ISC Class 12 Commerce Board Exam Question Paper 2020 with Solutions

ISC Class 12 Commerce Board Exam Question Paper with Solutions

PART I (20 Marks)

Question 1 [20 Marks]
Answer briefly each of the questions (i) to (x):

(i) What is meant by Micro-Environment? [2 Marks]

Answer:
Micro-environment refers to the forces close to the business enterprise that directly affect its routine operations and ability to serve its customers, including suppliers, customers, competitors, intermediaries, and the public.

Teacher's Note:
a) Ensure students distinguish between micro (internal/immediate) and macro (external/broad) environmental factors.
b) Keywords such as "immediate environment", "direct impact", and specific constituents must be included for full credit.

(ii) State any two features of a Credit Card. [2 Marks]

Answer:
1. It allows the holder to purchase goods and services on credit up to a pre-approved limit without immediate cash payment.
2. It provides a revolving credit facility where the user can repay the amount in installments with interest or clear the full balance by the due date.

Teacher's Note:
a) Emphasize that a credit card allows borrowing from the bank/issuer, unlike a debit card which draws directly from a savings account.
b) Clear, distinct points regarding credit limit and deferred payment must be stated.

(iii) What is Net Working Capital? [2 Marks]

Answer:
Net Working Capital is the excess of current assets over current liabilities. Formula: Net Working Capital = Current Assets - Current Liabilities.

Teacher's Note:
a) Mentioning the formula along with the conceptual definition ensures complete marks.
b) Students often confuse gross working capital with net working capital; make sure to highlight the subtraction of current liabilities.

(iv) Give two advantages of Trade Credit, as a source of short-term finance. [2 Marks]

Answer:
1. It is a convenient and continuous source of funds that arises automatically in the ordinary course of business without formal negotiations.
2. It does not require any collateral or security for obtaining goods on credit.

Teacher's Note:
a) Focus on automatic generation and lack of collateral as key benefits.
b) Keep the points crisp and specific to short-term commercial financing.

(v) Define Management as an activity. [2 Marks]

Answer:
Management as an activity refers to a distinct set of functions (such as planning, organizing, directing, and controlling) performed by managers to effectively utilize resources and achieve organizational goals.

Teacher's Note:
a) Explain that management is viewed as a process of actions or activities rather than just a group of people.
b) Mentioning the core managerial functions adds necessary weight to the definition.

(vi) Moon Ltd. imported new machinery from Germany. However, the productivity of the business did not improve with the use of this machinery. On investigation, it was found that the workers were not able to operate the high-tech machinery effectively, causing poor performance and wastages. What can be done by Moon Ltd. to overcome the above problem? [2 Marks]

Answer:
Moon Ltd. should organize appropriate training and development programs for the workers to upgrade their technical skills and enable them to operate the high-tech machinery efficiently.

Teacher's Note:
a) Identify the core issue as a lack of training and skill mismatch regarding new technology.
b) The recommended solution must explicitly mention employee training or skill development.

(vii) What is meant by Span of Control? [2 Marks]

Answer:
Span of control refers to the number of subordinates who report directly to a single superior or manager in an organizational hierarchy.

Teacher's Note:
a) Explain that it determines the shape of the organizational structure (flat or tall).
b) The definition must clearly state the reporting relationship between a superior and subordinates.

(viii) Name two types of Markets on the basis of subject of exchange. [2 Marks]

Answer:
1. Commodity Market
2. Capital Market (or Financial Market)

Teacher's Note:
a) Ensure the classification strictly adheres to the 'subject of exchange' criterion.
b) Other valid examples include bullion market or foreign exchange market.

(ix) State any two points of difference between Marketing and Selling. [2 Marks]

Answer:

Teacher's Note:
a) Presenting differences in a tabular format makes the answer clear and structured.
b) Ensure scope and primary objective form the basis of distinction.

(x) What is meant by Physical Distribution? [2 Marks]

Answer:
Physical distribution refers to the set of activities concerned with the physical handling and movement of goods from the place of production to the place of consumption, including transportation, warehousing, inventory control, and order processing.

Teacher's Note:
a) Highlight that it bridges the time and place gap between producers and consumers.
b) Mentioning key components like transportation and warehousing enhances the answer.

SECTION B

Question 2

(a) Explain any three advantages of Debentures from the Debenture holder’s point of view. [3 Marks]

Answer:
1. Regular Income: Debenture holders receive a fixed and regular rate of interest irrespective of whether the company makes a profit or loss.
2. Safety of Investment: Debentures are generally secured by a charge on the assets of the company, making them a safer investment compared to equity shares.
3. Priority in Repayment: In the event of liquidation or winding up of the company, debenture holders are repaid in priority to equity and preference shareholders.

Teacher's Note:
a) Focus strictly on the perspective of the investor (debenture holder), not the issuing company.
b) Clearly state fixed returns, security, and priority rights.

(b) With reference to the various dimensions of Business Environment, state what is meant by Political Environment. Mention any three components of Political Environment. [4 Marks]

Answer:
Political environment consists of political conditions such as general stability and peace in the country, and specific attitudes that elected government representatives hold towards business.

Three components of Political Environment are:
1. Ideology of the ruling political party and its policies towards business.
2. Extent of government intervention in business and economic affairs.
3. Political stability, law and order situation, and attitude towards foreign investments.

Teacher's Note:
a) Definition must capture government attitude and political stability.
b) Components must be distinctly listed and pertain strictly to the political sphere.

(c) Enumerate any five points of importance of staffing as a function of management. [5 Marks]

Answer:
1. Obtaining Competent Personnel: Staffing helps in discovering and selecting right persons for various positions in the organization.
2. Higher Performance: Proper placement and training of personnel ensure better performance and higher efficiency.
3. Continuous Survival and Growth: By proper succession planning and talent management, staffing ensures continuous survival and growth of the enterprise.
4. Optimum Utilization of Human Resources: It prevents under-utilization of personnel and high labor turnover, ensuring optimum utilization of human resources.
5. Improves Job Satisfaction: Fair assessment, recruitment, and remuneration boost the morale and job satisfaction of employees.

Teacher's Note:
a) List and explain five distinct organizational benefits of staffing.
b) Avoid mixing staffing with directing or controlling functions.

Question 3

(a) Distinguish between a Formal Organisation and an Informal Organisation. [3 Marks]

Answer:

Teacher's Note:
a) A comparative table with clear bases of distinction is ideal for this question.
b) Cover origin, structure, and leadership clearly.

(b) Explain any four objectives of Communication. [4 Marks]

Answer:
1. To Provide Information: To share relevant facts, instructions, and policies with employees and stakeholders to ensure smooth operations.
2. To Ensure Coordination: To harmonize various activities and departments within an enterprise to achieve common goals.
3. To Build Motivation: To encourage employees, boost their morale, and build commitment towards organizational objectives.
4. To Aid Decision Making: To gather and transmit accurate data necessary for management to make informed and timely decisions.

Teacher's Note:
a) Objectives should focus on the purpose of transmitting information within an organization.
b) State four distinct objectives clearly with brief explanations.

(c) Define Advertising. Explain any four features of Advertising. [5 Marks]

Answer:
Advertising is any paid form of non-personal presentation and promotion of ideas, goods, or services by an identified sponsor.

Four features of advertising are:
1. Paid Form: The sponsor has to bear a cost for disseminating the message through various media channels.
2. Non-Personal Presentation: There is no face-to-face contact between the buyer and the seller; it is directed at a mass audience.
3. Identified Sponsor: The source of the advertising message is clearly known and identified (the sponsor pays for it).
4. Mass Reach: It reaches a vast geographical area simultaneously, targeting a large number of potential customers.

Teacher's Note:
a) The definition must include the core elements of being paid, non-personal, and having an identified sponsor.
b) Explain four distinct features clearly to secure full marks.

Question 4

(a) Explain any three sources of External Recruitment. [3 Marks]

Answer:
1. Direct Recruitment: Notice is placed on the notice board of the enterprise specifying the details of jobs available, and casual callers assemble for selection.
2. Advertisement: Vacancies are advertised in newspapers, journals, or online portals to attract a large number of qualified applicants.
3. Employment Exchange: Government-run employment exchanges act as intermediaries between employers seeking workers and people seeking employment.

Teacher's Note:
a) External recruitment involves sourcing candidates from outside the organization.
b) Mentioning standard sources like advertisements, employment exchanges, or campus recruitment is recommended.

(b) Give four differences between Taylor’s and Fayol’s Principles of Management. [4 Marks]

Answer:

Teacher's Note:
a) Focus on perspective, level of management, and unity of command as clear points of difference.
b) Tabular presentation is best suited for comparative questions.

(c) What is meant by RTGS? Give any three features of RTGS. [5 Marks]

Answer:
RTGS stands for Real Time Gross Settlement. It is a funds transfer system where money is transferred from one bank account to another in real-time and on a gross basis.

Three features of RTGS are:
1. Real-Time Processing: Transactions are processed and settled continuously throughout the working hours without any waiting period.
2. Gross Settlement: Transactions are settled on a one-to-one basis without bunching or netting with other transactions.
3. Final and Irrevocable: Once processed, the payment settlement is final and cannot be reversed or recalled by the sender.

Teacher's Note:
a) Expand the acronym accurately and explain the core mechanism.
b) Clearly state real-time execution, gross settlement, and irrevocability as features.

Question 5

(a) Explain any three factors that you will consider while determining the Working Capital requirement for a business enterprise. [3 Marks]

Answer:
1. Nature of Business: Manufacturing firms require larger working capital compared to service providers or retail traders due to production cycles.
2. Scale of Operations: Larger businesses operating at a massive scale require more working capital than small-scale enterprises.
3. Business Cycle: During periods of boom, higher working capital is required due to increased production and sales, whereas during depression, requirement drops.

Teacher's Note:
a) Explain factors affecting current asset and current liability management.
b) Provide three distinct factors with concise explanations.

(b) Explain four advantages of raising funds from Commercial Banks. [4 Marks]

Answer:
1. Timely Assistance: Commercial banks provide funds quickly as and when required by businesses through loans, cash credit, or overdrafts.
2. Confidentiality: Financial dealings and credit arrangements between the bank and the customer remain strictly confidential.
3. Flexibility: Borrowers can repay loans according to their financial convenience or as per mutually agreed terms, and can also prepay when surplus funds are available.
4. No Interference: Banks do not interfere in the internal management and day-to-day administration of the borrowing company.

Teacher's Note:
a) Focus on flexibility, confidentiality, and lack of management interference.
b) State four distinct advantages clearly.

(c) Explain the first five steps involved in the process of Planning, as a function of Management. [5 Marks]

Answer:
1. Setting Objectives: The first step is to establish major organizational objectives and departmental goals specifying what is to be achieved.
2. Developing Premises: Formulating assumptions about future conditions (economic, social, political) that may affect the plans.
3. Identifying Alternative Courses of Action: Brainstorming and listing all possible alternative ways to achieve the set objectives.
4. Evaluating Alternative Courses: Assessing the positive and negative aspects, costs, and risks of each alternative in light of company resources.
5. Selecting an Alternative: Choosing the best and most feasible course of action based on analysis and evaluation.

Teacher's Note:
a) Steps must be written in chronological order.
b) Explain each of the first five planning steps accurately.

Question 6

(a) Explain any three methods of Consumer Protection. [3 Marks]

Answer:
1. Self-Regulation by Business: Ethical business practices, fair trade, and setting up customer grievance cells to resolve consumer complaints voluntarily.
2. Consumer Awareness: Educating consumers about their rights, responsibilities, and remedies available under law through campaigns, media, and educational programs.
3. Government Legislation: Enactment of laws and protective acts (such as the Consumer Protection Act) to safeguard consumer interests and punish erring traders.

Teacher's Note:
a) Highlight methods through which consumer rights are protected and promoted.
b) Keep explanations clear and concise.

(b) What are Retained Earnings? Explain any three demerits of Retained Earnings. [4 Marks]

Answer:
Retained earnings refer to that portion of net profits which is not distributed as dividends to shareholders but is retained and reinvested in the business.

Three demerits of retained earnings are:
1. Dissatisfaction of Shareholders: Excessive ploughing back of profits leads to lower dividend payouts, causing dissatisfaction among shareholders.
2. Uncertain Source: It is an unreliable source of finance because profits fluctuate from year to year.
3. Risk of Monopoly: Accumulation of huge reserves can lead to monopolistic tendencies and reckless management behavior without adequate accountability.

Teacher's Note:
a) Define retained earnings (ploughing back of profits) clearly before listing demerits.
b) State three drawbacks like shareholder dissatisfaction, uncertainty, and potential misuse.

(c) Define Marketing. Briefly explain any three features of Marketing. [5 Marks]

Answer:
Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others.

Three features of marketing are:
1. Needs and Wants: Marketing process revolves around satisfying the needs and wants of consumers.
2. Creating a Market Offering: It involves developing a product or service that fulfills customer requirements and offering it for exchange.
3. Customer Value: It ensures that the product offers value, satisfaction, and utility to the customer in exchange for a price.

Teacher's Note:
a) The definition should emphasize customer orientation and exchange of value.
b) Explain three distinct features clearly.

Question 7

(a) Explain any three objectives of Publicity, as an element of Promotion Mix. [3 Marks]

Answer:
1. Building Corporate Image: To create a positive public image and reputation for the organization and its brand.
2. Creating Awareness: To generate widespread awareness about a new product or company initiative without direct advertising costs.
3. Maintaining Credibility: Since publicity appears as news or editorial commentary, it carries higher credibility among consumers than paid advertisements.

Teacher's Note:
a) Focus on publicity as a non-paid, credible tool of promotion.
b) State three clear objectives.

(b) What are the various Channels of Distribution available to a Manufacturer in the process of distribution? [4 Marks]

Answer:
1. Zero-Level Channel (Direct Channel): Manufacturer to Consumer (e.g., direct selling, company outlets).
2. One-Level Channel: Manufacturer to Retailer to Consumer.
3. Two-Level Channel: Manufacturer to Wholesaler to Retailer to Consumer.
4. Three-Level Channel: Manufacturer to Agent/Distributor to Wholesaler to Retailer to Consumer.

Teacher's Note:
a) List all four levels of distribution channels clearly.
b) Briefly specifying the intermediaries at each level is recommended.

(c) Give five differences between Preference Shares and Equity Shares. [5 Marks]

Answer:

Teacher's Note:
a) Use a tabular format with clear points of comparison.
b) Cover dividend priority, voting rights, redemption, and return rates.

Question 8

(a) Explain any three features of Industrial Products. [3 Marks]

Answer:
1. Derived Demand: Demand for industrial products is derived from the demand for consumer goods that they help produce.
2. Number of Buyers: The number of buyers for industrial goods is relatively small and concentrated compared to consumer goods.
3. Channel Length: Distribution channels for industrial products are relatively short, often involving direct selling or a single intermediary.

Teacher's Note:
a) Industrial products are meant for use in producing other goods or for business operations.
b) Mention derived demand, buyer concentration, and short channels.

(b) Define Management. Briefly explain any three objectives of Management. [4 Marks]

Answer:
Management is the process of getting things done with the aim of achieving goals effectively and efficiently.

Three objectives of management are:
1. Organizational Objectives: Ensuring survival, profit, and growth of the business enterprise.
2. Social Objectives: Creating value for society, providing employment, and using eco-friendly production methods.
3. Personal Objectives: Fulfilling financial, social, and developmental needs of employees to keep them motivated.

Teacher's Note:
a) The definition should capture efficiency and effectiveness.
b) Explain organizational, social, and personal objectives clearly.

(c) Explain any five qualities that a good leader should possess. [5 Marks]

Answer:
1. Integrity and Honesty: A good leader must maintain high standards of integrity and set an example for subordinates.
2. Communication Skills: Ability to communicate policies, instructions, and ideas clearly and persuasively to the team.
3. Confidence: Self-assurance helps in taking bold decisions and keeping subordinates motivated during difficult times.
4. Empathy: Ability to understand and appreciate the feelings, viewpoints, and problems of followers.
5. Decision-Making Ability: Sound judgment and capability to make timely and rational decisions under pressure.

Teacher's Note:
a) List and explain five essential leadership traits.
b) Ensure qualities described are distinct and relevant to business management.

Question 9

Write short notes on the following:

(a) Instalment Credit as a source of short-term funds for business. [4 Marks]

Answer:
Instalment credit is a financing arrangement where a business acquires assets (such as machinery, vehicles, or equipment) by making a down payment and paying the balance amount in regular periodic installments (monthly or quarterly) along with interest. It allows businesses to use equipment while paying for it over time, easing immediate cash outflow.

Teacher's Note:
a) Explain the concept of down payment and deferred periodic payments.
b) Highlight its utility as a short-to-medium-term asset acquisition method.

(b) Line and Staff Organisation. [4 Marks]

Answer:
Line and staff organisation combines line authority with staff expertise. Line managers have direct authority over production and execution of goals, while staff specialists (experts/advisors) provide research, advice, and specialized support to line managers to improve decision-making and operational efficiency, without having direct command over line workers.

Teacher's Note:
a) Distinguish between line authority (executing) and staff authority (advising).
b) Mention the advantage of combining expert advice with clear line command.

(c) Marketing Research. [4 Marks]

Answer:
Marketing research is the systematic and objective collection, recording, analysis, and interpretation of data relating to marketing problems and opportunities. It helps businesses understand consumer preferences, market trends, competitor behavior, and the effectiveness of promotional strategies, enabling informed decision-making.

Teacher's Note:
a) Emphasize the systematic collection and analysis of data.
b) State its core purpose of aiding marketing decisions and reducing risk.