CBSE Sample Papers for Class 12 Business Studies Paper 3 are part of CBSE Sample Papers for Class 12 Business Studies Here we have given CBSE Sample Papers for Class 12 Business Studies Paper 3.
CBSE Sample Papers for Class 12 Business Studies Paper 3
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Students who are going to appear for CBSE Class 12 Examinations are advised to practice the CBSE sample papers given here which is designed as per the latest Syllabus and marking scheme, as prescribed by the CBSE, is given here. Paper 3 of Solved CBSE Sample Papers for Class 12 Business Studies is given below with free PDF download solutions.
Time: 3 Hours
Maximum Marks: 80
(i) Answer to questions carrying 1 mark may be from one word to one sentence.
(ii) Answer to questions carrying 3 marks may have about 50 to 75 words.
(iii) Answer to questions carrying 4 – 5 marks may have about 150 words.
(iv) Answer to questions carrying 6 marks may have about 200 words.
(v) Attempt all the parts of a question together.
“Doing the task with minimum cost.” Name the term associated with it.
Sita wants to buy an iron. As an aware customer, how can she be sure about the quality of an iron?
Many multinational food joints such as KFC, Me Donalds, Domino’s, etc have altered their menu according to Indian taste and culture. Name the dimension of business environment which is responsible for this step.
Name the principle of scientific management which emphasizes the study and analysis of methods rather than estimation.
Which type of organization structure is suitable for a single product line firm?
State two responsibilities of a consumer that are associated with customer’s rights and grievances.
Why is marketing called a social process?
‘A company wants to establish a new unit in which a machinery worth ₹15 lakh is involved.” Identify the type of decision involved in the above – said statement.
Rajan has just joined a company engaged in manufacturing sleeper, berths for the railways. After joining, Rajan observes that there is always a chaos in the production department. Employees are always facing the shortage of raw materials and they do not know whom to contact. Also, the workers do not know their place of work.
(i) Which principle is being violated by the company?
(ii) What are the consequences of violating this principle?
Surya Ltd is manufacturing steel at its plant in India. It is enjoying a buoyant demand for its products as economic growth is about 7% to 8% and the demand for steel is growing. Therefore, it is planning to set-up a new steel plant to take benefit of such trends in demand. It is estimated that such an expansion will require about ₹5,000 crore to set-up and about ₹500 crore of working capital. As the finance manager of the company, state any three factors that would be considered while determining the capital structure for the new venture.
Divesh and Hitesh are working in the same organization but in different departments. One day, at lunchtime, Divesh came to Hitesh and informed him that many people are going to be retrenched soon from the organization due to computerization.
(i) Which type of communication is this?
(ii) State any two limitations of this type of communication.
What can manufacturers, consumers, and government do to remove the evils of advertising?
Aryan is a manager overburdened with work. Recently, the other managers advised him to share his authority with his subordinates, using the process of delegation. They explained the concept of delegation to him and its essential elements also. Discuss briefly the essential elements of ‘delegation’.
IT company Polaris Software is planning to set-up a new unit in Mumbai with a capacity for 800 professionals. The company currently has 1,200 professionals across its centers in Mumbai, and the new unit is expected to come up in the next six months. The company’s chairman and CEO said that the company was well on the track to meet its earlier announcement to increase the headcount by 1,500 to 2,000 professionals in the current year.
(i) Which function of management is present here?
(ii) Which values are satisfied in the above para?
Rajeev has just joined a company as its CEO. Advise him, regarding the functions to be performed by him.
What is meant by a business environment? Explain ‘dynamic nature’ and ‘uncertainty’ as features of the business environment.
Mr. Sharma purchased a book from a bookseller and took the cash memo of ₹ 800 which he paid for the book. Later, he found that the actual price of the book is ₹ 720, but the bookseller had put a sticker of ₹ 800 on the original price. Can Mr. Sharma recover the extra money that he paid? What other options are available to him against bookseller?
XYZ Co is a newly established company. The company is not having adequate finance to recruit persons from outside. In this situation, which source of recruitment would be beneficial and why?
“Planning and controlling are inseparable twins of management”, how?
Mega Ltd was manufacturing water heaters. In the first year of its operations, the revenue earned by the company was just sufficient to meet its costs. To increase revenue, the company analyzed the reasons for fewer revenues. After analysis, the company decided
(a) to reduce the labor cost by shifting the manufacturing unit to a backward area where labor was available at a very low rate.
(b) to start manufacturing solar water heaters and reduce the production of electric water heaters slowly.
This will not only help in covering the risks but also help in meeting other objectives too.
(i) Identify and explain the objectives of management discussed above.
(ii) State any two values which the company wanted to communicate to society.
Mr. A is a teacher, having a reputed job with good earnings. He wants to trade on a stock exchange. Enumerate the steps involved in the purchase and sale of securities in a stock exchange.
Explain briefly any five factors to which the marketer should pay attention before fixing the price of a product.
Explain the various networks of formal communication.
In the backdrop of growing crimes against women, Sudhakar has just floated a private company by the name of ‘Suraksha’ to provide female bodyguards for women, while traveling or commuting between work and home. Being new to business, he appointed Mr. Bokade as his finance manager and asked him to assess the finance needs of his company.
(i) In which two categories, the finance needs of a firm can be categorised into?
(ii) Explain any four factors that Mr. Bokade have to consider while determining the working capital requirement for the company.
Mr. Inderjeet had started a business of supplying components required in the manufacturing of solar panels. He had started his business five years back and with growing demand, he had opened two more offices. One in Bhopal and the other in Chennai, in addition to the head office in Delhi. He has to travel a lot, from one city to another, related to his business. He tries to look after all the aspects of the business. He also takes all the major decisions himself. For the last couple of months, he is facing a number of problems. He is not able to meet his orders on time, raw material supply is being affected and productivity is falling. His son Dinesh, a management student advises him to change his style of functioning and delegate his authority.
(i) What does delegation of authority means?
(ii) Delegation of authority is important for effective organisation. How? State by giving three reasons.
(iii) Quoting lines from the para, identify and discuss the leadership style of Mr Inderjeet.
The term associated is efficiency, which means doing the task with minimum cost.
Sita should check ISI mark on the product.
Social environment is the dimension of business environment responsible for this step.
Science not rule of thumb is the principle, which emphasises on study and analysis of methods rather than estimation.
Functional structure is suitable for a single product line firm.
Two such responsibilities are as follows:
(i) Consumer must exercise his/her rights.
(ii) Filing complaint for the redressai of genuine grievances.
Marketing is a social process because people interact with others ¡n order to persuade them to act in a particular way, say to purchase a product or a service, rather than forcing them to do so.
Investment decision is involved in this statement.
(i) In this case, the principie of ‘order’ is violated.
(ii) Following are its consequences:
(a) Wastage of time and energy ¡n search of men and material.
(b) Obstacle in smooth working in the organisation.
In this case, the various factors that are considered in determining the capital structure for the new venture will be:
- Cost of Debt If the rate of interest on debt is high, the company should use less debt in its capital structure, and vice-versa.
- Cost of Equity When a company increases debt, the financial risk faced by equity shareholders increases. Thus, debt can be used upto a limit. Beyond that point, cost of equity may go up and share prices may decrease.
- Interest Coverage Ratio ICR refers to the number of times earnings before interest and tax covers the interest obligation. Higher the ICR, the company can borrow more funds and vice-versa.
(i) This type of communication is diagonal communication.
(ii) Limitations of diagonal communication are:
- It can increase competitiveness as more information of ongoing production is given.
- It may consume time of the employees.
Following steps are required to be taken by manufacturers, consumers and government to remove the evils of advertising as follows:
- Manufacturers should not incur unnecessary expenditure on advertising and avoid indecent advertising which is likely to cause decay of social value.
- Consumers should not be misguided by advertising nor should they discard consumer goods before the expiry of their utility period.
- Government should take strong action against those who indulge in false propaganda by using advertising media.
Delegation refers to downward transfer of authority from a superior to a subordinate.
Following are the elements of delegation:
- Authority It refers to the right of an individual to command his subordinates and to take action within the scope of his position. It is needed to discharge a given responsibility to the subordinates. It flows downwards, i.e. from top to bottom in a scalar chain.
- Responsibility It is the obligation of a subordinate to properly perform the assigned task. It arises from a superior-subordinate relationship because the subordinate is bound to perform the duty assigned to him by his superior. It flows upwards, i.e. from bottom to top.
- Accountability It implies being answerable for the final outcome of the assigned task. It flows upwards, i.e. a subordinate will be accountable to his superior for satisfactory performance of work.
(i) The function of management present here is ‘planning’. It tells us what is to be done, how and by whom. It bridges the gap between where we are and where we want to go.
(ii) The values satisfied in the above para are:
- Increase in income
- Higher living standard of people
Rajeev is a top level executive. The functions of top level management are as follows:
- Determining Objectives Top level management sets objectives for the organisation, e.g. An objective can be set that in the following year, the sales of the company must cross ₹1,000 crore.
- Determining Policies At this level, policies related to the realisation of objectives are formed, e.g. It can be a sales policy of a company to just make cash sales.
- Determining Activities Different activities to be performed for the fulfilment of a fixed objective such as sales, purchase, advertisement, production, research, etc.
- Assembling Resources Needed resources are assembled for the realisation of an objective, like capital, raw material, fixed assets, etc.
Business environment is the sum total of all factors and institutions which operate outside the business enterprise, but affect its performance.
Features of business environment are:
- dynamic Business environment is dynamic as it keeps on changing. These changes take place continuously in social, economic, political, legal and technological environment.
- Uncertainty Business environment is uncertain because it is very difficult to predict the changes, especially when they occur very frequently.
Mr Sharma is a cautious consumer. He had taken the cash memo for the book, he purchased. Therefore he can recover the extra money (i.e.₹ 80)
Besides, as per the Consumer Protection Act, 1986, following options are also available to him against bookseller.
- He can return the book and ask for the repayment of ₹800 which he paid for buying the book.
- He can sue the bookseller for using unfair and restrictive trade practices.
Internal source of recruitment will be beneficial. There are two important sources of internal recruitment, i.e.
transfers and promotions and both are economical.
It is beneficial because of the following reasons:
- Transfer is the tool of training the employees to prepare them for higher jobs. Also people recruited from within the organisation do not need induction training.
- Transfer has the benefit of shifting workforce from the surplus department to those departments where there is shortage of staff.
- Employees are motivated to improve their performance. A promotion at higher level motivates the employees to improve their performance through learning and practice.
Planning and controlling are inseparable twins of management because of the following reasons:
- Planning provides the basis for controlling activities and vice-versa. .
- Controlling ensures that planned goals are achieved efficiently and effectively. It measures the performances with the predetermined standards and finds out the deviations, if any.
- The causes of deviations as remarked by controlling serve as the basis of effective future planning.
- Planning and controlling both are forward looking as well as backward looking.
(i) Mega Ltd is discussing about the achievement of ‘organisational objectives’ in part (a) and ‘social
objectives’ in part (b) of the question.
(a) Organizational Objectives Management is responsible for setting and achieving the organisational objectives. It achieves the objectives in such a manner that the human and financial resources are acquired, used and maintained in the most economic and efficient manner. Organisational objectives are as follows :
- Survival The most important objective of every business is to survive and in order to survive, it should earn enough revenues to cover its costs.
- Profit It is the incentive or reward for the efforts put in by an entrepreneur, moreover, it is the reason behind carrying out a business.
- Growth Business organisation must grow and expand their activities. The success of every business is measured by the growth rate and growth is measured in terms of sales, profits, number of products produced and sold, etc.
(b) Social Objectives Since, organisations are social units, their objectives should be in line with general needs of the society. Some of the social objectives of an organisation are as follows:
- Supply of quality products.
- Using environment friendly methods of production.
- Providing employment opportunities to the backward sections of society.
(ii) Two values which the company wants to communicate to the society are:
(a) Giving employment opportunities to the people of backward area.
(b) Environment friendly by producing solar heaters and reducing the production of electric heaters.
The procedure for purchase and sale securities in a stock exchange involves the following steps:
- Selection of a Broker The first step is to select a broker, who will buy/sell securities on behalf of the investor/speculator. Brokers may be individuals, partnership firms or corporate bodies. Selection of broker is compulsory as trading can only be done by SEBI registered brokers, who are members of a stock exchange.
- opening of a Demat Account with Depository Dematerialised (Demat) account refers to an account which an individual must open with the depository participant (banks, stock brokers) to trade in the listed securities in electronic form.
- Placing the Order The next step is to place the order with the broker, which can be done through telephone, cell phone, e-mail, etc. Instruction regarding which securities and how many securities are to be bought or sold should be clearly given to the broker.
- Executing the Order According to the instructions, the broker executes the order and buys or sells the required securities. The broker then issues a contract note. A copy of contract note specifies the name and the price of securities, names of parties, brokerage charges, etc which is signed by the broker.
- Settlement This is the last stage in the trading of securities done by brokers on behalf of their clients. The mode of settlement depends upon the nature of contract.
Equity spot markets follow a T+ 2 rolling settlement. This means a trade taking place on Monday gets settled by Wednesday. Trading times on stock exchange are between 9:55 am and 3:30 pm 1ST, from Monday to Friday. Each exchange has its own clearing house, which assumes all settlement risk.
Factors affecting pricing decision are as follows:
- Product Cost The total cost of product includes production, selling and distribution costs. The cost sets the minimum level or floor price for a product. Price must be decided by adding a profit margin to the total cost of the product.
- The Utility and Demand It is necessary to anticipate the utility and demand of a product while fixing the price, as if a product is offering higher utility, one can easily charge high price. Whereas, if utility is low, one cannot charge high price for such products.
- Extent of Competition in the Market The price of a product can be set upto the higher limit, if the extent of competition is low in the market and vice-versa.
- Pricing Objectives If the objective of the firm is to maximise sales, price will be set at a lower level, whereas, if the firm’s objective is profit maximisation, price will be set at a higher level.
- Marketing Methods Used The price of the product also gets affected by various techniques and methods of marketing used to promote the products. If the company is using intensive advertising to promote the sale of product, then it will charge high price.
The pattern through which communication flows within the organisation is indicated by communication network.
Some popular formal communication networks are as follows:
(i) Single Chain In this network, communication flows from every superior to his subordinates in a single chain.
As shown in the diagram, communication flows from A to 6, from B to C and so on.
(ii) Wheel Network In this network, all subordinates working under a superior communicates through him only. The superior is at the ‘hub’ of the wheel, communicating with all at the same time.
As shown in the diagram, B,C,D and £ can only communicate through A.
(iii) Circular Network In this network, communication moves in a circle, from one person to another. But, communication is slow in this network.
Each person can communicate with two adjoining colleagues. Here A can communicate with B and E, and likewise others communicate in the circle.
(iv) Free Flow In this network, each person can communicate with others freely and therefore, communication is fast in this network. In the diagram, A can communicate with B, C, D and E, B can communicate with A,E,C,D and so on.
(v) Inverted V In this network, a subordinate is allowed to communicate with his superior and his superior’s superior. As depicted in the diagram C can communicate with A and B.
(i) The finance needs of a business can be categorised into following two categories:
(a) Fixed capital needs
(b) Working capital needs
(ii) The main factors that Mr Bokade have to consider while determining the working capital requirement of a company are :
- Nature of Business The basic nature of a business influences the amount of working capital. A trading organisation and a service industry firm usually needs a smaller amount of working capital as compared to a manufacturing organisation.
- scale of Operations Organisations which operate on a large scale, their quantum of inventory and debtors required is generally high. Such organisations, therefore, require large amount of working capital as compared to the organisations which operate on a lower scale.
- Business Cycle Different phases of business cycles affect the requirement of working capital by a firm. In case of a boom, the sales as well as production are likely to be larger and therefore larger amount of working capital is required. As against this, the requirement for working capital will be lower during the period of depression, since the sales as well as production will be less.
- Seasonal Factors Some of the businesses have seasonal operations. During peak season, larger amount of working capital is required because of higher level of activity. As against this, the level of activity as well as the requirement for working capital will be lower during the lean season.
- Production Cycle Production cycle is the time span between the receipt of raw material and their
conversion into finished goods. Some businesses have a longer production cycle while some have a shorter one. Duration and length of production cycle affect the amount of funds required for raw materials and expenses.
(i) Delegation of authority refers to the transfer of authority from superior to subordinate for the completion of tasks.
(ii) It is a key element in effective organising because of the following reasons:
- Organizational Growth Delegation helps in expansion and growth of an organisation by providing trained and experienced individuals. It provides a ready workforce to take up leading positions in new ventures or projects.
- Better Coordination Delegation of authority helps to avoid overlapping of duties and duplication of efforts. It also helps in developing and maintaining effective coordination amongst various departments, levels and functions of management.
- Basis of Management Hierarchy It establishes superior-subordinate relationships, which are the basis of the hierarchy of management. Every individual in the organisation knows that he is accountable to whom.
(iii) Mr Inderjeet is an autocratic leader. Lines which indicate it are, “He tries to look after all himself.” An
autocratic leader is one who centralises all decision-making powers in himself and exercises complete control over his subordinates. He gives orders and insists that they are obeyed. He does not include employees in the decision-making activity.
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