Class 12 Business Studies Sample Paper Term 2 Set B
Please see below Class 12 Business Studies Sample Paper Term 2 Set B with solutions. We have provided Class 12 Business Studies Sample Papers with solutions designed by Business Studies teachers for Class 12 based on the latest examination pattern issued by CBSE. We have provided the following sample paper for Term 2 Class 12 Business Studies with answers. You will be able to understand the type of questions which can come in the upcoming exams.
CBSE Sample Paper for Class 12 Business Studies Term 2 Set B
1. ‘In an interview with a leading news channel, Mr. Rakesh Kwatra, CEO of ‘Get My Job’ has suggested that the Companies which want more and more candidate to apply for jobs in their organisation should make the process of applying for jobs easier and candidate friendly.’
Name and explain the next two steps which follow the step, in the process of the function of management being discussed above.
Answer: 1. The function of management being discussed in the given question is Staffing.
Staffing has been described as the managerial function of filling and keeping filled the positions in the organisation structure.
The next two steps are:
(a) Selection: Selection begins where recruitment ends. It is the process of choosing from among the pool of prospective candidates who have applied for a job. Many steps are involved in the process of candidate selection.
(b) Placement and Orientation of Induction: Placement refers to the employee occupying the position or post for which the person has been selected. In other words, it involves putting the selected candidates on the right job.
Orientation refers to the process of introducing the newly selected employees with their superior, subordinates and colleagues and familiarising them with the rules and policies of the organisation
2. Hariram Private Limited is a large creditworthy company that manufactures washing machines. It now wants to export these washing machines to other countries and decides to invest in new hi-tech machines.
Since the investment is large, it requires long-term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation cost. To meet the expenses of floatation cost, the company decides to tap the money market.
(a) Name and explain the money-market instrument the company can use for the above purpose.
(b) What is the duration for which the company can get funds through this instrument?
(c) State any other purpose for which this instrument can be used.
Answer: (a) Commercial Paper: Commercial paper is a short-term unsecured, negotiable, promissory note with a fixed maturity period, which is issued by large and creditworthy companies to raise short term funds at lower rates of interest than the market rates.
(b) The duration for which the company can get funds through this instrument is 15 days to one year.
(c) It is also used to meet the short-term seasonal and working capital requirements of a business enterprise.
3. Discuss two Off-the-Job methods of training.
Answer: Off-the-job methods are the methods of training which are adopted for the development of employees away from the field of the job. The two different methods of off-the job training method are:
(a) Class Room Lectures/Conferences: The lecture or conference approach is well adapted to conveying specific information, rules, procedures or methods. The use of audio-visuals or demonstrations can often make a formal classroom presentation more interesting while increasing retention and offering a vehicle for clarifying more difficult points.
(b) Films: They can provide information and explicitly demonstrate skills that are not easily represented by the other techniques. Used in conjunction with conference discussions, it is a very effective method in certain cases.
4. Only significant deviations which go beyond the permissible limit should be brought to the notice of management. Which principle of management control and step of controlling is being referred here?
Answer: The principle of management control in which only significant deviations which go beyond the permissible limit should be brought to the notice of management is Control by Exception.
Control by exception, which is often referred to as Management by exception, is an important principle of management control based on the belief that an attempt to control everything results in controlling nothing. Thus, only significant deviations which go beyond the permissible limit should be brought to the notice of management
5. Mrs. Rajlaxmi is working as the Human Resource Consultant in a firm that manufactures cosmetics, which is facing a problem of high employee turnover. The CEO of the company has invit ed suggestion from her for retaining the talented employees and reducing the employee turnover. Mrs. Rajlaxmi recommends that the good employees should be rewarded in a way that it creates a feeling of ownership among the employees and at the same time, makes them contribute towards the growth of the organisation.
Explain the type of incentive discussed above as well as two other incentives of the same type.
Answer: Co-partnership/stock option, has been suggested by Mrs. Rajlaxmi to the CEO of the company.
Co-partnership/Stock option: Under these incentive schemes, employees are offered company shares at a set price which is lower than market price.
It is the financial incentive offered the by Company.
The two other financial incentives are described below:
(a) Retirement Benefits: An organisation may provide several retirement benefits to its employees after their retirement such as provident fund, pension and gratuity which provide financial security.
These benefits serve as an incentive when they are in service in the organisation.
(b) Productivity linked wage incentives: Several wage incentive plans aims at linking payment of wages to increase in productivity at individual or group level.
6. Discuss Elements of Directing.
State the Importance of Directing.
Answer: There are four elements of Directing:
(a) Supervision (b) Motivation (c) Leadership (d) Communication
(a) Supervision: The process of guiding the efforts of employees and other resources to accomplish the desired objectives.
(b) Motivation: Motivation means incitement or inducement to act or move for the attainment ofdesired objective.
(c) Leadership: Leadership is the process of influencing the behaviour of people by making them strive voluntarily towards achievement of organisational goals.
(d) Communication: Communication is a transfer of information from the sender to the receiver with the information being understood by the receiver.
Importance of Directing are:
(a) Directing helps to initiate action by people in the organisation towards attainment of desired objectives. For example, if a supervisor guides his subordinates and clarifies their doubts in performing a task, it will help the workers to achieve work targets given to them.
(b) Directing integrates employees efforts in the organisation in such a way that every individual effort contributes to the organisational performance. Thus, it ensures that each individual puts in efforts towards achieving the organisational goals.
(c) Directing guides employees to fully realise their potential and capabilities by motivating and providing effective leadership.
7. Dheeraj wants to start a business of selling N-95 masks after the outbreak of the global pandemic of COVID-19. Due to the uncertain market conditions, he wants to make a low investment in fixed capital.
Suggest how the decisions related to the choice of technique and financing alternatives can help Dheeraj in ensuring a low investment in fixed capital requirements.
Answer: (a) Choice of Technique: A company that adopt a labour intensive technique would require a small amount of fixed capital to manufacture N-95 masks. Since, better technology would cost Dheeraj much and his risk appetite is not conducive for capital intensive techniques of production.
(b) Financial Alternatives: As Dheeraj wishes to stick to a low investment model, we may suggest him to go with the lease option. Because leasing facilities are easily available in a market, they provide an easy alternative for firm. This may lead to reduction in his investments which is being required
in the business.
8. Das Ltd. is a large company engaged in assembling of coolers. Recently, the company had conducted the ‘Time’ and ‘Motion’ study and concluded that on an average, a worker can assemble ten coolers in a day. The target volume of the company in a day is assembling of 1,000 units of coolers. The company is providing attractive allowances to reduce labour turnover and absenteeism. All the workers are happy.
Even then the assembling of coolers per day is 800 units only. To find out the reason, the company compared actual performance of each worker and observed through CCTV that some of the workers were busy in gossiping.
Identify the function of management discussed above and explain the steps in the process of the function identified which are discussed in the above paragraph.
Answer: The function of management discussed in the given case study is Controlling.
The steps involved in the process of controlling which are discussed in the given paragraph are:
(a) Setting standards of performance: “Concluded that on an average, a worker can assemble ten coolers in a day.” “The target volume of the company in a day is assembling of 1,000 units of coolers.”
(b) Measurement of actual performance: “Even then the assembling of coolers per day is 800 units only.”
(c) Comparison of actual performance with the standards: The company compared the actual performance of the workers with the planned performance and noted deviation of 200 units.
(d) Analysing deviations : “To find out the reason, the company compared the actual performance of each worker and observed through CCTV that some of the workers were busy in gossiping.”
9. Discuss the importance of Consumer Protection from Business Point of view.
Discuss the various Consumer Rights under Consumer Protection Act, 2019.
Answer: A business must also lay emphasis on protecting the consumers and adequately satisfying them. This is important because of the following reasons:
(a) Long-term Interest of Business: Enlightened businesses realise that it is in their long-term interest to satisfy their customers. Satisfied customers not only lead to repeat sales but also provide good feedback to prospective customers and thus, help in increasing the customer-base of business.
(b) Business uses Society’s Resources: Business organisations use resources which belong to the society. They, thus, have a responsibility to supply such products and render such services which are in public interest and would not impair public confidence in them.
(c) Social Responsibility: A business has social responsibilities towards various interest groups.
Business organisations make money by selling goods and providing services to consumers. Thus, consumers form an important group among the many stakeholders of business and like other stakeholders, their interest has to be well taken care of.
(d) Moral Justification: It is the moral duty of any business to take care of consumer’s interest and avoid any form of their exploitation. Thus, a business must avoid unscrupulous, exploitative and unfair trade practices like defective and unsafe products, adulteration, false and misleading advertising,hoarding, black marketing, etc.
(e) Government Intervention: A business engaging in any form of exploitative trade practices would invite government intervention or action. This can impair and tarnish the image of the company.
The Consumer Protection Act, 2019 provides six rights of consumers:
(a) Right to Safety: The consumer has a right to be protected against the goods and services which are hazardous to life and properly. For instance, electrical appliances which are manufactured with substandard products or do not conform to the safety norms might cause serious injury.
(b) Right to be Informed: The consumer has a right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use, etc.
(c) Right to Choose: The consumer has the freedom to choose from a variety of products at competitive prices. This implies that the marketers should offer a wide variety of products in terms of quality, brand, prices, size, etc. and allow the consumer to make a choice from amongst these.
(d) Right to be Heard: The consumer has a right to file a complaint and to be heard in case of dissatisfaction with a good or a service. It is because of this reason that many enlightened business firms have set up their own consumer service and grievance cells.
(e) Right to seek redressal: The consumer has a right to get relief in case the product or service falls short of his expectations. The Consumer Protection Act provides a number of reliefs to the consumers including replacement of the product, removal of defect in the product, compensation paid for any loss or injury suffered by the consumer, etc.
(f) Right to Consumer Education: The consumer has a right to acquire knowledge and skill to be a well-informed consumer throughout life.
10. Explain the objectives of Securities Exchange Board of India(SEBI).
Answer: Securities and Exchange Board of India (SEBI) is a statutory regulatory body entrusted with the responsibility to regulate the Indian capital markets. It monitors and regulates the securities market and protects the interests of the investors by enforcing certain rules and regulations.
SEBI was founded on April 12, 1992, under the SEBI Act, 1992. It has its headquarters in Mumbai, India.
SEBI has 10 regional offices in New Delhi, Chennai, Kolkata and Ahmedabad along with other local regional offices across prominent cities in India.
The objectives of Securities Exchange Board of India (SEBI) are following:
(a) To regulate the stock exchange and the securities market to promote their ordinarily functioning.
(b) To protect the rights and interests of investors especially individual investors to guide and educate them.
(c) To prevent trading malpractices like price rigging and insider trading.
(d) To regulate and develop a code of conduct and fair practices by intermediaries like brokers and merchant bankers etc. with an aim to make them competitive and professional.
11. Biru Nandan, Chairman of Lalit Group of Companies founded “Biru University” for undergraduate and post-graduate courses in diverse disciplines. The Information and Technology Department of Company has few vacancies. The Human Resource Department of the Company decided to hire fresh talent from ‘Biru University’ for the same.
(a) Identify the type of source of recruitment.
(b) State the advantages of the company of the source identified in part (a).
Answer: (a) As the company decided to hire fresh talent from Biru University for their vacancies in Information and Technology Department, used Campus Recruitment (External Source of Recruitment).
(b) Advantages of External Source of Recruitment:
(i) Fresh talent: With external recruitment, fresh talent with innovative ideas comes in organisation.
(ii) Wider choice: In external recruitment, the organisations have wider choice for selecting the best suitable candidate than internal recruitment.
(iii) Qualified personnel: In external process of recruitment, organizations get qualified, skilled and talented personnel.
(iv) Latest technological knowledge: Through campus placement, the organisation can get tech savy employee.
(v) Competitive spirit: New employee brings competitive spirit in the organisation, which motivates the existing employees of the organisation also.
12. “A business that doesn’t grow dies”, says Mr. Shah, the owner of Shah Marble Ltd. with glorious 36 months of its grand success having a capital base of ` 80 crores. Within a short span of time, the company could generate cash flow which not only covered fixed cash payment obligations but also create sufficient buffer. The company is on the growth path and a new breed of consumers is eager to buy the Italian marble sold by Shah Marble Ltd. To meet the increasing demand, Mr. Shah decided to expand his business by acquiring a mine. This required an investment of ` 120 crores. To seek advice
in this matter, he called his financial advisor Mr. Seth who advised him about the judicious mix of equity (40%) and Debt (60%). Mr. Seth also suggested him to take loan from a financial institution as the cost of raising funds from financial institutions is low. Though this will increase the financial risk but will also raise the return to equity shareholders. He also apprised him that issue of debt will not dilute the control of equity shareholders. At the same time, the interest on loan is a tax deductible expense for computation of tax liability. After due deliberations with Mr. Seth, Mr. Shah decided to raise funds from a financial institution.
(a) Identify and explain the concept of Financial Management as advised by Mr. Seth in the above situation.
(b) State the four factors affecting the concept as identified in part (a) above which have been discussed between Mr. Shah and Mr. Seth.
India Tech Ltd. is one of the leading information technology outsourcing services providers in India. The company provides business consultancy and outsourcing services to its clients. Over the past five years the company has been paying dividends at high rate to its shareholders. However, this year, although the earnings of the company are high, its liquidity position is not so good. Moreover, the company plans to undertake new ventures in order to expand its business.
In context of the above case:
(a) Give any three reasons because of which you think India Tech Ltd. has been paying dividends at high rate to its shareholders over the past five years.
(b) Comment upon the likely dividend policy of the company this year by stating any two reasons in support of your answer.
Answer: (a) Capital structure is the concept of Financial Management as advised by Mr. Seth in the above situation. Capital structure refers to the mix between owners funds and borrowed funds.
Capital structure of a business affects both the profitability and financial risk of business. Since, use of equity and debt in the capital structure has both its merits and demerits, a judicious mix of both are used in the capital structure.
(b) The four factors affecting capital structure which have been discussed between Mr. Shah and Mr. Seth are explained below:
(i) Cash flow 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.
(ii) 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.
(iii) Tax rate: Considering the fact that amount of interest paid is a deductible expense, cost of debt is affected by the tax rate. 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.
(iv) 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.
(a) Computer Tech Ltd. has been paying dividends at high rate to its shareholders over the past five years because of the following reasons:
(i) Earnings: The earnings of the company have been high. Since the dividends are paid out of current and past earnings, there is a direct relationship between the amount of earnings of the company and the rate at which it declares dividend.
(ii) Cash flow position: The cash flow position of the company must have been good as in order to pay high dividends, more cash is required.
(iii) Access to capital market: Because of its credit worthiness, the company enjoyed an easy access to capital market. Therefore, it did not feel the need to depend entirely on retained earnings to meet its financial needs. Hence, it declared higher dividends in past.
(b) This year the company is likely to follow a conservative dividend policy because of the following reasons:
(i) The cash flow position of the company is not good and dividends are paid in cash.
(ii) The company may like to retain profits to finance its expansion projects. Retained profits do not involve any explicit cost and are considered to be the cheapest source of finance.