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Wednesday, January 03, 2018

AHSEC Class 12: Business Studies Solved Question Papers' 2017

Business Studies Question Papers
Full Marks: 100
Pass Marks: 30
Time: 3 hours
The figures in the margin indicate full marks for the questions
1. Answer the following questions:
a)      Why is it said management principles are universal?                             1
Ans. Universal Application: Management principles are applied in every situation, where the objectives are attained through group efforts. All social, economic, political, cultural or even religious organizations apply management principles for the successful operations of their activities.
b)      How management is an intangible force?                    1
Ans. Management is intangible: It cannot be seen but it can be felt through the performance of the workers. Mismanagement if any is quickly noticed and is a sign of poor management.
c)       Name the concept which permits direct communication between two employees working at the same level.1
Ans: Gang Plank
d)      Who wrote the book titled General and Industrial Management published in the year 1949?
Ans: Henry Fayol

e)      What is the other name of long term investment decision?                                1
Ans: A long term Investment decision is called capital budgeting decision.
f)       In which year SEBI came into being?                               1
Ans: It was established in 1988 but was given statutory status in 1992.
g)      Give an example of speciality products.                       1
Ans: Specialty goods are those considered unique by the buyer, who will go to great lengths to get them.
h)      Under what source of recruitment employees get motivated?                          1
Ans: Internal Source
2. How is planning a pervasive function?                             2
Ans: Planning is regarded as a pervasive function as it is required at all levels of mgt. as well as in all departments of the organisation. However the scope of planning differs at different levels and among different departments.
3. State the authority of top management and freedom of action under centralization.                                2
Ans: Under centralization, the important and key decisions are taken by the top management and the other levels are into implementations as per the directions of top level.
4. Explain job-rotation as a method of training.                                 2
Ans. Job rotation: Job rotation is an on-the-job method of training in which the employee is shifted from one job position to other for short interval of time to make him aware of requirements of all the job positions. For example, in banks the employees are shifted from one counter to other so that they learn the requirements of all the counters.          
5. Mention two non-financial incentives to promote motivation.                            2
Ans. Non Financial or non monetary Incentives: Incentives which are not measurable in terms of money are called non-financial incentives. Examples of Non Financial Incentives - Status, organizational climate, career advancement opportunity, job security etc.               
6. State any one instrument of money market.                  2
Ans: Money market is the short term security market. Following are the instruments dealt in money market.
a) Treasury bills: It is a short term borrowing by the Government of India. It is also called a zero coupon bond as no interest is paid on such bills but they are issued at a discount redeemable at par. These are issued by the RBI on behalf of government of India. They are issued in the form of promissory note.
7. What do you mean by management by exception?                    3
Ans. Management by Exception; Management by exception, is an important principle of management control based on the belief that an attempt to control everything results in controlling nothing. Thus, only significant deviations which go beyond the permissible limit should be brought to the notice of management.
8. Outline three leading features of a good control system.                        3
Ans: Essentials of an Effective control system:
The following are the essentials or basic requirements of an effectively control system:
1)      Suitable: The control system must be suitable for the kind of activity intended to serve. Apart from differences in the systems of control in different business, they also vary from department to department and from one level in the organization to the other.
2)      Understandable: The system must be understandable, i.e., the control information supplied should be capable of being understood by those who use it. A control system that a manager cannot understand is bound to remain ineffective.
3)      Economical: The system must be economical in operation, i.e., the cost of a control system should not exceed the possible savings from its use. The extent of control necessary should be decided by the standard of accuracy or quality required. A very high degree or standard of accuracy or quality may not really be-necessary.
9. Discuss three objectives of financial planning.                             3
Ans. Objectives of Financial Planning: Financial planning is done to achieve the following two objectives:
1. To ensure availability of funds whenever these are required: The main objective of financial planning is that sufficient fund should be available in the company for different purposes. It ensures timely availability of finance.
2. To see that firm does not raise resources unnecessarily: Excess funding is as bad as inadequate or shortage of funds. If there is surplus money, financial planning must invest it in the best possible manner.
State the three decisions involved in financial management.                    3
Ans: The finance functions relate to three major decisions which every finance manager has to take:
a) Investment decision or capital budgeting
b) Finance Decision or Capital Structure decision
c) Dividend decision
a) Investment decision: Funds procured from different sources have to be invested in acquiring fixed assets as well as current assets. When decision regarding fixed assets is taken it is called capital budgeting decision.
b) Finance decision: The second important decision which finance manager has to take is deciding source of finance. Under this decision finance manager has to decide how much to raise from owner’s fund and how much to raise from borrowed fund. This type of decision is also known as capital structure decision.
c) Dividend decision: Dividend Decision: This decision is concerned with distribution of surplus funds. The profit of the firm is distributed among various parties such as creditors, employees, shareholders, debenture holders etc. Under this decision the finance manager decided how much to be distributed in the form of dividend and how much to keep aside as retained earnings.
10. What are the legal protections offered to consumers under ‘The Consumers Protection Act’ 1986?                 3
Ans: REMEDIES/PROTECTION UNDER THE ACT: In case it is proved that there exists a defect in the goods or that the services rendered were deficient in nature the following remedies against the seller are available to the Consumer.
a)      To remove the defect pointed out by the appropriate laboratory from the goods in question or;
b)      Replace the goods with new goods of similar description, which shall be free from any defect;
c)       Return to the complainant the price of the goods or the charges for the services rendered and / or;
d)      Pay such amount as compensation for any loss or injury suffered by the Consumer or;
e)      Remove the deficiency in the service and/ or;
f)       Discontinue the unfair or restrictive trade practice and not to repeat them and / or;
g)      Not to offer hazardous goods for sale and / or;
h)      Withdraw the hazardous goods for sale and / or;
i)        Provide adequate costs to the parties.
Who is an entrepreneur? Mention the functions of an entrepreneur.                   3
11. Explain any three rights ensured to consumers in India.                        3
Ans: Rights of Consumers:          
a)      The right to safety: It refers to the right to be protected against products which are hazardous to health or life.
b)      The right to be informed: Consumers have a right to be informed about the quality, quantity and price of goods or services so that they can make the right decision.
c)       The right of choice: The consumer has the right to be assured of a choice of various goods and services of satisfactory quality and competitive price.
State the three basic needs for entrepreneurship in India today.                             3
12. Why Co-ordination is considered as the essence of management?                  5
Ans. Importance of co- ordination (Essence of Management): 
Co-ordination is an integral element or ingredient of all the managerial functions as discussed below: -
a)      Coordination through Planning: Planning facilitates co-ordination by integrating the various plans through mutual discussion, exchange of ideas. e.g. - co-ordination between finance budget and purchases budget.
b)      Co-ordination through Organizing - Mooney considers co-ordination as the very essence of organizing. In fact when a manager groups and assigns various activities to subordinates, and when he creates department’s co-ordination uppermost in his mind.
c)       Co-ordination through Staffing - A manager should bear in mind that the right no. of personnel in various positions with right type of education and skills are taken which will ensure right men on the right job.
d)      Co-ordination through Directing - The purpose of giving orders, instructions & guidance to the subordinates is served only when there is a harmony between superiors & subordinates.
e)      Co-ordination through Controlling - Manager ensures that there should be co-ordination between actual performance & standard performance to achieve organizational goals.
Now we can conclude that all the functions of management are affected by coordination. Hence coordination is essential for achieving the objectives of the organisation. It is also required for the survival, growth and profitability of the organisation. Coordination encourages team spirit, gives right direction, motivates employees, and makes proper utilization of resources. Therefore, Coordination is rightly called the "Essence of Management".
13. Explain the principle of Unity of Command and the principle of Unity of Direction.                                 5
Ans. Unity of command: According to this principle of Fayol, every employee should receive orders and instructions from one boss and he should be responsible and accountable to him only.
Unity of Direction: One objective and one plan. There must be one plan for an organization at a time and should be directed by one manager using the same plan. 
14. State the five key components of economic environment in India.                  5
Ans. ECONOMIC ENVIRONMENT: The survival and success of each and every business enterprise depend fully on its economic environment. The three main factors that affect the economic environment are:
(a)    Economic Conditions: The economic conditions of a nation refer to a set of economic factors that have great influence on business organisations and their operations. These include gross domestic product, per capita income, markets for goods and services, availability of capital etc.
(b)   Economic Policies: All business activities and operations are directly influenced by the economic policies framed by the government from time to time. Some of the important economic policies are: Industrial policy, Fiscal policy, Monetary policy, Foreign investment policy, Export –Import policy (Exim policy)
(c)    Economic System: The world economy is primarily governed by three types of economic systems, viz., (i) Capitalist economy; (ii) Socialist economy; and (iii) Mixed economy. India has adopted the mixed economy system which implies co-existence of public sector and private sector.
(d)   Economic Planning: The management of national economy must begin with national level economic planning within the framework provided by the general economic policy of the government. An economic planning is a mechanism for allocation of available resources and encourages efficient decision making process in an economy to achieve pre determined objectives of plans like increasing growth rate, reducing inflation, creating employment , obtaining self sufficiency etc. A government plays an important role as it has the authority of drafting and implementing financial plans keeping in mind the interest of various business industries and social welfare.
(e)   Regional economic groups: They promote cooperation and free trade among members by removing tariff and other restrictions. They provide opportunities to member countries and threats to non-member counties. Examples are: SA ARC: South Asian Association for Regional Cooperation. ASIAN: Association of South East Asian Nations. EU :European Union
15. Discuss five features of planning.                     5
Ans: Following are the features of Planning:
A)     Planning contributes to objectives: Planning starts with the process of setting up the objectives. We cannot think of planning without objectives. After setting up the objectives various activities are decided which would help in the achievement of the same.
B)      Pervasive: Planning is required at all levels of management. It is not a function restricted to top level managers only but planning is done by managers at every level.
C)      Primary Function: Planning is the first function of the management (primacy).On the basis of planning; the other functions of organizing, staffing, directing and controlling are performed.
D)     Forward looking: planning is looking ahead. It is done for the future and not for the past. All the managers try to make assumptions for the future and act accordingly.
E)      Continuous: Planning goes on continuously. It does not stop after a particular period. If plans are made for a month, after one month new plans are made. So Planning goes on without halt.
Mention five advantages of laying down procedure.                                       5
16. State five disadvantages of internal sources of recruitment.                               5
Ans. Disadvantages of Internal Source of Recruitment  
a)      Discourages new ideas: Recruitment of internals leads to inbreeding and discourages new blood with new ideas from entering into the organization.
b)      Lack of suitable employee: It is possible that internal sources ultimately dry up and hence it may be difficult to find suitable persons from within the organization.
c)       Management Bias: As promotion is based on seniority, the danger is that really capable hands may not be chosen. The likes and dislikes of the management may also play an important role in the selection of personnel.
d)      Lack of innovation: Since the learner does not know more than the lecturer, no innovations worth the name can be made. Therefore, on jobs which require original thinking, this practice is not followed.
e)      Generally for middle level managers internal source is rarely used, however for promoting blue collar workers to white collar jobs internal source is more desirable.
17. Outline five points of distinction between primary and secondary capital market in India.                   5
Primary Market
Secondary Market
1. Meaning
It is the market where the securities are issued for the first time. It is also referred as New issue market.
It is the market where the existing securities are traded. It is also called stock Exchange.
2. Pricing
The prices of the securities are determined by the company.
The prices of the securities are determined by the forces of demand and supply of the securities.
3. Purchase and sale of securities
Here, only buying of the securities take place.
Here, buying and selling of the securities, both take place.
4. Ownership transferred
 Securities are sold by the company directly to the investors.
Ownership of the securities is exchanged among the investors. The company is not involved at all.
5. Purpose
Purpose of primary market is to provide capital for setting new business.
The main purpose of secondary market is to provide liquidity of securities.
6. Geographical area
There is no fixed geographical area for primary market.
There is a fixed geographical area and working hours.

18. How can marketing be distinguished from selling?                  5
Ans: Difference between selling & marketing concept
Selling starts with the seller & the needs of the seller.
Marketing starts with the buyer & needs of buyer
Seeks to quickly convert products into cash.
Seeks to convert customer ‘needs’ into products.
Seller is the centre of business universe.
Buyer is the centre of the business universe
Views Business as a goods producing process.
Views businesses as a customer satisfying process.
Seller preference determines the formulation of marketing mix.
Buyer determines the shape marketing mix should take.
Selling is product oriented.
Marketing is customer oriented.
Seller’s motives dominate marketing communication.
Marketing communication is looked upon as a tool for communicating the benefits / satisfactions provided by the product.

19. What is functional organisation structure? State three merits and demerits of such a structure         2+3+3=8
Ans:  Functional organisation structure is a structure whereby the departments are created on the basis of functions of the organization such as Production, marketing, finance etc.
a)      Specialisation: A functional structure leads to occupational specialization. This promotes efficiency in utilization of manpower as employee performs similar tasks within a department.
b)      Efficiency: It helps in increasing managerial and operational efficiency and these results in increased profit.
c)       Minimises costs: It leads to minimum duplication of efforts thus lowers cost.
d)      Better control and coordination: It promotes control and coordination within a department because of similarity in the tasks being performed.
a)      Functional empires: A functional structure places less emphasis on overall organizational objectives than the departmental objectives.
b)      Problems in coordination: Pursuing departmental interests at the cost of organizational interests can also hinder the interaction between two or more departments. It may lead to problems in coordination.
c)       Conflict of interests: A conflict of interests may arise among departments when the interests of two or more departments are not compatible.
d)      Inflexibility: It may lead to inflexibility.
State four features of informal organization and mention two advantages and two disadvantages of such organization                4+2+2=8
Ans: Informal Organisation: In the words of Keith Davis, “Informal organisation is a network of personal and social relations not established or required by the formal organisation but arising spontaneously as people associate with one another.”
Features of Informal Organisation:
a)      It is not established by any formal authority. It arises from the personal and social relations amongst the people working in the organisation.
b)      Informal Organisation arises unintentionally, and not by deliberate or conscious efforts.
c)       It is influenced by the personal attitudes, emotions, likes and dislikes, etc. of the people in the organisation.
d)      It is based on rules, regulations and procedures.
e)      The existence of informal organisational structure depends on the formal organisation structure.
Benefits of Informal organisation:
a)      It helps the formal organisation to make a workable system to get the work done.
b)      It assists the formal organisation to become humanistic.
c)       It helps the group members to attain specific personal objectives.
d)      It provides social satisfaction to group members.
Drawbacks of Informal Organisation:
a)      The communication in informal organisation may, sometimes, lead to rumours.
b)      Informal organisation may put resistance to changes and innovations.
c)       It may not effectively contribute to the attachment of the objectives of the enterprise.

20. Discuss four barriers to communication and suggest four measures to make communication effective.         4+4
Ans: Types of Barriers: The barriers to communication in an organization may be broadly categorized into following groups:
a.       Physical Barriers: There are the environmental factors that also reduce the sending and receiving of communication, such as physical distance, noises and other interferences difficulty arises in communicating a message.
b.      Socio-psychological or personal Barriers: There are certain socio psychological factors which restrict the free flow of communication. They are the attitude and opinions, status consciousness, ones relations with fellow workers, seniors, and junior’s etc. family background.
c.       Organizational Barriers: Organisational barriers arise due to defects in the organization structure and the communication system of an organization. Such barriers include hierarchical distance, diversion, status barriers, goal conflicts etc.  
d.      Semantic Barriers: Semantic means the relationships of signs of their reference. Semantic barrier arises from the disadvantages of the symbolic system. Symbols have got number of meaning and one has to choose any one of them according to the requirement of communication.
e.      Mechanical Barriers: Mechanical barriers include inadequate arrangement for transmission of news, facts and figures. Example poor office layout and defective procedure and the use of wrong media led to poor communication.
The barriers to an effective communication can be reduced by following measures:
a)      Clarify the Idea: Clarify in the thoughts of the sender is must for effective ‘communication’.
b)      Use of proper people language: Sender should try to make the message meaningful and understandable by using appropriate words.
c)       Message should be precise: Lengthy and unwarranted elaboration makes message less meaningful this should be avoided.
d)      Ensure proper feedback: The sender of the message should take the feedback from the receiver. Feedback of the conveyed message is an essential tool to the check that the message is duly understood. Facilities like suggestion box complaint box secret box helps in making the communication effective.
e)      Good Listener: The sender must listen to receiver’s words carefully on the other hand receiver must also listen with due attention. Attentive listening solves many problems.
In between verbal and written communication which one would you prefer and why?                 4+4=8
Ans: Oral / Verbal Communication: It is a process of communication through words. Verbal communication consists of words arranged in meaningful patterns. Oral communication normally takes place in a face to face situation. It may be formal or informal. Although oral communication suffers from some drawbacks, this method of communication is more effective than written communication in the following situations:
a)      Instant Communication: Oral communication is more effective when it is needed to communicate with someone instantly.
b)      Detailed Explanation of Policies: If any direction of managers and policy or procedure of the company requires explanation, oral communication is the best way to communicate.
c)       Developing Direct Relationship: If it is important to establish a direct relationship between sender and receiver, or between workers and management, they should communicate orally.
d)      Maintaining Secrecy: Oral communication is best suited when information is to be kept secret. Written communication leaks secrecy as the message passes from hand to hand.
e)      Instant Response: Where instant reply from the receiver is required, oral communication is the best suited there.
Written Communication: When information, ideas, or feelings exchange in written form that is known as written communication. Written communication has its own importance and for some particular purposes it has no other alternatives. Although people spend more time in oral communication, written communication is more effective under the following circumstances:
a)      Conveying Complex Information: When the sender wants to convey complex information, written communication serves better than oral communication. Having the written document, the receiver can read it repeatedly until he/she understands the entire message.
b)      Need for Permanent Record: Written communication is preferable when a permanent record is needed for future reference.
c)       Communicating with Large Audience: When the audiences are large in number and geographically dispersed, written communication is fruitful there. The sender can communicate repeatedly with the same written document or information sheet.
d)      Less Need for Interaction with Audience: Written communication is also suitable when immediate interaction with the audience is either unimportant or undesirable.
e)      Maintaining Uniformity of Application: When any message is to be applied uniformly at different places, the sender should prefer written communication instead of oral communication.
From the above explanation, it is clear that both medium of communication has its own significance depending on situation.
21. Elaborate the concept of working capital. Explain five factors affecting the working capital requirement of a firm. 3+5=8
Ans: Working capital is the capital required for meeting day to day requirements/operations of the business. Simply, it refers to excess of current assets over current liabilities.
Calculation of working capital:
a) Gross working capital: This refers to the total investment made in all the current assets such as stock, debtors, bills receivable etc. It is calculated by adding all the current assets.
b) Net working capital: This refers to excess of current assets over current liabilities. It is calculated as: Net working capital= current assets – current liabilities. If current liabilities are more than current assets then working capital becomes negative.                            
Following factors are to be considered before determining the requirement of working capital.
1.       Scale of operations: There is a direct link between the scale of business and working capital. Larger business needs more working capital as compared to the small organizations.
2.       Nature of Business: The manufacturing organizations are required to purchase raw materials, convert them into finished goods, maintain the stock of raw materials; semi finished goods and finished goods before they are offered for sale. They have to block their capital for labour cost, material cost etc, so they need more working capital. In the trading firm processing is not performed. Sales are affected immediately after receiving goods for sale. Thus they do no block their capital and so needs less working capital.
3.       Credit allowed: If the inventory is sold only for cash, it requires less working capital as money is not blocked in debtors and bills receivable. But due to increased competition, credit is usually allowed. A liberal credit policy results in higher amount of debtors, so needs more working capital.
4.       Credit availed: If goods are purchased only for cash, it requires more working capital. Similarly if credit is received from the creditors, the requirement of working capital decreases.
5.       Availability of Raw materials: If the raw materials are easily available in the market and there is no shortage, huge amount need not be blocked in inventories, so it needs less working capital. But if there is shortage of materials, huge inventory is to be maintained leading to larger amount of working capital.
State the objectives of financial management and discuss the role of finance manager in a corporate organization. 4+4=8
Ans. Objectives of financial management:
Efficient financial management requires existence of some objectives or goals because judgment as to whether or not a financial decision is efficient is to be made in light of some objective. The two main objectives of financial management are:
1) Profit Maximisation: It is traditionally being argued, that the objective of a company is to earn profit, hence the objective of financial management is profit maximisation. Thus, each alternative is to be seen by the finance manager from the view point of profit maximisation.
2) Wealth maximisation: The companies having profit maximisation as its objective may adopt policies yielding handsome profits in the short run which are unhealthy for the growth, survival and overall interests of the business. A company may not undertake planned and prescribed shut-downs of the plant for maintenance, and so on for maximising profits in the short run. Thus, the objective of a firm should be to maximise its value or wealth.
Functions of a Finance Manager
The twin aspects, procurement and effective utilisation of funds are crucial tasks faced by a finance manager. The financial manager is required to look into the financial implications of any decision in the firm. Some of the important decisions as regards finance are as follows:
1) Estimating the requirements of funds: A business requires funds for long term purposes i.e. investment in fixed assets and so on. A careful estimate of such funds is required to be made.  Forecasting the requirements of funds is done by a finance manager by the use of techniques of budgetary control and long range planning.
2) Financing decision or Decision regarding capital structure: Once the requirements of funds are estimated, a decision regarding various sources from where the funds would be raised is to be taken.
3) Investment decision: Funds procured from different sources have to be invested in acquiring fixed assets as well as current assets. When decision regarding fixed assets is taken it is called capital budgeting decision.
4) Dividend decision: Dividend Decision: This decision is concerned with distribution of surplus funds. The profit of the firm is distributed among various parties such as creditors, employees, shareholders, debenture holders etc. Under this decision the finance manager decided how much to be distributed in the form of dividend and how much to keep aside as retained earnings.
5) Supply of funds to all parts of the organisation or cash management: The finance manager has to ensure that all sections i.e. branches, factories, units or departments of the organisation are supplied with adequate funds.
6) Keeping in touch with stock exchange quotations and behavior of share prices: It involves analysis of major trends in the stock market and judging their impact on share prices of the company's shares.
22. What is marketing mix? Explain four leading elements of marketing mix.                    2+6=8
Ans: Marketing mix prefers to one of the major concept in modern marketing according Philip Kotler “marketing mix is a set of controllable marketing variables that the firm blends to produce the response it wants in the target market”. It is the combination of four controllable variables which constitutes the company’s marketing system. The four controllable variables are:
Ø  Product
Ø  Price
Ø  Promotion
Ø  Place
These elements are inter related and inter dependent since decisions in one area usually actions in other area.
4 P’s of Marketing Mix:
1) Product mix: Product is the starting point of all marketing activities. The product mix has the following dimensions: a) Product innovation and invention. b) Product features i.e., shape, size, weight, design, color, quality, standard etc. c) Product planning and development. d) Product range and mix etc.
2) Price mix: Price in decision is important from the point of view of the producer, consumer and seller. The product mix has the following dimension: a) Pricing policies b) Cost of production and profit margin c) Determination of per unit price. d) Discount, rebates and level of margins etc.
3) Promotion mix: Promotion means communication with customers to stimulate them to buy goods. The nature of promotion mix is determined by the marketing environment. There are various dimensions of promotion mix are: a) Advertising and publicity b) Personal selling techniques c) Sales promotion measures d) Public relation techniques etc.
4) Place mix: - place mix is also known as distribution mix. It is concerned with making the goods available to the customers at the places through a chain of marketing channels such as whole sellers, retailer’s middlemen and agents. The place mix has the following directions:  a) Type of intermediaries. b) Different marketing channels c) Physical distribution system etc.
What are industrial products? Explain its six distinctive features.                            2+6=8
Ans: Industrial Products: Goods which are used for commercial production or in carrying of some business activities are known as industrial goods. It is for commercial use not for personal use.
Features of Industrial products are:
a) Number of Buyers: Number of buyers of industrial products are limited as compared to consumer products.
b) Channel of distribution: Shorter channel of distribution is used for sale of industrial products are there are limited buyers.
c) Geographical Concentration: Generally the demand for industrial products is not scattered but is concentrated at a fixed geographical location.
d) Derived Demand: Industrial products are demanded to produce consumer products that is why it is called derived demand.

e) Technical consideration: Industrial products are produced as a result of complex process so there is more technical consideration of these products.