Business Studies Class - XII 
Sample Paper - 1997 (Part- 2)
(Solved)

PART I
(PRINCIPLES AND FUNCTION OF MANAGEMENT)

Q 1 What is meant by management? (2 marks)
Ans. 1 Management may be defined as creating the internal environment of an enterprise where individuals working together in groups can perform efficiently and effectively towards the attainment of group goals.   
                                                                     
Q 2 Explain, in brief, the principle of parity of authority and responsibility. (2 marks)
Ans. 2 Authority is the right to give orders to the subordinate, take decision on specified matters, use resources of the organisation and guide and regulate the behaviours of the subordinates.

Responsibility means the duty which the subordinate is expected to perform by virtue of his position in the organisation. The principle states that authority and responsibility should bear a logical relation to each other. Sufficient authority should be delegated to a subordinate to enable him to discharge his duties. If authority is less, the subordinate will not be able to perform his duties well. If he is given excessive authority he may misuse.

Authority ½, Responsibility ½ , Parity 1 (1/2 +1/2+1=2 marks)

Q 3 Give two functions of a supervisor. (2 marks)
Ans. 3 Any Two functions :
     1. Planning the work.
     2. Issuing orders.
     3. Providing guidance or leadership.
     4. Motivation.
     5. Preserving Records.
     6. Controlling output.
     7. Grievance handling or liaison between management and workers.
     8. Introducing new work methods.
     9. Enforcing safety.
    10. Linking pin.
    11. Scheduling.
    12. Reporting.           (1x2=2)

Q 4 Explain briefly the meaning of "organisation structure".
(3 marks)
Ans. 4 The process of organising leads to the creation of the structure of an organisation. The term organisation structure may be defined as a system of job positions, the roles assigned to them and the authority relationships among the various positions. The structure provides basis or frame work for managers and other employees for performing their respective functions. The structure also facilitates work flow in the organisation. If a chart is prepared, the organisational structure looks like a pyramid with a narrow top and broad bottom. (3 Marks)
 
Q 5 State the main features of line and staff organisation. Any three with brief explanation where needed. (3 marks)

Ans. 5 (i)  It is a modification of line organisation and more complex than the latter.
(ii) Two forms of authority - line and staff.
(iii) Certain secondary and supportive activities related to the basic activities are separated and formed into separate units/departments.
(iv) More specialisation and division of labour.
(v) Characterised by conflict among line managers and staff because of difference in the nature of their authority influence, expertise, and remuneration. (1x3=3)

Q 6 Differentiate between formal and informal organisation on the basis of formation, purpose, structure and communication.
Ans. 6

Q 7 "Management is the art of getting things done through other people." Explain the importance of management in the light of the statement. (5 marks)

Ans. 7 Management is the art of securing maximum output with minimum of effort.
The following points should be discussed : (any five)
(a) Helps in achieving goals.
(b) Utilises available human resources so as to secure highest productivity.
(c) Reduces cost.
(d) Ensures efficient and smooth running of business through effective control.
(e) Co-ordinates human efforts.
(f) Maintains equilibrium. (1x5=5 marks)

Q 8 Briefly explain(a) Motion study, and (b) Esprit de corps. (5 marks)
Ans. 8 Motion study This technique involves close observation of the movement of the body and limbs required to perform a job. The purpose of motion study is to avoid wasteful motion and determine the best way of doing a job. Upon a close examination of body wasteful motions it is possible to find.
(a) Which motions are productive?
(b) Which are incidental?
(c) Which are unproductive?

The movement which are considered as wasteful are avoided and eliminated (2and1/2 marks)
Esprite de corps
It refers to team spirit i.e., harmony in group work and mutual understanding among workers. If there is team spirit, everyone comes forward to help others. It helps to develop an atmosphere of mutual trust and understanding which inspires the workers to work harder and improve quality. Employees
with proved merit should be suitably rewarded and those not up to the standard should be given opportunity to improve the performance.
(2and1/2 marks)

Q 9 What is manpower planning? How will you assess the manpower requirement of a business enterprise?(5 marks)
Ans.9 Manpower planning is the process of determining scientifically the number and type of employees that an enterprise will need in a specified period of time in future. The process of estimating the manpower
requirement consists of the following steps :
(1) Forecasting future manpower needs.
(2) Analysing how manpower resources are utilised.
(3) Anticipating manpower problems.
(4) Preparing manpower inventory.
(5) Planning programmes of recruitment, selection, training, development and the likes. (1/2x5=21/2 marks)
Q 10 Explain briefly the various steps in the process of control.
(5 marks)
Ans. 10 Steps in the process of control :
(a) Establishment of standards.
(b) Measurement of performance.
(c) Comparison of actual performance with standard.
(d) Take Corrective action.
½ Mark for each point 3 mark for explanation (2+3=5)

Q 11 Describe briefly the various features of planning.
OR
Explain briefly the benefits of planning to an organisation. (6 marks)
Ans. 11 Features of planning : (any six)
1. It is goal oriented.
2. It is a primary function of management.
3. It is pervasive in nature.
4. It is an intellectual activity/process.
5. It is looking ahead (forward looking).
6. It is continuous process.
7. It involves choice.
8. It is designed for efficiency.
½ Mark for each point ½ mark for each explanation (6 Marks)

OR
Benefits (any six)
1. Planning makes objective clear and specific.
2. It makes activities meaningful.
3. It reduces the risk of uncertainty.
4. It helps co-ordination.
5. It facilitates control.
6. It promotes creativity.
7. It leads to economy and efficiency of operations.
8. Facilitates decision making by managers.

1/2 Mark for each point 1/2 mark for each explanation.

Q 12 What is meant by 'communication'? Differentiate between oral and written communication.
OR
What is leadership? Discuss the importance of leadership in the management of a business organisation.(8 marks)

Ans. 12 Communication is the process of transmission of messages, information and the likes and creation of understanding between the parties. It involves sending a message by one person to another, who receives the message and responds to it. Effective communication takes place when the received message is understood in the same sense by the receiver as the sender intends. (3 Marks)

Difference between oral and written communication (any five)

(1x5=5)

OR

Leadership is the process of influencing other people to work willingly for group objectives. It is the process by which an executive imaginatively directs, guides and influences the work of others in choosing and attaining specified goals by mediating between the individuals and the organisation in such a manner that both will get maximum satisfaction. (3 Marks)


Importance : (any five)
1. Helps in guiding and inspiring employees.
2. Secures co-operation of the members of the organisation.
3. Creates confidence or motivation.
4. Develops and maintains an environment conducive to maximum work effort.
5. Goal clarity.
6. Morale building.
7. Facilitates changes.
½ Mark for each point ½ Mark for explanation (1x5=5 Marks)

PART II
FUNCTIONAL MANAGEMENT

Q 13 What is meant by the term "price mix"? (2 marks)
Ans. 13 Price mix refers to the decisions relating to the price charged for the product,service or idea. Price means the money value that the customer has to pay in exchange for the product. Price mix involves decisions with regard to basic price, discounts, allowances, credit freight payment and the likes. Price policy of a firm depends on factors such as cost, demand, degree of competition, external factors, government regulations and the likes. (2 marks)

Q 14 State the role and responsibilities of a personal manager.
(3 marks)
Ans. 14 Role of counsellor, a mediator and advisor besides his primary role of staff official and specialist adviser. (11/2)

Responsibilities :
(a) Formulating personnel policies.
(b) Initiating and implementing personnel programmes.
(c) Providing specialised services. (11/2)

Q 15 Distinguish between training and development. (3 marks)
Ans. 15 Distinguish between training and development :

Q 16 Explain briefly the objectives of financial management.
(3 marks)
Ans. 16 Any three(objectives)
(i) To ensure availability of sufficient funds.
(ii To ensure effective utilisation of funds.
(iii) To minimise the cost of capital.
(iv ) Maximising returns to shareholders.
(v) To ensure safety of funds through creation of reserves and reinvestment of profits. (1x3=3)

Q 17 State any three effects of undercapitalisation on a company.
(3 marks)
Ans. 17 Any three effects of under-capitalisation of a company.
(a) Goodwill of the company is increased due to higher profitability.
(b) More competition in the market due to high rate of earning.
(c) The workers of the company may be tempted to demand higher wages
and other benefits.
(d) Because of higher profits, the customers may feel that they are being charged higher prices by the company. (1x3=3 marks)

Q 18 Enumerate the qualities of a good salesman. (3 marks)
Ans. 18 Any six qualities of good salesman : (1/2x6=3 marks)
(a) Physical qualities
(b) Mental qualities
(c) Social qualities
(d) Communication ability
(e) Patience
(f) Determination
(g) Knowledge of the product
(h) Personal attributes
(i) Vocational skill

Q 19 How does performance appraisal help in taking different types of management decisions? (4 marks)
Ans. 19 Role of performance appraisal in management decision-making :
(a) Compensation-helps in wages and salary administration and considering pay increases and increments.
(b) Considering employees for promotion, transfer, lay off and the likes.
(c) Employee development - Evaluation of skill and training capability of employees and planning suitable training and development programmes.
(d) Provides a basis for comparison between persons to segregate efficient and inefficient employees.
(e) Helps supervisors to know their subordinates more closely for increasing their efficiency.
(f) It guides and helps the employees in their self improvement.
(g) Motivation
(h) Selection validation-to help evaluate selection method to ensure that individuals have been well matched with the job requirement. (1x4=4)
(Any four)

Q 20 Which method of wage payment-time rate or piece rate-would you prefer in the following situations?
(a) When workers have no control over the rate of output?
(b) When work and work methods are of a standardised nature?
(c) When workers are to be remunerated on a group basis?
(d) When quality of output is more important than its quantity?
(4 marks)

Ans. 20 (a) Time Rate
(b) Piece Rate
(c) Time Rate
(d) Time Rate (1x4=4)

Q 21 You are the finance manager of a company. The Board of Directors have asked you to determine the working capital requirement for the company. State the factors that you would take into consideration while determining the requirement of working capital for the company. (5 marks)
Ans. 21 Factors considered to determine working capital requirements :
(Any five)
(a) Nature of business/Type of products manufactured.
(b) Volume of business.
(c) Time consumed in managing operations.
(d) Turnover of working capital.
(e) Terms of buying and selling.
(f) Current expenses.
(g) Sales level.
(h) Credit policy.
(i) Efficiency in management.
(j) Inventory polices.
½ Mark for each points ½ mark for each explanation (1x5=5)

Q 22 Explain briefly the factors that you will keep in mind while selected a suitable medium of advertisement. (5 marks)
Ans. 22 Any five with brief explanation
1. Selectivity- The product for which it is meant.
2. Coverage
3. Flexibility
4. Cost
5. Editorial environment
6. Permanence
7. Media used by competitors.
8. Nature of market.
9. Objectives of advertising
½ Mark for each point ½ Mark for explanation (1x5=5 marks)

Q 23 Explain 'Financial Planning' and discuss the essentials of a sound financial plan. (7 marks)
OR
What meant by capital structure? What are the factors to be kept in mind while determining the capital structure of a company?

Ans. 23 Financial planning is the process of determining the objective, policies procedures, programmes and budget to deal with the financial activities of an organisation. Financial planning lays down guidelines for the procurement, administration and disbursement of funds. (1x5=5 marks)

Essentials (Any five)
(a) Simplicity,
(b) Foresight
(c) Economy
(d) Flexibility
(e) Optimum use of funds.
(f) Provision for contingencies.
½ Marks for each point ½ marks for explanation. (1x5=5 marks)

OR

Capital structure refers to the total capital funds raised by a company, that is, the proportion of equity capital and borrowed funds.
Factors to be kept in mind : (Any five)
1. Cost of capital.
2. Capital market conditions.
3. Exercise of control.
4. Need for flexibility.
5. Nature and style of business.
6. Stability of business.
7. Trading on equity.
8. Legal requirements.
9. Cash flow ability.
10. Floatation costs.
½ Mark for each point ½ Mark for explanation (1x5=5 marks)

Q 24 Explain "personal selling" and state the advantages of personal selling.
OR
"Advertising in unnecessary and wasteful." Do you agree with the statement? Give reasons for your answer. (8 marks)
Ans. 24 Personal selling or salesmanship it the process of assisting and persuading people to buy a product or service in a face to face situation. It involves direct and personal contact between the buyer and seller or his
representative. In this process, the seller ascertains and stimulates the needs on wants of the buyer and satisfies his needs to the mutual benefit of both the buyer and seller. It's the part of presenting a product or service so that the customer appreciates the need for its as a mutually satisfactory sale follows. (2 marks)

Any six advantages :
1. Personal contact.
2. To render the knowledge of the product to the customer.
3. Two way communication.
4. Display and demonstration of the product.
5. Knowledge of the taste and liking of the customer can be ascertained.
6. Economical
7. Develops confidence in customer.
8. Immediate sales.
9. Identification of the prospective customer.
10. Minimum of waste of effort in personal selling. (1x6=6 marks)

OR

No-advertising is not unnecessary and wasteful. (1 marks)
Advertising is often criticised as unnecessary and wasteful because of the following :
(Any three reasons) (1x3=3 marks)
(a) It multiplies the needs of the people.
(b) Amount spent on it adds to the cost of the product.
(c) It may lead to monopoly of brand.
(d) A large no of advertisement either escape the attention of the people or are ignored by them.
(e) Sometimes it undermines ethical and aesthetic value.
(f) It does not always increase the demand of the product.

Despite the above, advertising is necessary as it enables a :
1. Manufacturer to introduce his products in the market and sell it.
2. It helps in educating the people regarding new uses of the various products.
3. It strengthens the freedom of choice of the people.
4. It sustains the press.
5. It helps to increase the standard of living of people.
It is due to this reason that advertising is not unnecessary and wasteful.
(4 marks)
On comparison of the above a student may conclude that it is a waste and not a waste with appropriate reasons. Full credit may be given.