ISC Class 12 Commerce Board Exam Question Paper 2014 with Solutions

ISC Class 12 Commerce Board Exam Question Paper with Solutions

PART I (20 Marks)

Answer all questions.

Question 1 [10×2]

Answer briefly each of the questions (i) to (x).

(i) What is the meaning of business environment? [2 Marks]

Answer:
Business environment refers to the sum total of all individuals, institutions and other forces that are outside the control of a business enterprise but that may affect its performance and survival.

Teacher's Note:
a) Ensure you include both internal forces and external forces (though external forces dominate the concept).
b) Keywords like "forces outside the control of business" must be highlighted in exams.

(ii) Enumerate the main forms in which financial assistance from a commercial bank may be available. [2 Marks]

Answer:
The main forms of financial assistance from commercial banks are:
1. Term Loans
2. Cash Credit
3. Overdraft facility
4. Discounting of Bills of Exchange

Teacher's Note:
a) Students should list at least four clear forms of bank credit.
b) Do not confuse overdraft with cash credit; they have different eligibility criteria and operational mechanisms.

(iii) Write any two features of principles of management. [2 Marks]

Answer:
Two features of principles of management are:
1. Universal applicability: They can be applied to all types of organizations, business as well as non-business.
2. General guidelines: They do not provide readymade solutions to all managerial problems, but rather serve as general guidelines for action.

Teacher's Note:
a) Other valid features include flexibility, contingent, and behavioral nature.
b) Explain each feature briefly with one line to secure full marks.

(iv) What is factoring? [2 Marks]

Answer:
Factoring is a financial service under which a financial institution or a specialized agency (called a factor) undertakes the task of collecting receivables for a business firm, and also provides short-term finance against accounts receivable.

Teacher's Note:
a) Mention both aspects: collection of debt and provision of advance finance.
b) This is a popular non-bank source of working capital finance.

(v) Distinguish between gross working capital and net working capital. [2 Marks]

Answer:

Teacher's Note:
a) Presenting the difference in a tabular format is recommended in board exams.
b) Ensure the formulas for both concepts are clearly stated.

(vi) State any two points of distinction between recruitment and selection. [2 Marks]

Answer:

Teacher's Note:
a) Highlighting the positive and negative nature of recruitment and selection respectively is vital.
b) Recruitment creates a large pool of applicants, whereas selection narrows it down.

(vii) Differentiate between bearer debentures and registered debentures. [2 Marks]

Answer:

Teacher's Note:
a) Focus on ownership records and transfer methods.
b) Bearer debentures offer higher liquidity in transfer.

(viii) In the context of right shares, bring out the meaning of pre-emptive right. [2 Marks]

Answer:
Pre-emptive right is the legal right of existing shareholders of a company to maintain their proportional ownership by having the first opportunity to purchase newly issued shares of the company before they are offered to the general public.

Teacher's Note:
a) This right protects existing shareholders from dilution of control and wealth.
b) Mention that these shares are typically offered at a price lower than the market price.

(ix) What is marketing research? [2 Marks]

Answer:
Marketing research is the systematic and objective collection, analysis, and interpretation of data relating to marketing problems, goods, services, and consumer behavior to help managers make effective decisions.

Teacher's Note:
a) Use keywords such as "systematic collection" and "analysis of data".
b) It forms the foundation for developing successful marketing strategies.

(x) Mention any two specific differences between product and service. [2 Marks]

Answer:

Teacher's Note:
a) Tangibility and separability are the most standard points of difference.
b) Give clear examples if space permits, though definitions suffice for short questions.

PART II (60 Marks)

Answer any five questions.

Question 2

(a) Explain why management is considered to be an art. [4 Marks]

Answer:
Management is considered to be an art because it satisfies all the major characteristics of an art:
1. Existence of theoretical knowledge: Like all arts, there is a lot of literature available in management which points out certain theoretical principles.
2. Personalized application: The use of this basic knowledge varies from person to person. Two managers use the same principles differently based on their experience and creativity.
3. Based on practice and creativity: Management requires continuous practice and creative application of knowledge to achieve desired results, just like a musician or painter.

Teacher's Note:
a) Compare management features with elements of art like painting, dancing, or music.
b) Clearly state all three points to fetch full credit.

(b) State and explain any four principles of F.W. Taylor. [8 Marks]

Answer:
F.W. Taylor proposed scientific principles of management. Four important principles are:
1. Science, not Rule of Thumb: Taylor emphasized that there is only one best method to maximize efficiency, which should be developed through scientific study and analysis, rather than trial and error or past experience.
2. Harmony, not Discord: There should be complete harmony between management and workers. A complete mental revolution on both parts is necessary to avoid class conflict.
3. Cooperation, not Individualism: This principle is an extension of harmony, emphasizing mutual cooperation between workers and management, with equal division of work and responsibility.
4. Development of each and every person to his or her greatest efficiency and prosperity: Scientific management involves the selection of workers best suited for each task and providing them with continuous training to increase efficiency.

Teacher's Note:
a) Taylor's principles must be quoted with exact scientific terminology as stated.
b) Briefly explaining each principle with an example ensures full marks.

Question 3

(a) Distinguish between fixed capital and working capital of a business concern. [3 Marks]

Answer:

Teacher's Note:
a) Tabular distinction is best for comparison questions.
b) Include meaning, duration, and objective as core points.

(b) What are equity shares? Explain any three advantages of issuing equity shares from the point of view of a company. [4 Marks]

Answer:
Equity shares refer to those shares which do not carry any preferential right in respect of payment of dividend or repayment of capital. They represent ownership capital.

Advantages of issuing equity shares from a company's point of view:
1. Permanent Capital: Equity capital is permanent capital; it is not refunded during the lifetime of the company, relieving the company from repayment pressure.
2. No Fixed Burden: There is no legal obligation to pay a fixed dividend on equity shares. Dividend is paid only when there are adequate profits.
3. Borrowing Capacity: Issue of equity shares strengthens the financial base of the company, which enhances its creditworthiness and borrowing capacity.

Teacher's Note:
a) Define equity shares clearly before listing advantages.
b) Distinguish clearly between the company's and investor's point of view.

(c) Briefly explain any five factors to be considered while preparing a suitable capital plan. [5 Marks]

Answer:
Factors to be considered while preparing a suitable capital plan are:
1. Return on Investment (ROI): The capital structure should be designed in such a way that it maximizes earnings per share and overall return for investors.
2. Risk: Debt financing increases financial risk. A company must balance equity and debt depending on its risk-bearing capacity.
3. Control: Issuing more equity dilutes the control of existing shareholders, whereas raising debt does not affect ownership control.
4. Flexibility: The capital structure must be flexible enough to allow raising additional funds easily when required and redeeming them when surplus funds arise.
5. Cost of Capital: The overall cost of raising funds should be minimum by judiciously mixing equity and debt sources.

Teacher's Note:
a) Explain five distinct factors clearly.
b) Emphasize cost, risk, and control as the primary considerations in financial planning.

Question 4

(a) What are sweat equity shares? [3 Marks]

Answer:
Sweat equity shares refer to equity shares issued by a company to its directors or employees at a discount or for consideration other than cash, for providing know-how or making available rights in the nature of intellectual property rights or value additions.

Teacher's Note:
a) Mention that these are issued for exceptional contribution or intellectual property.
b) They align the interests of employees with those of the company.

(b) List any four features of NEFT. [4 Marks]

Answer:
Four features of NEFT (National Electronic Funds Transfer) are:
1. Deferred Net Settlement: Transactions are settled in batches rather than on an individual gross basis.
2. No Minimum or Maximum Limit: There is generally no lower or upper limit on the amount of funds that can be transferred through NEFT.
3. Availability: It operates on a 24x7x365 basis for electronic channels.
4. Bank Account Requirement: Both the remitter and beneficiary must have bank accounts enabled for NEFT services.

Teacher's Note:
a) Clearly differentiate NEFT from RTGS (which operates in real-time with higher limits).
b) Highlight batch settlement as the defining mechanism of NEFT.

(c) Briefly explain any five external factors of micro-environment of business. [5 Marks]

Answer:
The micro-environment consists of external forces close to the company that directly affect its ability to serve its customers. Five factors are:
1. Customers: The target market and buyers whose preferences and demands dictate the company's offerings.
2. Competitors: Rival firms offering similar products or substitutes, directly impacting market share and pricing strategy.
3. Suppliers: Providers of raw materials, equipment, and inputs who influence production costs and schedules.
4. Intermediaries: Middlemen like wholesalers, retailers, and distributors who bridge the gap between producer and consumer.
5. Public: Any group that has an actual or potential interest in or impact on an organization's ability to achieve its objectives (e.g., media, local communities).

Teacher's Note:
a) Distinguish clearly between micro-environment and macro-environment (micro elements are closer and industry-specific).
b) Give one-line explanations for each of the five factors.

Question 5

(a) Distinguish between centralisation and decentralisation. [3 Marks]

Answer:

Teacher's Note:
a) Use a tabular format for better presentation.
b) Clearly state where decision-making power lies in both cases.

(b) Write four methods by which the objectives of consumer protection can be achieved. [4 Marks]

Answer:
Four methods by which consumer protection can be achieved are:
1. Self-regulation by business: Business firms setting up their own customer service cells and ethical codes to protect consumers.
2. Consumer awareness and education: Educating consumers about their rights, responsibilities, and remedies available under consumer laws.
3. Consumer associations/NGOs: Formation of voluntary consumer organizations to guide consumers, publish testing reports, and file class-action suits.
4. Government legislation: Enactment of laws like the Consumer Protection Act to provide legal recourse, grievance redressal forums, and penalties for unfair trade practices.

Teacher's Note:
a) Mention both proactive methods (awareness, self-regulation) and reactive methods (legal action).
b) The Consumer Protection Act is the cornerstone of legal consumer protection.

(c) Describe any five qualities of a good leader. [5 Marks]

Answer:
Five qualities of a good leader are:
1. Integrity and Honesty: A good leader must possess high moral standards and integrity to inspire trust among followers.
2. Communication Skills: Ability to clearly express ideas and instructions, as well as listen actively to subordinates.
3. Vision and Foresight: Capacity to look ahead, anticipate future challenges, and set clear goals for the organization.
4. Decision-making Ability: Confidence and competence to make sound and timely decisions even under pressure.
5. Empathy: Ability to understand the feelings, problems, and perspectives of team members and support them.

Teacher's Note:
a) List and briefly explain five qualities.
b) Integrity and communication are considered the most fundamental leadership traits.

Question 6

(a) Explain any three barriers to communication. [3 Marks]

Answer:
Three barriers to communication are:
1. Semantic Barriers: Problems related to the interpretation of words and symbols differently by the sender and receiver (e.g., bad translation, technical jargon).
2. Psychological Barriers: Emotional states such as anger, mistrust, or premature evaluation that hinder effective transmission and reception of messages.
3. Organizational Barriers: Rigid rules, layers of hierarchy, and complex structures that cause delays or distortion in information flow.

Teacher's Note:
a) Categorize the barriers properly (semantic, psychological, organizational, personal).
b) Give brief examples to illustrate each barrier clearly.

(b) Explain the features of planning as a function of management. [4 Marks]

Answer:
Four features of planning as a function of management are:
1. Primary function: Planning is the first and foremost function of management; all other managerial functions flow from it.
2. Goal-oriented: Planning focuses on defining organizational goals and laying down ways to achieve them.
3. Pervasive: Planning is required at all levels of management as well as across all departments.
4. Continuous process: Planning is an ongoing exercise because business environments keep changing continuously.

Teacher's Note:
a) Mention that planning bridges the gap between where we are and where we want to go.
b) Highlight its continuous nature to distinguish it from static decision-making.

(c) Explain the various steps involved in the process of organising. [5 Marks]

Answer:
The steps involved in the process of organizing are:
1. Identification and Division of Work: Breaking down total work into manageable activities or jobs according to plans.
2. Departmentalization: Grouping similar or related jobs into departments or divisions for better coordination.
3. Assignment of Duties: Allocating specific jobs to competent individuals based on their skills and qualifications.
4. Establishing Reporting Relationships: Defining clearly who reports to whom, creating a hierarchy and chain of command.
5. Establishing Authority and Responsibility: Granting necessary authority to individuals along with corresponding responsibility for tasks assigned.

Teacher's Note:
a) The steps must be written in proper sequential order.
b) Division of work followed by departmentalization forms the core of structural design.

Question 7

Write short notes on: [3×4=12 Marks]

(a) Maslow's theory of needs. [4 Marks]

Answer:
Abraham Maslow proposed a theory of human motivation based on a hierarchy of needs:
1. Physiological Needs: Basic survival needs like food, water, and shelter.
2. Safety/Security Needs: Protection from physical and emotional harm.
3. Social/Affiliation Needs: Sense of belonging, affection, and friendship.
4. Esteem Needs: Factors like self-respect, autonomy, status, and recognition.
5. Self-Actualization Needs: Drive to become what one is capable of becoming and realizing full potential.

Teacher's Note:
a) Mention that needs move in a hierarchical order from lowest to highest.
b) A satisfied need no longer motivates an individual.

(b) Line and staff organisation. [4 Marks]

Answer:
Line and staff organization is a combination of line organization and staff expertise. In this system, line executives have direct authority over subordinates to achieve primary objectives (scalar chain of command), while staff specialists (experts in legal, HR, R&D) provide advisory, specialized, and supportive services to line managers to help them perform their duties effectively.

Teacher's Note:
a) Clearly distinguish between line authority (command) and staff authority (advice).
b) This structure resolves the limitations of pure line organization in large enterprises.

(c) Modern concept of marketing. [4 Marks]

Answer:
The modern concept of marketing is customer-oriented rather than production or sales-oriented. It states that the main task of a business is to identify the needs and preferences of target consumers and satisfy them more effectively than competitors, while ensuring long-term consumer welfare and social well-being (societal marketing).

Teacher's Note:
a) Contrast modern marketing with the traditional concept (which focused purely on selling existing products).
b) Customer satisfaction and profitability through satisfaction are core principles.

Question 8

(a) Explain any three elements of Promotion Mix. [3 Marks]

Answer:
Three elements of Promotion Mix are:
1. Advertising: Any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.
2. Personal Selling: Direct personal presentation of goods or services to prospective buyers in order to make sales and build customer relationships.
3. Sales Promotion: Short-term incentives such as discounts, contests, and free samples designed to encourage immediate purchase of a product or service.

Teacher's Note:
a) Mention three elements clearly out of the four main tools (Advertising, Personal Selling, Sales Promotion, Public Relations).
b) Give standard definitions for each chosen element.

(b) Explain the meaning of: [2×2=4 Marks]

(i) SMS alert [2 Marks]

Answer:
An SMS alert is a short message service notification sent automatically by banks or financial institutions to a customer's registered mobile phone regarding account transactions, debits, credits, or security verification.

Teacher's Note:
a) Emphasize real-time notification of transactions.
b) It acts as a security measure against unauthorized access.

(ii) Fayol's principle of centralization [2 Marks]

Answer:
Fayol's principle of centralization refers to the degree of concentration of decision-making authority in an organization. According to Henri Fayol, there should be a proper balance between centralization (concentration at the top) and decentralization (dispersal down the hierarchy) depending on the nature of the organization.

Teacher's Note:
a) Clarify that Fayol does not advocate complete centralization or complete decentralization.
b) Balance is the key word in this principle.

(c) Explain any five sources of external recruitment. [5 Marks]

Answer:
Five sources of external recruitment are:
1. Direct Recruitment: Notice placed on the notice board of the enterprise specifying vacant jobs (casual callers).
2. Advertisements: Publishing job vacancies in newspapers, professional journals, or employment portals.
3. Employment Exchanges: Government-run offices that act as intermediaries between job seekers and employers.
4. Campus Recruitment: Collaborating with educational institutions, universities, and management institutes to hire fresh graduates directly.
5. Placement Agencies and Management Consultants: Private agencies that maintain databases of candidates and help companies find suitable talent for a fee.

Teacher's Note:
a) Ensure all five points are distinct external sources.
b) External recruitment introduces fresh talent and wider choice.

Question 9

(a) Write the meaning of the following types of plans: [3×1=3 Marks]

(i) Policy [1 Mark]

Answer:
A policy is a general guideline or standing plan that guides managerial thinking and decision-making in the achievement of organizational objectives.

Teacher's Note:
a) Keep the definition concise and focused on guidance for decision-making.
b) Policies provide broad boundaries within which managers operate.

(ii) Procedure [1 Mark]

Answer:
A procedure is a chronological sequence of routine steps or routine actions laid down to execute a specific task or carry out an activity.

Teacher's Note:
a) Emphasize "step-by-step sequence" in chronological order.
b) Procedures detail the exact way work is to be done.

(iii) Method [1 Mark]

Answer:
A method prescribes the standardized manner in which a specific step of a procedure is to be performed, considering objective, time, and effort.

Teacher's Note:
a) Distinguish method from procedure (method relates to a single step or task specification).
b) It brings uniformity and efficiency to operations.

(b) Explain any four functions of a supervisor. [4 Marks]

Answer:
Four functions of a supervisor are:
1. Day-to-day Guidance: Providing direct instructions, guidance, and support to workers on the shop floor.
2. Link between Management and Workers: Communicating management policies to workers and workers' grievances back to higher management.
3. Maintenance of Discipline: Ensuring punctuality, safety compliance, and discipline among operating staff.
4. Quality Control: Inspecting work to ensure that production adheres to established quality standards and wastage is minimized.

Teacher's Note:
a) Supervisors operate at the lowest level of management (operational level).
b) Their role as a vital bridge between workers and management must be highlighted.

(c) What is packaging? Explain three functions of packaging. [5 Marks]

Answer:
Packaging refers to the act of designing and producing the container or wrapper for a product. It serves as a vital marketing tool.

Three functions of packaging are:
1. Product Protection: Protecting the product from damage, breakage, spoilage, leakage, or pilferage during storage and transportation.
2. Identification/Information: Providing necessary information about the product such as ingredients, usage instructions, price, expiry date, and manufacturer details.
3. Promotion: Acting as a silent salesman by attracting customer attention through eye-catching colors, designs, and labeling on store shelves.

Teacher's Note:
a) Define packaging clearly before explaining functions.
b) Functions can be classified into protective, communicative, and promotional functions.