ISC Class 12 Business Studies Board Exam Question Paper 2025 with Solutions

ISC Class 12 Business Studies Board Exam Question Paper with Solutions

SECTION A - 16 MARKS

Question 1

(i) Mahima has joined XYZ Ltd. as a Sales Executive. She is a bright employee with good interpersonal skills. At a review meeting, the management feels that Mahima is promising and can be considered for a future leadership role in the company. Identify the method of appraisal that has led the management to this conclusion about Mahima [1 Mark]

Answer: Potential Appraisal.

Teacher's Note:
a) Potential appraisal focuses on identifying and evaluating an employee's future capabilities and traits rather than just current performance.
b) Ensure students do not confuse it with performance appraisal, which measures past achievements.

(ii) As per the Blake and Mouton Managerial Grid, name the 5,5 leadership style combination. [1 Mark]

Answer: Middle-of-the-Road Management.

Teacher's Note:
a) This style reflects a moderate concern for both production and people, aiming for adequate organizational performance.
b) It avoids extremes, balancing employee needs with task requirements to achieve average results.

(iii) Observe the relation between the first two phrases / terms and then fill in the fourth phrase / term.
(a) Monthly sales report: Routine report :: Report on theft : ____________ [1 Mark]

Answer: Special Report

Teacher's Note:
a) Routine reports are prepared periodically at regular intervals for general business monitoring.
b) Special reports are non-recurring documents prepared specifically for unexpected incidents or investigations.

(b) Reserve Bank of India: Regulator :: State Bank of India : ____________ [1 Mark]

Answer: Intermediary

Teacher's Note:
a) The RBI acts as the apex regulatory authority overseeing the country's monetary and banking framework.
b) Commercial banks like the State Bank of India act as financial intermediaries dealing directly with public deposits and loans.

(iv) A movement to a higher pay scale without any change in the status of the employee is known as ____________ [1 Mark]

Answer: Upgrading

Teacher's Note:
a) Upgrading involves a financial promotion where pay increases while job responsibilities and designation remain identical.
b) Differentiate this clearly from promotion, which involves both higher pay and elevated rank or authority.

(v) As a source of finance, ____________ shares are considered best for cautious investors seeking steady dividends. [1 Mark]

Answer: Preference

Teacher's Note:
a) Preference shares carry a preferential right regarding the payment of fixed dividends prior to equity shareholders.
b) They offer lower risk and stable returns, making them attractive for risk-averse investors.

(vi) Ex-employees are an ____________ source of recruitment. [1 Mark]

Answer: Internal

Teacher's Note:
a) Re-hiring former employees falls under internal recruitment as they are already familiar with company culture.
b) This method reduces onboarding time and training costs significantly.

(vii) The ____________ significance of Human Resource Management implies maximum utilisation of human resources by ensuring their physical and mental well-being. [1 Mark]

Answer: Social

Teacher's Note:
a) Social significance emphasizes employee welfare, fair compensation, safe working conditions, and overall job satisfaction.
b) It ensures human capital is nurtured ethically for sustainable community and organizational development.

(viii) Organisational barriers to communication refer to those obstacles that hinder the flow of communication within an organisation.
Which one of the following scenarios correctly indicates an organisational barrier? [1 Mark]
(A) Rohit submits a report to his Manager about a new consignment. The report is ambiguous, poorly worded and does not present all facts.
(B) Vidya has innovative ideas on product design but is hesitant to present them to her superior as she fears rejection.
(C) Tarun, an employee at Tarzan Associates urgently needs to meet the General Manager. However, his immediate superior tells him to follow all the levels of hierarchy and then meet the General Manager.
(D) Some employees at ABC Ltd. could not apply for the position of a Manager within the company, due to a technical error in the internet server in their departments.

Answer: (C) Tarun, an employee at Tarzan Associates urgently needs to meet the General Manager. However, his immediate superior tells him to follow all the levels of hierarchy and then meet the General Manager.

Rigid rules and adherence to hierarchical levels represent formal organizational structures acting as communication barriers.

Teacher's Note:
a) Organizational barriers arise from rules, policies, and hierarchical structures that delay or block information flow.
b) Option (A) is a semantic barrier, option (B) is a psychological barrier, and option (D) is a technical or physical barrier.

(ix) With reference to non-monetary incentives offered by an organisation, identify the odd one out from the following. [1 Mark]
(A) Appreciation of work
(B) Participation in management decisions
(C) Job security
(D) Medical reimbursement

Answer: (D) Medical reimbursement

Medical reimbursement provides direct financial compensation or coverage, classifying it as a monetary incentive.

Teacher's Note:
a) Non-monetary incentives satisfy psychological, emotional, and social needs without direct cash payouts.
b) Appreciation, job security, and participation are classic examples of non-financial motivators.

(x) Select the preliminary step in the procedure of staff dismissal [1 Mark]
(A) Holding of an enquiry
(B) Issuing of a written charge sheet
(C) Issuing of a notice of enquiry
(D) Receipt of an explanation

Answer: (B) Issuing of a written charge sheet

Issuing a formal written charge sheet informs the employee of specific allegations, initiating the disciplinary process.

Teacher's Note:
a) Formal disciplinary procedures must always begin by notifying the employee of exact charges in writing.
b) Subsequent steps include receiving explanations, issuing inquiry notices, and conducting formal hearings.

(xi) Read the two statements given below and choose the correct option.
Statement I: Pay slips help employees to understand their wage structure.
Statement II: Since composition of wages is complicated, employees require a pay slip showing details of total wages, deductions and net wages. [1 Mark]
(A) Statement I is true and Statement II is false.
(B) Statement I is false and Statement II is true.
(C) Both Statement I and Statement II are true and Statement II is the correct explanation for Statement I.
(D) Both Statement I and Statement II are true but Statement II is not the correct explanation for Statement I.

Answer: (C) Both Statement I and Statement II are true and Statement II is the correct explanation for Statement I.

Pay slips clarify wage structures precisely because complex salary computations require transparent itemized breakdowns.

Teacher's Note:
a) Transparency in payroll is vital to ensure employees trust organizational accounting and statutory deductions.
b) Statement II directly explains the reason why pay slips are necessary and useful tools.

(xii) State whether the following are True or False:
(a) A sole proprietorship firm has no legal existence separate from its owner. [1 Mark]

Answer: True

Teacher's Note:
a) In sole proprietorships, the business and the owner are treated as a single legal entity.
b) This results in unlimited personal liability for business debts.

(b) Staff Transfer refers to a vertical movement of an employee from one branch to another. [1 Mark]

Answer: False

Teacher's Note:
a) Staff transfer is a horizontal or lateral shift of an employee, not a vertical promotion or demotion.
b) It helps balance workforce distribution across different branches or departments.

(c) Though Casual Leave allows an employee to enjoy the leave, it results in deduction of pay during the period of leave. [1 Mark]

Answer: False

Teacher's Note:
a) Casual leave is typically paid leave granted for urgent personal matters or unforeseen contingencies.
b) Deductions occur only when leave is exhausted or categorized as leave without pay.

(d) Informal communication is completely authentic and reliable. [1 Mark]

Answer: False

Teacher's Note:
a) Informal communication (grapevine) is prone to distortions, rumors, and exaggerations.
b) While fast, it lacks the formal authentication and record-keeping of official channels.

SECTION B - 32 MARKS

Question 2

State any two advantages and any two disadvantages of Oral Communication [4 Marks]

Answer:
Advantages of Oral Communication:
1. Quick Exchange of Information: It allows for immediate feedback and clarification, making it much faster than written communication.
2. Personal Touch and Persuasion: It helps build interpersonal relationships, conveys emotions, and enhances understanding through tone, gestures, and facial expressions.
Disadvantages of Oral Communication:
1. Lack of Record: Unlike written communication, oral communication does not provide a permanent record, making it difficult to refer back to later.
2. Possibility of Misinterpretation: Oral communication can be prone to misunderstandings due to factors like unclear language, poor listening skills, or noise and distractions.

Teacher's Note:
a) Emphasize that oral communication is ideal for urgent matters requiring immediate feedback.
b) Mention the lack of legal validity as a key disadvantage in corporate settings.

OR

State any four effects of Globalisation on business around the world. [4 Marks]

Answer:
1. Increased Market Competition: Businesses face greater competition from international companies, driving them to improve quality and efficiency.
2. Expansion of Markets: Companies can operate and sell their products in multiple countries, leading to global brand recognition.
3. Technological Advancements: Businesses adopt modern technology to stay competitive, enhancing productivity and innovation.
4. Cultural Exchange: Globalisation encourages diverse workplace cultures and international collaborations, fostering new business strategies and consumer preferences.

Teacher's Note:
a) Explain how economic integration breaks down international trade barriers.
b) Highlight both opportunities and threats posed by foreign competitors.

Question 3

With reference to Business Correspondence, briefly explain each of the following:
(i) Subject and Reference [2 Marks]

Answer:
Subject: This is a brief statement that summarises the main purpose of the letter. It helps the recipient quickly understand the content.
Reference: It refers to any previous communication, order number, or file reference related to the letter. It helps in tracking and organising correspondence.

Teacher's Note:
a) Subject lines ensure efficient mail handling and immediate context recognition.
b) Reference lines provide continuity in multi-stage business negotiations.

(ii) Complimentary close and Signature [2 Marks]

Answer:
Complimentary Close: This is a polite way to end a business letter, expressing courtesy and professionalism. Common examples include "Yours sincerely," or "Best regards."
Signature: The sender's handwritten or digital signature, followed by their name, designation and company details, to authenticate the letter.

Teacher's Note:
a) Complimentary closes must match the formal tone set by the salutation.
b) A missing designation or signature invalidates the official authority of a business document.

Question 4

With reference to Herzberg's Two-factor Theory, explain the motivational and hygiene factors. [4 Marks]

Answer:
Herzberg's Two-Factor Theory includes two types of factors that affect how motivated or satisfied an employee is at work. These are comprised of hygiene factors and motivational factors.
1. Hygiene Factors: Hygiene factors are those that need to be addressed by a business in such a way that they would not result in employees' unpleasant experiences and feelings at work. The presence of hygiene factors does not lead to positive satisfaction or higher motivation, but their absence results in dissatisfaction among employees.
2. Motivational Factors: Motivational factors emerge from the need of an individual to achieve personal growth. Job satisfaction results from the presence of motivational factors. Moreover, effective motivational factors do not only lead to job satisfaction, but also to better performance at work.

Teacher's Note:
a) Clearly distinguish between factors preventing dissatisfaction (hygiene) and those creating satisfaction (motivators).
b) Give examples such as salary for hygiene and achievement for motivators to secure full marks.

Question 5

Distinguish between Training and Education on the following bases:
(a) Nature      (b) Participants      (c) Duration      (d) Contents [4 Marks]

Answer:

Teacher's Note:
a) Tabular presentation is best for comparative questions.
b) Ensure all four requested points of distinction are explicitly covered.

OR

Distinguish between Recruitment and Selection on the following bases:
(a) Nature      (b) Aim      (c) Process      (d) Number [4 Marks]

Answer:

Teacher's Note:
a) Highlight that recruitment widens the job market while selection narrows it down.
b) Check that all four bases specified in the prompt are addressed systematically.

Question 6

With reference to the Morale Productivity Matrix, name the quadrant indicated in each of the following cases:
(i) Firoz, an efficient tailor in a garment factory, normally stitches 40 shirts in a week which is more than the average of 30 shirts stitched by the other tailors in the factory. However, his sewing machine broke down one day and he could stitch only 25 shirts in that week. [1 Mark]

Answer: High Morale / Low Productivity

Teacher's Note:
a) Morale remained high despite lower output because the drop was due to equipment failure, not lack of motivation.
b) Emphasize that external constraints can temporarily suppress productivity without affecting employee morale.

(ii) Natasha is working with a company that has laid off many employees in the past few months. The fear of losing her job makes Natasha work beyond fixed hours to achieve all her sales targets. [1 Mark]

Answer: Low Morale / High Productivity

Teacher's Note:
a) High output driven by fear of job insecurity indicates low morale combined with high productivity.
b) Employees work hard under duress rather than through genuine job satisfaction.

(iii) Gurdeep, a new employee at MN Sons Ltd., is a very dedicated and diligent worker. Strives relentlessly to achieve organisational goals for which she has received recognition by the company. [1 Mark]

Answer: High Morale / High Productivity

Teacher's Note:
a) Dedication coupled with recognition points directly to optimal organizational alignment.
b) This represents the ideal state in the Morale Productivity Matrix.

(iv) Prince has been working as a clerk at Ronald Bank. He has completed twenty-five years of service and is due for retirement. During his tenure, the management of the bank did not consider him for any promotion because of his laid-back attitude towards his work. [1 Mark]

Answer: Low Morale / Low Productivity

Teacher's Note:
a) A laid-back attitude leading to stagnation indicates poor motivation and poor output.
b) This reflects the least desirable quadrant of the matrix.

Question 7

A 360 degree appraisal is inclusive and based on collection of feedback from a variety of sources. With reference to the above statement, explain any two components of this method of appraisal. [4 Marks]

Answer:
1. Self-Assessment: In this component, employees evaluate their own performance by reflecting on their achievements, strengths and areas where improvement is needed. This introspection encourages self-awareness and accountability.
2. Peer Feedback: Peer feedback involves gathering assessments from colleagues at the same hierarchical level. These peers can offer insights into day-to-day interactions, teamwork, communication and overall collaboration that might not be visible to supervisors.

Teacher's Note:
a) 360 degree feedback provides a comprehensive evaluation by including subordinates, superiors, peers, and self-evaluation.
b) Clearly state both components with their developmental benefits.

Question 8

Observe the image shown below and answer the questions that follow.
[Figure: A new employee being oriented in a conference room with an "EMPLOYEE HANDBOOK" displayed on a stand, surrounded by colleagues and a presenter.]
(i) Identify the type of training indicated in the image shown above. [1 Mark]

Answer: Induction Training (Orientation Training)

Teacher's Note:
a) Induction training is designed to introduce new recruits to company policies, rules, and colleagues.
b) The visible handbook and conference setting are typical indicators of corporate orientation.

(ii) How often is this type of training conducted for employees? [1 Mark]

Answer: Induction training is usually conducted whenever new employees join an organisation.

Teacher's Note:
a) It is a one-time onboarding process for each new hire.
b) It helps bridge the gap between initial selection and active job placement.

(iii) State any two reasons for conducting this type of training. [2 Marks]

Answer:
1. To help new employees understand company policies and procedures, ensuring they adapt quickly to the workplace.
2. To improve employee confidence and productivity by making them aware of their roles, responsibilities and work environment.

Teacher's Note:
a) Emphasize how induction reduces initial anxiety and promotes organizational socialization.
b) It ensures clarity regarding behavioral expectations from day one.

Question 9

Vasu, a Sales Executive at Sunshine Ltd., has been working with the organisation for fifteen years. He has a good track record. In recognition of his capabilities and long years of service in the organisation, the management promotes him to the post of Sales Manager.
Identify the basis on which Vasu has been promoted. Enumerate any three advantages of this type of promotion. [4 Marks]

Answer:
Basis of Promotion: Seniority-cum-Merit.
Three advantages of Seniority-cum-Merit promotion:
1. Encourages Loyalty and Retention: Employees are motivated to stay longer with the organisation, knowing that their dedication and tenure will be rewarded with career growth.
2. Ensures Fairness and Experience-Based Leadership: Promoting experienced employees ensures that managerial positions are filled by individuals who are well-versed in the company's culture, policies and work environment.
3. Boosts Employee Morale and Motivation: Employees feel valued when their hard work and commitment are recognised, leading to increased job satisfaction and productivity.

Teacher's Note:
a) Seniority-cum-merit balances length of service with proven competence.
b) List both the correct basis and three clear operational benefits to secure full credit.

SECTION C - 32 MARKS

Question 10

(i) Explain two types of Retirement. [4 Marks]

Answer:
1. Voluntary Retirement: In this type of retirement, an employee chooses to retire before reaching the official retirement age, usually after completing a certain number of years in service. Organisations may offer Voluntary Retirement Schemes (VRS) with benefits to encourage employees to retire early.
2. Compulsory Retirement: This occurs when an employee is required to retire upon reaching a specified age (e.g., 58 or 60 years) as per company policy or government regulations.

Teacher's Note:
a) Differentiate clearly between voluntary employee choice and mandatory organizational rules.
b) Mention superannuation as the standard term for age-based compulsory retirement.

(ii) With reference to staff benefits, briefly explain each of the following:
(a) Encashment of Leave [2 Marks]

Answer: Encashment of Leave: Employees may have accumulated unused leave, which they can convert into cash when they leave the organisation or at certain points during employment. For example, if an employee has 30 days of unused paid leave, they receive a salary equivalent for those days instead of taking leave.

Teacher's Note:
a) Explain that this benefit monetizes accumulated unutilized leaves.
b) It acts as a financial incentive encouraging employees not to waste earned leaves.

(b) Maternity Leave [2 Marks]

Answer: Maternity Leave: This is a statutory benefit that allows female employees to take paid leave during pregnancy and childbirth. The duration varies by organisation but generally ensures job security and financial support during this period.

Teacher's Note:
a) Mention legal mandates such as the Maternity Benefit Act in India.
b) Emphasize its role in supporting women's health and workforce retention.

Question 11

(i) Briefly explain each of the following:
(a) Human Resource Management [2 Marks]

Answer: Human Resource Management (HRM): HRM refers to the strategic approach of managing an organisation's workforce. It includes recruitment, training, performance management, compensation, employee relations and ensuring compliance with labour laws. HRM aims to enhance productivity and create a positive work environment.

Teacher's Note:
a) Highlight that HRM treats employees as valuable organizational assets.
b) Mention both procurement and maintenance functions of HR.

(b) B2B [2 Marks]

Answer: B2B (Business-to-Business): B2B refers to commercial transactions between businesses rather than between a business and individual consumers. Companies sell products or services to other businesses, such as raw materials, software, or wholesale goods.

Teacher's Note:
a) Focus on the commercial nature of transactions involving corporate entities.
b) Contrast it briefly with B2C to show clarity.

(c) Loans [2 Marks]

Answer: Loans: A loan is a sum of money borrowed from a bank or financial institution that must be repaid with interest over a specified period. Loans can be personal, business, home, or educational, based on the borrower's needs.

Teacher's Note:
a) Emphasize the repayment obligation and interest component.
b) Classify loans as borrowed funds or debt financing.

(d) Private Limited Company [2 Marks]

Answer: Private Limited Company: A Private Limited Company (Pvt. Ltd.) is a business entity privately owned by shareholders with limited liability. It cannot trade shares publicly and usually has a restriction on the number of shareholders (e.g., 2 to 200 in India).

Teacher's Note:
a) Point out the restricted invitation to the public for subscribing to shares.
b) Highlight limited liability as a key characteristic.

OR

(ii) Briefly explain each of the following:
(a) Job Description [2 Marks]

Answer: A job description is a document outlining the duties, responsibilities, qualifications and expectations for a specific job role. A job description also allows an organisation to explain the purpose and goals of the position and how it fits in with the company's long-term vision. It helps both employers and employees understand the scope of work.

Teacher's Note:
a) Distinguish job description (what the job entails) from job specification (qualifications needed).
b) Emphasize its utility in performance evaluation and recruitment.

(b) Refresher Training [2 Marks]

Answer: Refresher training is a type of training programme designed to update employees on new industry developments, reinforce existing knowledge and improve efficiency. It is often used for employees who have been in a role for a long time.

Teacher's Note:
a) Explain that it prevents skill obsolescence among veteran employees.
b) Differentiate it from induction training meant for newcomers.

(c) Retainership [2 Marks]

Answer: A retainership is an agreement where a professional or consultant is hired on a long-term basis to provide specific services regularly, usually in return for a fixed fee.

Teacher's Note:
a) Highlight the contractual and ongoing nature of professional consultancy.
b) Distinguish retainers from regular payroll employment.

(d) EPF [2 Marks]

Answer: EPF (Employees' Provident Fund): EPF is a retirement savings scheme where both employers and employees contribute a percentage of the employee's salary each month. It is managed by a government body, such as the Employees' Provident Fund Organisation (EPFO) in India.

Teacher's Note:
a) Emphasize its statutory nature and long-term social security objective.
b) Mention that it accumulates interest until retirement or withdrawal.

Question 12

Neeta Kumar, an entrepreneur, wants a modern look for her new office. She comes across a newspaper advertisement from Majestic Furniture that gives an overview of the furniture available with them.
Based on the above information, draft a letter from Neeta Kumar to Majestic Furniture seeking more information about the furniture. [8 Marks]

Answer:

Neeta Kumar
[Your Address]
[City, Pin Code]
[Email Address]
[Phone Number]
[Date]

The Sales Manager
Majestic Furniture
[Company Address]
[City, Pin Code]

Subject: Inquiry about Office Furniture

Dear Sir/Madam,

I recently came across your advertisement in the newspaper and was impressed by the range of furniture you offer. I am in the process of setting up a new office and am looking for modern, stylish and ergonomic furniture that aligns with a contemporary workspace.

I would appreciate it if you could provide me with more details regarding:

1. The types of office furniture available (desks, chairs, storage units, etc.).
2. Price range and any ongoing discounts or offers.
3. Customisation options, if available.
4. Delivery timelines and installation services.
5. Warranty and after-sales service policies.

Kindly share a catalogue or brochure, along with the pricing and any other relevant information. If possible, I would also like to visit your showroom to explore the options in person.

Looking forward to your prompt response.

Sincerely,

Neeta Kumar

Teacher's Note:
a) Ensure all parts of a formal business inquiry letter (sender's address, date, receiver's designation/address, clear subject line, formal salutation, structured body points, and proper closing) are included.
b) Deduct marks if the tone is informal or if essential inquiry points are missing.

Question 13

Read the passage given below and answer the questions that follow.
Guardian Angels, a startup, offers childcare services for working parents. They have a set of trained caregivers and provide child and toddler care services at the client's residence. They offer two packages. Parents can opt for services in either the morning or the evening shift. Guardian Angels soon gains popularity and is flooded with demand for its services. However, it is understaffed and works under pressure to meet the growing demand.
Since it is a startup, Guardian Angels does not want to refuse the clients. Therefore, it decides to pay an additional amount to the employees who are now required to work in both the shifts. The increased work pressure leads to low morale among the employees.

(i) 'However, it is understaffed and struggles to meet the growing demand. Which area of job planning needs to be reconsidered by Guardian Angels? [1 Mark]

Answer: Manpower planning

Teacher's Note:
a) Proper estimation of workforce requirements prevents operational bottlenecks during unexpected demand surges.
b) Manpower planning ensures correct staffing levels to maintain work-life balance.

(ii) Name the method of remuneration followed by Guardian Angels [1 Mark]

Answer: Time rate system

Teacher's Note:
a) Employees are paid additional amounts for extra shifts based on time worked rather than piece-rate output.
b) Distinguish between time-based and output-based wage systems.

(iii) Outline any two roles that Angel Investors play in a startup venture [2 Marks]

Answer:
1. Providing Financial Support: Angel investors fund early-stage start-ups to help them cover initial operational costs, expansion, or product development.
2. Mentorship and Guidance: They offer strategic advice, industry expertise and networking opportunities to help the start-up grow successfully.

Teacher's Note:
a) Angel investors provide seed capital when traditional bank funding is difficult to secure.
b) Their advisory role is equally valuable for fledgling entrepreneurs.

(iv) Discuss any two strategies that Guardian Angels can adopt to raise the morale of its employees. [4 Marks]

Answer:
1. Hire More Staff or Outsource: Guardian Angels should focus on expanding their workforce to meet the growing demand. This can involve hiring more caregivers or outsourcing some tasks to ensure employees aren't overworked. By reducing the workload per employee, morale can be improved significantly.
2. Offer Recognition and Rewards: Implementing a recognition programme where employees are acknowledged for their hard work and dedication can boost morale. Rewards could include bonuses, gift cards, or even public recognition for their efforts. This will make employees feel valued and appreciated.

Teacher's Note:
a) Address the root cause of burnout (overwork) through structural solutions like hiring.
b) Combine financial rewards with psychological appreciation to restore high morale.