SAMPLE QUESTION PAPER (2021-22)
BUSINESS STUDIES (054)
TERM II
CLASS 12
Time: 2 Hrs Max. Marks: 40
GENERAL INSTRUCTIONS
- This is a Subjective Question Paper containing 12 questions.
- This paper contains 4 questions of 2 marks each, 4 questions of 3 marks each and 4 questions of 5 marks each.
- 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words.
- 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words.
- 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words.
- This question paper contains Case/Source Based Questions.
PART A
(Accounting for Not-for-Profit organizations, Partnership firms and Companies)
Q.1 An organisation provides security services. It requires such candidates who are reliable and don’t leak out the secrets of their clients. What step should be incorporated in selection process?
1. Personality test
2. Reference check
Q.2 Name the financial instrument which may be used in the following situations:
(i) A company needs funds to meet floatation cost in order to issue equity shares in the market.
Commercial Paper
(ii) The instrument that is issued during the period of tight liquidity when the deposit growth of bank is slow but demand for credit is high.
Treasury Bill
Q.3 ‘Saurashtra’ is a company involved in the export of indigenous food products like chutneys and pickles. it has tied up with the small farmers in various states for sourcing of fruits and vegetables. In this way it helps the small farmers to sell their produce at reasonable rates. The company follows a practice where only significant deviations from a budget or plan are brought to the attention of management. The degree of deviations allowed in different categories in the budget are well defined in advance, along with the appropriate levels of managements who will respond to the deviations in question. For example, a deviation of Rs. 20,000 or more in purchase costs will be reported to the concerned department manager.
In context of the above case:
1. Identify the principle of management control adopted by the company. State the belief underlying this principle.
Management by exception is the principle of management control adopted by the company. It is based on the belief that ‘if you try to control everything, you may end up controlling nothing.
Q.4 Ramesh is working under the guidance of Harish, a carpenter. For the last three years to learn the different skills of this job. Name and explain the method of training Ramesh is Undergoing.
Apprenticeship Training: Trainee is kept under guidance of a master worker. It is designed to acquire a higher level of skill e.g. plumbers, electricians, iron workers, motor mechanic etc.
Q.5 A behaviour study was done on total of 100 employees of an organization. Group A (of 50 employees) were appreciated by the manager for their work and initiative for new idea. All these employees were given option of flexible working hours and were paid wages at a higher piece rate. On the other hand, Group B (of remaining 50 employees) was criticized for their poor performance. Their increments were stopped and they were paid wages at a lower piece rate.
(a) Identify and explain the feature of motivation highlighted in the above case.
Motivation can be either positive or negative. Positive motivation provides positive rewards like increase in pay, promotion, recognition, etc. Negative motivation uses negative means like punishment, stopping increments, threatening, etc.
(b) What type of leadership is followed by the manager? Justify your answer.
Autocratic leadership style. The leader’s following assumes that reward or punishment both can be given depending upon the result.
Q.6 Differentiate between formal communication and informal communication on the basis of: Channel, Nature and speed.
State the importance of directing.
1. Directing helps to initiate action in the organization.
2. Directing integrates employees’ efforts in the organization
3. Directing guides employees to realise their potential by motivation and leadership.
4. Directing facilitates introduction of changes by reducing resistance to change.
5. Directing brings stability and balance in the organisation
Or
Explain any three features of formal communication.
(a) Written and oral. It can be both in written or oral. Daily works are handed through oral communication while the policy matters require written communication.
(b) Formal Relations: This communication is adopted among those employees where formal relations have been established by the organization. The sender and the receiver have some sort of organizational relation.
(c) Prescribed path: The communication has to pass through a definite channel while moving from one person to another for example to convey the feelings of a worker to the manager, their foreman’s help has to be sought.
(d) Organisational message. This channel is concerned with the authorized organizational messages only and the personnel messages are out of its jurisdiction.
Q.7 In a meeting, General manager is of the view that profit maximization is the main objective of financial management, while you as a finance manager believe that -wealth maximization is the most important objective. Justify your position to convince the board member by giving suitable reasons.
Profit maximization implies procuring the optimum amount of finance by creating minimum liabilities on the companies and by utilizing the finance in the best possible way. While wealth maximization means increase in the market value of shares.
Wealth of a company can be maximized only if funds are economically used. Hence wealth maximization become the most important objective since it includes profit maximization and represents the long-term interest of shareholders.
Q.8 ‘A.S. Ltd.’ is a large company engaged in assembly of air-conditioners. Recently the company had conducted the ‘Time’ and ‘Motion’ study and concluded that on an average a worker can assemble ten air-conditioners in a day. The target volume of the company in a day is assembling of 1,000 units of air-conditioners. The company is providing attractive allowances to reduce labour turnover and absenteeism. All the workers are happy. Even then the assembly of air-conditioners per day is i800 units only. To find out the reason the company compared actual performance of each worker and observed through C.C.T.V. that some of the workers were busy is gossiping.
1. Identify the function of management discussed above.
Controlling
2. State those steps in the process of the function identified which are discussed in the above paragraph.
Steps discussed in the above paragraph are:
1. Setting performance standards
2. Measurement of actual performance
3. Comparing actual performance with the standards
4. Analysing deviations for their causes.
Q. 9 A company x Ltd. is setting up a new plant in India for manufacturing auto components. India has highly competitive and cost-effective production base in this sector. X Ltd. is planning to capture about 40% of the market share in India and also export to the tune of at least $5 million in about 2 years of its planned operations. To achieve these targets, it requires a highly trained and motivated workforce. You have been retained by the company to advise it in this matter.
(i) Which sources of recruitment the company should rely upon?
The company should rely upon the following external sources of recruitment because it is setting up a new plant and requiring large number of employees with latest technology. So, it needs to recruit technical, professional and managerial personnel.
● Advertisement
● Management consultants
● Campus recruitment.
(ii) Which methods of training should company initiate?
The company should initiate following methods of training
● Apprenticeship training
● Vestibule training
● Internship.
Q.10 Enumerate any five rights of a consumer under the Consumer Protection Act, 2019.
Consumer Rights: The Consumer Protection Act provides following six rights to consumers to safeguard their interests.
(i) Right to Safety It means a consumer has a right to be protected against the marketing of such goods and services that are harmful to life and health. Thus, consumers are educated to use standardised goods, such as electrical goods with ISI mark, food products with FPO mark, etc. as such goods would be an assurance of meeting quality specifications.
(ii) Right to be Informed A consumer has the right to get true and complete information about the quality, quantity, price, contents, expiry date of the goods and services which he intends to buy. Therefore, the legal framework in India has made it compulsory to provide all such information on the package of the product.
(iii) Right to be Assured Consumers have the freedom to choose products of their choice. This implies that the marketers should offer a wide variety of products in terms of quality, brand, size, etc., so that the consumer can make a wise choice by comparing different products available at competitive prices.
(iv) 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, many enlightened business firms have setup their own consumer service and grievance cells, and help consumers in redressal of their grievances.
(v) Right to Seek Redressal This right assures justice to consumers against exploitation and includes compensation for any loss or injury suffered by the consumers, replacement of goods or repair of defects in the goods in order to provide satisfaction to consumers. Thus, the consumer has a right to get relief in case the product falls short of his expectation.
OR
Enumerate any five responsibilities of a Consumer Protection Act, 2019.
A consumer should fulfil the following responsibilities, while purchasing, using and consuming goods and services (any four)
(i) A consumer must read the labels carefully, so as to have complete information about the price, quantity, ingredients, usage, contents, expiry date, etc.
(ii) A consumer must ensure that he gets a fair deal.
(iii) A consumer should be honest in his dealings, choose legal goods and discourage unscrupulous practices like black marketing, hoarding, etc.
(iv) A consumer should always ask for a cash memo, as it is the proof of purchase required at the time of taking any action against a fraudulent seller/manufacturer.
(v) A consumer must file a complaint in case of any shortcoming in goods or services availed.
(vi) A consumer should take initiative to form consumer societies that can take active part in educating consumers and safeguarding their interests.
(vii) A consumer should respect the environment and avoid creating pollution.
Q.11 Explain the trading procedure on a stock exchange.
Trading procedure on a stock exchange involves the following steps
(i) Approach a registered broker and open a trading account.
(ii) Open a demat account with depository participant.
(iii) Place on order with the broker to buy or sell shares.
(iv) Execution of the order by the broker.
(v) Issue of a contract note containing details of number of shares sold, price, date and time of deal.
(vi) Delivery of shares sold or payment of cash for the shares bought on the pay-in day.
(vii) Settlement of the deal on the pay-out day, i.e. T +2 day.
(viii) Delivery of shares and payment of cash by the broker to the investors.
Q.12 Surya Ltd. is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7% to 8% and the demand for steel is growing. Therefore, it is planning to set-up a new steel plant to take benefit of such trends in demand. It is estimated that such an expansion will require about ` 5,000 crore to set-up and about ` 500 crore of working capital. As the finance manager of the company, state any three factors that would be considered while determining the capital structure for the new venture.
In this case, the various factors that are to be considered in determining the capital structure for the new venture will be
(i) Cost of Debt If the rate of interest on debt is high, the company should use less debt in its capital structure and vice-versa.
(ii) Cost of Equity When a company interest debt, the financial risk faced by equity shareholders increases. Thus, debt can be used up to a limit. Beyond that point, cost of equity may go up and share prices may decrease.
(iii) Interest Coverage Ratio (ICR) It refers to the number of times earnings before interest and tax covers the interest obligation. Higher the ICR, the company can borrow more funds and vice-versa.
OR
The Return on Investment (RoI) of a company ranges between 10-12% for the past three years. To finance its future fixed capital needs, it has the following options for borrowing debt.
Option ‘A’ Rate of interest 9%
Option ‘B’ Rate of interest 13%
Which source of debt, ‘Option A’ or ‘Option B’, is better? Give reason in support of your answer. Also state the concept being used in taking the decision.
The company should use ‘Option A’ as in this case the return on investment (10-12%) will be more than the cost of debt (9%).
The concept being used in the above case is Trading on Equity. The use of debt along with equity increases Earnings Per Share (EPS). This use of fixed financial charge, i.e., interest, increases the profit earned by shareholders. This concept is known as trading on equity.
If the company opts for Option A, it will lead to favourable trading on equity as in this case RoI > CoD,
Where RoI—Return on Investment (10-12%)
CoD—Cost of Debt (9%)