ISC Class 12 Commerce Board Exam Question Paper 2026 with Solutions

ISC Class 12 Commerce Board Exam Question Paper with Solutions

SECTION A - 16 MARKS

Question 1

(i) Tara Ltd. provides medical insurance to all its employees as a part of their compensation package. [1 Mark]
According to Maslow's theory, which one of the following needs of the employees is fulfilled by Tara Ltd.?
(a) Social
(b) Safety
(c) Esteem
(d) Physiological

Answer: (b) Safety

Medical insurance provides security and protection against future uncertainties, satisfying safety/security needs.

Teacher's Note:
a) Maslow's hierarchy places safety and security needs right above physiological needs, covering job security and medical insurance.
b) Students often confuse safety needs with social needs; remember that insurance and medical benefits protect against physical and financial risks.

(ii) The sales team at Nikhar Beauty observed a decline in the customer's interest. The marketing manager decided to adopt a creative approach to address the issue. He designed a unique social media campaign and created vlogs (video clips) wherein customers shared their views and experiences.
Which aspect of the nature of management is evident in the approach adopted by the marketing manager? [1 Mark]
(a) Management as a Science
(b) Management as a Profession
(c) Management as an Art
(d) Management as a Discipline

Answer: (c) Management as an Art

Using creativity, personal skill, and innovative approaches to solve practical problems highlights management as an art.

Teacher's Note:
a) Art involves the personalized application of existing knowledge and personal skill to achieve desired results.
b) Look for keywords like creative approach, innovation, and personalized solutions to identify management as an art.

(iii) Libas is an omnichannel brand that manufactures, designs, and sells women's apparel through its own website, exclusive brand outlets, and online marketplaces such as Myntra and Amazon. It operates under names like Libas, Gerua etc.
(Source: edited, 31st May, 2024)
Identify the different channels of distribution used by Libas. [1 Mark]
(P) Zero level
(Q) One level
(R) Two level
(S) Three level
(a) Only (P) and (Q)
(b) Only (Q) and (R)
(c) Only (R) and (S)
(d) Only (Q) and (S)

Answer: (a) Only (P) and (Q)

Selling through its own website represents a zero level channel (direct), and selling through online marketplaces and exclusive outlets represents a one level channel (involving retailers/platforms).

Teacher's Note:
a) Zero level involves no intermediaries (Manufacturer to Customer via website). One level involves one intermediary like a retailer or e-commerce platform.

b) Carefully analyze all touchpoints mentioned in the stem to trace the exact channel levels involved.

(iv) Dairy Dream is a company that sells milk, cheese, and yogurt. It ensures the freshness of these food items by using the First-In-First-Out (FIFO) method of stock management. Old stock is sold first, while new stock is stored in inventory.
With reference to Inventory Management, identify the element of marketing mix used by Dairy Dream. [1 Mark]
(a) Product mix
(b) Price mix
(c) Place mix
(d) Promotion mix

Answer: (c) Place mix

Physical distribution and inventory management form key components of the place mix in marketing.

Teacher's Note:
a) Place mix encompasses channels of distribution, physical movement of goods, warehousing, and inventory management.
b) Do not confuse inventory management with product features; storing and moving goods relate directly to the place element.

(v) The management at XYZ Ltd. heavily invests in upgrading techniques of production. It conducts marketing research at regular intervals and discards obsolete technological products.
Which one of the following BEST describes the approach of the management at XYZ Ltd.? [1 Mark]
(a) It focuses only on cost reduction.
(b) It aims to improve its public image.
(c) It wants to stay ahead of its rivals.
(d) It wants to lead the market with innovative products.

Answer: (d) It wants to lead the market with innovative products.

Continuous technological upgrades and regular marketing research indicate a strong drive toward product innovation and market leadership.

Teacher's Note:
a) Innovation-driven firms constantly upgrade production techniques and track consumer preferences through research.
b) Read all options carefully; while staying ahead of rivals is a broad outcome, leading with innovative products precisely matches technological upgrades and research.

(vi) Given below are two statements marked Assertion and Reason. Read the two statements carefully and choose the correct option.
Assertion: Delegation of authority reduces the workload of managers.
Reason: It allows the managers to focus on strategic activities by assigning the routine work to subordinates. [1 Mark]
(a) Both Assertion and Reason are true and Reason is the correct explanation for Assertion.
(b) Both Assertion and Reason are true but Reason is not the correct explanation for Assertion.
(c) Assertion is true and Reason is false.
(d) Both Assertion and Reason are false.

Answer: (a) Both Assertion and Reason are true and Reason is the correct explanation for Assertion.

Delegation reduces workload because managers pass routine tasks to subordinates, freeing up time for strategic decision-making.

Teacher's Note:
a) Always check if the reason correctly explains the cause behind the assertion.
b) Delegation is an effective organizing tool that relieves managers from operational burdens.

(vii) With reference to Equity Shares, select the odd one out. [1 Mark]
(a) Ownership securities
(b) Fixed dividend
(c) Share in residual profits
(d) Participation in management

Answer: (b) Fixed dividend

Equity shares do not carry a fixed rate of dividend; dividends fluctuate based on profits earned by the company.

Teacher's Note:
a) Preference shares carry a fixed dividend rate, whereas equity shareholders are residual owners who receive dividends after all claims are met.
b) Equity shareholders have voting rights, making them participants in management and ownership securities.

(viii) State whether the following are True or False:
(a) As a function of management, Planning increases the cost significantly as it involves research, analysis, and utilisation of manpower. [1 Mark]

Answer: False.

Planning is a cost-effective process that reduces uncertainty and wastage, rather than increasing costs significantly.

Teacher's Note:
a) Although planning involves intellectual work and analysis, its primary objective is efficiency and cost reduction, not unnecessary expenditure.
b) Read true/false statements carefully and evaluate their economic and managerial logic.

(b) Critical point control narrows down focus and intervention to key result areas. [1 Mark]

Answer: True.

Critical point control focuses attention on Key Result Areas (KRAs) that are critical to the success of an organization.

Teacher's Note:
a) Managers cannot control every minor deviation, so they focus on critical points that affect business operations significantly.
b) Remember the distinction between Management by Exception (focusing on significant deviations) and Critical Point Control (focusing on key areas).

(ix) In recent times, a software application has been developed that securely stores digital money and personal data of the user, thereby allowing seamless transaction of electronic funds.
What mode of digital banking has been referred to above? [1 Mark]

Answer: Digital Wallet (or E-Wallet).

A digital wallet securely stores payment information and passwords for numerous payment methods and websites.

Teacher's Note:
a) Digital wallets enable users to make electronic transactions easily using smartphones or computers.
b) Ensure precise terminology is used when identifying modern banking and fintech instruments.

(x) Jasdeep purchased a new car worth Rs. 9 lakhs and paid Rs. 1 lakh to the car dealer. She asked him to accessorise it with an enhanced music system and velvet seat covers. The car dealer told Jasdeep to pay the remaining amount after customisation.
Identify the short-term source of capital used by the car dealer. [1 Mark]

Answer: Customer Advance (or Advance from Customers).

The partial payment and remaining amount collected before delivery serve as an advance from the customer, acting as a short-term source of funds.

Teacher's Note:
a) Advances received from customers against orders provide working capital for completing the required work.
b) Identify trade credit, customer advances, and accruals correctly from business scenarios.

(xi) Study the relation between the first pair and complete the analogy.
(a) Luxury electronic watch: Price skimming :: Mass market consumer goods: ___________ [1 Mark]

Answer: Penetration pricing

Price skimming is used for high-end luxury products, whereas penetration pricing is used for capturing a large share in mass markets.

Teacher's Note:
a) Price skimming sets a high initial price, while penetration pricing sets a low initial price to attract mass customers.
b) Complete analogies by establishing the exact pricing or marketing principle underlying the given pair.

(b) Goods and Services Tax: Economic environment :: Consumer Protection Act 2019: ___________ [1 Mark]

Answer: Legal environment

Goods and Services Tax relates to the economic environment, while the Consumer Protection Act is part of the legal environment of business.

Teacher's Note:
a) Dimensions of business environment include economic, social, technological, political, and legal dimensions.
b) Acts passed by the legislature form part of the legal environment.

(xii) A cement manufacturing company plans to raise Rs. 100 crores by offering Equity Shares to financial institutions.
Name the capital raising method considered by the cement company. [1 Mark]

Answer: Private Placement

Allotment of securities to institutional investors and select financial institutions without a public issue is known as private placement.

Teacher's Note:
a) Private placement helps companies raise capital quickly without incurring the heavy floatation costs of a public issue.
b) Differentiate carefully between public issue, rights issue, and private placement.

(xiii) Given below is a poster put up in a library. Identify the type of plan depicted by it. [1 Mark]
[Figure: A library poster titled DOS AND DON'TS containing rules: 1. Quiet please! 2. Put your mobile phone on silent mode. 3. No food or drink is allowed in the library. 4. Keep the library clean. 5. Put the books in correct order in shelves, with an illustration of stacked books.]

Answer: Rule

Rules are rigid plans that specify what is to be done or not to be done, leaving no scope for discretion.

Teacher's Note:
a) Rules command strict obedience and carry no flexibility, unlike policies or procedures.
b) Look for exact prohibitions and mandates (Dos and Don'ts) to identify rules in organizational cases.

(xiv) A couple sued an airline and its regional manager after they failed to allot them seats on a flight despite having paid extra for seat selection. The consumer court directed the airline to give a compensation of Rs. 25,000 and a refund of seat selection charges to the couple.
Name the consumer right exercised by the couple. [1 Mark]

Answer: Right to seek redressal

The right to seek redressal entitles consumers to seek relief against unfair trade practices or exploitation, including compensation.

Teacher's Note:
a) Compensation and refunds awarded by consumer courts fall under the right to seek redressal.
b) Distinguish between the right to be heard (filing a complaint) and the right to seek redressal (getting compensation/relief).

SECTION B - 32 MARKS

Question 2 [4 Marks]
Shubhi has to transfer Rs. 1 lakh to her son's account who is pursuing a course in engineering in Mumbai. She considers NEFT for transferring funds.
Discuss any four features of the method of fund transfer considered by Shubhi.

Answer:
1. National Electronic Funds Transfer (NEFT) is an electronic fund transfer system that operates on a deferred net settlement (DNS) basis.
2. Transactions are settled in batches throughout the day rather than individually in real-time.
3. There is no minimum or maximum amount limit imposed by the Reserve Bank of India for NEFT transactions.
4. It is available 24x7x365, enabling users to initiate transfers at any time from anywhere using net banking or mobile banking.

Teacher's Note:
a) Clearly state batch settlement and 24x7 availability as key operational features of NEFT.
b) Students often confuse NEFT with RTGS; remember that RTGS is real-time and has a minimum threshold, whereas NEFT operates in batches.

Question 3

(i) A company has five hundred workers. The management has created a structure in which each worker has a clearly defined role and responsibility.
Identify the type of organisation described above. State any three of its features. [4 Marks]

Answer:
Identification: Formal Organisation.
Features:
1. It is deliberately and consciously designed by the top management to achieve organizational goals.
2. It clearly defines authority, responsibility, and reporting relationships for every member.
3. It places emphasis on work and task accomplishment rather than interpersonal relationships.
4. Scalar chain of command is strictly followed in communication.

Teacher's Note:
a) Formal organization structures define official duties and reporting hierarchies clearly.
b) List any three distinct features accurately as required by the question.

OR

(ii) Global Designs Ltd. organised a virtual meeting of its head office in Mumbai and its overseas branch in France. During the discussion, the manager of the overseas branch used some French words and phrases that the Indian staff could not understand.
Identify the barrier that hampered communication in the above scenario. Explain any three other barriers to communication. [4 Marks]

Answer:
Identification: Semantic barrier (specifically, faulty translation or words with different meanings/unfamiliar language).
Explanation of three other barriers:
1. Psychological barriers: Emotional states such as anger, mistrust, or premature evaluation can obstruct clear understanding of a message.
2. Organizational barriers: Rigid rules, complex hierarchies, and red tape can delay or distort communication across levels.
3. Personal barriers: Fear of authority, lack of incentive to communicate, or unwillingness to express views can hamper effective exchange.

Teacher's Note:
a) Language and vocabulary differences create semantic barriers in communication.
b) Ensure you categorize barriers correctly into semantic, psychological, organizational, and personal groups.

Question 4 [4 Marks]
At Vision Ltd., the CEO always consults her team before taking any major decision. On the contrary, the CEO at Mica Ltd. gives strict instructions to her subordinates and expects them to follow without questioning.
What types of leadership styles are reflected at Vision Ltd. and Mica Ltd.? Briefly explain each of them.

Answer:
Vision Ltd.: Democratic (or Participative) Leadership style.
Explanation: The leader encourages subordinates to participate in decision-making and values their opinions and suggestions.
Mica Ltd.: Autocratic (or Authoritarian) Leadership style.
Explanation: The leader exercises complete control over decision-making, issues orders, and expects unquestioned obedience from subordinates.

Teacher's Note:
a) Democratic leadership fosters teamwork and high morale, whereas autocratic leadership ensures quick decision-making but can lead to lower subordinate satisfaction.
b) Identify leadership styles based on the degree of centralization and employee involvement shown in the scenario.

Question 5

With reference to the Principles of Scientific Management advocated by F.W. Taylor, briefly explain the principles illustrated in subparts (i) and (ii).

(i) [2 Marks]
[Figure: Image 1 shows a group of managers and workers sitting together around a table discussing amicably, with a handshake/collaborative posture.]

Answer:
Principle: Harmony, Not Discord.
Explanation: Taylor emphasized that there should be complete harmony between management and workers. Both groups should realize that each other's prosperity is interdependent, requiring a mental revolution.

Teacher's Note:
a) Harmony, Not Discord calls for a complete mental revolution on the part of both management and workers.
b) Connect collaborative discussions and cordial meetings shown in illustrations directly to the principle of mental harmony.

(ii) [2 Marks]
[Figure: Image 2 shows a manager sitting at a desk giving instructions/charts while workers work together in coordination, or a collaborative team working efficiently with mutual cooperation.]

Answer:
Principle: Cooperation, Not Individualism.
Explanation: This principle is an extension of Harmony, Not Discord, emphasizing mutual cooperation between workers and management instead of individualism. Competition should be replaced by cooperation.

Teacher's Note:
a) Cooperation, Not Individualism stresses internal competition replacement with mutual trust and cooperation.
b) Analyze tabular data or visual prompts carefully to link them to Taylor's scientific principles.

Question 6 [4 Marks]
Blossom Ltd. is a newly established company which faces a challenge of raising additional capital from the public for its long-term needs. Therefore, it approaches SIDBI and SFCs, for support.
Evaluate any two advantages and any two disadvantages to Blossom Ltd. of raising capital through financial institutions mentioned above.

Answer:
Advantages:
1. Long-term Finance: Financial institutions provide long-term and medium-term funds which cannot be easily raised from other sources.
2. Managerial Advice: These institutions often provide valuable expert advice, guidance, and managerial assistance to businesses.
Disadvantages:
1. Rigid Conditions: Financial institutions impose stringent restrictive covenants and conditions regarding management and dividend policies.
2. Procedural Delays: Obtaining funds from financial institutions involves lengthy legal formalities, detailed investigations, and bureaucratic delays.

Teacher's Note:
a) Financial institutions (like SFCs and SIDBI) act as developmental banks providing both capital and advisory support.
b) Clearly state two advantages and two disadvantages as specifically requested in the question.

Question 7

(i) Pep-up Beverages introduced fruit juices in tetra packs which displayed the brand's name, ingredients, nutritional value, expiry date, and price. It also mentioned 'No Added Sugar' to attract health-conscious buyers.
State any four merits of the facilitating marketing function indicated in the above scenario. [4 Marks]

Answer:
Identification of function: Labelling and Packaging.
Merits:
1. Product Identification: It helps customers easily identify the product and distinguish it from competing brands.
2. Information Display: It provides essential details such as ingredients, nutritional value, price, and expiry date.
3. Promotion: Attractive packaging and labelling act as a silent salesman and promote sales.
4. Health and Safety Compliance: Mentioning details like 'No Added Sugar' helps build trust with health-conscious consumers.

Teacher's Note:
a) Labelling and packaging are crucial marketing functions that inform consumers and stimulate sales.
b) List the merits clearly with specific reference to product information and brand differentiation.

OR

(ii) Samsung sells mobiles, televisions, laptops and other electronic products under a single unique name. This has led to an increase in its market share.
With reference to the above context, discuss any four benefits of the facilitating marketing function. [4 Marks]

Answer:
Identification of function: Branding.
Benefits:
1. Enables Product Differentiation: Branding helps a firm distinguish its products from those of competitors in the market.
2. Helps in Advertising and Display: A well-known brand name makes advertising and promotion more effective and economical.
3. Differential Pricing: A strong brand allows a company to charge a higher price for its products compared to unbranded competitors.
4. Ease in Introduction of New Products: Established brand names make it easier for a company to launch new products successfully under the same umbrella.

Teacher's Note:
a) Branding creates distinct identity and customer loyalty.
b) Ensure you explain the specific benefits of branding clearly in the context of market share expansion.

Question 8 [4 Marks]
Consumer protection is a necessity in today's business environment. Justify the statement by giving any four reasons.

Answer:
1. Ignorance of Consumers: Most consumers are unaware of their rights, remedies, and product standards, making them vulnerable to exploitation.
2. Unorganized Consumers: Consumers in developing markets are largely unorganized and lack collective bargaining power against powerful producers.
3. Widespread Exploitation: Consumers face rampant exploitation through unfair trade practices, misleading advertisements, adulteration, and defective goods.
4. Social Responsibility: Business organizations utilize societal resources and therefore have a moral obligation to protect consumer interests and welfare.

Teacher's Note:
a) Consumer protection is essential from both consumer and business perspectives.
b) State four distinct reasons clearly covering consumer ignorance, exploitation, and business responsibility.

Question 9 [4 Marks]
The Board of Directors at Meet & Geet Ltd. takes all major and minor decisions which often results in a delay in execution of work. To overcome this challenge, they decide to disperse the authority of decision making to all the levels of management.
Analyse any four ways in which this change will benefit Meet & Geet Ltd.

Answer:
Identification of concept: Decentralisation.
Benefits:
1. Quick Decision-Making: Since decisions are taken at levels closest to where work is performed, operational delays are eliminated.
2. Relief to Top Management: Relieving top executives from routine operational decisions allows them to focus on strategic planning and policy formulation.
3. Develops Managerial Talent for the Future: Giving authority to lower levels prepares subordinates to handle higher responsibilities and leadership roles.
4. Promotes Self-Reliance and Confidence: Lower-level managers gain autonomy, boosting their confidence and job satisfaction.

Teacher's Note:
a) Decentralization involves systematic dispersal of authority to lower levels of management.
b) Highlight the direct organizational benefits such as speed, relief for top management, and talent development.

SECTION C - 32 MARKS

Question 10

(i) Discuss any five points highlighting the importance of business environment. [5 Marks]

Answer:
1. Enables the firm to identify opportunities and get the first mover advantage: Understanding environment trends helps firms spot profitable opportunities before competitors do.
2. Helps the firm to identify threats and early warning signals: Environmental scanning alerts businesses to impending threats, allowing proactive measures.
3. Tapping useful resources: Businesses draw inputs (finance, labour, raw materials) from the environment and supply outputs back; understanding it ensures optimal resource mobilization.
4. Coping with rapid changes: Dynamic environments bring technological and market shifts; awareness helps businesses adapt effectively.
5. Assisting in planning and policy formulation: Insights into environmental forces serve as the basis for deciding future courses of action and corporate strategy.

Teacher's Note:
a) The business environment surrounds an enterprise with dynamic forces that impact performance.
b) Write five distinct points with clear headings and brief explanations as expected for a 5-mark question.

(ii) Explain any three points on the relevance of objectives of management. [3 Marks]

Answer:
1. Directional Focus: Objectives provide clear direction to organizational efforts, ensuring all departments work toward common goals.
2. Performance Measurement: They establish benchmarks against which actual performance can be evaluated and controlled.
3. Motivation of Employees: Well-defined objectives inspire employees, align individual goals with organizational targets, and boost morale.

Teacher's Note:
a) Objectives represent the end points toward which all managerial activities are directed.
b) Keep explanations concise and focused on direction, measurement, and motivation.

Question 11

(i) Name the hybrid security that carries a fixed rate of dividend and is a source of long-term finance for a company. Explain any four types of such security. [5 Marks]

Answer:
Identification: Preference Shares.
Types of Preference Shares:
1. Cumulative Preference Shares: Dividends in arrears accumulate and are paid out of future profits before any dividend is paid to equity shareholders.
2. Participating Preference Shares: These shares carry the right to participate in surplus profits remaining after equity shareholders have been paid a specified dividend.
3. Redeemable Preference Shares: Shares that can be redeemed or repaid by the company after a specified period in accordance with terms of issue.
4. Convertible Preference Shares: Preference shares that can be converted into equity shares after a specified period.

Teacher's Note:
a) Preference shares combine features of both equity and debentures, hence termed hybrid securities.
b) Clearly state the identification followed by four distinct types with accurate explanations.

(ii) Mr. Yang wants to invest Rs. 30 lakhs in his company. His manager advises him to invest 40% in capital that changes its form and remaining 60% in capital that does not change its form.
Identify the types of capital advised by the manager. State any two differences between these types of capital. [3 Marks]

Answer:
Identification:
- Capital that changes its form (40% i.e., Rs. 12 lakhs): Working Capital (Circulating Capital).
- Capital that does not change its form (60% i.e., Rs. 18 lakhs): Fixed Capital.
Differences:
1. Meaning: Fixed capital is invested in long-term fixed assets, whereas working capital is invested in current assets and day-to-day operations.
2. Liquidity: Working capital is more liquid as it continuously changes its form (cash to inventory to receivables to cash), whereas fixed capital is relatively less liquid.

Teacher's Note:
a) Working capital constantly changes its form during operating cycles, while fixed capital remains locked in long-term assets.
b) Clearly compute or mention the identification and present differences in a structured format.

OR

(iii) Describe any five factors that a business organisation considers while determining its debt-to-equity ratio. [5 Marks]

Answer:
1. Cash Flow Position: If a company has robust and steady cash inflows, it can easily service high debt obligations; otherwise, equity financing is preferred.
2. Interest Coverage Ratio (ICR): A higher ICR indicates lower risk of default, allowing the company to raise more debt.
3. Cost of Debt: If the cost of borrowing is lower than the return on investment, using debt increases earnings per share through financial leverage.
4. Tax Rate: Interest paid on debt is tax-deductible, making debt cheaper compared to dividends on equity.
5. Floatation Costs: Raising debt through loans involves lower issue costs compared to public issues of equity shares.

Teacher's Note:
a) The debt-to-equity ratio determines the capital structure mix and financial risk of an enterprise.
b) Outline five clear financial and operational determinants considered by finance managers.

(iv) Kriya Ltd. wants to issue fully paid-up shares to its existing shareholders, whereas Aakash Ltd. plans to issue new shares to its existing shareholders for increasing the subscribed capital of the company.
Name the types of securities which Kriya Ltd. and Aakash Ltd. want to issue. Contrast these securities on any two bases. [3 Marks]

Answer:
Identification:
- Kriya Ltd.: Bonus Shares.
- Aakash Ltd.: Rights Shares.
Contrast / Differences (on 2 bases):
1. Consideration / Payment: Bonus shares are issued free of cost to existing shareholders out of accumulated profits/reserves, whereas rights shares require existing shareholders to pay subscription money.
2. Increase in Capital: Bonus shares capitalize reserves without bringing in fresh cash inflow, whereas rights shares bring in fresh capital into the company.

Teacher's Note:
a) Bonus shares are distributed as a capitalization of profits, while rights shares are offered for cash subscription to existing members.
b) Contrast the two securities clearly on payment and capital inflow bases.

Question 12

(i) Explain any five objectives of Marketing. [5 Marks]

Answer:
1. Creation of Customers: The primary objective of marketing is to attract and create new customers by understanding their needs.
2. Satisfying Customer Needs: Providing products and services that deliver superior value and satisfaction to consumers.
3. Building Brand Reputation and Goodwill: Earning customer trust and loyalty to enhance the brand image in the market.
4. Achieving Sales Volume and Profitability: Generating adequate sales revenue and sustainable profits for the enterprise.
5. Market Share Expansion: Increasing the company's share of total industry sales over time.

Teacher's Note:
a) Marketing objectives guide a firm's commercial strategies toward customer satisfaction and profitability.
b) Enumerate five clear objectives with brief, professional explanations.

(ii) Discuss any three marketing functions of Exchange. [3 Marks]

Answer:
1. Buying and Assembling: Gathering raw materials or finished goods of appropriate quality at the right price for resale or processing.
2. Selling: Transferring ownership and possession of goods and services to ultimate consumers or buyers in exchange for money.
3. Pricing of Product: Determining the price to be charged for products, taking into account costs, demand, competition, and government regulations.

Teacher's Note:
a) Functions of exchange facilitate the transfer of ownership of goods between buyers and sellers.
b) Describe buying, selling, and pricing clearly as core exchange functions.

Question 13

Read the passage given below and answer the questions that follow.
Maria, an MBA from a foreign university, quit her job in multinational corporation and decided to start a tea business by using organic products. She researched on the commercial viability of the business, existing tea producing companies in India and the prospective consumers. She created a business plan and approached the financers to raise funds.
On receiving funds, she established a small company and hired an HR Manager whose prime responsibility was to recruit suitable candidates. He was required to select personnel and assign job profiles as per their specialisation and experience. His role also entailed acquainting them with the service rules, order of hierarchy and entitlements.

(i) Identify the steps of planning followed by Maria in the above case. [2 Marks]

Answer:
1. Setting Objectives: Deciding to start an organic tea business.
2. Developing Premises / Analyzing the Environment: Researching commercial viability, existing tea companies, and prospective consumers.
3. Formulating a Plan: Creating a comprehensive business plan to approach financiers.

Teacher's Note:
a) Planning involves a logical sequence of steps starting from setting objectives to formulating plans.
b) Extract specific actions from the case text to justify the planning steps correctly.

(ii) Suggest any two suitable sources of recruitment that the HR Manager can adopt in the above case. [2 Marks]

Answer:
1. Campus Recruitment (Placement cells of management and professional institutes).
2. Advertisements in Newspapers and Professional Portals (Online job portals like LinkedIn, Naukri).

Teacher's Note:
a) External sources of recruitment bring in fresh talent and specialized expertise suitable for a new venture.
b) Suggest two appropriate external sources applicable to hiring professional managers.

(iii) Discuss any four points on the relevance of Staffing for Maria's company. [4 Marks]

Answer:
1. Competent Personnel: Staffing helps Maria's company discover and obtain competent personnel for various job positions.
2. Higher Performance: Placing the right person on the right job ensures higher productivity and superior quality of work.
3. Continuous Survival and Growth: Proper staffing ensures succession planning and continuous development of managerial talent for future expansion.
4. Optimum Utilization of Human Resources: It prevents underutilization of personnel and avoids overmanning or shortages, ensuring cost efficiency.

Teacher's Note:
a) Staffing is the crucial managerial function of filling and keeping filled positions in the organizational structure.
b) Highlight four key advantages of staffing tailored to the needs of Maria's startup company.