ISC Class 12 Commerce Board Exam Question Paper 2018 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) Name the two dimensions of business environment. [2 Marks]

Answer:
The two dimensions of business environment are:
1. Micro Environment
2. Macro Environment

Teacher's Note:
a) Micro environment consists of forces close to the enterprise that directly affect its operations and performance.
b) Macro environment includes general forces like economic, social, technological, political and legal conditions that indirectly affect all business firms in an economy.

(ii) What is meant by factoring? [2 Marks]

Answer:
Factoring implies raising finance through the sale or mortgage of book debts. The finance companies provide finance to business concerns through outright purchase of accounts receivables. The debtors of the firm make payments to the finance company, which in turn forwards them to the business firm after deducting its charges.

Teacher's Note:
a) Factoring is an important source of short-term finance for meeting working capital requirements.
b) Students must remember that the factor also provides services like debt collection and credit rating besides providing finance.

(iii) What is a debit card? [2 Marks]

Answer:
A debit card is a plastic card issued by a bank that allows the cardholder to make immediate electronic payment for goods purchased or services availed directly from their savings or current bank account, provided the seller has a terminal facility. It can also be used to withdraw cash from Automated Teller Machines (ATMs).

Teacher's Note:
a) Unlike a credit card, a debit card draws money directly from the user's existing bank balance.
b) Mentioning both merchant payments and ATM cash withdrawal ensures full credit.

(iv) Why is management considered to be a discipline? [2 Marks]

Answer:
Management is considered to be a discipline because it has its own distinct body of knowledge, principles, and specialized vocabulary. Furthermore, it helps improve discipline among employees by exercising authority, assigning responsibility, and introducing systematic procedures of evaluation and control.

Teacher's Note:
a) A discipline refers to a branch of knowledge that can be formally taught and studied.
b) Ensure both aspects - management as a field of study and its role in organizational discipline - are highlighted.

(v) Explain any two sources of external recruitment used in today's world. [2 Marks]

Answer:
1. Advertisement: Advertisement in newspapers, business magazines, and journals is a very common source for filling senior positions in an organization. It provides adequate information to allow self-screening by prospective candidates.
2. Employment Exchange: Employment exchanges are run by the government to register job seekers and maintain records of their qualifications and experience, acting as a link between job seekers and employers.

Teacher's Note:
a) External recruitment involves hiring personnel from outside the organization.
b) Other valid sources include campus recruitment, placement agencies, and direct recruitment.

(vi) Name the four elements of directing, as a function of management. [2 Marks]

Answer:
The four elements of directing are:
1. Supervision
2. Motivation
3. Leadership
4. Communication

Teacher's Note:
a) Directing is the core of management action that initiates execution of plans.
b) All four elements must be listed correctly in order to secure full marks.

(vii) Distinguish between advertisement and publicity. [2 Marks]

Answer:

Teacher's Note:
a) Tabular presentation is the best way to answer distinction questions in business studies.
b) Students should include at least two clear points of difference.

(viii) Mention two types of markets, on the basis of the position of buyers and sellers. [2 Marks]

Answer:
The two types of markets on the basis of the position of buyers and sellers are:
1. Primary Market
2. Secondary Market

Teacher's Note:
a) Primary market deals with the issuance of new securities.
b) Secondary market deals with the buying and trading of previously issued securities.

(ix) The producer of 'Lime Fresh' tea introduces 'Buy one Get one' scheme on all the products of 'Lime Fresh'. Identify the promotional strategy used by the producer. State any one objective that could be met by this strategy. [2 Marks]

Answer:
The promotional strategy used by the producer is Sales Promotion.
Objective: To increase immediate sales.

Teacher's Note:
a) Sales promotion involves short-term incentives to encourage the purchase or sale of a product or service.
b) Other valid objectives include clearing excess inventory or attracting new customers.

(x) Expand the following terms: [2 Marks]
(a) RTGS
(b) NEFT

Answer:
(a) RTGS: Real Time Gross Settlement.
(b) NEFT: National Electronic Funds Transfer.

Teacher's Note:
a) Spelling of every word in banking terms must be accurate.
b) RTGS settles transactions on a one-to-one basis in real time, whereas NEFT operates on deferred net settlement basis.

SECTION A

Part - II (60 Marks)
Answer any five questions.

Question 2.
(a) Explain any three barriers to communication. [3 Marks]
(b) Explain any four features of Business Environment. [4 Marks]
(c) Discuss the need for the principles of management. [5 Marks]

Answer:
(a) Three barriers to communication are:
1. Semantic Barriers: These are related to problems in the process of encoding and decoding messages into words or symbols. People interpret words differently based on their experience, leading to faulty translations, technical jargon, or unclarified assumptions.
2. Organizational Barriers: These are related to organizational structure, authority relationships, and rules. Due to long lines of communication, information gets delayed and distorted as every layer of authority filters it.
3. Personal Barriers: Personal factors like judgment, emotions, and social values create psychological distance between the sender and receiver when there is a lack of mutual trust.

(b) Four features of Business Environment are:
1. Specific and General Forces: Business environment comprises both specific forces (customers, competitors, investors) that directly affect day-to-day operations and general forces (economic, social, political) that indirectly influence operations.
2. Dynamic Nature: It is dynamic because it keeps changing continuously due to technological shifts, new competitors, or changing consumer preferences.
3. Complexity: It is complex as it consists of several interrelated and interdependent forces whose individual impact is difficult to isolate.
4. Uncertainty: It is highly uncertain because future happenings, especially in fashion and technology, cannot be predicted accurately.

(c) The need for the principles of management is explained by the following points:
1. Providing managers with useful insights into reality: Principles increase managerial efficiency by adding to their knowledge, enabling them to solve problems methodically without trial and error.
2. To train managers: They provide a conceptual framework for the scientific and systematic training and development of managers.
3. To evaluate managerial behaviour: Principles prescribe what managers should do in given situations and help evaluate their performance objectively.
4. To fulfill social goals: They guide managers in making optimum use of human and material resources, translating individual objectives into social attainments.
5. To improve research: They attract experts towards study and analysis, helping managers make decisions free from bias and prejudice.

Teacher's Note:
a) For part (a), ensure distinct categories of communication barriers are explained.
b) For parts (b) and (c), headings must be clearly stated followed by a brief explanation.

Question 3.
(a) Discuss three advantages of ploughing back of profit, from the company's point of view. [3 Marks]
(b) Explain why management is considered to be a science. [4 Marks]
(c) What is labeling? Explain four advantages of labeling. [5 Marks]

Answer:
(a) Three advantages of ploughing back of profits (retained earnings) are:
1. Independence: The company can undertake expansion, growth, and modernization plans without depending on outside agencies or capital market conditions.
2. Financial Strength: It adds to the financial strength and creditworthiness of the company.
3. Dividend Stabilization: Reserves created through retained earnings can be used to maintain a stable rate of dividend during lean years.

(b) Management is considered to be a science because:
1. Systematic Body of Knowledge: Management has its own systematized body of knowledge with distinct concepts, terms, and principles.
2. Based on Experimentation and Observation: Management principles have been developed over time through observation and practical experimentation.
3. Cause and Effect Relationship: Management principles establish cause and effect relationships (e.g., dual subordination leads to confusion).
4. Universal Validity: Principles of management have universal application, though they need modification to suit specific situations.

(c) Labeling refers to designing the label and putting it on the package to denote its nature, contents, ownership, and destination, providing necessary information to the consumer.
Four advantages of labeling are:
1. Product Identification: A carefully designed label helps customers easily identify the product among various options.
2. Product Differentiation: It helps differentiate a product from competitors' offerings.
3. Information Disclosure: It provides vital information regarding ingredients, manufacturing date, price, and usage instructions.
4. Legal Compliance: It ensures fulfillment of legal requirements such as statutory warnings and nutritional information.

Teacher's Note:
a) Ploughing back of profits is an internal source of finance.
b) When explaining management as a science, emphasize that it is a social science dealing with human behavior rather than an exact physical science.

Question 4.
(a) Give three points of difference between a product and a service. [3 Marks]
(b) What are the different types of short term financial assistance provided by the commercial banks to business houses? [4 Marks]
(c) Explain any five types of debentures through which a company can collect borrowed capital from the public. [5 Marks]

Answer:
(a) Differences between a product and a service:

(b) Types of short-term financial assistance provided by commercial banks:
1. Cash Credit: A revolving credit agreement where a borrower is allowed to borrow up to a certain limit, paying interest only on the amount utilized.
2. Discounting of Bills: Short-term finance provided by discounting bills of exchange or promissory notes before their maturity date.
3. Loans and Advances: A direct advance made in a lump sum credited to a loan account, usually secured by the pledge of assets.
4. Bank Overdraft: An arrangement where a current account holder is allowed to overdraw up to a specified limit, with interest charged on the overdrawn amount.

(c) Five types of debentures are:
1. Mortgage and Unsecured Debentures: Mortgage debentures are secured by a fixed or floating charge on company assets, whereas unsecured debentures carry no such charge.
2. Redeemable and Irredeemable Debentures: Redeemable debentures are repayable on a predetermined date, while irredeemable debentures are not repaid during the lifetime of the company except on winding up.
3. Bearer Debentures: Transferred by mere delivery, with interest paid on presentation of attached coupons.
4. Registered Debentures: Names and addresses of holders are registered with the company, and transfer requires a proper transfer deed.
5. Convertible and Non-Convertible Debentures: Convertible debentures can be converted into equity shares after a specified period, whereas non-convertible debentures do not carry this option.

Teacher's Note:
a) Ensure all points in the distinction table are clearly contrasted.
b) For commercial bank facilities, clearly distinguish between cash credit and overdraft.

Question 5.
(a) Explain the need for consumer protection. [3 Marks]
(b) 'Planning is not a guarantee of success.' In this context, explain the limitations of Planning. [4 Marks]
(c) Explain the following principles of management, as advocated by Henry Fayol: [5 Marks]
(i) Stability of tenure
(ii) Discipline
(iii) Unity of command
(iv) Unity of Direction
(v) Order

Answer:
(a) The need for consumer protection arises from:
1. Consumer is the Purpose of Business: Customers are the foundation of business existence, and their satisfaction ensures repeat sales and business growth.
2. Business Uses Society's Resources: Since business utilizes societal resources, it has a moral obligation to protect consumer interests.
3. Ethical Obligation: Leading businesses are founded on ethical values, making the avoidance of consumer exploitation a primary moral duty.

(b) Limitations of planning include:
1. Planning may not work in a dynamic environment: Business environments change rapidly due to economic, political, and technological shifts, making forecasts inaccurate.
2. Time-Consuming: Planning requires extensive data collection and analysis, which delays urgent decision-making during emergencies.
3. Rigidity: Strict adherence to pre-determined plans creates inflexibility, discouraging initiative among employees.
4. Costly Process: The cost of formulating plans often exceeds the benefits derived from them.

(c) Explanation of Fayol's principles:
(i) Stability of Tenure: Employee turnover should be minimized to maintain organizational efficiency and foster loyalty.
(ii) Discipline: Implies obedience, respect for authority, and observance of established rules and agreements.
(iii) Unity of Command: An employee should receive orders from and report to only one superior to avoid confusion and divided loyalty.
(iv) Unity of Direction: Activities with a common goal should have one head and one plan of action.
(v) Order: Proper arrangement of things (Material Order) and people (Social Order) to ensure maximum efficiency.

Teacher's Note:
a) For part (c), all five sub-parts must be answered precisely with reference to Henri Fayol.
b) Typographical errors in the question paper text like 'Unit}’of Direction' have been corrected in the answer.

Question 6.
(a) Explain any three types of training that can be given to an employee. [3 Marks]
(b) What is Branding? Give any three advantages of branding to the marketers. [4 Marks]
(c) Explain the various steps involved in the process of organizing. [5 Marks]

Answer:
(a) Three types of training are:
1. Films: Used to provide information and demonstrate skills effectively in conjunction with conferences.
2. Vestibule Training: Employees learn jobs on actual equipment set up in a simulated workspace, ideal for sophisticated machinery.
3. Lectures: Used to convey specific information, rules, and procedures, often aided by audio-visuals.

(b) Branding is the process of assigning a distinctive name, term, sign, or symbol to a product to distinguish it from competitors.
Three advantages of branding to marketers:
1. Product Identification: Helps customers recognize and repeatedly purchase the branded product easily.
2. Product Differentiation: Distinguishes the firm's product from competitors, securing market share.
3. Differential Pricing: Allows the firm to charge premium prices for established and trusted brands.

(c) Steps in the organizing process:
1. Division of Work: Total work is divided into specific jobs to promote specialization.
2. Grouping Jobs or Activities: Similar activities are grouped into departments through departmentalization (by functions, products, or territory).
3. Assigning Duties: Specific job roles are assigned to individuals best suited for them.
4. Delegation of Authority: Appropriate authority is delegated to individuals to establish a clear chain of command.
5. Establishing Reporting Relationships: Clearly defining who reports to whom to ensure coordination across departments.

Teacher's Note:
a) Training methods can be on-the-job or off-the-job.
b) Organizing steps must be written in logical sequence from division of work to establishing reporting relationships.

Question 7.
(a) Explain any three disadvantages of borrowing funds from specialized financial institutions. [3 Marks]
(b) Briefly explain any four types of working capital required by a business concern. [4 Marks]
(c) Explain Maslow's theory. [5 Marks]

Answer:
(a) Disadvantages of borrowing from specialized financial institutions:
1. Restrictive Covenants: Institutions impose restrictions on dividend payouts and managerial powers.
2. Rigorous Investigation: Securing finance involves thorough investigation and cumbersome legal formalities.
3. High Cost: High interest rates charged by financial institutions make this form of financing expensive.

(b) Four types of working capital:
1. Permanent Working Capital: Minimum amount of current assets required permanently to maintain baseline business operations.
2. Variable Working Capital: Extra working capital required over permanent capital to meet seasonal fluctuations.
3. Gross Working Capital: Total funds invested in current assets (Gross Working Capital = Book value of current assets).
4. Net Working Capital: Excess of current assets over current liabilities (Net Working Capital = Current Assets - Current Liabilities).

(c) Maslow's Hierarchy of Needs theory:
Abraham Maslow proposed that human needs follow a hierarchical order from basic survival to self-fulfillment:
1. Physiological Needs: Basic survival needs like food, water, and shelter.
2. Safety and Security Needs: Protection from physical danger and economic insecurity.
3. Social and Affiliation Needs: Need for love, affection, friendship, and belonging.
4. Ego Needs: Need for self-respect, status, recognition, and autonomy.
5. Self-Actualization Needs: Desire to grow, realize one's potential, and achieve self-fulfillment.

Teacher's Note:
a) Financial institutions are valuable for long-term project financing.
b) Maslow's needs must be explained in ascending order from base physiological needs to self-actualization.

Question 8.
(a) Discuss the features of good packaging. [3 Marks]
(b) Explain the advantages of equity shares, as a source of finance. [4 Marks]
(c) Discuss any five functions of marketing. [5 Marks]

Answer:
(a) Features of a good package:
1. Convenience: Easy to handle, open, close, and store.
2. Protection: Safe and capable of protecting the product from damage and spoilage.
3. Appeal and Distinction: Lends individuality and prestige to the product while grabbing consumer attention.

(b) Advantages of equity shares:
1. No Fixed Burden: Dividends are payable only when there are profits at management discretion.
2. Permanent Capital: Equity capital is not redeemable during the lifetime of the company.
3. Trading on Equity: Helps enhance earnings per share when debt is combined with equity.
4. No Charge on Assets: Issuing equity shares does not create any mortgage or charge on company assets.

(c) Five functions of marketing:
1. Marketing Planning and Product Development: Analyzing market opportunities, designing product standards, and planning production.
2. Standardization and Grading: Establishing quality standards and sorting products into categories based on quality and size.
3. Storage and Warehousing: Preserving goods from production to consumption to maintain steady supply.
4. Transportation: Physical movement of goods from production centers to consumption markets.
5. Pricing: Determining the price of products considering customer demand, cost, and competitor pricing.

Teacher's Note:
a) Packaging acts as a silent salesman.
b) Equity shares represent ownership capital carrying voting rights.

Question 9.
Write short notes on the following:
(a) Meaning and Elements of Product Mix.
(b) Core banking solutions.
(c) Coordination, as the essence of management. [3 × 5 = 15 Marks]

Answer:
(a) Product Mix refers to the total number of products and items offered by a firm to the market. Its key elements include:
1. Branding: Assigning a distinctive name or symbol to identify the product.
2. Packaging: Designing wrappers or containers to protect goods and facilitate handling.
3. Labelling: Putting informative slips on packages detailing contents and instructions.

(b) Core Banking Solutions (CBS): It is a networking of bank branches that allows customers to access their accounts and perform transactions from any member branch regardless of where they opened their account. It provides centralized record keeping, faster fund transfers, and passbook updates across all branches.

(c) Coordination as the Essence of Management: Coordination is the force that binds all other management functions (planning, organizing, staffing, directing, and controlling) together. It ensures unity of action, harmonizes individual efforts with organizational goals, and eliminates friction across different departments.

Teacher's Note:
a) All three short notes must cover both definitions and key components.
b) For core banking, emphasize the 'Customer of the Bank' rather than 'Customer of the Branch' concept.