Solved Question  Papers Business Studies Set 1
 

Question 1.
Rishabh joined an entertainment company Avtaar, as a creative head. As a manager looking after the creative unit of the company, one of the functions he has to perform is the process of organizing. Which step of the process will he need to perform after identifying and dividing the work that has to be done in accordance with previously determined plans?
(a) Identification and division of work
(b) Departmentalisation
(c) Assignment of Duties
(d) Establishing Reporting Relationships 
Answer:
(b) Departmentalisation

Explanation: Once work has been divided into small and manageable activities then those activities which are similar in nature are grouped together. Such sets facilitate specialisation. This grouping process is called departmentalisation.

 

Question 2.
Which characteristic of the business environment is highlighted when changes are taking place too frequently and it becomes diffcultto predict the future?
(a) Uncertainty
(b) Complexity
(c) In ter-related ness
(d) Relativity 
Answer:
(a) Uncertainty

Explanation: business environment is uncertain because it is difficult to predict future happenings especially when environmental changes are taking place too frequently.

 

Question 3.
Aarohan Ltd. is a company manufacturing automobiles where division of work into key areas includes production, purchase, marketing, accounts and personneL Which of the following is a disadvantage of the organization structure of Aarohan Ltd.?
(a) it may lead to increase in cost
(b) Managers may gain power and assert independence and ignore organization interests.
(c) It ensures that different functions get due attention.
(d) Heads do not get training for top management positions. 
Answer:
(d) Heads do not get training for top management positions.

Explanation: Arohan limited has the functional organisational structure. Functional heads do not get training for top management positions because they are unable to gather experience in diverse areas.

 

Question 4.

Identify the dimensions of the business environment illustrated by the picture given above in which Sapna who has joined the workforce recently is working on an accounting software.
(a) Technological and social.
(b) Technological and political
(c) Political and economic
(d) Social and legal 
Answer:
(a) Technological and Social

Explanation: Sapna is working on accounting software it is a part of technological environment. Technological dimensiono includes any changes taken place due to technological advancement and innovation. Social dimenstion includes social customes, rituals, the culture in which individual was educated or lived in.

 

 

Question 5.
Identify the reason which makes management important in the light of the fact that it is generally seen that individuals in an organization resist change, as a change often means moving from a familiar, secure environment into a newer and a more challenging one.
(a) Management helps in achieving group goals.
(b) Management creates a dynamic organization
(c) Management increases efFciency
(d) Management helps in the development of society, 
Answer:
(b) Management creates a dynamic organization

Related Theory
characteristics of management:

• Management is a goal oriented process

• Management is pervasive

• Management is multi- dimensional

• Management is a continuous process

• Management is a group activity

• Management is a dynamic function

• Management is intangible

 

Question 6.
The government of India made an announcement regarding Demonetization of the Indian economy on November 8, 2016 with profound implications for it. The process which put restrictions on convertibility of domestic money and bank deposits was meant to create a less-cash economy. One argument against the cash-lite economy is that:
(a) Internet connectivity is a prerequisite
(b) More people will be introduced into the formal economy.
(c) Financial saving will increase
(d) Tax evasion will be reduced 
Answer:
(a) Internet connectivity is a prerequisite

Explanation: Internet connectivity is a pre-requisit for the cash lite economy. Demonetisation came with the major changes in the paying pattern of the consumer. All the transactions are to be made online for this purpose internet is necessary.

 

Question 7.
Airlines will be able to offer the benefit of lower pricing to customers on sectors/ routes due to the decision of the civil aviation ministry to remove price caps from August 31, 2022. This can help an airline to do better performance if they take early decisions regarding future courses of action after understanding and doing analysis. Which importance of business environment and its understanding by managers is not highlighted above:
(a) It helps in improving performance
(b) It helps in assisting in planning and policy formulation
(c) It helps in tapping useful resources
(d) It enables a firm to identify opportunities and get first mover advantage. 
Answer:
(c) It helps in tapping useful resources

Explanation: Careful scanning of the Business Environment helps in tapping the useful resources required for the business. It helps the firm to track these resources and convert them into goods and services.

 

 

Question 8.
Also a mobility platform is in the process of laying off 400-500 employees in a move aimed at driving cost efficiency. Which objective of management will the firm not be able to achieve by carrying out this process.
(a) Effciency
(b) Social
(c) Profit
(d) Survival 
Answer:
(b) Social

Explanation: The firm will not be able to achieve social objective of management by carrying out this process. Social objectives of mangement should be fulfill by each organisation as business is a social process. It includes provinding employement opportunities, eco¬friendly methods of production, employment in rural areas, etc.

 

Question 9.
Radha started a home cooked food delivery Dabba service. Her mother, who is a great cook, decided to help her. They relied on friends and family for orders and then on word of mouth. As a step in the process of ensuring that activities are performed as per her plan of supplying healthy, good quality, reasonable food and earning profit, she decided to keep both qualitative and quantitative benchmarks towards which she would strive to work. A function of management is being discussed above. An important characteristic of this function of management is:
(a) It is the first function of management
(b) It is the Last function of management
(c) It is both forward looking and backward looking
(d) It is required only in business organizations
Answer:
(c) It is both forward looking and backward looking.

Explanation: This situation is based on controlling function of management Controlling is backward looking as well as forward looking functions as it involves assessment of past performance, it also aims at improving the future performance by taking the required corrective actions.

 

Question 10.
Raman and Vasudev were two employees who were embezzling an import-export. company in Varanasi where they were working. The finance manager of the company Sampat Singh became suspicious of the two employees when he realized that their activities were not being performed as per the plans. He installed a software program that could secretly log every single stroke of the suspects’ computer keys and send an encrypted email report to the Cyber police. The police were able to catch the two dishonest employees red handed and arrest
them. Identify the function of management ’ being discussed above.
(a) Staffng
(b) Coordination
(c) Controlling
(d) Organizing 
Answer:
(c) Controlling

Explanation: Controlling can be defined as that function of management which helps to seek planned results from the subordinates, managers and at all levels of an organization. The controlling function helps in measuring the progress towards the organizational goals & brings any deviations, & indicates corrective action.

 

Question 11.
Name the outcome of the function of management which includes designing of roles to be filled by suitably skilled people and defining the inter relationship between roles so that ambiguity in performance of duties can be eliminated.
(a) Organization structure
(b) Delegation of authority
(c) Decentralization
(d) controlling 
Answer:
(a) Organization structure

 

Related Theory
The type of structure adopted by an organisation will vary with the nature and types of activities performed by an organsation. The organisational structure can be classified under two categories which are as follows:

• Functional structure and

• Divisional structure

 

Question 12.
Statement-I: Transportation helps in creating time utility and warehousing helps in creating place utility
Statement-ll: The process of classification of products into different groups on the basis of their important characteristics is known as standardization.
Choose the correct option from the options given below:
(a) Statement I is true and II is false
(b) Statement II is true and I is false
(c) Both the statements are true
(d) Both the statements are false
Answer:
(d) Both the statements are false

Explanation: Warehousing helps in creating time utility and Transportation helps in creating place utility. The process of classification of products into different groups on the basis of their important characteristics is known as grading.

 

Question 13.
Match the various terms of Financial Markets Column-1 with their respective Statements in Cotumn-ll:

	Column 1		Column II
(A)	Financial market	(I)	It is also known as Stock Market
(B)	Primary Market	(II)	It is a market for creation and exchange of financial assests.
(C)	Secondary Market	(III)	It is also known as New Issue Market

(a) (ii), (iii), (i)
(b) (i), (iii), (ii)
(c) (iii), (ii), (i)
(d) (i),(ii), (iii) (1)
Answer:
(a) (ii), (iii), (i)

Related theory
functions of financial markets:

• Mobilisation and channelling of savings into most efficient uses

• Encourages and facilitates price discovery

• Creates liquidity for financial assets

• Decreases transaction costs

 

Question 14.
………….. is a number assigned to each transaction by the stock exchange and is printed on the contract note.
(a) Client code number
(b) Unique order code
(c) Permanent account number
(d) Depository participant number 
Answer:
(b) Unique order code

Related Theory
Dematerialisation: Dematerialisation is the process by which a client can get physical certificates converted into electronic balances.An investor intending to dematerialise its securities needs to have an account with a DP. The client has to deface and surrender the certificates registered in its name to the DP.

 

Question 15.
One of the important decision areas under die marketing function of is managing inventory.
(a) Branding
(b) Pricing
(c) Promotion
(d) Physical distribution
Answer:
(d) physical distribution

Explanation: Physical distribution refers to the movement of finished goods from the point of its manufacturing to the end user. In ecommerce, physical distribution involves several ecommerce supply chain activities including warehousing, inventory control, order processing, retail fulfillment, and shipping.

 

Question 16.
Which of the following statements is incorrect?
(a) Providing liquidity to securities is one of the functions of stock exchange
(b) Process of holding shares in electronic form is known as Dematerialization
(c) Securities Exchange Board of India performs the regulatory function of controlling insider trading and imposing penalties for such practices.
(d) Capital market consists of Commercial banks, Development banks and stock exchanges 
Answer:
(c) Securities Exchange Board of India performs the regulatory function of controlling insider trading and imposing penalties for such practices. ?

Related Theory
Money market Money market basically refers to a section of the financial market where financial instruments with high liquidity and short-term maturities are traded. Money market has become a component of the financial market for buying and selling of securities of short-term maturities, of one year or less, such as treasury bills and commercial papers.

 

Question 17.
One of the following is considered to be an extension of the marketing concept, which apart from customer satisfaction pays attention to ethical and ecological aspects of marketing. Identify the concept.
(a) Selling concept
(b) Product concept
(c) Production concept
(d) Societal Marketing concept 
Answer:
(d) Societal Marketing concept

Explanation: marketing concept focused on the satisfaction of consumer needs, but societal marketing concept focuses on the ethical and ecological aspects of marketing. Societal Marketing emphasizes social responsibilities and suggests that to sustain long-term success, the company should develop a marketing strategy to provide value to the customers to maintain and improve both the customers’ and society’s well-being better than the competitors.

 

Question 18.
While the product costs set the lower limits of the price for a product, the upper limit of price which a buyer would be prepared to pay is decided by:
(a) Utility and demand of the product
(b) The marketing manager of the firm
(c) The Government
(d) The competitors of the firm 
Answer:
(a) Utitity and demand of the product Related Theory

factors affecting price determinahtion:

• product cost,

• utility and demand,

• extent of competition in the market,

• government and legal regulations

 

Question 19.
Which of the following statements about Advertising is incorrect?
(a) It is a personal form of communication
(b) It is a paid form of communication
(c) It is a mass selling technique.
(d) It is inflexible as the message can’t be adjusted to the needs of the buyer. 
Answer:
(a) It is a personal form of communication Explanation: It is a impersonal form of communication.

 

Question 20.
Arrange the steps involved in trading procedure at the stock exchange in correct sequence:
(i) Settlement of order
(ii) Opening of Demat Account
(iii) Placing of order
(iv) Execution of order
(a) (ii); (iv); (iii); (i)
(b) (ii);(i);(iii);(ii)
(c) (iii); (ii): (ii); (i)
(d) (ii);(iii);(iv); (i)
Answer:
(d) (ii);(iii);(iv); (i)

Related Theory
The following are the various methods through which floating of new issues can be done.

• Offer through Prospectus.

• Offer through Sale

• Private Placement

• Rights Issue

• e-IPOs

 

Question 21.
Top management plans for the entire organization. According to these plans the organizational structure is developed and staffed. In order to ensure that these plans are executed according to plans, directing is required. Any discrepancies between actual and realized activities are then taken care of at the stage of controlling. Name and explain the process highlighted above which started at the planning stage itself and is implicit and inherent in all the functions of management in an organization. 
Answer:
Coordination The process by which a manager synchronizes the activities of different departments is known as coordination. Coordination is the force that binds all the other functions of management. It is the common thread that runs through all activities. It is implicit and inherent in all functions of an organization.

 

Question 22.
Mrs. Ahilya Pasi is the Principal of a prestigious school in New Delhi. The school has a vacancy of a headmistress/ headmaster of the junior wing of the school. The senior teachers of the school have the opinion that only internal candidates should be considered for this post. However, Mrs. Pasi and the management would like to invite applications from external sources too. Briefly explain any three justifications the management can provide to convince the staff for inviting applications of external candidates for the vacant post. 
Answer:
Merits of external sources: (Any three)
1. Qualified personnel: By using external sources of recruitment, the management can attract qualified and trained people to apply for vacant jobs in the organization.

2. Wider choice: When vacancies are advertised wisely, a large number of applicants from outside the organization can apply. The management has a wider choice while selecting the people for employment. ‘

3. Fresh Talent: The present employees may be insufficient or they may not fulfill the specifications of the jobs to be filled. External recruitment provides wider choice and brings new blood in the organization.

4. Competitive spirit If a company taps external sources, the existing sources, the existing staff will have to compete with the outsiders. They will work harder to show better performance.

 

Question 23.
Explain “Critical point control” with respect to Analyzing deviations, a step in the process of controlling. Give a suitable example.
Answer:
Critical point control: It is neither economical nor easy to keep a check on each and every activity in an organization.
Control should therefore focus on key result areas which are critical to the success of an organization. These KRAs are set as the critical points. If anything goes wrong at the critical points, the entire organization suffers. For instance, in a manufacturing organization, an increase of 5% in the labour cost may be more troublesome than a 15% increase in postal charges.

OR

Explain “Management by exception” with respect to Analyzing deviations, a step in the process of controlling. Give a suitable example. 
Answer:
Management by Exception: Management by exception, which is often referred to as control 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 the management.

For instance, if the plans lay down 2% increase in labour cost as an acceptable range of deviation in a manufacturing organization, only an increase in labour cost beyond 2% should be brought to the notice of the management However, in case of major deviation from the standard (say, 5%), the matter has to receive immediate action of management on a priority basis.

 

Question 24.
State any three objectives of the Securities Exchange Board of India.
Answer:
Following are the objectives of SEBI: (any three)
1. To regulate stock exchanges and the securities industry to promote their orderly functioning

2. To protect the rights and interests of investors, particularly individual investors and to guide and educate them.

3. To prevent trading malpractices and achieve a balance between self-regulation by the securities industry and its statutory regulation.

4. To regulate and develop a code of conduct and fair practices by intermediaries like brokers, merchant bankers etc., with a view to making them competitive and professional

OR

State any three functions performed by the stock exchange.
(i) Providing liquidity and marketability to existing securities.
(ii) Pricing of securities on the stock exchange is determined by the forces of demand and supply.
(iii) Safety of transaction is ensured as membership of a stock exchange is well regulated and its dealings are well defined.
(iv) Contributes to economic growth through the process of disinvestment and reinvestment
(v) Spreading of equity cult by ensuring wider ownership by way of regulating new issues.
(vi) Providing scope for speculation by ensuring speculative activity within the provisions of law for it to take place in a restricted and controlled manner.

Caution
Students should not consider SEBI as stock exchange. These are two different bodies. The functions and objectives of stock exchnage are different from SEBI.

 

Question 25.
Enumerate any four benefits of the process by which the aptitudes, skills and abilities of employees to perform specific jobs are increased.
Answer:
The benefits of training to an organization are as follows: (any four)
(i) Training is a systematic learning, Always better than hit and trial methods which Idad to wastage of efforts and money.
(ii) It enhances employee productivity both in terms of quantity and quality, leading to higher profits.
(iii) Training equips the future manager who can take over in case of emergency.
(iv) Training increases employee morale and reduces absenteeism and employee turnover.
(v) It helps in obtaining an effective response to a fast changing environment- technological and economic

OR

Name the mechanism that attempts to measure certain characteristics of individuals in the process of identifying and choosing the best person out of the number of prospective candidates for the job. Enumerate any three of its types. 
Answer:
Selection test
Types of tests are: ( ariy three)
(a) Intelligence test is one of the important psychological tests used to measure the level of intelligence quotient of an individual and is an indicator of a person’s ability or the ability to make decisions and judgments.

(b) Aptitude test is a measure of an individual’s potential for learning new skills and indicates the person’s capacity to develop.

(c) Personality tests provide clues to a person’s emotions, her reactions, maturity, and value system and probe the overall personality.

(d) Trade tests measure the existing skills of the individual, level of knowledge and proficiency in the area of professions or technical training.

(e) Interest tests are used to know the pattern of interests or involvement of a person.

Caution
Selection test is a part of selection process. Do not write definition of selection in this answer.

 

Question 26.
State any four barriers to communication which are concerned with problems and obstructions in the process of encoding and decoding the message into words or impressions.
Answer:
Semantic barriers (Any four):
1. Sometimes intended meaning may not be conveyed by a manager to his subordinates due to badly expressed messages which may be on account of inadequate vocabulary, usage of wrong works, omission of needed works, etc.

2. A word may have different meanings and the receiver has to perceive one such meaning for the word used by the communicator.

3. If the translator is not proficient with both the languages, mistakes may creep in causing different meanings to communication.

4. Some communications may have certain assumptions which are subject to different interpretations.

5. It is usually found that specialists use technical jargon while explaining to persons who are not specialists in the concerned field and therefore they may not understand the actual meaning of. many words.

6. If there is no match between what is said and what is expressed in body movements, communications may be wrongly perceived.

OR

State any four barriers to communication which are related to authority relationships, rules and regulations of the company. 
Answer:
Organizational barriers (Any four):
1. If organizational policy either explicit or implicit is not supportive to free flow of communication it may hamper effectiveness of communications.

2. Rigid rules and regulations, cumbersome procedures may be a hurdle to communication, as communications through prescribed channeLs may result in delays.

3. Status of superior may create psychological distance between him and his subordinates.

4. Complexity in the organization caused by the number of managerial levels may delay and distort the communication as the number of filtering points is more.

5. If facilities like frequent meetings, suggestion box, and complaint box, social and cultural gathering, transparency in operations, etc, for smooth, clear and timely communications are not provided, communications may be hampered.

 

Question 27.
In Saarthak Steel several initiatives have been taken to further improve the motivation levels of employees through designing jobs that include greater variety of work content, providing certain stability about future income and work, providing fringe benefits like housing, medical aid, etc., allotment of shares in line with various incentives. Identify and briefly explain the incentives being given by the organization to the employees. 
Answer:
Incentives being given by the organization to the employees are:
1. Job enrichment Job enrichment is concerned with designing jobs that include greater variety af work content, require higher level of knowledge and skill; give workers more autonomy and responsibility; and provide opportunity for personal growth and a meaningful work experience.

2. Job security: Employees want their jobs to be secure. They want certain stability about future income and work so that they do not feel worried about these aspects and work with greater zeal

3. Perquisites: In many companies perquisites and fringe benefits are offered such as car allowance, housing, medical aid and education to the children, etc., over and above the salary.

4. Co-partnership/stock option: Under these incentive schemes, employees are offered company shares at a set price which is lower than market price. Sometimes, management may allot shares in line of various incentives payable in cash.

 

Question 28.
State any four factors affecting the financial decision that is concerned with raising of finance using shareholders’ funds and borrowed funds. 
Answer:
Following are the factors affecting capital
structure of a company : (Any four)
1. Size of the projected Cash flows must be considered before borrowing.

2. Interest Coverage Ratio refers to the number of times earnings before interest and taxes of a company covers the interest obligation.

3. Debt Service Coverage Ratio takes care of the deficiencies referred to in the interest coverage ratio.

4. More debt can be used if debt can be raised at a lower rate

5. A higher Tax Rate makes debt relatively cheaper and increases its attraction vis-a-vis equity.

6. Process of raising resources also involves some cost which may affect the choice between debt and equity and hence capital structure.

7. If a firm’s business risk is lower, its capacity to use debt is higher and vice versa.

8. To maintain flexibility the firm must maintain some borrowing power to take care of unforeseen circumstances.

9. Capital Structure of other companies is a useful guideline in the capital structure planning.

10. Stock Market Conditions often affect the choice between debt and equity.

11. Every company operates within a regulatory framework provided by the’ law.

12. Control as a factor also influences the choice between debt and equity especially in companies in which the current holding of management is on a lower side.

13. If the ROI of the company is higher, it can choose to use trading on equity to increase its EPS.

14. When a company increases debt, the financial risk faced by the equity shareholders increases consequently their desired rate of return may increase.

OR

Factors affecting financing decision: (Any four)

1. A prudent financial manager would normally opt for a source which is the cheapest.

2. The risk associated with each of the sources is different.

3. Higher the floatation cost, less attractive the source.

4. A stronger cash flow position may make debt financing more viable than funding through equity.

5. If a business has high fixed operating costs, it must reduce fixed financing costs.

6. Issues of more equity may lead to dilution of management’s control over the business.

7. Health of the capital market may also affect the choice of source of funds.

 

Question 29.
Krish limited is in the business of manufacturing and exporting carpets and other home decor products. It has a share capital of ₹ 70 lacs at the face value of ₹ 100 each. Company is considering a major expansion of its production facilities and wants to raise ₹ 50 lacs. The finance manager of the company Mr. Prabhakar has recommended that the company can raise funds of the same amount by issuing 7% debentures. Given that earning per share of the company after expansion is f 35 and tax rate is 30%, did Mr. Prabhakar give a justified recommendation?
Show the working. 
Answer:
Earnings per share = ₹ 35

Earning after tax = ₹ 24,50,000
Interest = 50,00,000 x 7100
= ₹ 3,50,0000
Let the Earning before tax (EBT) = x
EBT – Tax = EAT
X – 0.30x = 24,50,000
0. 7 Ox = 24,50,000
\(x ={24,50,0000\over 0.70}\)
x = 35,00,000
Earning before tax = R 35,00,000
EBIT = Earning before tax + Interest = 35,00,000+ 3,50,000 = ₹ 38,50,000

As ROI (32.08%) > Rate of interest (7%). The company can choose to use trading on equity to increase its EPS. The finance manager was justified in making this recommendation.

Caution
in this type of questions, formulae should be correctly written.

 

Question 30.
Mayank purchased a pack of chocolates of a renowned brand for his daughter from a shop in the nearby market. After consuming the chocolates, his daughter fell sick. He filed a case with the District forum against the renowned brand. He lost the case because of a mistake that he could not provide proof of purchase. What should be kept in mind by a consumer while purchasing, using and consuming goods and services apart from avoiding the mistake committed by Mayank, in order to enable him/her to achieve the objective of consumer protection? Enumerate any four points. 
Answer:
A consumer should keep in mind the following responsibilities while purchasing, using and consuming goods and services (Any four)

(i) Be aware about various goods and services available in the market so that an intelligent and wise choice can be made.

(ii) Buy only standardized goods as they provide quality assurance. Thus, look for ISI mark on electrical goods, FPO mark on food products, Hallmark on jewelry, etc.

(iii) Learn about the risks associated with products and services, follow manufacturer’s instructions and use the products safely.

(iv) Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.

(v) Assert yourself to ensure that you get a fair deal

(vi) Be honest in your dealings. Choose only from legal goods and services and discourage unscrupulous practices like black-marketing, hoarding, etc.

(viii) File a complaint in an appropriate consumer forum in case of a shortcoming in the quality of goods purchased or services availed. Do not fail to take an action even when the amount involved is small.

(ix) Form consumer societies which would play an active part in educating consumers and safeguarding their interests.

(x) Respect the environment. Avoid waste, littering and contributing to pollution.

 

Question 31.
Briefly explain any three of the following techniques of Scientific Management as given by F.W. Taylor:
(a) Method study
(b) Functional foremanship
(c) Standardization
(d) Differential piece wage system
Answer:
Techniques of Scientific Management given by F.W.Taylor:

Method Study
The objective of method study is to find out one best way of doing the job. There are various methods of doing the job. To determine the best way there are several parameters. Right from procurement of raw materials till the final product is delivered to Techniques of Scientific Management given by F.W.Taylor:

Method Study
The objective of method study is to find out one best way of doing the job. There are various methods of doing the job. To determine the best way there are several parameters. Right from procurement of raw materials till the final product is delivered to the customer every activity is part of method study. Taylor devised the concept of assembly line by using method study. Ford Motor Company used this concept very successfully. Even now auto companies are using it.

The objective of the whole exercise is to minimize the cost of production and maximize the quality and satisfaction of the customer. For this purpose many techniques like process charts and operations research etc. are used.

(a) For designing a car, the assembly line production would entail deciding the sequence of operations, place for men, machines and raw materials etc. All this is part of method study.

(b) Functional foremanship is an extension of the principle of division of work and specialization to the shop floor. Each worker will have to take orders from these eight foremen in the related process or function of production. Foremen should have intelligence, education, tact, grit, judgment special knowledge, manual dexterity, and energy, honesty and good health.

Since all these qualities could not be found in a single person, Taylor proposed eight specialists. Each specialist is to be assigned work according to her/ his qualities. For example, those with technical mastery, intelligence and grit may be given planning work. Those with energy and good health may be assigned execution work

(c) Standardization refers to the process of setting standards for every business activity; it can be standardization of process, raw material, time, product, machinery, methods or working conditions. These standards are the benchmarks, which must be adhered to during production. The Objective Of

(i) To reduce a given line or product to fixed types, sizes and characteristics.
(ii) To establish interchangeability of manufactured parts and products.
(iii) To establish standards of excellence and quality in materials.
(iv) To establish standards of performance of men and machines

(d) Taylor was a strong advocate of a piece wage system. He wanted to differentiate between efficient and inefficient workers. The standard time and other parameters should be determined on the basis of the work- study discussed above. The workers can then be classified as efficient or inefficient on the basis of these standards. He wanted to reward efficient workers. So he introduced different rates of wage payment for those who performed above standard and for those who performed below standard

OR

Briefly explain any three of the following principles of management given by Henry Fayol:
(a) Unity of command
(b) Equity
(c) Remuneration
(d) Initiative (6)
Answer:
Principles of Management given by Henry Fayol

(a) Unity of Command: According to Fayol there should be one and only one boss for every individual employee.
If an employee gets orders from two superiors at the same time the principle of unity of command is violated. The principle of unity of command states that each participant in a formal organization should receive orders from and be responsible, to only one superior. Fayol gave a lot of importance to this principle.

He felt that if this principle is violated “authority is undermined; discipline is in jeopardy, order disturbed and stability threatened”. The principle resembles military organization. Dual subordination shouLd be avoided. This is to prevent confusion regarding tasks to be done. Suppose a sales person is asked to clinch a deal with a buyer and is allowed to give a 10% discount by the marketing manager. But the finance department tells her/ him not to offer more than a 5% discount. Now there is no unity of command. This can be avoided if there is coordination between various departments.

(b) Equity: Good sense and experience are needed to ensure fairness to all employees, who should be treated as fairly as possible,” according to Fayol. This principle emphasizes kindliness and justice in the behavior of managers towards workers. This will ensure loyalty and devotion.

Fayol does not rule out use of force sometimes. Rather he says that lazy personnel should be dealt with sternly to send the message that everyone is equal in the eyes of the management. There should be no discrimination against anyone on account of sex, religion, language, caste, belief or nationality etc In practice we can observe that now a days in multinational corporations people of various nationalities work together in a discrimination free environment. Equal opportunities are available for everyone in such companies to rise.

(c) Remuneration of Employees: The overall pay and compensation should be fair to both employees and the organization. The employees should be paid fair wages, which should give them at least a reasonable standard of living. At the same time it should be within the paying capacity of the company. In other words, remuneration should be just and equitable. This will ensure a congenial atmosphere and good relations between workers and management. Consequently, the working of the company would be smooth.

(d) Initiative: Workers should be encouraged to develop and carry out their plans for improvements according to Fayol. Initiative means taking the first step with self-motivation. It is thinking out and executing the plan. It is one of the traits of an intelligent person. Initiative should be encouraged.

But it does not mean going against the established practices of the company for the sake of being different. A good company should have an employee suggestion system whereby initiative/suggestions which result in substantial cost/time reduction should be

 

Question 32.
‘The pros and cons of each alternative need to be weighed.’ Name and briefly explain the logical steps in the process of planning which are followed by a manager before performing the step highlighted in the above statement.
Answer:
Steps in the process of planning to be followed by a manager before performing the step of evaluation of alternatives:
(i) Setting Objectives: The first and foremost step is setting objectives. Every organization must have certain objectives. Objectives may be set for the entire organization and each department or unit within the organization. Objectives or goals specify what the organization wants to achieve. It could mean an increase in sales by 20% which could be the objective of the entire organization.

How all departments would contribute to the organizational goals is the plan that is to be drawn up. Objectives should be stated clearly for all departments, units and employees. They give direction to all departments. Departments/ units then need to set their own objectives within the broad framework of the organization’s philosophy. Objectives have to percolate down to each unit and employees at all levels.

At the same time, managers must contribute ideas and participate in the objective setting process. They must also understand how their actions contribute to achieving objectives. If the end result is clear it becomes easier to work towards the goal.

(ii) Developing Premises: Planning is concerned with the future which is uncertain and every planner is using conjecture about what might happen in future. Therefore, the manager is required to make certain assumptions about the future. These assumptions are called premises. Assumptions are the base material upon which plans are to be drawn. The base material may be in the form of forecasts, existing plans or any past information about policies. The premises or assumptions must be the same for all and there should be total agreement on them. All managers involved in planning should be familiar with and use the same assumptions.

For example, forecasting is important in developing premises as it is a technique of gathering information. Forecasts can be made about the demand for a particular product, policy change, interest rates, prices of capital goods, tax rates etc. Accurate forecasts therefore become essential for successful plans.

(iii) Identifying alternative courses of action: Once objectives are set, assumptions are made. Then the next step would be to act upon them. There may be many ways to act and achieve objectives. All the alternative courses of action should be identified. The course of action which may be taken could be either routine or innovative. An innovative course may be adopted by involving more people and sharing their ideas. If the project is important, then more alternatives should be generated and thoroughly discussed amongst the members of the organization.

OR

Briefly explain the next three steps in the process of planning which the manager will have to have to follow after using conjecture about what might happen in the future.
Answer:
The next three steps are :
(i) Identifying alternative courses of action: Once objectives are set, assumptions are made. Then the next step would be to act upon them. There may be many ways to act and achieve objectives. All the alternative courses of action should be identified. The course of action which may be taken could be either routine or innovative. An innovative course may be adopted by involving more people and sharing their ideas. If the project is important, then more alternatives should be generated and thoroughly discussed amongst the members of the organization.

(ii) Evaluating alternative courses: The next step is to weigh the pros and cons of each alternative. Each course will have many variables which have to be weighed against each other. The positive and negative aspects of each proposal need to be evaluated in the light of the objective to be achieved. In financial plans, for example, the risk- return trade-off is very common. The more risky the investment, the higher the returns it is likely to give. To evaluate such proposals detailed calculations of earnings, earnings per share, interest, taxes, dividends are made and decisions taken. Accurate forecasts in conditions of certainty/uncertainty then become vital assumptions for these proposals. Alternatives are evaluated in the light of their feasibility and consequences.

(iii) Selecting an alternative: This is the real point of decision making. The best plan has to be adopted and implemented. The ideal plan, of course, would be the most feasible, profitable and with least negative consequences. Most plans may not always be subjected to a mathematical analysis. In such cases, subjectivity and the manager’s experience, judgment and at times, intuition play an important part in selecting the most viable alternative. Sometimes, a combination of plans may be selected instead of one best course. The manager will have to apply permutations and combinations and select the best possible course of action.

 

Question 33.
Jojo and Jojo is a company known for its consumer business of baby oil and bandages, but many people do not know that the company also runs a medical device and diagnostics business, as well as a pharmaceutical company. With more than 1,80,000 employees worldwide the company has chosen to share decision making authority with lower levels and place it nearest to the point of action.

Therefore the response does not take time. This propagates the belief that people are competent, capable and resourceful who can get a chance to prove their abilities. And enables the company in identifying those executives who have the necessary potential to become dynamic leaders, so that the checking required on decisions taken by lower levels of management is the least.

This makes it possible to evaluate performance at each level and each department can be individually held accountable for their results. By quoting the lines given above identify and briefly explain the benefits of the concept discussed above.
Answer:
Importance of Decentralization:
1. “Response does not take time”. Quick decision making- In a decentralized organization since decisions are taken at levels which are nearest to the point of action and there is no requirement for approvals from many levels, the process is much faster.

2. “Who can get a chance to prove their abilities”. Develops managerial talent for the future- Decentralization gives managers a chance to prove their abilities and creates a reservoir of qualified manpower that can be considered to fill up more challenging positions through promotion.

3. “Identifying those executives who have the necessary potential to become dynamic leaders”. Develops initiative among subordinates- Decentralization helps to promote self-reliance and confidence amongst the subordinates.
It also keeps them in a state wherein they are constantly challenged and have to develop solutions for the various problems they encounter.

4. “This makes it possible to evaluate performance at each level and each department can be individually held accountable for their results.” Better control- Feedback from levels helps to analyze variances and improve operations.

 

Question 34.
Choco Ltd. offers a wide variety of chocolate products, it has an action program of not selling its products by their generic name but under different names like Choco-silk bar, Choco-Munchy and Choco-crunchy etc. for different customer segments. All these names have great popularity and acceptability in the markets. As the company policy the products were offered at reasonable and affordable prices for targeting a mass customer base.

During the festive season the company launched a massive promotional campaign to increase its revenue and achieve its communication objectives. The company introduced free gifts for the customers.

Their on-ground sales team delivers the product not only to the departmental stores but also to small shops, so that all segments of customers can easily get the products. They also provide information and support services to customers to ensure repeat sales. From the viewpoint of the management function, briefly explain any four activities of marketing which the firm will be involved in, apart from the above-mentioned ones it’s already performing. 
Answer:
Functions of marketing, apart from the ones Choco Ltd is already performing: (Any four)
1. Gathering and analyzing market information: This is necessary to identify the needs of the customers and make various decisions for the successful marketing of the products and services. This is important for making an analysis of the available opportunities and threats as well as strengths and weaknesses of the organization and help in deciding what opportunities can best be pursued by it.

2. Product designing and development: The design of the product contributes to making the product attractive to the target customers. A good design can improve performance of a product and give it a competitive advantage in the market

3. Standardization: Standardization refers to producing goods of predetermined specifications which help in achieving uniformity and consistency in the output

4. Packaging and labeling- Packaging refers to designing and developing the package for the products. Labeling refers to designing and developing the label to be put on the product.

5. Transportation- Transportation involves physical movement of goods from one place to another. As generally the users of products particularly consumer products are wide spread and geographically separated from the place where they are produced.

6. Storage and warehousing- In order to maintain smooth flow of products in the market, there is a need for proper storage of the products. Further there is need for storage of adequate stock of goods to protect against unavoidable delays in delivery or to meet out contingencies in the demand. Ram Kumar the CEO of Sabarmati Enterprises in a meeting with the middle management of the company advised that the personal goals of the people should be reconciled with the organizational objectives for harmony in the organization. Briefly explain the objective of management that he was referring to.

 

 

Solved Question Papers for  Business Studies Set 2

 

Question 1.
Adies Ltd. is into the production and marketing of cosmetic products. The company decided to donate ? 1 from sale of every unit of its products for the upliftment and education of poor children in the country. This was greatly responded by the consumers and the sale of company’s products rose drastically. Identify the objective of management depicted in this case.
(a) Organisational objective
(b) Personal objective
(c) Social objective
(d) None of these. 
Answer:
(c) Social objective

Explanation: Business is a part of society so it has same obligations regarding society. Social objects can attempt to supply products and services at reasonable prices, community development, establishment of healthcare, educational and training facilities, providing environment-friendly products/services, etc.

Related Theory
The main objective of any organisation should be to utilise human and material resources to the maximum possible advantage. Management has to reconcile personal goals of employees with organisatoin objectives.

 

Question 2.
In Axis Ltd., the employees went on strike on their demands for increased salaries and reduced working hours. After lots of discussions between the management and the labour union, the management agreed to increase the salaries but only when the employees agrees upon to work overtime for the losses the company suffered due to strike. The employees agreed for the same. The company covered its losses and increased the salaries of the employees.
State the principle of management described here.
(a) Unity of order
(b) Unity of direction
(c) Discipline
(d) Scalar chain
Answer:
(c) Discipline

Explanation: To ensure smooth operation in a business, it is essential that members of an organisation respect the rules that govern it. Fay ol believed that discipline can be maintained by employing superiors at all levels, by maintaining contractual agreements between workers and superiors and by penalising workers in case of errors made by them.

Related Theory
The principle of unity of order states that each participant in a formal organisation should receive orders from and be responsible to only one superior.

According to the unity of direction, all the units of an organisation should move towards the same objectives through co-ordinated and focussed efforts. Scalar chain is the formal lines of authority from highest to lowest ranks.

 

Question 3.
Asha Motors is a taxi service provider. The company is targeting a revenue of ? 100 crore this year. However, with the passage of time it has found entrance of new service providers in the market which was not expected at one stage of time. It has a good team of technicians, drivers, software providers, etc.

The company has decided to make it adaptable to such continuously changing circumstances. It knows that if it has to expand in new countries, it will have to learn the basic differentiating factors like traffic rules, technological aspects, etc Thus, it understands that conditions are different in different countries.

Which feature of Business Environment is discussed in this case?
(a) Uncertainty
(b) Dynamic
(c) Complex
(d) None of these 
Answer:
(b) Dynamic

Explanation: Business environment is very flexible and keeps changing as there are multiple factors in action at any given time. It is not static and can not be monitored or predicted.

Related Theory
Business environment is largely uncertain as it is very difficult to predict future happenings. Business environment is a complex phenomenon that is relatively easier to understand in parts but difficult to grasp in its totality.

 

Question 4.
Match the steps of organising process in column I with their definitions in column II:

Column I	Column I
(A) Division of work	(i) Work to those who are best fitted for it
(B) Departmenta­lisation	(ii) Purpose is to avoid duplication
(C) Assignment of duties	(iii) Grouping of similar activities together

(a) A-(i), B-(ii), C-(iii)
(b) A-(ii), B-(i), C-(iii)
(c) A-(ii). B-(iii), C-(i)
(d) A-(iii), B-(ii), C-(i) (1)
Answer:
(c) A-(ii). B-(iii), C-(i)

Explanation: Division of work is the first step in organising process. The work is divided into manageable activities so that duplication can be avoided.

Departmentalisation is the grouping of activities of similar nature to facilitate specialisation. Assignment of duties is the allocation of jobs to the members of each department in accordance to their skills and competencies.

 

Question 5.
“Planning ensures that the goals or objectives are clearly stated so that they act as a guide for deciding what action should be taken.” Identify the benefit of planning described here.
(a) Planning promotes innovative ideas
(b) Planning reduces overlapping and wasteful activities
(c) Planning reduces the risks of uncertainty
(d) Planning provides direction 
Answer:
(d) Planning provides direction Explanation: By stating in advance how work is to be done, planning provides direction for action. If goals are well defined, exmployees are aware of what the organisation has to do and what they must do to achieve those goals.

Related Theory
Since planning is the first function of management, new ideas can take the shape of concrete plans. It promotes innovative ideas. Planning serves as the basis of coordinating the activities and efforts of different divisions, departments and individuals. It helps in avoiding confusion and misunderstanding. Planning is an activity which enables a manager to look ahead and anticipate changes thereby reducing the risks of uncertainty.

 

Question 6.
Manohar started the manufacturing of detergent, soaps and cakes. In a short span of time, the business started doing well and Manohar could earn goods profits. He decided to expand his business and diversify into shaving creams and shampoos. Which type of organisation structure would be suitable for his expanded organisation?
(a) Functional structure
(b) Divisional structure
(c) Both (a) and (b)
(d) None of the above
Answer:
(b) Divisional structure.

Explanation: In a divisional structure, the organisational structure comprises of seperate business units or divisions. The manpower is grouped on the basis of different products manufactured. Here, Manohar is diversifying into the production of shaving creams and shampoos and each product can be grouped into different divisions.

Related Theory
The benefits of divisional structure are:

• It promotes flexibility and initiative because each division functions as a autonomous unit.

• It facilitates expansion and growth as new divisions can be added without interrupting the existing operations

 

Question 7.
Treasury bills are available for a minimum amount of and in multiplies there of:
(a) ₹ 10,000
(b) ₹ 20,000
(c) ₹ 25,000
(d) ₹ 30,000 
Answer:
(c) ₹ 25,000
Explanation: Treasury bill is an instrument of short term borrowings by the Government of India maturing in less than one year. They are also known as Zero coupon bonds. These are available for a minimum amount of ₹ 25,000 and in multiplies thereof.

Related Theory
Same other money market instruments are: commercial paper, call money and certificate of deposit.

 

Question 8.
Which of the following is not a participant in the money market?
(a) RBI
(b) SEBI
(c) Mutual funds
(d) NBFCs
Answer:
(b) SEBI

Explanation: Securities and Exchange Board of India (SEBI) is the regulator of the capital market whose function is regulation and development of securities market. It is not a participant in the money market.

Related Theory
The major participants of money market are: Lenders, which include RBI, commercial banks and brokers. These participants facilitate the expansion or contraction of money in the market and Borrowers, which include commercial banks, stock brokers, other financial institutions, business houses

 

Question 9.
Sudershan Ltd. is in need of long terms funds to increase its output to meet expanded demand of its products. The company decides to fulfill its requirements for loan from a nationalised bank. Which type of decision is this?
(a) Financing decision
(b) Investment decision
(c) Dividend decision
(d) None of the above 
Answer:
(a) Financing decision

Explanation: Financing decisions are made for acquiring funds in the context of a business’ capital structure, which is a mix of long term debt and equity used for business operations.

Related Theory
investment decision relates to how the firm’s funds are invested in different assets. It can be long term or short term. Dividend decision involves how much of the profit earned by the company is to be distributed to the shareholders and how much of it should be retained in the business for meeting the investment requirement.

 

Question 10.
Krishna Ltd. is in manufacturing of pure desi ghee. Over the years, the earnings of the company has gone up and it enjoys the position of market leader. The Financial Manager is confident of the fact that not just the earnings of the current year, but for the future years are likely to be high. Identify the related factor of dividend decision being described here.
(a) Earnings
(b) Stability of earnings
(c) Stability of dividends
(d) Growth opportunities 
Answer:
(c) Stability of dividends

Explanation: The companies generally follow a policy of stabilising dividend per share. The increase in dividends is generally made when there is confidence that their earning potential has gone up and not just earnings of the current year.

Related Theory
Dividends are paid out of current and past earnings. Therefore, earnings is a major determinant of the dividend decision. Other things remaining the same, a company having stable earnings is in a position to declare higher dividends. Companies having good growth opportunities retain more money out of their profits so as to finance the required investments. The dividend in growth companies is therefore small

 

Question 11.
Volvo Ltd., is proposing to issue capital through online system of stock exchange and has entered into an agreement with the stock exchange. What would this type of issue be called?
(a) Right Issue
(b) Private placement
(c) E-IPOs
(d) All of these 
Answer:
(c) E-IPOs

Explanation: Initial Public Offering (IPO) is made in primary markets when an unlisted company makes fresh issues of securities for the first time.

Related Theory
SEBI has proposed e-IPO norms where investors can bid for new shares through internet and eventually through mobile applications. Public Sector Undertakings (PSUs) securities will be provided a fast-route track for share sales/purchase in order to meet their disinvestment targets. For already listed companies as well, the market regulator has proposed a fast-track route for raising of funds through FPOs or rights offers (where funds can be raised from existing shareholders).

 

Question 12.
Kaitaki took her daughter, Kinaya for shopping to ‘First Cry’ to buy her a dress on the occasion of her birthday. She was
delighted when on payment for the dress she got a discount voucher to get 25% off on a meal of ₹ 1000 or above at a famous restaurant. Identify the technique of sales promotion used by ‘First Cry’ in the above situation.
(a) Rebate
(b) Discount
(c) Usable benefit
(d) Product combination 
Answer:
(c) Usable benefit

Explanation: Usable benefit is that activity of sales promotion in which benefits not related to the product are offered. Here, 25% discount voucher on meals of ₹ 1000 and above at a famous restaurant is offered on purchase of a dress. This benefit can be used by the consumer some other time.

Related Theory

• Rebate is offering products at special prices for a limited period to clear off excess inventory.

• Discount is offering products at less than list price.

• Product combination is offering another product as a gift along with purchase of a product.

 

Question 13.
Usha enterprises is engaged in maufacturing swing machine. The target production is 100 units per day. The company had been successfully attaining this target until two months ago. Over the last months, production manager has observed that there is the negative variation in the daily production. Which function of management is being performed here?
(a) Directing
(b) Controlling
(c) Staffing
(d) Organising 
Answer:
(b) controlling

Explanation: controlling means ensuring that activities in an organisation are performed as per the plans.

 

Question 14.
Shubam Mahajan is the manager at ASEAN Private Limited. His job was to check the production levels of each day. He is a good leader who takes decision only after consulting her subordinates and work out the policies after acceptance of the group. Identify the leadership style being discussed here.
(a) Democratic style of leadership
(b) Autocratic style of leadership
(c) Free rein style of leadership
(d) None of these. 
Answer:
(a) Democratic style of leadership.

Explanation: A democratic leader will develop action plans and makes decisions in consultation with his subordinates. He/she will encourage them to participate in decision-making.

 

Question 15.
Name the function of management which helps in the formulation of future plans, in the light of the problems that were identified and thus helps in better planning in the future period.
(a) Directing
(b) Controlling
(c) Staffing
(d) Organising 
Answer:
(b) controlling

Explanation: Controlling means ensuring that activities in an organisation are performed as per the plans.

 

Question 16.
Reflex sports Ltd. is a renowned brand in sportswear and equipments. The company holds a major share in the market. All the decisions regarding production and marketing are taken the CEO, Mr. Juneja. Due to growing business and expansion of activities and products range, the CEO is overburdened with the work.

The management decided to delegate some of his authority to General Manager who further dispersed some of his authority to the production manager and marketing manager. Identify the concept.
(a) Delegation
(b) Decentralisation
(c) Both (a) and (b)
(d) None of the above 
Answer:
(b) Decentralisation

Explanation: Decentralisation can be considered to have originated from centralisation that enables decision making at different levels. “Everything that goes to increase the importance of the subordinates’ role is decentralisation and everything which goes to reduce it is centralisation.”

Related Theory
Delegation refers to the downward transfer of authority from a superior to a subordinate. It is a pre-requisite to the efficient functioning of an organisation because it enables a manager to use his time on high priority activities.

 

Question 17.
The sale of famous brand of potato chips is declining in the market. The marketing manager comes up with a scheme of “Bug one Get one free.” This boosted the sales of the potato chips and the compang was able to regain its market. Identify the promotional tool used bg the compang.
(a) Public relations
(b) Advertising
(c) Sales promotion
(d) Personal selling 
Answer:
(c) Sales promotion

Explanation: Sales promotion refers to short term incentives which are designed to encourage the buyers to make immediate purchase of a product or service. It is usually undertaken to supplement other promotional efforts.

Related Theory
Promotion mix refers to combination of promotional tools used by an organisation to achieve its communication objectives. Various tools of communication used by marketer include; advertising; personal selling; sales promotion and publicity.

 

Question 18.
Statement I: Advertisement is an internal source of recruitment.
Statement II: Advertisement gives the management a wider range of candidates from which to choose.

Choose the correct option from the options given below:
(a) Statement I is true and II is false
(b) Statement II is true and I is false
(c) Both the statements are true
(d) Both the statements are false 
Answer:
(b) Statement II is true and I is false

Explanation: Advertisement is an external source of recruitment, which attracts pool of candidates for the job.

 

Question 19.
‘Get 2 GB memorg card free with a Nokia cellphone’ is an example of one of the techniques of sales promotion. Identify the technique.
(a) Rebate
(b) Product combination
(c) Quantitg gift
(d) Discount 
Answer:
(b) Product combination

Explanation: Product combination is a tool of sales promotion. Under this method, along with the main product some other product is offered to the customer as a gift. Here, in the given case, customer is getting 2 GB memory card free along with the product purchased i.e. an additional product, hence we can classify this as product combination.

 

Question 20.

Consumer should onlg purchase standardised products. On which tgpe of product the above logo is printed?
(a) Jewellery
(b) Edibles
(c) Agriculture product
(d) Electronics (1)
Answer:
(c) Agriculture products.

Explanation: Agmarksymbolis used to approve the quality of agricultural products. Agmark is a certification mark employed on agricultural products in India, assuring that they adhere to a set of standards approved by the Directorate of Marketing and Inspection.

 

Question 21.
The Government of India launched “Make in India” as an initiative to encourage the companies to manufacture their products in India. The initiative aims at high quality standards and also seeks to attract foreign capital investment. A web portal was released under this initiative. Identify the various dimensions of business environment referred to by quoting lines from the paragraph.

OR

As per the directions issued by the Supreme Court, the government passed on order to ban the sale of liquor within the area of 200 metres of all educational institutions as its consumption is injurious to health. People are becoming more conscious about health and fitness. This indicates the government’s attitude towards this business. Identify the dimensions of business environment discussed above by quoting lines from the paragraph. (3)
Answer:
The various dimensions of business environment being referred to in the above case are:
(i) Political Environment: “The Government of India launched “Make in India” as an initiative to encourage the companies to manufacture their products in India.” Political environment includes political conditions such as general condition and peace in the country and special attitudes that elected government representatives hoLds towards business.

(ii) Technological environment: “A web portal was released under this initiative.” Technological environment are forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business.

(iii) Economic environment: “The initiative aims at high quality standards and also seeks to attract foreign capital investment.” Interest rates inflation, rates, changes in disposable income of people, stock market indices and the value of rupee are some of the economic factors that can affect managerial practices in an enterprise.

OR

The various dimensions of business environment being referred to in the above paragraph are as follows:
(i) Legal environment: “As per the directions of the Supreme Court”. Legal environment includes various legislations passed by the administrative orders issued by the government court judgements as well as the decisions rendered by various commissions and agencies.

(ii) Political environment: “The government passed an order to ban the sale of liquor within the area of 200 metres of all educational institutions.” Political environment include political conditions such as general stability and peace in the country and specific attitudes that elected government representatives holds towards business.

(iii) Social environment: “Its consumption is injurious to health and people are becoming more conscious about health and fitness.” Social environment include the social forces, customs and traditions, values, social trends, society’s expectations from business etc.

Caution
Legal environment is concerned with the law of the land, whereas political environment is related to the government of the natuion.

 

Question 22.
Explain Functional Foremanship.
OR
Explain “Science is not a Rule of Thumb”
Answer:
Functional foremanship is a factory management technique advocated by Taylor. He advocated seperation of planning and execution functions. This concept was extended to the lowest level of the shop floor. Under the factory manager, there was a planning incharge and a production incharge. Under planning incharge the following personal worked:

1. Instruction card clerk: He assigns work to all the employees.

2. Route clerk: He decides how work will progress regarding total productions so, that production takes place on time.

3. Time and cost clerk: He determines what will be the total cost and how much time each job will take.

4. Disciplinarian: He sees that there is discipline at work place.

Under production incharge, personnel who would work were:

1. Speed boss: He ensures that the work is being completed timely.

2. Gang boss: He ensures sufficient availability of raw material, tools etc.

3. Repair boss: He sees that whenever some repair is involved in any work, the work is done properly.

4. Inspector: He sees that whether the quality of output is good or not

OR

Taylor pioneered the introduction of the method of scientific enquiry into the domain of management practice. Taylor believed that only method to maximise efficiency can be developed through study and analysis. As different managers would follow their indigenous rule of thumb, the new method developed should substitute Rule of thumb throughout the organisation.

Scientific method involved investigation of traditional methods through work study, unifying the best practices and developing a standard method, which should be followed throughout the organisation.

 

Question 23.
Rajat is responsible for formulating and implementing the plans in his company “Relax Ltd.” He takes all the decisions related to marketing and finance.
(a) Identify the level of management at which Rajat was working.
(b) State two other functions being performed by Rajat. 
Answer:
(a) Rajat was working at top level of management.

(b) The two other functions being performed by him at this level are outlined below:

• He is responsible for formulating the overall organisational goals and strategies.

• He is responsible for all the business activities and its impact on society.

 

Question 24.
Arjun is working in a footwear manufacturing company. He is the senior most employee in the division. He is senior even to division manager, Shanker. Arjun is considered as one of the most committed, capable and hard working employee. As a result of his abilities and seniority, he generally received work assignments of his choice. A problem developed when a young and intelligent Karan was appointed by Shanker.

Karan’s previous three years’ experience in the closely related work made it possible for him to catch on to the routine work of his new job rapidly. On several occasions, Shanker noticed tension between the two employees. One day the tension rose and Arjun complained to Shanker stating that his duties were largely taken over by Karan.

Shanker issued the order stating the clear allocation of the jobs and related duties between the two. He further clarified the working relationship between them by specifying who was to report to whom. This helped in reducing the workload, enhancing productivity and removing ambiguity.
(a) Identify and state the step of organising process which has not been carried out properly and contributed to this problem.

(b) State the two steps of organising process which have been taken by Shanker in respond to the complaint of Arjun.
Answer:
(a) The step of organising process that has not been carried out properly and contributed to this problem is ‘assignment of duties’.

(b) The two steps of organising process which have been taken by Shanker to respond to the complaint of Arjun are:
(i) Assignment of duties: It is necessary to allocate work to various employees. In the process of organising, once departments have been formed, each of them is placed under the charge of an individual It is essential for effective performance and communication that a proper match is made between the nature of a job and the ability of an individual The work must be assigned to those who are best fitted to perform it well

(ii) Establishing reporting relationships:
Merely allocating work is not enough. Each individualshould knowfrom whom to take orders and to whom he/she is accountable. The establishment of such clear relationships helps to create a hierarchial structure and coordination amongst various departments.

 

Question 25.
Hindustan Lamps Ltd. is the manufacturer of LED bulbs. The company has a very good reputation in the domestic market as well as international market. The company has set standards as regards to quality and specifications of its products. The company also adopts the policy of discontinuing the production of those products which have less demand in the market.

In a recent feedback, one of the supplier informs the purchase department to take special care in the use of a particular raw material at production stage. The store incharge knows that this information should be given immediately to the production department but the company’s policy only allow him to give this message to his immediate boss who will further pass this message to his boss.

The passing of this message will continue till it reaches the desired person in the production department.
(a) Which technique of management is followed here?
(b) Also, name the principle of management followed here by the company.
(c) Which option is available to the store incharge since the company is not allowing him to interact with the concerned worker in the production department? 
Answer:
(a) The technique of management which is followed here is Standardisation (“the company has set standards as regards to quality and specifications of its products)” and Simplification (the company adopts the policy of discontinuing the production of those products which have less demand in the market).

Standardisation refers to the process of setting standards for every business activity; it can be standardisation of process, raw materialtime, product, machinery, methods or working conditions. These standards are the benchmarks, which must be adhered to during production. Simplification aims at eliminating superfluous varieties, sizes and dimensions. It aims at eliminating unnecessary diversity of products.

(b) The principle of management followed here is Scalar Chain.

(c) The option available to the store incharge is Gang plank as this is an emergency situation. The store incharge knows that the information should be given to the production department immediately.

 

Question 26.
What are the factors affecting financing decision?
OR
Explain the importance of financial planning. 
Answer:
The factors affecting financial decision are as follows:
(a) Cash flow position of the business: If a company has a strong cash flow, it can easily choose debt financing. On the other hand, a company which has weak cash flow cannot go for debt financing. A company will choose equity funding when its cash flow position is not so strong.

(b) Control considerations: Debt normally does not cause dilution of control while issue of equity shares may reduce management control over the business. So, when companies wants dilution of ownership they go for equity rather than debt financing.

(c) Floatation cost: Cost of raising funds is known as floatation cost. Issuing equity shares includes floatation cost of issuing prospectus, advertising etc. Getting a loan from financial institution may not cost so much.

(d) Rislc Debt is cheaper source of finance but it is riskier for a business because under debt it is compulsory to pay interest on debt and principal amount on maturity. Therefore, use of more debt increases the financial risk of a business.

OR

The importance of Financial Planning are as follows:

1. It ensures smooth running of a business enterprise by ensuring availability of funds at the right time.

2. It helps in anticipating future requirements of funds and evading business shocks and surprises.

3. It facilitates coordination among various departments of an enterprise, like marketing and production

4. functions, through well- defined policies and procedures.

5. It increases the efficiency of operations by curbing wastage of funds, duplication of efforts and gaps in planning.

6. It helps to establish a link between the present and the future.

Caution
Financial Planning and financial management are two different concepts.

 

Question 27.
Identify the method of sales-promotion in the following cases:
(a) A mobile company offers a discount of ₹ 1,500 to clear off excess inventory.
(b) A customer gets ₹ 10 off on return of an empty wrapper while making a new purchase of the same product.
(c) A company offers a pack of 1 kg of sugar with the purchase of a 10 kg bag of wheat flour.
(d) A company offers 40% of extra shaving cream in a pack of 1 kg. 
Answer:
(a) Rebate: The company is offering products at special prices for a limited period to clear off excess inventory. Here, a discount of ₹ 1,500 is offered by the mobile company to clear off excess inventory. So, rebate is the method of sales promotion in this case.

(b) Refund: Refunding a part of price paid by customer on some proof of purchase, say, on return of empty foils or wrapper. In this case, the customer gets ₹ 10 off on return of empty wrapper while making new purchase of same product. This is a case of refund method of sales promotion.

(c) Product combination: It is offering another product as gift alongwith the purchase of a product. In this case, the company has offered 1 kg of sugar with purchase of 10 kg of wheat flour. This is a case of product combination of sales promotion.

(d) Quantity gift: It is offering extra quantity of the product. It is commonly used by marketer of toiletry products. In this case, the company has offered 40% extra shaving cream in a pack of 1 kg. This is a case of quantity gift of sales promotion.

 

Question 28.
“Planning involves huge costs but even then it is the most important function of management.” Is planning actually worth the huge costs involved? Discuss. 
Answer:
Plans involves huge costs in their formulation in terms of time and money. Detailed plans require scientific calculations to ascertain facts and figures. There are number of incidental costs as well. Inspite involving huge costs, planning is the most important function of management. The following importance of planning justifies the worth of planning:
(i) Planning provides direction: By stating in advance, how work is to be done, planning provides direction for action. Planning ensures that the goals or objectives are clearly stated so that they act as a guide for deciding what action should be taken in which direction.

(ii) Planning reduces the risks of uncertainty: Planning is an activity which enables a manager to look ahead and anticipate changes. By deciding in advance the tasks to be performed, planning shows the way to deal with changes and uncertain events.

(iii) Planning promotes innovative ideas: Since planning is the first function of management new ideas can take the shape of concrete plans.

(iv) Planning facilitates decision making: Planning helps to look into the future and make a choice from amongst various alternative courses of action.

 

Question 29.
Rohan Talwar is a computer engineer and completed his B. Tech from IIT recently. He started a software developing company and due to his innovations and business eff iciency his business grew rapidly. He found that the volume of work made it impractical for him to handle all the work by himself.

The company recruited new employees. He found the new employees capable, enthusiastic and trustworthy. He was, thus, able to focus on the objectives and with the help of new employees he was able to extend his area of operations and also satisfy customer’s needs. On the other hand, the new employees also got opportunities to develop and exercise initiative.
(i) Identify and briefly explain the concept used by Rohan Talwar in the above case which helped him in focusing on objectives.

(ii) Also, state any four points of importance of the concept identified above.

OR

“Fresh Deals” is a well known chain of large department store offering various products under one roof. The company owns stores in various parts of the country and each store is managed by Store Manager, who is allowed to run their stores autonomously by deciding about the products which may be promoted, appointment of staff, ways to handle customer complaints etc. In the context of the above case:
(a) Identify and explain the policy followed by “Fresh Deals” to run their stores successfully.
(b) Also, give any three points highlighting the importance of the approach followed as identified in part (a). 
Answer:
(i) The concept used by Rohan Talwar is Delegation. Delegation refers to the downward transfer of authority from a superior to subordinate. It is a pre requisite to the efficient functioning of an organisation because it enables a manager to use his time on high priority activities.

It also satisfies the subordinate’s need for recognition and provides them opportunities to develop and exercise initiative. Here, in this case, Rohan Talwar found the volume of work impractical to handle and thus, recruited new employees so that he can focus on his objectives. Thus, here, he is delegating the tasks to his subordinates.

(ii) The four points of importance of delegation . are as follows:

(a) Effective management: By empowering the employees, the managers are able to function more efficiently as they get more time to concentrate on important matters.

(b) Employee development: As a result of delegation, employees get more opportunities to utilise their talent and this may give rise to latent abilities in them.

(c) Facilitation of growth: Delegation helps in the expansion of an organisation by providing a ready workforce to take up leading positions in new ventures.

(d) Better coordination: The elements of delegation, viz., authority, responsibility and accountability help to define the powers, duties and answerability related to various positions in an organisation.

OR

(a) The approach followed by “Fresh Deals” to run their stores successfully is Decentralisation. Decentralisation explains the manner in which decision making responsibilities are divided among hierarchical levels. Decentralisation refers to delegation of authority throughout all the levels of the organisation. Decision making authority is shared with lower levels and is consequently placed nearest to the points of action.

(b) The importance of decentralisation is highlighted through the following points:
(i) Develops initiative among subordinates: Decentralisation helps to promote self-reliance and confidence amongst the subordinates. This is because when lower managerial levels are given freedom to take their own decisions they learn to depend on their own judgement.

(ii) Quick decision making: The management hierarchy can be looked as a chain of communication. In a decentralised organisation, since decisions are taken at levels which are nearest to the points of action and there is no requirement for approval from many levels, the process is faster.

(iii) Better control: Decentralisation makes it possible to evaluate performance at each level and the departments can be individually held accountable for their results.

 

Question 30.
Auto tech Ltd. is engaged in manufacturing auto-parts. The target production is 300 units per day. The company had been successfully attaining this target until two months ago. Over the last two months, it has been observed that daily production varies between 250-270 units.
(a) Identify the management function needed to rectify the above situation.
(b) Briefly state the procedure to be followed so that the actual production may come up to the target production. 
Answer:
(a) The controlling function of management is needed to rectify the above situation.
(b) The procedure to be followed so that the actual production may come up with the target production is as follows:

• Providing training to workers if the workers are not well versed with the production process.

• Improving the work environment if it is not conducive to efficient working.

• Ensuring timely availability of the raw materials and other equipments if they are not made available on time.

• Replacing the machinery if it is defective or has become obsolete.

 

Question 31.
(a) Shristi joined Tech Solutions Ltd. as Creative Manager. As per the policy of the company, every new employee has to undergo training to understand the jobs and responsiblities to be performed by them. Do you think is there any benefit to the organisation by providing training to its employees. State the benefits of training to the organisation.

(b) Explain ‘transfers’ and ‘promotions1 as internal sources of management. 
Answer:
(a) Yes, training is beneficialforan organisation. Training is concerned with upgradation of the knowledge and skills of the employees so that their ability to perform can be enhanced. The importance of training to the organisation are as follows:

• Training imparts systematic learning to employees thereby helping to avoid wastage of efforts and

• money and is considered better than the hit and trial method.

• It increases the employees’ productivity both in terms of quantity and quality, leading to higher profits.

• Training increases the morale of the employees and reduces absenteeism and employee productivity.

• It helps in obtaining effective response to fast changing environment technological and economic.

• Training equips the future manager who can take over in case of emergency.

(b) Transfers: It involves shifting of an employee from one job to another, one department to another or from one shift to another, without a substantive change in the responsibilities and status of the employee. It may lead to changes in duties and responsibilities, working condition etc.

but not necessarily salary. Transfer is a good source of filling the vacancies with employees from over staffed departments. Job transfers are also helpful in avoiding termination and in removing individual problems and greivances. Transfers can also be used for training of employees for learning different jobs.

Promotions: Business enterprises generally follow the practice of filling vacancies of higher jobs by promoting employees from lower jobs. Promotion lead to shifting an employee to a higher position carrying higher responsibilities, facilities, status and pay. Promotion is a vertical shifting of employees. This practice helps to improve the motivation, loyalty and satisfaction level of employees.

 

Question 32.
Sparkle Lights Ltd. is into the manufacture of fancy light lamps and shades. There is lot of discontentment in the organisation and the targets are not met. The company appointed Mr. Chawla as CEO of the company and he was asked to find out the reason.

Mr. Chawla found that all the decision making in the company was in the hands of the Managing Director and he did not have confidence in the competency of the employees. Thus, the employees were not happy.
(a) Identify any two communication barriers because of which Sparkle lights Ltd. was not able to achieve its target.

(b) State one more barrier of each of the types identified in part (a) above. 
Answer:
(a) The two communication barriers because of which Sparkle lights Ltd. was not able to achieve its targets are:
(i) Organisational barriers: If the organisational policy is not supportive to free flow of communication, it may hamper effectiveness of communications. Like in this case, CEO, Mr. Chawla found that all the decision making power of the organisation was highly centralised as it was in hands of managing director only.

(ii) Personal barriers: Lack of confidence of superior to communication with the subordinate. The personal factors of both sender and receiver may exert influence on effective communication and they may not be able to understand each other’s message in the same sense. Like in the above case, the CEO found out that the managing director didn’t have confidence in the competency of the employees.

(b) (i) Organisational barriers:
Status: Sometimes a status conscious manager also may not allow his subordinates to express their feelings freely. This kind of an attitude may create psychological distance between him and his subordinates.

(ii) Personal barriers: Fear of challenge to authority: If a superior may withhold or suppress the communication that he may perceive is likely to have an adverse effect on his authority.

 

Question 33.
Raj Ltd. plans to expand its business operations and decides to impart latest technique machines to enhance the quality and quantity of its products. After discussions with the Finance Manager, the company decides to raise the required funds by issue of equity shares.

The issue of equity shares involves huge floatation cost. To meet the expenses of floatation, the company decided to tap the money market.
(a) Name and explain the money-market instrument the company can use for the above purpose.
(b) What is the duration for which the company can get funds through this instrument?
(c) State any other purpose for which this instrument can be used.

OR

Sudershan Agro Ltd. wants to modernise its plants and machinery. To fulfill its capital requirements, the company decides to make a public issue of shares. Explain the different methods which the company may adopt for the new public issue of shares.
Answer:
(a) Commercial Papers can be used for Bridge financing by Raj Ltd. as they are issued by large and creditworthy companies. Bridge financing is the funds raised to meet the floatation costs. The instrument is in the form of an unsecured promissory note and is freely transferable by endorsement. It is sold at discount and redeemed at par.

(b) Its maturity period may range from a fortnight to a year.

(c) It is also used to meet the short-term seasonal and working capital requirements of a business enterprise.

OR

The market for the new issues of shares is known as primary market It deals with new securities being issued for the first time.

The essential function of a primary market is to facilitate the transfer of investible funds from savers to entrepreneurs seeking to establish new enterprises or to expand existing ones through the issue securities for the first time. The various methods of floating new issues in the primary market are:
(i) Offer through prospectus: Offer through prospectus is the most popular method of raising funds by public companies in the primary market A prospectus makes a direct appeal to investors to raise capital through an advertisement in newspapers and magazines.

(ii) Offerfbrsale: Underthis method, securities are not issued directly to the general public but are offered for sale through intermediaries like issuing houses or stock brokers.

(iii) Private placement: Private placement is the allotment of shares by a company to institutional investors or some selected individuals. It helps to raise capital more quickly than a public issue.

(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.

(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).

 

Question 34.
Pooja bought a packet of chocolates from a big departmental store. On consuming these chocolates she fell ilL On examaination, it was revealed that this was due to presence of raisins in it. Pooja was allergic to it due to which she fell ill Pooja found that the ingredients of the product were not mentioned anywhere.

She filed a case for the relief.
(a) Identify the important aspect which has been neglected by the seller/ manufacturer in the above case.
(b) Explain briefly the functions of the aspect identified in (a) above.

OR

Explain any four factors which effect the determination of the price of a product. 
Answer:
(a) The aspect neglected by the manufacturer in the above ease is ‘Labelling.’ Labelling is the display of label in a product. A label contains information about a product on its container, packaging, or the product itself It also has warnings in it

(b) The various functions performed by a label are as follows:
(i) Describe the product and specify its contents: The main function performed by labelling is to provide the description about the product regarding its use, applications, cautions, content etc

(ii) Identification and differentiation: A label helps in easy identification of the product. It helps the consumers to differentiate their favourable products from other products.

(iii) Standardising and grading: A label also helps in setting gradesfora product. This helps the marketers to classify the product in different categories based on certain specific quality or features.

(iv) Promotion of products: An important function of label is to aid in promotion of the products. A carefully designed label can attract attention and give reason to purchase.

(v) Provide information required by law: Another important function of labelling is to provide information required by law. Such as statutory warnings, ingredients, date of manufacture etc

OR

Pricing occupies an important place in the marketing of goods and services by a firm. Pricing is often used as a regulator of the demand of a product. There are number of factors which affect fixation of the price of a product. Some of the important factors are as follows:
(i) Product cost: One of the most important factor affecting price of a product or service is its cost This includes the cost
of producing, distributing and selling the product. The cost sets the minimum level or the floor price at which the product may be sold.

(ii) The utility and demand: While the product costs set the lower limits of the price, the utility provided by the product and the intensity of demand of the buyer sets the upper limit of price, which a buyer would be prepared to pay. The price of a product is affected by the elasticity of demand of the product.

(iii) Extent of competition in the market: The price between the lower limit and upper limit is affected by the nature and degree of competition. The price will tend to reach the upper limit in case there is lesser degree of competition. Competitor’s prices and their anticipated reasons must be considered before fixing the price of a product.

(iv) Government and legal regulations: In orderto protect the interest of publicagainst unfair practices in the field of pricing, the government can intervence and regulate the price of commodities. Government can declare a product as essential product and regulate its price.