Students must start practicing the questions from CBSE Sample Papers for Class 12 Business Studies with Solutions Set 5 are designed as per the revised syllabus.
CBSE Sample Papers for Class 12 Business Studies Set 5 with Solutions
Time : 3 hrs Max.
Marks : 80
Instructions
- This question paper contains 34 questions.
- Marks are indicated against each question.
- Answers should be brief and to the point.
- Answers to the questions carrying 3 marks may be from 50 to 75 words.
- Answers to the questions carrying 4 marks may be about 150 words.
- Answers to the questions carrying 6 marks may be about 200 words.
- Attempt all parts of the questions together.
Question 1.
“Spirit of invention and innovation among people” is the component of which environment? [1]
(a) Legal environment
(b) Technological environment
(c) Social environment
(d) Economic environment
Answer:
(b) Technological environment
Question 2.
The impact of financial leverage on the profitability of a business can be seen through which analysis? [1]
(a) EBT-EPS
(b) EAT-EPS
(c) EBIT-EPS
(d) EBIT-EBT
Answer:
(c) EBIT-EPS
Question 3.
An analysis that reveal the number and type of employees available with the organisation is [1]
(a) workforce analysis
(b) workload analysis
(c) medical examination
(d) internal source
Answer:
(a) workforce analysis
Question 4.
Natural disaster like flood in Kerala lead to failure of production sales strategies of many companies. Which limitation of planning is highlighted? [1]
(a) Planning leads to rigidity
(b) Planning may not work in dynamic environment
(c) Planning reduces creativity
(d) Planning does not guarantee success
Answer:
(d) Planning does not guarantee success
Question 5.
Having transformed 3,000 Kirana stores across eight cities into virtual super markets, the start-up quick flee further decided in advance, to collaborate with 18,000-22,000 store owners in top 40 cities of the country by the end of this year. The company has set its eye on digitising over 2,00,000 Kirana stores over next 2430 months. Identify the step in the process of planning discussed above. [1]
(a) Setting objectives
(b) Developing premises
(c) Evaluating alternative courses
(d) Selecting an alternative
Answer:
(a) Setting objectives
Question 6.
Statement I Accountability can be delegated. [1]
Statement II Responsibility can be delegated completely.
Alternatives
(a) Statement I is true and Statement II is false
(b) Statement II is true and Statement I is false
(c) Both the statements are true
(d) Both the statements are false
Answer:
(d) Responsibility cannot be entirely delegated while accountability cannot be delegated at all.
Question 7.
Which of the following is incorrect with regard to characteristics of directing? [1]
(a) Directing is a continuous process
(b) Directing flows from bottom to top
(c) Directing takes place at every level of management
(d) Directing initiates action
Answer:
(b) Directing flows from top to bottom
Question 8.
Choose the correct option regarding the arrangement of current assets in order of liquidity from highest to lowest. [1]
(a) Marketable securities, cash, debtors, bills receivables
(b) Prepaid expenses, cash, marketable securities, bills receivables
(c) Bills receivables, cash, marketable securities, debtors
(d) Cash, marketable securities, bills receivables, debtors
Answer:
(d) Cash, marketable securities, bills receivables, debtors
Question 9.
Which of the following statements is incorrect? [1]
(a) Opportunity is referred to the positive internal trends or changes that will help the person to improve his/her performance.
(b) Business environment is the sum total of all things internal to business firms.
(c) Business environment is a relative concept.
(d) None of the above
Answer:
(b) Business environment is the sum total of all things internal to business firms
Question 10.
Philippines aero group PAL Holdings announced discounted fares, starting as low as ₹ 1,599 for domestic destinations operated by its Indian joint venture carrier and ₹ 2,599 for international flights operated by other group airlines under a limited period offer. Suggest the medium of communication, which can be used by the firm to inform a large number of people about the new fares. [1]
(a) Personal selling
(b) Sales promotion
(c) Advertising
(d) Public relations
Answer:
(c) Advertising
Question 11.
Identify the principle of Fayol illustrated by the above picture in which manager is asking for suggestions from his subordinates to achieve the projected sales. [1]
(a) Equity
(b) Stability of personnel
(c) Scalar chain
(d) Unity of direction
Answer:
(a) Equity
Question 12.
Match the Column I with Column II on the basis of Maslow’s need hierarchy theory of motivation. [1]
| Column I | Column II |
| A Stability of Income | (i) Self-actualisation |
| B. Acceptance and Friendship | (ii) Basic physiological need |
| C. Growth | (iii) Security need |
| D. Shelter | (iv) Affiliation need |
Codes
A — B — C –D
(i) (iii) –(iv) –(i) — (ii)
(ii) (ii) — (iv) — (iii) –(i)
(iii) (iv) — (iii) — (i) — (ii)
(iv) (ii) — (iii) –(iv) –(i)
Answer:
(a) (iii), (iv), (i), (ii)
Question 13.
Himesh is a senior manager in a software consultancy firm. He regularly prepares performance reports of his subordinates as part of appraisal. The step of controlling process highlighted here is [1]
(a) measuring performance
(b) compare performance against standard
(c) analysing deviation
(d) taking corrective action
Answer:
(a) measuring performance
Question 14.
Assertion (A) The activities of each department need to be linked through coordination. [1]
Reason (R) Specialists usually think that they are only qualified to evaluate, judge and decide according to their professional criteria.
Alternatives
(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A)
(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true
Answer:
(b) Both Assertion (A) and Reason (R) are true, but
Reason (R) is not the correct explanation of
Assertion (A)
Question 15.
In a construction company, the procurement manager consistently awards contracts to a close friend’s construction firm without following proper bidding procedures or considering other qualified contractors. Despite the friend’s firm often charging higher prices and delivering subpar quality, the manager prioritises personal connections over company’s best interest. Which principle of management has been violated in this situation?
(a) Unity of command
(b) Unity of direction
(c) Subordinating personal interest to general interest
(d) Equity
Answer:
(c) Subordinating personal interest to general interest
Question 16.
Personal objectives are related with satisfying the personal needs of the employees. Management must seek to satisfy the diverse needs of employees like [1]
(a) financial needs, by giving competitive salary and perks
(b) social needs, by peer recognition
(c) higher level needs, by providing opportunities of personal growth and development
(d) All of the above
Answer:
(d) The satisfaction of personal objectives of individuals is necessary as only satisfied employees will help to achieve the organisational goals.
Question 17.
Suhasini plans her winter collection in the month of June itself. She has to then ensure that there is adequate workforce and continuously monitor whether production is proceeding according to plans. Her marketing department also has to be briefed in time to prepare their promotional and advertising campaigns. Identify the characteristic of coordination to which the above case is related. [1]
(a) Coordination is an all pervasive function
(b) Coordination is a deliberate function
(c) Coordination is a continuous process
(d) Coordination ensures unity of action
Answer:
(c) Coordination is a continuous process
Question 18.
Statement I Not only employee-turnover, but frequent termination of rotation must also be avoided.
Statement II Employee must be provided the feeling of job security. With feeling of insecurity of job, the employees cannot contribute their maximum. [1]
Alternatives
(a) Statement I is true and Statement II is false
(b) Statement I is false and Statement II is true
(c) Both the statements are true
(d) Both the statements are false
Answer:
(c) Both the statements are true
Question 19.
The main objective of ‘motion study’ is ……… [1]
(a) to save cost of labour and machines
(b) to determine and eliminate the unnecessary movements
(c) to represent a clear picture of management
(d) to plan and execute day-to-day work
Answer:
(b) to determine and eliminate the unnecessary movements
Question 20.
After obtaining the Post Graduate degree in the subject of ‘Business Environment’, Mr. Saksham Miglani was appointed as the manager in a company. He noticed that the market changes taking place very fast were having a negative impact on the company. Taking advantage of his academic ability, he made a thorough study of the business environment. Based on his study, he prepared a formula to cope with the rapid changes taking place. Within no time, the negative impact on the company of the changes taking place disappeared. Now, the company is running successfully, Identify the point of importance of the business environment highlighted in the above event. [1]
(a) It helps the firm in identifying the threats and early warning signals.
(b) It enables the firm in identifying opportunities and getting the first mover advantage.
(c) It helps in tapping useful resources.
(d) It helps in coping with rapid changes.
Answer:
(d) It helps in coping with rapid changes.
Question 21.
Ankit is a marketing head in Avenue Ltd. He prepare sales target for upcoming year. For this, he analyse the previous year’s sales data, growth trend of the company, market demand, competitors strategy, etc. The activities performed by Ankit in the given case highlights one of the characteristics of planning. Identify and comment on the characteristic so identified. [3]
Answer:
The characteristic of planning highlighted in the given case is ‘Planning is a mental exercise’.
Planning is a mental exercise because of the reasons stated below (any two)
- It requires application of the mind involving foresight, intelligent imagination and sound judgement.
- It is basically an intellectual activity of thinking rather than doing because planning determines the actions to be taken.
- It requires logical and systematic thinking rather than guesswork or intuitional thinking. In other words, thinking for planning must be orderly, based on the analysis of facts and forecasts.
Question 22.
“Controlling is an indispensable function in the process of management.” In the light of this statement, explain its importance. [3]
Or
“Directing is the least important function of management.” Do you agree with this statement? Give any two reasons in support of your answer.
Answer:
Controlling is an indispensable function of management due to the following reasons
- Accomplishing Organisational Goals It measures progress towards the organisational goals and find out deviations. In the absence of control system, activities may not be carried out according to plans.
- Judging Accuracy of Standards Through an effective control system, managers can easily judge the accuracy of standards.
- Making Efficient Use of Resources By exercising control, a manager seeks to reduce wastage and spoilage of resources.
Or
No, the statement is incorrect. Directing is of great importance for management.
Its importance is as follows (any two)
- Initiates Action Directing is executing function of converting plans into action. It initiates action in the organisation for the achievement of predetermined goals.
- Introduces Changes Employees are generally reluctant towards changes. Manager through effective directions helps the employees to adopt to such changes.
- Provides Leadership Through direction, manager provides motivation and leadership to employees which helps them to identify their potentials, leading to growth.
Question 23.
Samiksha and Amit were both working in a multi-national company. Samiksha was a hard worker and was quite proficient in her work. At the time of performance appraisal, the performance of Samiksha was judged better than Amit. Even then, their boss Mr Raj Kashyap decided to promote Amit, stating that being a female, Samiksha would not be able to handle the complications of a higher post. [3]
(i) Identify and explain the principle of management which was not being followed by the company.
(ii) State two effects of violating the principle.
Answer:
(i) Multinational company was not following the principle of equity as the manager promoted Amit on the grounds that a female will not be able to handle the complications of a higher post. Fayol in his principle clearly stated that the managers should be fair and impartial while dealing with their subordinates. There should be no discrimination on the basis of caste, sex or religion. The principle of equity implies that similar treatment is assured to employees in similar positions.
(ii) Two effects of violating the principle are
- Dissatisfaction amongst employees.
- Poor relations between workers and managers.
Question 24.
Sound financial management is the key to prosperity of business. Explain why? [3]
Or
State three advantages of screen based trading system.
Answer:
Financial management soundness ensures the following, which are the key to prosperity of business
- Availability of adequate funds, whenever required. through financial planning.
- Procurement of funds at reasonable cost, through financing decision.
- Effective utilisation of funds, through investing decision.
Or
The three advantages of screen based trading system are as follows:
- It ensures transparency as it allows participants to see the prices of securities in the market while business is being transacted.
- It enables a large number of participants to trade with each other, leading to improvement of liquidity of the market.
- All the trading centers spread across the country have been brought onto one trading platform.
Question 25.
Identify the principle of management violated in the following cases and explain them. [4]
(i) Mandeep, a manager, speaks to people at all levels, including his as well as other departments.
(ii) Keshav, a manager, expects his subordinates to work for personal satisfaction and contentment, without any monetary reward.
(iii) Gaurav, a manager, expects that his subordinate produce instant results, without giving him sufficient time to settle in the new environment.
(iv) Vinay, a manager, is not strict with his employees regarding timings and targets to work.
Answer:
(i) Scalar Chain According to Fayol, scalar chain refers to the chain of authority and communication that runs from top to bottom and should be followed by managers and their subordinates.
The above figure illustrates the scalar chain. If D and G wants to communicate, the message should usually move up through C, B, A, E, F and then G, whereas in the given case, the manager is communicating with all levels and all departments, without following the scalar chain.
(ii) Remuneration of Employees According to Fayol, the quantum and methods of remuneration payable to employees should be fair and reasonable. It should be satisfactory to both employers and employees, which gives them a reasonable standard of living and should be within the paying capacity of the company.
(iii) Stability of Personnel According to Fayol, employee turnover should be minimised to maintain organisational efficiency. Therefore, suppose an individual gets selected for a post, then he should be given appropriate time to prove his abilities.
(iv) Discipline is the sincerity and obedience towards organizational rules and regulations, as these are necessary for the smooth functioning of an organisation. According to Fayol, good superiors at all levels, fair agreements and judicious application of penalties are helpful in maintaining discipline. It means obedience on part of workers as well as managers.
Question 26.
Explain following points of importance of consumer protection from the point of view of business. [4]
(i) Long-term interest of business
(ii) Business uses society’s resources
Or
Explain the following rights of a consumer
(i) Right to safety
(ii) Right to consumer education
Answer:
(i) Long-term Interest of Business Customer is the foundation of business. Satisfied consumers not only bring repeated sales but also give positive feedback about the product, which helps in increase the customer-base of business.
(ii) Business uses Society’s Resources Business firms use resources that belong to the society such as manpower, mineral resources, capital etc. Therefore, it is the responsibility of business to convert these resources into useful goods and services for the welfare of society.
Or
(i) Right to Safety It means a consumer has a right to be protected against the marketing of such goods and services that are hazardous to life and health. Thus, consumers are educated to use standardised goods, such as electrical goods with ISI mark, as such goods would be an assurance of meeting specifications.
(ii) Right to Consumer Education Consumer should have knowledge about the various rights and reliefs provided by the legislations to protect their interest. Every consumer has the right to be well informed about his rights and to spread awareness and education by forming consumer organisations and associations.
Question 27.
How the promotional tool like personal selling helps in increasing the sales of businessmen? Explain. [4]
Answer:
The promotional tool of marketing mix that plays a persuasive, service and informative role and thereby link a business firm to its customers is personal selling. It refers to the oral presentation of message in the form of conversation with one or more prospective customers for the purpose of making sales.
Companies appoint sales persons to contact prospective buyers and create awareness about the product and develop product preferences with the aim of making sale.
Importance of Personal Selling to a Business:
Personal selling is an effective tool of promotion mix. Its importance to business is judged by the following factors
- Flexible Tool It is personal in nature and offers the salesperson an advantages of adjusting as per the needs of the customer.
- Link with Customers There is a direct contact between the salesman and the prospects, which reduces chances of diffusion and distortion in the desired message.
- Feedback It enables the business to obtain the feedback from the customers and accordingly prepare the strategies for the future.
Question 28.
Arnab has been appointed as a manager in ‘Tifco Gears Ltd’, engaged in a business of giving vehicles on rent. However, he does not know who he has to take orders from and to whom he is accountable. There is no reporting relationship established in the company. [4]
(i) Identify and explain the step of organising process being overlooked in the above case.
(ii) Also, state the two steps which are performed before the step identified in (i) above.
Answer:
(i) The step of organising process being overlooked by the company is ‘establishing reporting relationships’. In an organisation, it is necessary that every individual must know whom he has to take orders from and to whom he is accountable, to facilitate coordination between different activities in the organisation.
(ii) The two steps of process performed before above said step are:
- Departmentalisation It is the process of dividing the work into small and manageable activities, and further grouping the activities of similar nature, together. Departments can be created on the basis of products, functions and territory.
- Assignment of Duties Once the departments are created, each department is placed under the charge of an individual, called department head. Then, each job is allocated to an individual, according to his knowledge and skill. These should be a proper match between the nature of jobs and the ability of an individual.
Question 29.
Keeping in mind that it is a highly capital intensive sector, what factors will affect the fixed and working capital?
Give reasons with regard to both in support of your answer. [4]
Or
The decision regarding determination of sources of finance is dependent on many factors. Discuss any four such factors.
Answer:
The working and fixed capital requirement of S Ltd will be high due to following reasons (any four)
- The business is capital intensive and the scale of operation is large.
- Heavy investments are required for building up the production base and for technological upgradation.
- In case of steel industry, the major input are iron ore and coal. The ratio of cost of raw material to total cost is very high. Hence, higher will be the need for working capital.
- The longer the operating cycle, the larger is the amount of working capital required, as the funds get locked up in the production process for a long-period of time.
- Terms of credit for buying and selling goods, discount allowed by suppliers and to the customers also determine the quantum of working capital.
Or
The decision regarding determination of sources of finance is dependent on following factors (any tour)
- Cost The cost of raising funds through different sources are different. Thus, before selecting a source of fund, costs should be compared.
- Risk Some degree of risk is involved in every source of finance. More risk is associated with borrowed funds as compared to owner’s fund.
- Cash Flow Position It also helps in selecting the securities as smooth and steady cash flow can easily afford borrowed funds but if a company faces shortage of cash flows, then it must opt for owners fund.
- State of Capital Market The conditions of capital market also help in deciding the type of securities to be raised. During boom period, demand is more for equity shares but in depression, debt securities are more in demand.
- Fixed Operating Costs If a business has high fixed operating costs, it must reduce fixed financing costs. Hence, equity financing is better. Similarly, if fixed operating cost are less, more debt financing should be preferred.
Question 30.
Ashutosh Fabrics Ltd. has a plan of increasing profits by 30%. For this, it has incurred a lot of time and money. But the competition starts increasing, so it could not change the plan to beat its competitors as huge amount of money had already been spent the pre-decided plan. It caused huge losses to the company. Identify and explain any two limitations of planning highlighted in this case by quoting lines. [4]
Answer:
Limitations of planning highlighted in the given case are
(i) Planning is a Time Consuming Process: The lines “For this, it has incurred a lot of time and money.” Sometimes, plans to be drawn up take so much of time that there is not much time left for their implementation. This leads to failure of planning.
(ii) Planning Leads to Rigidity The lines : “The competition starts increasing spend to the pre-decided plan.” A specific plan made in an organisation clearly indicates the obsective to be achieved and the ways of doing work. Since, a manager may not be able to change these plans, it leads to rigidity.
Question 31.
Read the statements given in point (i) and (ii) answer the questions that follows [3+3=6]
(i) Deepak Ltd. has hired 100 salesmen who will be assigned the task of contacting prospective buyers and creating awareness about the new range of products introduced by the company.
(a) Identify the element of promotion described in the given lines.
(b) Explain two features of that element identified above.
(ii) Honda sells its cars and vans through company approved retailers and covers a wide area of market.
(a) Identify channel of distribution adopted by Honda.
(b) Discuss in brief the other two channels also.
Answer:
The working and fixed capital requirement of Ltd will be high due to following reasons (any four)
- The business is capital intensive and the scale of operation is large.
- Heavy investments are required for building up the production base and for technological upgradation.
- In case of steel industry, the major input are iron ore and coal. The ratio of cost of raw material to total cost is very high. Hence, higher will be the need for working capital.
- The longer the operating cycle, the larger is the amount of working capital required, as the funds get locked up in the production process for a long-period of time.
- Terms of credit for buying and selling goods, discount allowed by suppliers and to the customers also determine the quantum of working capital.
Question 32.
Sahil, the director of a textile company, is planning to manufacture bags for the utilisation of waste material from one of his textile units. For this, he decided to setup a new manufacturing unit. He also thought of giving equal opportunities to men and women.
For this, he selected S Chatterjee, Inderjeet Kaur, Aslam and Sarabject as heads of sales, accounts, purchase and production departments.
(i) Identify and state the next two steps that Sahil has to follow in the staffing process after selecting the above heads.
(ii) What benefits does a company derive by following the process of staffing?
Answer:
(i) Selection is done in the third step, in which a prospective candidate is chosen from the pool of candidates. It ensures that the organisation gets the best among the available and it enhances the morale of selected candidate.
The next two steps are as follows:
- Placement and Orientation In this step, employee occupies the position, 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. - Training and Development In this step, training is imparted to the selected candidate, by which he/she can enchance his/her skills, knowledge and through this, one can explore the opportunities.
(ii) Two benefits of staffing in an organisation are [6]
- Obtaining Competent Personnel It ensures the availability of the most suitable and capable person for various jobs.
- Higher Performance By placing the right person at the right job, it ensures better performance.
Or
Explain the following
(i) Controlling takes place on the basis of certain standards, developed by planning.
(ii) Planning without controlling is meaningless.
(iii) Planning is perscriptive, whereas controlling is evaluative.
Answer:
(i) Controlling takes Place on the Basis of Certain Standards, Developed by Planning The standards of performance which serve as the basis of controlling are provided by planning. If the standards are not set In advance, managers have nothing to control. Planning is clearly a pre-requisite foc controlling. Thus. controlling is blind without planning.
(ii) Planning without Controlling is Meaningless Once a plan becomes operational, controlling is necessary to monitor the progress, measure it. discover deviations and initiate corrective measures to ensure that events conform to plans. Thus planning without controlling is meaningless.
(iii) Planning is Prescriptive, whereas Controlling is Evaluative Planning is basically an intellectual process involving thinking articulation and analysis to discover and prescribe an appropriate course of action for achieving objectives. Controlling, on the other hand. checks whether decisions have been translated into desired action, Thus, controlling is evaluative.
Question 33.
(i) Explain any two non-financial incentives from the following [3+3=6]
(a) Job enrichment
(b) Perquisites
(c) Job security
Answer:
(i) Non-financial incentives are (any two)
(a) Job Enrichment It is concerned with designing jobs that include greater variety of work content, require higher level of knowledge and skill, give workers more autonomy and responsibility, and provide opportunity for personal growth and a meaningful work experience.
(b) Perquisites These include benefits such as car allowance, housing, medical aid and education to the children, etc., that are offered to employees over and above the salary.
(c) Job Security Employees want their jobs to be secure. They want certain stability about future income and work so that they do not feel worried about these aspects and work with greater zeal.
(ii) Distinguish between leader and manager on any three basis. [3+3=6]
Answer:
| Basis | Leader | Manager |
| Formal Rights | A leader has no formal rights. | A manager has certain formal rights. |
| Functions | A leader is to guide and motivate his followers. | A manager is to plan, organise, staff, direct motivate and control |
| Necessity | Leadership is not a necessity for an organisation. | Managership is a necessity for an organisation. |
Or
(i) Explain any two features of controlling from the following
(a) Controlling is a pervasive function
(b) Controlling is a continuous function
(c) Both a backward looking as well as a forward looking function.
Answer:
(i) Features of controlling are (any two)
(a) Controlling is a Pervasive Function Controlling is performed by all managers, to keep a check on the activities of their subordinates. It is equally required in a business as well as non-business organisations such as hospitals, a club, an educational institution, etc.
(b) Controlling is a Continuous Function Control should not be misunderstood as the last function of the management process. By analysing deviations and taking corrective action, it helps in formulating better plans for the future. Thus, it is a function that brings the management cycle back to planning and is regarded as a continuous function.
(c) Both a Backward-looking as well as a ‘Forward-looking Function Controlling is backward-looking process because it is like a post-mortem of past activities to find out deviations from standard plans and it is also a forward looking process, as it seeks to improve future results by taking corrective action. (1.5 x2 = 3)
(ii) Mention the main standards used in various functional areas.
Answer:
| Functional Areas | Standards Used |
| Production | Quality, quantity, cost, individual job. |
| Marketing | Sales volume, sales expenses, advertising expenditure, sales person performance |
| Human Resources | Labour relations, labour turnover, labour absenteeism |
| Finance and Accounting | Capital expenditure, inventories, flow of capital, liquidity |
Question 34.
There are two companies B and D. Total contribution of capital is ₹ 40 lakh each. The ratio of equity to total capital in company B is ₹ 10 lakh and debt is ₹ 30 lakh while in company D, the total equity capital is ₹ 40 lakh, sourced through equity. EBIT is ₹ 8 lakh, the interest rate on debt is 10% and the tax rate is 30%. Which company enjoys favourable financial leverage? [6]
Answer:
As per the given details, company enjoying the favourable financial leverage can be identified as below:
Company B is in the position of favourable financial leverage as use of debt increases the EPS and thus, the situation is considered as favourable for trading on equity.
