CBSE Business Studies Class 12 Sample Paper 1 Page 1

CBSE Sample Paper 5

Class XII 2022-23
Business Studies
Time: 3 Hours Max. Marks: 80
General Instructions:
1. This question paper contains 34 questions.
2. Marks are indicated against each question.
3. Answers should be brief and to the point.
4. Answers to the questions carrying 3 marks may be from 50 to 75 words.
5. Answers to the questions carrying 4 marks may be about 150 words.
6. Answers to the questions carrying 6 marks may be about 200 words.
7. Attempt all parts of the questions together.

1. DK Choudahry who was unwell, called his son Ramesh and gave him a gift packet. Ramesh
opened the packet and saw many crumpled share certificates inside. His grandfather told him
that they had been left behind by his late father. As no trading is now done in physical form,
Ramesh wants to know the process by adopting which he is in a position to deal with these
certificates.
Identify the process.
(a) Dematerialisation (b) Demutualisation
(c) Neither (a) nor (b) (d) Both (a) and (b)

2. Identify the right of consumers being promoted in the given picture.

(a) Right to be heard
(b) Right to seek redressal
(c) Right to be informed
(d) Right to consumer education

3. Manahis Sharma works readymade garments factory. in an production manager. He was shifted
sales department without any substantial change in the responsibility and status.
Which type of recruitment is done in this case?
(a) Horizontal recruitment (b) External recruitment
(c) Internal recruitment (d) None of these
4. A new packaging machine is to be installed in a fast food factory. Which type of decision is
taken while deciding about its installation?
(a) Working capital decision (b) Capital budgeting decision
(c) Financing decision (d) All of these

5. SolarTop Power Private Limited set up a factory for manufacturing solar lanterns in a remote
village as there was no reliable supply of electricity in rural areas. The revenue earned by the
company was sufficient to cover the costs and the risks. The demand of lanterns was increasing
day-by-day, so the company decided to increase production to generate higher sales. For this,
they decided to employ people from the nearby villages as very few job opportunities were
available in that area. The company also decided to open schools and crèches for the children
of its employees.
Identify the objectives of management discussed above.
(a) Social objective (b) Organisational objective
(c) Neither (a) nor (b) (d) Both (a) and (b)

6. Match the work performed by specialist foremen under functional foremanship in Column I
with job assigned to them in Column II.
Column I Column II
A. Ensures (i) Inspector
discipline
B. Check quality of (ii) Instruction
work card clerk
C. Draft (iii) Disciplinary
instructions to
workers
(a) (iii), (ii), (i) (b) (i), (iii), (ii)
(c) (iii), (i), (ii) (d) (ii), (iii), (i)

7. PS Fabric Company is planning to measure potential of each employee for learning new skills
to know their capacity to develop.
Which type of test will cater company’s aim?
(a) Aptitude test
(b) Intelligence test
(c) Trade test
(d) Interest test
8. Which of the following is the first and largest depository presently operational in India.
(a) Central Depository Services Limited (CDSL)
(b) National Securities Depository Limited (NSDL)
(c) Neither (a) nor (b)
(d) Both (a) and (b)

9. Identify the element of directing that aims to influence the behaviour of people to strive them
willingly for the achievement of group goals.
(a) Motivation (b) Supervision
(c) Leadership (d) None of these

10. For the following two statements choose the correct option:
Statement I: Working capital requirements of a company is affected by inflation.
Statement II: ‘Choice of technique’ affects the requirement of fixed capital of a company.
Choose the correct option from the options given below:
(a) Statement II is true and I is false
(b) Statement I is true and II is false
(c) Both the statements are false
(d) Both the statements are true

11. Familiarising the selected employees with the rules and policies of the organisation and
introducing the selected employees to other employees is the process of:
(a) Induction training (b) Performance appraisal
(c) Employment interview (d) None of these

12. ‘The human resource manager assessed the number and type of human resources necessary for
the performance of various jobs under an electronic division, and found it to be understaffed.’
Which type of analysis has been done by human resource manager?
(a) Workload analysis
(b) Workforce analysis
(c) Human resource analysis
(d) None of these
13. A company earned a profit @12% last year. Debts are available in the market @15%. If the
company issue debt for its financial needs, it will be______.
(a) Unlevered (b) Unfavourable levered
(c) Favourable levered (d) Cannot decide

14. Which of the following is not a characteristic of a good brand name?

(a) Short and simple (b) In local language
(c) Sufficiently versatile (d) Distinctive

15. A manager should replace ‘I’ with ‘We’ in all his conversations with workers to foster team
spirit. Which principle of management is being highlighted here?
(a) Order (b) Equity
(c) Discipline (d) Espirit de Corps

16. Arrange the following steps involved in the staffing process in correct sequence:
(i) Estimating the Manpower Requirements
(ii) Selection
(iii) Recruitment
(iv) Performance Appraisal
(v) Training and Development
(vi) Placement and Orientation
(vii) Compensation
(viii) Promotion and career planning
(a) (i), (iii), (ii), (iv), (vi), (v), (vii), (viii)
(b) (i), (ii), (iii), (v), (vi), (vii), (viii), (iv)
(c) (i), (ii), (iii), (vii), (v), (viii), (iv), (vi)
(d) (i), (iii), (ii), (vi), (v), (iv), (viii), (vii)

17. A element/dimension of business environment involves improvements and innovations which

provide new ways of producing goods and services and new methods and techniques of operating
a business?
Select the above element :
(a) Technological (b) Political
(c) Economic (d) Social
18. Which of the following principle of equity does not imply ?
(a) Equal pay to everyone
(b) Fair treatment to all employees
(c) Stern action against the lazy personnel
(d) No discrimination against anyone on the basis of gender, religion, language, caste, belief,
etc.

19. GSV Steel Ltd. is a steel manufacturing company located in India. It is enjoying buoyant
demand for its products as economic growth is about 9 to 10 percent and demand for steel is
growing. The company has decided to set up a new plant to cash on the increase demand. It is
estimated that it will require about ` 5,000 crores to set up and about ` 1,000 crores of working
capital to start the new plant.
Identify the decision taken by the financial manager in the above case?
(a) Financial decision
(b) Investment decision
(c) Dividend decision
(d) Capital structure decision

20. Which of the following is not an advantage of functional structure?

(a) Minimum duplication of work
(b) Coordination across departments
(c) Ease in training of employees
(d) Control and coordination within departments

21. “If we delegate the authority, we multiply it by two; if we decentralise it, we multiply it by
many”. How?

22. Which marketing management philosophy lays more emphasis on the consumer welfare rather
than the consumer satisfaction? How is it different from the Production Concept?

23. Rajesh was working as a First Line Manager. At which level of management was he working?
State any two functions performed at that level.


O
Nowadays the market offers a lot of opportunities to the marketers as the customer income is
rising. People have developed a taste for better quality products even though they may have to
pay more. Their aspiration levels have increased.
(a) Which dimension of business environment is being referred to?
(b) Explain one more dimension of business environment with example.

24. What is meant by ‘Financial Management’ ? State its objective.

O
It is that component of Financial market, in the absence of which the primary market will
become unattractive as there will be no liquidity. Identify the type of Financial market and list
its two functions.

25. In an organisation the morale of the employees is very low in-spite of the different financial
incentives offered to them. The organisation does not provide any developmental opportunities
to them. Neither they are involved in the decision making nor their work appreciated by the
top level management.
(a) Why is the morale of employees low?
(b) State the different incentives that the organisation should offer by giving reference to the
relevant lines.

26. Explain the concept of Democratic style of leadership and state its any two features.


O
‘An ideal controlling technique is the one that checks each and every stage in the process of
production.’ Comment.

27. Elctroreck limited is in the business of manufacturing and exporting untransformed. It has
a share capital of ` 80 lacs at the face value of ` 100 each. Company is considering a major
expansion of its production facilities and wants to raise ` 60 lacs. The finance manager of the
company Mr. Dinkar has recommended that the company can raise funds of the same amount
by issuing 8 % debentures. Given that earning per share of the company after expansion is `
35 and tax rate is 30%, did Mr. Dinkar give a justified recommendation? Show the working.

28. In an organisation different workers completed the same task by adopting different methods,
involving different movements and took different amount of time. This led to a lot of variation
in the type of work performed and the output produced. To do away with this, Rakesh, the
manager decided to eliminate unnecessary diversity of products and find out the best way of
doing the job. Various studies were undertaken to determine standard way and time of doing
a work.
Explain any two techniques of Taylor used by Rakesh.


O
Harish Sharma set up a small factory manufacturing toys. To begin with he employed 12 people
who had the experience of working in small factories. He was a strict task master. He kept all
the decision making power with himself. The employees were frequently leaving the job as they
were not satisfied about his way of dealing with them and as such Harish faced a lot of problems
tackling the employees. He then appointed a Manager who through his experience, creativity
and personalized way created an atmosphere of complete co-operation and coordination which
led to the achievement of goals.
(a) Which principles of management were ignored by Harish? Identify by quoting the lines.
(b) What does the manager’s way of dealing tell about the nature of management? Discuss.

29. Give your argument in the support that success of a business enterprise is significantly influenced
by its environment?

30. State and explain any four points of importance of planning.

31. After laying down the plans, a function is initiated to lay down the organisational structure.
Explain the importance of this function in management.


O
Planning is deciding in advance the future course of action. Explain briefly what all needs to
be done to make effective and efficient plans.

32. A company was marketing ‘water purifiers’ which were very popular due to their quality and
after sales services provided to the customers. The company was a leading company in the
market and earning huge profits. Because of huge profits, the company ignored the after sales
services. As a result, its relations with the customers got spoiled and the image of the company
was damaged in the public. Top management became concerned when the profits for the
current quarter fell steeply. On analysis, it was revealed that ignoring the after sales services
was its reason. Therefore, the company took all possible measures to protect and promote its
favourable image in the eyes of the public. As a result, the goodwill of the company improved
in the society.
(a) Name and state the communication tool used by the marketer in the above case to
improve its image.
(b) Also explain role of the tool as identified in part (a).

33. A company wants to replace its old machinery with new hi tech machines available in the
market. For this, it will have additional funds requirement of at least ` 50 Crores. As a Finance
Manager, help the company in deciding the right source for raising the money by explaining
the different factors that impact such a decision.


O
Market ‘A’ involves the sale of securities by the new companies or further issue of securities by
the existing companies to the investors, whereas Market ‘B’ involves the purchase and sale of
existing securities.
Identify the Market ‘A’ and Market ‘B’ highlighted here and differentiate between the two on
any five basis.

34. Blue Heavens Private Limited purchased a new hi-tech machine from Germany for manufacturing
high quality auto components in a cost effective manner. But during the production process,
the manager observed that the quality of production was not as per standard. On investigation
it was found that there was lack of knowledge amongst the employees of using these hi-tech
machines. So, frequent visit of engineers was required from Germany. This resulted in high
overhead charges.
Suggest what can be done to develop the skills and abilities of employees for producing
high quality products by using these hi-tech machines. Also state how the employees or the
organization will benefit from your suggestion.

******
Page 1 Sample Paper 1 Solutions CBSE Business Studies Class 12

Sample Paper 5 Solutions

Business Studies
Class XII Session 2022-23
Time: 3 Hours Max. Marks: 80
General Instructions:
1. This question paper contains 34 questions.
2. Marks are indicated against each question.
3. Answers should be brief and to the point.
4. Answers to the questions carrying 3 marks may be from 50 to 75 words.
5. Answers to the questions carrying 4 marks may be about 150 words.
6. Answers to the questions carrying 6 marks may be about 200 words.
7. Attempt all parts of the questions together.

1. DK Choudahry who was unwell, called his son 3. Identify the right of consumers being promoted in
Ramesh and gave him a gift packet. Ramesh opened the given picture.
the packet and saw many crumpled share certificates
inside. His grandfather told him that they had been
left behind by his late father. As no trading is now
done in physical form, Ramesh wants to know the
process by adopting which he is in a position to deal
with these certificates.
Identify the process.
(a) Dematerialisation
(b) Demutualisation
(c) Neither (a) nor (b)
(d) Both (a) and (b)


Ans :
(a) Dematerialisation

2. Manahis Sharma works readymade garments

factory. in an production manager. He was shifted
sales department without any substantial change in
the responsibility and status.
Which type of recruitment is done in this case?
(a) Horizontal recruitment
(b) External recruitment
(c) Internal recruitment (a) Right to be heard
(d) None of these (b) Right to seek redressal


Ans : (c) Right to be informed
(d) Right to consumer education
(c) Internal recruitment


Ans :
(b) Right to seek redressal

4. A new packaging machine is to be installed in a fast

food factory. Which type of decision is taken while
deciding about its installation?
(a) Working capital decision
(b) Capital budgeting decision
 (c) Financing decision (c) Trade test
(d) All of these (d) Interest test


Ans :

Ans :
(b) Capital budgeting decision (a) Aptitude test

5. SolarTop Power Private Limited set up a factory

for manufacturing solar lanterns in a remote village
as there was no reliable supply of electricity in
rural areas. The revenue earned by the company
was sufficient to cover the costs and the risks. The
demand of lanterns was increasing day-by-day, so
the company decided to increase production to
generate higher sales. For this, they decided to
employ people from the nearby villages as very few
job opportunities were available in that area. The
company also decided to open schools and crèches
for the children of its employees.
Identify the objectives of management discussed 8. Which of the following is the first and largest
above. depository presently operational in India.
(a) Social objective (a) Central Depository Services Limited (CDSL)
(b) Organisational objective (b) National Securities Depository Limited
(c) Neither (a) nor (b) (NSDL)
(d) Both (a) and (b) (c) Neither (a) nor (b)


Ans : (d) Both (a) and (b)
(d) Both (a) and (b)

Ans :
(b) National Securities Depository Limited (NSDL)
6. Match the work performed by specialist foremen
under functional foremanship in Column I with job 9. Identify the element of directing that aims to
assigned to them in Column II. influence the behaviour of people to strive them
willingly for the achievement of group goals.
Column I Column II
(a) Motivation
A. Ensures discipline (i) Inspector (b) Supervision
B. Check quality of (ii) Instruction card (c) Leadership
work clerk (d) None of these
C. Draft instructions to (iii) Disciplinary


Ans :
workers
(c) Leadership
(a) (iii), (ii), (i)
(b) (i), (iii), (ii)
10. For the following two statements choose the correct
(c) (iii), (i), (ii)
option:
(d) (ii), (iii), (i) Statement I: Working capital requirements of a


Ans : company is affected by inflation.
Statement II: ‘Choice of technique’ affects the
(c) (iii), (i), (ii)
requirement of fixed capital of a company.
Choose the correct option from the options given
7. PS Fabric Company is planning to measure potential below:
of each employee for learning new skills to know (a) Statement II is true and I is false
their capacity to develop.
(b) Statement I is true and II is false
Which type of test will cater company’s aim?
(a) Aptitude test (c) Both the statements are false
(b) Intelligence test (d) Both the statements are true


Ans : 15. A manager should replace ‘I’ with ‘We’ in all his
(d) Both the statements are true conversations with workers to foster team spirit.
Which principle of management is being highlighted
here?
11. Familiarising the selected employees with the rules (a) Order
and policies of the organisation and introducing the (b) Equity
selected employees to other employees is the process
(c) Discipline
of:
(a) Induction training (d) Espirit de Corps
(b) Performance appraisal

Ans :
(c) Employment interview (d) Espirit de Corps
(d) None of these


Ans : 16. Arrange the following steps involved in the staffing
(a) Induction training process in correct sequence:
(i) Estimating the Manpower Requirements
(ii) Selection
12. ‘The human resource manager assessed the number (iii) Recruitment
and type of human resources necessary for the (iv) Performance Appraisal
performance of various jobs under an electronic (v) Training and Development
division, and found it to be understaffed.’ (vi) Placement and Orientation
Which type of analysis has been done by human (vii) Compensation
resource manager? (viii) Promotion and career planning
(a) Workload analysis (a) (i), (iii), (ii), (iv), (vi), (v), (vii), (viii)
(b) Workforce analysis (b) (i), (ii), (iii), (v), (vi), (vii), (viii), (iv)
(c) Human resource analysis (c) (i), (ii), (iii), (vii), (v), (viii), (iv), (vi)
(d) None of these (d) (i), (iii), (ii), (vi), (v), (iv), (viii), (vii)


Ans :

Ans :
(a) Workload analysis (d) (i), (iii), (ii), (vi), (v), (iv), (viii), (vii)

13. A company earned a profit @12% last year. Debts 17. A element/dimension of business environment
are available in the market @15%. If the company involves improvements and innovations which
issue debt for its financial needs, it will be______. provide new ways of producing goods and services
(a) Unlevered and new methods and techniques of operating a
(b) Unfavourable levered business?
(c) Favourable levered Select the above element :
(d) Cannot decide (a) Technological
(b) Political


Ans : (c) Economic
(b) Unfavourable levered (d) Social


Ans :
14. Which of the following is not a characteristic of a
good brand name? (a) Technological
(a) Short and simple
(b) In local language
(c) Sufficiently versatile
(d) Distinctive


Ans :
(b) In local language
18. Which of the following principle of equity does not Whereas, scope of decentralisation of authority
imply ? is wider than delegation. It involves systematic
(a) Equal pay to everyone delegation of authority at all levels and in all
(b) Fair treatment to all employees functions of the organisation. It is an extension of
(c) Stern action against the lazy personnel delegation to the lowest levels in the organisation.
In case of decentralisation, middle and lower level
(d) No discrimination against anyone on the basis
managers are entrusted with authority for taking
of gender, religion, language, caste, belief, etc.
decisions on tasks assigned to them. So, it is clear


Ans : that if we decentralise the authority, we multiply it
by many.
(a) Equal pay to everyone

22. Which marketing management philosophy lays

19. GSV Steel Ltd. is a steel manufacturing company
more emphasis on the consumer welfare rather than
located in India. It is enjoying buoyant demand
the consumer satisfaction? How is it different from
for its products as economic growth is about 9 to
the Production Concept?
10 percent and demand for steel is growing. The
company has decided to set up a new plant to cash

Ans :
on the increase demand. It is estimated that it will The Societal marketing concept lays more emphasis
require about ` 5,000 crores to set up and about on the consumer welfare rather than the consumer
` 1,000 crores of working capital to start the new satisfaction. It is different from the Production
plant. concept in the following ways:
Identify the decision taken by the financial manager
in the above case? Basis Societal Production
(a) Financial decision Marketing Concept
(b) Investment decision Concept
(c) Dividend decision (a) Focus Its main focus Its main
(d) Capital structure decision is on consumer focus is on
welfare while large scale


Ans : satisfying their production
(b) Investment decision needs and wants.
(b) Aim It aims at earning It aims at
20. Which of the following is not an advantage of profits through maximising
functional structure? c u s t o m e r the profits
(a) Minimum duplication of work satisfaction. by increasing
(b) Coordination across departments t h e
(c) Ease in training of employees production
and reducing
(d) Control and coordination within departments the per unit


Ans : cost.
(b) Coordination across departments
23. Rajesh was working as a First Line Manager. At
21. “If we delegate the authority, we multiply it by two; which level of management was he working? State
if we decentralise it, we multiply it by many”. How? any two functions performed at that level.


o


Ans :
Nowadays the market offers a lot of opportunities
Scope of delegation of authority is limited as to the marketers as the customer income is rising.
it is confined to a manager and his immediate People have developed a taste for better quality
subordinates in work unit. It refers to entrusting products even though they may have to pay more.
the authority by an individual to another. Now, it is Their aspiration levels have increased.
clear that if we delegate the authority we multiply it (a) Which dimension of business environment is
by two, i.e., delegator and his subordinate to whom being referred to?
authority is delegated. It is a process of sharing (b) Explain one more dimension of business
of task and authority between a manager and his environment with example.
subordinate.


Ans :
Rajesh was working at the Lower Level of
Management. The functions performed at this level
are:
(a) Act as a link between middle level management
and workers: The lower level management passes
the instructions of middle level management to
the workers and the complaints or suggestions
of the workers to the middle level management.
(b) Supervision of workers: The lower level
management is responsible for overseeing the
activities of workers and to guide and instruct
them.


o
(a) Social environment
(b) Legal dimension: It is concerned with the legal
framework within which the business concerns
operate. It includes the different Acts and the
Legislations passed by the government, courts
and other commissions at different levels, i.e.,
local, state or centre.
For example, Companies Act 2013, Consumer
Protection Act, 1986
24. What is meant by ‘Financial Management’ ? State
its objective.


o
It is that component of Financial market, in the
absence of which the primary market will become
unattractive as there will be no liquidity. Identify the
type of Financial market and list its two functions.


Ans :
Financial Management is concerned with optimal
procurement and usage of finance in business.
It aims at reducing the cost of funds procured,
keeping risk under control and achieving effective
deployment of such funds. The primary aim of
financial management is shareholder’s wealth
maximisation, i.e. maximising market price of the
shares of the company. The funds of the company
belong to the shareholders and the way they are
invested and the return earned on it, determines the
market value and price of the shares. The market
price of equity shares increases, if benefit from a
decision exceeds the cost involved. The share prices
decreases, if the decision is wrong and the benefit
derived from it is less than the cost involved. Thus,
every decision taken aims at having value addition
for the shareholders.


o
The Financial market being referred to is Stock
Exchange or Secondary market.
Functions of Stock Exchange are:
(a) Liquidity and marketability of securities: The
main function of stock markets is to provide
a ready and continuous market for the sale
and purchase of securities. The presence of a
continuous market is an assurance to investors
that their investment can be converted into
cash as and when required by them.
(b) Pricing of securities: The stock market helps to
determine the price of securities through the
forces of demand and supply. This provides
instant information to the investors about the
price at which securities can be traded.
25. In an organisation the morale of the employees is
very low in-spite of the different financial incentives
offered to them. The organisation does not provide
any developmental opportunities to them. Neither
they are involved in the decision making nor their
work appreciated by the top level management.
(a) Why is the morale of employees low?
(b) State the different incentives that the
organisation should offer by giving reference to
the relevant lines.


Ans :
(a) The employees morale is low due to non-
fulfilment of their psychological, social and
emotional needs.
(b) The different non-financial incentives that the
organisation should offer are:
(i) Career advancement opportunities:
‘The organisation does not provide any
developmental opportunities to them.’
(ii) Employee participation: ‘Neither they are
involved in the decision making.’
(iii) Employee recognition programmes: ‘Nor
is their work appreciated by the top level
management.’
26. Explain the concept of Democratic style of leadership
and state its any two features.


o
‘An ideal controlling technique is the one that checks
each and every stage in the process of production.’
Comment.


Ans :
Democratic style of leadership is also known as
 participative leadership. It is the most effective Earning after Tax
35 = 80, 000
leadership style. Democratic leaders offer guidance
to group members, but they also participate in the Earning after Tax = ` 28, 00,000
group and allow input from other group members. 8
Interest = 60, 00, 000 # 100
Participative leaders encourage group members to
participate, but retain the final say over the decision- = ` 4,80,000

making process. Group members feel engaged in the Let x be the earning before Tax (EBT).
process and are more motivated and creative. The EBT - Tax = EAT
features of Democratic style of leadership are:
(a) It encourages staff member to be a part of the x - 0.30x = 28, 00, 000
decision-making process. 0.70x = 28, 00, 000
(b) It keeps staff members informed about 28, 00, 000
everything that affects their work, shares x = 0.70
decision making and problem solving x = 40, 00, 000
responsibilities. = ` 40,00,000
Earnign before Tax
(c) The democratic leader:
(i) develops plans to help staff evaluate their EBIT = Earning before tax + Interest
own performance. = 40, 00, 000 + 4, 80, 000
(ii) allows staff to establish goals. = ` 44,80,000

(iii) encourages staff to grow on the job and be
EBIT
promoted. ROI = Total Investment # 100


o
The statement, ‘an ideal controlling technique is the 44, 80, 000
=
=
one that checks each and every stage in the process 1, 40, 00, 000 # 100 32%
of production.’ is with reference to the ‘Critical As ROI (32%) > Rate of interest (8%), the company
Point Control’. It states that it is neither economical can choose to use trading on equity to increase its
nor easy to keep a check on each and every activity EPS. The finance manager was justified in making
in an organisation. Therefore, the managers should this recommendation.
identify the Key Result Areas (KRAs) which are
critical to the success of an organisation. If anything
goes wrong at the critical points then the entire
organisation suffers, therefore, the managers should
exercise control at those points rather than checking
each and every stage of production. 28. In an organisation different workers completed the
same task by adopting different methods, involving
27. Elctroreck limited is in the business of manufacturing different movements and took different amount of
and exporting untransformed. It has a share time. This led to a lot of variation in the type of
capital of ` 80 lacs at the face value of ` 100 each. work performed and the output produced. To do
Company is considering a major expansion of its away with this, Rakesh, the manager decided to
production facilities and wants to raise ` 60 lacs. eliminate unnecessary diversity of products and find
The finance manager of the company Mr. Dinkar out the best way of doing the job. Various studies
has recommended that the company can raise funds were undertaken to determine standard way and
of the same amount by issuing 8 % debentures. time of doing a work.
Given that earning per share of the company after Explain any two techniques of Taylor used by
expansion is ` 35 and tax rate is 30%, did Mr. Rakesh.
Dinkar give a justified recommendation? Show the

o
working. Harish Sharma set up a small factory manufacturing
toys. To begin with he employed 12 people who had


Ans : the experience of working in small factories. He was
Earnings per share = ` 35 a strict task master. He kept all the decision making
80, 00, 000 power with himself. The employees were frequently
Number of Equity Share = 100
= 80, 000
leaving the job as they were not satisfied about
Earning after Tax his way of dealing with them and as such Harish
EPS = No. of Equity Shares faced a lot of problems tackling the employees.
He then appointed a Manager who through his
experience, creativity and personalized way created
an atmosphere of complete co-operation and
coordination which led to the achievement of goals.
(a) Which principles of management were ignored
by Harish? Identify by quoting the lines.
(b) What does the manager’s way of dealing tell
about the nature of management? Discuss.


Ans :
The two techniques of Taylor used by Rakesh are:
(a) Time study: This study carefully observes
each element of the work and measures the
time taken to do a particular job. It helps in
determining the standard time taken to perform
a well defined job, the number of workers to be
employed, framing suitable incentive schemes
and determine labour costs.
(b) Method study: This study determines the best
way of doing a job. Right from procurement of
raw materials to the delivery of final product,
every activity is studied carefully. The best
method is devised to minimise the cost of
production and maximise the quality to the
satisfaction of the customer.
(c) Simplification and standardisation of work:
Simplification aims at eliminating unnecessary
diversity of products. This results in saving of
cost of labour, machine and tools and helps in
fuller utilisation of equipment and increases
turnover. Standardisation means setting up
standards for every element of business activity.
These standards are the benchmarks which
must be adhered to.


o
(a) The following principles of management were
ignored by Harish:
(i) Centralisation and Decentralisation: He was
a strict task master. He kept all the decision
making power with himself.
(ii) Stability in tenure of personnel: The
employees were frequently leaving the job
as they were not satisfied about his way of
dealing with them and as such Harish faced
a lot of problems tackling the employees.
(b) Managers way of dealing implies that
‘Management is an Art’.
Art is concerned with the personalised application
of the knowledge, it involves creativity. Management
can also be considered as an Art as it involves the
application of the principles of management in one’s
own unique way. The manager handles the real life
problems with creativity and on the basis of his
experience.
29. Give your argument in the support that success of a
business enterprise is significantly influenced by its
environment?


Ans :
No organisation can function in isolation. Its
working and actions are influenced by many external
forces such as social and political conditions and
technological changes, etc. which are beyond
its control. A continuous study of the business
environment enables an organisation to identify
the forces that affect it functioning. The following
points highlight the importance of environment for
the success of a business organisation.
(a) Identification of opportunities: A careful
analysis of the business environment enables an
enterprise to identify positive opportunities and
take first mover advantage in competition. It
also enables the organisation to gain maximum
benefit and move ahead of its competitors. For
example, Tata motors recognised the demand
for a small and economical car in India and
launched the popular Tata Nano.
(b) Identification of threats: Besides positive
opportunities, a study of business environment
helps an enterprise in the identification of
threats or negative signals. Thereby, it enables
it to take appropriate preventive measures. For
example, a mobile manufacturing company
finds that another company is coming up
with new or improved features in its product.
An identification of the threats can enable
the organisation to take measures such as
improving the quality and features of its
mobile, advertising, etc.
(c) Tapping useful resources: Environment acts
as a source of inputs or resources such as raw
material, machinery, labour, etc. required for
the functioning of an organisation. On the other
hand, it acts as a source of demand for goods and
services produced by the organisation. Thus, it
is rational for the organisations to take up those
resources from the environment that can be
converted into the desired output. It is possible
only if the organisations have an understanding
of what the environment can offer.
(d) Formulating plans and policies: With a
continuous study of the environment, an
organisation can frame suitable plans and
policies in view of the current scenario. For
example, if on analysing the market for clothes
in India, it is found that there is an increasing
demand for female western wear, then a cloth
manufacturing company can frame policies and
strategies to incorporate western wear in its
production.
30. State and explain any four points of importance of
planning.


Ans :
The importance of planning function of management
is as follows:
(a) Provides directions: Due to planning, employees
and managers know how their activities relate
to organisational goals. Everyone is conscious
of his own contribution towards achievement
of organisational goals. In this way, planning
provides directions.
(b) Reduces the risk of uncertainty: Planning helps
to reduce the risks associated with uncertainties.
In the process of planning, attempt is made to
look into the future and to predict it. Planning
helps to identify potential threats and to
develop contingency plans to deal with them.
(c) Facilitates decision-making: Planning ensures
foreseeing future and choosing the best
alternative available. The managers evaluate
the positive and negative aspects of each
alternative and choose the one with least
negative consequences, having feasibility
and profitability. Through this, a direction is
provided to all the activities of the organisation
which acts as basic guidelines to the managers
for decision making.
(d) Reduces overlapping and wasteful activities:
Planning serves as a basis of coordinating the
activities and efforts of different departments
and individuals. It ensures clarity in thoughts
and actions. Useless activities are eliminated
and overlapping of work is avoided.
(e) Promotes innovative ideas: Planning gives
shape to new ideas. Many innovative ideas are
scrutinised and evaluated during the planning
process.
(f) Establishes standard for controlling: Planning
provides goals or standards against which
actual performance is measured. If there is no
planning, then controlling function can not be
performed.
(Any Four)
31. After laying down the plans, a function is initiated
to lay down the organisational structure. Explain
the importance of this function in management.


o
Planning is deciding in advance the future course of
action. Explain briefly what all needs to be done to
make effective and efficient plans.


Ans :
Organising enables people to relate to each other
and to work together for a common purpose. The
importance of Organising is as follows:
(a) Benefits of specialisation: Through organising,
jobs are allocated amongst the workforce.
It ensures that the specific worker performs
specific job on a regular basis, which allows
him to gain experience in that area and leads
to specialisation.
(b) Clarity in working relationships: Organising
leads to the formation of organisational
structure, which clarifies the authority-
responsibility positions among individuals
in the organisation. The path of flow of
communication and accountability relationship
is also specified.
(c) Optimum utilisation of resources: The proper
assignment of jobs avoids overlapping of
work and makes the best possible use of the
resources. The wastage of resources and efforts
is minimised due to avoidance of duplication of
work.
(d) Adaptation to change: Organising allows a
business enterprise to accomodate changes in
the business environment and pave its way to
smooth transition. The organisational structure
can be suitably modified and inter-relationship
among managerial levels can be revised. It gives
stability to the organisation as it continues to
survive and grow in spite of many changes.
(e) Effective administration: Organising clarifies
the working relationships and description of
jobs. Thus, it enables proper execution of work.
Management of an enterprise becomes easy and
brings effectiveness in administration.
(f) Development of personnel: Organising enables
a manager to share his responsibilities with his
subordinates through delegation. The manager
develops new methods and ways of performing
a task. It gives him time to explore areas
for growth and opportunity to innovate and
strengthen the company’s competitive position.
It also helps the subordinates to realise their
full potential.


o
Planning process is as follows:
(a) Setting the objectives: The first step in planning
 process is setting the objectives. These are the
end results that the company aims to achieve.
Objectives and goals must be quantifiable,
specific, and realistic. Otherwise the activities
undertaken are sure to be ineffective. For
example increase in turnover by 20% by the
end of current year.
(b) Planning premises: The second step involves
establishing the planning premises These are
the anticipated future conditions in the which
the plan is to be executed. These are the
foundations upon which a plan is based. If the
scientific forecasts or assumptions go wrong
then the entire planning process will fail.
(c) Identifying alternative courses of action: An
objective can be achieved in a number of ways.
All these alternative courses of action have to
be identified.
(d) Evaluating alternative courses: The merits
and demerits as well as consequences of each
alternative course of action must be examined
before a choice is made.
(e) Selecting an alternative: After evaluation of
various available alternative courses, the best
alternative with the maximum benefit and
the least negative consequences is selected.
Sometimes a firm may also go for combination
of plan instead of selecting one best course.
(f) Implementing the plan and Follow up: Planning
is essentially goal oriented. Hence the plans
formulated must be implemented effectively.
To ensure success follow up of plans is done in
the light of the dynamic environment.
32. A company was marketing ‘water purifiers’ which
were very popular due to their quality and after
sales services provided to the customers. The
company was a leading company in the market
and earning huge profits. Because of huge profits,
the company ignored the after sales services. As a
result, its relations with the customers got spoiled
and the image of the company was damaged in the
public. Top management became concerned when
the profits for the current quarter fell steeply. On
analysis, it was revealed that ignoring the after sales
services was its reason. Therefore, the company
took all possible measures to protect and promote
its favourable image in the eyes of the public. As a
result, the goodwill of the company improved in the
society.
(a) Name and state the communication tool used
by the marketer in the above case to improve
its image.
(b) Also explain role of the tool as identified in
part (a).


Ans :
(a) The marketer used Public Relations as the
communication tool to improve its image.
Public relations involve a variety of programmes
designed to promote and protect a company
and its product’s image in the eyes of public.
(b) Role of Public Relations in marketing
management can be highlighted with the given
points:
(i) Press relations. The public relations
department is in direct contact with media
to present true facts and a correct picture
about the company.
(ii) Product publicity. The public relations
department sponsor events for the launch
of a new product. The public attention can
be drawn by arranging sports and cultural
events like news conferences, seminars and
exhibitions.
(iii) Corporate communication. An organisation’s
image can be promoted through
communicating with the help of newsletter,
annual reports, brochures, articles and
audio-visual material. Through this way,
the target customer can be reached. The
executives interview on media or responding
to the queries helps in promoting public
image.
(iv) Lobbying. An organisation needs to maintain
a good relationship with government
officials and different ministers, in respect to
policies related to business and the economy.
The public relations department has to be
really proactive in promoting or defeating
regulations that affect them.
(v) Counselling. The public relations department
advises the management on general issues
like contributing money and time for
certain causes like environment, children’s
right, education etc. By contributing to
these activities, an organisation’s image is
improved and thus, builds goodwill.
33. A company wants to replace its old machinery with
new hi tech machines available in the market. For
this, it will have additional funds requirement of
at least ` 50 Crores. As a Finance Manager, help
the company in deciding the right source for raising
the money by explaining the different factors that
impact such a decision.


o
Market ‘A’ involves the sale of securities by the
new companies or further issue of securities by the
existing companies to the investors, whereas Market
‘B’ involves the purchase and sale of existing (c) C a p i t a l It directly It indirectly
securities. formation p r o m o t e s promotes
Identify the Market ‘A’ and Market ‘B’ highlighted c a p i t a l capital
here and differentiate between the two on any five formation by formation
basis. transferring b y


Ans : funds from enhancing
The company can fulfill its financial requirements savers to liquidity of
through owned funds (equity) or borrowed funds investors. securities.
(debt). To decide the right source, it need to (d) Location There is no fixed There is
consider the following factors: geographical a specific
(a) Cash flow position: The size of cash flow area. location of
needs to be considered before deciding the this market.
appropriate source of finance If the cash flow
(e) P r i c e Prices are Prices are
position is sound, then they can go in for debt
determination determined and determined
otherwise they should opt for equity.
decided by by the
(b) Interest coverage ratio: This ratio refers to the
management of interaction
number of times earnings before interest and
the company. of demand
tax covers the interest obligations. Higher the
and supply
ratio, better is the ability of the company to
forces.
raise funds through debt.
(c) Return on investment: If the Return on (f) Transaction Only buying of B o t h
Investment of the company is higher than the securities takes buying and
cost of debt, then the company can make use place in this selling of
of trading on equity to increase its EPS, which market. Sale of securities
means, its ability to use debt increases. securities is not take place
(d) Stock market conditions: If the stock market is possible in this here.
bullish, then the company can easily raise the market.
funds by the issue of equity shares as people
will readily invest. But during the bearish
phase, debt financing should be opted by the
company.


o
Market ‘A is primary market and Market ‘B’ is
secondary market.

Basis Primary Secondary

Market Market
34. Blue Heavens Private Limited purchased a new hi-
(a) S e c u r i t i e s It is the new It is the
tech machine from Germany for manufacturing high
traded issue market market for
quality auto components in a cost effective manner.
dealing with sale and
But during the production process, the manager
new securities purchase
observed that the quality of production was not as
being issued for of existing
per standard. On investigation it was found that
the first time. securities.
there was lack of knowledge amongst the employees
(b) Parties to The securities T h e of using these hi-tech machines. So, frequent visit of
transaction are sold by the securities engineers was required from Germany. This resulted
company to are sold and in high overhead charges.
the investors p u r ch a s e d Suggest what can be done to develop the skills and
directly or b y abilities of employees for producing high quality
t h r o u g h i nve s t o r s . products by using these hi-tech machines. Also
intermediaries There is no state how the employees or the organization will
involvement benefit from your suggestion.
of the


Ans :
company.
Training of employees can be done to develop
the skills and abilities of employees for producing
quality products by using these hi-tech machines.
Benefits of training to the organisation:
(a) Economic operations. Trained personnel will
make economic and efficient use of resources
such as men, money, material and machines.
This will lead to the reduction in the cost of
production per unit. There will be a great
savings as training reduces wastage and spoilage.
This will result in economic operations. Thus,
training expenditure is treated as an investment
in human resources.
(b) Increases productivity. It helps to improve
employee’s knowledge and skills, which in
turn increases the quality and quantity of
production. Higher productivity means higher
profitability for the organisation.
(c) High motivation and morale. Training reduces
the rate of labour turnover and absenteeism
and increases job satisfaction. This improves
staff morale and self-esteem. With the help
of training, employees are able to direct the
staff towards management philosophy, mission,
attitudes, work ethics, team work and greater
cooperation and loyalty.

******