See below CBSE Class 12 Business Studies Term 2 Sample Paper Set E with solutions. We have provided CBSE Sample Papers for Class 12 Business Studies as per the latest paper pattern issued by CBSE for the current academic year. All sample papers provided by our Class 12 Business Studies teachers are with answers. You can see the sample paper given below and use them for more practice for Class 12 Business Studies examination.
CBSE Sample Paper for Class 12 Business Studies Term 2 Set E
Short Answer Type Questions – I
1 Name and explain the process that helps in searching for possible candidates for a job or a function.
Recruitment is the process of searching for prospective employees and stimulating them to apply for jobs in the organization. Thus, it aims at creating a pool of the prospective job candidates and inviting them to apply for the job in the organization.
2 Explain internship training and identify whether it is on-the-job or off-the job method of training.
Answer. Internship training is a joint programme of training in which educational institutions and business firms cooperate with each other. The selected candidates carry on regular studies for the particular period. Thereafter, they also work in some factory or office to acquire practical knowledge and skills. It is on-the-job method of training.
3 ‘Ambika is in the business of preparing sweet delicacies and decided to invest more money in order to increase production to be able to meet the increasing demand unlike the previous festive season when there was shortage of supply.’ Which step does this represent in the controlling process? Explain briefly.
Answer. The step referred to in the caselet is ‘Taking corrective action’.
Ambika has taken corrective action by deciding to increase investment. No corrective action is required when the deviations are within acceptable limits. However, when the deviations go beyond the acceptable range, especially in the important areas, it demands immediate managerial attention so that deviations do not occur again and standards are accomplished.
4. What does ‘Demat Account’ stand for? Explain the same briefly.
Answer. ‘Demat Account’ stands for ‘Dematerialization Account’.
It is an account also known as ‘beneficial owner’ (BO) account which is opened by an investor with a Depository Participant (DP) for holding and transferring securities in electronic form.
Short Answer Type Questions – II
5. Mr. Sameer, the production manager of Clarity Redefined, discusses with his staff about the new export order. All the staff members unanimously agree that they will work together overtime whenever required in order to complete the order and meet the deadline. Which Leadership Style is Mr. Sameer following? Explain the same.
Answer. Mr. Sameer is following Democratic Leadership Style.
A democratic leader develops action plans and makes decisions in consultation with his subordinates. He encourages them to participate in decision-making because such leaders cogitate that people perform best if they have set their own objectives. They also respect other’s opinion and support the subordinates to perform their duties and accomplish organizational objectives. Thus, they exercise more control by using forces within the team.
6. Namrata was the zonal sales manager in a garment company. On the retirement of the marketing manager, she applied for the same post as she was extremely ambitious. However, the top management of the company decided to fill this post by selecting another person from outside the company. Due to this, Namrata was disappointed and her output declined. When the new marketing manager joined in, one of the major problems was how to inspire and motivate Namrata to resume her previous level of performance.
Suggest any three incentives that are non-financial in nature which the new marketing manager may adopt to motivate Namrata.
Answer. The Non-Financial Incentives that may be used to motivate Namrata are as follows:
(i) Job Enrichment: It is concerned with designing jobs that include a greater variety of work content, requiring higher level of knowledge and skill, and which give more autonomy and opportunity for personal growth.
(ii) Employee Recognition: It means acknowledgement with a show of appreciation towards the efforts and achievement of the employees.
(iii) Employee Participation: It means employees’ involvement in decision making of matters related to them.
(iv) Employee Empowerment: It means providing more autonomy and power to subordinates to take any decision or action.
(v) Job Security: It refers to providing stability to the employees regarding future income and employment so that they are not worried about these aspects and perform their duties with a greater enthusiasm.
7. Which function of management completes one cycle of management process and improves planning in the next cycle. Briefly explain how the function so identified helps in improving the future plans.
Controlling is the fifth and the last function of management. It is the process of ensuring that actual activities conform to planned activities. Controlling helps to find out the deviation between the actual performance and defined standards, analyses the causes of such deviations and attempts to take corrective actions based on the same. Thus, controlling completes one cycle of management process and improves planning in the next cycle as plans are prepared in the light of the problems that were identified.
8. Explain the objectives of Financial Planning.
State any three points of importance of Financial Planning.
Answer. Objectives of Financial Planning:
(i) To ensure availability of funds whenever required which involves estimation of the funds required, the time at which these funds are to be made available and the sources of these funds.
(ii) To see that the firm does not raise resources unnecessarily as excess funding is almost as bad as inadequate funding. Financial planning ensures that enough funds are available at right time and surplus funds should be used in the best possible way.
Importance of Financial Planning:
(i) It helps in avoiding business shocks and surprises and helps the company to prepare for the future.
(ii) It helps in coordinating various business functions by providing clear policies and procedures.
(iii) Detailed plans of action prepared under financial planning helps in reducing waste, duplication of efforts and gaps in planning.
(iv) It tries to link the present with the future.
(v) It provides a link between investment and financing decisions on a continuous basis.
(vi) It makes the evaluation of actual performance easier by spelling out detailed objectives for various business segments.
Long Answer Type Questions
9. Olax Taxi Ltd. has hired 2000 four- wheelers for the different routes for the passengers of a metropolitan city. In order to fill vacancies, it advertised in the newspaper and number of applicants applied for the same. The company has to now undertake the process of selection to identify and select the best. Explain the first five steps involved in the process.
‘Training is a life-long necessity, both for the employees as well as for the organization.’ Briefly explain the term training and justify the statement by giving four arguments each in favour of the employees and the organization.
Answer. Following are the steps involved in the selection process:
(i) Preliminary Screening: Managers can remove the unsuitable job seekers on the basis of the information supplied in the application forms. Preliminary interviews can also be conducted to reject them for reasons which are not evident in the application forms.
(ii) Selection Tests: An employment test is a pen and paper test or an exercise or activity aimed at measuring some characteristics (e.g. intelligence, behavioral personality etc.) of individuals which are necessary to perform the work.
(iii) Employment Interview: It is a formal interaction between the employer and job candidate to evaluate an applicant’s suitability for the position. The interviewer seeks information and the interviewee provides the same. Interviewee can also seek information from interviewer in case required.
(iv) Reference and Background Checks: Employers ask for names, addresses and telephone numbers of references like previous employers, colleagues, teachers etc., from job candidates to verify any information as well as gain additional information about an applicant.
(v) Selection Decision: The final candidate is chosen from among the candidates who have cleared the previous selection stages. Herein, opinion of the concerned manager matters during finalizing because the manager will be responsible for the performance of the new joinee.
Training is any process by which the aptitudes, skills and abilities of employees to perform specific jobs are increased. Employees can be trained using on-the-job or off-the-job methods for the purpose of skill development.
Training is a life-long necessity for employees as:
(i) It leads to improve the career of an individual.
(ii) It helps them to earn more by increased performance.
(iii) It increases the satisfaction and morale of the employees.
(iv) It makes the employees more efficient to handle machines and therefore, lesser prone to accidents.
Training is a life-long necessity for organizations as:
(i) It avoids wastage of efforts and money by systematic learning of skills.
(ii) It enhances employee’s productivity leading to higher profits in the organization.
(iii) It equips the future manager who can take over in case of an emergency.
(iv) It reduces absenteeism and increases turnover of the organization by increasing employees morale.
(v) It helps in obtaining an effective response to a fast changing environment.
10 Hema Motor Manufacturers has been into business for many years. The company has decided to give a special privilege to their existing shareholders to subscribe to the new issue of shares. The company always gives special treatment to its loyal stakeholders and also ensures that they remain associated with the organization for longer durations. Last year, the company was successfully dealing through the capital market where both the buying and selling of securities was taking place. The owner of the company is a man of repute. He also contributes by writing articles for business magazines and newspaper editorials. He recently wrote an article about the watchdog of stock market that was well received and now is part of the MBA curriculum of some B-Schools.
(i) Name and explain the method of floatation used by Hema Motor Manufacturers?
(ii) Which type of capital market was this company dealing in last year? Explain briefly the market so identified.
(iii) Which watchdog of the capital market has been referred to in the above case?
(i) Rights Issue
It is a privilege given to existing shareholders to subscribe to the new issue of shares according to the terms and conditions of the company. The shareholders are offered the ‘right’ to buy new shares in proportion to the number of shares they already possess.
(ii) Secondary Market
The secondary market is also known as the stock market or stock exchange. It is a market for the purchase and sale of existing securities. It helps existing investors to disinvest and fresh investors to enter the market. It also provides liquidity and marketability to existing securities.
(iii) SEBI: Securities and Exchange Board of India
11 Tech Agro Fertilizers Ltd. has plans to set up a new manufacturing plant for urea fertilizer which has very high market potential due to excess demand in comparison with the supply. Being a capital intensive project, it involves an investment of ₹ 2,500 crore. Major portion of this investment will be in the form of fixed capital and financial institutions prefer to provide funds to such projects because it is in the core sector. As market for urea fertilizer is quite high, it is mostly sold on cash basis.
(i) What is the most desirable debt/equity ratio for the company?
(ii) Give any four bases to determine investment in working capital?
‘Vidyuta Ltd.’ is a company manufacturing textiles. It has a share capital of ₹ 60 lakh. Face value of each share is ₹ 10. The earnings per share in the previous year were ₹ 0.50. For diversification purposes, the company requires an additional capital of ₹ 40 lakh. The company raised funds by issuing 10% debentures. During the current year the company earned profit of ₹ 8 lakh on capital employed. It paid tax @ 40%.
(i) State whether the shareholders have gained or lost in respect of earning per share on diversification. Show your calculations clearly.
(ii) Also, state any four factors that favour the issue of debentures by the company as a part of its capital structure.
Answer. (i) Since the project is capital intensive, proportion of debt should be much higher than equity.
The company should therefore rely on financial institutions for advancing loans which they are readily providing to the companies operating in the core sector.
(ii) The company should determine investment in working capital on the basis of the following requirements:
(a) To purchase and maintain required level of inventory of raw materials.
(b) To pay wages and salaries to employees.
(c) To meet overhead expenses for power, fuel, stationery and other items.
(d) To pay taxes, insurance premium, etc.
(e) To meet marketing and general expenses.
(f) To maintain required level of inventory of finished goods.
(g) To have cash in hand and at bank to meet recurring expenses and meet contingencies.
(i) Calculation of Earnings per share after issue of Debentures:
This clearly shows that the shareholders have lost after the issue of debentures since the Earning per share has decreased from
0.50 to 0.40.
(ii) Factors that favour issue of debentures by the company are:
(a) A good cash flow position makes debt funding more viable.
(b) High Interest Coverage ratio lowers the risk of company failing to meet its interest payment obligations.
(c) High debt service coverage ratio indicates better ability to meet the debt service obligations.
(d) If Return on Investment of the company is higher than the interest rate on debt, its ability to use debt is greater.
(e) Lower the cost of debt, higher is the ability to employ debt.
(f) High tax rate makes debt relatively cheaper.
(g) If the stock market conditions are bearish, a company may be able to easily raise funds through debt.
(h) If the company does not want dilution of control, it will favour debt as a source of finance.
(i) Inclusion of debt in the capital structure makes the capital structure flexible.
(j) If the business risk is lower, its capacity to use debt is higher.
(k) Raising funds through debt involves low floatation costs.
12 State any eight reliefs available to the consumer where the District or State or National Commission is satisfied about the genuineness of the complaint.
Answer. Reliefs available:
(i) To remove the defect in goods or deficiency in service.
(ii) To replace the defective product with a new one, free from any defect.
(iii) To refund the price paid for the product, or the charges paid for the service.
(iv) To pay a reasonable amount of compensation for any loss or injury suffered by the consumer due to the negligence of the opposite party.
(v) To pay punitive damages in appropriate circumstances.
(vi) To discontinue the unfair/ restrictive trade practice and not to repeat it in the future.
(vii) Not to offer hazardous goods for sale.
(viii) To withdraw the hazardous goods from sale.
(ix) To cease manufacture of hazardous goods and to desist from offering hazardous services.
(x) To compensate for any loss or injury suffered by consumer under product liability action and withdraw hazardous products from being offered for sale etc.