CBSE XII | Business Studies

CBSE XII | Business Studies

Sample Paper 1 (Updated 2019-20)

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CBSE

Class XII Business Studies


Note: Answers given in this paper provide a full explanation of a concept and are not

framed as per the word limit given by CBSE. Please write appropriate points keeping

in mind the word limit provided by CBSE as per the weightage of the answer.

Section A

Answer no.

Answer Marks

1 (c) The Sale of Goods Act, 1930 1 2 (d) Controlling 1 3 False. Accountability can never be delegated. 1 4 (a) Inspector 1 5 (c) Business environment remains the same across regions. 1 6 (b)Decentralisation 1 7 (c) Supreme Court 1 8 (a) Planning is done for an infinite time. 1 9 Marketing concept 1

10 (b) Screening 1 11 False. Debt financing is suitable for organisations having a strong cash

flow. 1

12 (a) Only Statement 1 is correct. 1 13 Personal selling 1 14 (c) Grapevine 1 15 False. Consumer protection is important for consumers as well as

business organisations. 1

16 (c) 2 1 17 (a) Debentures 1 18 (d) All of these 1 19 (b) Equity, equity share 1 20 (d) Commercial paper 1

Section B

Answer no.

Answer Marks

21 Planning refers to the process of formulating objectives for the organisation and chalking out appropriate ways to fulfil these objectives. Planning is the basic function of management which lays the foundation for all other functions, i.e. various management functions are performed

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according to the plans formulated by the organisation. Hence, planning precedes all other functions of management.

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22 a) The function of management reflected in the question is staffing. b) Points highlighting the importance of staffing:

Ensuring that the right personnel are assigned the right job which helps in improving the performance in the organisation.

It helps in avoiding the situations of both shortage of personnel and overmanning. In this way, it helps in the optimum use of human resources.

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23 1) Maximum individual contribution: Such a technique of directing should be used which encourages workers to work efficiently and to the best of their capabilities such that they contribute the maximum towards the common goals of the organisation. For example, various financial and non-financial incentives can be given to encourage workers.

2) Harmony of objectives: Often it is seen that the personal goals of an employee are not in sync with the overall organisational goals. In such situations, the focus of directing function should be to bring about convergence between the two. For example, while an employee may wish to increase earnings, the goal of the organisation may be to increase production. In such cases, the directing techniques used should encourage workers to work harder such that production increases and they are able to earn better. Unity of command: An employee should receive instructions or orders from only one superior. In other words, he should be answerable to only one superior. Violation of this principle leads to confusion and chaos in the minds of the subordinate.

OR

Basis Manager Leader Existence Exists only in a formal

organisation. Exists in both formal and informal organisations.

Objective The main objective of a manager is to influence the behaviour of employees such that they work towards achieving the common goals of the organisation.

The main objective of a leader is to ensure individual satisfaction and achievement of group goals of his followers.

Power and Authority

A manager has formal power and authority in the organisation through which he modifies the behaviour of employees.

A leader does not have any formal authority and power. He uses the values of trust and faith to influence behaviour.

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24 Methods of flotation reflected in the question: 1) Private placement: The company allots securities only to selected

individuals or institutional investors. It is generally preferred by those companies which are not in a position to afford public issue.

2) Rights issue: Existing shareholders are offered new shares. The shares offered are in proportion to the shares already held by them.

(1/2 mark for identification; 1 mark for explanation)

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25 Kalpana Ltd. should adopt a divisional structure as the organisation is involved in the manufacturing of diversified products which require different resources for production. (1/2 mark for identification; 1/2 mark for reason) Points highlighting the advantages of the divisional structure of the organisation: 1) Managerial efficiency: Each division is headed by a division head. The

division head performs multiple functions for the division. In this way, he/she gets multiple opportunities for new experience and development. It helps in developing his/her skills and knowledge related to all functions of a particular product.

2) Gauging performance: Each division is responsible for its own profit and loss. In this way, the performance of each division of the organisation can be clearly evaluated, and if required, necessary remedial actions can be taken.

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Section C

Answer no.

Answer Marks

26 Characteristics of management: 1) All pervasive: Management is all pervasive in the sense that the

concept of management is applicable to every organisation irrespective of its nature, size, geographical location etc. For instance, a college must be managed as much as a post office. Similarly, an organisation in India must be managed as much as an organisation in Japan. The only difference is the ways of performing various activities of management.

2) Goal oriented: Every organisation exists with a particular goal or objective. These goals and objectives of the organisation should be clearly defined. It is the management which binds together the various activities and efforts in the organisation towards the common goals of the organisation.

3) Continuous: Management is a continuous process as various functions of management are performed simultaneously by managers. In simple words, several functions are performed at the

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same time. 4) Dynamic: Management is dynamic in the sense that it must

continuously adapt to the dynamic business environment. As the economic, social or political environment changes, the goals and objectives of the organisation must also change accordingly.

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27 Features of business environment:

1) Inter-relatedness: ‘increased awareness of healthcare has

increased the demand for many health products and services such as

Diet Coke, fat-free cooking oil and health resorts’

Explanation: Different forces and factors such as legal,

technological, political and social conditions of business

environment are closely related to each other. For example, an

increase in the income of consumers increases the demand for

consumer durables such as televisions and refrigerators. Thus, a

change in one factor leads to a change in the other factor.

2) Dynamic: ‘There are also continuous changes in fashion and tastes

of consumers and technological improvements’

Explanation:

Being a mixture of numerous forces and factors, changes are bound to happen continuously in a business environment. Every business should cope with the dynamic nature of the environment. For example, tastes and preferences of a consumer, technology, government rules or policies keep changing continuously.

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28 Points highlighting the importance of consumer protection from the point of view of a business: 1) Long-term interest

For any business, customer satisfaction is essential. In today’s times, with increasing competition, customer satisfaction has become all the more important. As the organisation takes care of the interests of consumers, it builds goodwill and reputation in the market. This in turn helps in increasing the sales and profits of the business. Thus, protecting consumers’ interests benefits the business in the long run.

2) Use of society’s resources Any business survives on the basis of society. It uses various resources of society for its activities. So, the business also needs to provide such goods and services which are beneficial to the public at large. This will maintain the confidence of the people in the business/ organisation.

OR

Two rights of a consumer: 1) Right to be Informed

Every consumer has the right to have complete information with regard to goods and services. For instance, they must have

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Section D

Answer no.

Answer Marks

29 Planning plays a vital role in the success of an organisation. However, it is not always possible for the organisation to follow pre-determined plans. Points highlighting the limitations of planning: 1) Rigidness

Planning is a process which determines objectives for an organisation along with a well-defined plan to achieve these objectives.

These plans further guide the efforts of various departments/units and employees in an organisation.

In case of any unforeseen circumstances, the changes which can be made to a plan are limited.

A major change to an already created plan is neither possible nor would prove to be beneficial for an organisation.

2) Unfavourable for a dynamic environment Planning is an activity which involves anticipation of future

events, but the business environment keeps changing from time to time.

Due to this, planning cannot foresee all the changes occurring in the complex business environment.

Hence, this dynamic nature of business environment creates many obstacles in the process of effective planning.

3) Planning reduces creativity: Generally, the function of planning is undertaken by the top level

management in the organisation, whereas the other departments/units and employees implement these plans.

The management does not allow anyone to change or deviate from the plan. So, most of the times, employees blindly follow the plans and take no other efforts.

Thus, all this leads to reduction in creativity of people in the

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information regarding quality, quantity, price, ingredients and weight of goods and services.

In India, it is mandatory under law for manufacturers to provide information about the product on its package and the label. This helps the consumer in making an informed choice.

2) Right to Choose A consumer has the right to have access to and choose from a

wide variety of goods and services available in the market at competitive prices.

Accordingly, the retailers or suppliers should offer a large variety of products to consumers.

They must not be biased or force a customer towards buying a particular product.

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organisation as they do not invest time in thinking of a new or innovative plan.

4) Involves gigantic costs: Planning involves analysis, research and scientific calculations.

These activities incur high cost and take much time. Apart from these, there are a number of incidental expenses like

board room meetings, hiring professional experts, feasibility analysis etc.

5) Time consuming: Along with incurring huge costs, the analysis, research and

scientific calculations involved in the process of planning consume too much time. So, there is not much time left for the implementation of plans.

OR

Features of planning: 1) Planning focuses on objectives:

Every organisation has a general purpose behind its existence. Planning involves setting specific objectives along with

developing an appropriate course of action in order to achieve these specific objectives.

Thus, planning is purposeful and holds value only when it contributes to the achievement of goals/objectives of the organisation.

2) Planning is a primary function of management: Planning forms the basis on which all the functions of

management are dependent, which means that all the other functions of management are performed within the framework of the plans drawn under the process of planning.

Thus, it is called the primary function of management. However, all the functions of management are interrelated and

hold the same significance in the process of management. 3) Planning is pervasive:

Pervasiveness of planning means that it is required at all the levels of management as well as in all the units/departments of an organisation.

Hence, it is a misconception that planning is a function undertaken by only the top level management in an organisation.

However, the scope of planning varies across the different levels of management in an organisation.

4) Planning is a continuous process: Plans are made for a specific period of time. At the end of that period, new plans are made according to the

new requirements and circumstances of the organisation. However, sometimes the plans are required to be modified within

the time period for which it has been formulated due to the changing business environment.

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Hence, planning is said to be a continuous process such that plans are made, implemented and followed by another plan, and this cycle is repeated.

5) Planning is futuristic: Planning is an activity which is forward looking, i.e. it deals with

events occurring in the future. It seeks to bridge the gap between where we are and where we

want to go by looking at the future. All this is done by forecasting future events, analysing them and

developing plans accordingly.

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30 a) The incentive which would work best in the given situation is the non-financial incentive of status. Shreya can be given a designation in the organisation which is according to her skills, knowledge and work experience.

b) Four other kinds of non-financial incentives: Career opportunity: Employees must be given ample

opportunities to develop their skills and knowledge such that they are able to improve their career prospects. This can be done through training and development programmes.

Job enrichment: Employees must be offered various tasks and responsibilities. In other words, the work must provide greater opportunities of growth and experience.

Security of job: Employees need a certain degree of security of job in the sense that they must be certain about income in the future. This is would enable them to work with greater passion.

Participation in decision making: Employees must be involved in decision making, especially in issues pertaining to them.

OR Importance of motivation: 1) Helps in improving performance: Motivation, which is provided in

a proper manner, stimulates workers to work to the best of their capabilities and improves performance. It also satisfies the needs of employees, and they are encouraged to work efficiently towards the goals of the organisation.

2) Helps to develop positive attitude: Good/proper motivation helps in developing positive attitude among employees towards work and towards achieving organisational objectives. In many cases, this can be achieved through positive encouragement in the form of reward or praise.

3) Helps to reduce employee turnover: Lack of motivation and incentives is one of the major reasons for employees quitting the organisation. If the motivational needs of the individual are properly identified and worked upon by undertaking steps like provision of incentives, then the employee would be satisfied and encouraged to work.

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4) Helps reduce absenteeism: Absenteeism in the organisation arises out of factors such as poor working conditions, lack of incentives and rewards, bad relations with superiors etc. Good motivation can work towards improving such factors and thereby encourage the workers to work regularly.

5) Introduction of change: With good motivation, resistance to change can be greatly reduced. Employees can be easily convinced by conveying the benefits of changes.

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31 Modern techniques of controlling:

1) Return on investment: Return on investment refers to the benefits from investment. In other words, it is an assessment of whether or not the investment is beneficial. In an organisation, managers use this technique for gauging the performance of various departments or the overall performance of the organisation.

2) Ratio analysis: Various ratios are calculated to analyse financial statements. The most commonly used ratios are as follows: Liquidity ratio: Analyses the short-term solvency of a business Solvency ratio: Evaluates the long-term solvency of a business Profitability ratio: Determines the position of the business with

regard to profitability Turnover ratio: Analyses whether the activities are carried out

efficiently or not 3) Responsibility accounting: Various divisions in the organisation are

set up as responsibility centres. Each division is given a target and it is the responsibility of the head of the division to achieve the set target. Different types of responsibility centres in an organisation can be cost centre, investment centre, profit centre and revenue centre.

4) Management audit: A systematic assessment is made of the overall work and activities of the management of the company. The basic objective of this technique is to evaluate efficiency and effectiveness in the tasks of the management. Accordingly, it helps in identifying the areas which require corrective actions.

5) PERT and CPM: The programme evaluation and review technique (PERT) and critical path method (CPM) are based on network analysis. Under these techniques, the entire task is divided into various smaller activities. Each activity is then accorded a timeline and a cost estimate. In this way, it helps in effective execution of the tasks and activities.

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Section E

Answer no.

Answer Marks

32 Three principles of scientific management: 1) Science, not rule of thumb:

Before Taylor developed the principles of management, the rule of thumb was a widely used concept.

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Under the rule of thumb, each manager handled a situation or problem based on his/her understanding as and when it arose using a trial and error method.

It was an easily applicable process but was a very vague and inaccurate technique of determining solutions to problems.

Taylor fostered the introduction of scientific methods. He believed that for every work, there is only one best method of doing it.

He wanted managers to take decisions on the basis of logic and science rather than the rule of thumb.

He proposed that various traditional methods used by managers should be studied and the best method/solution among them should be adopted and followed by all managers in the organisation.

With such scientific management, he was able to increase efficiency to a large extent.

2) Harmony, not discord Taylor emphasised that managers and workers should maintain a

harmonious work environment. They should realise their interdependence and work in amity. He introduced this principle for the peaceful co-existence of the

employees and management which will help to improve efficiency of work.

In all types of organisations, there is always a conflict of thoughts between workers and management.

Workers generally feel that they are overburdened and underpaid, whereas the management feels that workers are not focussed or do not work efficiently.

To dismiss such a situation, Taylor showcased a need to bring about a mental revolution. It implied on bringing a change in the thinking/attitude of both workers and managers.

Hence, this will help to build a friendly working environment which will develop harmonious relations between them.

3) Development of personnel to their greatest efficiency and prosperity Taylor states that every organisation should focus on the

development of its personnel along with the company's growth. This is because the efficiency of a company is directly

proportional to the efficiency of its workers. Workers can be equipped with the required skills through various

training programmes conducted by the organisation. Efforts towards increasing efficiency should begin at the very first

step, i.e. while hiring workers. Therefore, employees should be recruited in a scientific manner

and they should be assigned work according to their mental/physical qualities.

For increasing efficiency, workers should be given proper training.

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This will make sure that the company as well as the workers prosper.

OR

Points explaining the importance of principles of management: 1) Provide useful insights into reality: The principles of management

were developed over the years on the basis of continuous observation

and experimentation of managers in real business situations.

Accordingly, these principles act as a guide to managers in dealing

with various business problems. They can be used by managers to

deal with recurring business situations while learning from the errors

made in the past. This shall also help managers to save time and

increase managerial efficiency.

2) Optimal use of resources: One of the basic aims of management is

the optimum utilisation of resources. These resources include human

as well as material resources. The principles of management require

the organisation to work on planned and systematic activities which

help to utilise resources efficiently, i.e. to the best of their capacity.

3) Meeting changing environment requirements: All business people

stay alert and make changes according to the changes prevailing in the

business environment. The management principles are useful to train

managers in moving in the right direction and at the right level in the

organisation. However, management principles are broad guidelines

which require modification to bring about a change in the

organisation according to the dynamic business environment.

4) Help in thoughtful decision making: As the principles of

management are developed on the basis of continuous observation

and experimentation, they are based on logic and reasoning. Thus, by

following the principles of management, managers approach

problems scientifically and are able to take logical and rational

decisions.

5) Fulfilling social responsibilities: A business is operated in society

with the use of resources available in society and hence should stay

responsible towards society. Management theory and principles

ensure that managers are achieving organisational goals along with

fulfilling social responsibilities.

6) Basic education of management: These principles form the base for

management education. They form the most important part of

management studies. Moreover, they form the basis for further

research on management.

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33 Financial planning involves designing the blueprint of the overall financial operations of a company such that the right amount of funds

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are available for various operations at the right time. Basic objectives of financial planning: 1) Identifying the sources from where the funds can be raised and

ensuring that the required funds are available to the firm as and

when needed. For this, under financial planning, an estimation is

made regarding the amount of funds which would be required for

various business operations. In addition, an estimation is made

regarding the time at which the funds would be needed.

2) To ensure that there is proper utilisation of funds in the sense that there is neither surplus nor inadequate funding by the firm. In other words, financial planning ensures that situations of both excess or shortage of funds are avoided. This is because while inadequate funds obstruct operations of the firm, excess funding leads to wasteful expenditure by the firm. Thus, proper financial planning ensures optimal utilisation of funds by the firm.

Points highlighting the importance of financial planning: 1) Helps in facing eventual situations:

It helps to forecast things that are to happen. It helps a business to prepare itself to face future situations in a

better manner. It helps in preparing a blueprint depicting alternative situations

and equips management in advance to tackle any change to the prevailing scenario.

2) Improves coordination: It helps in coordinating various business functions. For example, coordinating the functions of the sales, production

and finance departments by laying out precise and clear rules, regulations and policies.

3) Evaluation of performance: By providing detailed business objectives and depicting all the

financial plans for varied business segments, it makes it easier to evaluate segment-wise business performance.

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34 a) The aspect of product reflected in the above question is labelling.

b) Functions performed by labelling: 1) Description of use and contents: A label describes the product and

specifies its components or other useful information such as contents of the product, the caution to be taken while using it, the procedure of use etc. For example, soup ingredients along with the procedure of preparation are mentioned on a packet of soup.

2) Identification: It helps consumers in identifying the product or brand. For instance, the name of the product is printed on the package. This makes the identification of one’s favourite brand easier. Similarly, the label provides useful information as well as the contents of the product, its weight, its maximum retail price etc.

3) Grading: It enables grading of the product into various categories. These grades are given to the products on the basis of their features,

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qualities etc. For example, the brand Lindt sells various flavours of chocolates under different label categories.

4) Promotion of the product: A label helps in attracting customers, thereby enabling promotion of the product. Moreover, any information regarding the promotion scheme is provided on the label.

5) Information required according to law: Information as required by the law is also provided by the label of the product. For instance, it is mandatory for tobacco-producing companies to print a warning message on the packet of the product.

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1) Role of marketing in a firm

Marketing plays an important role in achieving the objectives of a firm, i.e. survival and growth of the firm.

It lays utmost importance on customer satisfaction which is considered a key element for the survival and growth of the firm.

It helps any kind of organisation to achieve its goals effectively.

It assists the firm/organisation in identifying and analysing customer needs which will help in designing and producing products or services as per customer needs.

Further, it will help the firm/organisation to make products available in the market at an affordable price.

2) Role of marketing in an economy

Marketing plays an important role in the development of the economy.

It stimulates economic development.

It inspires people to undertake new activities and to set up enterprises for producing goods which are needed by customers.

It helps in overcoming the hurdles posed by high prices due to imbalances in the levels of production and consumption.

It helps in maintaining smooth flow of goods through efficient arrangements made for the physical distribution of goods.

It acts as a link between the business and consumption centres, accelerates economic activity leading to higher incomes and more consumption, as well as increased savings and investment.

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