Class XII – Business Studies – Paper – 2

Ans. (B) Financing decision

Ans. (B) By assisting in issuing long-term securities in the capital market and providing short-term instruments in the money market

Ans. (C) Market research

Ans. (B) Translating strategic plans into actionable tasks

Ans. (C) Peaceful cooperation between management and workers

Ans. (B) By adhering to drug safety regulations and obtaining necessary licenses

Ans. (C) A is false, but R is true.

Ans. (D) All of the above

Ans. (D) Both A and R are incorrect.

Ans. (B) Setting SMART goals

Ans. (A) Both statements are true.

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

Ans. (A) 1, 2, 3, 4

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

Ans. (B) 1, 2, and 3 only

Ans. (B) Controlling

Ans. (B) It includes factors like GDP, inflation, and exchange rates.

Ans. (B) Strategies outline how to achieve long-term objectives.

Ans. (D) Motivating employees

Ans. (B) They are generally less expensive than internal recruitment.

Ans. (a) Controlling

(b) Features of Controlling:

(i) Pervasive function: Controlling is as much required in an educational institution, military, hospital, and a club as in any business organisation. Managers at all levels of management-top, middle and lower-need to perform controlling function.

(ii) Goal-oriented function: Controlling ensures that an organisation’s resources are being used effectively and efficiently for the achievement of predetermined goals.

Ans. Procter and Gamble is following the Societal marketing concept.

This concept holds that the task of any organisation is to identify the needs and wants of the target market and deliver the desired satisfaction in an effective and efficient manner so that the long-term well-being of the consumers and the society is taken care of. It is the extension of the marketing concept as supplemented by the concern for the long-term welfare of the society. Apart from the customer satisfaction, it pays attention to the social, ethical and ecological aspects of marketing. There are large number of such issues that need to be attended in the long-term interest of the firm.

Ans. No, Romila cannot be called a consumer. According to Consumer Protection Act 2019, a consumer is a person who buys any goods or avails services for a consideration, which has been paid or promised, or partly paid and partly promised, or under any scheme of deferred payment. It includes any user of such goods or beneficiary of services if such use is made with the approval of the buyer. It applies to both offline and online transactions through electronic means or by teleshopping or direct selling or multilevel marketing. However, any person who obtains goods or avails services for resale or commercial purpose is not treated as a consumer and is outside the scope of Consumer Protection Act 2019.

Since Romila purchased the goods for resale purposes, she cannot be called a consumer.

Ans. Following are the remedies that can be made available:

(a) To remove the defect in goods or deficiency in service.

(b) To replace the defective product with a new one, free from any defect.

(c) To refund the price paid for the product, or the charges paid for the service.

(d) To discontinue the unfair/restrictive trade practice and not to repeat it in the future.

(e) To pay punitive damages in appropriate circumstances.

(f) Not to offer hazardous goods for sale.

Ans. Authority: Authority refers to the right of an individual to command his subordinates and to take action within the scope of his position. It also refers to the right to take decisions inherent in a managerial position. It flows from top to bottom. As we go higher up in the management hierarchy, the scope of authority increases.

Responsibility: Responsibility is the obligation of a subordinate to properly perform the assigned duty. It arises from a superior – subordinate relationship because the subordinate is bound to perform the duty assigned to him by his superior. It flows upwards.

Accountability: It implies being answerable for the final outcome. Once authority has been delegated and responsibility accepted, one cannot deny accountability. It cannot be delegated and flows upwards, i.e., a subordinate will be accountable to a superior for satisfactory performance of work.

Ans. Following are the points of importance of decentralisation:

Quick decision making: Since decisions are taken at levels which are nearest to the points of action and there is no requirement for approval from many levels, the process is much faster.

Relief to top management: Decentralisation diminishes the amount of direct supervision exercised by a superior over the activities of a subordinate because they are given the freedom to act and decide within the limits set by the superior. Develops managerial talent for the future: Decentralisation gives them a chance to prove their abilities and creates a reservoir of qualified manpower who can be considered to fill up more challenging positions through promotions.

Ans. (a) Democratic or Participative leader

(b) A democratic leader develops action plans and makes decisions in consultation with his subordinates. He will encourage them to participate in decision-making. Such leaders recognise that people perform best if they have set their own objectives. They also need to respect the other’s opinion and support subordinates to perform their duties and accomplish organisational objectives. They exercise more control by using forces within the group.

Ans. Financial planning is the preparation of a financial blueprint of an organisation’s future operations. The objective of financial planning is to ensure that enough funds are available at right time. Financial planning strives to achieve the following twin objectives.

(a) To ensure availability of funds whenever required.

(b) To see that the firm does not raise resources unnecessarily.

Financial planning includes both short-term as well as long-term planning. It focuses on capital expenditure programmes. Short-term planning covers short-term financial plan called budget.

The importance of Financial Planning for an organization is as follows:

(i) It helps in forecasting what may happen in future under different business situations. By doing so, it helps the firms to face the eventual situation in a better way.

(ii) Detailed plans of action prepared under financial planning reduce waste, duplication of efforts, and gaps in planning.

(iii) It provides a link between investment and financing decisions on a continuous basis.

(iv) It tries to link the present with the future.

Ans. Factors affecting the dividend decision of a firm

(a) Amount of Earnings: Dividends are paid out of current and past earning. Therefore, earnings is a major determinant of the decision about dividend. Higher the earnings, more will be the amount of dividend.

(b) Stability Earnings: Other things remaining the same, a company having stable earning is in a better position to declare higher dividends. As against this, a company having unstable earnings is likely to pay smaller dividend.

(c) Growth Opportunities: Companies having good growth opportunities retain more money out of their earnings so as to finance the required investment. The dividend in growth companies is, therefore, smaller, than that in the non- growth companies.

(d) Cash Flow Position: The payment of dividend involves an outflow of cash. A company may be earning profit but may be short on cash. Availability of enough cash in the company is necessary for declaration of dividend.

Ans. Following are the features of marketing:

(a) Needs and Wants: The hotel and lodging industry across the world are focused on meeting leisurely needs of their guests rather than basic ones as they are well aware that majority of their guests avails their facilities to refresh themselves physically and mentally.’

(b) Creating a market offer: In doing so the hotels offers a wide range of facilities that includes gourmet dining, luxury spas, full-service health clubs with personal trainers, golf courses, tennis centers, cultural activities and children’s day camps.

(c) Customer Value: Therefore, before finalizing their bookings, the customer always compares the sacrifice they make in terms of the amount charged by the hotel with the facilities offered by it.

(d) Exchange Mechanism: While this sector can take the vacation of an individual to a totally different level, but it comes at a price.

Ans. Functional Foremanship is the technique suggested by Production Manager.

Taylor had identified a list of qualities of a good foreman/supervisor and found that no single person could fit them all, so he proposed eight specialists at the shop floor level. Each specialist is to be assigned work according to her/his qualities. In doing so, he advocated separation of planning and execution functions.

Under the factory manager there was a planning in- charge and a production in-charge. Under planning in-charge four personnel namely instruction card clerk, route clerk, time and cost clerk and a disciplinarian worked. These four personnel would draft instructions for the workers, specify the route of production, prepare time and cost sheet and ensure discipline respectively

Under Production in-charge, personnel who would work were speed boss, gang boss, repair boss, and inspector. These respectively were responsible for timely and accurate completion of job, keeping machines and tools etc., ready for operation by workers, ensure proper working condition of machines and tools and check the quality of work. Each worker will have to take orders from these eight foremen in the related process or function of production. This technique is based upon the principle of Division of work but violates the Unity of Command as given by Fayol.

Ans. (a) Planning

(b) Steps of Planning Process being performed:

(i) Setting Objectives: Objectives refer to the goals to be achieved in future. They may be set for the entire organisation and each department or unit within the organisation. Objectives should be stated clearly and should be realistic and time bound. Here the company aims to expand its area of operation overseas in the next 2 years.

(ii) Evaluating alternative courses: It is concerned with weighing the pros and cons of each alternative. The positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved. Here the lines stating considering the stock market conditions and the recession in the economy, the team knew that it would be difficult to raise funds through equity, relates to evaluating the alternatives.

(iii) Selecting an alternative: This is the real point of decision making. The best plan has to be adopted and implemented. The ideal plan, of course, would be the most feasible, profitable and with least negative consequences. Here the decision to fulfill their financial requirements through the borrowings from Financial Institutions and issuing of Debentures, is related to selecting the best alternative.

Ans. Packaging and Labelling are considered as the pillars of Marketing.

(a) Packaging: It refers to the act of designing and producing the container or wrapper of a product. Plays a very important role in the marketing success or failure of many products, particularly the consumer non-durable products. There can be three different levels of packaging:

Primary Package: It refers to the product’s immediate container.

Secondary Packaging: It refers to additional layers of protection that are kept till the product is ready for use.

Transportation Packaging: It refers to further packaging components necessary for storage, identification or transportation.

(b) Labelling: It refers to the act of putting the label on the products. The label may vary from a simple tag attached to the product (such as in case of local unbranded products like sugar, wheat, pulses, etc.) indicating some information about the quality or price, to complex graphics that are part of the package, like the ones on branded products. Labels are useful in providing detailed information about the product, its contents, method of use, etc.

Ans. (a) Sales Promotion is the tool of promotion used. (b) Other tools are:

(i) Advertisement: It is an impersonal form of communication, which is paid for by the marketers (sponsors) to promote some goods or service. The most common modes of advertising are ‘newspapers”, ‘magazines’, ‘television’, and ‘radio’.

(ii) Personal Selling: Personal selling involves oral presentation of message in the form of conversation with one or more prospective customers for the purpose of making sales. It is a personal form of communication. Companies appoint salespersons to contact prospective buyers and create awareness about the product and develop product preferences with the aim of making sale.

(iii) Public Relation: It involve a variety of programmes designed to promote or protect a company’s image and its individual products in the eyes of the public. The main task under this is to disseminate information and build goodwill about the business. Concrete steps to be taken to monitor the attitude of the general public and generate positive publicity come under it.

Ans. (a) Divisional Structure

(b) Organizing

(c) Steps of Organizing

(i) Identification and division of work: The first step in the process of organising involves identifying and dividing the work that has to be done in accordance with previously determined plans. The work is divided into manageable activities.

(ii) Departmentalisation: Once work has been divided into small and manageable activities then those activities which are similar in nature are grouped together to facilitate specialisation. Departments can be created using several criteria as a basis. Examples of some of the most popularly used basis are territory and products.

(iii) Assignment of duties: It is necessary to define the work of different job positions and accordingly allocate work to various employees. Once departments have been formed, each of them is placed under the charge of an individual. Jobs are then allocated to the members of each department in accordance to their skills and competencies.

(iv) Establishing authority and reporting relationships: Merely allocating work is not enough. Each individual should also know who he has to take orders from and to whom he is accountable. The establishment of such clear relationships helps to create a hierarchical structure and helps in coordination amongst various departments.

Ans. (a) Debt is a cheaper source of finance as the lender earns an assured return and repayment of capital due to which lender’s risk is less as compared to equity, thereby making it a cheaper source. Also, the tax deductibility feature of debt also makes it cheaper as compared to equity.

(b) The risk that is associated with the use of debt in financing the business is Financial Risk.

It is the risk of default on repayment of the Principal amount or the regular payment of interest.

(c) When the Cost of Debt is more than that of the Return on Investment, the EPS of the company falls with increased use of debt.

(d) Wealth Maximization: It means maximisation of the market value of equity shares. All financial decisions aim at ensuring that each decision is efficient and adds some value to the shareholders in terms of increase in the market value of their shares. Those financial decisions are taken which will ultimately prove gainful from the point of view of the shareholders. Hence the excessive use of equity (when the cost of debt is lower than the return on investment) does not prove beneficial for shareholders as their EPS will be high when optimal amount of debt is combined with equity.

Ans. Staffing is concerned with filling and keeping filled the positions in the organisational structure. Importance of staffing:

(a) Helps in discovering and obtaining competent personnel for various jobs: Through the process of workload analysis and workforce analysis. the firms get to know whether they are understaffed, overstaffed or optimally staffed. Recruitment and Selection helps to obtain the right personnel.

(b) Makes for higher performance: Through Placement which involves putting right person on the right job, staffing ensures that the performance of the employees is most efficient.

(c) Ensures survival and growth of the enterprise: Staffing plays an important role to ensure the continuous survival of the organization, through the succession planning for managers.

(d) Optimum utilisation of the human resources: By avoiding overmanning, it prevents under -utilisation of personnel and high labour costs. At the same time it avoids disruption of work by indicating in advance the shortages of personnel.

(e) Improves job satisfaction and morale of employees: Staffing involves finding the most suitable source of recruitment, selected the best candidate through objective assessment, continued growth through training and development and ensuring reward for their contribution. This boosts the morale of employees.

Ans. Selection Process helps to choose the best candidate out of pool of applicants.

(a) Preliminary Screening: Preliminary screening helps the manager eliminate unqualified or unfit job seekers based on the information supplied in the application forms.

(b) Selection Tests: It is a mechanism (either a paper and pencil test or an exercise) that attempts to measure certain characteristics of individuals ranging from aptitudes, such as, manual dexterity to intelligence, aptitude to personality.

(c) Employment Interview: Interview is a formal, in-depth conversation conducted to evaluate the applicant’s suitability for the job.

(d) Reference and Background Checks: Many employers request names, addresses, and telephone numbers of references (previous employer, teachers, etc) for the purpose of verifying information and, gaining additional information on an applicant.

(e) Selection Decision: The final decision is made after consulting the concerned manager, from among the candidates who pass the tests, interviews and reference checks.

(f) Medical Examination: The candidate is required to undergo a medical fitness test. The job offer is given to the candidate being declared fit.

(g) Job Offer: Job offer is made to those applicants who have passed all the previous hurdles through a letter of appointment to confirm his acceptance. Such a letter generally contains a date by which the appointee must report on duty.

(h) Contract of Employment: After the job offer has been made and candidate accepts the offer, certain documents need to be executed by the employer and the candidate. One such document is the attestation form which contains certain vital details about the candidate, which are authenticated and attested by him or her and will be a valid record for future reference. Contract of employment is also prepared and signed by both employer and employee.

Ans. (a) Management is a dynamic function: An organisation interacts with its external environment which consists of various social, economic and political factors. In order to be successful, Management must adapt itself and its goals according to the needs of the environment.

(b) Other features of Management are as follows:

(i) Management is an intangible force: Management is an intangible force that cannot be seen but its presence can be felt in the way the organisation functions. The effect of management is noticeable in an organisation where targets are met according to plans, employees are happy and satisfied, and there is orderliness instead of chaos.

(ii) Management is a continuous process: The process of management is a series of continuous, composite, but separate functions (planning, organising, directing, staffing and controlling). These functions are simultaneously performed by all managers all the time.

(iii) Management is all pervasive: The activities involved in managing an enterprise are common to all organisations whether economic, social or political. A petrol pump needs to be managed as much as a hospital or a school. What managers do in India, the USA, Germany or Japan is the same although their methods may be quite different due to the differences in culture, tradition and history.

Ans. (a) Organisational Objectives is being referred Management is responsible for setting and achieving objectives for the organisation. It has to achieve a variety of objectives in all areas considering the interest of all stakeholders. It is related to fulfilling the economic objectives of a business. These are survival, profit and growth.

(i) Survival: Management must strive to ensure the survival of the organisation by earning enough revenues to cover costs.

(ii) Profit: Profit is essential not only for covering costs and risks of the business but also as an incentive for the continued successful operation of the enterprise.

(iii) Growth: To remain in the industry, management must exploit fully the growth potential of the organisation.

(b) (i) Social objectives: It involves the creation of benefit for society. As a part of society, every organisation whether it is business or non-business, has a social obligation to fulfill by consistently creating economic value for various constituents of society. This includes using environmental friendly methods of production, giving employment opportunities to the under previledged sections of society, etc.(ii) Personnel objectives: In every organisation people with different personalities, backgrounds, experiences and objectives work. These differ in terms of their financial needs such as competitive salaries and perks, social needs such as peer recognition and higher-level needs such as personal growth and development. Management has to reconcile personal goals with organisational objectives for harmony in the organisation.