ISC Class 12 Commerce Board Exam Question Paper 2015 with Solutions

ISC Class 12 Commerce Board Exam Question Paper with Solutions

Part-I (20 Marks)

Answer all questions.

Question 1.
Answer briefly each of the questions (i) to (x)

(i) Enumerate the components of macro environment of a business concern. [2 Marks]

Answer:
The components of a macro environment include economic, demographic, technological, natural, social, cultural, legal, and political factors that exist outside the organization and affect its performance.

Teacher's Note:
a) Macro environment factors are generally uncontrollable by individual business firms.
b) Students should list at least four to five major dimensions to score full marks.

(ii) What is meant by capital gearing ratio? [2 Marks]

Answer:
Capital gearing ratio is the ratio between the capital plus reserves i.e. equity and fixed cost bearing securities. Fixed cost bearing securities include debentures, long-term mortgage loans, etc.

Teacher's Note:
a) It indicates the proportion of fixed-interest-bearing capital to equity capital.
b) A high geared company has a larger proportion of debt and preference share capital relative to equity.

(iii) Explain the meaning of gross working capital. [2 Marks]

Answer:
Gross working capital is the sum of current assets of a company and does not account for current liabilities. Gross working capital includes assets such as cash, checking and savings account balances, accounts receivable, short-term investments, inventory, and marketable securities.

Teacher's Note:
a) Gross working capital highlights the total funds invested in current assets.
b) Do not confuse gross working capital with net working capital, which is current assets minus current liabilities.

(iv) Distinguish between NEFT and RTGS. [2 Marks]

Answer:
NEFT (National Electronic Funds Transfer) service can be used for sending funds inter-bank and intra-bank, and the limit of remitting funds is from Rs. 1 to limitless. RTGS (Real Time Gross Settlement) can also be utilized for sending funds inter-bank and intra-bank, but the minimum amount is Rs. 2 lakh with no upper limit.

Teacher's Note:
a) NEFT settles transactions in batches, whereas RTGS settles transactions on a real-time basis.
b) Mentioning the minimum limit for RTGS is essential for full marks.

(v) Distinguish between Unity of Direction and Unity of Command. [2 Marks]

Answer:

Teacher's Note:
a) Unity of command relates to employer-employee reporting relationships.
b) Unity of direction relates to organizational planning and departmental focus.

(vi) Explain the term span of control. [2 Marks]

Answer:
The span of control is the number of subordinates for whom a manager is directly responsible. Some companies also have an ideal span of control, which is the number of reports they feel a manager can effectively manage.

Teacher's Note:
a) A wider span of control means fewer hierarchical levels in the organization.
b) A narrow span of control is suitable for complex tasks requiring close supervision.

(vii) What are the steps involved in the process of recruitment? [2 Marks]

Answer:
1. Identify vacancy
2. Prepare job description and person specification
3. Advertising the vacancy
4. Managing the response and short-listing
5. Arranging and conducting interviews and decision making

Teacher's Note:
a) Recruitment is a positive process aimed at attracting a large number of candidates.
b) The sequence of steps must be maintained logically.

(viii) What is meant by the term place in marketing mix? [2 Marks]

Answer:
Place is the element of the marketing mix that ensures that the product is distributed and made conveniently available for the consumer at the right location at the right time.

Teacher's Note:
a) It encompasses physical distribution, channels of distribution, and inventory management.
b) Availability of goods at the right place prevents customers from switching to competitors.

(ix) Explain branding. [2 Marks]

Answer:
Branding serves as an identity for a company, which is much more than logos and names. It involves creating a unique identity based on a distinct idea that connects with potential customers and builds strong bonds.

Teacher's Note:
a) Branding helps in product differentiation and builds brand loyalty.
b) It adds intangible value to the product offerings of the firm.

(x) What is mobile banking? State any two banking services available on mobile phone. [2 Marks]

Answer:
Mobile banking means banking through mobile phones, allowing customers to access banking services anytime and anywhere. Two banking services available on mobile phones are checking account balances and transferring funds between accounts.

Teacher's Note:
a) Mobile banking leverages smartphone technology and internet connectivity.
b) It provides 24/7 access to routine banking transactions without visiting bank branches.

Part-II (20 Marks)

(Answer any five questions)

Question 2.
(a) Explain any three features of business environment. [3 Marks]

Answer:
1. Specific and general forces: Business environment includes specific forces like investors, customers, competitors, and suppliers, as well as general forces like social, legal, technological, and political conditions.
2. Inter-relation: All the forces and factors of business environment are closely inter-related to each other. For example, changing lifestyles increase demand for specific products.
3. Uncertainty: It is very difficult to predict future changes in the business environment accurately, especially in dynamic sectors like IT and fashion.

Teacher's Note:
a) Features highlight the nature of the environment within which businesses operate.
b) Students must explain the headings clearly with brief examples.

(b) Discuss in brief any four factors that affect the working capital requirement of a company. [4 Marks]

Answer:
1. Nature of Business: Trading and service concerns have short operating cycles and require less working capital, whereas manufacturing concerns require higher working capital.
2. Size of the Enterprise: Enterprises operating on a higher scale of activity require more working capital due to higher levels of inventory and debtors.
3. Seasonality of Operations: Firms dealing in seasonal goods experience fluctuating working capital needs, requiring more funds during peak seasons.
4. Market Conditions: Competitive markets and liberal credit policies demand larger investments in finished goods inventories and higher working capital.

Teacher's Note:
a) Working capital requirements vary across industries and company lifecycles.
b) Proper explanation of each factor with a suitable example ensures full marks.

(c) Explain any five rights of consumers as provided under the Consumer Protection Act, 1986. [5 Marks]

Answer:
1. Right to be protected against the marketing of goods and services which are hazardous to life and property.
2. Right to be informed about the quality, quantity, potency, purity, standard, and price of goods or services so as to protect the consumer against unfair trade practices.
3. Right to be assured, wherever possible, access to a variety of goods and services at competitive prices.
4. Right to be heard and to be assured that consumer interests will receive due consideration at appropriate forums.
5. Right to seek redressal against unfair trade practices or exploitation and right to consumer education.

Teacher's Note:
a) These rights form the core framework of consumer protection in India.
b) Students should list and explain any five statutory rights clearly.

Question 3.
(a) What is meant by trade credit? Mention two advantages of trade credit as a short-term source of finance. [3 Marks]

Answer:
Trade credit is an important external source of working capital financing. It is a short-term credit extended by suppliers of goods and services in the normal course of business to a buyer in order to enhance sales. Two advantages are:
1. It is a spontaneous source of financing that does not require formal legal instruments.
2. It serves as an internal arrangement between buyer and seller without immediate cash outflow.

Teacher's Note:
a) Trade credit bridges the gap between purchase of raw materials and sale of finished goods.
b) Clearly mention both definition and advantages to secure full marks.

(b) Explain any four types of debentures through which a public limited company can collect its borrowed capital from the public. [5 Marks]

Answer:
1. Redeemable Debentures: Debentures that carry a specific date of redemption on the certificate, and the company is legally bound to repay the principal amount on that date.
2. Irredeemable (Perpetual) Debentures: Debentures that do not carry any fixed date of redemption and are repaid only on liquidation or through due notice.
3. Convertible Debentures: Debentures that give holders an option of converting their holdings into equity shares after a specified period and rate.
4. Non-Convertible Debentures: Simple debentures with no option of getting converted into equity, remaining as debt throughout their tenure.

Teacher's Note:
a) Debentures represent long-term debt capital for a company.
b) Classification based on redemption and convertibility are standard categories.

(c) What is retained earnings? Explain two of its merits and two of its demerits. [5 Marks]

Answer:
Retained earnings refer to the portion of net profits not distributed among shareholders as dividends, but retained and reinvested in the business (ploughing back of profit).
Merits:
1. Cheaper source of financing since it involves no floatation costs or external borrowing obligations.
2. Financial stability is enhanced as it strengthens the equity base and financial position.
Demerits:
1. Improper utilization of funds may occur if management misallocates retained earnings.
2. Over-capitalization can result from excessive accumulation of reserves through conservative dividend policies.

Teacher's Note:
a) Retained earnings serve as an important source of internal financing.
b) Both merits and demerits must be balanced in the answer.

Question 4.
(a) Distinguish between equity shares and preference shares. [4 Marks]

Answer:

Teacher's Note:
a) Equity shareholders are the real owners and risk-bearers of the company.
b) Preference shareholders enjoy preferential rights regarding dividend and capital return.

(b) Explain any four facilitating functions of marketing. [8 Marks]

Answer:
1. Selling: Involves transfer of ownership of goods to buyers through personal selling, advertising, and sales promotion to realize profits.
2. Transportation: Physical movement of goods from places of production to places of consumption, creating place utility.
3. Storage and Warehousing: Holding goods in proper usable condition from production until consumption, protecting them from deterioration.
4. Standardization and Grading: Establishing uniform standards based on quality and physical characteristics, and classifying products into well-defined groups.

Teacher's Note:
a) Facilitating functions support physical exchange and distribution of goods.
b) Detailed explanation of four functions is required for full credit.

Question 5.
(a) Mention three remedies available to consumers under the Consumer Protection Act, 1986. [3 Marks]

Answer:
1. To remove the defects pointed out by the appropriate laboratory from goods in question.
2. To replace the defective goods with new goods of similar description free from any defect.
3. To return to the complainant the price or charges paid, and to pay adequate compensation for any loss or injury suffered.

Teacher's Note:
a) Redressal agencies can grant multiple reliefs based on the nature of the complaint.
b) Mentioning any three valid statutory remedies is sufficient.

(b) Explain any four merits of borrowing funds from financial institutions. [4 Marks]

Answer:
1. Immediate Infusion of Cash: Ability to obtain large sums of money quickly for business expansion and capital investment.
2. Competitive Interest Rates: Strong credit scores allow firms to secure loans at lower interest rates.
3. Collateral Security: Loans backed by assets ensure secured funding arrangements for major capital projects.
4. Specialized Financial Support: Financial institutions provide expert advisory services along with capital support.

Teacher's Note:
a) Financial institutions play a vital role as medium and long-term financing providers.
b) Clear heading-wise explanation secures full marks.

(c) Explain any five ways of overcoming barriers to communication. [5 Marks]

Answer:
1. Clarifying ideas before communication: Ideas must be properly planned and structured before initiating an interaction.
2. Using simple language: The language used must be easily understandable to the listener without jargon.
3. Ensuring proper feedback: Adopting a question-answer technique to clear doubts and confirm understanding.
4. Consistency in communication: Speech, gestures, and tone must be consistent with each other.
5. Active listening: Pay careful attention to the message and observe proper timing between speaker and listener.

Teacher's Note:
a) Effective communication reduces misunderstandings in organizational workflows.
b) Students should list and explain five distinct remedial measures.

Question 6.
(a) Explain any three internal factors of micro environment of a business organization. [4 Marks]

Answer:
1. General Vision of the Company: Developed by management to guide operational focus towards production, technology, or marketing objectives.
2. Organizational Culture: Values and beliefs promoted company-wide, shaped by employees, managers, and shareholders.
3. Employees: The primary internal micro-environmental factor involved in operations; employee satisfaction directly impacts customer satisfaction.

Teacher's Note:
a) Internal factors operate within the organization and are largely controllable.
b) Explaining three factors with appropriate headings is expected.

(b) Explain the objectives of marketing. [4 Marks]

Answer:
1. Creation of Demand: Identifying consumer preferences and tastes to produce goods that satisfy needs and generate demand.
2. Customer Satisfaction: Ensuring modern customer-oriented approaches where satisfying consumer needs takes precedence over mere selling.
3. Market Share: Aiming to increase the ratio of the firm's sales to total industry sales through innovative promotions and competitive pricing.

Teacher's Note:
a) Marketing objectives drive the strategic planning of commercial enterprises.
b) Both customer-centric and organizational goals should be highlighted.

(c) Planning is beneficial to all. In the light of this statement, discuss the importance of planning. [5 Marks]

Answer:
1. Focuses attention on objectives: Planning concentrates organizational efforts on achieving predefined goals.
2. Reduces uncertainty and change: Helps managers anticipate future changes and prepare contingency measures.
3. Provides sense of direction: Saves organizations from aimless activities by charting clear courses of action.
4. Facilitates coordination: Integrates diverse departmental efforts and resources harmoniously.
5. Promotes innovative ideas and efficiency: Encourages optimal utilization of resources and rational problem-solving.

Teacher's Note:
a) Planning is the primary function of management.
b) Mentioning at least five key points of importance ensures full marks.

Question 7.
(a) Differentiate between functional organization and divisional organization. [3 Marks]

Answer:

Teacher's Note:
a) Functional structure is suitable for small organizations with single product lines.
b) Divisional structure is ideal for multi-product, large enterprises.

(b) What is meant by service? Mention three features of service. [4 Marks]

Answer:
A service is an act or performance offered by one party to another that is economic in nature and creates value and benefits for customers at specific times and places. Three features are:
1. Intangibility: Services cannot be seen, tasted, felt, heard, or smelt before purchase.
2. Inseparability: Production and consumption of services take place simultaneously.
3. Perishability: Services cannot be stored for future use; they perish if not consumed immediately.

Teacher's Note:
a) Services differ fundamentally from physical goods due to their unique characteristics.
b) Clear definition followed by three distinct features is required.

(c) Coordination is the essence of management. Explain. [5 Marks]

Answer:
Coordination is not a separate function of management, but the force that binds all other functions together. It is required across all management processes:
1. Coordination in Planning: Ensures that sub-plans of departments align with the overall organizational plan.
2. Coordination in Organizing: Harmonizes vertical and horizontal authority relationships to eliminate conflicts.
3. Coordination in Staffing: Aligns manpower recruitment and development with enterprise needs.
4. Coordination in Directing: Synchronizes leadership, motivation, and communication to guide employee efforts effectively.
5. Coordination in Controlling: Establishes harmony between planned standards and actual performance.

Teacher's Note:
a) Coordination ensures unity of action amidst diverse departmental activities.
b) Students must explain how coordination permeates all managerial functions.

Question 8.
(a) What is a market? Explain the meaning of capital market and money market. [3 Marks]

Answer:
A market is an arrangement where buyers and sellers interact for the exchange of commodities or financial assets.
1. Capital Market: A market that deals in long-term funds, supplying industry with fixed and working capital through equity shares, debentures, and government securities.
2. Money Market: A market that deals in short-term debt instruments and monetary assets with a maturity period of up to one year, facilitating liquidity management for banks and institutions.

Teacher's Note:
a) Financial markets are categorized based on the maturity of instruments traded.
b) Clear distinction between capital and money markets is essential.

(b) Differentiate between traditional concept of marketing and modern concept of marketing. [4 Marks]

Answer:

Teacher's Note:
a) Traditional marketing was product-oriented.
b) Modern marketing is customer-centric and relationship-driven.

(c) What is meant by indirect channels of distribution? Explain the types of indirect channels of distribution. [5 Marks]

Answer:
Indirect channels of distribution refer to the use of middlemen such as wholesalers and retailers by producers to transfer goods to ultimate consumers. Types include:
1. Manufacturer to Retailer to Consumer (One-level channel): Used for specialty goods or bulk retail items.
2. Manufacturer to Wholesaler to Retailer to Consumer (Two-level channel): The most common channel for consumer goods like food grains and spices.
3. Manufacturer to Agent to Wholesaler to Retailer to Consumer (Three-level channel): Used when wide distribution through agents is necessary.

Teacher's Note:
a) Indirect channels help bridge the gap between large-scale production and scattered consumers.
b) Clearly list and explain the level structures.

Question 9.
Write short notes on:
(a) Directing [4 Marks]

Answer:
Directing refers to the process of instructing, guiding, motivating, and leading people in an organization to achieve organizational objectives. It is a continuous managerial process that initiates action and ensures subordinates perform their duties efficiently. Key elements of directing include supervision, motivation, leadership, and communication.

Teacher's Note:
a) Directing bridges planning and actual execution of work.
b) Mentioning its core elements adds value to the answer.

(b) Formal organization [4 Marks]

Answer:
Formal organization refers to the organizational structure deliberately designed by top management to achieve specific goals. Features include predefined authority-responsibility relationships, division of labor, adherence to formal rules, and impersonal relationships focused strictly on job performance.

Teacher's Note:
a) It creates a systematic framework for efficient resource utilization.
b) Emphasize that authority flows downwards in a formal structure.

(c) Internal sources of recruitment [4 Marks]

Answer:
Internal sources of recruitment involve filling vacant positions from within the existing workforce of the organization. Common methods include transfers (shifting employees to similar jobs) and promotions (advancing employees to higher positions with greater responsibility and pay). It boosts employee morale and reduces induction costs.

Teacher's Note:
a) Internal sources are economical and reliable compared to external hiring.
b) Explain promotions and transfers clearly as primary methods.