Business Studies Class - XII 
Sample Paper - 1997 (Part- 3)
(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.
Note : If the student has given a definition other than this, full credit may be given. (2 marks)

Q 2 Explain, in brief, the principle of Esprit de Corps. (2 marks)
Ans. 2 Principle of Esprit de Corps :
It refers to team spirit that is harmony in group work and mutual understanding among workers. Managers must take steps to develop a sense of belonging among the members of a work group. If there is team spirit, everyone comes forward to help others. It helps in developing an atmosphere of mutual trust and understanding. People them enjoy working in an organisation. It inspires them to work harder and improve the quality of work. When esprit de corps is present, the need to use penalties for default is minimised. (2 marks)

Q 3 Give any two elements of directing. (3 Marks)
Ans. 3 Any two of the following elements of direction :
(i) Leadership
(ii) Communication
(iii) Motivation
(iv) Supervision (1x2 marks)

Q 4 Explain briefly the steps in the process of organising. (3 Marks)
Ans. 4 The steps in the process of organising with brief explanation :
(i) Division of work.
(ii) Grouping jobs and departmentation.
(iii) Establishing authority relationship. (1x3 marks)

Q 5 Give any three main features of the line organisation. (4 Marks)
Ans. 5 Any three of the following main features of line organisation :
(i) It is simple type of organisation.
(ii) Only one form of authority, viz.; line authority exists in this form of organisation.
(iii) The authority relationships are clearly established.
(iv) All managers in a line organisation have full authority to decide things and to act with respect to their respective functions.
(v) In a line organisation departments are created for basic activities each of which is self-contained as the related services are also part of the activities of the departmental head.
(vi) Specialised, supportive activities are not specifically recognised and distinguished in a line organisation. (1x3 marks)

Q 6 Distinguish between decentralisation and delegation on the basis of nature, control, need and responsibility. (4 Marks)
Ans. 6 Distinction between delegation and decentralisation of authority :

(1x4 marks)

PART II
(PRINCIPLES AND FUNCTION OF MANAGEMENT)

Q 7 "Co-ordination is the essence of management." Explain the statement with the help of examples. (5 marks)
Ans. 7 Co-ordination is the essence of management :-
* Integrates the activities of separate units of an organisation to accomplish the organisational goals efficiently.

* Ensures the goals of units and sub-units are pursued in harmony with each other keeping in view the goals of the organisation.

* Needed at all levels of management due to the interdependent nature of activities assigned to various departments and units and to different individuals. Example :

This may be illustrated by reference to purchase, production and sales activities. Unless goods are produced in adequate quantities and at the proper time, supply of goods to customers cannot he undertaken by the Sales department. What needs to be co-ordinated between the Production department and the Sales department is the adequacy as well as the timely production of goods. Likewise, the requirements of the production department. If purchasing operations slow down, production will suffer,which will also affect selling activities.
(Example given on similar lines may be given full credit) (3+2 marks)

Q 8 Briefly explain(a) Time Study and (b) 'Stability of Tenure' principle. (5 marks)
Ans. 8. (a) Time study :
Time study is the technique used to measure the time that may be taken by a workman of reasonable skill and ability to perform various elements of the tasks in a job. In time study a worker of reasonable skill and ability is selected. Then a person watches him and with the help of a stopwatch, notes the time spent on different activities. It helps in
(i) Deciding how much time is normally required to perform a certain job.
(ii) Determining a fair day's work for the workman. (2 and 1/2 marks)

(b) Stability of tenure :
Fayol emphasised that employees should not be moved from their position
frequently.

The period of service in a position should be fixed.

It often takes times to get used to work. An employee can not render useful service if he is removed before he gets accustomed to the work assigned to him. (2 and 1/2 marks)

Q 9 Enumerate the various steps in the staffing procedure. ( 5 marks)
Ans. 9 The various steps in the staffing procedure are enumerated as follows :
(i) Manpower planning
(ii) Recruitment and selection
(iii) Placement
(iv) Training
(v) Introduction
(Explanation not required)

Q 10  Explain briefly the features of a god control system.
Ans. 10 The features of a good control system with brief explanation.
(i) Appropriate
(ii) Economical
(iii) Simple
(iv) Objective
(v) Flexible
(vi) Forward looking
(vii)Concentration on exception
(If a student has explained any five of the above or other points, full credit may be given.)

Q 11 Explain, in brief, the steps in the planning process.
OR
What are the limitations of planning? Explain briefly. (6 marks)
Ans. 11 The steps in the planning process with brief explanation :
(i) Setting of objectives.
(ii) Establishing the planning premises.
(iii) Choice of alternatives.
(iv) Formulation of derivative plans.
(v) Securing co-operation of employees.
(vi) Follow-up reviews.
½ mark each for giving point ½ mark each for brief explanation

OR

Limitations of planning with brief explanation :
(i) Rigidity : The existence of a plan puts managerial activities in a rigid framework.
(ii) Misdirection : Planning may be used to serve individual and groups
interest ignoring the interest of the organisation.
(iii) Time consuming : Planning is a time consuming process and is not
practicable during emergency or crises.
(iv) False sense of security : Elaborate planning may create a false
sense of security among employees.
(v) Probabilistic : Plans based on forecasts do not reflect the reality.
(vi) Natural factors (1x6 marks)

Q 12What is meant by incentive? Discuss the role of financial and non-financial incentives to increases the efficiency of workers.
OR

Differentiate between formal rate and informal communication.
(8 marks)
Ans. 12 Meaning of 'incentive' 'Incentive' means an inducement which stimulates a person to act in a desired direction.
Role of financial and non-financial incentives to increase the efficiency of workers :
Role of incentives :
To employees :
(1) More wage, (2) High moral (3) Better machines utilisation, (4) Low wastage
To employers :
(1) More Production (2) Less deprecation
To society :
(1) Less, Cost, (2) Better Quality goods

OR

Distinction between formal and informal Communication :-
Any four : Two points for each:

PART III
(PRINCIPLES AND FUNCTION OF MANAGEMENT)

Q 13 What is meant by the term "price mix"? (2 marks)
Ans. 13 Product mix:- Product mix involves planning and developing the right type of product that will satisfy fully the needs of customers. A product has several dimensions. These dimensions are collectively called 'product mix'. Product mix consist of size and weight of the product, volume of output, product quality, product design, product range, brand name, package, product testing, warranties and after sales services and the likes. (2 marks)

Q 14 State the role and responsibilities of a personal manager.
(3 marks)
Ans. 14 The role of a personnel manager :-
(i) As a staff official specialist adviser :-
He assist and advice's line managers on all personal matters. (1 mark)

(ii) As a counsellor - a mediator and a spokesman (1 mark)
As a counsellor - he is expected to attend to the problems of employees and give them appropriate advice.

As a mediate - he may be required to reconcile the viewpoints of management and the trade unions in the events of disputes.

As a spokesman- he acts as a representative of the organisation in committees appointed by the government. (2 marks)

Q 15 Distinguish between training and development. (3 marks)
Ans. 15 Distinction between recruitment and the selections :

Q 16 Explain briefly the objectives of financial management.
(3 marks)
Ans. 16 Any three of the following functions of a financial managers with brief explanation :-
(i) Estimating capital requirement.
(ii) Determining the composition of capital.
(iii) Determining the sources of finds.
(iv) Utilisation of funds.
(v) Disposal of profits/ surplus.
(vi) Management of cash.
(vii) Financial control. (1x3 marks)

Q 17 State any three effects of undercapitalisation on a company.
(3 marks)
Ans. 17 Any three of the following effects of over capitalisation on a company :
(i) The market value of the shares of a company falls drastically because of its reduced earning capacity.
(ii) It becomes difficult for such a company to raise loans since its credit standing is adversely affected.
(iii) Since earnings are decreasing the company cuts down the 4 expenditure on maintenance, replacement of assets and adequate provision for depreciation.
(iv) The company resorts to manipulations of accounts to show profits.
(v) The reputation of a company is affected and goodwill is lost. (1x3 marks)

Q 18 Enumerate the qualities of a good salesman. (3 marks)
Ans. 18 Any six of the following methods of sales promotion :-
(i) Free samples
(ii) Coupons
(iii) Premiums/Bonus offers.
(iv) Price-off offers
(v) Contests
(vi) Demonstrations
(vii Reduction sales
(viii) Advertising material
(ix) Store demonstration
(x) Dealers contest (1/2x6 marks)

Q 19 How does performance appraisal help in taking different types of management decisions? (4 marks)
Ans. 19 If a company does not have any scheme of performance appraisal, following are the consequences the company is likely to face :-
The company will not be in a position to :-
(i) Maintain a record of each employee's performance for the purpose of the determining the wage structure, salary level and compensation package.

(ii) Analyse the strength and weaknesses of current employees for placing the right man on the right job.

(iii) Identify employees who have the potential for future growth and advancement.

(iv) Provide feedback to the employee about his performance level so that he can take adequate steps to develop himself.

(v) Serve as a basis for improving or changing behaviour towards some more effective working habits.

In other words, it will be very difficult to take the decisions in the following areas :-
(i)Promotion (ii) Compensation (iii) Employee's development (iv) Motivation (v) Communication

(vi)Selection validity. (4 marks)

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 wage system.
(b) Piece rate system.
(c) Piece wage system.
(d) Time wage system. (1x4 marks)

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 Merits and demerits of issuing equity shares for the purpose of modernising the plant and machinery at an estimated cost of rupees one crore.
Merits with brief explanation :
(i) No fixed liability.
(ii) No charge on assets.
(iii) More popular.
(iv) No liability as to repayment.
(v) Economical and best method.

Demerit with brief explanation :
(i) No Trading on equity.
(ii) High cost of raising capital.
(iii) Absence of close control.
(iv) Danger of over capitalisation. (21/2+21/2 marks)

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 of the following Functions of advertising with brief explanations :
(i) Creates demand.
(ii) Provides support to salesman.
(iii) Creates good image.
(iv) Helps introducing new products.
(v) Makes shopping easier.
(vi) Educates consumers.
(vii) Provides/offers employment opportunities.
(viii) Provides aid to press. (1x5 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 Meaning of financial planning :
Financial planning means the process of determining the objectives, policies, procedures, programmes and budgets to deal, with the financial activities of an enterprises. (2 marks)

Factors to be kept in mind while formulating a financial plan :
(Any five)
(i) Nature of enterprise.
(ii) Nature of risk assumed.
(iii) Future growth plan.
(iv) Availability of different sources of funds.
(v) Government regulation.
(vi) Management attitude of control.
(vii) Market conditions.
(viii) Flexibility
(ix) Cash flow ability (1x5 marks)

OR

Meaning of Capital Structure :-
Capital structure refers to the composition or make-up of long term sources of funds such as equity shares, preference shares, debentures and long-term loans. The essence of capital structure problem is to decide the ration of debt capital to equity capital. (2 marks)

Any five of the following factors effecting capital structure with brief explanation :-
(i) Trading on equity
(ii) Stability of sales
(iii) Cost of capital
(iv) Cash flow ability
(v) Control
(vi) Flexibility
(vii) Size of the company
(viii) Market
(ix) Flotation costs (1x5 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 implies face to face communication between a seller and a buyer .It involves oral presentation by sales persons to one or more prospective purchasers for the purpose of making sales. (2 marks)

Steps in the process of personal selling :
1. Pre-sale preparation.
2. Prospecting
3. Approaching
4. Presentation
5. Demonstration
6. Handling objections
7. Closing the sale (6 marks)

OR

The statement may be proved on the basis of merits and objections given below :
Merits
(i) Creates demand.
(ii) Support to salesman.
(iii) Creates good image.
(iv) Helps introducing new products.
(v) Main shopping easier.
(vi) Educates customers.
(vii) Provides/offers employment opportunities.

Objections :
(i) Effect of advertising on values, materialism and life styles.
(ii) Advertising encourage sale of inferior and dubious products.
(iii) Advertising confuses rather than help.
(iv) Some advertisement in bad taste.
(v) Advertising costs are passed on to the consumer in the form of high prices.

Conclusion :-
Note : On comparison of the above, if a statement conclude that it is waste or it is not a waste-gives appropriate reasons. (1+7 marks)
1 mark for definite opinion 7 marks for arguments.