time.
As shown in the diagram, B,C,D and E can only communicate through A.
(iii) Circular Network In this network, communication moves in a circle, from one person to another. But, communication is slow in this network. Each person can communicate with two adjoining colleagues. Here, A can communicate with B and E, and likewise others communicate in the circle.
(iv) Free Flow In this network, each person can communicate with others freely and therefore, communication is fast in this network. In the diagram, A can communicate with B,C,D and E,B can communicate with A,E,C,D and so on.
(v) Inverted V In this network, a subordinate is allowed to communicate with his superior and his superior’s superior.
Or Motivation is lacking in the organisation. Incentives which can satisfy the esteeem needs of the employees are:
(i) Employee Recognition It refers to the appreciation shown towards the employees for the work done by him. This motivates the employees. It can be done by congratulating employee for his/her good performance or giving award or certificate.
(ii) Employee Empowerment It means giving more autonomy and power to subordinates to make them feel that their jobs are important. As a result, they contribute positively and are motivated. This satisfies their esteem needs.
(iii) Employee Participation By involving employees in decision-making regarding the issues related to them, the organisations build a trust with the employees so that their confidence is boosted.
(iv) Status One of the major non-financial incentive required to fulfill the esteem needs of employees is status. The authority, responsibility, rewards, recognition, perquisites and prestige of job indicate the status given to an employee.
Question 10.
Shubham Singhania, has been working as an educator and content developer with Oliveboard for the last 10 years. He is known for her commitment and dedication towards work. When the educator senior to her retired, all his colleagues thought that now Shubham will be promoted. But to everyone’s surprise, Oliveboard appointed Mrs. Reena through Linkedln. Shubham felt demoralised and his performance started declining.
Being a good leader, Mrs. Reena noticed his behaviour and started involving him in decision-making issues related to the organisation and increased his salary also. Shubham’s performance started improving immediately. Mrs. Reena is loved by all as she takes decisions in consultation and participation with employees.
(i) Identify the function of management being performed by Mrs. Reena.
(ii) Name the element of the above function of management which helped Reena improve Shubham’s performance.
(iii) Identify the type of leadership style followed by Reena by quoting lines from the text.
(iv) State any two features of element identified in part (ii) above.
Answer:
(i) Mrs. Reena has performed the directing function of management.
(ii) Mrs. Reena has been able to improve Shubham’s performance with the help of motivation which is an element of directing.
(iii) “Mrs. Reena is loved by all as she takes decision in consultation and participation with employees”. These lines depict that democrative leadership style has been followed by her.
(iv) Features of motivation are as follows:
- It is an internal feeling which influence human behaviour to behave in a particular manner.
- It is both negative or positive i.e., positive motivation is given through giving rewards like increase in pay, promotion, recognition, etc while negative motivation involves use of warnings, stopping increments, etc.
Question 11.
Differentiate between primary arid secondary market on any five basis.
Answer:
Differences between primary market and secondary market are
| Basis | Primary Market | Secondary Market |
| Nature of Securities | New securities are issued by new and existing companies. | Here, sale and purchase of existing securities is dealt with. |
| Capital Formation |
It directly promotes capital formation as there is flow of funds from savers to investors. | It indirectly promotes capital formation by enhancing the liquidity of securities. |
| Buying and Selling | Only buying of securities takes place and securities are not sold here. | Both buying and selling of securities takes place. |
| Price Determination |
Management of the company determines the prices of securities to be issued. | Price of securities are determined by market forces of demand and supply (for the securities). |
| Entry | All companies enter the primary market to raise capital for their operations. | Only listed companies’ securities are bought and sold in the secondary market. |
Question 12.
Rahul purchased a washing machine from an electronics store at a discount of 40%.
The salesman assured him of the quality and assured that the product was in proper working condition, but was put up in sale due to off-season and stiff competition in the market. Believing him, Rahul bought the machine without bill to get an additional benefit of tax reduction.
After two months, the machine broke down. The seller refused to either accept the complaint or take any further step to compensate for the loss.
Name the redressal agency under the Consumer Protection Act, 2019 where Rahul can file the complaint. Also, mention the responsibilities of Rahul here, while purchasing and using a washing machine.
Or
Mr. Seth and his wife had booked business class tickets for Air Mindo Flight from New York to Mumbai on 14th October, 2021 and paid a total of ₹ 2,43,241. The complainants had paid for business class seats, but had been provided defective seats. As a result, they had to bear physical discomfort and mental harassment. Air Mindo was found guilty of deficiency in service.
District Commission, Ahmedabad allowed Mr and Mrs Seth to file a complaint by Consumer Education and Research Society (CERS), Ahmedabad, against the Regional Manager of Air Mindo, Ahmedabad and the Commercial Director of Air Mindo, Mumbai. It was observed by the Commission that the airline was guilty of deficiency in service and directed it to refund Mr. Seth’s ₹ 2,43,241 along with 9% interest from the date of complaint.
(i) Is the step taken by them appreciable or not?
(ii) What are the other possible reliefs they could ask for? State any four.
Answer:
Rahul cannot file a complaint to redressal agency under the Consumer Protection Act, 2019 as he has not taken the bill while purchasing washing machine. Thus, he has not exercised his responsibility properly. The responsibilities of Rahul are as follows (any four)
(i) He should purchase standardised products as they provide quality assurance. He should look for ISI mark on electrical goods.
(ii) He must read the labels carefully, to have complete information about price, quantity, content etc.
(iii) He should always ask for cash memo, as it is a proof of purchase required at the time of taking any legal action.
(iv) He should take initiative to form consumer societies to provide education to other customers as well.
(v) He should respect the environment and avoid creating the pollution.
Or
(i) Yes, the step taken by them is appreciable.
(ii) Other possible reliefs could be
(a) To pay punitive damages in appropriate circumstances.
(b) To discontinue the airline service.
(c) To remove the deficiency in services.
(d) To pay an amount to be credited to consumer welfare fund or any other organisation be utilised in the prescribed manner.