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CBSE Class 12 Business Studies Solved Practice Paper for 2018 Board Exam

Feb 6, 2018 14:50 IST
    CBSE Class 12 Business Studies Solved Practice Paper for 2018 Board Exam
    CBSE Class 12 Business Studies Solved Practice Paper for 2018 Board Exam

    Solve paper for Class 12 Business Studies board exam is available here. The format of this paper is almost similar to latest CBSE Class 12 Business Sample Paper 2018. This paper carries 80 marks and there are total 25 questions. This paper contains important solved questions for CBSE Class 12 Business Studies board exam 2018.  

    Completely solved CBSE Class 12 Business Studies practice paper is given below

    General Instructions:

    (i) Answers to questions carrying 1 mark may be from one word to one sentence.

    (ii) Answers to questions carrying 3 marks may be from 50 ‒ 75 words.

    (iii) Answers to questions carrying 4 ‒ 5 marks may be about 150 words.

    (iv) Answers to questions carrying 6 marks may be about 200 words.

    (v) Attempt all parts of a question together.

    Question 1: Explain the term Planning premises?

    (1)

    Solution:

    The planner or the manager is required to make assumptions about the future. These assumptions are known as planning premises.

    Latest Class 12 Business Studies Sample Paper issued by CBSE

    Question 2: Explain the ‘Performance Appraisal’?

    (1)

    Solution:

    It means evaluating an employee’s current and/or past performance as against certain predetermined standards.

    Question 3: What do you understand by 'efficiency' in management?

    (1)

    Solution:

    Management is the process of getting things done in an efficient manner. The term 'efficiency' in management implies that tasks or activities are completed without any error and with minimum incurred cost.

    Question 4: SEBI recently called for information and issued a show cause notice to NSE and its 14 officials seeking explanation on the Preferential Access allegations at the Exchange’s Co-location facility. State the function that SEBI performed by doing so.

    (1)

    Solution:

    The following function was performed by SEBI- Calling for information by undertaking inspection, conducting enquiries and audits of stock exchanges and intermediaries. (Regulatory Function).

    Question 5: How 'cost of debt' affects the choice of capital structure of a company?

    (1)

    Solution:

    Cost of debt affects the choice of capital structure of a company in the sense that if the cost of debt is low or funds can be borrowed at a lower rate, then more debt can be raised. Alternatively, if the cost of debt is high, then a fewer amount of debt will be raised.

    Question 6: Explain how 'cost of equity' affects the choice of capital structure of a company.

    (1)

    Solution:

    The rate of return expected by the shareholders is directly related to risk factors associated with the investment.

    The financial risk faced by the company increases the share holder's expectations of rate of return increases & vice-versa.

    An increase in the expectations of the rate of return implies an increase in the cost of equity, which in turn makes it difficult for the company to opt for equity.

    On the other hand, a decrease in the expectations of the rate of return implies a fall in the cost of equity which makes it easy for the company to opt for equity.

    CBSE Class 12 Business Studies Syllabus 2017 - 2018

    Question 7:

    Define 'co-ordination'.

    (1)

    Solution:

    It is the process through which the activities of the various departments and units are synchronised for the achievement of organisational goals.

    Question 8: State any 2 responsibilities of a consumer.

    (1)

    Solution:

    Two responsibilities are:

    (i) Consumers should be aware about various goods and services available in the market so that an intelligent and wise choice can be made.

    (ii) Consumers should buy only standardised goods as they provide quality assurance. Thus, look for ISI mark on electrical goods, FPO mark on food products, Hall mar k on jewellery etc.

    Question 9: State any 3 functions performed by non-governmental organisations for consumer protection.

    (3)

    Solution:

    The functions performed by non- governmental organisations for consumer protection are given below:

    (i) Testing Quality of the Products: They carry out the quality tests for various products in laboratories and publish the results. Such results help the consumers in making informed choices.

    (ii) Consumer Education: The NGOs and consumer organisations organise various training programmes and workshops to educate the consumer about their rights and responsibilities.

    (iii) Publishing Journals: In addition to the training programmes and seminars they also spread awareness through journals and periodicals. These journals and other publications provide knowledge about various consumer problems, legal remedies available and other such matters.

    Question 10: What is meant by a ‘long-term investment decision’? State any 3 factors which affect the long term investment decisions.

    (3)

    Solution:

    Long-term investment decisions, also known as capital budgeting decisions, refer to the decisions regarding the allocation of fixed capital to different competent projects.

    They involve investment decisions regarding acquisition of new assets, expansion, modernisation and replacement.

    The following are the factors that affect long-term investment decisions:

    (1) Cash flows: From an investment decision, a company expects to generate a series of cash flows and receipts. As a long-term investment decision involves huge money outlays, a company must carefully analyse the expected cash flows (returns) from an investment before making the investment.

    (2) Rate of return: The rate of return is the most important factor that affects the long-term investment decisions of a company. The return from the investment as well as the risk involved should be carefully assessed before making a long-term investment decision. Investments are made in projects that assure a higher rate of return with minimised risks.

    (3) Investment criteria: Before selecting a particular project for investment, a company evaluates various projects based on criteria such as total amount of investment, expected rate of return, expected cash flows and interest rate. Thus, the final decision to invest in a project involves a series of meticulous calculations

    Question 11: State any three characteristics of principles of management

    Solution:

    Three characteristics of principles of management are:

    (i)They are formed by practice, experience, collective wisdom of managers and experimentation.

    (ii) The principles of management have universal applicability in all types of organisations, business as well as non-business, small as well as large, public sector as well as private sector, manufacturing as well as the service sectors.

    (iii) They are general guidelines to action but do not provide readymade strait-jacket solutions to all managerial problems.

    Question 12: The workers of 'XYZ Ltd.' are unable to work on new computerised machines imported by the company to fulfil the increased demand. Therefore the workers are seeking extra guidance from the supervisor and the supervisor is overburdened with the frequent calls of workers.

    Suggest how the supervisor, by increasing the skills and knowledge of workers, can make them handle their work independently.

    Also state any three benefits that the workers will derive by the decision of the supervisor.

    (3)

    Solution:

    The supervisor can provide necessary technical training to the workers related to the use of machines. With increased and improved knowledge, the workers will be able to work independently.

    The benefits that the workers will derive by the decision of the supervisor are given below

    (i) More Career Opportunities: Training enhances the skills and knowledge of the employees, thereby helping them in improving their career prospects.

    (ii) Improving Efficiency: By helping an individual in learning more, training assists him in earning more. Training enhances the individual's understanding and knowledge, thereby improving his efficiency and performance, which, in turn, gives him a chance to earn more.

    (iii) Less Accident Prone: Work that require the employees to work with complex machines and in more accident-prone areas need to emphasise strongly on training and development as it helps the employees in taking precautionary actions. This will decrease the chances of accidents.

    Question 13: Explain briefly any three organisational barriers to communication.

    (3)

    Solution:

    Organisational barriers refer to those barriers in the communication that are related to structure of the organisation, hierarchical relationships in the organisation, rules and policies.

    The following are some of the organisational barriers:

    (a) Policy of the organisation: If the organisation’s policy does not support free flow of communication, then it hampers the flow of communication. For instance, in a centralised organisational structure, free flow of communication is restricted.

    (b) Rules and regulations: Rigid rules and regulations hamper effective communication. Such rules as following strict channels of communication make the communication process cumbersome and lead to delays in the flow of information.

    (c) Difference in status: In an organisation, there exists a difference in the status of the superior and the subordinate in terms of their job profile and the level of authority. Such a difference may sometime create psychological barriers between them and restrict free flow of communication.

    Question 14: Explain briefly 'Casual Callers' & 'Labour Contractors' as external sources of recruitment.

    (4)

    Solution:

    (i) Casual callers: An organisation maintains a database of probable applicants along with their contact details. As and when vacancies arise, it contacts them and persuades them to apply for the jobs available.

    (ii) Labour contractors: Organisations approach labour contractors for engaging low-skilled workers or labourers. They maintain a close contact with labourers and other workers and call them for work when the need arises.

    Question 15: The employees of ABC Ltd, a software company, have formed a dramatic group for their recreation. Name the type of organisation so formed arid state its three features.

    (4)

    Solution:

    Employees of ABC Ltd have formed an informal organisation.

    Features of informal organisation:

    (i) An informal organisation originates within the formal organisation as a result of personal interaction among employees.

    (iii) Independent channels of communication without specified direction of flow of information are developed by group members.

    (ii) The standards of behaviour evolve from group norms rather than officially laid down rules.

    Question 16: Explain briefly 'Casual Callers' and 'Labour Contractors' as external sources of recruitment.

    (4)

    Solution:

    (i) Casual callers: An organisation maintains a list of probable applicants along with their contact information. As and when vacancies arise, it contacts them and persuades them to apply for the jobs available.

    (ii) Labour contractors: Organisations approach labour contractors for engaging low-skilled workers or labourers. Labour contractors maintain a close contact with labourers and other workers and call them for work when the need arises.

    CBSE Class 12 Business Studies Board Exam 2018: Blueprint or Question Paper Design

    Question 17: Give the meaning of 'Policy' and 'Budget' as types of plans

    (4)

    Solution:

    (i) Policy: A policy is a general statement that aims at channelling the efforts of the organisation in a particular direction. It forms the general response or a course of action to be followed in a particular situation. The policies are the guidelines to managerial actions and decisions which help in the implementation of the strategies in an organisation. Moreover, they can be defined as the broad parameters which are used by managers to control the overall working of the management.

    (ii) Budgets: A budget refers to a numerically expressed financial statement that defines the targets to be achieved and the policies to be followed in a specific period. The unique feature of a budget is that it is numerical in nature and quantifies the future facts and data in numbers. A budget is often said to be a control device as it facilitate the comparison and analysing of deviations from the set targets.

    Question 18: Give the meaning of ‘Strategy’ and ‘Rule’ as types of plans.

    (4)

    Solution:

    (a) Strategy: A strategy is a comprehensive plan that includes determining the long-term objectives, adopting the required course of action and allocating the necessary resources. They are often defined as the future decisions which showcase the direction and scope of the organisation in the long run. While formulating a strategy, a manager must consider all the different aspects of the business environment and based upon all factors, should finally take up the strategic decisions.

    (b) Rule: A rule refers to a standard or specific statement that gives information about what is to be done and what is not to be done. Rules are the simplest type of plans that do not allow any kind of flexibility. They signify the managerial decision that a particular task or action has to be performed or not. Such rules do not allow any scope for compromise or change unless a policy decision is taken by the managers.

    Question 19: State any four factors which help in determining the working capital requirements of a company.

    (4)

    Solution:

    Factors wh4ch help in determining the working capital requirements of a company are (Any four)

    (i) Nature of business influences the working capital required. e.g, A trading firm requires a smaller working capital as compared to a manufacturing firm. This is because there is usually no processing, therefore, there is no distinction between raw materials and finished goods.

    (ii) An organisation operating on a higher scale of operation requires a large amount of working capital as compared to the organisacion which operates on a lower scale.

    (iii) Different phases of bussiness cycle affect the requirement of working capital by a firm. In case of boom, larger amount of working capital is required as compared to depression.

    (iv) Seasonal factors affect the level of activity and working capital requirements of a business. In peak season, larger amount of working capital is required as compared to lean season.

    (v) The duration and the length of the production cycle affects the amount of funds required for material and expenses and consequently affects the working capital requirement of a firm. Firms with longer processing cycles lead to higher working capital requirements of a business.

    Question 20: Despite internal sources of recruitment being economical why do companies not always use this source? State any five reasons.

    (5)

    Solution:

    The companies do not always use internal sources of recruitment despite of them being economical because of the following reasons (Any five

    (i) It is an incomplete source as no organisation can fill all its vacancies from internal sources.

    (ii) The employees may become lethargic if they are sure of time bound promotions.

     (iii) Frequent transfers of employees may often reduce the productivity of the organisation.

    (iv) Complete reliance on internal recruitment involves danger of 'inbreeding’ by stopping

    'infusion of new blood’ into the organisation.

    (v) A new enterprise cannot use internal source of recruitment.

    Question 21: Describe briefly the steps in the process of controlling.

    (5)

    Solution:

    Steps involved in the controlling process are given below:

    (i) Setting Standards:

    Setting up of standards involves setting up benchmarks against which the actual performance is to be measured. The standards can be set in qualitative as well as quantitative terms. Qualitative benchmarks can be in the form of improving coordination in work, higher goodwill or increased motivation level of employees, etc. Quantitative benchmarks can be in the form of sales targets, production units to be produced or time to be spent on a particular action, etc.

    (ii) Measuring Actual Performance:

    Once the standards are set, further step is to measure the actual performance of the activities. This may be done through various techniques such as personal observation, checking the sample, performance reports, etc. The checking should be done in an exact and reliable manner so that correct measurement is taken for comparison. Measurement can be done after the completion of an activity as well as while it is in progress.

    (iii) Comparing the Performances:

    Performances once measured are then compared with the set standards. Such a comparison helps in assessing the deviations in the work. Thereby, it guides the managers in taking the necessary steps so as to improve the performances. These comparisons are easier when they are in quantitative terms. For example, efficiency in work in terms of cost incurred can be measured against the standard cost.

    (iv) Analysing Deviation:

    Every organisation faces deviations when comparing the actual performance with the pre-developed standards. Thus, it is important to find the deviations that are in the permissible range. It is said that deviations in key areas should be attended first. For analysing the deviations the managers generally use 'Critical Point Control' and 'Management by Exception'. Once the deviations are recognised, it is necessary to acknowledge the cause for it. There can be a number of elements causing deviations in work such as infeasible standards, deficiencies in process, under utilisation of resources, changes in business environment, etc. Thus, it becomes important for the management to take into regard the causes for the concerned deviations.

    (v) Corrective Actions:

    When deviations go beyond the admissible limits, there arises a need for the management to take corrective actions. This is the last step of controlling which aims on correcting the deficiencies of the organisation so that the errors do not occur again. For example, if the production target was not met duly, appropriate corrective actions such as training the workers or updating the machinery for working, etc. can be taken.

    Question 22: Namita and Aslam completed their MBA and started worki ng i n a multi-national company at the same level. Both are working hard and are happy with their employer. Aslam had the habit of backbiting and wrong reporting about his colleagues to impress his boss. All the employees in the organisation knew about it. At the time of performance appraisal the performance of Namita was judged better than Aslam. Even then their boss, Saleem Khan decided to promote Aslam stating that being a female Namita will not be able to handle the complications of a higher post.

    (i) Identify and explain the principle of management which was not followed by this multinational c mpany.

    (ii) Identify the values which are being ignored quoting the lines from the above para.

    (5)

    Solution:

    (i) The principle violated is EQUI TY.

    It advocates that there should be no discrimination against anyone on account of sex, religi on, language, caste, belief, nationality etc.

    It emphasises kindliness and justice in the behaviour of managers towards the workers to ensure loyalty and devotion.

    (ii) The values which are being ignored are:

     Good human behaviour because ‘Aslam had the habit of backbiting and wrong reporting about his colleagues to impress his boss’.

     Gender Equality because ‘Their boss decided to promote Aslam stating that being a female Namita will not be able to handle the complications of a higher post’

    Question 23: Differentiate between formal and informal organization on the basis of the following:

    (i) Meaning

    (ii) Origin

    (iii) Authority

    (iv) Flow of communication

    (v) Nature

    (6)

    Solution:

    Basis of difference

    Formal organisation

    Informal organisation

    Meaning

    It means the relationship between authorities as defined by the management

    It means the relationship based on personal & informal relationship among the employees.

    Origin

    The structure originates from the rules and policies of the management.

    The structure originates from the social interactions among the employees.

    Authority

    It is defined by the profile and managerial positions.

    It is defined by the personal qualities of the employees.

    Flow of communication

    Communication flows through the scalar chain.

    No planned route of communication is followed.

    Nature

    Formal organisations are rigid

    Informal organisations are flexible

     

    Question 24: Radhika was a student of Business Studies of Class XII. Her father was a farmer who grew different varities of rice and was well-versed about various aspects of rice cultivation. He was also selected by the government for a pilot-project on rice cultivation. As a project-work in Business Studies she decided to study the feasibility of marketing good quality rice at a reasonable price. Her father suggested her to use internet to gather customers' views and opinions. She found that there was a huge demand for packaged organic rice. She knew that there were no pre-determined specifications in case of rice because of which it would be difficult to achieve uniformity in the output. To differentiate the product from its competitors, she gave it the name of 'Malabari Organic Rice' and classified it into three different varieties namely − Popular, Classic and Supreme, based on the quality. She felt that these names would help her in product differentiation. Explain the three functions of marketing, with reference to the above paragraph. (6)

    Solution:

    The following three functions of marketing are being performed in the given case:

    (i) Branding: Branding implies giving a unique name, symbol, sign or term for the identification of a product. Through branding the firms differentiate their products from that of other similar products. If instead of branding the firms opt for a generic name for their product, they would not be able to distinguish their product from that of competitors.

    Reason being a generic name would represent the whole class of the product. For example, every type of rice is used for consumption purposes. However, one quality of rice differs from that of others based on their brand name, symbol or sign used by different rice producing firms. Thus, Radhika is using this function of management by giving the brand name 'Malabari Organic Rice' to differentiate her product.

    (ii) Standardisation and Grading: Standardisation means producing a product according to certain specific details and grading implies classifying the good into various classes or groups based on size, quality, etc. In the given case, Radhika found that there are no specifications regarding the rice in the market. Therefore, she decided to classify her rice under three different names based on the quality. Thus, she performed the function of standardisation and grading by grading her rice based on quality.

    (iii) Gathering and Analysing Market: Marketers gather important data about market so as to appropriately identify the requirements of the customers. It helps the firm to identify and analyse the various business opportunities & related problems. As Radhika is studying about the market and the customer's views and opinions through internet, she is performing the function of gathering information and analysing the market.

    Question 25: Kay Ltd. is a company manufacturing textiles. It has a share capital of Rs 60 lakhs. In the previous year its earning per share was Rs 0.50. For diversification, the company requires additional capital of Rs 40 lakhs. The company raised funds by issuing 10% Debentures for the same. During the year the company earned profit of Rs 8 lakhs on capital employed. If paid tax at the rate of 40%.

    State whether the shareholders gained or lost, in respect of earning per share on diversification. Show you calculations clearly. Also, state any three factors that favour the issue of debentures by the company as part of its capital structure

    (6)

    Solution:

    Interest on 10% debentures = Rs 4,00,000

    Profit before Interest and Tax = Rs 8,00,000

    Profit before Tax = (Profit before Interest and Tax) − Interest = 8,00,000 − 4,00,000 = Rs 4,00,000

    Tax at the rate of 40% = Rs 1,60,000

    Profit after Tax = (Profit before Tax) – Tax = 4,00,000 − 1,60,000 = Rs 2,40,000

    EPS = (Profit after tax)/(Number of equity shares) = 2,40,000/6,00,000 = 0.4

    If the face value of equity shares is assumed to be Rs 10 each. Therefore, number of equity shares is 6,00,000.

    The three factors that favour the issue of debentures by the company as part of its capital structure are given below.

    • Interest paid by the company to its debentures is tax deductible. In the above scenario, the company is paying tax at the rate of 40%. Thus, it is beneficial for the company to issue debentures
    • According to the information given in question, the company already has a share capital of Rs 60,00,000. 
    • Issuing more shares will dilute the control of management. Thus, companies that are apprehensive of the dilution of control opt for more of debt and less of equity.
    • For an organization, cost of raising capital through debentures is relatively lesser than that through equity.

    This is due to assurance and guaranteed repayment that debenture holders require lower rate of returns.

    In addition to this, interest amount payable to debenture holders is deductible expense. This is to say that interest amount is deducted from the company's earnings and then the net amount is used for calculation of tax liabilities.

    This is the main reason, companies prefer to opt for debentures, as higher use of debt, lowers the over-all cost of capital with cost of equity remaining unchanged.

    Download Completely Solved Paper for CBSE Class 12th Business Studies Exam 2018

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