EAD Business Studies-XII Mockpaper Answer.indd

Answers to EAD Mock Paper (Business Studies)
Class XII
1.Feedback facilitates the comparison of actual performance with standards and hence,
analysing deviations.
2. Leadership may be defined as the process of influencing other people to work willingly for
group objectives.
3.Motivation
4. Comparison of actual performance with standards and analysing deviations
5. Private placement
6. Mobilisation of savings and channelising them into the most productive uses
7. No, because controlling brings back the management cycle back to planning function.
8. He can appeal before the State Commission within 30 days of the passing of the order.
9. Proper understanding of management principles is necessary due to the following reasons:
(a) Provides useful insight to managers/Improves understanding. The knowledge
of principles improves the understanding of managers about the ways and means of
managing an organisation. These principles are helpful in taking decisions and handling
situations arising in course of management.
(b) Direction for training of managers. The principles are helpful in identifying the
areas of management in which existing and future managers should be trained. The
principles of management help the Universities and professional institutes to impart
teaching and training in the theory and practice of management.
(c) Role of management. The principles focus on matters on which greater managerial
attention is required. Principles act as ready reference for the managers to check
whether their decisions are appropriate or not.
10. Employees at all levels should be allowed to take initiative in work related matters. It does
not imply freedom to do whatever people like. They must observe discipline. Encouraging
initiative is likely to motivate employees to work better and harder. Fayol says that
manager should have a dynamic nature, commanding, encouraging, persuading and at the
same time, keeping their dignity intact.
For example, every employee has a right to give suggestions about any matter of the
organisation but once a decision is taken on any issue then there is no scope for disobedience.
11. Planning provides the standards/targets against which actual performance is compared.
Deviation of actual results from the standards indicate the nature of corrective action
needed. Therefore, planning may be said to provide the basis of control. For example, a
firm has planned to sell 100 units of its product. Performance of sales department shall
be compared with the planned sale. If actual sale is less than the planned sale, then
corrective actions would be taken. Thus, planning provides the basis of control.
12. Yes, I agree with the statement.
Reasons:
(a) When carefully planned, promotion from within or transferring to new jobs can provide
training ground for developing middle and top level executives.
(b) It promotes loyalty among the employees as it gives them a sense of a job security and
opportunity for better prospects. The employees’ training needs are minimised because
they know the major goals, policies, procedures and functions of the organisation.
13. Yes, I agree with the statement due to the following reasons:
(a) Liquidity. The main function of stock markets is to provide a ready and continuous
market for the sale and purchase of securities. The presence of a continuous market
Answers to EAD Mock Paper (Business Studies–XII) 1
is an assurance to investors that their investments can be converted into cash as and
when required by them.
(b) Valuation of securities. The stock market helps to correctly value and price securities.
Profitable and growth-oriented companies are valued higher by buyers and sellers as
compared to average performing companies. Indian Stock Market indices like Nifty,
Sensex reflect the direction and indicate day-to-day price fluctuation of share prices.
14. The values achieved through informal organisation are:
(a) It brings a feeling of belongingness, status, self-respect and satisfaction.
(b) It satisfies social and cultural needs of members.
(c) It helps in maintaining the personality of the individual.
(d) It leads to faster spread of information as well as quick feedback.
15. Organising is a process which involves the following steps:
(a) Identification and division of work. The first step in organising is to identify/
divide the total work to be done into specific jobs. Dividing the total work into jobs is
necessary because the entire work cannot be done by an individual. Division of work
facilitates specialisation of efforts and skills.
(b) Grouping jobs and departmentation. The second step in organising is to combine or
group similar or related jobs into larger units called departments, divisions or sections.
This grouping process is called departmentation/departmentalization. The departments
or work units so created are linked together on the basis of their interdependence.
(c) Assignment of duties. After considering qualifications, experience and aptitudes of
people, group of activities are assigned to an individual who is best suited to perform
it.
(d)Establishing authority-responsibility relationships/Establishing reporting
relationships. The next step in the process of organising is the creation of authority
relationships among the job-holders or job positions. In fact, the various members of
the organisation, who perform the jobs are linked by authority-responsibility relations
through the process of organising. It is an essential step as it helps each member to
know from whom he/she has to take orders and to whom he/she is accountable.
16. Financial management is concerned with procurement and utilisation of finance in a proper
way. It may be defined as planning, organising, directing and controlling the financial
activities of an organisation.
Following are the important objectives of financial management:
(a) To estimate accurately the amount of capital to be required.
(b) To determine the form and proportionate amount of securities to be issued.
(c) To raise funds at minimum cost and at most advantageous terms.
17. The controlling function has vital importance in the management of organisation due to
the following reasons:
(a) Helps in achieving the objectives. Controlling ensures that results of operations
conform as closely as possible to the predetermined objectives. It ensures the use of
human and material resources in the best possible manner. The objective may be in
terms of a target profit, target sales or target production.
(b) Facilitates decision-making. Controlling facilitates decision-making, enabling
managers to identify the gap between thinking and doing functions of management. It
helps in finding out the problems of work performance and take appropriate decisions
aimed at rectifying the deficiencies.
2 Answers to EAD Mock Paper (Business Studies–XII)
(c) Improves employee’s morale. Controlling creates an atmosphere of order and
discipline in the organisation. It improves employee’s morale. Evaluation of performance
against predetermined standards induces employees to do things in a proper manner.
(d) Helps in better coordination. Controlling facilitates the work of coordination. This
is possible by keeping all activities and efforts directed towards the achievement of
goals in conformity with plans and programmes. Overlapping and duplication of work
are avoided and deviations, if any, are promptly corrected.
18. (a) Consumer awareness. A customer can oppose or take action against any unfair trade
practices/exploitation if he is aware of his rights and responsibilities. An understanding
of his responsibilities would enable a consumer to safeguard his interests.
(b) Government. The Government has enacted a specific law called the Consumer
Protection Act in 1986. The Act provides for the establishment of Consumer Disputes
Redressal Agencies at District, State and National levels for the protection and
promotion of consumer interests and to redress their grievances in a speedy, simple
and inexpensive manner.
19.Qualities of a good salesman are:
(a) Personality. His physical appearance should be impressive, healthy, speak in a wellpitched voice to create receptivity among listeners.
(b) Mental qualities. He should be imaginative, have presence of mind, strong memory,
nitiative, perceptive ability and intelligence.
(c) Social qualities. He should be social and have the ability to mix with people.
(d) Communication ability. He should be able to speak freely, clearly in a well-pitched
voice.
20. Objectives are the goals or ends towards which the activities of an organisation are directed.
These objectives act as a standard or yardstick against which the actual performance is
assessed or compared. Following are the different types of objectives:
(a) Organisational objectives:
 Optimum use of physical and financial resources available
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Innovation and development of new product or a new method of production
Reasonable profit motive
Securing maximum results with minimum efforts
Increasing the performance of management and workers by influencing their attitude
(b) Social objectives:
 Customer satisfaction by providing quality products and good services
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Generation of economic wealth
Preservation and protection of environment by selecting those techniques and methods
of production which involves lesser pollution and are in national interest by making
better and efficient utilisation of scarce resources
Generating more employment opportunities
(c) Individual/Personal objectives:
 Maximum prosperity for employees by providing competitive salary
Politics for their growth and development
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Peer recognition and societal recognition
Providing good working conditions
Integration of personnel objectives with corporate objectives.
Answers to EAD Mock Paper (Business Studies–XII) 3
21. Social environment describes characteristics of the society in which the organisation
exists. Literacy rate, educational levels, customs, beliefs, value, lifestyle, age, demographic
distribution and mobility of population are part of the social environment.
If an organisation fails to adapt the changes in the social environment, it may lead to
dissatisfaction among its customers and rejection of its products.
22. The importance of leadership can be viewed as under:
(a) Effective handling of conflicts: It facilitates sharing of feelings, opinions,
disagreements etc. and nullify the adverse effects. Thus, leadership helps in handling
conflicts effectively.
(b) Team spirit: It helps in persuading employees to work cooperatively and enthusiastically.
As a result, employees give up their narrow personal interests and work for the
achievement of common goals.
(c) Healthy environment: It aims at developing and maintaining healthy working
environment; conducive to maximum work effort.
(d) Provides training: It facilitates training of employees and ensures proper utilisation
of resources. As a result, increasing productivity per employee can be achieved.
23. Four non-financial incentives are:
(a)Status. It means formal position in the organisation. Higher status motivate people
by satisfying their ego needs as lot of perquisites and authority is attached to it.
(b) Career advancement opportunity. Most of the employees want to grow in their
careers. If sound promotion policy and training programmes are implemented, it will
help them to achieve promotions.
(c) Organisational climate. If management takes special efforts in maintaining better
organisational climate as compared to other companies, it acts as motivating factor to
an employee for better performance.
(d) Job security. In India, due to widespread unemployment, job security is very important.
It ensures regular income in future and relieves them of worry. However, it may make
them complacent.
Or
Psychological/Emotional barriers are:
(a) Premature evaluation. If a person has pre-conceived notions against the communication
then he will evaluate the meaning of message before the sender completes his message.
(b) Loss by transmission and poor retention. Successive transmission of the message
results in inaccurate information. Usually, people cannot retain the information for
long time if they are inattentive or not interested.
(c) Lack of attention. Listening demands full attention as well as self discipline. Nonlistening of message acts as a major psychological barrier.
(d) Distrust. If the parties do not believe each other, they cannot understand each other's
message in its original sense.
24.Financial management is concerned with procurement and utilisation of finance in a proper
way. The term ‘finance’ refers to money or funds available to a firm. Financial management
is done to maximise owner’s wealth, to ensure adequate supply of capital to the business, to
use funds effectively and to conserve the funds through creation of reserves, reinvestment
of profits, etc.
There are three major decisions which an organisation has to take in respect of finance:
(a) Investment decision. The first and foremost decision which a business must take,
is to allocate resources or capital to different investment proposals. The benefit of
4 Answers to EAD Mock Paper (Business Studies–XII)
these investments may not be realised immediately since the value of future benefits
is not known. These investments involve risks. Therefore, the risk factor also has
to be considered. Different investment proposals are evaluated on the basis of their
expected returns and risks involved. Investment in long-term assets is known as capital
budgeting decision and those relating short-term assets is known as working capital
decisions.
(b) Finance decision. The second decision which concerns a company is, how to finance the
activities of the business. There are different sources of finance like shares, debentures
and loans. But, a proper mix of all these types of securities is essential. The combination
of shares, loans and debentures constitute the capital structure of a company.
The best financing mix or capital structure has to be decided which involves determining
the proportion or ratio of shares and debentures in the capital structure.
(c) Dividend decision. The third decision to be taken is the disposal of profits. Profits
are required for a number of purposes. Some amount of profit has to be recycled in the
business for reinvestment and expansion of business activities. This part of the profit
is retained in the business and is called retained earnings. The rest of the profits then
has to be distributed to shareholders in the form of dividends. How much to retain
for reinvestment and expansion and how to pay out as dividends to the shareholders,
are crucial decisions to be taken by the company.
All these decisions are interrelated and interdependent. Their joint impact will determine
how much the business is worth.
Or
Fixed capital refers to investment in fixed assets which remains in the business for more than
one year, usually for much longer, e.g. plant and machinery, furniture and fixtures, land and
building, vehicles, etc.
The amount of fixed capital required in a business enterprise depends upon the following factors:
(a) Nature of business. A manufacturing enterprise needs a huge investment in fixed
assets (plant and machinery) as compared to a trading firm.
(b) Scale of operations/size of business. Higher investment in fixed assets is required
in a large scale enterprise as compared to a small firm.
(c) Technology upgradation. Companies which use assets which are likely to become
obsolete in the near future require high investment in fixed assets.
(d) Choice of techniques. Higher investments in fixed assets is required for a company
which employs capital-intensive technique of production as compared to firms which
use labour-intensive techniques of production.
25. The characteristics of a good brand name are as following:
(a) A brand name should be short and simple. Long and complex words should be avoided
because they create difficulty in reading and remembering. For instance, Lux, VIP,
Dettol or Surf are short and simple words, which are read and remembered without
much effort.
(b) A brand name should be easily pronounceable.
(c)Suggestive brand names are better because they can convey product attributes or
benefits. For instance, Hajmola suggests digestive properties etc.
(d) A brand name should be selected after considering its meaning in other languages and
cultures. Some words are perfect in one culture or country but many become offensive,
obscene and inappropriate in other countries.
(e) A brand name should be versatile to accommodate new products, which are added to
the product line, e.g. Colgate.
(f) A brand name should be capable of being registered and protected legally.
Answers to EAD Mock Paper (Business Studies–XII) 5
Or
(a) Discount. These are like price promotion, in which certain percentage of price is reduced
as discount from the list price, e.g., most of the retailers of garment like Shopper’s
Stop offer their products at generous discount during a limited period at the end of
the season.
(b) Product combination. It means offering other items given free with the purchase of
a product. For example, a milk shaker along with Nescafe, or mugs with Bournvita
or a dairy milk along with a packet of chips.They are effective in getting consumers
to try a new product.
(c) Financing. Easy financing schemes are offered by many sellers of consumer durables
such as electronic goods, automobiles, etc. For example, full finance @ 0%, 4 quarterly
installments, 12 easy installments etc.
(d) Lucky draw. A firm, on purchases of a fixed amount/purchase of product, gives a
coupon to a customer which entitles them for a lucky draw, e.g., Bikanerwala restaurant
in particular season gives lucky draw coupon on purchase of ` 200 or more to its
customers which entitles them to win exciting prizes like car etc.
6 Answers to EAD Mock Paper (Business Studies–XII)

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