CBSE Class 12 Business Studies Question Paper 2026 Solved Code 66-1-3

1. 'Business environment keeps on changing whether in terms of technological improvement, shifts in consumer preferences or entry of new competitors in the market.'
The feature of business environment highlighted in the above statement is : [1 Mark]
(A) Totality of external forces
(B) Complexity
(C) Dynamic nature
(D) Relativity

Answer: (C) Dynamic nature

Teacher's Note:
a) The key words "keeps on changing" point to the dynamic nature of business environment.
b) Do not confuse it with uncertainty, which is about the difficulty of predicting future changes.

2. A position when a company is unable to meet its fixed financial charges like interest payment, dividend on preference shares and repayment obligations is referred to as ______ . [1 Mark]
(A) Trading on equity
(B) Financial risk
(C) Business risk
(D) Operating risk

Answer: (B) Financial risk

Teacher's Note:
a) Financial risk rises as the use of debt and fixed-charge funds rises.
b) Trading on equity is the use of fixed-charge funds to raise returns to equity shareholders, not the risk itself.

3. Organising is the process that initiates implementation of plans by clarifying jobs and working relationships and effectively deploying resources for attainment of identified and desired results.
Organising process thus involves a series of steps that need to be taken in order to achieve the desired goal.
Arrange the steps of the process of organizing in the correct order : [1 Mark]
(A) Identification and Division of work, Assignment of duties, Departmentalisation, Establishing authority and reporting relationships
(B) Identification and Division of work, Assignment of duties, Establishing authority and reporting relationships, Departmentalisation
(C) Departmentalisation, Identification and Division of work, Establishing authority and reporting relationships, Assignment of duties
(D) Identification and Division of work, Departmentalisation, Assignment of duties, Establishing authority and reporting relationship

Answer: (D) Identification and Division of work, Departmentalisation, Assignment of duties, Establishing authority and reporting relationship

Teacher's Note:
a) Remember the order: divide the work, group it into departments, assign duties, then fix authority.
b) Duties can be assigned only after departments are created, so departmentalisation comes second.

4. The step of controlling process which reveals the deviation between actual performance and desired results is : [1 Mark]
(A) Setting performance standards
(B) Analysing deviations
(C) Taking corrective action
(D) Comparing actual performance with the standards

Answer: (D) Comparing actual performance with the standards

Teacher's Note:
a) Comparison with standards reveals the deviation; analysing deviations comes after it.
b) Order of steps: set standards, measure performance, compare, analyse deviations, take corrective action.

5. Read the following statements carefully :
Statement - I : Consumers should get together and form themselves into consumer associations for protection and promotion of their interests.
Statement - II : The Consumer Protection Act provides for setting up a two-tier enforcement machinery for the redressal of consumer grievances.
With reference to given statements, choose the correct alternative from the following : [1 Mark]
(A) Both the statements are true.
(B) Both the statements are false.
(C) Statement I is true, Statement II is false.
(D) Statement I is false, Statement II is true.

Answer: (C) Statement I is true, Statement II is false.

Teacher's Note:
a) The Consumer Protection Act provides a three-tier machinery: District, State and National Commissions.
b) Forming consumer associations is a responsibility of consumers, so Statement I is true.

6. Identify the feature of planning which states that the purpose of planning is to meet future events effectively to the best advantage of an organisation : [1 Mark]
(A) Planning involves decision making
(B) Planning is futuristic
(C) Planning is a mental exercise
(D) Planning focuses on achieving objectives

Answer: (B) Planning is futuristic

Teacher's Note:
a) The words "meet future events" are the clue for the futuristic nature of planning.
b) Planning involves looking ahead and forecasting the future.

7. Read the following statements carefully :
Statement - I : Control should focus on key result areas which are critical to the success of an organization.
Statement - II : Only significant deviations which go beyond the permissible limit should be brought to the notice of management.
With reference to the given statements, choose the correct alternative from the following : [1 Mark]
(A) Both the statements are true.
(B) Both the statements are false.
(C) Statement I is true and Statement II is false.
(D) Statement I is false and Statement II is true.

Answer: (A) Both the statements are true.

Teacher's Note:
a) Statement I describes Critical Point Control.
b) Statement II describes Management by Exception.

8. Ritika wanted to buy a new washing machine. She visited 'Elec Duniya', a large electronics store. She saw there many different brands and models on display like KM, Neo, Unipool, INH etc.
The salesperson at the store explained the differences in quality, brand reputation and prices of different washing machines. Ritika could now compare fully automatic, semi-automatic, top load and front load washing machines. The salesperson encouraged her to take her time, check different brands and resolve her queries. Ritika also went to another shop nearby to compare prices and features of different washing machines.
After comparing all the available options, Ritika chose a 'Neo' front load washing machine because it offered the best features within her budget.
The consumer right exercised by Ritika in the above case is : [1 Mark]
(A) Right to be heard
(B) Right to be assured
(C) Right to consumer education
(D) Right to seek redressal

Answer: (B) Right to be assured

Teacher's Note:
a) The case shows a consumer who is assured of access to a variety of products at competitive prices and chooses freely.
b) This idea is part of the right to choose, so link "variety of brands" and "compare prices" with this right.

9. Match the principle of management given in Column - I with its explanation given in Column - II : [1 Mark]
Column - I | Column - II
(a) Discipline | (i) There should be one and only one boss for every individual employee in the organisation.
(b) Unity of direction | (ii) There should be a place for everything (everyone) and everything (everyone) should be in its (his/her) place.
(c) Order | (iii) There should be obedience to organisational rules and employment agreement which is necessary for the working of the organisation.
(d) Unity of command | (iv) Each group of activities having the same objective must have one head and one plan.
Choose the correct option from the following :
(a) (b) (c) (d)
(A) (iii) (iv) (i) (ii)
(B) (iv) (iii) (ii) (i)
(C) (iv) (iii) (i) (ii)
(D) (iii) (iv) (ii) (i)

Answer: (D) (iii) (iv) (ii) (i)

Teacher's Note:
a) One boss for each employee is unity of command; one head and one plan is unity of direction.
b) "A place for everything" is the principle of order; obedience to rules is discipline.

10. Sudha is a corporate executive and has to attend a felicitation function to be held in her office tomorrow. So she decides to colour her hair. On recommendation of her friend, she purchased 'NATURO' hair colour. After reading essential details such as shade, its ingredients, usage instructions and expiry date mentioned on the box, Sudha opened the box. She took out the colour tube and developer bottle from the box and threw away the box.
The level of packaging of box thrown away by Sudha was : [1 Mark]
(A) Primary packaging
(B) Transportation packaging
(C) Secondary packaging
(D) General packaging

Answer: (C) Secondary packaging

Teacher's Note:
a) The tube and bottle are the primary packages; the outer box that is thrown away is secondary packaging.
b) Transportation packaging is used for storage and transport, not for the retail unit.

11. Which of the following is NOT an organisational barrier to communication ? [1 Mark]
(A) Status
(B) Organisational facilities
(C) Lack of proper incentives
(D) Rules and regulations

Answer: (C) Lack of proper incentives

Teacher's Note:
a) Lack of proper incentives is a personal barrier to communication.
b) Organisational barriers include policy, rules and regulations, status, complexity in structure and organisational facilities.

12. Due to severe winter and rising pollution levels, 'Green India Electronics' planned to launch a new eco-friendly heater in the market. It conducted a survey and found that the demand of this product was very high. As the winter season lasts only for 2 to 3 months, the Chief Executive Officer wanted that there should be close coordination among all the managers to deliver orders on time. Top level managers were asked to work in coordination with their subordinates to ensure that company's policies were properly followed. To ensure that the heaters would be ready on time, the production manager co-ordinated with the operational level managers. Operational level managers co-ordinated the activities of the workers to ensure that work proceeded according to plans. As a result 'Green India Electronics' was able to launch its heaters on time, in the market.
The feature of co-ordination discussed in the above case is : [1 Mark]
(A) Co-ordination is a deliberate function.
(B) Co-ordination is the responsibility of all managers.
(C) Co-ordination is a continuous process.
(D) Co-ordination ensures unity of action.

Answer: (B) Co-ordination is the responsibility of all managers.

Teacher's Note:
a) The case shows top, middle (production manager) and operational level managers all coordinating.
b) When every level of management is involved, the feature is "responsibility of all managers".

13. Read the following statements - Assertion (A) and Reason (R) : [1 Mark]
Assertion (A) : Money market instruments have a higher degree of liquidity as compared to capital market securities.
Reason (R) : Money market instruments are traded on the stock exchanges.
Choose the correct alternative from the alternatives given below :
(A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true and Reason (R) is false.
(D) Assertion (A) is false and Reason (R) is true.

Answer: (C) Assertion (A) is true and Reason (R) is false.

Teacher's Note:
a) Money market instruments are short-term and highly liquid, so the Assertion is true.
b) They are not traded on stock exchanges; deals take place over phone or through electronic systems, so the Reason is false.

14. The workers in Alpha manufacturing company were using traditional methods for production of metal parts. Since no standard procedure existed, workers relied on personal experience and guess work. As a result, productivity in the assembly line began to decline.
To improve productivity, the company hired a consultant specializing in scientific management. The consultant explained that there was only one best method to maximize efficiency and this method could be developed through proper study and analysis. He emphasized that the scientific method should replace the old method, that the workers were using.
So, to develop the scientific method, the consultant carefully investigated the traditional methods through work-study and by unifying the best practices, he developed a standard method that would be followed by everyone in the organization.
After applying scientific method, there was a three fold increase in productivity within six months.
The principle of scientific management which helped the company in increasing the productivity was : [1 Mark]
(A) Science, not Rule of Thumb
(B) Harmony, Not Discord
(C) Cooperation, Not Individualism
(D) Development of Each and Every Person to His or Her Greatest Efficiency and Prosperity

Answer: (A) Science, not Rule of Thumb

Teacher's Note:
a) Replacing guess work with one best method found by study and analysis is "Science, not Rule of Thumb".
b) Key clue words: "only one best method" and "scientific method should replace the old method".

15. Ravi purchased gold jewellery from a reputed jewellery store. He ensured that the jewellery had a hallmark which confirm its purity and authenticity. To avoid paying goods and services tax (GST) he asked the salesperson to write the gold weight and making charges on a slip of paper and hand over it to him.
Which of the following responsibilities of a consumer was not fulfilled by Ravi while purchasing jewellery ? [1 Mark]
(A) Be aware about various goods and services available in the market so that an intelligent and wise choice can be made.
(B) Ask for a cash memo on purchase of goods and services.
(C) Buy only standardized goods as they provide quality assurance.
(D) Assert yourself to ensure that you get a fair deal.

Answer: (B) Ask for a cash memo on purchase of goods and services.

Teacher's Note:
a) A slip of paper instead of a proper bill means Ravi did not take a cash memo.
b) Checking the hallmark shows he did fulfil the responsibility of buying standardised goods.

16. Identify the incorrect statement with respect to the importance of planning function of management : [1 Mark]
(A) Planning provides directions by stating in advance how work is to be done.
(B) Planning eliminates uncertainty by looking ahead and anticipating changes.
(C) Planning facilitates decision making by making a choice among various alternative courses of action.
(D) Planning promotes innovative ideas as new ideas can take the shape of concrete plans.

Answer: (B) Planning eliminates uncertainty by looking ahead and anticipating changes.

Teacher's Note:
a) Planning only reduces the risks of uncertainty; it can never eliminate uncertainty.
b) Watch for absolute words like "eliminates" in "incorrect statement" questions.

17. Read the following statements - Assertion (A) and Reason (R) : [1 Mark]
Assertion (A) : Many enlightened business firms have set up their own consumer service and grievance cells.
Reason (R) : The consumer has a right to file a complaint and to be heard in case of dissatisfaction with a good or service.
Choose the correct alternative from the alternatives given below :
(A) Both Assertion (A) and Reason (R) are false.
(B) Assertion (A) is false and Reason (R) is true.
(C) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(D) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Answer: (D) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Teacher's Note:
a) Grievance cells are set up by firms to honour the consumer's right to be heard.
b) Since the Reason explains why firms set up such cells, option (D) is correct.

18. 'While granting loans to a company, sometimes the lender may impose certain restrictions on the payment of dividends in future.'
The factor affecting dividend decision discussed above is [1 Mark]
(A) Access to capital market
(B) Contractual constraints
(C) Legal constraints
(D) Stock market reaction

Answer: (B) Contractual constraints

Teacher's Note:
a) Restrictions placed by a lender in a loan agreement are contractual constraints.
b) Legal constraints come from law, such as the Companies Act, not from a loan contract.

19. 'CARO Tech Solutions' aimed at development of a software system for the company's growing operations. The project was to be completed within six months with a budget of Rs. 12,00,000.
The software development team successfully completed its project on time by outsourcing a part of the project, leading to an additional expense of Rs. 2,00,000.
From the following, identify whether the software development team is : [1 Mark]
(A) Efficient and Effective
(B) Efficient but not effective
(C) Effective but not efficient
(D) Neither efficient nor effective

Answer: (C) Effective but not efficient

Teacher's Note:
a) Completing the project on time means the goal was achieved, so the team is effective.
b) Spending Rs. 2,00,000 over the budget means resources were not used well, so it is not efficient.

20. Identify the element of communication process from the above picture : [1 Mark]
(A) Feedback
(B) Media
(C) Noise
(D) Decoding

[Figure: A man in a suit shouting through a loudspeaker (megaphone) with zig-zag lines around it; another man in front of him covers both ears with his hands and closes his eyes; a speech bubble above the listener is filled with jumbled symbols such as !, *, %, + and x, and zig-zag lines appear near the bottom.]

Answer: (C) Noise

Teacher's Note:
a) Noise is any obstruction or hindrance in the communication process.
b) The jumbled symbols and the listener covering his ears show that the message is disturbed.

For Visually Impaired Candidates (in lieu of Q. 20)

The element of communication process that converts the message into communication symbols is : [1 Mark]
(A) Feedback
(B) Media
(C) Decoding
(D) Encoding

Answer: (D) Encoding

Teacher's Note:
a) Encoding converts the message into symbols such as words, pictures or gestures.
b) Decoding is the reverse: the receiver converts the symbols back into meaning.

21. 'Soal Footwear Ltd.' is known for its high quality athletic shoes and casual sneakers. With increasing competition and changing consumer preferences, it decided to diversify its product range by adding clothing, bags and accessories under the same brand umbrella. This diversification aimed to capture a larger share of the market and increase customer loyalty.
(i) Suggest with reason which type of organisational structure will be suitable for 'Soal Footwear Ltd.'
(ii) State any two advantages of the organisational structure suggested in (i) above. [3 Marks]

Answer:
(i) Divisional structure will be suitable for 'Soal Footwear Ltd.'
Reason: Divisional structure is suitable where a large variety of products are manufactured. The company has decided to diversify its product range by adding clothing, bags and accessories.
(ii) Advantages of divisional structure (any two):
1. Product specialisation helps in developing varied skills in a divisional head and prepares him for higher positions.
2. Divisional heads can be held accountable for profits, as revenues and costs of each division can be easily identified and assigned to them.

Teacher's Note:
a) Diversification into many product lines is the key clue for divisional structure.
b) Part (i) needs both the structure and the reason; writing only the name loses marks.
c) Other advantages you may write: flexibility and faster decisions, and easy expansion by adding new divisions.

22. (a) State any three measures to improve communication effectiveness. [3 Marks]

Answer:
1. Clarify the ideas before communication: the problem should be studied in depth, analysed and stated clearly so that it is clearly conveyed to subordinates.
2. Communicate according to the needs of the receiver: the manager should adjust his communication to the education and understanding level of subordinates.
3. Ensure proper feedback: the manager should ask questions about the message conveyed to check whether it has been understood.

Teacher's Note:
a) Other valid measures: consult others before communicating, be aware of language and tone, follow up communication and be a good listener.
b) Give a heading for each measure and one line of explanation; only listing points gets half marks.

OR

(b) State any three features of leadership. [3 Marks]

Answer:
1. Leadership indicates the ability of an individual to influence others.
2. Leadership tries to bring change in the behaviour of others.
3. Leadership is exercised to achieve the common goals of the organisation.

Teacher's Note:
a) Other features: it shows interpersonal relations between leaders and followers, and it is a continuous process.
b) Write exactly three features, as the question asks for any three.

23. 'Riya Mart' is a company manufacturing disposable crockery. They have been in business for the past five years, but were not earning good profits. Concerned about this, the Chief Executive Officer (CEO), Verma, ordered an internal audit. The audit uncovered several issues like inventory pilferage, employees coming late and their performance not upto the mark. To stop inventory pilferage, Verma, the CEO, introduced surprise stock checks and installed an automated inventory management system to track stock movements. A biometric attendance system was also setup to keep a check on employees coming late. In addition to this, to motivate employees for better performance, they were told in advance what they are expected to do and what are their standards of performance. As a result of these steps, the inventory pilferage reduced, employees became more punctual and their performance improved.
(i) Identify and state the function of management performed by Verma, the Chief Executive Officer of the company.
(ii) State any two points of importance of the function identified in (i) above, which are not discussed in the above para. [3 Marks]

Answer:
(i) The function of management performed by Verma is Controlling. Controlling means measuring the accomplishment against the standards and correcting deviations, to ensure that objectives are achieved according to plans.
(ii) Importance of controlling not discussed in the para (any two):
1. Accomplishing organisational goals: it measures progress towards goals and brings to light the deviations, if any.
2. Judging accuracy of standards: it helps to review and revise the standards in the light of changes in the organisation and the environment.

Teacher's Note:
a) Surprise stock checks and biometric attendance are checking devices, which point to controlling.
b) Do not write points already in the case, such as ensuring order and discipline, or improving employee motivation.
c) Other valid points: facilitating coordination in action and making efficient use of resources.

24. (a) State any three functions of top level management. [3 Marks]

Answer:
1. They integrate diverse elements and coordinate the activities of different departments according to the overall objectives of the organisation.
2. They formulate overall organisational goals and strategies for their achievement.
3. They are responsible for the welfare and survival of the organisation.

Teacher's Note:
a) Other functions: analysing the business environment, and being responsible for all business activities and their impact on society.
b) Do not mix up with middle level functions like interpreting policies or assigning duties.

OR

(b) State any three points of importance of business environment. [3 Marks]

Answer:
1. It enables the firm to identify opportunities and get the first mover advantage, instead of losing them to competitors.
2. It helps the firm to identify threats and early warning signals, so that it can prepare to meet such threats.
3. It helps in planning and policy formulation, as understanding the environment is the basis for future courses of action and guidelines for decision making.

Teacher's Note:
a) Other points: tapping useful resources, coping with rapid changes and improving performance.
b) Write a short heading and one line of explanation for each point.

25. 'Eco Care', a start-up, plans to launch a reusable water bottle for environmentally conscious millennials and Gen Z. For this, they conducted a market research to identify the needs of the customers so that an informed decision could be taken for successful marketing of the product. They wanted to work carefully on the design to make the bottle attractive to the target customers.
On the basis of consumer views and opinions, they developed a stylish stainless steel bottle with double wall insulation to keep beverages cold for 24 hours, giving it a competitive advantage in the market.
They named the bottle 'Eco-Sip' creating a brand identity focused on sustainability and simplicity. It would also help in product differentiation. The packaging was made using hundred percent recyclable cardboard, with details of sustainability, features, price etc. printed on it.
State the four functions of marketing that are carried out by 'Eco Care' in the above case. [4 Marks]

Answer:
1. Gathering and analysing market information: it is done to identify the needs of customers and to analyse the opportunities, threats, strengths and weaknesses of the organisation.
2. Product designing and development: it makes the product attractive to the target customers, improves its performance and gives it a competitive advantage in the market.
3. Branding: it is the decision to sell the product under a generic name or give it a brand name; a brand name helps in product differentiation, building customer loyalty and promoting sales.
4. Packaging and labelling: it means designing and developing the package for the product and the label to be put on the package.

Teacher's Note:
a) Link each function to its clue: market research, design of the bottle, the name 'Eco-Sip', and recyclable cardboard with details printed.
b) Name each function and add one line on what it means; only listing gets half marks.

26. (a) State any four merits of external sources of recruitment. [4 Marks]

Answer:
1. Qualified personnel: the management can attract qualified and trained people to apply for vacant jobs.
2. Wider choice: a large number of applicants from outside apply, so the management has a wider choice in selection.
3. Fresh talent: it brings new blood and adds fresh talent to the organisation.
4. Competitive spirit: existing staff work harder to show better performance when they compete with outsiders.

Teacher's Note:
a) Use the short headings qualified personnel, wider choice, fresh talent and competitive spirit to remember the points.
b) Do not write merits of internal sources, like improved morale of existing staff.

OR

(b) State any four benefits of training to an organization. [4 Marks]

Answer:
1. Training is systematic learning, which is always better than hit and trial methods that waste effort and money.
2. It enhances employee productivity in terms of both quantity and quality, leading to higher profits.
3. It equips future managers who can take over in case of an emergency.
4. It increases employee morale and reduces absenteeism and employee turnover.

Teacher's Note:
a) Another valid benefit: it helps to respond effectively to fast changing technological and economic environment.
b) The question asks for benefits to the organisation, not to the employee, so do not write points like better career or higher earnings.

27. (a) Explain the following limitations of planning function of management : [4 Marks]
(i) Planning may not work in a dynamic environment.
(ii) Planning reduces creativity.

Answer:
(i) Planning may not work in a dynamic environment:
1. The business environment is dynamic and keeps changing due to economic, political, physical, legal and social factors, so organisations have to keep adapting to these changes.
2. Planning cannot foresee everything, so there may be obstacles to effective planning.
(ii) Planning reduces creativity:
1. Planning is mainly done by top management; middle management and other decision makers are neither allowed to deviate from plans nor permitted to act on their own.
2. So the initiative and creativity of employees gets lost or reduced, as they only carry out orders and leave little scope for new ideas.

Teacher's Note:
a) Each limitation carries 2 marks, so write two clear points for each.
b) Use the key words "constantly changing environment" for (i) and "only carry out orders" for (ii).

OR

(b) Explain the following types of plans : [4 Marks]
(i) Policy
(ii) Procedure

Answer:
(i) Policy:
1. A policy is a general statement that guides thinking and channelises energies towards a particular direction; it guides managerial action and decisions in implementing strategy.
2. It defines the broad parameters within which a manager may function, and the manager may use his discretion to interpret and apply it.
(ii) Procedure:
1. Procedures are routine steps on how to carry out activities and specify the exact manner in which any work is to be performed.
2. They are specified in a chronological order, within a broad policy framework, and are meant for insiders to follow.

Teacher's Note:
a) Policy is a general guide with scope for discretion; procedure is a fixed sequence of steps.
b) Mention "chronological order" for procedure, as examiners look for this keyword.

28. 'GW Industries', known for its paper products, decided to produce and launch a new line of sustainable packaging called 'EcoPac'.
As management is a complex activity, the Chief Executive Officer of the company translated the work into clear goals and assigned the means to achieve those. He knew that human resources are the greatest asset of an organization, so getting work done through them is also a major task. The production of high quality sustainable packaging also required a proper production process. This was put in place for managing the flow of input materials and technology to convert these materials into high quality sustainable packaging.
In this way 'GW industries' took care of various aspects for successful launch of 'EcoPac'.
A characteristic of management is discussed in the above case. Identify and explain the characteristic. [4 Marks]

Answer: The characteristic of management discussed is: Management is multidimensional. It has three dimensions:
1. Management of work: all organisations exist to perform some work; management translates this work into goals to be achieved and assigns the means to achieve them.
2. Management of people: it means dealing with employees as individuals with diverse needs and behaviour, and also dealing with them as a group of people.
3. Management of operations: it requires a production process that involves the flow of input materials and the technology for converting these inputs into the desired output for consumption.

Teacher's Note:
a) Identification carries 1 mark; each of the three dimensions carries 1 mark.
b) The case lines on goals, human resources and production process match the three dimensions in order.

29. Rajiv was on the board of directors of 'Tako Solutions', a software development company and 'Sabka Mart Retail', a large supermarket chain. He wanted to apply management principles in both the companies to improve efficiency and profitability.
He knew that management principles can be applied as much to 'Tako Solutions' as to 'Sabka Mart Retail' though the extent to which the principles can be applied will differ, because the nature of work, scale of operations and business activities in a software firm and a supermarket chain are not the same.
Rajiv also knew that the management principles would not provide readymade solutions because real world situations faced by the two companies were very complex and dynamic. Still, he believed that even small guidelines could help in solving many problems and will improve the way both companies worked.
Identify and explain the two points that highlight the nature of principles of management, in the above case. [4 Marks]

Answer:
1. Universal applicability: the principles of management apply to all types of organisations - business and non-business, small and large, public and private sector, manufacturing and services. However, the extent of their application varies with the nature of the organisation, business activity, scale of operations and the like.
2. General guidelines: the principles are guidelines to action but do not provide readymade, straitjacket solutions to all managerial problems, because real business situations are complex and dynamic. Still, their importance cannot be underestimated, as even a small guideline helps to solve a given problem.

Teacher's Note:
a) Each point gets half a mark for identification and one and a half marks for explanation.
b) Clue lines: "can be applied as much to 'Tako Solutions' as to 'Sabka Mart Retail'" and "would not provide readymade solutions".

30. 'Sheetal Cosmetics Ltd.', is a fast growing beauty and skin care company known for its innovative products and aggressive market expansion. As the company increased its marketing activities like new product launches, accelerated advertising campaigns, social media promotions and influencer collaborations etc., the workload of the marketing department grew sharply. Despite working long hours, the marketing manager Arjun couldn't give adequate attention to strategic planning and high impact decisions as minor operational issues began consuming most of his time. Noticing this, the Chief Executive Officer (CEO) advised Arjun that it was now impractical for him to handle the entire volume of work alone, so he should allow his subordinates to take up routine tasks. This would not only help him manage his time better but also satisfy the subordinate's need for recognition. This will also provide opportunities to the subordinates to develop and exercise initiative.
(i) Identify the concept suggested by CEO that will help Arjun to manage volume of work effectively.
(ii) State any three points of importance of the concept identified in (i) above. [4 Marks]

Answer:
(i) The concept suggested by the CEO is Delegation.
(ii) Importance of delegation (any three):
1. Effective management: by empowering employees, managers get more time to concentrate on important matters.
2. Employee development: employees get more opportunities to use their talent and develop themselves for higher positions.
3. Facilitates growth: it provides a ready workforce to take up leading positions in new ventures, which helps the organisation to expand.

Teacher's Note:
a) "Allow his subordinates to take up routine tasks" is the clue for delegation.
b) Other valid points: motivation of employees, basis of management hierarchy and better coordination.
c) Write exactly three points of importance for part (ii).

31. 'Koka Manufacturing Ltd.' is a large scale manufacturer in the electronics industry. In this industry assets are prone to obsolescence and their replacement becomes due faster with change in technology. The company is constantly under pressure to upgrade its machinery and equipment as it would help company to stay competitive, improve its product quality and reduce production costs. So instead of purchasing the machinery, company decides to lease the required machinery, giving it flexibility to upgrade equipment at the end of lease term. This helps company to maintain operational efficiency, technological competitiveness and financial flexibility.
Identify and explain four factors that would affect the fixed capital requirements of 'Koka Manufacturing Ltd.'. [6 Marks]

Answer:
1. Nature of business ("a large scale manufacturer in the electronics industry"): a manufacturing organisation needs higher investment in fixed assets than a trading concern, as it has to buy plant and machinery, etc.
2. Scale of operation ("large scale manufacturer"): a larger organisation operating at a higher scale needs a bigger plant, more space, etc., so it requires higher investment in fixed assets than a small organisation.
3. Technology upgradation ("assets are prone to obsolescence and their replacement becomes due faster"): in certain industries assets become obsolete sooner and must be replaced faster, so higher investment in fixed assets may be required.
4. Financing alternatives ("company decides to lease the required machinery"): when an asset is taken on lease, the firm pays lease rentals and uses it; availability of leasing reduces the funds to be invested in fixed assets, thereby reducing fixed capital requirements.

Teacher's Note:
a) Each factor carries half a mark for identification and one mark for explanation.
b) Note the direction of effect: leasing reduces fixed capital needs, while faster obsolescence increases them.
c) Do not write working capital factors like operating cycle or credit allowed.

32. (a) Explain the following steps in the process of selection : [6 Marks]
(i) Preliminary screening
(ii) Selection tests
(iii) Employment interview

Answer:
(i) Preliminary screening:
1. It helps the manager to eliminate unqualified or unfit job seekers on the basis of the information given in the application forms.
2. Preliminary interviews help to reject misfits for reasons that did not appear in the application forms.
(ii) Selection tests:
1. An employment test is a mechanism (a paper and pencil test or an exercise) that tries to measure certain characteristics of individuals.
2. These characteristics range from aptitudes, such as manual dexterity, to intelligence and personality.
(iii) Employment interview:
1. An interview is a formal, in-depth conversation conducted to evaluate the applicant's suitability for the job.
2. The interviewer seeks information and the interviewee provides it; in present times the interviewee also seeks information from the interviewer.

Teacher's Note:
a) Each step carries 2 marks, so give two clear points for each.
b) Mention examples of tests (intelligence, aptitude, personality, trade, interest) for extra clarity.

OR

(b) Explain the following semantic barriers to communication : [6 Marks]
(i) Badly expressed message
(ii) Faulty translations
(iii) Body language and gesture decoding

Answer:
(i) Badly expressed message:
1. Sometimes the intended meaning may not be conveyed by a manager to his subordinates.
2. Such badly expressed messages may be due to inadequate vocabulary, use of wrong words, omission of needed words, etc.
(ii) Faulty translations:
1. Sometimes communication drafted in one language (e.g. English) has to be translated into a language understood by workers (e.g. Hindi).
2. If the translator is not proficient in both languages, mistakes may creep in and give a different meaning to the communication.
(iii) Body language and gesture decoding:
1. The body movements and gestures of the communicator matter a lot in conveying the message.
2. If there is no match between what is said and what is shown by body movements, the communication may be wrongly perceived.

Teacher's Note:
a) Semantic barriers relate to problems in encoding and decoding the message into words or impressions.
b) Give two points for each barrier, as each carries 2 marks.

33. Ria ran a small online bakery business. Her business was doing very well. She saved a good amount of money every month and now wanted to invest it wisely. She was in a dilemma to keep her savings in a bank account or to invest it in the stock market. Her friend Aabha, who had done a certification course from National Stock Exchange, encouraged her to invest in the stock market. She explained to Ria that if she invests in the stock market, she could disinvest and reinvest whenever she wanted, which would provide her good liquidity. Aabha also told her that the membership of stock exchange is well regulated and all trading takes place within the legal framework. As a result, investors get a fair and safe deal.
Ria was still apprehensive as she had heard that there is lot of speculation in the stock market. She wanted to be cautious. Aabha clarified that speculation does exist, but it happens in a restricted and controlled way. She also told Ria that the stock exchange is keen to promote wider share ownership and does so by educating public about investments etc. As a result, young people have started investing in the stock market. After all this discussion, Ria felt confident and decided to invest a part of her savings in the stock market.
Quoting lines, identify and explain the four functions of stock exchange highlighted in the above case. [6 Marks]

Answer:
1. Quoted line: "She explained to Ria that if she invests in the stock market, she could disinvest and reinvest whenever she wanted, which would provide her good liquidity."
Function: Providing liquidity and marketability to existing securities. The basic function of a stock exchange is to create a continuous market where securities are bought and sold, which gives liquidity and marketability.
2. Quoted line: "Aabha also told her that the membership of stock exchange is well regulated and all trading takes place within the legal framework. As a result, investors get a fair and safe deal."
Function: Safety of transactions. The membership of a stock exchange is well regulated and its dealings are well defined under the existing legal framework, so the investing public gets a safe and fair deal.
3. Quoted line: "Aabha clarified that speculation does exist, but it happens in a restricted and controlled way."
Function: Providing scope for speculation. The stock exchange provides enough scope, within the provisions of law, for speculative activity in a restricted and controlled manner.
4. Quoted line: "She also told Ria that the stock exchange is keen to promote wider share ownership and does so by educating public about investments etc. As a result, young people have started investing in the stock market."
Function: Spreading of equity cult. The stock exchange ensures wider share ownership by regulating new issues, better trading practices and educating the public about investments.

Teacher's Note:
a) Each function carries half a mark each for quoting, identifying and explaining.
b) Copy the quoted lines exactly from the case inside quotation marks.
c) Do not write functions not in the case, such as pricing of securities or contributing to economic growth.

34. (a) Explain the following factors affecting the determination of price of a product : [6 Marks]
(i) Product cost
(ii) The utility and demand
(iii) Extent of competition in the market

Answer:
(i) Product cost:
1. Product cost includes the cost of producing, distributing and selling the product; it sets the minimum level or floor price at which the product may be sold.
2. Firms try to cover all their costs at least in the long run, and also aim to earn a margin of profit over and above the costs.
(ii) The utility and demand:
1. The utility of the product and the intensity of the buyer's demand set the upper limit of price; the buyer may pay up to the point where the utility is at least equal to the price paid.
2. Consumers usually buy more units at a low price than at a high price.
(iii) Extent of competition in the market:
1. With less competition, the price tends to reach the upper limit; under free competition, the price tends to be set at the lowest level.
2. Competitors' prices, their expected reactions and the quality and features of competing products must be examined before fixing the price.

Teacher's Note:
a) Remember: cost sets the lower limit (floor) and utility and demand set the upper limit of price.
b) Give two points for each factor, as each carries 2 marks.

OR

(b) Explain the following marketing management philosophies : [6 Marks]
(i) Production concept
(ii) Product concept
(iii) Selling concept

Answer:
(i) Production concept:
1. Profits can be maximised by producing on a large scale, which reduces the average cost of production.
2. Availability and affordability of the product are the key to success, so emphasis is on improving production and distribution efficiency.
(ii) Product concept:
1. As the supply of products increased, customers started looking for products superior in quality, performance and features.
2. The focus is on continuous improvement in quality and adding new features, making product improvement the key to profit maximisation.
(iii) Selling concept:
1. Firms must undertake aggressive selling and promotional efforts, such as advertising, personal selling and sales promotion, to make customers buy their products.
2. The focus is on pushing the sale of products through aggressive selling techniques to persuade, lure or coax buyers.

Teacher's Note:
a) Key words: availability and affordability (production), quality and features (product), aggressive selling (selling).
b) Give two points for each concept, as each carries 2 marks.

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