Practice paper-Marking Scheme

Business Studies
Class 12

1 b. Apex level of management

2 (d)-social environment
3 (d) None of the above.
4 (c) Both (a) and (b)
5 (a) Two managers deal with the same problem differently.
6 (b)Technological environment
7 (c) Literacy rates
8 (a) Coordination
9 (c) Implementing the plan
10 (b) Time to be spent in performing a task
11 (b) Divisional structure
12 (c) Promotion/(a)-1, (b)-2
13 (b) Commercial paper
14 (b) Money market
15 (a) Short-term
16 (b) 14 days to 365 days
17 (b) Trade mark
18 (a) Price
19 (c) Societal Marketing concept
20 (d) Promotion
21 Top level of management.
The other functions at this level are outlined below:
1. She is responsible for the success and failure of the organization.
2. She is responsible for all the business activities and its impact on
society.
3. She has to coordinate the activities of different departments in pursuit of
common goals.

22 Apprenticeship training is provided to the people seeking to enter

skilled jobs like plumbers, electricians or iron workers. They are
provided training under the guidance of a master worker.
Vestibule training is a popular method for providing off the job training
through which the trainees learn their jobs on the equipment they will be
using at their actual work place. This is usually done when employees
are required to handle sophisticated machinery and equipment.

23  Importance of controlling:
 It helps in accomplishing organisational goals by constantly monitoring
the performance of the employees and bringing to light the deviations, if
 any, and taking appropriate corrective action.
 It helps the business managers to judge the objectivity and accuracy of
the standards.
 It seeks to make efficient use of resources.
 It seeks to motivate the employees and helps them in giving a better
performance.
 It creates an atmosphere of order and discipline in the organisation.
 It facilitates coordination in action by providing direction to all
activities within and among departments.
(Any two)
Or
Process of controlling:
 Setting performance standards in clear, specific and measurable terms.
 Measurement of actual performance as far as possible in the same units
in which standards are set.
 Comparing actual performance with standards to identify deviations if
any.

24  Functions of SEBI:
 SEBI prohibits fraudulent and unfair trade practices in the securities
market
 Promotion of fair practices and code of conduct in securities market
 Undertaking steps for investor protection
 Controlling insider trading and imposing penalties for such malpractices.
(any three)
Or
Functions of Stock Exchange
25 1. The next three steps to be followed by Nishant in the selection process
after giving an advertising and short listing ten candidates per post after
conducting different selection tests are as follows:
Employment Interview: It is a face-to-face interaction between the
interviewers and prospective candidate. It involves a formal, in-depth
conversation that is conducted to evaluate the applicant’s suitability for
the job.
Reference and Background Checks: At the time of filling up of the job
application form,the prospective candidates are required to provide
names, addresses, and telephone numbers of references for the purpose
of verifying information and gaining additional information about
him/her.
Selection Decision: The final decision about the selection is made from
among the candidates who pass the tests and interview.
26 Democratic style of leadership is being adopted by Umang Gupta. Under this
style of leadership a leader takes suggestions from his subordinates and takes
any decision taking these suggestions into consideration.
This is one of the most popular style of leadership nowadays because it brings
the feeling of belongingness in the employees. They feel motivated and work
with more sincerity.
27 To be written accordingly:
Merits/Demerits of informal communication:
Or
Informal communication: “One of his colleagues sent a text message to his
superior, Mr. B. Chatterjee. Mr. B. Chatterjee immediately sent a text message
to the employees of the organisation requesting them to donate blood for
Prateek.”
Formal communication: “When the general manger came to know about it, he
ordered for fumigation in the company premises and cleaning surroundings.”
The features of informal communication are as follows:
The grapevine/ informal communication spreads very fast and sometimes gets
distorted.
It is very difficult to detect the source of such communication.

28 Factors affecting fixed capital requirements:

1. Nature/type of business
2. Scale of operations
3.Choice of techniques
4. Technology upgradation
5. Growth prospects
6. Diversification
7. Financing alternatives
8. Level of collaboration
Or
Factors affecting dividend decisions:
1. If the earnings of the company are high, dividends are paid at a higher rate.
If the earnings of a company are stable, it is likely to pay higher dividends.
2. A company is more likely to maintain a stable dividend rate over a period of
time,unless there is a significant change in its earnings.
3. A company planning to pursue a growth opportunity is likely to pay lower
dividends.
4. The dividends are paid in cash, therefore if the cash flow of the company is
good, it is likely to pay higher dividends.
5. If the shareholders prefer regular income in form of dividends, the company
is likely to maintain a dividend payout rate.
6. If the tax rate is high, the company is likely to pay less dividend.
7. If a company wants positive reactions at stock market, It Is likely to pay
higher dividends.
8. A large company can access funds easily from capital market as per its
 requirements, therefore, it is likely to retain lesser profits and is likely to pay
higher dividends.
9. The legal constraint should be considered at the time of dividend payment by
a company.
10. The contractual constraints may also affect the dividend payment by a
company.

29 Capital structure is the concept of Financial Management as advised by Mr.

Sethi in the above situation.
Capital structure refers to the mix between owners funds and borrowed funds.
The four factors affecting capital structure which have been discussed between
Mr. Sharma and Mr. Sethi are explained below:
Cashflow position: The issue of debt capital involves a fixed burden on the
company in the form of payment of interest and repayment of capital. Therefore
if the cash flow position of a company is good it may issue debt else equity to
raise the required amount of capital.
Risk Consideration: Financial risk refers to a situation when a company is
unable to meet its fixed financial charges. Financial risk of the company
increases with the higher use of debt. This is because issue of debt involves
fixed commitment in terms of payment of interest and repayment of capital.
Tax rate: Considering the fact that amount of interest paid is a deductible
expense, cost of debt is affected by the tax rate. If for example a firm is
borrowing @ 10% and the tax rate is 30%, the after tax cost of debt is only 7%.
Therefore, when the tax rate is higher it makes debt relatively cheaper and
increases its attraction vis-a-vis equity.
Control: The issue of debentures doesn’t affect the control of the equity
shareholders over the business as the debenture holders do not have the right to
participate in the management of the business. (Any Three)

30 Right to be informed:
The consumer has a right to have complete information about the product
he/she intends to buy including its ingredients, date of manufacturing, price ,
quantity, directions for use, etc.
Right to seek redressal:
The consumer has a right to get relief(s) in case the product or service falls
short of his expectations. The consumer protection act provides a number of
reliefs to the consumers, for example:
(a) Removal of defect in the delivered goods or service.
(b) Replacement of defected product.
(c) Compensation to be paid for any loss or injury caused by the product.
31 Harmony, Not Discord
Taylor emphasised that there should be complete harmony between the
management and workers instead ofa kind of class-conflict, the managers
versus workers.
To achieve this state, Taylor called for complete mental revolution on the part
of both management and workers.
 The prosperity for the employer cannot exist fora long time unless it is
accompanied by prosperity for the employees and vice versa.
He advocated paternalistic style of management should be in practice.
Cooperation, Not Individualism
This principle is an extension of principle of ‘Harmony Not Discord’
There should be complete cooperation between the labour and the management
instead of individualism.
Competition should be replaced by cooperation and there should be an almost
equal division of work and responsibility between workers and management.
Also, management should reward workers for their suggestions which results in
substantial reduction in costs.
At the same time workers should desist from going on strike and making
unreasonable demands on the management
Development of Each and Every Person to His or Her Greatest Efficiency
and Prosperity
Taylor was of the view that the concern for efficiency could be built in right
from the process of employee selection.
Each person should be scientifically selected and the work assigned should suit
her/his physical, mental and intellectual capabilities.
To increase efficiency, they should be given the required training.
Efficient employees would produce more and earn more. This will ensure their
greatest efficiency and prosperity for both company and workers.

32 Importance of planning:
1. Planning provides direction as it acts as a guide for deciding what course of
action should be taken to attain the organisational goals.
2. Planning reduces the risk of uncertaintyarising due to the dynamic nature of
business environment as it enables a manager to anticipate and meet changes
effectively.
3. Planning reduces overlapping & wasteful activities as it serves as the basis
for coordinating the activities and efforts of different divisions and individuals.
4. Planning promotes innovation as it encourages new ideas that can take shape
of concrete plans.
5. Planning facilitates decision making as it enables a manager to choose the
best alternative course ‘of action among the various available alternatives in
light of present and future conditions.
6. Planning establishes standards for controlling. Planning provides standards
against which the actual performance is measured and timely corrective actions
the taken. ( Any Four)
Or
1. Planning is the function of management which is being described in the
above paragraph.
2. The various steps involved in the planning process are explained below:
 Setting objectives: The planning process is initiated by setting the
objectives in clear, specific and measurable terms. The objectives
may be set for the organization as a whole and for each department
 or unit within the organization.
“The company plans to increase the sale of its sedan cars by 20%
in next quarter.”
 Developing Premises: Planning process is carried out keeping in
view the assumptions related to the future, which is uncertain.
These assumptions are called premises and may relate to
government policy, interest rate, inflation, etc. Accurate forecasts
are therefore essential for successful planning.
“In order to achieve the desired target the marketing team of the
company considers the impact of policy of the government towards
diesel vehicles and level of competition in this segment of cars.” .
 Identifying alternative courses of action: The next step in the
planning process involves identification of the various ways in
which the goals can be achieved.
“They explore the various available options like offering more
discount to dealers and customers, providing more customer
friendly finance options, lucky draws on test drives, increasing
advertising, offering more of free accessories on the purchase of
the car, etc.”
 Evaluating alternative courses: In order to select the best option,
the relative positive and negative aspects of each alternative should
be evaluated in the light of their feasibility and consequences.
“A thorough analysis of the various available options is done
keeping in view the relative viability of each option.”
 Selecting an alternative: The best plan is adopted to achieve the
desired goals. Sometimes, a combination of plans may be selected
instead of one best course of action.
“The company decides to pursue the option of offering more
discount to dealers and customers in order to boost the sale of
sedan cars.”
 Implement the plan: This step is concerned with putting plans
into action.
“In order to implement the plan, they determine the various
discount packages and communicate the same to their product
dealers. To make the prospective consumers aware about the new
available benefits, advertisements are made through various
sources of print and electronic media.”
 Follow up action: Monitoring of plans is equally important to
ensure that objectives are achieved efficiently and effectively.
“The market analysts of the company keep a close watch on the
revenue from the sedan cars to study the effect of new initiatives
by the company to promote its sales.”

33 The concept used by Vivek Gupta through which he is able to steer his
company to greater heights is Decentralisation. It is a process to distributing the
 authority equally up to the last level of management.
The three advantages of using decentralisation are as follows:
1. Decentralisation helps to promote self-reliance and confidence amongst
the subordinates: When the subordinates are given freedom to take their own
decisions they learn to depend on their own judgment and develop solutions for
the various problems they encounter. Moreover, a decentralisation policy helps
to identify those executives who have the necessary potential to become
dynamic leaders.
2. Relief to top management: Decentralisation reduces the need of direct
supervision and helps to save the time of top management for persuing other
important work.
3. Quick decision-making: In a decentralisedorganisation, managers at all
levels are allowed to take such decisions independently which lie within their
area of jurisdiction. This makes the process of decision making much faster.

34
Basis Marketing Concept
Starting point The marketing efforts start
from the identification of
needs of the target market.
Focus Its focus is on satisfaction
of consumers’ needs.
Means It uses integrated
marketing (in respect of
product, price, promotion
and physical distribution)
as a means to achieve the
objective.
Objectives Its objective is to earn
profits by satisfying needs
of the target market better
than the competitors.
Societal Marketing Concept
The marketing efforts start
from the identification of
needs of the target market and
the society.
Customers’ needs and
society’s well being- It takes
care of long-term well-being
of the consumers as well as
society.
It uses integrated marketing as
a means to achieve the
objective.
Its objectives is to earn profits
through customers satisfaction
and social welfare.

Or
The combination of variables used by Haryaramto prepare its market offerings
are described below:
 Product: “Their products include chips, biscuits , sweets and squashes.”
A product is anything of value i.e. a product or service offered to a
market to satisfy its needs or wants. A product includes physical product,
after ..sale service, handling grievances etc. Every marketer needs to
 constantly review and revise its products in order to enhance customer’s
satisfaction and have a competitive edge.
 Price: “It charges a comparatively higher price than its competitors.”
Price is the monetary value paid in consideration for purchase of a
product or service by a buyer to its seller. It is a very crucial decision for
the marketers as consumers are very sensitive to the pricing. The factors
affecting price determination are cost of product, the utility and demand,
extent of competition in the market, government and legal regulations,
pricing objectives and marketing methods used.
 Place: “It has five of its own retail shops.”Or “It also sells its products
through various
grocery shops.”
It is considered an important element of marketing mix because it
includes all those activities that help in making the goods and services
available to the prospective buyers in the right quantity, at the right time
and in right condition. The two main decisions involved in physical
distribution are physical movement of goods from producers to
consumers and choice of channels of distribution.
 Promotion: “It regularly uses different communication tools to increase
its sales.”
Promotion refers to the set of activities undertaken by a marketer to
inform the prospective buyers about the product and persuading them to
make a purchase. The various components of promotion mix are
advertising, sales promotion, personal selling and public relation.”