Business Studies Solved Question Papers' 2013 | AHSEC Class 12 Business Studies Solved Question Papers

[Class 12 Business Studies Solved question Paper, AHSEC, 2013, Assam Board]

Full Marks: 100
Time: 3 hours
The figures in the margin indicate full marks for the questions.

1. Answer the following questions: 1*10=10

a)      Which plan states ‘one plan, one boss’ and ‘one head one plan’?
Ans: Unity of Command
b)      What do you mean by disinvestment?
Ans: Disinvestment refers to the use of a concerted economic boycott to pressure a government, industry, or company towards a change in policy, or in the case of governments, even regime change.
c)       A company is manufacturing cosmetics, readymade garments, toilet items and biscuits. What kind of organization structure is suitable for this company?
Ans:  Divisional organization structure
d)      Give two example of non-financial incentives.
Ans: Examples of Non Financial Incentives - Status, organizational climate, career advancement opportunity, job security etc.
e)      What types of instruments are traded in the money market?
Ans: Call money, Commercial Papers, Certificates of deposits, Bills of exchange.
f)       Name the four p’s of marketing mix.
Ans: Product, Price, Promotion and Place
g)      Which function of management ensures that actual activities conform to planned activities?
Ans: Controlling
h)      Under which environmental factor does fiscal policy fall?
Ans: Economic Environment
i)        Give one difference between policy and procedure.
Ans: Policies are guidelines which facilitate the achievement of predetermined objectives. Procedures are sequences of steps to be followed for performing some important jobs.
j)        Ankit failed a case against Mahindra ltd. In the National commission. But he was not satisfied with the order of the national commission. Name the authority where he can appeal against the decision of the National commission.
Ans: He can appeal in Supreme Court within 30 days.
2. Discuss three fundamental features of management.      3
Ans: Features of Management:
a)      Management is goal oriented: Every management activity is directed towards achieving predetermined objectives of the organisation.
b)      Management deals with several functions: Management includes several functions such as planning, organizing, staffing, directing, co-ordinating, controlling, motivating or actuating, controlling, decision making, leadership and communication.
c)       Management is intangible: It cannot be seen but it can be felt through the performance of the workers. Mismanagement if any is quickly noticed and is a sign of poor management.      
3. Write three qualities of a leader.      3
Ans: Qualities of a Leader:
a)      Physical Qualities: Good physical features like height, weight, health and look of person attract an individual. Healthy and smart leader can work hard and also induce his subordinates to work hard.
b)      Judgement skills: A good leader should be able to examine problems in right perspective. His judgement and decision making abilities should be superior to others.
c)       Communication skills: A good leader should be able to communicate the goals and procedures of the organisation clearly, precisely and effectively to the subordinates.

4. Distinguish between primary market and secondary market.      3
Ans: Differences between primary and secondary market which are given below:
Primary Market
Secondary Market
1. Meaning
It is the market where the securities are issued for the first time. It is also referred as New issue market.
It is the market where the existing securities are traded. It is also called stock Exchange.
2. Pricing
The prices of the securities are determined by the company.
The prices of the securities are determined by the forces of demand and supply of the securities.
3. Purchase and sale of securities
Here, only buying of the securities take place.
Here, buying and selling of the securities, both take place.
5. Explain any three major factor affecting pricing of a product.     3
Ans: Factors determining Fixation of price:-
                i) Cost of the product: - Cost of the product is the main component of the price. No company can sell its product or service at less than the cost of the product. A Fixed and variable cost are to be considered for determining the price.
                ii) The utility and demand for the product: - Intensive study for the demand for product and service in the market is to be undertaken before the fixation of the price of the product. If demand is relatively more than supply, higher price can be fixed.
                iii) Extent of competition in the market: - It is necessary to take into consideration prices of the product of the competing firms prior to fixing the price. In case of cut throat competition it is desirable to keep price low.
                iv) Government & Legal Regulation: - If the price of the commodity and service is to be fixed as per the regulation of the govt., it should also be borne in mind.
6.’’ Authority can be delegated but responsibility cannot be delegated’’ comment.                       3
Ans: Yes, it is right to say that authority or decision-making power can be delegated but the accountability can never be delegated according to the principle of absolute responsibility or principle of abdication. The accountability remains with the manager even after delegating the work. For example, the directors of a computer manufacturing company have asked their production manager to achieve a target production of 150 computers per day. The production manager has asked five foremen to achieve this target. Two of them could not achieve the target. In this case production manager is responsible and accountable for non-completion of target because by passing authority and work to foremen, manager cannot get rid of his responsibility and accountability.
7. Explain ‘’Method study’’ and ‘’motion study’’as technique of scientific management.    3
Ans: Method study: It refers to identify the most suitable, economical way of doing a particular activity. To conduct this study, process chart, operation research technique can be used. The main objective is to minimize the cost of production and maximize the quality of the work.
Motion Study: Motion study is designed to eliminate unnecessary motions and to reinforce necessary motions. It is a close observation of analyzing the body movements of the worker performing the job. This study helps in analyzing that if any element of the job can be eliminated or not.     
8. What is planning premises?                  3
Ans: Planning is concerned with the future, which is uncertain. Therefore, the manager is required to make certain assumptions about the future. These assumptions are called premises.
9. What is meant by internal source recruitment? Why do organizations prefer recruitment through internal source? 1+5=6
Ans: Under internal source of recruitment, the vacant job positions are filled by using existing employees of the organisation and no outsiders are permitted in internal source.
The reasons why organizations prefer Internal Source of Recruitment are explained below:
a)      Job Security: It creates a sense of security among employees when they are assured that they would be preferred in filling up vacancies.
b)      Improved Commitment: It promotes loyalty and commitment among employees due to sense of job security and opportunities for advancement.
c)       Less costly and time consuming: Time and costs of training will be low because employees remain familiar with the organisation and its policies.
d)      Less training: As the persons in the employment of the company are fully aware of, and well acquainted wit, its policies and know its operating procedures, they require little training, and the chances are that they would stay longer in the employment of the organisation than a new outsider would.
It is due to the above mentioned advantages, internal source of recruitment is more preferable as compared to external source of recruitment.
Discuss various steps involve in the process of control.                                 6
Ans: Following are the steps of controlling process:
(i) Setting Performance Standards: the first step of controlling is to set performance standards. Standards are those criteria s on the basis of which the actual performance is measured. Thus, standards serve as benchmarks towards which an organization strives to work. Standards can be set in both quantitative as well as qualitative terms.
(ii) Measurement of Actual Performance: the second step in the controlling process is the measurement of actual performance. The measurement of actual performance is done on the basis of pre-determined standards. The measurement of actual performance tells the manager whether the work has been done according to the plan or not.
(iii) Comparison of Actual Performance with Standards: At this step, actual performance is compared with the standards and deviations are found out.
(iv) Analyzing Deviations: Deviations are examined the light of pre-determined Deviation Tolerance Limits. If the deviations are within limits they can be avoided. But if they cross the limits, they should be reported to the higher level managers without any delay. There are two important principles regarding this:
(a) Principle of Critical Point Control: According to this principle, those activities should be determined in the very outset which have an important role to play in ensuring the actual work progress in accordance with the plans. These are known as Key Result Areas – KRAs. It means that the managers should not be involved in small insignificant activities but should pay more attention to those activities where unfavourable results can cause heavy loss to the enterprise.
(v) Taking Corrective Action: The last but the most important step in the controlling process is taking corrective action. By now the deviations and their causes become known. Now is the turn of removing the hurdles in the actual work progress. The purpose of corrective action is to bring the actual work progress to the level of expected progress.

10. Distinguish between delegation and decentralization of authority on the following basis : 4
(a) Nature
(b) Purpose
(c) Freedom of action
(d) Level of authority
Delegation of Authority
Sharing of the task with the subordinate and granting authority in a prescribed limit by the superior is Delegation.
The systematic delegation to the lowest level of management is called decentralization.

It becomes compulsory in all the organizations as the complete task cannot be performed by the superior.
It becomes compulsory in the large organisations.

Freedom in action
Less freedom to the subordinate Final authority lies with the delegator.
More freedom given to the subordinate.

This is a process done as a result of Division of work.
This is the result of the policies framed by higher officials.
It depicts limited distribution of work, so has a limited scope.
It depicts broader distribution of authority so has a wider scope.
Its purpose is reduction of workload of the officer.
The purpose is expansion of the authority in the organization.

11.Explain various types of channels of distribution.          4
Ans: A channel of distribution is an organised net-work or a system of agencies and institutions which, in combination, perform all the activities required to link producers with users and users with producers to accomplish the marketing task.
According to Philip Kotler, “The distribution is the set of all firms & individuals that assist in the transferring the little of goods & services as they move from producers to customers.”
Types of Channels of Distribution:
A) Direct Channel -     Manufacturer - Customer
B) Indirect Channel - Manufacturer - Retailer - customer
Manufacturer - wholesaler - Retailer - customer
Manufacturer - Agent - wholesaler - Retailer customer
12. State any four services of advertising to consumers.   4
Ans: Main benefits of advertising to consumer are as follows:
a)      The manufacturer is compelled to maintain the quality of the goods advertised. Money spent on advertising being an investment the manu­facturer naturally expects returns on such investment
b)      Advertising also acts as an information service and educates the con­sumer. It enables him to know exactly what he wants and where to get it.
c)       Advertising stimulates production and reduces the cost per unit. This reduction in the cost is generally passed on to the consumer and that is why price of well-advertised goods are found to be generally lower than other goods of the same quality which are not so well advertised.
d)      Advertising also makes it possible to sell direct to the consumer by Mail Order Business.
13.Explain, in brief any five economic changes that have been initiated by the Government of India since 1991.  5
Ans: As a part of economic reforms, the Government of India announced a new industrial policy in July 1991. The broad features of this policy were as follows:
(a)    Delicencing: The Government reduced the number of industries under compulsory licensing to six.
(b)   Disinvestment: Disinvestment was carried out in case of many public sector industrial enterprises.
(c)    Liberalisation of foreign policy: Policy towards foreign capital was liberalized. The share of foreign equity participation was increased and in many activities 100 per cent Foreign Direct Investment (FDI) was permitted.
(d)   Liberalisation in technical area: Automatic permission was now granted for technology agreements with foreign companies.
(e)   Promotion of foreign investment: Foreign Investment Promotion Board (FIPB) was set up to promote and channelise foreign investment in India.
14. Briefly describe the levels of management found in modern business enterprises.  5
Ans: Levels of Management are divided into three parts:
1)      Top management is the 3rd line of management, which consists of Chairman, Directors, Managing Director, General Manager and other top-level executives required to achieve the goals of the enterprise. For example: Mr. Hazarika has retired as the managing director of a manufacturing company. He is said to be working at top level of management. The functions of top management are:
a)      They determine both long term as well as short term objective of the enterprise.
b)      They formulate plans and policies to achieve the desired objectives.
2)      Middle management consists of departmental heads and other executive officers of different departments. They execute the policies framed by the top management. They are a link between the top management and supervisory or lower level of management. Functions of middle level management
a)      They explain the main plans and policies framed by the top management to the lower level.
b)      They prepare the organizational set up of their department.
3)      Low level management is considered as operative management. The first line/operative or low level management includes supervisors, foreman and Inspectors. They are a link between middle level management and workers. They have the following functions:
Ø  They represent the workers’ grievances before the middle level management.
Ø  They procure tools, materials required for the job.
15. Explain the following principles of Management :  5
(a)Stability in tenure
(b)unity of command                                                                
Ans:  a) Stability of tenure of personnel: There must be stability and job security. High employee turnover affects organization adversely.
b) Principle of unity of command: According to this principle of Fayol, every employee should receive orders and instructions from one boss and he should be responsible and accountable to him only. The violation of this principle will have the following consequences:
a)      It will be very difficult to maintain discipline
b)      Duplication of work
c)       Over – lapping of orders and instructions
d)      Disrespect to the work and officers
16. Explain in brief any five function of consumer organization.                                5
Ans: Functions of Consumer organisation and Non-Government Organisations (NGO):
a)      Creating consumer awareness: They publish periodicals brochures journals etc for creating consumer awareness.
b)      Encourage the consumer: They encourage and educate the consumer to protect against exploitative, unfair trade practice of the seller.
c)       Filing complaints: They file suits, complaints, on behalf of consumer.
d)      Focus on consumer problem: They arrange seminars, workshops and conference for the purpose of focusing on problem of consumer.
e)      Problem legal assistance: They provide legal assistant for getting legal remedy against the damage caused to consumer.
Mention the importance of consumer protection from the point of view of business.                   5
Ans: Importance of Consumer Protection from the point of view of business:
a)      Business is a means of human welfare: Business serves the customer. It is in the interest of both the consumer and the businessman to ensure that the business is run well because ignoring the interest of the consumer may be a sure death of the business.
b)      Growth with social justice: Growth with social justice is the prime feature of our economic philosophy. Exploitation of consumers is against the directive principles of State Policy laid down in our Indian Constitution.
c)       Single versus multiple objectives: Business works for all stakeholders – consumers, shareholders, employees, government, and the public. It is both a social and economic institution. Therefore it cannot just make profit by ignoring the interest of the society.
d)      Power Centre: Business has considerable influence over society and government. Therefore it has to set standards regarding food, dress habits, living styles, etc which will not damage the cause of society.
e)       Self interest: Due to liberalization and globalization, firms have to compete with multinationals. Unless they become customer oriented and provide right quality, quantity and price they cannot survive for long time and will be out beaten by competition from multinationals.
17. State any five main function of SEBI.   5
Ans: Functions of SEBI are as Follows:
a) To check unfair trade practices such as to supply misleading statement to the public, price rigging.
b) To check insider trading in securities. Insider trading means the buying and selling of the securities by those persons (Directors, promoters) who have some secret information of the company and wish to take advantage of it. It hurts the interest of the common man.
c) To provide education to the investors so as to protect them from being exploited by unfair means: or unhealthy activities of the intermediaries.
d) To promote code of conduct relating to the security market (for the companies, stock exchange and intermediaries)
e) To regulate takeover bids of companies.
Explain the meaning and objective of financial management.                                   5
Ans: Business Finance or Financial management refers to that part of the management activity which is concerned with the planning, raising, controlling and administration of the funds used in the business. Its main objective is to use the funds of the business in the most appropriate way.

In simple words we can say financial management refers to “Efficient acquisition of finance, efficient utilisation of finance and efficient distribution and disposal of surplus funds for smooth working of company.”
Objectives of financial management:
Efficient financial management requires existence of some objectives or goals because judgment as to whether or not a financial decision is efficient is to be made in light of some objective. The two main objectives of financial management are:
1) Profit Maximisation: It is traditionally being argued, that the objective of a company is to earn profit, hence the objective of financial management is profit maximisation. Thus, each alternative is to be seen by the finance manager from the view point of profit maximisation.
2) Wealth maximisation: The companies having profit maximisation as its objective may adopt policies yielding handsome profits in the short run which are unhealthy for the growth, survival and overall interests of the business. A company may not undertake planned and prescribed shut-downs of the plant for maintenance, and so on for maximising profits in the short run. Thus, the objective of a firm should be to maximise its value or wealth.
18. What is meant by informal organization? Write any five features of informal organization.  1+5=6
Ans: Informal Organisation: In the words of Keith Davis, “Informal organisation is a network of personal and social relations not established or required by the formal organisation but arising spontaneously as people associate with one another.”
Features of Informal Organisation:
a)      It is not established by any formal authority. It arises from the personal and social relations amongst the people working in the organisation.
b)      Informal Organisation arises unintentionally, and not by deliberate or conscious efforts.
c)       It is influenced by the personal attitudes, emotions, likes and dislikes, etc. of the people in the organisation.
d)      It is based on rules, regulations and procedures.
e)      The existence of informal organisational structure depends on the formal organisation structure.
19. What is motivation? Explain Maslow’s need hierarchy theory of motivation.   1+5=6
Ans: Understanding and influencing the human behaviour requires understanding their needs. Need or the desire is a very important element in motivation because the employees get motivated only for their needs and if the needs are fulfilled completely then it is not possible to motivate the employees. According to Abraham Maslow, need can be classified in the following categories:
a)      Physiological needs: these needs include basic requirements for survival and maintenance of human life. The common physiological needs are food, shelter and clothing.
b)      Security needs: Once the present day physiological needs are fulfilled then the people start thinking about their future as they want to secure their future by making sure that in future also they continue to satisfy their physiological needs. Under safety and security there are two categories:
Ø  Physical security which means safety from illness, accident, fire etc.
Ø  Economic security which means having sufficient funds to meet the future physiological needs and to come out of physical security threat.
c)       Social needs: It means the need for love, affection, companionship, friendship etc. Once the people satisfy their physiological and safety needs then the social need becomes more active and to fulfill the social needs.
d)      Esteem needs: These needs are related to the respect and recognition. When the above three needs are satisfied then people start demanding respect for themselves in a group. This need is more common in higher level employees.
e)      Self actualization: This need refers to realizing or reaching to the aim of your life. Once the employee becomes what he wants to become it means satisfaction of his actualization need. For example, need to grow, sense of fulfillment.
Assumptions of Maslow’s Need Hierarchy Theory
a) Behaviour of people depends upon their need. Human behaviour can be changed or motivated by fulfilling their needs.
b) Generally the needs follow the hierarchy i.e., starting from physiological need.
Discuss the barriers to effective communication.         6
Ans: The barriers to communication in an organization may be broadly categorized into following groups:
a.       Physical Barriers: There are the environmental factors that also reduce the sending and receiving of communication, such as physical distance, noises and other interferences difficulty arises in communicating a message.
b.      Socio-psychological or personal Barriers: There are certain socio psychological factors which restrict the free flow of communication. They are the attitude and opinions, status consciousness, ones relations with fellow workers, seniors, and junior’s etc. family background.
c.       Organizational Barriers: Organisational barriers arise due to defects in the organization structure and the communication system of an organization. Such barriers include hierarchical distance, diversion, status barriers, goal conflicts etc.  
d.      Semantic Barriers: Semantic means the relationships of signs of their reference. Semantic barrier arises from the disadvantages of the symbolic system. Symbols have got number of meaning and one has to choose any one of them according to the requirement of communication.
e.      Mechanical Barriers: Mechanical barriers include inadequate arrangement for transmission of news, facts and figures. Example poor office layout and defective procedure and the use of wrong media led to poor communication.
20.” Money spent in advertisement is a waste.” Do you agree with this statement? Give reason for your answer.    6
Ans: Several objections have been raised against advertising and some people criticize advertising as a social waste. The main point of criticism is as follows:-
a)      Creates Monopoly in the Market: Advertisement leads to promotion and cover mass level of customers at a time. Large firms can bear the advertisement expenditure but not the small firms, due to that it can eliminate the small firms from the market and creates its monopoly authority in the market.
b)      Higher the Prices of Product: Investment of money in advertisement leads to increase in the price of goods and services for which consumer has to face high prices and pay for it. Hence, more the advertisement cost- more the product cost.
c)       Misleading the consumers: Now days, advertisement misleads the consumers on false representation regarding their goods. Consumer attracts to those goods which are not necessary for them. Thus, advertisement misleads the consumer and sale goods to them.
d)      Wasteful Consumption by the Consumers: Advertisement attracts the consumers for wasteful products which are not necessary for consumers. Due to advertisement businessmen takes undue advantage from them. They sale unhealthy and artificial goods to them and exploits consumer emotions.
e)      Wastage of National Resources: There will be wastage of national resources, valuable stationary, time and energy used by the people or is ignored by them. Here, Valuable resources that can be used to create new industries are wasted in the production of needless varieties and designs.
What is packaging? State any five function of packaging.            1+5=6
Ans: Packaging: It refers to the group of those activities which are related with the designing and production of the containers in which the product are packet.
Functions of Packaging
1. Product Identification: Packaging help in identification of the product.
2. Product Protection: The main function of the packing is to provide protection to the product from dirt, insect and breakage.
3. Convenience: It provides convenience in carriage, stocking and in consuming.
4. Product Promotion: Packaging simplifies the work of sales promotion.
Answer any one from the following Units.
Unit XII (consumer Protection) : Question No. 21
Unit XIII ( Entrepreneurship Development) Elective : question No. 22.
21.Explain the meaning of working capital. Briefly explain any four factors that determine the working capital of the company.  6
Ans: Working capital is the capital required for meeting day to day requirements/operations of the business. Simply, it refers to excess of current assets over current liabilities.
Calculation of working capital:
a) Gross working capital: This refers to the total investment made in all the current assets such as stock, debtors, bills receivable etc. It is calculated by adding all the current assets.
b) Net working capital: This refers to excess of current assets over current liabilities. It is calculated as: Net working capital= current assets – current liabilities. If current liabilities are more than current assets then working capital becomes negative.            
Following factors are to be considered before determining the requirement of working capital.
1.       Scale of operations: There is a direct link between the scale of business and working capital. Larger business needs more working capital as compared to the small organizations.
2.       Nature of Business: The manufacturing organizations are required to purchase raw materials, convert them into finished goods, maintain the stock of raw materials; semi finished goods and finished goods before they are offered for sale. They have to block their capital for labour cost, material cost etc, so they need more working capital. In the trading firm processing is not performed. Sales are affected immediately after receiving goods for sale. Thus they do no block their capital and so needs less working capital.
3.       Credit allowed: If the inventory is sold only for cash, it requires less working capital as money is not blocked in debtors and bills receivable. But due to increased competition, credit is usually allowed. A liberal credit policy results in higher amount of debtors, so needs more working capital.
4.       Credit availed: If goods are purchased only for cash, it requires more working capital. Similarly if credit is received from the creditors, the requirement of working capital decreases.
5.       Availability of Raw materials: If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital. But if there is shortage of materials, huge inventory is to be maintained leading to larger amount of working capital.
22. What are the characteristics of Entrepreneurship ?    6

Explain the role of entrepreneur in relation to enterprise.