Solution

PRE-BOARD 1

Class 12 - Business Studies

1. (a) Restricted Entry

Explanation:
The entry to a profession is restricted through an examination or through acquiring an educational degree. Whereas there is no
legal restriction on appointment of a manager, anyone can become a manager irrespective of the educational qualification.
2.
(d) Primary market
Explanation:
Primary market

3. (a) Flexible
Explanation:
Planning is flexible.
4.
(d) Growth opportunities
Explanation:
Growth opportunities doesn't effect the financing decision of the organisation. financial decision relates to procurement of
finance in the organisation.

5.
(b) Pervasive
Explanation:
Controlling is a Pervasive function of management as it is performed in all levels of organizations.

6.
(b) Unity of command
Explanation:
The principle of unity of command is followed by the company.

7. (a) Purchase-sale
Explanation:
Purchase-sale of securities are deal in secondary market
8.
(d) Placement agencies and management consultants
Explanation:
Placement agencies and management consultants being used by the management.

9.
(c) Option (iii)
Explanation:
The objectives of financial management is to maximize the wealth of shareholders, to provide maximum returns to the owners
on their investment. To ensure continuous availability of sufficient funds at reasonable cost, etc.

10. (a) Both A and R are true and R is the correct explanation of A.
Explanation:
Both A and R are true and R is the correct explanation of A.

1/7
11.
(d) Pricing of securities
Explanation:
Pricing of securities

12. (a) Decrease the requirement for fixed capital

Explanation:
At times, certain business organisations share each other's facilities. Such collaboration reduces the level of investment in fixed
assets for each one of the participating organisations.
13.
(d) Both the Statements I and II are correct.
Explanation:
Both the Statements I and II are correct.

14.
(d) Planning does not guarantee success
Explanation:
Planning does not guarantee success

15.
(c) Trading on equity
Explanation:
Trading on equity

16.
(d) Both the Statements I and II are correct.
Explanation:
Both the Statements I and II are correct.

17.
(b) option (b)
Explanation:
Developing premises

18.
(d) (a) - (iii), (b) - (i), (c) - (iv), (d) - (ii)
Explanation:
(a) - (iii), (b) - (i), (c) - (iv), (d) - (ii)

19. (a) Option (i)

Explanation:
Some part of current assets is usually financed through short-term sources, i.e., current liabilities. The rest is financed through
long-term sources and is called net working capital. Thus, NWC = CA - CL (i.e. Current Assets - Current Liabilities.)
20.
(d) Forward-looking
Explanation:
Controlling is forward-looking.

21. i. Maga Ltd is discussing about the achievement of ‘organisation objective’ in part (i) and ‘social objective’ in part (ii) of the
question. Organisational objectives It refers to the goals for the benefit of all stakeholders such as employees, government,
shareholders and investors. Organisation objectives are:

2/7
 a. Survival When the organisation earns enough revenue to cover its cost.
b. Profit When the organisation earns enough revenue to cover costs and risks of the business.
c. Growth It implies growth in terms of sales, profit, number of workers, products produced and sold, etc.
ii. Social objectives Since, business organisations are social units, their objectives should be in line with general needs of the
society. Some of the social objectives of an organisation are :
a. Supply of quality products.
b. Using environmental friendly methods of production…
c. It should provide employment opportunities to the disadvantaged sections of society.
iii. Two values which the company wants to communicate to the society are:
a. Promoting employment opportunities By providing employment to the people of backward area.
b. Environment friendly By producing solar heaters and reduce production of electric heaters
22. i. 'No one showed concern and enquired about her health'. The quoted line depicts that her affiliation/belongingness needs are
not fulfilled.
ii. The two other needs which still remain to be satisfied according to Maslows' Need Hierarchy Theory are:
a. Self-actualisation needs: It is the highest level of need in the need hierarchy theory. These needs include realizing
personal potential, self-fulfillment, seeking personal growth and peak experiences.
b. Esteem needs: These include fulfilment of needs such as self-respect, autonomy, status, recognition and attention.
OR
Two styles of leadership are:
i. Transformational Leadership: This style focuses on inspiring and motivating followers to achieve exceptional performance
by setting high standards, providing support, and fostering a sense of purpose and personal growth.
ii. Democratic Leadership: This style involves involving followers in decision-making processes, encouraging open
communication, and considering their input. It promotes teamwork, collaboration, and empowerment among the members of
the organization.
23. i. Cash Flows of the project:
When a company takes an investment decision involving huge amount it expects to generate some cash flows over a period.
These cash flows are in the form of a series of cash receipts and payments over the life of an investment
ii. The investment Criteria involved:
It involves a number of calculations regarding the amount of investment, interest rate, cash flows and rate of return. There are
different techniques to evaluate investment proposals which are known as capital budgeting techniques.
24. Aman has set up an NGO or consumer organisation in the village for the protection and promotion of consumer interests. The key
functions highlighting the role of a consumer association are listed below:
a. Educating the general public about consumer rights by conducting training programmes, conferences and workshops.
b. Publishing periodicals, other publications, arrange conferences, seminars and workshops, to give knowledge about consumer
problems, provide special education to women about consumerism, legal reporting, reliefs available and other matters of
interest.
c. Carrying out comparative testing of consumer products in accredited laboratories to test the relative qualities of competing
brands and publishing the test results for the benefit of consumers.
d. Encouraging consumers to strongly protest and take an action against unscrupulous, exploitative and unfair trade practices of
sellers.
e. Providing legal assistance to consumers by way of providing aid, legal advice etc. in seeking legal remedy.
f. Filing complaints in appropriate consumer courts on behalf of the consumers.
g. The consumers’ organisations play a significant role in eliminating the evils of adulteration, hoarding, black- marketing, and
under-weight selling. Whenever there is an unnecessary rise in the prices of certain things, the consumers’ organisation raise a
voice of protest against it.
OR
Consumer organizations and NGO's perform several functions for the protection and promotion of interest of consumers. These
include:
i. Educating the general public about consumer rights by organising training programmes, seminars, and workshops.
ii. Publishing periodicals and other publications to impart knowledge about consumer problems, legal reporting, reliefs available
and other matters of interest.

3/7
25. Policy
These are the general guidelines which bring uniformity in decision making.
It can be defined as an organisation's general response to a particular problem or situation.
Policies are made at every level because the managers at every level need to decide or predetermine the way of handling a
situation.
These act as a guide to take decisions in an unexpected situation.
For example, a school may have a policy of giving admission to the students who have secured more than 60% marks.
Procedure
These are those plans which determine the sequence of any work to be performed.
They are specified in chronological order.
Procedures are designed to execute policies and achieve objectives.
For example, the procedure may be for the purchase of raw material, selection of employees, redressal of grievances, etc.
OR
Objectives
These are defined as end results which the management seeks to achieve by its operations
These are set by the top management of the organisation.
Different departments and units may have their own objectives.
These are expressed in quantifiable terms.
There must be a time limit for the achievement of objectives.
For example, an increase in sales by 10% or decrease in rejections by 2%.
Strateg
A strategy is a comprehensive plan to achieve organisational objectives.
The dimensions of strategy are:
a. Determining long-term objective.
b. Adopting a particular course of action.
c. Allocating resources for achieving the objectives.
A strategy is formulated after scanning the business environment.
It studies environmental opportunities and threats and tries to fix a match between them and the organization's resources.
26. The relationship between planning and controlling is stated in the points below:
i. Planning provides the basis for controlling activities.
ii. Controlling ensures that planned goals are achieved efficiently and effectively. It measures the performance with the
predetermined standards and finds out the deviations if any.
iii. The causes of deviation as identified by controlling are the basis of effective future planning.
iv. Planning and controlling both are forward-looking and backward-looking.
v. Both are integral parts of an organisation and are necessary for the smooth functioning of an enterprise.
vi. Planning proceeds controlling and controlling succeeds planning.
vii. The process of planning and controlling works on Systems Approach which is "Planning → Results → Corrective Action".
OR
Controlling is a process under which:
(i) After setting the targets actual performance is compared with the standard or planned performance.
(ii) This is done in order to identify the deviations or difference between the two.
(iii) Finally, the aim of doing controlling is to remove these deviations after identifying the causes and taking action to correct or
match the actual and planned performance.
27. i. Division of work
Work is divided into small tasks/ jobs. A trained specialist who is competent is required to perform each job.
Thus, division of work leads to specialisation.
ii. Order
The principle of order states that ‘A place for everything (everyone) and everything (everyone) in its (her/his) place’.
If there is a fixed place for everything and it is present there, then there will be no hindrance in the activities of
business/ factory. This will lead to increased productivity and efficiency.
iii. Unity of command
The principle of unity of command states that each participant in a formal organisation should receive orders from and
be responsible to only one superior.

4/7
 This is to prevent confusion regarding tasks to be done.
It brings uniformity in the command for a common work related to worker.
28. Directing means giving instructions and guiding people in doing work. In the context of management of an organisation, directing
refers to the process of instructing, guiding, counselling, motivating and leading people in the organization to achieve its
objective.
It provides many benefits to a concern which are as follows:-
i. It Initiates Actions - Directions is the function which is the starting point of the work performance of subordinates. It is from
this function the action takes place, subordinates understand their jobs and do according to the instructions laid. Whatever are
plans laid, can be implemented only once the actual work starts. It is there that direction becomes beneficial.
ii. It Ingrates Efforts - Through direction, the superiors are able to guide, inspire and instruct the subordinates to work. For this,
efforts of every individual towards accomplishment of goals are required. It is through direction the efforts of every
department can be related and integrated with others. This can be done through persuasive leadership and effective
communication. Integration of efforts bring effectiveness and stability in a concern.
iii. Means of Motivation - Direction function helps in achievement of goals. A manager makes use of the element of motivation
here to improve the performances of subordinates. This can be done by providing incentives or compensation, whether
monetary or non - monetary, which serves as a “Morale booster” to the subordinates Motivation is also helpful for the
subordinates to give the best of their abilities which ultimately helps in growth.
iv. It Provides Stability - Stability and balance in concern becomes very important for long term sun survival in the market. This
can be brought upon by the managers with the help of four tools or elements of direction function - judicious blend of
persuasive leadership, effective communication, strict supervision and efficient motivation. Stability is very important since
that is an index of growth of an enterprise. Therefore a manager can use of all the four traits in him so that performance
standards can be maintained.
29. Capital market refers to facilities and institutional arrangements through, which medium and long-term funds, both debt and
equity are raised and invested.
The capital market can be divided into two parts:
i. Primary Market (New Issues Market)
ii. Secondary Market (Stock Exchange)
Differentiation in Primary market and secondary market
Basis Primary Market Secondary Market

There is sale of securities by new companies or further

Securities
new issues of securities by existing companies to There is trading of existing securities only.
traded
investors.

Buying
Only buying of securities takes place in the primary Both the buying and the selling of securities can take
and
market, securities cannot be sold there. place on the stock exchange.
Selling

Capital The flow of funds is from savers to investors, i.e. the Enhances encashability (liquidity) of securities, i.e. the
formation primary market directly promotes capital formation. secondary market indirectly promotes capital formation.

Location There is no fixed geographical location. Located at specified places.

30. i. Self-regulation by Business: In today's scenario, where there is stiff competiton in the business world, only the best can
survive. Therefore, the need of the hour is to make the customers loyal which is only possible when the sellers would be able
to win their customers. In this way the self regulation by business, the sellers along with focusing on the maximization of
profits, must also ensure the satisfaction of the customers and must not indulge in such practices which could affect the
consumers adversly and ultimately force them to part away with the seller.
ii. Business associations The associations of trade, commerce and business like Associated Chambers of Commerce
(ASSOCHAM), Federation of Indian Chambers of Commerce of India (FICCI) and Confederation of Indian Industries (CII)
have laid down certain code of conduct, which lay down for their members the guidelines reagarding dealings with the
customers
31.
i. The next three steps that Harish has to follow in the staffing process after selecting the heads of different departments are as
follows:

5/7
 a. Placement and Orientation: Placement refers to the process of giving the charge of the job for which they have been appointed.
Orientation may involve a series of activities related to introducing the new employee to other employees and familiarising him
with the rules and policies of the organization. Moreover, he is taken around the workplace and made aware of the fire safety
policy, canteen, conference room, etc.
b. Training and Development: Organisations either have in-house training centres or make alliances with training and educational
institutes. This is done to ensure continuous learning of their employees and in order to strengthen their competencies for both
present and future jobs. This helps to motivate them and enables them to perform better and contribute more towards the
realization of organizational effectiveness and efficiency.
c. Performance Appraisal: It is a process of evaluating the worth of an employee to the organization. It may be done in both formal
and informal ways. The process performance appraisal includes defining the job, appraising performance and providing feedback.
ii. The two values that Harish wants to communicate to society by setting up this manufacturing unit are:
a. Rural development
b. Sustainable development
OR
Reasons on the basis of which 'Pratik' would have taken the decision not to make appointment with the help of an outside source
are:
1. Reduce time to hire: When recruiting externally, hiring teams find candidates, evaluate them and, if all goes well, persuade
them to join their company. All of which takes time.
2. Shorten onboarding time: Everyone needs some time to adjust to a new role, but internal hires are quicker to onboard than
external hires.
3. Cost less: Research has shown that external hiring may cost 17 times more than internal hiring.
4. Strengthen employee engagement: Promoting from within sends a message that you value your employees and want to invest in
them. This helps to build a culture of trust that enhances employee engagement and retention.
32. a. The understanding of the business environment helps in assisting in planning and policy formulation as its understanding and
analysis can be the basis for deciding the future course of action or decision making. It enables the firm to identify
opportunities and getting the first-mover advantage instead of losing them to its competitors. The lines from the given
paragraph are:
"After completing his MBA from the USA, Mr. Ajay came to India to start a new business under the banner Ecom Creations
Ltd. He launched a new product in e-leaming for senior secondary school students in the commerce stream which already had
an established market in the UK and the USA but not in India."
b. It helps in improving the performance of an enterprise through continuous monitoring of the environment and adopting
suitable business practices that help to improve both their present and future performance. The lines from the given paragraph
are:
"His business started flourishing in India."
c. It helps the firm to identify threats and early warning signals that are likely to hinder a firm's performance and take timely
actions. The lines from the given paragraph are:
"As a result, more Indian companies entered the market with other subjects."
OR
The negative effects of liberalization and globalization are as follows:
i. Threats from multinational companies (MNCs): With the arrival of multinationals it is becoming difficult for small and
medium business units to even survive. The massive entry and consolidation to multinationals in the Indian markets is a
challenge that has already forced some business enterprises to take the exit route.
ii. Destabilization of protected environment: With easier entry of multi-national companies, Indian business environment is
fast losing its protective shield. The new entrepreneurial freedom is creating problems for the existing players. Even
manufacturers of Maruti car could not retain their market share and had to remodel their products and announce heavily price
reductions from time to time.
iii. Decline in public sector: Public sector is losing markets and their capacity utilization has declined, hampering thereby pace
of country's technological and economic growth.
iv. Fall in the value of rupee: Indian rupee has been devaluing against DOLLAR, EURO and many other foreign currencies.
This phenomenon has forced even some established exporters to encash their stake partly/fully.
v. Increase in the consumption of products: Activists have pointed out that globalization and liberalisation has led to an
increase in the consumption of products, which has impacted the ecological cycle. Increased consumption leads to an increase
in the production of goods, which in turn puts stress on the environment.

6/7
 vi. Rise in pollution level: The amount of fuel that is consumed in transporting the products has led to an increase in the
pollution levels in the environment. It has also led to several other environmental concerns such as noise pollution and
landscape intrusion. Transportation has also put a strain on the non-renewable sources of energy, such as gasoline.
33. Delegation means sharing of authority by a superior with his subordinate and make him confident to assume the same position in
the future.
i. Authority: It refers to the right of an individual to command his subordinates and to take action within the scope of his
position.
a. Authority is needed to discharge a given responsibility to the subordinates. Without authority, it is like a toothless tiger
sent for the hunt.
b. It flows from top to bottom of the scalar chain on the basis of hierarchical job positions.
c. The superior has authority over the subordinates. It is highest at the top management, However, it reduces as we move
downward in the corporate hierarchy.
ii. Responsibility: It is the obligation of a subordinate to properly perform the assigned duties.
a. Responsibility arises from a superior-subordinate relationship because the subordinate is bound to perform the duty
assigned to him by his superior. Responsibility is by default, while, the Authority is deliberate in nature.
b. Responsibility flows upwards, i.e. from bottom to top. A subordinate will always be responsible to his superior based on
the principle of Unity of Command.
iii. Accountability:
a. Accountability implies 'being answerable for the final outcome of the assigned task'. Where responsibility ends, the
accountability originates.
b. Accountability flows upwards, i.e. a subordinate will be accountable to his superior for satisfactory performance of the
assigned work.
34. Personal selling refers to the oral presentation of the message in the form of conversation with one or more prospective customers
for the purpose of making sales. It is a door to door selling of the product where the salesman is in direct contact with the
customer. This enables him to describe the product comprehensively and take immediate feedback. This method of Promotion
enables the seller to get a first-hand response about the product from the customer.
Qualities of good salesman are as follows
i. Physical qualities Good looking, healthy.
ii. Psychological qualities Should be sweet natured, possess good behaviour, should be mentally healthy, intelligent and
creative.
iii. Technical quality Should be fully conversant with technical knowledge of the product.
iv. Communication skills Should be pleasing, polite and courteous. He should have good oratory skills and he should also be a
good listener.

7/7