CBSE Class 12 Business Studies Sample Paper Set A

1. Rishabh joined an entertainment company Avtaar, as a creative head. As a manager looking after the creative unit of the company, one of the functions he has to perform is the process of organizing. Which step of the process will he need to perform after identifying and dividing the work that has to be done in accordance with previously determined plans?
a) Identification and division of work
b) Departmentalisation
c) Assignment of Duties
d) Establishing Reporting Relationships
Answer: B

2. Which characteristic of the business environment is highlighted when changes are taking place too frequently and it becomes difficult to predict the future?
a) Uncertainty
b) Complexity
c) Inter-relatedness
d) Relativity
Answer: A

3. Aarohan Ltd. is a company manufacturing automobiles where division of work into key areas includes production, purchase, marketing, accounts and personnel. Which of the following is a disadvantage of the organization structure of Aarohan Ltd.?
a) It may lead to increase in cost
b) Managers may gain power and assert independence and ignore organization interests.
c) It ensures that different functions get due attention.
d) Heads do not get training for top management positions.
Answer: D

4. 

Identify the dimensions of the business environment illustrated by the picture given above in which Sapna who has joined the workforce recently is working on an accounting software.
a) Technological and social.
b) Technological and political
c) Political and economic
d) Social and legal
Answer: A

5. Identify the reason which makes management important in the light of the fact that it is generally seen that individuals in an organization resist change, as a change often means moving from a familiar, secure environment into a newer and a more challenging one.
a) Management helps in achieving group goals.
b) Management creates a dynamic organization
c) Management increases efficiency
d) Management helps in the development of society.
Answer: B

6. The government of India made an announcement regarding Demonetization of the Indian economy on November 8, 2016 with profound implications for it. The process which put restrictions on convertibility of domestic money and bank deposits was meant to create a less-cash economy. One argument against the cash-lite economy is that:
a) Internet connectivity is a prerequisite
b) More people will be introduced into the formal economy.
c) Financial saving will increase
d) Tax evasion will be reduced
Answer: A

7. Airlines will be able to offer the benefit of lower pricing to customers on sectors/routes due to the decision of the civil aviation ministry to remove price caps from August 31, 2022. This can help an airline to do better performance if they take early decisions regarding future courses of action after understanding and doing analysis. Which importance of business environment and its understanding by managers is not highlighted above:
a) It helps in improving performance
b) It helps in assisting in planning and policy formulation
c) It helps in tapping useful resources
d) It enables a firm to identify opportunities and get first mover advantage.
Answer: C

8. Alo a mobility platform is in the process of laying off 400-500 employees in a move aimed at driving cost efficiency. Which objective of management will the firm not be able to achieve by carrying out this process.
a) Efficiency
b) Social
c) Profit
d) Survival
Answer: B

9. Radha started a home cooked food delivery Dabba service. Her mother, who is a great cook, decided to help her. They relied on friends and family for orders and then on word of mouth. As a step in the process of ensuring that activities are performed as per her plan of supplying healthy, good quality, reasonable food and earning profit, she decided to keep both qualitative and quantitative benchmarks towards which she would strive to work. A function of management is being discussed above. An important characteristic of this function of management is :
a. It is the first function of management
b. It is the Last function of management
c. It is both forward looking and backward looking.
d. It is required only in business organizations.
Answer: C

10. Raman and Vasudev were two employees who were embezzling an import-export company in Varanasi where they were working. The finance manager of the company Sampat Singh became suspicious of the two employees when he realized that their activities were not being performed as per the plans. He installed a software program that could secretly log every single stroke of the suspects’ computer keys and send an encrypted email report to the Cyber police. The police were able to catch the two dishonest employees red handed and arrest them. Identify the function of management being discussed above.
a. Staffing
b. Coordination
c. Controlling
d. Organizing
Answer: C

11. Name the outcome of the function of management which includes designing of roles to be filled by suitably skilled people and defining the inter relationship between roles so that ambiguity in performance of duties can be eliminated.
a) Organization structure
b) Delegation of authority
c) Decentralization
d) controlling
Answer: A

12. Statement-I Transportation helps in creating time utility and warehousing helps in creating place utility
Statement-II The process of classification of products into different groups on the basis of their important characteristics is known as standardization.
Choose the correct option from the options given below:
a) Statement I is true and II is false
b) Statement II is true and I is false
c) Both the statements are true
d) Both the statements are false
Answer: D

13. Match the various terms of Financial Markets Column - I with their respective Statements in Column-II
Column - I                 Column - II
a Financial market      i It is also known as the Stock market
b Primary market        ii It is a market for creation and exchange of financial assets.
c Secondary market   iii It is also known as New issue market
a) (ii), (iii), (i)
b) (i), (iii), (ii)
c) (iii), (ii), (i)
d) (i), (ii), (iii)
Answer: A

14. ________________ is a number assigned to each transaction by the stock exchange and is printed on the contract note.
a) Client code number
b) Unique order code
c) Permanent account number
d) Depository participant number
Answer: B

15. One of the important decision areas under the marketing function of …………………….. is managing inventory.
a) Branding
b) Pricing
c) Promotion
d) Physical distribution.
Answer: D

16. Which of the following statements is incorrect?
a) Providing liquidity to securities is one of the functions of stock exchange
b) Process of holding shares in electronic form is known as Dematerialization
c) Securities Exchange Board of India performs the regulatory function of controlling insider trading and imposing penalties for such practices.
d) Capital market consists of Commercial banks, Development banks and stock exchanges
Answer: C

17. One of the following is considered to be an extension of the marketing concept, which apart from customer satisfaction pays attention to ethical and ecological aspects of marketing. Identify the concept.
a) Selling concept
b) Product concept
c) Production concept
d) Societal Marketing concept
Answer: D

18. While the product costs set the lower limits of the price for a product, the upper limit of price which a buyer would be prepared to pay is decided by:
a) Utility and demand of the product
b) The marketing manager of the firm
c) The Government
d) The competitors of the firm
Answer: A

19. Which of the following statements about Advertising is incorrect?
a) It is a personal form of communication
b) It is a paid form of communication
c) It is a mass selling technique.
d) It is inflexible as the message can’t be adjusted to the needs of the buyer.
Answer: A

20. Arrange the steps involved in trading procedure at the stock exchange in correct sequence :
i) Settlement of order
ii) Opening of Demat Account
iii) Placing of order
iv) Execution of order
a) (ii) ; (iv);( iii);(i)
b) (ii) ;(i) ;(iii);(ii)
c) (iii);(ii);( ii);(i)
d) (ii);(iii);(iv);(i)
Answer: D

21. Top management plans for the entire organization. According to these plans the organizational structure is developed and staffed. In order to ensure that these plans are executed according to plans, directing is required. Any discrepancies between actual and realized activities are then taken care of at the stage of controlling. Name and explain the process highlighted above which started at the planning stage itself and is implicit and inherent in all the functions of management in an organization.
Answer: Coordination
The process by which a manager synchronizes the activities of different departments is known as coordination.
Coordination is the force that binds all the other functions of management. It is the common thread that runs through all activities. It is implicit and inherent in all functions of an organization.

22. Mrs. Ahilya Pasi is the Principal of a prestigious school in New Delhi. The school has a vacancy of a headmistress/headmaster of the junior wing of the school. The senior teachers of the school have the opinion that only internal candidates should be considered for this post. However, Mrs. Pasi and the management would like to invite applications from external sources too. Briefly explain any three justifications the management can provide to convince the staff for inviting applications of external candidates for the vacant post.
Answer: 1. Qualified personnel: By using external sources of recruitment, the management can attract qualified and trained people to apply for vacant jobs in the organization.
2. Wider choice: When vacancies are advertised wisely, a large number of applicants from outside the organization can apply. The management has a wider choice while selecting the people for employment.
3. Fresh Talent: The present employees may be insufficient or they may not fulfill the specifications of the jobs to be filled. External recruitment provides wider choice and brings new blood in the organization.
4. Competitive spirit: If a company taps external sources, the existing sources, the existing staff will have to compete with the outsiders.
They will work harder to show better performance.

23. Explain “Critical point control” with respect to Analyzing deviations, a step in the process of controlling. Give a suitable example.
Answer: Critical point control: It is neither economical nor easy to keep a check on each and every activity in an organization.
Control should therefore focus on key result areas which are critical to the success of an organization.
These KRAs are set as the critical points. If anything goes wrong at the critical points, the entire organization suffers.
For instance, in a manufacturing organization, an increase of 5% in the labour cost may be more troublesome than a 15% increase in postal charges.

OR

Explain “Management by exception” with respect to Analyzing deviations, a step in the process of controlling. Give a suitable example.
Answer: Management by Exception: Management by exception, which is often referred to as control 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 the management.
For instance, if the plans lay down 2% increase in labour cost as an acceptable range of deviation in a manufacturing organization, only an increase in labour cost beyond 2% should be brought to the notice of the management. However, in case of major deviation from the standard (say, 5%), the matter has to receive immediate action of management on a priority basis.

24. State any three objectives of the Securities Exchange Board of India.
Answer: 1. To regulate stock exchanges and the securities industry to promote their orderly functioning
2. To protect the rights and interests of investors, particularly individual investors and to guide and educate them.
3. To prevent trading malpractices and achieve a balance between selfregulation by the securities industry and its statutory regulation.
4. To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers etc., with a view to making them competitive and professional.

OR

State any three functions performed by the stock exchange.
Answer: (i) Providing liquidity and marketability to existing securities.
(ii) Pricing of securities on the stock exchange is determined by the forces of demand and supply.
(iii) Safety of transaction is ensured as membership of a stock exchange is well regulated and its dealings are well defined.
(iv) Contributes to economic growth through the process of disinvestment and reinvestment.
(v) Spreading of equity cult by ensuring wider ownership by way of regulating new issues.
(vi) Providing scope for speculation by ensuring speculative activity within the provisions of law for it to take place in a restricted and controlled manner.

25. Enumerate any four benefits of the process by which the aptitudes, skills and abilities of employees to perform specific jobs are increased.
Answer: (i) Training is a systematic learning,
Always better than hit and trial methods which lead to wastage of efforts and money?
(ii) It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
(iii) Training equips the future manager who can take over in case of emergency.
(iv)Training increases employee morale and reduces absenteeism and employee turnover.
(v) It helps in obtaining an effective response to a fast changing environment – technological and economic.

OR

Name the mechanism that attempts to measure certain characteristics of individuals in the process of identifying and choosing the best person out of the number of prospective candidates for the job. Enumerate any three of its types.
Answer: a. Intelligence test is one of the important psychological tests used to measure the level of intelligence quotient of an individual and is an indicator of a person’s ability or the ability to make decisions and judgments.
b. Aptitude test is a measure of an individual's potential for learning new skills and indicates the person’s capacity to develop.
c. Personality tests provide clues to a person’s emotions, her reactions, maturity, and value system and probe the overall personality.
d. Trade tests measure the existing skills of the individual, level of knowledge and proficiency in the area of professions or technical training.
e. Interest tests are used to know the pattern of interests or involvement of a person.

26. State any four barriers to communication which are concerned with problems and obstructions in the process of encoding and decoding the message into words or impressions.
Answer: 1. Sometimes intended meaning may not be conveyed by a manager to his subordinates due to badly expressed messages which may be on account of inadequate vocabulary, usage of wrong works, omission of needed works, etc.
2. A word may have different meanings and the receiver has to perceive one such meaning for the word used by the communicator.
3. If the translator is not proficient with both the languages, mistakes may creep in causing different meanings to communication.
4. Some communications may have certain assumptions which are subject to different interpretations.
5. It is usually found that specialists use technical jargon while explaining to persons who are not specialists in the concerned field and therefore they may not understand the actual meaning of many words.
6. If there is no match between what is said and what is expressed in body movements, communications may be wrongly perceived.

OR

State any four barriers to communication which are related to authority relationships, rules and regulations of the company.
Answer: 1. If organizational policy either explicit or implicit is not supportive to free flow of communication it may hamper effectiveness of communications.
2. Rigid rules and regulations, cumbersome procedures may be a hurdle to communication, as communications through prescribed channels may result in delays.
3. Status of superior may create psychological distance between him and his subordinates.
4. Complexity in the organization caused by the number of managerial levels may delay and distort the communication as the number of filtering points is more.
5. If facilities like frequent meetings, suggestion box, and complaint box, social and cultural gathering, transparency in operations, etc, for smooth, clear and timely communications are not provided, communications may be hampered.

27. In Saarthak Steel several initiatives have been taken to further improve the motivation levels of employees through designing jobs that include greater variety of work content, providing certain stability about future income and work, providing fringe benefits like housing, medical aid, etc., allotment of shares in line with various incentives. Identify and briefly explain the incentives being given by the organization to the employees.
Answer: 1. 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 opportunity for personal growth and a meaningful work experience.
2. Job security: Employees want their jobs to be secure. They want certain stability about future income and work so that they do not feel worried about these aspects and work with greater zeal.
3. Perquisites: In many companies perquisites and fringe benefits are offered such as car allowance, housing, medical aid and education to the children, etc., over and above the salary.
4. Co-partnership/stock option: Under these incentive schemes, employees are offered company shares at a set price which is lower than market price. Sometimes, management may allot shares in line of various incentives payable in cash.

28. State any four factors affecting the financial decision that is concerned with raising of finance using shareholders’ funds and borrowed funds.
Answer: 1. Size of the projected Cash flows must be considered before borrowing.
2. Interest Coverage Ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation.
3. Debt Service Coverage Ratio takes care of the deficiencies referred to in the interest coverage ratio.
4. More debt can be used if debt can be raised at a lower rate
5. A higher Tax Rate makes debt relatively cheaper and increases its attraction vis-a-vis equity.
6. Process of raising resources also involves some cost which may affect the choice between debt and equity and hence capital structure.
7. If a firm’s business risk is lower, its capacity to use debt is higher and vice versa.
8. To maintain flexibility the firm must maintain some borrowing power to take care of unforeseen circumstances.
9. Capital Structure of other companies is a useful guideline in the capital structure planning.
10. Stock Market Conditions often affect the choice between debt and equity.
11. Every company operates within a regulatory framework provided by the law.
12. Control as a factor also influences the choice between debt and equity especially in companies in which the current holding of management is on a lower side.
13. If the ROI of the company is higher, it can choose to use trading on equity to increase its EPS.
14. When a company increases debt, the financial risk faced by the equity shareholders increases consequently their desired rate of return may increase.

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