Category: CBSE Sample Papers

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 4 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Standard Term 2 Set 4 with Solutions

Time Allowed: 2 Hours
Maximum 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
• 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.

Question 1.
Beta Enterprises is a company manufacturing pipes. The company has a functional structure with four main functions – Production, Marketing, Finance and Human Resource. As the demand for the product grew, the company decided to hire more employees.

Identify the concepts which will help the Human Resource Manager in deciding the actual number of persons required in each department and how many work force available in each department.
Answer:
The concept which will help the Human Resource Manager in deciding the actual number of persons required in each department is Workload Analysis. While workforce analysis estimates the number and type of human resources available. It would reveal whether the organisation is understaffed, overstaffed or optimally staffed.

Question 2.
ABC Ltd. issued prospectus for the subscription of its shares for ₹ 500 crores in 2008. The issue was oversubscribed by 20 times. The company issued shares to all the applicants on pro-rata basis. Later SEBI inspected the prospectus and found some misleading statement about the management of the company in it. SEBI imposed a penalty of ₹ 5 crores and banned its three executive directors for dealing in securities market for three years. Identify the function and its type performed by SEBI in the above case and also enumerates other function of same type.
Answer:
Protective function has been performed by SEBI in the above case. And the type of Protective function is Prohibition of fraudulent and unfair trade practices.
The other Protective Functions are:

• Controlling insider trading and imposing penalties for such practices.
• Undertaking steps for investor protection.
• Promotion of fair practices and code of conduct in securities market.

Question 3.
Explain any two methods of external recruitment.
Answer:
Two methods of external recruitment are:
(a) Advertisement: Advertisement in newspapers or trade and professional journals is generally used when a wider choice of candidates is required. Most of the senior positions of industry as well as commerce are filled by this method. The advantage of advertising vacancies is that more information about the organisation and job can be given in the advertisement.

(b) Employment Exchange: Employment exchanges run by the Government are regarded as a good source of recruitment for unskilled and skilled operative jobs. In some cases, compulsory notification of vacancies to employment exchange is required by law. Thus, employment exchanges help to match personnel demand and supply by serving as link between job-seekers and employers.

Question 4.
Whirlwind Enterprises was a renowned name for manufacturing quality machines since 1965. When the profit of the last year declined, Mr.Ahmed, the owner of Whirlwind Enterprises asked General Manager to prepare the probability report of the company including Gross Profit, Net Profit Ratio etc. besides using other techniques to assess the company’s performance.
Identify the steps taken by Mr. Ahmed which is related to the one of the function of management.
Answer:
The function of management indicated here is Controlling and the step taken by Mr. Ahmed is “Measurement of Actual Performance”
Measurement of Actual Performance: Once performance standards are set, the next step is measurement of actual performance. Performance should be measured in an objective and reliable manner. There are several techniques for measurement of performance. These include personal observation, sample checking, performance reports, etc. As far as possible, performance should be measured in the same units in which standards are set as this would make their comparison easier.

Question 5.
XYZ Ltd. has the policy of providing incentives in the form of monetary terms. It knows that to improve the performance of the employees their needs must be satisfied. The company has come up with a plan of increasing wages of workers who perform beyond a definite level. By the end of the year the company has some other plans. It wants to give an incentive to the workers over and above the wages. The workers have started putting more efforts. The company has announced that after the month of March it will be giving shares to the exceptionally performing workers. The company is hoping to a good response from the employees through this announcement in terms of better performance and contribution.
(a) Identify the element of directing being referred here.
(b) Identify the different incentives given by company by quoting lines.
Answer:
(a) Motivation is the element of directing being referred here.
(b) Financial incentives are being provided to employees, i.e.,

Productivity Linked wage incentives:
“The Company has come up with a plan of giving more wages to workers who perform beyond a definite level.”
Bonus:
“XYZ Ltd. wants to give an incentive to the workers over and above the wages”
Profit Sharing:
“The company has announced that after the month of March it will be giving shares to the exceptionally performing workers.”

Question 6.
State any three importance of Communication.
OR
Define Laissez Faire of Leadership Style.
Answer:
Communication is one of the most central aspects of managerial activities. The importance of Communication is:

• Communication acts as basis of coordination. It provides coordination among departments, activities and persons in the organisation.
• Communication makes possible for the smooth and unrestricted working of the enterprise.
• Communication provides needed information for decision making. In its absence, it may not be possible for the managers to take any meaningful decision.

OR
Derived from the french word ‘Laissez Faire’ meaning “leave it alone” or “let it be,” stands accurate for the laissez-faire approach of leadership. It is relevant for companies who support independence and creativity with an initiative.

Also known as “delegative leadership,” laissez-faire assesses the individual talents of each worker, a workplace environment- suitable for employees who have a forward-thinking intelligence and are resourceful. Employees are allowed to complete tasks using their skills as long as they do not hinder the company.

Advantages:

• Personal growth of employees.
• Increase in employee motivation.
• Provides learning and development opportunities for employees.

Disadvantages:

• Confusion among employees.
• Leaders escape from their low accountability.
• Too much independence can lead to isolation and affect team-building opportunities.

Question 7.
List any three differences between Financial Management and Financial Planning.
Answer:
The differences between Financial Management and Financial Planning are. as follows:

Question 8.
Arti is the Senior Manager in the Advisory Service Department of XYZ Ltd. She regularly prepares the performance reports of her subordinates and compare them from expected performance.
(a) Identify the function of management mentioned in the above question.
(b) Explain the process of function of management identified in part(a)
Answer:
(a) The function of management performed by Arti (Senior Manager of XYZ Ltd.) is Controlling.
Controlling is comparison of actual performance with planned performance and taking corrective measures for deviations.

(b) Process of Controlling;

• Setting the performance standards in clear, specific and measurable terms.
• Measurement of actual performance with standard performance in same units.
• Comparison of actual performance with standard performance to check about the deviation.
• Analyzing the deviation with the help of critical point method, management by exception, etc.
• Taking corrective action whenever deviation occurs more than the tolerable limit.

Question 9.
What is Consumer Protection Act, 2019? Describe three rights and responsibilities mentioned under the Act.
OR
Discuss the importance of consumer protection from the consumers’ point of view.
Answer:
The Consumer Protection Act, 2019 safeguard and promote consumers’ interests by resolving their complaints timely and cost-effectively. It came into force on July 20th 2020.
Consumer Rights:

• Right to Safety: Consumers have the right that items and services which he/ she purchased should not be harmful to their health and are for their well-being. The consumers are righteous to get quality products, and they should buy standardized products.
• Right to be Informed: Before purchasing a product, the consumer has the right to get complete information about the quality, quantity, ingredients, purity, price etc. of the product or service.
• Right to Choose: Consumers have the right to choose any product from the available options. No seller has the right to influence the consumer to buy a particular product.

Consumer Responsibilities:

• Be knowledgeable: Consumer should have knowledge about the numerous items available in the market so that he/she can make an informed and educated decision.
• Standardised products: Consumer should purchase standardised products to ensure quality. Look for the ISI mark on electrical goods, the FPO label on food products, and the Hallmark on jewellery.
• Follow Instructions: Follow the instructions which have been given about the product and learn about the hazards linked with it, then use it safely.

OR
Importance of Consumer Protection: From Consumer’s Point of View

• Consumer ignorance: The majority of consumers are unaware of their rights and remedies, and as a result, they are constantly exploited. Consumer protection is required to protect consumers from such exploitative practices.
• Widespread exploitation of consumers: Consumers are abused on a huge scale through a variety of unfair trade practices, and consumer protection is necessary to safeguard them.
• Unorganised consumers: Consumers in India are still unorganised, and there are few consumer organisations that would advocate for them.

Question 10.
Write a short note on BSE.
Answer:
BSE Ltd (formerly known as Bombay Stock Exchange Ltd) was established in 1875 and was Asia’s first Stock Exchange. It was granted permanent recognition under the Securities Contract (Regulation) Act, 1956. It has contributed to the growth of the corporate sector by providing a platform for raising capital. It is known as BSE Ltd but was established as the Native Share Stock Brokers Association in 1875. Even before the actual legislations were enacted, BSE Ltd. already had a set of Rules and Regulations to ensure an orderly growth of the securities market. As discussed earlier, a stock exchange can be set up as a corporate entity with different individuals (who are not brokers) as members or shareholders. BSE is one such exchange set up as a corporate entity with a broad shareholder base.

It has the following objectives:

• To provide an efficient and transparent market for trading in equity, debt instruments, derivatives, and mutual funds.
• To provide a trading platform for equities of small and medium enterprises.
• To ensure active trading and safeguard market integrity through an electronically-driven exchange.

Question 11.
You are the personnel manager of Kapila and Company Ltd. You have been directed by the directors of the company to select a chartered accountant for the company. Explain the selection procedure you will follow for the same.
Answer:
Following are the steps to be followed to select chartered accountant for Kapila and Company Ltd.:
(a) Scrutiny of applications: Applications are received in response to the advertisement or from other sources. They are scrutinised in the light of requirement and suitability and those found unsuitable are dropped or rejected.

(b) Selection/Employment tests: These tests are developed by psychologists and other experts to assess candidate’s nature, abilities and characteristics. There are several tests such as aptitude test, intelligence test, interest test, personality test, trade test, etc.

(c) Employment interview: In this interview, the ability and suitability of a candidate for a specific job is directly judged by experts or specialists in the board of selection.

(d) Reference checks: Prior to final selection, the prospective employer makes an investigation of the references supplied by the applicant. He undertakes a thorough search into candidates family background, past employment, education etc.

(e) Selection decision: Candidates who are considered suitable are selected after taking the opinion of all the selectors, especially the manager of the concerned department.

(f) Medical or physical test: Selected candidates may be asked to get themselves thoroughly examined by a prescribed doctor within or outside the organisation.

(g) Job offer: After satisfying, a job offer is being given to the applicant so that within a reasonable time an applicant would be able to report.

(h) Contract of employment: After getting a job offer a contract of employment is being given to the employees that includes terms and conditions of employment such as job title, job description, pay, working hours etc.,

Question 12.
Amol wants to start an EdTech. company. He wants to modernise and expand his business. He wants to raise money for the same. His cash flow and stability of earnings are unstable. Suggest him the source of funds he should choose. Also, discuss the other factors which affect this decision.
OR
Baba garments is manufacturing inner wear clothes. It has been consistently earning good profits for many years. This year too, it has been able to generate enough profits. There is availability of enough cash in the Company and good prospects for growth in future. It is a well-managed organisation and believes in quality, equal employment opportunities and good remuneration practices. It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ? 20 lakhs from SBI and is bound by certain restrictions on the payment of dividend according to the terms of the loan agreement.
The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.
(a) Identify the decision which Baba Garments wants to take.
(b) Explain four factors which can affect the decision of Baba Garments.
Answer:
Amol should go for Equity as the cash flow and stability of earnings are unstable. If he chooses debt, he has to pay regular servicing. Interest payment and repayment of principal are obligatory on a business. In addition if a company is planning to raise debt must have sufficient cash to meet the increased outflows because of higher debt.

The other factors which affect this decision are:
(a) Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation. The higher the ratio, lower shall be the risk of company failing to meet its interest payment obligations.

(b) Debt Service Coverage Ratio (DSCR): Debt Service Coverage Ratio takes care of the deficiencies referred to in the Interest Coverage Ratio (ICR). The cash profits generated by the operations are compared with the total cash required for the service of the debt and the preference share capital. A higher DSCR indicates better ability to meet cash commitments and consequently, the company’s potential to increase debt component in its capital structure.

(c) Tax Rate: Since interest is a deductible expense, cost of debt is affected by the tax rate.

(d) Cost of Equity: Stock owners expect a rate of return from the equity which is commensurate with
the risk they are assuming. When a company increases debt, the financial risk faced by the equity holders, increases. Consequently, their desired rate of return may increase. It is for this reason that a company cannot use debt beyond a point.

(e) Flexibility: If a firm uses its debt potential to the full, it loses flexibility to issue further debt. To maintain flexibility, it must maintain some borrowing power to take care of unforeseen circumstances.
OR
(a) In the given para, Baba Garments are talking about dividend decision. Dividend is that portion of profit which is distributed to shareholders. The decision involved here is how much of the profit earned by company (after paying tax) is to be distributed to the shareholders and how much of it should be retained in the business. While the dividend constitutes the current income re-investment as retained earnings increases the firm’s future earning capacity. The extent of retained earnings also influences the financing decision of the firm.

(b) The factors which have to be considered before taking dividend decisions are:
(i) Growth opportunities: Financial needs of a firm are directly related to the investment opportunities available to it. If a firm has abundant profitable investment opportunities, it will adopt a policy of distributing lower dividends. It would like to retain a large part of its earnings because it can reinvest them at a higher rate.

(ii) Stability of dividends: Investors always prefer a stable dividend policy. They expect to get a fixed amount as dividends which should increase gradually over the years.

(iii) Legal restrictions: A firm’s dividend policy has to be formulated within the legal provisions and restrictions of the Indian Companies Act.

(iv) Restrictions in loan agreements: Lenders, mostly financial institutions, put certain restrictions on the payment of dividends to safeguard their interests.

(v) Liquidity: The cash position is a significant factor in determining the size of dividends. Higher the cash and overall liquidity position of a firm, higher will be its ability to pay dividends or vice versa.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 3 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Standard Term 2 Set 3 with Solutions

Max. Marks: 40
Time: 2 Hours

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 Shot? Answer Type Questions end are to be answered in 30-50 words
• 3 marks questions aré Short Answer Type Questions and ere to be answered in 50-80 words
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words 4
  This question paper contains Case/Source Based Questions.

Question 1.
Kiran has started a business after completing a course in textile designing. She has tied up with an e-commerce company for supplying to them good quality designer clothes like kurtas, sarees, etc. She believes that controlling without planning is blind. So, every time she gets an order, she sets the standards in terms of the number of personnel required, the estimated requirements in man-hours per product, the requirements of direct materials for the projected production and the amount of normal overhead expenses required at the projected work-load.

She also keeps a close watch on the activities so as to ensure that they are according to plans. Whenever the order size is too large, she hires extra workers by placing a notice on the notice-board of the factory specifying the details of the jobs available. Which method of recruitment is being used by Kiran to hire the extra workers?
Answer:
Kiran has hired the extra workers through external recruitment methods, i.e., direct recruitment. Under direct recruitment, a notice is placed on the notice-board of the enterprise specifying the details of the jobs available. Jobseekers assemble outside the premises of the organization on the specified date and selection is done on the spot. The practice of direct recruitment is followed usually for casual vacancies of unskilled or semi-skilled jobs. Such workers are known as casual or ‘badly’ workers and they are paid remuneration on a daily wage basis.

Question 2.
These days, the development of a country is also judged by its system of transferring finance from the sector where it is in surplus to the sector where it is needed the most. To give strength to the economy, SEBI is undertaking measures to develop the capital market. In addition to this, there is another market in which unsecured and short-term debt instruments are actively traded every day. These markets together help the savers and investors in directing the available funds into their most productive investment opportunity.
Identify the function being performed by the market in the above case.
Answer:
An allocative function is the function being performed by the financial market in the above case. This function act as a link between the savers and investors by mobilizing funds and investing them into the most productive channels.

Question 3.
Manasvi, Manager in a company using highly sophisticated machines and equipments, wants that every employee should be fully trained before using the machines and equipments. Suggest and describe the best method of training that Manasvi can use for training of the employees.
Answer:
Vestibule method of training should be imparted in the given situation.
Vestibule training: Under this method, employees learn their jobs on the equipment they will be using, but the training is conducted away from the actual work floor. Actual work environment is created in a classroom and employees use the same materials, files, and equipment.

This is usually done when employees are required to handle sophisticated machinery and equipment. Vestibule training is suitable where a large number of persons are to be trained at the same time for the same kind of work. The main emphasis is on learning rather than on production.

Question 4.
Kamal is an experienced manager concerned about the 3% rise in the raw materials. However, he knows that this is an acceptable range. He tells his staff that if this rise goes beyond 3% it should be brought into the notice of management. Then, he sets a limit of 5% when the management should give it the priority over other activities. Identify the step of controlling process applicable in the following case.
Answer:
Analyzing deviations is the step of process which is being applicable here. In this, the deviations from the standárds are assessed and analysed to identify the causes of deviations. Management by exception is the technique which is used in this case. This technique of management belief that only the essential and significant deviations that are beyond the acceptable limit should be controlled.

Question 5.
Joydeep has completed his Ph.D. from London School of economics. He observed there that the senior management more often communicated failures than successes. They rarely shared any good news related to the growth of the firm or give any recognition to its employees for their extraordinary contributions towards the firm. As a result, Joydeep never felt encouraged enough to work up to his full potential and started exploring other avenues for employment.

In the context of the above case:
(a) Identify and explain the element of directing in the absence of which the employees don’t feel encouraged to work.
(b) State the importance of this element as identified in part (a) by giving any two suitable points.
Answer:
(a) The element of directing being referred to is motivation.
Motivation: It is a psychological factor that motivates employees to work effectively and efficiently to achieve organizational goals. It is a force or influence that causes someone to act or work eagerly. Employees can be motivated by triggering their psychological needs and desires of power, achievement, recognition, appreciation, and love.

(b) The importance of motivation is described below:
(i) Improves performance: Motivation helps to improve the performance of both the employees as well as the organization. This is because motivated employees contribute their maximum efforts for organizational goals.

(ii) Reduces employee turnover: Motivation helps to reduce employee turnover and thereby saves the cost of new recruitment and training. This is due to the fact that the managers identify the motivational needs of employees and provide suitable incentives. Consequently, the employees feel satisfied and may not think of leaving the organization.

Question 6.
Explain any three features of Directing.
OR
Discuss Autocratic Style of Leadership.
Answer:
The characteristics or features of direction can be explained as follows:
(a) Related to human relations: Directing involves communicating with superiors, instructing subordinates and guiding human resources across all levels of management in an organization. Directing aims at productively utilizing all resources through appropriate means of communication.

(b) Grouped function: Directing is not a single function but a group of various functions like supervision, motivation, leadership and communication.

(c) Harmonising of objectives: This implies that directing establishes consensual coexistence of organizational and personal (individual) goals. This further implies that directing aims at avoiding conflicts across all levels of management leading to organizational success and employee satisfaction.
OR
Autocratic Leadership Style: An autocratic leader gives orders and expects his subordinates to obey those orders. If a manager is following this style, then communication is only one-way with the subordinate
only acting according to the command given by the manager. This leader does not change or wish to be contradicted. His following is based on the assumption that reward or punishments both can be given
depending upon the result.

This leadership style is effective in getting productivity in many situations like in a factory where the supervisor is responsible for production on time and has to ensure labour productivity.

Question 7.
List any three factors which affect financing decision of the company.
Answer:
Financing Decision is about the quantum of finance to be raised from various long-term sources. Short-term sources are studied under the ‘working capital management.
The factors that affect the Financing Decision are:
(a) Cost: The cost of raising funds through different sources is different. A prudent financial manager would normally opt for a source which is the cheapest.
(b) Risk: The risk associated with each of the sources is different.
(c) Floatation Costs: Higher the floatation on cost, less attractive the source.
(d) Cash Flow Position of the Company: A stronger cash flow position may make debt financing more viable than funding through equity.

Question 8.
Anil Ltd. is engaged in manufacturing auto parts. The target production is 200 units per day. The company had been successfully attaining this target until two months ago. Over the last two months, it has been observed that daily production varies between 150-170 units.
(a) Identify the management function to rectify the above situation.
(b) Briefly state the procedure to be followed so that the actual production may come up to the target production.
Answer:
(a) The controlling function of management is needed to rectify the above situation.

(b) The procedure to be followed so that the actual production may come up with the target production is as follows:

• Providing training to workers if the workers are not well-versed with the production process.
• Improving the work environment if it is not conducive to efficient working.
• Ensuring timely availability of the raw materials and other equipments if they are not made available on time.
• Replacing the machinery if it is defective or has become obsolete.

Question 9.
Enumerate the reliefs available for Consumers under Consumer Protection Act, 2019?
OR
Enumerate the three-tier machinery under Consumer Protection Act, 2019.
Answer:
Reliefs available to Consumers under Consumer Protection Act, 2019 are as follows:

• Removal of flaws in the goods.
• Removal of the deficiencies in the services.
• Replacement of damaged goods with new ones that is free of flaws.
• Refunding the complainant for the price paid by him.
• Payment of an appropriate amount of compensation for any loss or injury that has occurred.
• In suitable circumstances, payment of punitive damages.
• Discontinuance or abandonment unfair/restrictive trade practices.
• Discontinuance of the sale of hazardous goods and services.
• Payment to the consumer welfare fund (not less than 5%) which is to be used in the prescribed manner.
• Run corrective advertisements to counteract the effect of misleading advertisements.
• Reimburse all parties for their expenses.

OR
The three-tier machinery under Consumer Protection Act 2019 are as follows:
(a) District Commission:
The state concerned establishes district forums in each district. The following are the key characteristics:

• It is made up of a President and two members, one of whom must be a woman, who are officially nominated by the state government.
• The value of consumer complaints should not exceed 1 crore.
• If any of the party is not satisfied with the district forum’s decision, they have 45 days to file an appeal with the state forum from the date of order.

(b) State Commission:
The government establishes a state commission in each state. The following are the key characteristics:

• Each commission has a president and at least two members appointed by the state governments one of whom should be a woman.
• The total worth of the products or services, including the compensation sought, is greater than I Crore but less than 10 crore.
• If any of the parties is not pleased with the judgment, they can file a complaint with the national commission within 30 days of the order being issued,

(c) National Commission:
Central government sets the National commission. The provisions are:

• It is made up of a President and at least four members chosen by the central government one of whom should be a woman.
• All complaints relating to products and services with a compensation value above ₹ 10 crores can be filed with the national commission.
• The National Commission has the authority to issue orders for product replacement arid loss compensation, among other things.
• If any of the parties is not pleased with the decision taken, they can file a complaint with the Supreme Court of India within 30 days of the order being issued.

Question 10.
Naresh was involved in a business. He manipulated the profits of the company and conducted some fraudulent activities against SEBI guidelines. On regular inspection and by conducting enquiries of the brokers involved, the Securities and Exchange Board of India (SEBI) was able to detect this irregularity. Identify the function performed by the SEBI in the above case and explain the protective function.
Answer:
The function performed by the SEBI in the above case is Regulatory function.
The protective function includes the following activities:
(a) Prohibits insider trading: Insider trading is the act of buying or selling of the securities by the insiders of a company, which includes the directors, employees and promoters. To prevent such trading SEBI has barred the companies to purchase their own shares from the secondary market.

(b) Check price rigging: Price rigging is the act of causing unnatural fluctuations in the price of securities by either increasing or decreasing the market price of the stocks that leads to unexpected losses for the investors. SEBI maintains strict watch in order to prevent such malpractices.

(c) Promoting fair practices: SEBI promotes fair trade practice and works towards prohibiting fraudulent activities related to trading of securities.

Question 11.
Mr.Kanan is an H.R. Manager of “Ahuja Furniture Private Limited.” At the beginning of the new year he
anticipated that the company will need 60 new additional persons to fill up different vacancies. He gave an advertisement in the newspaper inviting applications for filling up different vacant posts. As many as 120 applications were received. The same were scrutinized.

Out of these, conditions of 15 applicants were not acceptable to the company. Letters of regret, giving reasons, were sent to them. The remaining candidates were called for preliminary interviews. The candidates called for were asked to fill up blank application forms. Thereafter, they were given four tests. The objective of the first test was to find out how much interest the applicant takes in his work. The objective of the second test was to find out ‘specialization’ of the applicant in any particular area.

Third test aimed at making sure whether the applicant was capable of learning through training or not. The purpose of the fourth test was to find out how much capability a person has to mix up with other persons, and whether he can influence other persons and get influenced by them. ‘
(a) Identify the function of management performed by Mr. Karan.
(b) Identify and explain different types of tests organized in the organization from the paragraph.
Answer:
(a) The function of management performed by Mr. Kanan here is Staffing. Staffing is placing right people at right place.

(b) Intelligence Test: “First test was to find out how much interest the applicant takes in his work”.
Trade Test “The objective of the second test was to find out ‘specialization’ of the applicant in any particular area”.

Aptitude Test: “Third test aimed at making sure whether the applicant was capable of learning through training or not”.

Personality Test “The purpose of the fourth test was to find out how much capability a person has to mix-up with other persons, and whether he can influence other persons and get influenced by them.”

Question 12.
Mr. X is running a successful business of R. K. Cement Ltd. Mr. X decided to expand his business by acquiring a Steel Factory. This required an investment of ₹ 80 crores. To seek advice in this matter, he called his financial advisor Mr. A who advised him about the judicious mix of equity (40%) and Debt (60%).

Employ more of cheaper debt may enhance the EPS. Mr. A 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.A, Mr. X decided to raise funds from a financial institution. Discuss the concept of Financial Management as advised by Mr. X in the above situation and also discuss the factors which affect the concept advised by Mr.X.
OR
Company X Ltd.

Which alternative should be used by the company in order to maximize the returns to the equity shareholders?
Answer:
The concept of financial management advised by Mr.X is Capital Structure. Capital Structure: Capital structure is defined as the combination of equity and debt that is put into use by a company in order to finance the overall operations of the company and for its growth. It can be calculated as a debt-equity ratio, i.e., Debt/Equity, or as the proportion of debt out of the total capital i.e., Debt /(Debt+ Equity). Debt and equity differ significantly in their cost and riskiness for the firm.

The cost of debt is lower than the cost of equity for a firm because the lender’s risk is lower than the equity shareholder’s risk, since the lender earns an assured return and repayment of capital and, therefore, they should require a lower rate of return.

Factors affecting the Choice of Capital Structure are:
(a) Cash Flow Position: The size of projected cash flows must be considered before borrowing. Cash flows must not only cover fixed cash payment obligations but there must be sufficient buffer also. It must be kept in mind that a company has cash payment obligations for

• normal business operations;
• for investment in fixed assets; and
• for meeting the debt service commitments, i.e., payment of interest and repayment of principal.

(b) Interest Coverage Ratio (ICR): The interest coverage ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation. This may be calculated as follows: ICR = \(\frac{\text { EBIT }}{\text { Interest }}\) The higher the ratio, lower shall be the of company failing to meet its Interest interest payment obligations.

(c) Debt Service Coverage Ratio: Debt Service Coverage Ratio takes care of the deficiencies referred to in the Interest Coverage Ratio (ICR). The cash profits generated by the operations are compared with the total cash required for the service of the debt and the preference share capital. A higher DSCR indicates better ability to meet cash commitments and consequently, the company’s potential to increase debt component in its capital structure.

(d) Return on Investment (Rol): If the RoI of the company is higher, it can choose to use trading on equity to increase its EPS, i.e., its ability to use debt is greater.

(e) Cost of debt: A firm’s ability to borrow at a lower rate increases its capacity to employ higher debt.
OR
Company X Ltd.

According to this table, Company X Ltd. Should go for third situation as in that case EPS is highest.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 5 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Standard Term 2 Set 5 with Solutions

Time Allowed: 2 Hours
Maximum 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
• 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.

Question 1.
Identify and explain the source of recruitment which would be best for recruiting employees for technical, professional and managerial personnel for middle and top level.
Answer:
The source of recruitment which can be used for recruiting employees for technical, professional and managerial personnel for middle and top level is management consultants and placement agencies. In technical and professional areas, private agencies and professional bodies appear to be doing substantive work. Placement agencies provide a nationwide service in matching personnel demand and supply. These agencies compile bio-data of a large number of candidates and recommend suitable names to their clients. Such agencies charge fee for their services and they are useful where extensive screening is required.

Question 2.
RBL bank is short of funds this year to maintain their cash reserve ratio (CRR). So, they decided to raise a money market instrument which will help them to maintain its CRR. Identify the money market instrument used here.
Answer:
The money market instrument used here is call money:

• Call money is a short-term money market instrument through which one bank may borrow money from another bank to maintain its cash reserve ratio as per the guidelines of RBI.
• Its maturity period may range from a single day to a fortnight.
• The rate at which the interest is paid on call money is called call money rate.

Question 3.
Explain the benefits of Training to the organisation.
Answerr:
Benefits of Training to the organisation are as follows:

• Training is a systematic learning, always better than hit and trial methods which lead to wastage of efforts and money.
• It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
• Effective training helps in boosting the morale of the employees. Thereby, it helps in reducing the rate of absenteeism and employee turnover.

Question 4.
“A manager should focus on Key Result Areas (KRAs) that are critical to the success of an organisation”. Identify and explain the step of controlling process highlighted here.
Answer:
The step of Controlling process highlighted here is Analysing Deviations and Critical point control technique is used.
Analysing Deviations:
When actual performance is measured with standard performance, some deviation in performance can be expected. It is, therefore, important to determine the acceptable range of deviations. The deviations in key areas of business need to be attended more urgently as compared to deviations in certain insignificant areas. In this regard, Critical point control and Management by exception should be used by a manager.

Question 5.
Rajat works in McDonalds. This month, he over achieved his targets. This achievement was declared on the notice board and CEO of the company awarded him a trophy.
(a) Identify the types of incentive given to Rajat.
(b) Name one more incentive of same type which can be given to Rajat.
Answer:
(a) The incentive which is being given to Rajat is Employee Recognition programmes (Non- financial
Incentives). In Employee Recognition Programmes most people have a need for evaluation of their work and due recognition. They feel that what they do should be recognised by others concerned. Recognition means acknowledgment with a show of appreciation. When such appreciation is given to the work performed by employees, they feel motivated to perform/work at higher level.

(b) Job Enrichment: Job enrichment is concerned with designing jobs that include greater variety of work content, require higher level of knowledge and skill; give workers more autonomy and responsibility; and provide the opportunity for personal growth and a meaningful work experience. If jobs are enriched and made interesting, the job itself becomes a source of motivation to the individual.

Question 6.
Discuss Maslow’s Need Hierarchy Theory of Motivation.
OR
Discuss the qualities of a good leader.
Answer:
Abraham Maslow, a well-known Psychologist in a classic paper published in 1943, outlined the elements of an overall theory of motivation. His theory was based on human needs. These are:

• Basic Physiological Needs: These needs are the most basic in the hierarchy and corresponds to primary needs. Hunger, thirst, shelter, sleep and sex are some examples of these needs. In the organisational context, basic salary helps to satisfy these needs.
• Safety/Security Needs: These needs provide security and protection from physical and emotional harm. Examples: job security, stability of income/ pension plans etc.,
• Affiliation/Belonging Needs: These needs refer to affection, sense of belongingness, acceptance and friendship.
• Esteem Needs: These include factors such as self-respect, autonomy status, recognition and attention.
• Self Actualisation Needs: It is the highest level of need in the hierarchy. It refers to the drive to become what one is capable of becoming.

OR
Qualities of a Good Leader are:

• Physical features: Physical features like height, weight, health, appearance determine the physical personality of an individual. It is believed that good physical features attract people. Health and endurance help a leader to work hard which inspires others to work with same tempo.
• Knowledge: A good leader should have required knowledge and competence. Only such person can instruct subordinates correctly and influence them.
• Integrity: A leader should possess high level of integrity and honesty. He should be a role model to others regarding the ethics and value.
• Initiative: A leader should have courage and initiative. He should not wait for opportunities come to his way, rather he should grab the opportunity and use it to the advantage of organisation.
• Communication skills: A leader should be a good communicator.

Question 7.
List three factors which affect the requirement of fixed capital.
Answer:
Factors affecting the requirement of Fixed Capital are:

• Nature of Business: A trading concern needs lower investment in fixed assets compared with a manufacturing organisation; since it does not require purchasing plant and machinery, etc.
• Scale of Operations: A larger organisation operating at a higher scale needs bigger plant, more space that is why requires higher investment in fixed assets as compared to small organisation.
• Choice of Technique: A capital-intensive organisation requires higher investment in plant and machinery that is why requires more fixed capital. On the other hand, Labour intensive organisations require less investment in fixed assets.

Question 8.
Raman is a production manager in a Cooler manufacturing company. Recently he noticed that his team could not achieve the target production of 90 units per day. Instead on an average the production touched the target of only 75 units. On thorough analysis he found out that the deviation between standard production and actual production is far beyond acceptable range, on overall analysis he also found out that there has been a marginal increase in office stationery expenses. Moreover, he detected that the machine installed for the purpose of manufacturing was not able to perform at its best. Being a management expert suggest Raman how he should deal with the existing problem.
Answer:
Raman should follow the following principles of managerial control while analysing deviations:
(a) Critical point control: According to this principle of managerial control, a manager should focus on Key Result Areas (KRAs) that are critical to the success of an organisation. A manager should not waste his precious time on checking each and every activity in the organisation.
In the above case, Raman should focus on improving the performance of the machinery either by repairing it or by replacing it with the new one.

(b) Management/Control by Exception: As per this principle of managerial control a manager trying to control everything may end up controlling nothing. Therefore, only significant deviations that go beyond the permissible limit should be brought to the notice of management. In the given case of cooler manufacturing company, poor performance of machinery needs immediate managerial attention.

Question 9.
Describe the various Redressal Agencies under Consumer Protection Act, 2019.
OR
Discuss the ways and means of Consumer Protection.
Answer:
As per Consumer Protection Act, 2019, the statue establishes a three-tier system for resolving consumer
complaints, as follows:
(a) District Commission:
The state concerned establishes district forums in each district. The following are the key characteristics:

• It is made up of a President and two members, one of whom must be a woman, who are officially nominated by the state government.
• The value of consumer complaints should not exceed ₹ 1 crore.
• If any of the party is not satisfied with the district forum’s decision, they have 45 days to file an appeal with the state forum from the date of order.

(b) State Commission:
The government establishes a state commission in each state. The following are the key characteristics:

• Each commission has a president and at least two members appointed by the state government, one of whom should be a woman.
• The total worth of the products or services, including the compensation sought, is greater than ₹ 1 Crore but less than ₹ 10 crore.
• If any of the parties is not pleased with the judgement of the state commission, they can file a complaint with the national commission within 30 days of the order being issued.

(c) National Commission:
The Central government sets the National commission. The provisions are:

• It is made up of a President and at least four members chosen by the central government, one of whom should be a woman.
• All complaints relating to products and services with a compensation value above ₹ 10 crore can be filed with the national commission.
• The National Commission has the authority to issue orders for product replacement and loss compensation, among other things.
• If any of the parties is not pleased with the decision taken, they can file a complaint with the Supreme Court of India within 30 days of the order being issued.

OR
The Consumer Protection Act of 2019 safeguard and promote consumers’ interests by resolving their complaints timely and cost-effectively. It came into force on July 20th 2020.
Ways and Means of Consumer Protection are:

• Self-regulation by businesses: Businesses should fulfill corporate social responsibility; adhere to ethical norms and practices while working with customers.
• Business associations: The FICCI and the CII have established codes of conduct for its members to follow while interacting with clients.
• Consumer Awareness: A consumer should have all knowledge because well-informed consumer will be able to speak out against any unethical business activities.
• Consumer Organisations: Consumer organisations play a vital role in informing consumers about their rights and protecting them against any exploitation.
• Government: The government safeguards consumers’ interests by establishing various consumer protection regulations.

Question 10.
Discuss the various methods of floating new issues in the primary market.
Answer:
Methods of floatation are:
(a) Offer through Prospectus: Offer through prospectus is the most popular method of raising funds by public companies in the primary market. This involves inviting subscription from the public through issue of prospectus. A prospectus makes a direct appeal to investors to raise capital, through an advertisement in newspapers and magazines.

(b) Offer for Sale: Under this method, securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers.

(c) Private Placement: Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue.

(d) Rights Issue: This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company.

Question 11.
Abhay is a skilled electrician worker. He joined the company and he has to go under training for gaining high skills in electrical field. In that training, he had to spend prescribed amount of time working with an experienced guide, or trainer. A uniform period of training is offered to trainees, in which both type of work skills are offered, i.e., fast and slow and all trainees are placed together.
(a) Identify the type of training which has been taken by Abhay.
(b) Discuss three more training of similar type identified in.
Answer:
(a) Abhay has taken the Apprenticeship Programmes (On the job training). In this, the trainee is put
under the guidance of a master worker. These are designed to acquire a higher level of skill. People seeking to enter skilled jobs, to become, for example, plumbers, electricians or iron-workers, are often required to undergo apprenticeship training.

(b)
(i) Coaching: In this method, the superior guides and instructs the trainee as a coach. The
coach or counsellor sets mutually agreed upon goals, suggests how to achieve these goals, periodically reviews the trainees progress and suggests changes required in behaviour and performance.

(ii) Internship Training: It is a joint programme of training in which educational institutions and business firms cooperate. Selected candidates carry on regular studies for the prescribed period. They also work in some factory or office to acquire practical knowledge and skills.

(iii) Job Rotation: This kind of training involves shifting the trainee from one department to another or from one job to another. This enables the trainee to gain a broader understanding of all parts of the business and how the organisation as a whole functions. The trainee gets fully involved in the departments operations and also gets a chance to test his own aptitude and ability.

Question 12.
Suppose there are two companies “A Ltd.” and B Ltd. Both the companies has raised ₹ 20 lakh Capital. A Ltd. has raised the capital through equity whereas B Ltd. has raised ₹ 8 lakh through equity and ₹ 12 lakh through Debt bearing 10 % fixed interest rate. The EBIT of both the companies is 4 lakh each and tax rate is 30 %. From both the companies, whose shareholders will get better return on equity shares? Show the workings clearly.
OR
Shalini, after acquiring a degree in Hotel Management and Business Administration, took over her family food processing company of manufacturing pickles, jams and squashes. The business had been
established by her great grandmother and was doing reasonably well. However, the fixed operating costs of the business were high and the cash flow position was weak. She wanted to undertake modernisation of the existing business to introduce the latest manufacturing processes and diversify into the market of chocolates and candies. She was very enthusiastic and approached a finance consultant, who told her that approximately 50 lakh would be required for undertaking the modernisation and expansion programme. He also informed her that the stock market was going through a bullish phase. Identify the source of finance which Shalini should not choose for financing the modernisation and expansion of her food processing business. Give one reason in support of your answer. Discuss any three other factors, apart from those stated in the above situation, which Shalini should keep in mind while taking this decision.
Answer:

In both the companies, shareholders of B Ltd. wil get better return on equity shares. As,
2.45 and A Ltd has 1.40.
OR
Shalini should not choose debt capital for financing the modernisation and expansion of her food processing business because the fixed operating cost of the company is high. It cannot take the additional burden of fixed commitments in terms of payment of interest and repayment of capital by issuing debt.
The other three factors that Shalini must keep in mind while taking this decision are stated below:
(a) Risk: 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.

(b) Flexibility: Too much dependence on debt reduces the firm’s ability to raise debt during unexpected situations. Therefore, it should maintain flexibility by not using debt to its full potential.
(c) Regulatory framework: Every company operates within a regulatory framework provided by the law, e.g., public issue of shares and debentures has to be made under SEBI guidelines. Raising funds from banks and other financial institutions require fulfillment of other norms.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 2 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Standard Term 2 Set 2 with Solutions

Max. Marks: 40
Time: 2 Hours

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 Shot? Answer Type Questions end are to be answered in 30-50 words
• 3 marks questions aré Short Answer Type Questions and ere to be answered ¡n 50-80 words
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words 4
  This question paper contains Case/Source Based Questions.

Question 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 candidates to apply for jobs in their organization 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:
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 organization structure.

The next two steps are:

1. 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.
2. 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 superiors, subordinates, and colleagues and familiarising them with the rules and policies of the organization.

Question 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 costs. 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.

Question 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.

Question 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.

Question 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 invited 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 organization. Explain the type of incentive discussed above as well as two other incentives of the same type.
Answer:
The 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 organization may provide several retirement benefits to its employees after their retirements such as provident fund, pension, and gratuity which provide financial security. These benefits serve as an incentive when they are in service in the organization.

(b) Productivity linked wage incentives: Several wage incentive plans aims at linking payment of wages to increase in productivity at individual or group level.

Question 6.
Discuss Elements of Directing.
OR
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 of desired objective.

(c) Leadership: Leadership is the process of influencing the behaviour of people by making them strive voluntarily towards achievement of organizational goals.

(d) Communication: Communication is a transfer of information from the sender to the receiver with the information being understood by the receiver.
OR
Importance of Directing are:
(a) Directing helps to initiate action by people in the organization 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 organization in such a way that every individual effort contributes to the organizational performance. Thus, it ensures that each individual puts in efforts towards achieving the organizational goals.

(c) Directing guides employees to fully realize their potential and capabilities by motivating and providing effective leadership.

Question 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 adopts a labor-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 technicalities 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 firms. This may lead to reduction in his investments which is being required in the business.

Question 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.”

Question 9.
Discuss the importance of Consumer Protection from Business Point of view.
OR
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 Sodety’s Resources: Business organizations 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 organizations 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.
OR
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 property. 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.

Question 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 objèctives of Securities Exchange Board of india (SEBI) are following:

• To regulate the stock exchange and the securities market to promote their ordinarily functioning.
• To protect the rights and interests of investors especially individual investors to guide and educate them.
• To prevent trading malpractices like price rigging and insider trading.
• 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.

Question 11.
Biru Nandan, Chairman of Lalit Group of Companies founded “Biru University” for undergraduate and postgraduate 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:

• Fresh talent: With external recruitment, fresh talent with innovative ideas comes in organization.
• Wider choice: In external recruitment, the organizations have wider choice for selecting the best suitable candidate than internal recruitment.
• Qualified personnel: In external process of recruitment, organizations get qualified, skilled and talented personnel.
• Latest technological knowledge: Through campus placement, the organisation cari get tech savy employee.
• Competitive spirit: New employee brings competitive spirit in the organization, which motivates the existing employees of the organization also.

Question 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.
OR
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 commitmènt 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.
OR

(a) Computer Tech Ltd. has been paying dividends at high rate to its shareholders over the past five years because of the following reasons:

• 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.
• 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.
• Access to capital market: Because of its creditworthiness, 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:

• The cash flow position of the company is not good and dividends are paid in cash.
• 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.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 6 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Standard Term 2 Set 6 with Solutions

Time Allowed: 2 Hours
Maximum 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
• 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.

Question 1.
Owing to the increased workload after demonetization, the income tax employees of Gurgaon and Delhi region had urged the center to increase manpower of the IT department by filling up 35% vacancies which were lying vacant. As there were confirmed reports about misuse of bank accounts, foreign exchange mechanism, gold purchases and adoption of various other dubious means for investing the unaccounted cash. Identify and explain the function of management and its step of process being discussed in the above lines.
Answer:
Staffing is the function of management which is being referred to in the above lines. The managerial function of staffing is concerned with obtaining and maintaining a satisfactory and satisfied workforce.

The step in the process of staffing which has already been carried out is estimating manpower requirements. It is the first step in the staffing process and is carried out with the help of workload analysis (assessment of the number and types of human resources necessary for performing of various jobs and accomplishment of organisational objectives) and work force analysis (assessment of the number and type available).

Question 2.
These days, the development of a country is also judged by its system of transferring finance from the sector where it is in surplus to the sector where it is needed most. To give strength to the economy, SEBI is undertaking measures to develop the capital market. In addition to this there is another market in which unsecured and short-term debt instruments are actively traded every day. These markets together help the savers and investors in directing the available funds into their most productive investment opportunity. Identify and explain the function being performed by the market in the above case.
Answer:
Mobilisation of funds is the function being performed by the financial market in the above case.
Mobilisation of Funds:
A financial market facilitates the transfer of savings from savers to investors. It gives savers the choice of different investments and thus helps to channelise surplus funds into the most productive use.

Question 3.
Ambreesh runs an NGO under the name ‘Sakhi’ in Delhi. The organisation is engaged in offering employment to underprivileged people. The website of ‘Sakhi’ provides a link to a careers site wherein the people desirous of joining the NGO can use simple Job Search to find the right opportunity for themselves. The NGO also keeps a database of unsolicited applicants in its office so that job seekers may be notified of future opportunities when they arise. In context of the above case:
Identify the two sources of external recruitment being used by the NGO ‘Sakhi’ by quoting lines from the paragraph.
Answer:
Recruitment is making people aware about the vacancy in the company and to persuade them to apply for the same.
The two sources of external recruitment being used by the NGO ‘Sakhi’ are as follows:
(a) Web Publishing:
“The website of ‘Sakhi’ provides a link to a careers site wherein the people desirous of joining the NGO can use simple Job Search to find the right opportunity for themselves”

(b) Casual Callers:
“The NGO also keeps a database of unsolicited applicants in its office so that job seekers may be notified of future opportunities when they arise.”

Question 4.
Adarsh is trying to reduce wastage of resources in his company. He is trying to do it in the best possible manner. He has set standards for performance of different types of activities and is doing his level best to perform according to these set standards to minimise wastage of resources. Things are not going to be over for him as he will have to look into other aspects too. He has set up a good monitoring system which helps him know how the employees are performing according to set standards and when the employees meet these standards they will be given incentives. He is hoping to pull out a good performance from his team this year. Identify the function of management and benefits of function of management which has been referred to in the given case.
Answer:
The function of management which has been referred to in the above case is controlling. Controlling means ensuring that activities in an organisation are performed as per the plans.
The benefits of controlling highlighted in the above case are:
(a) Controlling helps in efficient utilisation of resources: He has set standards for performance of different types of activities and is doing his level best to perform according to these set standards to minimise wastage of resources.

(b) Controlling helps in improving employee motivation: He has set up a good monitoring system which helps him know how employees are performing according to set standards as when the employees meet these standards they will be given incentives.

Question 5.
Aprajit works in an organisation. He is part of the organisation for last 20 years. During all these years inspite of his best performance in the organisation he hasn’t yet reached the post of Vice-President.
(a) Which need of Aprajit has been referred here?
(b) Mention the assumptions of Maslow’s theory.
Answer:
(a) The Self-Actualisation need of Aprajit has been referred here. It is the highest level of need in the
hierarchy. It refers to the drive to become what one is capable of becoming. These needs include growth, self-fulfillment and achievement of goals.

(b) Maslow’s theory is based on the following assumptions:

• People’s behaviour is based on their needs. Satisfaction of such needs influences their behaviour.
• People’s needs are in hierarchical order, starting from basic needs to other higher level needs.
• A satisfied need can no longer motivate a person; only next higher level need can motivate him.
• A person moves to the next higher level of the hierarchy only.

Question 6.
State three importance of Supervision.
OR
Enumerate few importance of Directing.
Answer:
Importance of Supervision:

• A good supervisor acts as a guide, friend and philosopher to the workers.
• Supervisor acts as a link between workers and management.
• Supervisor plays a crucial role in maintaining group unity among workers placed under his control.

OR
Importance of Directing:

• Directing integrates employees’ efforts in the organisation in such a way that it contributes to the organisational performance.
• Directing guides employees to fully realise their potential through effective communication, motivation and leadership.
• Directing facilitates introduction of needed changes in the organisation as it helps to reduce employees’ resistance and develop an environment which is conducive to introducing changes in the organisation.

Question 7.
List the types of working capital.
Answer:
Working capital is classified into two types:
(a) Permanent Working Capital: The need for working capital or current assets fluctuates from time to time. However, to carry on day-to-day operations of the business without any obstacles, a certain minimum level of raw- materials, work-in-progress, finished goods and cash must be maintained on a continuous basis. The amount needed to maintain current assets on this minimum level is called permanent or regular working capital. The amount involved as permanent working capital has to be met from long-term sources of finance, e.g., capital, debentures, long-terms loans, etc.

(b) Temporary or Variable Working Capital: Any amount over and above the permanent level of working capital is called temporary, fluctuating, or variable working capital. Due to seasonal changes, the level of business activities higher than normal during some months of the year, and therefore, additional working capital will be required along with the permanent working capital. It is so because during peak season, demand rises and more stock is to be maintained to meet the demand.

Question 8.
Sunita Ltd. is engaged in manufacturing Fan components. The target production is 300 units per day. The company had been successfully attaining this target until two months ago. Over the last two months, it has been observed that daily production varies between 150-170 units.
Explain the procedure to be followed so that the actual production may come up to the target production.
Answer:
The procedure to be followed so that the actual production may come up with the target production is
as follows:

• Providing training to workers if the workers are not well versed with the production process.
• Improving the work environment if it is not conducive to efficient working.
• Ensuring timely availability of the raw materials and other equipment’s if they are not made available on time.
• Replacing the machinery if it is defective or has become obsolete.

Question 9.
Enumerate some responsibilities of a consumer.
OR
Enumerate any five consumer rights given under Consumer Protection Act,1986.
Answer:

Responsibilities of a Consumer are:

• Be aware about various goods and services available in the market.
• Buy only standardised goods and check for standardisation mark.
• Be aware about the risks associated with the products and services and use them prudently.
• Read the labels carefully.
• Assert yourself to ensure that you get a fair deal.
• Be honest in your dealings.
• Ask for a cash memo on purchase of goods or services.
• File a complaint in an appropriate consumer forum in a case of a shortcoming in the quality of goods purchased or services availed.
• Form consumer societies which would play an active part in educating consumers and safeguarding their interests.

OR
Consumer rights given under Consumer Protection Act,1986 are:
(a) Right to Safety: The consumer has a right to be protected against goods and services which are hazardous to life and death.
For instance, electrical appliances which are manufactured with substandard products or do not confirm to the safety norms might cause serious injury.
Thus, consumers are educated that they should use electrical appliances which are ISI marked as this would be an assurance of such products meeting quality specifications.

(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, quality, directions for use, etc. It is because of this reason that the legal framework in India requires the manufactures to provide such information on the package and label of the product.

(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 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.

(e) Right to Consumer Education: The consumer has a right to acquire knowledge and to be a well- informed consumer throughout life. He should be aware about his rights and the reliefs available to him in case of a product or service falling short of his expectations.

Question 10.
Discuss the functions of Financial Market.
Answer:
Functions of financial markets are:
(a) Information dissemination: The main function of financial markets is to disseminate information about trading activity of financial instruments between financial intermediaries and investors as per regulatory norms that enables informed decision-making about their transactions.

(b) Facilities price recovery: Financial markets also facilitates price discovery that is the process used to determine current market prices of a financial instrument depending upon the demand and supply for those instruments.

(c) Provides liquidity: Financial markets provide liquidity by enabling a trading platform for investors who can invest their money in any type of instrument they desire.

(d) Mobilises savings: Financial markets boost people into utilising their savings into investments to obtain higher returns.

(e) Reducing the cost of transactions: Financial markets provide valuable information about securities being traded in the market. It helps to save time, effort and money that both buyers and sellers of a financial asset would have to otherwise spend to try and find each other.

Question 11.
Neeraj, the director of a garment company, is planning to manufacture bags for the utilisation of waste material from one of his garment units. He has decided that this manufacturing unit will be set-up in a „ rural area of Uttar Pradesh where people have very few job opportunities and labour is available at very
low rates. He also thought of giving equal opportunities to men and women.

For this, he wanted four different heads for sales, account, purchase and production. He gave an advertisement and shortlists ten candidates per post after conducting different selection tests.

Identify and state the next three steps for choosing the best candidate out of the candidates shortlisted. Also identify two values which Neeraj wants to communicate to the society by setting up this manufacturing unit.
Answer:
Selection is done in the third step, in which a prospective candidate is chosen from the pool of candidates.
It ensures that the organisation gets the best among the available and it also enhances the .morale of the
selected candidate. Preliminary screening and selection tests have been conducted.
The next three steps in the process of selection are:

• Employment interview: All applicants who qualify in selection tests are called for an interview. Interview is the formal face to face oral conversation between the employer and the applicant.
• Reference and background checks: A candidate who is successful in the interview is required to give name and address of some references. The organisation checks the credibility of the candidate through reference checks
• Selection decision: A final decision has to be made about the selection among the candidates who have cleared the interviews and reference checks.

By setting up a manufacturing unit in the rural area of Uttar Pradesh, Neeraj wants to communicate the
following values to the society:

• Manufacturing bags from the waste material will help in reducing pollutants from the environment and will also reduce wastage.
• Giving equal opportunities to men and women, will increase the standard of living of rural area labourers.

Question 12.
Saurabh is engaged in transport business and transports fruits and vegetables to different states. Stating
the reason in support of your answer, identify the working capital requirements of Saurabh. Saurabh also wants to expand and diversify his transport business, explain any five factors that will affect his fixed capital requirements.
OR
Organic Ltd. is a company engaged in production of organic food. Presently it sells its products through indirect channels of distribution. The company is planning to start its own show rooms and online portals. The financial manager suggested to use debt to invest in own showrooms and online portals. %
Company plans to raise debt capital of ₹ 40 lakhs through a loan from ICICI bank at 10% Interest. The 1 present capital base of the company is 9 lakhs equity shares of 10 each. The rate of tax is 30% .
In the context of above case –
Assuming expected rate of return same as current year, i.e., 15%, Do you think the decision to
use debt is justified? Show your working clearly.
Answer:
In the transportation business, lesser amount of working capital is required as Saurabh is engaged in
service industry. A firm engaged in service industry needs less working capital.

• Lower investment is required to carry out the day-to-day operations.
• Lower investment require to maintain inventory, if any.

Factors that affect Fixed Capital Requirement are as follows:
(a) Growth prospects: Businessman wants to expand his business, in such a situation; company requires higher investment to meet the anticipated demand in future. Thus the requirement of fixed capital will be higher.

(b) Diversification: If the businessman diversity his business, this mean larger amount of fixed capital is required.

(c) Level of Collaboration: Sometimes, certain business organisations share each other’s facilities. Collaboration reduces the level of investment in fixed assets for each one of the participating organisations.

(d) Technology Upgradation: In certain industries like transportation, assets become obsolete sooner. Consequently, their replacements become due faster. Higher investment in fixed assets may, therefore, be required in such cases.

(e) Financing Alternatives: A developed financial market may provide leasing facilities as an alternative to outright purchase. When an asset is taken on lease, the firm pays lease rentals and uses it and firm need not to arrange huge sums required to purchase it. Availability of leasing facilities, thus, may reduce the funds required to be invested in fixed assets.
OR
Organic Ltd.

Yes, the decision to raise debt is correct or justified as the EPS is more in case of Situation 2 in
which company has raised the money through debt also.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 7 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Standard Term 2 Set 7 with Solutions

Time Allowed: 2 Hours
Maximum 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
• 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.

Question 1.
Identify and explain the tests which are to be conducted to ascertain the intelligent quotient and capacity of learning new skills of a candidate to develop.
Answer:
The test which needs to be conducted to assess the intelligent quotient of a candidate is Intelligent test, This is one of the psychological tests which measure the level of intelligence quotient of an individual, It is an indicator of a person’s learning ability or the ability to make decisions and judgments.

The test which needs to be conducted to know the capacity of a candidate to leam new skill is Aptitude test. It is a measure of individual’s potential for learning new skills and person’s capacity to develop.

Question 2.
Mr. Naveen and Mr. Praveen are the directors of Sujata Ltd. and are discussing about how to raise the funds in the market. Mr. Praveen said they wanted to earn high yield of return irrespective of the risk involved in it.
(a) About which market Mr. Naveen and Mr. Praveen were talking about?
(b) What are its sub-markets or components?
(c) How can Mr. Praveen raise the funds?
Answer:
(a) Mr. Naveen and Mr. Praveen are talking about raising funds from the capital markets which provides
long- term capital money and provides higher returns for their investment through relevant profits.

(b) The sub-markets or components of capital markets are primary and secondary markets and the financial instruments used in these markets are equity and debt.

(c) Mr. Praveen can issue new securities in primary markets. They can make a public issue and become a listed company in the stock exchange. They could also consider e-IPOs (Electronic Initial Public Offer) where investors can bid for new shares through internet.

Question 3.
Explain the concepts which are related to finding possible candidate and identifying and choosing the best person.
Answer:
The concept related to “Finding possible candidate” is Recruitment.
Recruitment is defined as “the process of searching for prospective employees and stimulating them to apply for jobs in an organisation.”
The concept related to “Choosing the best person” is selection.
Selection is the process of identifying and choosing the best person out of a number of prospective candidates for a job. Selection is negative process as the candidates are being rejected in this process.

Question 4.
Virendra wants to run his company in a different manner. He wants to set standards to be achieved in both qualitative as well as quantitative terms. He wants to judge the motivation, skill levels and satisfaction of the employees. All these things will require qualitative standards. On the other hand the company will have to set quantitative standards for the number of units produced.
Identify the step of controlling process applicable in the above case.
Answer:
Setting performance standards is the step which is being referred here.
The first step in the process of controlling is concerned with setting performance standards. These standards are the basis for measuring the actual performance.

Question 5.
Hemant is working in a multinational company in Gurugram. He was running a temperature for the last many days. When his blood was tested, he was found to be positive for Covid-19. He was admitted in a hospital as his condition was very serious. One of his colleagues sent a text message to his superior, Mr. Bishnoi. Mr. Bishnoi immediately sent a text message to the employees of the organisation requesting them to donate plasma for Hemant. When the General Manager came to know about it, he ordered for sanitisation in the company premises and cleaning the surroundings. Explain the different types of communication which took place in whole situation.
Answer:
Informal Communication:
Informal communication is generally referred to as the ‘Grapevine’ because if spreads throughout the organisation very rapidly with its branches going out in all directions. It is difficult to assess the source of generation.
“One of his colleagues sent a text message to his superior, Mr. Bishnoi. Mr. Bishnoi immediately sent a text message to the employees of the organisation requesting them to donate Plasma for Hemant.”

Formal Communication:
Formal communication flows through official channels designed in the organisation chart. This communication takes place between a superior and subordinate or among employees or managers of same levels.

Question 6.
Differentiate between formal and informal communication.
OR
Discuss the features of motivation.
Answer:
Differences between formal communication and informal communication are:

OR
Motivation is the process of stimulating people to action to accomplish desired goals. Motivation depends upon satisfying needs of people.
Features of Motivation:
(a) Motivation is an internal feeling: The urge, drives, desires, aspirations, striving or needs of human being, which are internal, influence human behaviour.

(b) 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. which also may induce a person to act in the desired way.

(c) Motivation is a complex process as the individuals are heterogeneous in their expectations, perceptions and reactions.

(d) Motivation produces goal directed behaviour.

Question 7.
Kamini runs a designer boutique in Gurgaon. She’s doing well in terms of profits. She wants to open branches in different parts of India. Identify the type of decision being referred here. Discuss any three factors which can affect this decision.
Answer:
The decision which is being taken by Kamini is investment decision.
The investment decision relates to how the firm’s funds are invested in different assets. Investment decision can be long-term or short-term. A long-term investment decision is also called a Capital Budgeting decision and short-term is Working Capital Decision.
The factors that will affect this decision are:
(a) Cash flows of the project: When a company takes an investment decision involving huge amount it expects to generate some cash flows over a period. These cash flows are in the form of a series of cash receipts and payments over the life of an investment.

(b) The rate of return: The most important criterion is the rate of return of the project. These calculations are based on the expected returns from each proposal and the assessment of the risk involved.

Question 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 airTConditioners 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 800 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 in gossiping. Identify the function of management and two steps of process of function of management which is being highlighted here.
Answer:
The function of management being performed here is Controlling. Controlling means ensuring that activities in an organisation are performed as per the plans.
Following steps of controlling are identified in the given para:
(a) Setting performance standards which are the criteria against which the actual performance would be measured.
‘…. and concluded that on an average a worker can assemble ten air-conditioners in a day.’
(b) Measurement of actual performance with the standards in an objective and reliable manner.
‘Even then the assembly of air-conditioners per day is 800 units only.’
(c) Comparing actual performance with standards to find out any deviations.
‘…. the company compared actual performance of each worker and observed through C.C.T.V’.

Question 9.
Discuss the three redressal agencies under Consumer Protection Act, 2019.
OR
What are the reliefs available to the consumer under Consumer Protection Act, 2019?
Answer:
As per Consumer Protection Act, 2019, the statute establishes a three-tier system for resolving consumer complaints, as follows:
(a) District Commission:
The state concerned establishes district forums in each district. The following are the key characteristics:

• It is made up of a President and two members, one of whom must be a woman, who are officially nominated by the state government.
• The value of consumer complaints should not exceed ? 1 crore.
• If any of the party is not satisfied with the district forum’s decision, they have 45 days to file an appeal with the state forum from the date of order.

(b) State Commission:
The government establishes a state commission in each state. The following are the key characteristics:

• Each commission has a president and at least two members appointed by the state government, one of whom should be a woman.
• The total worth of the products or services, including the compensation sought, is greater than ? 1 Crore but less than ? 10 crore.
• If any of the parties is not pleased with the judgement, they can file a complaint with the national commission within 30 days of the order being issued.

(c) National Commission
Central government sets the National Commission. The provisions are:

• It is made up of a President and at least four members chosen by the central government, one of whom should be a woman.
• All complaints relating to products and services with a compensation value above ? 10 crore can be filed with the National Commission.
• The National Commission has the authority to issue orders for product replacement and loss compensation, among other things.
• If any of the parties is not pleased with the decision taken, they can file a complaint with the Supreme Court of India within 30 days of the order being issued.

OR
Reliefs available to the Consumer are:

• Removal of flaws in the goods.
• Removal of the deficiencies in the services.
• Replacement of damaged goods with new ones that is free of flaws.
• Refunding the complainant for the price paid by him.
• Payment of an appropriate amount of compensation for any loss or injury that has occurred.
• In suitable circumstances, payment of punitive damages.
• Discontinuance or abandonment unfair/restrictive trade practices.
• Discontinuance of the sale of hazardous goods and services.
• Payment to the consumer welfare fund (not less than 5%) which is to be used in the prescribed manner.
• Run corrective advertisements to counteract the effect of misleading advertisements.
• Reimburse all parties for their expenses.

Question 10.
Differentiate between capital market and money market.
Answer:
Differences between capital market and money market are:

Question 11.
Cabana Ltd. purchased new machinery from Germany for manufacturing some auto components. It was a cost-effective and quality production machine but during the production process, manager observed that the quality of the production was not as per standards. On investigation, it was found that there was lack of knowledge of using these hi-tech machines. So, frequent visits by engineers were required from Germany but this resulted in high overhead charges.
Suggest what can be done to develop the skills and abilities of employees for producing quality products by using these hi-tech machines. Also state how the employees or the organisation will be benefited by your suggestion.
Answer:
Training should be provided to the employees to develop their skills and abilities for producing quality products by using these hi-tech machines.
The benefits of imparting training to the employee are as follows:

• Better career: Training leads to better career opportunities for the employees as it helps to improve their skills and knowledge of doing the job.
• Increased earnings: Training leads to increased performance by the employees thereby helping them to earn more.
• Increased efficiency: Training makes the employees more efficient in handling machines and less prone to accidents.
• Improved motivation: Training increases the satisfaction and morale of employees thereby motivating them to work with greater enthusiasm.

Question 12.
Seema runs a utensils manufacturing company. She earned ? 500 crore out of this business. She doesn’t know how to appropriate these profits. Discuss any five factors which will help her in taking this decision.
OR
Hemant, a businessman, is engaged in the purchase and sale of bread. Identify his working capital requirements by giving reasons to support your answer. Now, he is keen to start his own bread factory. Explain any two factors that will affect his fixed capital requirements.
Answer:
The five factors which will help Seema, in taking the dividend decision are described below:
(a) Earnings: 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. If the earnings of the company are high, it may declare a higher dividend or vice-versa.

(b) Cash flow position: Since the dividends are paid in cash, if the cash flow position of the company is good it may declare higher dividend or vice-versa.

(c) Access to capital market: The company enjoys an easy access to capital market because of its credit worthiness. It does not feel the need to depend entirely on retained earnings to meet its financial needs. Hence, it may declare higher dividend or vice-versa.

(d) Growth prospects: If the company has any forthcoming investment opportunities, it may like to retain profits to finance its expansion projects. This is because retained profits are considered to be the cheapest source of finance as it doesn’t involve any explicit costs. Hence, it may declare lower dividend or vice- versa.

(e) Preferences of the shareholders: The companies paying stable dividends are always preferred by small investors primarily if they want regular income in the form of ‘stable returns’ from their investments. Large shareholders may be willing to forgo their present dividend in pursuit of higher profits in future. Therefore, the preferences of the shareholders must be taken into consideration.
OR
The working capital requirements of Hemant will be less as he is engaged in trading business. Working capital is the capital which one needs for its day to day operations.
Working Capital = Current Assets – Current Liabilities
Fixed capital refers to investment in long-term assets. Management of fixed capital involves allocation of firm’s capital to different projects or assets with long-term implications for the business.
The two factors that will affect his fixed capital requirements when he will start his own bread factory are described below:
(a) Level of collaboration: If Hemant gets an opportunity to set -up his factory in collaboration with another enterprise, his fixed capital requirements will reduce considerably else his fixed capital requirements will be more.
(b) Financial alternatives available: If Hemant is able to get the place to start the factory and machinery on lease, his fixed capital requirements will reduce considerably. Whereas if he decides to purchase them, his fixed capital requirements will be more.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 2 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Standard Term 2 Set 1 with Solutions

Max. Marks: 40
Time: 2 Hours

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 Shot? Answer Type Questions end are to be answered in 30-50 words
• 3 marks questions aré Short Answer Type Questions and ere to be answered ¡n 50-80 words
• 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words 4
  This question paper contains Case/Source Based Questions.

Question 1.
Identify and explain the two sources of the source of recruitment which can be used when the organisation wants to fulfill with existing staff.
Answer:
1. Recruitment seeks to attract suitable applicants to apply for available jobs. If the organization wants to fulfill the position with existing staff then it should go for internal recruitment. The two ways through which position can be fulfilled are:

1. Transfers
2. Promotion

1. Transfers: It involves shifting of an employee from one job to another, one department to another or from one shift to another, without a substantive change in the responsibilities and status of the employee. It may lead to changes in duties and responsibilities, working conditions,s, etc., but not necessarily salary.

2. Promotion: Business enterprises generally follow the practice of filling higher jobs by promoting employees from lower jobs. Promotion leads to shifting an employee to a higher position, carrying higher responsibilities, facilities, status, and pay. Promotion is a vertical shifting of employees. This practice helps to improve the motivation, loyalty, and satisfaction level of employees.

Question 2.
Meca Ltd. a reputed automobile manufacturer needs ₹ 10 crores as additional capital to expand its business. Atul Jalan, the CEO of the company wanted to raise funds through equity. On the other hand, the Finance Manager, Nimi Sahdev said that the public issue may be expensive on account of various mandatory and non-mandatory expenses. Therefore, it was decided to allow the securities to institutional investors. Name the method through which the company decided to raise additional capital.
Answer:
A private placement is a method through which the company decided to raise additional capital. Private Placement: Private placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue.

Access to the primary market can be expensive on account of various mandatory and non-mandatory expenses. Some companies, therefore, cannot afford a public issue and choose to use the private placement as a source to raise additional capital.

Question 3.
Explain the tests which will be used by the company to test the learning capacity, intelligence and level of knowledge of a candidate?
Answer:
The company should conduct the following tests to know about the learning capacity, intelligence, and level of knowledge of a candidate. Aptitude Test: It is a measure of individual’s potential for learning new skills. It indicates the person’s capacity to develop.

Intelligence Tests: This is one of the important psychological tests used to measure the level of intelligence quotient of an individual. It is an indicator of a person’s 1eamin ability or the ability to make decisions and judgments.

Trade Test: These tests measure the existing skills of the individual. They measure the level of knowledge and proficiency in the area of professions or technical training.

Question 4.
Lalita is trying to apply a function of management in her department. First, she lets her team perform according to their best potential. Then in a meeting, she asks her team to check what they have performed. One day it was found, that the total number of units produced were 20 less than the set target.

It was decided that no worker will go home unless this gap of 20 units is overcome.
(a) Which function of management is being performed by Lalita and her team?
(b) Explain any two advantages of the function of management performed by Lalita and her team.
Answer:
(a) The function of management being performed by Lauta and her team is Controlling. Controlling: Controlling means ensuring that activities in an organization are performed as per the plans. Controffing also ensures that an organization’s resources are being used effectively and efficiently for the achievement of predetermined goals.

(b) Two advantages of controlling are as follows:

1. Accomplishing Organisational Goals: The controlling function measures progress towards the organizational goals and brings to light the deviations, if any, and indicates corrective action.
2. Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate or not. An efficient control system keeps a careful check on the changes taking place in the organizational environment and helps to review and revise the standards in light of such changes.

Question 5.
Kamini is a supervisor at “Shyam Bakery”. The factory produces 20,000 packets of bread and biscuits every day. As a supervisor, Kamini ensures that work goes on smoothly and there is no interruption in production.
She is a good leader who gives orders only after consulting her subordinates, working out the policies with the acceptance of the group. Identify and explain the leadership style being adopted by Kamini.
Answer:
The leadership style adopted by Kamini is Participative or democratic style. In a democratic leadership style, members of the group take a more participative role in the decision-making process. This leadership style is more effective and leads to higher productivity and better contributions from group members as the group members are encouraged to share their thoughts, their problems are solved faster through better ideas and more creative solutions.

Question 6.
State any three features of Directing.
OR
Define Motivation and its importance.
Answer:
Directing means giving instructions and guiding people in doing work. Directing refers to the process of instructing1 guiding, counseling, motivating, and leading people in the organization to achieve its objectives.

The features of directing are:
(a) Directing initiates action: Directing is a key managerial function. A manager has to perform this function along with planning, organizing, staffing, and controlling while discharging his duties in the organization. While other functions prepare a platform for action, directing initiates action in the organization.

(b) Directing is a pervasive function: Every manager, from top executive to supervisor performs the function of directing. The directing takes place wherever there is superior-subordinate relations exist.

(c) Directing is a continuous process: Directing is a continuous activity. It takes place throughout the life of the organization irrespective of people occupying managerial positions.
OR
Motivation means incitement or inducement to act or move. In the context of an organization, it means the process of making subordinates to act in a desired manner to achieve certain organizational goals.  In other words, motivation refers to the way a person is enthused at work to intensify his willingness to use his potentiality for the achievement of organizational objectives.

Features of motivation are:
(a) Motivation is an internal feeling: The urge, drives, desires, aspirations, striving or needs of human beings, which are internal influence human behavior.

(b) Motivation produces goal-directed behavior Suppose, the employee is interested in promotion, it helps to produce a behaviour to improve performance of an employee.

(c) 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.

Question 7.
“Pure Ltd.” is a company manufacturing cotton yarn. It has been consistently earning good profits for many years. This year too, it has been able to generate enough profits. There is availability of enough cash in the company and good prospects for growth in future. It is a well-managed organization and believes in quality, equal employment opportunities, and good remuneration practices.

It has many shareholders who prefer to receive a regular income from their investments. It has taken a loan of ₹ 40 lakhs from IDBI and is bound by certain restrictions on the payment of dividends according to the terms of a loan agreement. The above discussion about the company leads to various factors which decide how much of the profits should be retained and how much has to be distributed by the company.
(a) Identify the decision taken by Pcue Ltd.
(b) Identify the factors by quoting lines which affect the decision – Stability of earnings, Shareholder’s preference, and Contractual obligation.
Answer:
(a) The decision taken by Pure Ltd. is dividend decision.
(b) The factors which affect the decision are stability of earnings.

“It has been consistently earning good profits for many years” Shareholder’s Preference. “It has many shareholders who prefer to receive regular income from their investments.’ Shareholder’s preference is kept in mind by the management before declaring dividends”. Contractual Obligation “It has taken a loan of ₹ 40 Lakhs from 1181 and is bound by certain restrictions on the payment of dividend according to the terms of loan agreement.”

Question 8.
Poonam is working in an Manufacturing Industry as a Production Manager. She has created an atmosphere of proper controlling in her department. In order to do so, she keeps herself aware about any dishonest behavior and takes a stern action immediately. Recently, she has installed CCTV cameras to keep vigil on the employees.
(a) In the above case, which importance of controlling has been implemented by Poonam?
(b) Name one more importance of controlling other than the above highlighted.
(c) Can you suggest one more way by which Poonam could have implemented controlling?
Answer:
(a) The importance of controlling implemented in the above case by Poonam is Controlling. It ensures proper order and discipline in the organization.

(b) One more importance of controlling: Controlling helps in making efficient use of resources.

(c) Poonam could have implemented controlling by issuing balanced scorecard to every employee. In this way, she could check their performance and contribution to the organization on a daily basis.

Question 9.
Describe the Redressal Agencies under Consumer Protection Act, 2019.
OR
What are reliefs available to the consumer?
Answer:
To protect consumer rights, the Act mentions the establishment of three redressal mechanisms wherein the consumers can approach to address their grievances.

District Commission: District commission has a jurisdiction to entertain complaints where value of goods or services paid as consideration does not exceed one crore rupees. Either on the first hearing or at any later stage, it appears to district commission that there exists elements of settlement which may be acceptable to the parties, it may direct them to give their consent for settlement of dispute through mediation within five days.

In case, the parties agree for settlement by mediation and give written consent, the district commission refers the matter for mediation and the provisions relating to mediation shall apply. However, in the event of failure of settlement by mediation proceeds with the complaint.

If the complaint alleges defect in goods which cannot be determined without proper analysis or test of goods, the Commission obtains the sample of goods, seal it and refer to the appropriate authority for analysis. In case of services, the dispute is settled based on the basis of evidence brought to its notice by the complainant and can ask for any required information document or records from the service provider for settlement.

If any of the parties are not satisfied by the order of District Commission can appeal against such order to the State Commission on the grounds of facts or law within a period of forty-five days from the date of order.

State Commission: It is established by the respective state government and ordinarily functions at the state capital. State Commission has a jurisdiction to entertain complaints where value of goods and services paid as consideration exceeds one crore but does not exceed ten crore rupees If any of the parties are not satisfied by the order of State Commission can appeal against such order to the National Commission within a period of thirty days of such order.

National Commission: The National Commission has territorial jurisdiction over the whole country. National Commission has jurisdiction to entertain complaints where value of goods or services paid as consideration exceeds ten crores rupees. If any of the parties are not satisfied by the order of National Commission can appeal against such order to the Supreme Court of India within a period of thirty days
of such order.
OR
Reliefs available to a consumer are following:

• To remove the defect in goods or deficiency in service.
• To replace the defective product with a new one, free from any defect.
• To refund the price paid for the product, or the charges paid for the service.
• To pay a reasonable amount of compensation for any loss or injury suffered by the consumer due to
  the negligence of the opposite party.
• To pay punitive damages in appropriate circumstances.
• To discontinue the unfair/restrictive trade practice arid not to repeat it in the future.
• Not to offer hazardous goods for sale.
• To withdraw the hazardous goods from the market.

Question 10.
State various functions of Securities and Exchange Board of India (SEBI).
Answer:
The Securities and Exchange Board of India was established by the Government of India on 12 April, 1988 as an interim administrative body to promote orderly and healthy growth of securities market and for investor protection. It was to function under the overall administrative control of the Ministry of Finance of the Government of India. The SEBI was given a statutory status on 30 January 1992 through an ordinance. The ordinance was later replaced by an Act of Parliament known as the Securities and Exchange Board of India Act, 1992.

Purpose of SEBI: The basic purpose of SEBI is to create an environment to facilitate efficient mobilization and allocation of resources through the securities markets. It also aims to stimulate competition and encourage innovation.

Functions of SEBI are:
Regulatory Functions:
(a) Registration of brokers and sub-brokers and other players in the market.
(b) Registration of collective investment schemes and Mutual Funds.
(c) Regulation of stockbrokers, portfolio exchanges, underwriters, and merchant bankers and the business in stock exchanges and any other securities market.
(d) Regulation of takeover bids by companies.
(e) Calling for information by undertaking inspection, conducting inquiries, and audits of stock exchanges and intermediaries.
(f) Levying fee or other charges for carrying out the purposes of the Act.
(g) Performing and exercising such power under Securities Contracts (Regulation) Act 1956, as may be delegated by the Government of India.

Development Functions:
(a) Training of intermediaries of the securities market.
(b) Conducting research and publishing information useful to all market participants.
(c) Undertaking measures to develop the capital markets by adopting a flexible approach.

Protective Functions:
(a) Prohibition of fraudulent and unfair trade practices like making misleading statements, manipulations, price rigging, etc.
(b) Controlling insider trading and imposing penalties for such practices.
(c) Undertaking steps for investor protection.
(d) Promotion of fair practices and code of conduct in securities market.

Question 11.
Blue Heavens Ltd. purchased new machinery from Germany for manufacturing some auto components. It was a cost-effective and quality production machine but during the production process, manager observed that the quality of the production was not as per standards. On investigation, it was found that there was lack of knowledge of using these hi-tech machines. So, frequent visits by engineers were required from Germany but this resulted in high overhead charges.

Suggest what can be done to develop the skills and abilities of employees for producing quality products by using these hi-tech machines. Also, state how the employees or the organization will be benefited by your suggestion.
Answer:
Training should be provided to the employees of Blue Heaven Ltd. to develop their skills and abilities for producing quality products by using these hi-tech machines.

Training: It is a process of learning new skills and application of knowledge. It attempts to improve their performance on the current job or prepare them for any intended job. There are various methods of training. These are broadly categorized into two groups: On-the-Job and Off-the-Job methods. On-the-Job methods refer to the methods that are applied to the workplace, while the employee is actually working. Off-the-Job methods are used away from the workplace.

The benefits of imparting training to the employee are as follows:
(a) Better career Training leads to better career opportunities for the employees as it helps to improve their skills and knowledge of doing the job.

(b) Increased earnings: Training leads to increased performance by the employees thereby helping them to earn more.

(c) Increased efficiency: Training makes the employees more efficient in handling machines and less prone to accidents.

(d) Improved motivation: Training increases the satisfaction and morale of employees thereby motivating them to work with greater enthusiasm.

Question 12.
Somnath Ltd. is engaged in the business of export of garments. In the past, the performance of the company had been up to the expectations. In line with the latest technology, the company decided to upgrade its machinery. For this, the Finance Manager, Dalmia estimated the amount of funds required and the timings.
This will help the company in linking the investment and the financing decisions on a continuous basis. Dalmia, therefore, began with the preparation of a sales forecast for the next four years.

He also collected the relevant data about the profit estimates in the coming years. By doing this, he wanted to be sure about the availability of funds from the internal sources of the business. For the remaining funds he is trying to find out alternative sources from outside. Discuss the financial concept stated in the above para. Also, state its objectives.
OR
Kay Ltd. is a company manufacturing textiles. It has a share capital of ₹ 60 lakhs. In the previous year, its earning per share was ₹ 0.50. For diversification, the company requires an additional capital of ₹ 40 lakhs.
The company raised funds by issuing 10% debentures for the same. During the year, the company earned a profit of ₹ 8 lakhs on the capital employed. It paid tax @ 40%.
(a) State whether the shareholders gained or lost, in respect of earning per share on diversification. Show your calculations clearly.
Answer:
Financial planning is the preparation of a financial blueprint of an organization’s future operations. The objective of financial planning is to ensure that enough funds are available at right time. If adequate
funds are not available, the firm will not be able to honour its commitments and carry out its plans. On the other hand, if excess funds are available, it will unnecessarily add to the cost and may encourage wasteful expenditure. It must be kept in mind that financial planning is not équivalent to, or a substitute for, financial management.

Thus, financial planning strives to achieve the following twin objectives:
(a) To ensure availability of funds whenever required: This includes a proper estimation of the funds required for different purposes such as for the purchase of long-term assets or to meet day-to-day expenses of business etc. Apart from this, there is a need to estimate the time at which these funds are to be made available. Financial planning also tries to specify possible sources of these funds.

(b) To see that the firm does not raise resources unnecessarily: Excess funding is almost as bad as inadequate funding. Even if there is some surplus money, good financial planning would put it to the best possible use so that the financial resources are not left idle and don’t unnecessarily add to the cost.

OR
Let us presume that the share capital of ₹ 60 lakh is made up of ₹ 6 lakh equity shares assuming that the face value of each share is ₹ 10.

1. *0.50 x 6,00,000 = 3,00,000
Consequently EBT/EBIT in situation 1 = ₹ 5,00,000
Thus, on diversification, the earning per share fell down from ₹ 0.50 to ₹ 0.40.

Students can access the CBSE Sample Papers for Class 12 Business Studies with Solutions and marking scheme Term 2 Set 8 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Business Studies Standard Term 2 Set 8 with Solutions

Time Allowed: 2 Hours
Maximum 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
• 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.

Question1.
Identify and explain the two sources of the source of recruitment which cannot be used when the existing
staff is either insufficient or does not fulfil the eligibility criteria of the jobs to be filled. [2]
Answer:
If the existing staff is either insufficient or does not fulfill the eligibility criteria of the jobs to be filled, the company should not use internal source of recruitment.
Two sources of internal recruitment are as follows:

• Promotion refers to shifting of an employee to a higher position, carrying higher responsibilities, facilities, status and pay. They do not need induction training.
• Transfer involves shifting of an employee from one job to another, one department to another, without substantive change in the responsibilities and status of the employee.

Question 2.
‘MYKAA Limited ‘is dealing in all types of cosmetic products. It is enjoying increased demand for
its product during the last few years. For the purpose of expansion the company needs ₹ 100 crores as additional capital. The company decides to raise funds through equity -shares. Chirag Kapoor, the finance manager of the company recommended that the shares may be sold through issuing houses or brokers. Identify and explain the method recommended by Mr.Kapoor through which the company can raise additional funds for expansion purposes. [2]
Answer:
The method recommended by Mr. Kapoor through which the Mykaa Limited can raise additional funds for expansion purposes is “Offer For Sale”
Under offer for sale, securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers. In this case, a company sells securities embolic at an agreed price to brokers who, in turn, resell them to the investing public.

Question 3.
Explain the two concepts which are part of the exercise which would reveal whether a company is
understaffed, overstaffed or optimally staffed. [2]
Answer:
The two concepts which are part of the exercise which would reveal whether a company is understaffed, overstaffed or optimally staffed are:
(a) Workload Analysis: Work load analysis is an estimation of the number and the kind of persons required for the job to be performed. It would enable an assessment of the number and types of human resources necessary for the performance of various jobs and the accomplishment of organisational objectives.

(b) Workforce Analysis: It is an estimation of the number of workforce available. It analyses existing work force already occupying the job positions.

Question 4.
“Measurement of a company’s progress may involve calculation of certain ratios like gross profit ratio, net profit ratio, and return on investment etc. at periodic intervals”. Identify the function of management
involved in the above context. Also briefly explain the step in the process of the identified function discussed above. [2]
Answer:
The function of management involved in the above context is controlling.
The controlling function helps in measuring the progress towards the organisational goals and brings any deviations, and indicates corrective action.

The step of controlling process which is being indicated here is “Measurement of Actual Performance” Measurement of actual performance: After the standards are set, the next step is measurement of actual performance. Performance should be measured in an objective and reliable manner. There are several techniques for measurement of performance like personal observation, sample checking, performance reports, etc.

Question 5.
Mr. Pawan Kumar, the CEO of an E-Commerce start up, which was facing the problem of huge employee
turnover, decided to hold a meeting with the managers to discuss the issue. While addressing the managers in the meeting, he advised them to take certain measures which focus on psychological, social and emotional factors, in order to motivate employees. Explain any two such measures discussed by him, when he suggested that job should be made interesting so that the job itself becomes a source of motivation, employees should be congratulated for good performance, also, stability regarding future income and work should be provided to employees, in order to develop a positive attitude among the subordinates. [3]
Answer:
In the meeting, Mr. Pawan Kumar (CEO of the Company) talked about the non-monetary incentives (psychological, social and emotional factors) which can help in developing a positive attitude among the subordinates.

Two measures discussed by him are as follows:
(a) Job Enrichment: Job enrichment is concerned with designing jobs that include greater variety of work content, require higher level of knowledge and skill; give workers more autonomy and responsibility; and provide the opportunity for personal growth and a meaningful work experience. If jobs are enriched and made interesting, the job itself becomes a source of motivation to the employee.

(b) Job Security: It is an assurance that employees may have about continuing gainful employment throughout their lives. Job security can be assured by signing terms of contractual agreement, collective bargaining employment that can prevent arbitrary termination, job dismissal etc.

Question 6.
State any three points of importance of Directing.
OR
Define leadership as an element of Directing? Enumerate any two styles of Leadership. [3]
Answer:
Importance of Directing are:

• Directing helps to initiate action by people in the organisation towards attainment of desired objectives.
• Directing integrates employees efforts in the organisation in such a way that every individual effort contributes to the organisational performance so that organisational goals can be achieved.
• Effective directing helps to bring stability and balance in the organisation since it fosters cooperation and commitment among the people.
• Directing helps employees in realising their full potential and capabilities by motivating and providing effective leadership.
• Directing facilitates introduction of needed changes in the organisation. Generally, people
  have a tendency to resist changes in the organisation. Effective directing through motivation, communication and leadership helps to reduce such resistance. (Any Three)

OR
Leadership is an action of leading a group of people or being a leader in an organisation who induces obedience, respect, loyalty and cooperation.
‘Leadership is the activity of influencing people to strive willingly for group objectives’. -George Terry Styles of Leadership are:

(a) Autocratic/Authoritative leadership: Under this style, all decision-making power is with the leader and he exercises complete control over his subordinates.
The leader determines the policies without consulting his/her subordinates and assign task to them without giving them any freedom. It is like ‘bossing people around’. It is a boss centered leadership, and is also called directive style of leadership.
Example:
Mr. Ram, the GM of Kamal Industries delegates the work to his staff Miss Rehea, Mr. Saurabh and Mr. Maahit, according to his discretion. Here, Mr. Ram is behaving as an autocratic leader.

(b) Democratic/Participative leadership: Under this style, leader consults with his/her subordinates in decision-making process and works out policies with the acceptance of the group. He/she encourages them to give suggestions in setting goals and implementing decisions. It is group centered leadership.
Example:
Mr. Ram realised that due to the absence of Mr. Maahit, the targets will not be met, so he discusses with his staff about meeting the deadline. Everybody decided to do overtime and complete the task. Here, Mr. Ram is behaving as a democratic leader.

Question 7.
List any three factors affecting the Working Capital requirement of a company. [3]
Answer:
The three main factors affecting working capital requirements are as follows:
(a) Nature of business: A trading business needs less amount of working capital because there is no processing of goods. On the other hand, the working capital requirement is more in case of manufacturing business where raw materials are converted into finished goods.

(b) Business cycle: At times of boom period in the market (like Diwali, Guru Parv, and Christmas etc.), the production as well as sales are likely to be higher. Whereas, the working capital requirement would be lower in times of depression in the market.

(c) Production cycle: It is the time span between the receipt of raw materials and their conversion into finished goods. Length of production cycle affects the working capital requirement. If the duration of production cycle is longer, the working capital requirements to meet day-to-day expenses would be higher and vice-versa.

Question 8.
Priya is a regional manager of XYZ. Ltd. She is a hardworking employee and is trying to reduce wastage
of resources in her company. She has set standards for performance of different activities and is ensuring that targets are met according to these standards with minimal wastage of resources. She has set up CCTV cameras which helps her to keep a close check on the activities of the subordinates and know how the employees are performing. She also rewards the employees with a bonus when these standards are met. She is trying her best to ensure a good performance of her team this year through the application of an important function of management. Explain any two benefits of the function of management highlighted above. [3]
Answer:
Priya is trying her best to ensure a good performance of her team this year through the application of “Controlling” function of management.
Importance of Controlling are:
(a) Accomplishing organisational goals: The controlling function measures progress towards the organisational goals and brings to light the deviations, if any, and indicates corrective action.

(b) Improving employee motivation: In an organisation employees are also aware that their performance is judged using some set of standards. Periodic and systematic evaluation of the employee performance and accordingly rewarding the deserving employees in the form of bonus, increment or promotion leads to the employees getting more motivated in order to perform for the organisation.

Question 9.
Enumerate any five rights of a consumer under the Consumer Protection Act, 2019.
OR
Enumerate any five responsibilities of a Consumer Protection Act, 2019. [5]
Answer:
Five rights of Consumer are as follows:

• Right to Safety: Consumers have the right to be safeguarded against items and services which are harmful to their health and well-being. The consumers should buy quality or standardised products and services.
• Right to be Informed: Before purchasing a product, the consumer has the right to get complete information about the quality, quantity, ingredients, purity, price etc. of the product and service.
• Right to Choose: Consumers have the right to choose any product from the available options based on their own preferences. No seller can influence the consumer to buy certain product through unacceptable means.
• Right to Seek Redressal: If a product or service fails to meet the consumer’s expectations or is dangerous for consumer then in that case the consumer has the right to seek redressal.
• Right to Consumer Education: Consumers have the right to learn and be well-informed throughout their lives. He should be informed of his rights and remedies in the event that the goods or service does not meet his expectations.

OR
Five consumer responsibilities are as follows:

• Be aware: Be knowledgeable about the numerous items available in the market so that an intelligent and wise choice can be made.
• Standardised products: Purchase just standardised products to ensure quality. Look for the ISI mark on electrical goods, the FPO label on food products, and the Hallmark on jewellery, among other things.
• Follow instructions: Follow the product’s instructions and learn about the hazards linked with it, then use it safely.
• Cautious purchasing: Carefully read labels for the information on prices, net weight, manufacturing, expiring dates, and so on.
• File a complaint in an appropriate consumer forum: In case of a shortcoming in the quality of goods purchased or services availed. Do not fail to take an action even when the amount involved is small.

Question 10.
State any five regulatory functions of the Securities and Exchange Board of India. [5]
Answer:
Regulatory functions of SEBI are:

• Registration of brokers and sub-brokers and other players in the market.
• Registration of collective investment schemes and Mutual Funds.
• Regulation of stock brokers, portfolio exchanges, underwriters and merchant bankers and the business in stock exchanges and any other securities market.’
• Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries.
• Performing and exercising such power under Securities Contracts (Regulation) Act 1956, as may be
  delegated by the Government of India.

Question 11.
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 people to apply for jobs in their organisation should make the process of applying for jobs easier and candidate friendly. It is for this reason, he said, that most progressive companies today have a short application process. He also said that the application form filled by the candidate is very important as it is the information supplied in the application forms, which helps the manager in eliminating unqualified or unfit job seekers. The company can create a mechanism that attempts to measure certain characteristics of individuals like aptitude, manual dexterity, and intelligence to personality. The candidate may then be called for an in-depth conversation to evaluate their suitability for the job.
(a) Name the process and steps in the process of identifying and choosing the best person out of a number of prospective candidates for a job discussed above.
(b) Also explain the next three steps in the process which can be subsequently performed by the
company. [5]
Answer:
(a) The concept discussed here is Selection.
Steps in the process of selection discussed below:
(i) Preliminary Screening: Preliminary screening helps the manager eliminate unqualified or unfit job seekers based on the information supplied in the application forms.
“He also said that the application form filled by the candidate is very important as it is the information supplied in the application forms, which helps the manager in eliminating unqualified or unfit job seekers.”

(ii) Selection Tests: An employment test is a mechanism (either a paper and pencil test or an exercise) that attempts to measure certain characteristics of individuals who have applied for job.
“The company can create a mechanism that attempts to measure certain characteristics of individuals like aptitude, manual dexterity, and intelligence to personality.”

(iii) Employment interview: Interview is a formal, in-depth conversation conducted to evaluate the applicant’s suitability for the job.
“The candidate may then be called for an in-depth conversation to evaluate their suitability for the job.”

(b) Next three steps are as follows:
(i) Reference and background checks: Many employers request names, addresses and telephone numbers of references for the purpose of verifying information and gaining additional information on an applicant. Previous employers, known persons, teachers and university professors can act as references.

(ii) Selection Decision: The final decision has to be made from among the candidates who passed the tests, interviews and reference checks. The views of the concerned manager will be generally considered in the final selection.

(iii) Medical Examination: After the selection decision and before the job offer is made, the candidate is required to undergo a medical fitness test. The job offer is given to the candidate being declared fit after the medical examination.

Question 12.
Vansh Limited is a large and reputed company which manufactures ventilators. After the outbreak of ‘COVID-19’ in 2020 the company witnessed an increase in revenue by 40%. It has plans to further increase its production capacity and also start production of PPE kits, sanitisers and masks in 2022. The Finance manager of the Company Mr. Rajiv feels confident about the future of the company and its liquidity position. Discuss the meaning of Dividend Decision and in the light of the above statement explain any two factors which should be considered by ‘Vansh Limited’ while formulating the dividend policy of the company.
OR
Vedansh Limited has a share capital of ₹10,00,000 divided into shares of ₹100 each. For expansion purpose, the company requires additional funds of ₹ 5,00,000. The management is considering the following alternatives for raising funds:
Alternative 1: Issue of 5000 Equity shares of ₹100 each
Alternative 2: Issue of 10% Debentures of ₹ 5,00,000
The company’s present Earnings Before Interest and Tax (EBIT) is ₹ 4,00,000 p.a. Assuming that the rate of Return of Investment remains the same after expansion, which alternative should be used by the company in order to maximise the returns to the equity shareholders. The Tax rate is 50%. Show the working. [5]
Answer:
Dividend decision: Dividend is that part of profit which has to be distributed among the shareholders of a company. In this decision, it is being decided that whether
(a) Whole profit is to be dispersed,
(b) All earnings should be retained in the business, or
(c) A portion of profits will be retained in the business and the rest of the profit should be distributed among shareholders.
Factors affecting dividend decision:
(a) Amount of earning: Dividend represents the share of profits distributed amongst shareholders. A firm pays dividends out of its current and past earnings. A company having higher earnings will be in a position to pay a higher amount of dividend to its shareholders. In contrast to this, a company having low or limited earnings would distribute low dividends.
(b) Stability earnings: A company with stable earnings is not only in a position to declare higher dividend but also maintain the rate of dividend in the long run.
OR
Vedansh Limited’

According to calculations, Vedansh Limited should go for second alternative that is Issue of 10% Debentures of ₹ 5,00,000
Working Notes:
Rate of Return of Investment is 4,00,000/10,00,000 × 100 = 40%
EBIT after expansion = 40% × 15,00,000
= 6,00,000

Students can access the CBSE Sample Papers for Class 12 Economics with Solutions and marking scheme Term 2 Set 4 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Economics Standard Term 2 Set 4 with Solutions

Time Allowed: 2 Hours
Maximum Marks: 40

General Instructions:

• This is a Subjective Question Paper containing 13 questions.
• This paper contains 5 questions of 2 marks each, 5 questions of 3 marks each and 3 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.

Question 1.
Distinguish between GNP and GDP.
OR
Distinguish between stocks and flows. Give an example of each.
Answer:

OR

Question 2.
If income rises from ₹50,000 to ₹60,000 consumption increases from ₹40,000 to ₹48,000. In this situation, what will be the value of Marginal Propensity to Consume (MPC)?
OR
Suppose in a hypothetical economy, the income rises from ₹5,000 crores to ₹6,000 crores. As a result, the consumption expenditure rises from ₹4,000 crores to ₹4,600 crores. Calculate marginal propensity to consume.
Answer:
MPC = \(\frac{\Delta \mathrm{C}}{\Delta \mathrm{Y}}\)
Given ΔC = ₹(48,000 – 40,000) = ₹8,000
ΔY = ₹(60,000 – 50,000) = ₹10,000
MPC = \(\frac{8,000}{10,000}\) = 0.8
OR
Initial income = ₹5,000 crores
New income = ₹6,000 crores
Change in income (ΔY) = 6,000 – 5,000
= ₹1,000 crores
Initial consumption = ₹4,000 crores
New consumption = ₹4,600 crores
Change in consumption (ΔY) = 4,600 – 4,000
(ΔC) = ₹600 crores
Marginal propensity to consume = \(\frac{\Delta \mathrm{C}}{\Delta \mathrm{Y}}\)
\(\frac{600}{1,000}\) = 0.6

Question 3.
Open market operations works as a method of credit control? Justify the given statement.
Answer:
The sale or purchase of government securities by the Central Bank in open market is termed as open market operations.
To reduce credit, the government securities are sold by the Central Bank. It reduces the supply of money in the hands of commercial banks and common public. On the other hand, to increase the credit, the Central Bank purchases the securities from public which releases money in the market. In this way, the Central Bank uses open market operations as a method of credit control.

Question 4.
Explain two different categories of infrastructure.
OR
Study the graph given below showing the population below poverty line and analyse the trend of poverty from 1973 to 2012.

Source: Indian Economic Development (NCERT)
Note: For the year (1973, Uttar Pradesh includes the present Uttrakhand, Madhya Pradesh includes Chhattisgarh and Bihar includes Jharkhand.
Answer:
The two different categories of infrastructure includes economic and social infrastructure. The economic infrastructure of the country includes all the resources that are used in the process of production of products and distribution of that products. The productivity of the country is based on the economic infrastructure available with them. On the other hand, the social infrastructure include those resources that contributes towards the improvement of human capital. The human productivity is based on the social infrastructure of the country.
OR
This graph shows state level trends in poverty.
(a) The line in the chart shows the national poverty line. The first line from below shows poverty level during 2011-12 and the other line indicates poverty level during 1973-74.
(b) The graph shows that the six states – Tamil Nadu, Uttar Pradesh, Bihar, Madhya Pradesh, West Bengal and Odissa contained a large section of poor in 1973-74.
(c) By 2012, many states reduced the poverty levels to a considerable extent.
(d) States like Odisha, Madhya Pradesh, Bihar and Uttar Pradesh are still far above from the national poverty line. West Bengal and Tamil Nadu reduced a poverty level much better than other states.

Question 5.
Salaried employees are more, in urban areas than in rural areas? Justify the given statement with a valid argument.
Answer:
Regular salaried employees are more in urban areas because of the following reasons:
(a) Education and Training: Urban area people are more educated and trained which is a requirement for salaried employees.
(b) Infrastructure: The urban areas are well organised and has a better infrastructure. Hence, the people in urban areas get better opportunities.

Question 6.
Which among the following are final goods and which are intermediate goods? Given valid reasons.
(a) Milk purchased by a tea stall.
(b) Bus purchased by a school.
(c) Juice purchased by a student from the school canteen.
OR
If Real GDP is ₹500 and Price Index (Base = 100) is 125. Calculate the Nominal GDP.
Answer:
(a) It is an intermediate good because it is used by teaseller during production process i.e., making tea and not for final consumption.
(b) It is a final good as, it is purchased by school for final consumption.
(c) It is a final good as, it is purchased by a student for final consumption.
OR
Real GDP is ₹500, Price Index is 125, Nominal GDP = ?
Price Index = \(\frac{\text { Nominal GDP }}{\text { Real GDP }}\) × 100
125 = \(\frac{\text { Nominal GDP }}{500}\) × 100
Nominal GDP = 125 × 5 = 625

Question 7.
Analyse the change in occupational structure of the country on the basis of the following table:

Read the text carefully and answer the question number 8 and 9 given below.
The China-Pakistan Economic Corridor (CPEC) is an economic route stretching from Western China through Pakistan to the Indian Ocean Coast. It is a part of China’s Belt and Road Initiative.

But China’s huge investment of millions of dollars did not work for the Baloch Population. The common people of Balochistan are protesting for their basic rights to life. People are demanding basic necessities like clean drinking water, electricity, jobs, health infrastructure etc.

The amount invested in CPEC has already crossed the original budget and not even 25% of the job has been completed. Out of 122 projects announced, only 32 has been completed. There has been a 54% slump in BRI investment during the pandemic. The construction of 9 promised SEZ to be constructed has not been started.
As per Chinese officials, 80% of the investment money is getting leaked due to corruption.
Answer:
From the above table, it is clear that percentage of workforce engaged in primary sector has reduced from 72.72% to 43.8%. In secondary sector, it has increased from 10.02% to 24.7%. Likewise, workforce has increased from 17.26% to 31.5% in tertiary sector. However, the shift from primary to secondary and tertiary sector is noticeable but not significant. The Indian economy is still known as agricultural economy.

Question 8.
Analyse the two consequences of non-progress of CPEC for China.
Answer:
The consequences of non- progress of CPEC for China are as follows:
(a) Wastage of huge amount of money invested in CPEC project as it did not lead to fruitful returns.
(b) Trade relations got worsened due to failure on part of Pakistan.

Question 9.
Suggest three ways which Pakistan can adopt for the progress of CPEC project.
Answer:
Following are the ways Pakistan can adopt for the progress of CPEC project:
(a) Provision of basic necessities to the people of Balochistan will ensure the removal of hurdles in the progress of projects.
(b) Providing job opportunities to the people of Balochistan will ensure the active participation in the projects.
(c) A check on corruption will certainly help so as to ensure that money invested is optimally utilised.

Question 10.
Explain the role of the following in correcting the inflationary gap in an economy.
(a) Legal reserves
(b) Bank rates
Answer:
The problem of excess demand or inflationary gap can be corrected by adopting following monetary measures:
(a) Legal Reserve or Cash Reserve Ratio: Legal reserves or Cash Reserve Ratio (CRR) is the minimum fraction of the total deposits with the commercial banks, which they are required to keep with the central bank. The central bank increases the CRR to correct the situation of excess demand or inflationary gap in the economy. High CRR reduces the supply of money in the economy, and thus, the Aggregate Demand will fall.

(b) Bank Rate: Bank rate is the minimum rate at which the Central Bank discounts the first class bills of exchange and provides credit to the commercial banks. The Central Bank increases the bank rate to correct the situation of excess demand in the economy. Higher bank rate reduces the lending capacity of the commercial banks as they get funds at a higher interest rate from the Central Bank. Consequently, money supply contracts in the economy as the public borrows less at high rate of interest and Aggregate Demand falls.

Question 11.
“Taxation is an effective tool to reduce the inequalities of income”. Justify the given statement with valid reasons.
Answer:
“Taxation is an effective tool to reduce the inequalities of income.” It means government reduces inequalities in income and wealth by taxing the rich more and spending more on the poor. Further, it provides for the employment opportunities to poor that help them to earn. Government through fiscal tools of taxation, subsidies and transfer payments brings about ‘fair’ distribution of income. Equitable distribution of income and wealth is a way to bring social justice.

Question 12.
(a) Calculate the Net National Product at Market Price from the given details:

(b) Differentiate between personal income and private income.
OR
(a) Suppose the Gross Domestic Product (GDP) of Nation X was ₹2,000 crores in 2018-19, whereas the Gross Domestic Product of Nation Y in the same year was ₹120,000 crores. If the Gross Domestic
Product of Nation X rises to ₹4,000 crores in 2019-20 and the Gross Domestic Product of Nation Y rises to ₹200,000 crores in 2019-20. ‘
Compare the rate of change of GDP of Nations X and Y, taking 2018-19 as base year.
(b) Explain the circular flow of income.
Answer:
(a) Net Domestic Product at Factor Cost (NDP_FC)
= Compensation of Employees + Rent + Interest + Profit + Mixed Income of Self-Employed
= 2,000 + 600 + 800 + 1,200 + 10,000 = ₹14,600 crores
Net National Product at Market Price (NNP_MP)
= NDP_FC – Net Factor Income to Abroad + Net Indirect Taxes = 14,600 – 80 + 500
= ₹15,020 crores

(b) Mentioned below are the points of differences between personal income and private income:

OR

Nation X has registered a GDP growth rate of 100% and has performed better on the front of GDP rises as compared to nation Y that has registered a GDP growth rate of 66.67%.

(b) Circular flow of income refers to the unending flows of production of goods and services, income, and expenditure in an economy. It circularly shows the redistribution of income between production units (firms) and households. It can be better understood with this diagram.

Phases of Circular Flow of Income: There are three different phases (generation, distribution, and disposal) in a circular flow of income, as shown in the given diagram

(i) Generation phase: In this phase, firms produce goods and services with the help of factor services.
(ii) Distribution phase: It involves the flow of factor income (rent, wages, interest, and profit) from firms to the households.
(iii) Disposal phase: In this phase, the income received by factors of production is spent on the goods and services produced by firms.
Income is first generated in production units, then distributed to households, and finally spent on goods and services produced by these units to make the circular flow complete its course.

Question 13.
(a) Low employment among women is a reflection of economic backwardness of a country.
In the light of above statement, suggest the measures to increase employment opportunities for women.
(b) Do you think health inequality exists even in the health infrastructure in India?
Support the statement with reasons for your answer.
Answer:
(a) The measures to increase the employment opportunities for women are :

• Education and training opportunities for women should be further expanded, diversified and made more easily accessible.
• Residential accommodation for working mothers should be increased.
• There should be much more facilities of creches and child care during the working hours of mothers.
• There should be large scale publicity and building of public opinion in favour of employment of women.

(b) The development of health infrastructure has shown gender, income and regional biasness in India. Rural areas do not have access to or cannot afford medical care. Even though majority of population . lives in rural areas, only one-fifth of India’s hospitals are located in rural areas with only half the number of dispensaries. Out of 7 lakh beds, roughly 11 % of them are available in rural areas. The PHCs in rural areas do not offer basic medical care like X-ray or blood testing devices.
In rural areas, the percentage of people who have no access to proper aid has risen from 15 in 1986 to 24 in 2003. States like Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh are relatively lagging behind in healthcare facilities.

Students can access the CBSE Sample Papers for Class 12 Economics with Solutions and marking scheme Term 2 Set 3 will help students in understanding the difficulty level of the exam.

CBSE Sample Papers for Class 12 Economics Standard Term 2 Set 3 with Solutions

Max. Marks: 40
Time: 2 Hours

General Instructions:

• This is a Subjective Question Paper containing 13 questions.
• This paper contains 5 questions of 2 marks each, 5 questions of 3 marks each, and 3 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.

Question 1.
Distinguish between Marginal Propensity to Consume and Average Propensity to Consume.
OR
Difference between Autonomous and Induced Consumption.
Answer:

OR

Question 2.
In an economy, the ratio of Average Propensity to Consume and Average Propensity to Save is 5 : 3. The level of income is ₹ 6000. How much are the savings? Calculate.
OR
If the value of Average Propensity to Consume is 1.5, what will be value of Average Propensity to Save?
Answer:
Here, \(\frac{\mathrm{APC}}{\mathrm{APS}}\) = \(\frac{5}{3}\) and Y = 6000, APC = \(\frac{5}{8}\) ,
APS = \(\frac{3}{8}\)
Now, as
\(\frac{\mathrm{APC}}{\mathrm{APS}}=\frac{5}{3}\)
So, ratio of consumption to income (APC) = \(\frac{5}{5+3}=\frac{5}{8}\)
Now, C= \(\frac{5}{8}\) x 6000
= ₹ 3750
Hence, Saving(s) =6000—3750
= ₹ 2250
OR
Here, APC = 1.5
Now, we know that, Al’S = 1 – APC
So,APS=1-1.5=-0.5

Question 3.
The problem of double counting in the computation of National Income can be removed. Justify the statement and state any two approaches to correct the problem of double counting.
Answer:
Double counting means counting of the value of the same product more than once while calculating the National Income.
Two ways to avoid the problem of double counting are:
(a) Take the value of final goods only: According to this method, the value of intermediate goods is not considered. Only the value of final goods should be added to determine the National Income.
(b) Adopt value-added method: According to this method, sum total of the value added by each production unit should be taken in the computation of National Income.

Question 4.
What is meant by sustainable development? Discuss briefly any two strategies of sustainable development.
OR
On the basis of the graph given below, analyze the distribution of employment in region.

Distribution of Employment by Region (1999-2000)
Source: Indian Economic Development (NCERT)
Answer:
Sustainable development: It refers to that development which will allow all future generations to have an average quality of life; the aim is to ensure that present generation should leave quality of life for next generation. The term sustainable development has its origin in IUCN (International Union for the Conservation of Natural Resources).

Strategies of sustainable development:
(a) Use of cleaner fuels: In urban areas, use of CNG is being promoted to be used as fuel. In Delhi, use of CNG in public transport has significantly lowered air pollution. In rural areas, households generally use wood, dung cake or other biomass as fuel. These fuels have several adverse implications like deforestation, reduction in green cover, wastage of cattle dung, and air pollution. To overcome this problem, use of LPG and global gas is being promoted as they are cleaner fuels.

(b) Establishment of Mini-Hydel Plant: In mountain regions, perpetual streams can be found almost everywhere. These streams can be used to generate electricity through mini-hydel plants. These power plants are more or less environment friendly and generate enough power to meet local demands. Moreover, large-scale transmission towers and cables are also not required in such plants.
OR
Distribution of Employment by Region:
Distribution of employed workers by region enables us to know the quality of employment and the attachment of workers to their jobs.
(a) Self-Employment: It is a major source of livelihood in both urban areas (42%) and rural areas (56%). But, in case of rural areas, self-employed workers are greater as majority of rural people are engaged in farming on their own plots of land.

(b) Casual Workers: In case of rural areas, casual workers account for second major source of employment with 37% of workforce. Casual workers in urban areas account for 18% of total workforce.

(c) Regular Salaried Employees: In urban areas, it is the second major source with 40% of workforce. Urban people have a variety of employment opportunities because of their educational attainments and skills. In urban areas, the nature of work is different and enterprises require workers on a regular basis. However, only 7% of rural people are engaged as regular salaried employees due to illiteracy and lack of skills.

Question 5.
The opportunity costs of negative environmental impact are high. Justify the given statement with a valid argument.
Answer:
The negative environmental impact has high opportunity costs as explained below:
(a) The industrial development in past has polluted and dried up rivers and other aquifers making water an economic good. Also, cleaning up of polluted rivers and replenishing water resources require huge investments.

(b) The intensive and extensive extraction of both renewable and non-renewable resources has exhausted some of these resources. Huge amount of funds need to be spent on technology and research to explore new resources.

(c) The health costs of degraded environmental quality are also rising as decline in air and water quality has resulted in increased incidence of respiratory and water-borne diseases.

(d) Global environmental issues such as global warming and ozone depletion also contribute to increased financial commitments for the government. Thus, it is clear that the opportunity costs of negative environmental impacts are high.

Question 6.
Giving valid reason explain how these transactions be treated in estimation of National Income:
(a) Expenditure by a firm on payment of fees to a chartered accountant.
(b) Payment of corporate tax by a firm.
(c) Purchase of refrigerator by a firm for own use.
OR
If NDP_FC is ₹10,000 crores and NFIA is (-) ₹500 crores, how much will be the National Income?
Answer:
(a) The services of chartered accountants hired by the firm should not be included in the estimation of National Income. This is because it forms a part of the firm’s intermediate consumption.

(b) Payment of corporate tax is not included in the National Income as it is a mere transfer payment from the firm to the government. It is a part of corporate profits which already form a part of National Income, therefore, it should not be separately included in National Income (in addition to corporate profits).

(c) Purchase of refrigerator by a firm for own use will be included in the National Income as it is regarded as final consumption expenditure.
OR
National Income = NDP_FC + NIFA
= ₹ 10,000 + (-500)
= ₹ 9,500 crores

Question 7.
Study the following information and compare the productivity of principal crops with India and other advanced countries and analyze its impact on industrial development with valid arguments.
Productivity of Principal Crops

Source: Agricultural Census Statistics 2016
Read the text carefully and answer the question number 8 and 9 given below.
India’s imports of 5.87 billion dollars from China were more than collective purchases from the US and the UAE together. And India’s exports to China grew 11% to 19 billion dollars in 2020. It has led to ballooning of trade deficit with China at 40 billion dollars.

Traders’ Body Confederation of All India Traders ( CAIT) which claims to represent 7 crore traders and 40000 trade associations have been campaigning against Chinese goods, vowing to boycott as many as 3000 items.
Government has also taken several steps to curb imports from China like ban on hundreds of Chinese mobile apps, including popular ones like TikTok, increased scrutiny on Chinese investments in India. Despite the heightened tensions between the two countries, China has emerged as India’s biggest trading partner in the first nine months of FY 2021.

Question 8.
Express your views about why imports have grown from China?
Answer:
Imports have increased from China because of the following reasons:
(a) Failure of Make in India project launched by the government did not lead to increase production in
the domestic boundary of country which led to increased imports.

(b) Increased prices in India restricted the domestic manufacturers to compete with Chinese products.

(c) Lack of willingness on part of Indians to prefer indigenous goods rather than Chinese goods.

Question 9.
Discuss the steps India can take to reduce imports from China.
Answer:
India can take the following steps to reduce imports from China:
(a) Policy of Export Substitution can be adopted i.e., producing those goods in domestic boundary which India imports from China.

(b) Tax incentives and subsidies can be given to domestic manufacturers.

(c) Campaigning about preference of indigenous products like use of Earthen lamps instead of Chinese lights.

Question 10.
How can deficient and excess demand be corrected by change in taxes?
Answer:
Change in taxes helps to correct excess demand in the following ways:
(a) Decrease in Taxes: Decrease in taxes increases the income of public, which increases ‘their purchasing power. As a result, demand for goods and services increases. This can correct deflationary gap or deficient demand. Taxes should be progressive i.e. higher rate of tax for rich people than poor people.

(b) Increase in Taxes: Increase in taxes (direct and indirect) will decrease the purchasing power of consumers and producers. This will decrease the Aggregate Demand. Therefore, government should implement new taxes for solving the problems of excess demand or inflationary gap or government should increase the rate of taxes.

Question 11.
An inflationary gap can be reduced in an economy. State three measures to reduce the inflationary gap to justify the given statement.
Answer:
Inflationary Gap: The extent to which current aggregate demand becomes higher than the aggregate supply at the level of full employment, is termed as inflationary gap.

Given below are the three measures to reduce inflationary gap:

• Reduction in government expenditure on public works, public welfare and defence, etc.
• Reduction in public expenditure on transfer payments and subsidies.
• Increase in taxes to lower the disposable income with the people.
• Restricted deficit financing to check the flow of money in the economy.

Question 12.
(a) From the given data, calculate Net National Product at factor cost (NNP_FC) by expenditure method.

(b) Differentiate between personal income and private income.
OR
(a) Calculate the Net National Product at market price.

(b) What precautions should be considered while estimating National Income by Income Method?
Answer:
(a) National Income (NNP_FC) = Private final consumption expenses + Government final consumption expenditure + Gross domestic capital formation + (Closing stock – Opening stock) + ( Exports
Imports) + Consumption of fixed capital + Net factor income from abroad – Net indirect taxes
= 11,000 + 450 + 300 + (850-450) + (850- 150) + 450 + (-1150)-225
= 11,750+400+700+450-1,150-225
= 13,300 – 1,375
= ₹ 11,925 crores

OR
(a) NDP_FC = COE + MI + OS (Rent + interest + profit)
= (vi) + (i) + (iv) + (v) + (iii)
=3,000+8,000+600+700+1,000
= ₹ 13,300 crores
NNP_MP = NDP_FC – (viii) + (vii)
= 13,300-60+500
= ₹ 13,740 crores.

(b) Precautions that are taken while estimating National Income by income method are:
(i) Transfer incomes (like scholarships, donations, charity, old-age pensions, etc.) are not included in the National Income because such receipts are not connected with any productive activity, and there is no value addition.

(ii) Income from the sale of second-hand goods will not be included in National Income as their original sale has already been counted. If they are included again, it will lead to double counting. However, any brokerage or commission received by brokers or commission agents on the sale of such goods will be included as it is an income received for rendering effective service.

(iii) Income from the sale of shares, bonds, and debentures will not be included as such transactions do not contribute to the current flow of goods and services. These financial assets are mere paper claims and involve a change of title only. However, any commission or brokerage on such financial assets is included as it is an effective service.

(iv) Windfall gains (like income from lotteries, horse races, etc.) are not included as no productive activity is done.

(v) Imputed value of services provided by owners of production units will be included. The imputed value of owner-occupied houses, interest on own capital, production for self-consumption, etc., will be included as these are productive activities and add to the flow of goods and services.

(vi) Payments out of past savings (like death duties, gift tax, wealth tax, etc.) are not included in the National Income because they are paid out of wealth or past savings and do not add to the current flow of goods and services.

(vii) Indirect Taxes (like sales tax, excise duty, customs duty, etc.) are not included in National Income at factor cost. However, they are included in National Income at market price.

Question 13.
(a) Infrastructure contributes to the economic development of a country. Do you agree with the given statement? Give reason in support of your answer.
(b) Unemployment is an economic as well as a social problem. Comment on the given statement.
Answer:
(a) Yes, infrastructure acts as a support system for production activity in the economy and, thereby, contributes to economic development.
(i) Infrastructure increases productivity: The availability of quality infrastructure guarantees increase in production and productivity. Infrastructure ensures easy movement of goods and raw materials thereby reducing inefficiencies and lead to efficient utilization of scarce resources and eliminate wastages.

(ii) Infrastructure encourages investment: Infrastructure provides an environment conducive to investment while lack of infrastructural facilities discourage investment. For example, an investor will not invest in absence of basic infrastructures such as transport and communication.

(iii) Infrastructure generates linkages in production: Infrastructure promotes economic development by way of various forward and backward linkages. In other words, infrastructure provides scope for expansion of one industry due to the expansion of the other by way of forward and backward linkages. The process of economic growth becomes a dynamic process in the presence of sufficient infrastructure facilities.

(iv) Infrastructure enhances size of the market: Infrastructure widens the size of the market. The fast and cost-effective movement of raw materials and finished goods in bulk enables a producer to offer his products across the country and even across international boundaries.

(b) Unemployment is both an economic and a social problem. Unemployment is an economic problem in the sense that unemployed persons will be consumers only without being a producer. Non- utilization of human resources due to unemployment involves double cost of maintenance and loss of output. Unemployment is a social problem in the sense that it causes enormous suffering to unemployed workers due to their reduced or zero income. Many social evils like dishonesty, immorality, drinking, gambling, robbery, etc are the outcome of unemployment, It causes social disruption in the society and the government has to incur heavy unproductive expenditure on law and order.