Class XII – Business Studies – Paper – 1

Ans. (B) Motivation

Ans. (D) Taking Corrective Action

Ans. (B) Resource allocation

Ans. (C) Manufacturing financial instruments

Ans. (C) The set of controllable marketing tools used by a company

Ans. (B) Planning

Ans. (A) Both A and R are correct, and R is the correct explanation of A.

Ans. (B) By enhancing digital payment systems like mobile wallets and online transactions

Ans. (C) A is correct, but R is incorrect.

Ans. (B) Organizing

Ans. (A) Both statements are true.

Ans. (C) Statement I is true, Statement II is false.

Ans. (A) 2 – 1 – 3 – 4

Ans. (A) a-ii, b-iii, c-iv, d-i

Ans. (C) 1, 3, and 4 only

Ans. (C) Investment decision

Ans. (B) Management objectives include organizational, social, and personal goals.

Ans. (C) Authority and responsibility should be balanced for effective management.

Ans. (C) It deals exclusively with economic factors.

Ans. (C) Implementing the plan is the first step.

Ans. Environment scanning means a process by which organisations monitor their relevant environment to identify its strengths, opportunities and threats affecting their business. By monitoring the environment through environmental scanning, an organisation can consider the impact of the different events, trends, issues and expectations on its strategic management process. This helps it in deciding what opportunities can best be pursued by it and the future course of action.

Ans. Ramawatar failed to achieve the target because he was not given sufficient authority to fulfil his responsibility. He could have achieved the production of target units, if he had the authority to employ 20 more workers. This imbalance made the subordinate ineffective.

While giving responsibility to the subordinate, the manager should see that equal authority is given to ensure that the targets are met.

Ans. (a) Divisional Structure, because this organisation structure is suitable for those organisations which are concerned with manufacturing of different products of distinctive characteristics.

(b) Two limitations of divisional structure are:

(i) There may be conflicts among different divisions over allocation of funds.

(ii) Similar activities may lead to duplication of work and increase in expenditure.

Ans.

Ans. The steps in the selection procedure after the employment interview and before the job offer are:

(a) Reference and background checking: After the employment interview, the next step is to gather more information about the candidates from indirect personal sources such as previous employer, principal of the college or institution. This investigation is based on references supplied by the candidates and is carried with the objective of verifying information and gaining additional information about the applicant.

(b) Selection decision: After the candidate passes the tests and interviews, final decision for selection is made after considering the views of concerned manager.

(c) Medical Examination: The selection process is not complete without the medical or physical test. A candidate who successfully crosses all the hurdles and passes the medical test, is given job offer.

Ans. Job enrichment: It is concerned with designing job in such a way that it includes greater variety of work content, require higher level of knowledge and skill. It aims at allocating more autonomy and responsibility to the employees. It motivates the employees as the job provide meaningful work experience and opportunity for personal growth. Employee participation: It means forming joint management committees, work committees, canteen committees etc. to ensure that the employees have a say on issues related to them. By doing so, the employees feel motivated as employees feel their authority.

Ans. Organising is considered as an important function of management because of following reasons:

(a) Benefit of Specialisation

(i) In the process of Organising, the activities are grouped very carefully into specialised jobs on the basis of similarity.

(ii) As worker performs a specific task regularly.

(iii) Repetitive performance of a particular task allows him/her to gain experience in that area and it ultimately leads to specialisation.

(b) Clarity of Authority and Responsibility Relationships

(i) The establishment of working relationship clarifies lines of communication and specific who is to report to whom.

(ii) The jobs of managers and non-managers are clearly defined and differentiated.

(iii) It helps to remove duplication of work and fixation of responsibility.

(iv) It minimizes conflict and conflict about the respective powers and privileges of managers.

(c) Optimum utilisation of resources

(i) Organising leads to the proper usage of all materials, financial and human resources.

(ii) The proper assignment of jobs avoids overlapping of work and also makes possible the best use of resources.

(iii) Also, it helps in minimizing the wastage of resources and effects.

(d) Effective management

(i) Organising provides a clear description of jobs and related duties. This helps to avoid confusion and duplication.

(ii) Clarity in working relationship enables proper execution of work. This brings effectiveness in administration.

(e) Adaptation of change.

(i) The process of Organising allows a business enterprise to adapt itself according to changing business environment.

(ii) It allows the organisation structure to be suitably modified and the revision of interrelationships amongst the members of the organisation.

(f) Development of Personnels

(i) Organising stimulates creativity amongst the managers.

(ii) Effective delegation allows the manager reduce their workload by assigning routine jobs to their subordinates.

(iii) The reduction in work load by delegation gives them the time to explore areas for growth and the opportunity to innovate. This strengthens the company’s competitive position.

(g) Expansion and Growth

(i) Organising helps in the growth and diversification of enterprise by enabling it to deviate from existing norms and taking up new challenges.

Ans. The importance of planning function of management is as follows:

(a) Makes objectives clear and specific: The planning exercise makes the goals clear and specific because it begins with the determination of objectives.

(b) Makes activities meaningful/Provides directions: Due to planning, employees and managers know how their activities relate to organisational goals. Everyone is conscious of his own contribution towards achievement of organisational goals. In this way, planning makes activities meaningful.

(c) Reduces the risks of uncertainty: Planning helps to reduce the risks associated with uncertainties. In the process of planning, attempt is made to look into the future and predict it. Planning helps to identify potential threats of future and help to develop contingency plan to deal with them.

(d) Facilitates decision-making: Planning ensures foreseeing future and choosing the best alternative amongst the various alternatives. The manager evaluates the positive and negative aspect of each alternative and choose the one with least negative consequence, having feasibility and profitability. Through this, a direction is provided to all the activities of the organisation which gives the basic guidelines to the manager for decision making.

(e) Promotes innovative ideas: Planning assists managers in developing new ideas that provide: a platform for building concrete plans. Such innovative ideas provide a direction towards the growth and prosperity of the business.

Ans. ‘Bending the customer according to the product’ is selling concept and ‘Developing the product according to the customer needs’ is marketing concept. The difference between the two is as follows:

Ans. The dimensions of Business environment discussed in the given paragraph are:

(a) Legal environment: Legal environment includes various legislations passed by the Government, administrative orders issued by government authorities, court judgements, as well as the decisions rendered by various commissions and agencies at every level of government Center, State, Local. Non-compliance of laws can land the business enterprises into legal problems.

(b) Political environment: Political environment includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business. Attitudes of the government officials may have either positive or negative impact upon business.

Ans. (a) The external source of recruitment is opted for. Its two benefits are:

(i) It brings competitive spirit among employees

(ii) It helps in bringing fresh talent in the organisation.

(b) The two external sources of recruitment are:

(i) Direct recruitment: A notice is placed on the notice board of the enterprise specifying the details of the jobs available. It is followed usually for casual vacancies of unskilled or semi-skilled jobs. Job seekers assemble outside the premises of the organisation on the specified date and selection is done on the spot.

(ii) Casual callers: Unsolicited applicants both at the factory gate or through walk- in interviews constitute an important source of personnel. The qualification of unsolicited applicants will depend on economic considerations, the organisation’s image and the perceived type of jobs that might be available.

(iii) Employment exchange: It was designed both to help the job seekers to find suitable employment and to help the employers find suitable workers. All states provide employment services. The records of employment exchange are often not up to date and many candidates referred by them may not be found suitable.

Ans. Management is considered as a science because it has an organised body of knowledge which contains certain universal truth. It is called an art because managing requires application of certain skills which are the personal possession of a manager. A manager should be an applied scientist. He should possess not only specialised knowledge of management but also the skills to put his knowledge into practice. Management has features of both art and science. The managers work on the basis of principle of management but its application is an art which a manager gains with experience and practice. The art of management cannot be learnt alone from books but needs practice and creative application. Management is an ‘Inexact Science’ because the outcomes of these experiments cannot be accurately predicted. Management deals with human beings and human behaviour and therefore its application cannot be accurately predicated.

Thus, management is a science as well as art, complementing both of them.

Ans. The importance of management may be outlined as follows:

(a) Helps in achieving group goals: It assembles and organises available resources for the accomplishment of the goals of an enterprise. It adds effectiveness to the efforts of a group of persons organised to achieve given objectives.

(b) Increases efficiency/Reduces costs: To secure efficiency of operations, management is concerned with reducing cost of production and increasing the output. Through better planning, organising and control, and the use of various cost reduction techniques, efficient management leads to reduced cost and increased output.

(c) Helps in achieving personal objectives: A manager motivates and leads his team in such a manner that individual members are able to achieve personal goals while contributing to the overall organisational objective.

(d) Helps in the development of society: It helps in providing good quality goods and services, creates employment opportunities, adopts new technology for the greater good of the people and helps in the development of society.

(e) Creates a dynamic organisation: Management helps people to adapt to the constantly changing environment so that the organisation is able to maintain its competitive edge.

Ans. (a) Scalar chain: Scalar chain is the formal line of authority and communication from highest to the lowest ranks. Scalar Chain shows the path of flow of authority and communication and in normal course of formal organisation, it should not be violated.

For example, the head. A, has two lines of authority under him. If E wants to communicate with J the communication will flow through the route E-D-C-B-A-G-H-I-J.

However, in case of emergency, E can directly contact J through a Gang Plank. However, they need to inform their superiors about it later on. Gang Plank is a shorter route provided so that communication is not delayed.

(b) Discipline: Discipline means obedience to organisational rules and employment agreement. Fayol considers it necessary for the working of an organisation and advocates that good superiors at all levels, clear and fair agreements and judicious application of penalties will enable discipline in the organisation. Thus, the subordinates must honour their commitment towards the organisation by working efficiently and effectively. Similarly, the management should also keep their promises and fulfil them by giving proper increment, promotion and rewards to its employees.

For example, to revive a company out of loss, its workers agreed to work for extra hours without any additional payment, and the management promised to increase the wages of the workers on successful accomplishment of the targets set, then discipline here means, both the workers and the management should honour their commitments.

Ans. The factors to be considered while determining the requirements of working capital of the company are:

(a) Nature of business: The basic nature of a business influences the amount of working capital required. A trading concern requires less working capital as there is no processing, i.e., sales are generally made immediately upon receipt of materials.

(b) Scale of operations: The firms, which operate at large-scale require more working capital as their inventory level, debtors, etc. are generally high. However, firms operating at small-scale need less working capital due to low level of activity.

(c) Production cycle: In case of long production cycle, raw material alongwith labour and overheads gets tied up for a long period, whereas firms with shorter production cycle can manage with less working capital.

(d) Credit allowed to customers: Credit policy of the company determines the average time period needed to collect the sale proceeds. It depends on competition level and credit worthiness of customers. A company following liberal credit policy needs more working capital due to more debtors. However, in case of a strict policy, less working capital is needed.

Ans. The factors affecting the requirement of fixed capital are:

(a) Scale of operations: A large organisation operating at a higher scale needs bigger plant, more space etc. so, it requires higher investment in fixed assets as compared to smaller organisations operating on a smaller scale.

(b) Choice of technique: A capital intensive organisation needs to invest more in plant and machinery. Labour intensive organisations rely more on manual labour. So, the fixed capital requirement will be more in case of a capital intensive organisation than a labour intensive organisation.

(c) Technology upgradation: An organisation, whose assets are prone to obsolescence, requires more fixed capital as there is a frequent need of upgrading the technology and changing of fixed assets. Thus, the fixed assets requirement is more in this type of organisation.

(d) Financing alternatives: A developed financial market may provide leasing facility to an organisation. A firm can take an asset on lease instead of outright purchase. In such a case, it has to only pay rental for it and by doing so the need of huge sum of funds required to purchase the asset can be avoided. This reduces the fixed capital requirement.

Ans. Pricing affects the revenue and profits of a firm. The factors which help in determining price are:

(a) Product cost: One of the most important factors affecting its price is the cost of the product or service. This includes the cost of producing, selling and distributing. The cost set the minimum price of floor price at which the product may be sold. There are broadly three types of costs fixed costs, variable costs and semi-variable costs.

(b) Utility and demand: The utility provided by the product and the intensity of the demand of the buyers sets the upper limit of the product, which a buyer would be prepared to pay. The buyer may be ready to pay upto the point where the utility from the product is equal to the sacrifice made in terms of the price paid.

(c) Extent of competition in the market: The prices will can be set higher if there is lower degree of competition while under higher degrees of competition the prices will tend to set at lowest level.

(d) Government and legal regulations: In order to protect the interest of public against unfair practices in the field of price fixing, government can intervene and regulate the price of commodities. Government can declare a product as essential product and regulate its price.

(e) Marketing methods used: Price fixation process is also affected by other elements of marketing such as quality of salesman employed, product differentiation, credit facility etc.

Ans. The various rights provided by the Consumer Protection Act, 2019 are:

(a) Right to safety: According to this right, a consumer has the right to be protected against goods and services which are hazardous to life and health. For example, electrical goods which are manufactured with substandard products or do not conform to the safety norms might cause serious injury. Thus, consumers are educated that they should use electrical goods which have ISI mark as this would be an assurance for such products in meeting quality specifications.

(b) Right to be informed: According to this right, a consumer has the right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use etc.

(c) Right to be assured: According to this right, consumer has freedom to choose from a variety of products at competitive prices. This implies that the marketers should offer a wide variety of products in terms of quality, brand, prices, size etc. and allow the consumer to make a choice from amongst these.

(d) Right to be heard: According to this right, consumer has the right to file a complaint and to be heard in case of dissatisfaction with a good or a service. It is because of this reason that many enlightened business firms have set up their own consumer service and grievance cells. Many consumer organisations are also working towards this direction and helping consumers in redressing their grievances.

(e) Right to seck redressal: According to this right, a consumer has the right to get relief in case the product or service falls short of his expectations. The Consumer Protection Act provides a number of reliefs to the consumers including replacement of the product, removal of defect in the product, compensation paid for any loss or injury suffered by the consumer etc.

(f) Right to consumer education: According to this right, a consumer has the right to acquire knowledge and to be well informed. He should be aware about his rights and the reliefs available to him in case of a product or service falling short of his expectations. Many consumer organisations and businesses are taking an active part in educating consumers in this respect.

Ans. The process of controlling includes the following steps:

(a) Setting performance standards: Standards are the benchmarks which every organisation strives to achieve. These should be set in quantitative terms to make their comparison with actual performance easier.

(b) Measurement of actual performance: The actual performance is measured in an objective and reliable manner. The superior prepares the performance report of an employee. This can be done by personal observation, sample checking, accounting ratios etc. As far as possible, performance should be measured in the same units in which standards are set.

(c) Comparison of actual performance with standards: Comparison of actual performance with standard performance will reveal the deviation between the two.

(d) Analysing deviations: Some amount of deviation can be expected in all activities, therefore, it is important to determine the acceptable range of deviations. Two important concepts, worth discussing here are:

(i) Critical point control: The key result areas are those areas which are critical to the success of an organisation. The deviations in these areas should be dealt with urgently. For example, an increase of 7% in the production cost is more critical than an increase of 17% in the courier cost.

(ii) Management by exception: An effort to control everything may end up in controlling nothing. Only significant deviations that go beyond the permissible limits should be brought to the notice of the management. For example, if the output standards of a factory states defect upto 1% are acceptable, then if the percentage increase in defects is much more than that only, then it should be brought to the notice of the management. The deviations and their causes are then analysed. The causes can be unrealistic standards, defective process, inadequacy of resources and change in environmental factors etc.(e) Taking corrective action: Corrective action might involve revising standards, training of employees, employing more workers, purchasing new machinery, etc. if the deviations go beyond the acceptable limits.