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Class 12 Business Studies: CBSE Sample Question Papers- Term II (2021-22)- 4 | Sample Papers for Class 12 Commerce PDF Download

Class-XII
Time:120
Max. Marks: 40

General instructions: 

  • This is a Subjective Question Paper containing 12 questions. 
  • This paper contains 4 questions of 2 marks each, 4 questions of 3 marks each and 4 questions of 5 marks each. 
  • 2 marks questions are Short Answer Type Questions and are to be answered in 30-50 words. 
  • 3 marks questions are Short Answer Type Questions and are to be answered in 50-80 words. 
  • 5 marks questions are Long Answer Type Questions and are to be answered in 80-120 words. 
  • This question paper contains Case/Source Based Questions.

Short Answer Type Questions – I

Q.1. Identify and explain the step in the process of selection in which certain documents need to be executed by the employer and the candidate.

The step in the process of selection in which certain documents need to be executed by the employer and the candidate is Contract of Employment.

After the job offer has been made and candidate accepts the offer, certain documents need to be executed by the employer and the candidate. One such document is the attestation form. This form contains certain vital details about the candidate, which are authenticated and attested by him or her. Attestation form will be a valid record for future reference. There is also a need for preparing a contract of employment. Basic information that should be included in a written contract of employment will vary according to the level of the job.


Q.2. Shoaib Ltd. is a company operating in the Dehradun Valley. It deals in exporting ‘Litchis’, a fruit grown on large scale in the Valley. Due to recent floods in the Valley, many problems have arisen for the company. Many workers have been dislocated and trees have been destroyed. The firm is therefore, unable to supply ‘Litchis’. Moreover, the company has to bear the fixed expenses. Thus, it is facing a liquidity crisis. The CEO of the company feels that taking a loan from a commercial bank is the only option to meet its short-term shortage of cash. As a Finance Manager of the company, name and explain the alternative to bank borrowing that the company can use to resolve the crisis.

The firm can use Commercial Paper instead of borrowing from the bank: Commercial Paper is a short-term unsecured promissory note, negotiable and transferable by endorsement and delivery with a fixed maturity period. It is issued mostly by large and creditworthy organizsations to raise short-term funds at lower rate of interest than market rates. The issuance of commercial paper is an alternative to bank borrowing for large companies that are considered to be financially strong.


Q.3. Name and explain the process that helps in searching for possible candidates for a job or a function.

Recruitment: Recruitment refers to the process of finding possible candidates for a job or a function. It has been defined as ‘the process of searching for prospective employees and stimulating them to apply for jobs in an organization.’ Advertising is commonly part of the recruitment process, and can occur through several means, e.g., newspapers, using TV programmes dedicated to job advertisement, through professional publication, using advertisements across internet, through a job center, through campus interviews, etc.


Q.4. Sameer Sweets, a renowned name for quality sweets since 1950 had maintained its standards ever since then. It is an ancestral sweet shop and Sana, the present owner of Sameer Sweets, is the third generation entrepreneur who has taken the charge of the sweet shop from her father. Sana has been handling her responsibilities exceptionally well except that she was worried as the sales had declined during the last three months despite her best efforts and involvement in business. When she inquired from the Sales Manager, Ajay, he reported that there were some complaints about the quality of sweets from many customers recently. Identify and explain the step in the process of controlling discussed in the above case.

The step in the process of controlling discussed is Setting Performance Standards. Standards are the criteria against which actual performance would be measured. Thus, standards serve as benchmarks towards which an organization strives to work. Standards can be set in both quantitative as well as qualitative terms. For instance, standards set in terms of cost to be incurred, revenue to be earned, product units to be produced and sold, time to be spent in performing a task, all represents quantitative standards. Sometimes, standards may also be set in qualitative terms. Improving goodwill and motivation level of employees are examples of qualitative standards.

Short Answer Type Questions – II

Q.5. Pratap Singh is the Chief Executive Officer of Nissar Enterprises. It is an automobile parts manufacturing company. The enterprise has a functional structure in which jobs of similar nature have been grouped together as Production, Finance, Marketing and Human Resource. Nissar Enterprises has its manufacturing unit at Manesar. The factory has been plagued with many problems for a long time which was in the knowledge of the Production Manager, Varun Sharma. The workers had internal differences. Again and again, there were misunderstandings between the management and the workers. Keeping the problems in mind, Varun Sharma appointed Siyaram Singh who had 14 years of experience of working with the actual work force and passing on instructions of the middle management to the workers. Siyaram Singh met Varun Sharma to understand what the management wanted. Thereafter, he met the workers and conveyed the ideas of management to them. He also promised the workers to convey their problems to the management. In this way, he cleared the misunderstanding between the management and the workers. He also sorted out internal differences and was able to unite the workers within a month of his joining. His work was acknowledged and he was given a certificate of good performance along with 10% increase in salary. 
Explain the incentives provided to Siyaram Singh.

(i) Pay and allowances - Financial Incentive: Pay and allowances: For every employee, salary is the basic monetary incentive. It includes basic pay, dearness allowance and other allowances. Salary system consists of regular increments in the pay every year and enhancement of allowances from time-to-time. In some business organizations, pay hike and increments may be linked to performance.

(ii) Employee Recognition Programmes - Non-Financial Incentive: Most people have a need for evaluation of their work and due recognition. They feel that what they do should be recognized by others concerned. Recognition means acknowledgment with a show of appreciation. When such appreciation is given to the work performed by employees, they feel motivated to perform/work at higher level. Some examples of employee recognition are: Congratulating the employee for good performance, displaying on the notice board or in the company news letter about the achievement of employee, installing award or certificate for best performance, distributing mementos, complementaries like T-shirts in recognition of employee services, rewarding an employee for giving valuable suggestions etc.


Q.6. Explain the concept of informal communication.
OR
Explain Maslow’s Need Hierarchy Theory of Motivation which is considered fundamental to the understanding of motivation.

Communication that takes place without following the formal lines of communication is said to be informal communication. Informal system of communication is generally referred to as ‘grapevine’ because it spreads throughout the organization with its branches going out in all directions in utter disregard to the levels of authority. The informal communication arises out of needs of employees to exchange their views, which cannot be done through formal channels. Workers chit chatting in a canteen about the behavior of the superior, discussing about rumors that some employees are likely to be transferred are some examples of informal communications. The grapevine/informal communication spreads rapidly and sometimes get distorted. It is very difficult to detect the source of such communication. It also leads to generate rumors which are not authentic. People’s behavior is affected by rumors and informal discussions and sometimes may hamper the work environment.

OR
Maslow’s Hierarchy of Human Needs: Maslow classified all human needs into different categories and they were arranged by him in the order of their priority. This arrangement is known as the Hierarchy of Needs.
(i) Physiological needs: These needs are basic essential needs necessary for human survival and include the need for food, air, shelter, clothing, water, sleep, etc.
(ii) Security or safety needs: These refer to the needs for physical safety, protection and economic security which include safety of person and property and come into picture only when physiological needs are satisfied.
(iii) Social needs: These needs include love, affection, sense of belongingness, acceptance, approval and friendship or companionship.
(iv) Esteem needs: These needs refer to factors such as self-respect, independence, status, recognition, appreciation and attention and their satisfaction leads to increased confidence.
(v) Self-actualization needs: It refers to the highest level of need in the hierarchy. It deals with the drive to become what one is capable of becoming by attaining one’s true potential and includes growth, self-fulfillment, etc.


Q.7. What is meant by financing decision? State any two factors affecting the financing decision.

Financing Decision: It refers to the determination as to how the total funds required by the business will be obtained from various long-term sources. Long-term financial sources chiefly include equity share capital, preference share capital, retained earnings, debentures, long-term loans, etc. The following factors affect the financing decision:

(i) Cost: The cost of raising funds through different sources is different. A prudent financial manager would normally opt for a source which is the cheapest.
(ii) Risk: The risk associated with each of the sources is different. From companies point of view debt is more risky than equity. So, a company should analyze its financial risk bearing capacity and choose a source accordingly
(iii) Floatation Costs: Higher the floatation cost, less attractive the source.
(iv) Fixed Operating Costs: If a business has high fixed operating costs (e.g., building rent, insurance premium, salaries, etc.), It must reduce fixed financing costs. Hence, lower debt financing is better. Similarly, if fixed operating cost is less, more of debt financing may be preferred.
(v) Control Considerations: Issues of more equity may lead to dilution of management’s control over the business. Debt financing has no such implication. Companies afraid of a takeover bid would prefer debt to equity.
(vi) State of Capital Market: Health of the capital market may also affect the choice of source of fund. During the period when stock market is rising, more people invest in equity. However, depressed capital market may make issue of equity shares difficult for any company.


Q.8. Kapil and Kamal & Co. is a large manufacturing unit. Recently the company had conducted time and motion studies and concluded that on an average, a worker could produce 300 units per day. However, it has been noticed that the average daily production of a worker is in the range of 200-225 units. 
(i) Name the function of management and identify and explain the step in the process of this function which helped in finding out that the actual production of worker is less than the set target. 
(ii) To complete the process of the function identified in (a) and to ensure the performance as per time and motion studies, identify and explain what further step a manager has to take.

(i) The function of management is ‘Controlling’. This is the third step of controlling process i.e., comparison of actual performance with established standards. This step involves finding deviations and their extent and in identifying the causes of such deviations.

(ii) Taking corrective actions: This is the last step of controlling process. By comparing actual performance with established standards, deviations are revealed. The remedial or corrective action is to be taken to remove deficiencies. Here, it involves change in working methods, material, machines, policies and procedures. It may also require improvement in the motivation, supervision and modifications in the business plans.

Long Answer Type Questions

Q.9. Mr. X purchased a car for ₹ 15 lakh but he is not satisfied with the quality and performance of the car. The company of the car did not provide any remedy to him. Under which authority of Consumer Protection Act, 2019 can he file an appeal?
OR
Sandeep purchased a packet of biscuits from a nearby shop. He observed that the ingredients given on the label were not legible. He complained about it to the customer care of the company. The company sent a written apology besides stating that it will be ensured that the existing packets in the market will be withdrawn with immediate effect and new packets with legible labels will be made available. Which consumer right/rights did Sandeep exercise?

Under district commission, he can file a complaint. The District Commission consists of a President and two other members, one of whom should be a woman. They all are appointed by the State Government concerned. A complaint can be made to the appropriate District Commission when the value of the goods or services along with the compensation claimed, does not exceed ₹ 1 crore. On receiving the complaint, the District Commission shall refer the complaint to the party against whom the complaint is filed. If required, the goods or a sample thereof, shall be sent for testing in a laboratory. The District Commission shall pass an order after considering the test report from the laboratory and hearing the party against whom the complaint is filed. In case the aggrieved party is not satisfied with the order of the District Commission, he can appeal before the State Commission within 45 days of the passing of the order.

OR
Following consumer rights were exercised by Sandeep:
(i) Right to be Informed: The consumer has a right to have complete information about the product he intends to buy including its ingredients, date of manufacture, price, quantity, directions for use, etc. It is because of this reason that the legal framework in India requires the manufactures to provide such information on the package and label of the product. Also, wherever necessary, the consumer must be informed about the safety precautions to be taken while using the product to avoid loss or injury. Taking the example of gas cylinder, the supplier must inform the user to stop the flow of gas with the help of the regulator when it is not in use.
(ii) Right to be Heard: The consumer has a right to file a complaint and to be heard in case of dissatisfaction with a good or a service. It is because of this reason that many enlightened business firms have set up their own consumer service and grievance cells. Many consumer organizations are also working towards this direction and helping consumers in redressal of their grievances. This right means that consumers have a right to be consulted by Government and public bodies when decisions and policies are made affecting consumer interests. Also, consumers have a right to be heard by manufactures, dealers and advertisers about their opinion on production and marketing decisions. Consumers have the right to be heard in legal proceedings in law courts dealing with consumer complaints.    


Q.10. Explain the methods of floatation of new issues in the Primary Market.

There are various methods of floating new issues in the Primary Market:

 (i) Offer through Prospectus: This involves inviting subscription from the public through issue of prospectus. A prospectus makes a direct appeal to investors to raise capital through an advertisement in the newspapers and in the magazines. The issues may be underwritten and also are required to be listed on at least one recognized stock exchange. The contents of the prospectus have to be in accordance with the provisions of the Companies Act and SEBI Disclosure and Investor Protection Guidelines. 

(ii) Offer for Sale: Under this method, securities are not issued directly to the public but are offered for sale through the intermediaries like issuing houses or stock brokers. In this case, a company sells securities in bulk at an agreed price to brokers who, in turn, resell them to the investing public. 

(iii) Private Placement: Private Placement is the allotment of securities by a company to institutional investors and some selected individuals. It helps to raise capital more quickly than a public issue. Access to the primary market can be expensive on account of various mandatory and non-mandatory expenses. Some companies, therefore, cannot afford a public issue and choose to use private placement. 

(iv) Rights Issue: This is a privilege given to existing shareholders to subscribe to a new issue of shares according to the terms and conditions of the company. The shareholders are offered the ‘Right’ to buy new shares in proportion to the number of shares they already possess. 

(v) e-IPOs: A company proposing to issue capital to the public through the online system of the stock exchange has to enter into an agreement with the stock exchange. This is called an Initial Public Offer (IPO). SEBI registered brokers have to be appointed for the purpose of accepting applications and placing orders with the company. The issuer company should also appoint a registrar to the issue having electronic connectivity with the exchange. The issuer company can apply for listing of its securities on any exchange other than the exchange through which it has offered its securities. The lead manager co-ordinates all the activities amongst intermediaries connected with the issue.


Q.11. Moga Industries Ltd.’ approached a well-established university in the city of Madurai to recruit qualified personnel for various technical and professional jobs. They selected Tanya, Ritu, Garima and Chetan for various vacancies in the organization. After the selection and placement, ‘Moga Industries Ltd.’ felt the need to increase their skills and abilities, and the development of the positive attitude of the employees to perform their specific jobs better. The company also realized that learning new skills would improve the job performance of the employees. Hence, the company decided to take actions for the same. 
(i) Name the step of the staffing process regarding which the company decided to take action.
(ii) State any four benefits of the action to ‘Moga Industries Ltd.’

(i) Training and Development

(ii) Benefits of training to ‘Moga Industries Ltd.’:

(a) Avoids wastage of efforts and money:  It avoids wastage of efforts and money as training is a systematic learning, better than hit and trial methods. 

(b) Enhances employee productivity: It enhances employee productivity both in terms of quantity and quality leading to higher profits.
(c) Equips the future manager: It equips the future manager to take over in an emergency.  
(d) Reduces employees’ turnover: It reduces employees’ turnover as it increases employee morale and reduces absenteeism.
(e) Effective response: It helps in obtaining effective response in a fast-changing environment.  


Q.12. MM Ltd. is manufacturing small cars at its manufacturing unit in Pune. The demand of its cars is increasing at the rate of 20% annually. It is planning to set up a new car manufacturing unit at Indore. For this, the company will require approximately ₹ 1,500 crore as fixed capital and ₹ 400 crores as working capital. The company has already arranged for its working capital. Explain any five factors that the finance manager should keep in mind while arranging its fixed capital.
OR
Viola Limited has a share capital of ₹ 10,00,000 divided into shares of ₹ 100 each. For expansion purpose, the company requires additional funds of ₹ 4,00,000. The management is considering the following alternatives for raising funds:
Alternative 1: Issue of 10,000 Equity shares of ₹ 100 each
Alternative 2: Issue of 30% Debentures of ₹ 5,00,000
The company ’s present Earnings Before Interest and Tax (EBIT) is ₹ 4,00,000 p.a. Assuming that the rate of Return of Investment remains the same after expansion, which alternative should be used by the company in order to maximise the returns to the equity shareholders. The Tax rate is 50%. Show the working.

Factors affecting the requirements of fixed capital are as follows:

(i) Nature of Business: The type of business has a bearing upon the fixed capital requirements. For example, a trading concern needs lower investment in fixed assets compared with a manufacturing organization; since it does not require to purchase plant and machinery, etc.

(ii) Scale of Operations: A larger organization operating at a higher scale needs bigger plant, more space etc. and therefore, requires higher investment in fixed assets when compared with the small organization.
(iii) Choice of Technique: Some organizations are capital intensive whereas others are labour intensive. A capital-intensive organization requires higher investment in plant and machinery as it relies less on manual labour. The requirement of fixed capital for such organizations would be higher. Labour intensive organizations on the other hand require less investment in fixed assets. Hence, their fixed capital requirement is lower.
(iv) Technology Upgradation: In certain industries, assets become obsolete sooner. Consequently, their replacements become due faster. Higher investment in fixed assets may, therefore, be required in such cases. For example, computers become obsolete faster and are replaced much sooner than say, furniture. Thus, such organizations which use assets which are prone to obsolescence require higher fixed capital to purchase such assets.
(v) Growth Prospects: Higher growth of an organization generally requires higher investment in fixed assets. Even when such growth is expected, a company may choose to create higher capacity in order to meet the anticipated higher demand quicker. This entails larger investment in fixed assets and consequently larger fixed capital.
(vi) Diversification: A firm may choose to diversify its operations for various reasons, with diversification, fixed capital requirements increase e.g., a textile company is diversifying and starting a cement manufacturing plant. Obviously, its investment in fixed capital will increase.
(vii) Financing Alternatives: A developed financial market may provide leasing facilities as an alternative to outright purchase. When an asset is taken on lease, the firm pays lease rentals and uses it. By doing so, it avoids huge sums required to purchase it. Availability of leasing facilities, thus, may reduce the funds required to be invested in fixed assets, thereby reducing the fixed capital requirements. Such a strategy is especially suitable in high risk lines of business.
(viii) Level of Collaboration: At times, certain business organizations share each other ’s facilities. For example, a bank may use another’s ATM or some of them may jointly establish a particular facility. This is feasible if the scale of operations of each one of them is not sufficient to make full use of the facility. Such collaboration reduces the level of investment in fixed assets for each one of the participating organizations.
OR

 Rate of Return of Investment is (4,00,000/10,00,000) x 100 = 40%

EBIT after expansion = 40% × 14,00,000=5,60,000
Calculation of EPS:
Class 12 Business Studies: CBSE Sample Question Papers- Term II (2021-22)- 4 | Sample Papers for Class 12 Commerce
The company should use Plan 2 in order to increase the return to the equity shareholders.

The document Class 12 Business Studies: CBSE Sample Question Papers- Term II (2021-22)- 4 | Sample Papers for Class 12 Commerce is a part of the Commerce Course Sample Papers for Class 12 Commerce.
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