We have provided CBSE Class 12 Business Studies Sample Paper with solutions below. These Sample guess papers have been prepared as per the latest examination guidelines and paper pattern issued by CBSE. Students of Class 12 should practice all practice papers for Class 12 Business Studies given below as it will help them top improve their understanding of the subject. Please click on the links below to access free sample paper for Business Studies Class 12.
Sample Papers for Class 12 Business Studies
CBSE Class 12 Business Studies Term 2 Sample Paper Set A
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.
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:
(a) Controlling insider trading and imposing penalties for such practices.
(b) Undertaking steps for investor protection.
(c) Promotion of fair practices and code of conduct in securities market.
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.
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.
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.’’
‘‘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.”
6. State any three importance of Communication.
Define Laissez Faire of Leadership Style.
Answer: 6. Communication is one of the most central aspects of managerial activities. The importance of Communication is:
(a) Communication acts as basis of coordination. It provides coordination among departments, activities and persons in the organisation.
(b) Communication makes possible for the smooth and unrestricted working of the enterprise.
(c) Communication provides needed information for decision making. In its absence, it may not be possible for the managers to take any meaningful decision.
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.
(a) Personal growth of employees.
(b) Increase in employee motivation.
(c) Provides learning and development opportunities for employees.
(a) Confusion among employees.
(b) Leaders escape from their low accountability.
(c) Too much independence can lead to isolation and affect team-building opportunities.
7. List any three differences between Financial Management and Financial Planning.
Answer: The differences between Financial Management and Financial Planning are as follows
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:
(i) Setting the performance standards in clear, specific and measurable terms.
(ii) Measurement of actual performance with standard performance in same units.
(iii) Comparison of actual performance with standard performance to check about the deviation.
(iv) Analyzing the deviation with the help of critical point method, management by exception, etc.
(v) Taking corrective action whenever deviation occurs more than the tolerable limit.
9. What is Consumer Protection Act, 2019? Describe three rights and responsibilities mentioned under the Act.
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.
(a) 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.
(b) 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.
(c) 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.
(a) 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.
(b) 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.
(c) Follow Instructions: Follow the instructions which have been given about the product and learn about the hazards linked with it, then use it safely.
Importance of Consumer Protection: From Consumer’s Point of View
(a) 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.
(b) 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.
(c) Unorganised consumers: Consumers in India are still unorganised, and there are few consumer organisations that would advocate for them.
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:
(a) To provide an efficient and transparent market for trading in equity, debt instruments, derivatives, and mutual funds.
(b) To provide a trading platform for equities of small and medium enterprises.
(c) To ensure active trading and safeguard market integrity through an electronically-driven exchange.
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 a pplicant. 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.,
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.
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.
(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.