Practicing the CBSE Sample Papers for Class 12 Business Studies with Solutions Set 6 allows you to get rid of exam fear and be confident to appear for the exam.
CBSE Sample Papers for Class 12 Business Studies Set 6 with Solutions
Time: 3 Hours.
Max. Marks: 80
General Instructions:
- This question paper contains 34 questions.
- Marks are indicated against each question.
- Answers should be brief and to the point.
- Answers to the questions carrying 3 marks may be from 50 to 75 words.
- Answers to the questions carrying 4 marks may be about 150 words.
- Answers to the questions carrying 6 marks may be about 200 words.
Question 1.
Keeping in view the changes in the consumer demands and preferences ‘Rama Bakery’ has reduced the sugar and fat content in its products. This approach of business shows that management is:
(a) an intangible force
(b) a group activity
(c) a dynamic function
(d) a multidimensional activity
Answer:
(c) a dynamic function
Explanation: Management is a dynamic function. It works according to the demand and preferences in the market.
Question 2.
According to this principle of general management, “an organisation should safeguard against abuse of managerial power, but at the same time a manager should have the necessary authority to carry out his responsibility.” Name the principle of management being described in the given statement.
(a) Discipline
(b) Authority and responsibility
(c) Unity of command
(d) Unity of direction
Answer:
(b) Authority and responsibility
Explanation: Authority and responsibility are two sides of the same coin. More authority with less/ no responsibility leads to misuse of authority and more responsibility without equal level of authority proves a hindrance in getting the work done from subordinates.
Question 3.
Changes and events cannot be eliminated but they can be anticipated and managerial response to them can be developed which importance of planning is highlighted in the above statement?
(a) Planning provides direction
(b) Planning reduces overlapping and wasteful activities
(c) Planning reduces the risk of uncertainty
(d) Planning facilitates decision making
Answer:
(c) Planning reduces the risk of uncertainty
Explanation: Planning forces the managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses. Thus planning reduces uncertainty.
Question 4.
Identify the importance of the business environment described in the given picture?
(a) It helps the business to identify threats and early warning signals.
(b) It helps in coping with rapid changes.
(c) It enables the business to identify opportunities and get the first mover advantage.
(d) It helps in coping with rapid changes.
Answer:
(c) It enables the business to identify opportunities and get the first mover advantage
Explanation: The environment provides several opportunities for firm success. Early identification of opportunities assists a company in being the first to exploit them instead of losing them to rivals.
Question 5.
If a firm wants to diversify its business into different products and expand to different territories. The organisational structure would be suited for this firm is:
(a) Informal structure
(b) Functional structure
(c) Divisional structure
(d) Network structur
Answer:
(c) Divisional structure
Explanation: In the divisional structure, activities are grouped on the basis of products or geographical territories. When the organisation has number of products of different types, it opts for the divisional structure.
Question 6.
Organisations maintain good relations with professional schools, colleges and universities and conduct recruitment drive to select fresh talent. This kind of recruitment source is known as:
(a) Transfers
(b) Casual recruitment
(c) Referrals
(d) Campus recruitment
Answer:
(d) Campus recruitment
Explanation: Campus placement or campus recruitment is a programme conducted within the universities or educational institutions to provide jobs to students nearing completion of their studies.
In this type of programme, the educational institutions partner with corporations who wish to recruit fresh talent.
Question 7.
Meera purchased a set of mixer grinder online from a reputed online site. The products delivered to Meera was defective. The jar of the mixer was slightly broken form the corner. She instantly complained and applied for return and replacement of the product. In such situation, if a seller refuses to give the replacement or issue refund against the damaged product. What advice will you give Meera to follow?
(a) As a consumer with all the related information and a valid receipt, she should file a complaint in Consumer Protection Council.
(b) Let it go as it was an online transaction.
(c) She should be more careful while doing online purchasing and go for offline mode of shopping.
(d) None of the above.
Answer:
(a) As a consumer with all the related information and a valid receipt, she should file a complaint in Consumer Protection Council.
Explanation: Right to seek redressal says that the consumer has the right to get his complains settled against the concerned producer. Any issue arising out of any unfair trade practices or malpractice by the producer or seller has to be attended by the concerned court.
The product has to be either repaired or taken back and replaced by the seller or producer. So, Meera should file complaint in Consumer Protection Council.
Question 8.
Jaggy started a small stationery shop in the nearby market. In pursuit of earning higher profits in the short term, he overpriced all his products by 20%. Gradually, the consumers understood his pricing strategy and stopped coming to his shop for making any purchase. Recognise the related point highlighting the importance of consumer protection from a businessmen’s point of view.
(a) The long-term interest of business is assured.
(b) Business uses society’s resources, so they need to safeguard consumers’ interests.
(c) Social responsibility towards consumers is an imperative interest group.
(d) It is the moral obligation of the businessmen to give due consideration to the consumer’s interests.
Answer:
(a) The long-term interest of business is assured.
Explanation: Keeping in view the consumers interest leads to increase in goodwill and thus benefits the business in long-run because there is long term interest of business is assured.
Question 9.
You are the financial manager of a newly established company. The directors have asked you to determine the amount of working capital requirements for the company. Which factor you will consider while determining the working capital requirements of the company?
(a) Nature of business
(b) Choice of technique
(c) Diversification of product
(d) Employees academic background
Answer:
(a) Nature of business
Explanation: The nature of business i.r., trading, manufacturing, construction or service provider, is a determining factor of working capital requirement.
Question 10.
Transaction cost of trading of financial instruments in centralised market is classified as:
(a) flexible costs
(b) low transaction costs
(c) high transaction costs
(d) constant costs
Answer:
(b) low transaction costs
Explanation: Transaction costs are expenses incurred when buying or selling a good or service. In a financial sense, transaction costs include brokers’ commissions and spreads, which are the differences between the price the dealer paid for a security and the price the buyer pays.
Question 11.
Name the type of distribution channel which is the most suitable for limited product line with objective to cover large market area.
(a) Zero level
(b) One Level
(c) Two level
(d) Three Level
Answer:
(d) Three level
Explanation: Manufacturers appoint agents in major areas who in turn connect them to wholesalers and retailers. Three level channel is suitable for manufacturers oflimited product line with customers spread over a wide geographical area.
Question 12.
Statement I: SWOT analysis is the acronym for strength, weakness, opportunity and threats.
Statement II: It helps a business organisation to identify all positive and negative influences that impact it from outside only.
Choose the correct option from the options given below:
(a) Statement I is true and II is false.
(b) Statement II is true and I is false.
(c) Both the statements are true.
(d) Both the statements are false.
Answer:
(a) Statement I is true and II is false
Explanation: SWOT (strengths, weaknesses, opportunities, and threats) analysis is a framework used to evaluate a company’s competitive position and to develop strategic planning. It influences the organisation from outside as well inside.
Question 13.
Match the various terms of Planning Column-I with their respective statements in Column-II.
| Column-I | Column-II |
| (A) Method | (i) Expressed in numerical terms |
| (B) Rule | (ii) Expressed in numerical terms |
| (C) Programme | (iii) Comprising of step to step procedure |
| (D) Budget | (iv) Detailed statements of the activities and policies of the company |
(a) (i), (iii), (iv), (ii)
(b) (ii), (iii), (iv), (i)
(c) (iii), (i), (ii), (iv)
(d) (iii), (ii), (iv), (i)
Answer:
(d) (iii), (ii), (iv), (i)
Question 14.
For delegation to be effective it is essential that responsibility should be accompanied with necessary ___________.
(a) incentives
(b) manpower
(c) promotions
(d) authority
Answer:
(d) authority
Explanation: For delegation to be effective it is essential that responsibility should be accompanied with necessary authority. Authority is the legitimate power which one person or group possesses and practices over another.
Question 15.
Single-use plans are formulated only__________.
(a) to meet the demand of definite situations
(b) to use two times
(c) to achieve goals
(d) for a indefinite period
Answer:
(a) to meet the demand of definite situations
Explanation: A single use plan is designed to accomplish a specific objective within a shorter period.
Question 16.
Which of the following statements is incorrect?
(a) Planning is looking ahead while controlling is looking back.
(b) Planning is first function while controlling is last function.
(c) Planning moves from upward to downward whereas controlling moves from downward to upward.
(d) Planning and controlling are different manager process which are not closely related
Answer:
(d) Planning and controlling are different manager process which are not closely related.
Explanation: All the option are correct except option (d) as planning and controlling are different management process but they are closely related. Planning cannot work without controlling and vice versa.
Question 17.
Virat has joined as a Creative Head in an event company. He always ensures that the work has been divided into small and manageable activities and also the activities of similar nature are grouped together. Identify the related concept in organising process mentioned in the above lines.
(a) Departmentalisation
(b) Assignment of duties
(c) Identification and division of work
(d) Establishing reporting relationships
Answer:
(a) Departmentalisation
Explanation: The step is thein organising process of grouping process mentioned activities into in the departments above lines is departmentalising.
Question 18.
Which of the following is a primary advantage of training?
(a) It increases the production capacity of firm.
(b) Resolve the financial issues of the company.
(c) Makes worker better equipped in handling and using material and machinery.
(d) Resolves technical issues with machinery.
Answer:
(c) Makes worker better equipped in handling and using material and machinery.
Explanation: A proper training helps to make worker better equipped in handling and using material and machinery. It helps to enhance the performance of the employee. Better performance of employees creates less need for supervision and increase workers output.
Question 19.
It is the process of influencing the behaviour of people by making them strive voluntarily towards achievement of organisational goals:
(a) Supervision
(b) Communication
(c) Leadership
(d) Motivation
Answer:
(c) Leadership
Explanation: Leadership is the process of influencing the behaviour of people by making them strive voluntarily towards achievement of organisational goals.
Question 20.
Arrange the steps involved in Staffing process in correct sequence:
(i) Estimating the Manpower Requirements
(ii) Placement and Orientation
(iii)Selection
(iv)Recruitment
(a) (i), (ii), (iii), (iv)
(b) (i), (iv), (iii), (ii)
(c) (i), (iii), (iv), (ii)
(d) (ii), (i), (iii), (iv)
Answer:
(b) (i), (iv), (iii), (ii)
Explanation:
The process of staffing is:
1. Estimating the Manpower Requirements
2. Recruitment
4. Placement and Orientation
3. Staffing
Question 21.
One of the functions of Securities and Exchange Board of India is ‘Promotion of fair practices and code of conduct in securities market’. State the category to which this function belongs and state any two other functions of this category.
Answer:
‘Promotion of fair practices and code of conduct in securities market, is one of SEBI’s Protective functions. Other two functions under this category include:
1. It prohibits fraudulent and unfair trade practices like misleading statements, manipulations, price riggings etc.
2. It controls insider trading and imposes penalties for such practices.
Question 22.
What is Capital budgeting decision? What steps are involved in the process of capital budgeting decision?
Answer:
Capital Budgeting decision is related to investment in fixed assets that yield income for a long-time. These decisions involve buying and managing the assets of a business whose returns will be available in future.
The process of capital budgeting is quite complex, which involves the following:
1. Identifying the potential investment opportunities.
2. Assembling the proposed investments.
3. Making the decision,
4. Capital budget proportion
5. Implementation
6. Performance review.
Question 23.
Explain any two elements of promotion
OR
“Advertising is a social waste.” Comment.
Answer:
Two elements of promotion are:
1. Advertising: Advertising is a paid form of non-personal communication to cultivate a positive image about a product, a service or even a company. The cost of the advertising is paid for by the company.
2. Personal selling: Personal selling can be defined as the process of motivating and persuading a consumer to buy a product of the seller’s choice by making use of a face-to-face interaction.
In such scenario, the consumer is in direct contact with the sales person whose aim is to convert the potential customer into a loyal consumer of the brand.
OR
Advertisement is an important medium for promoting any product or service. Products are made to satisfy wants of the people. Any product, no matter how good it may be, will not be demanded by people until and unless they know that any such product is available in the market.
Such kind of product will be vanished from the market for the lack of demand and the consumer will suffer because they don’t have information regarding the availability of such goods that may fulfill their requirements.
So, advertisement do favour to both the consumers and producers. So, we can say that advertisement is not a social waste.
Question 24.
Explain the following “Rights of consumers”:
(i) Right to Information
(ii) Right to Seek Redressal
OR
Explain briefly the meaning of following terms:
(i) Consumer Protection
(ii) Consumer Association
Answer:
(i) Right to Information: The Consumer has the right to be informed about the quality, quantity, price, weight, purity etc. of the goods and services to protect against unfair trade practices.
In India, it is mandatory for the manufactures to provide all such information on the package of the goods. The consumer is entitled to know about the goods and the period within which it should be used.
(ii) Right to Seek Redressal: Consumer has the right to seek redressal against unfair trade practices or restrictive trade practices or unsrupulous exploitation of consumers.
The Consumer Protection Act provides compensation in the form of replacement of product, monetary compensation etc., to the aggrieved consumer. Under this Act, consumer forums have been set up at district, state and national levels with different monetary limits to handle the grievance of the consumers.
OR
(i) Consumer protection is a regulation or a law designed to protect consumers against improperly described, damaged, faulty and dangerous products and services or to protect consumers from unfair trade and credit practices. It implies safeguard against anti-consumer trade practices of producers and traders.
(ii) Consumer association is a body of consumer established for the purpose of protecting consumer interest. The main role of consumer association are:
1. Educating the general public about consumer rights by organising training programmes, seminars and work shop.
2. Organising campaigns on issues related to consumer protection.
3. File PILs on important consumer issues.
Question 25.
‘Science is a systematised body of knowledge that explains certain general truths or the operation of general laws.’ In the light of this statement, describe management as a science.
Answer:
Science is a systematised body of knowledge that explains certain general truths or the operation of general laws. Management is science but not exact science.
The reasons are:
1. Systematised body of knowledge: Like science, management is a systematised body of knowledge with its own theories and principles that have developed over a period of time. So, this feature is present in management.
2. Principles are based on experimentation and observation: Like science,management principles are derived through observation and repeated experimentation.
However, since management deals with human beings, the outcome of these experiments are not predicted accurately. Different human being may behave differently in different situations. So no exact cause and effect relationship can be established.
3. Universal validity: Theories and principles of management are valid universally to a great extent. They can be used to impart basic knowledge and managerial skills to the budding managers.
Question 26.
Explain how principles of management help in
(i) meeting changing environment requirement and
(ii) making scientific decisions.
OR
Fayol points out the danger and the cost of unnecessary labour turnover in one of his ‘Principles’.
Name and explain the principle.
Ans.
Management principles are essential for the successful running of a business organisation. These principles are guidelines to the management.
They highlight the areas where the management should pay immediate attention. These principles simplify the process of management, increase the overall efficiency of management and help in the achievement of objectives.
(i) Meeting changing environment requirements: Every businessman has to cope up with the changes that are taking place in the business environment. Management principles train the managers to implement the changes in right direction and at right level in the organisation.
(ii) Scientific decisions: The knowledge of management principles enables managers to learn the cause and effect relationship between variables operating in the organisation. They are able to develop a scientific and objective approach towards problem solving and decision-making.
OR
The principle that fayol points out is the Principle of stability of tenure of personnel. Principle of stability of tenure of personnel: According to this principle, employees should not be moved from their place frequently.
The period of service in a position should be fixed. Fayol suggest that employee turnover should be minimised to maintain organisational efficiency. There should not be frequent terminations and transfers.
Effects:
1. Provides a feeling of job security among the employees.
2. Efficiency of employees increases and they contribute their maximum when they feel that their job is secure.
3. No wastage of time and resources.
Adverse effects of violation:
1. Cost of unnecessary labour turnover.
2. Recruitment, selection and training cost will be high.
3. If the job of a person is not secure, he/she will look out job else where and his/her work will not be satisfactory.
Question 27.
“Most plans may not always be subjected to a mathematical analysis. In such cases, subjectivity and the manager’s experience and judgement are taken into consideration.” Identify the step of planning process.
Answer:
Selecting alternative courses of action. The best plan has to be adopted and implemented. The ideal plan, of course, would be the most feasible, profitable and with least negative consequences. Most plans may not always be subjected to a mathematical analysis.
In such cases, subjectivity and the managers experience, judgement and at times, intuition play an important part in selecting the most viable alternative.
Sometimes, a combination of plans may be selected instead of one best course. The manager will have to apply permutations and combinations and select the best possible course of action.
Question 28.
What is economic environment? Highlight four components of economic environment.
Answer:
Economic environment comprises of all the factors and forces related to ownership of means of production and distribution of wealth, economic conditions, etc.,
which influences the cost of operation, profits and productivity of the business concern. Four important components of economic environment are:
1. The nature of economic system of the country: Property rights, ownership of factors of production, functioning of price mechanism, production function, economic plan and programmes, etc.
2. Economic structure: Occupational distribution, composition and structure of national output, pattern of capital investment, composition of trade, etc.
3. Economic policies: Industrial policies, monetary policy, fiscal policy, licensing policy, foreign trade policy, etc.
4. Economic indices: Gross national product, per capita income, rate of savings, rate of investment, inflation, tax rates, etc.
Question 29.
Sharan Rajput started ‘Horse Eye’ a company for providing cyber security solutions to businesses. Its objective is to prevent, detect and respond to cyber attacks and protect critical data. He was a hardworking software engineer and an expert in cyber security.
His reputation grew by leaps and bounds as he was not only a person of integrity but also did his work with utmost honesty and sincerity. The business started growing day by day.
He was delighted when he was offered a big project by the Ministry of Defence. While working on the project, he found that the volume of work made it impractical for him to handle all the work by himself. He decided to expand the team.
The company maintained a close liaison with a local engineering college. During a campus placement, Roshan and Nrinda were appointed to work for the new project. He found the new employees capable, enthusiastic and trustworthy.
Sharan Rajput was thus, able to focus on objectives and with the help of Roshan and Nrinda, the project was completed on time. Not only this Sharan Rajput was also able to extend his area of operations. On the other hand Roshan and Nrinda also got opportunities to develop and exercise initiative.
1. Identify and briefly explain the concept used by Sharan Rajput in the above case which helped him in focusing on objectives.
2. Also, state any two points of importance of the concept identified in (i) above.
Answer:
1. Delegation of authority is the concept used by Sharan Rajput in the above case which helped him in focusing on objectives. Delegation of authority is the process of granting of authority to the subordinates to operate within prescribed limits.
2. The four points of importance of delegation of authority are described below:
Effective management: It helps the managers to function more efficiently as they get more time to concentrate on important matters. Freedom from doing routine work provides them with opportunities to excel in new areas.
Employee development: By empowering the employees, they are given more opportunities to utilise their talent and this may help them to become better leaders and decision makers in future.
Question 30.
In ‘ERA MODEL ‘ which is a school of reputation the principal has decided to improve the performance of teachers through proper motivation. He has planned to promote some of the good performing teachers to the post of supervisors in their respective wings.
The adjoining school after knowing this decides to do the same but the school is new and there is no scope of filling the higher slots with the teachers of the school as all of them are new too. This school then goes for external sources of recruitment for which two sources are checked:
1. They approach a government office for this purpose. Here in this government agency link between job seekers and employers is matched and people who are unemployed get registered for skilled as well as unskilled jobs.
2. They check the data of people who applied for the jobs of teachers but were unable to make it. There was a chance that these people could be easily recruited since they were interested in the jobs last year.
A friend of the principal of ‘ERA MODEL’ is a factory owner. He told him that finding workers for his factory is easy as he generally requires unskilled labour. Daily notification is put outside the factory building and people apply and get selected on spot.
Which limitation is discussed in the last part of first paragraph of the case? Identify the two external sources of recruitment involved by the second school in the above case.
Answer:
Limitation of internal recruitment: The school is new and there is no scope of filling the higher slots with the teachers of the school as all of them are new too.
This school then goes for external sources of recruitment for which two sources are checked: They approach a government office for this purpose. Here in this government agency link between job seekers and employers is matched and people who are unemployed get registered for skilled as well as unskilled jobs.
They check the data of people who applied for the jobs of teachers but were unable to make it. There was a chance that these people could be easily recruited since they were interested in the jobs last year.
The two external sources of recruitment used by the second school are:
Employment exchange: This government agency creates a link between job seekers and employers. People who are unemployed get registered for skilled as well as unskilled jobs.
Casual callers: Since they were interested in the jobs last year but were unable to make it. A friend of the principal of ‘ERA MODEL’ is a factory owner.
He told him that finding people for jobs is easy for his factory is easy as he generally requires unskilled labour. Daily notification is put outside the factory building and people apply and get selected on spot.
Direct recruitment: As he generally requires unskilled labour. Daily notification is put outside the factory building and people apply and get selected on the spot.
Question 31.
What is meant by communication? Explain how communication is an important function of OR
“Directing is the heart of the management process”. Do you agree? Give any four reasons in support of your answer.
Answer:
Communication is a two-way process wherein the message in the form of ideas, thoughts, feelings, opinions is transmitted between two or more persons with the intent of creating a shared understanding.
Simply, an act of conveying intended information and understanding from one person to another is called as communication. The term communication is derived from the Latin word “Communis” which means to share.
Effective communication is when the message conveyed by the sender is understood by the receiver in exactly the same way as it was intended.
Importance of communication is explained as follows:
1. Acts as a basis of coordination: Communication acts as a basis of coordination. It provides coordination among departments, activities and persons in the organisation.
Such coordination is provided for explaining about organisational goals, the mode to their achievement and interrelationships between different individuals, etc.
2. Acts as a basis of decision-making: The decisions made in an organisation depends largely on the amount and quality of information available. On the basis of communication of relevant information, one can take the right decisions.
3. Increases managerial efficiency: The employees must know clearly about their responsibilities and authority, who will report to whom, what part of the total job they are expected to perform and what are their decision-making powers.
4. Helps in the process of motivation and morale: Motivation and morale of employees largely depend upon the effectiveness of communication. Sharing of information with employees helps management to secure their willing cooperation.
5. Effective leadership: Communication is the basis of leadership. By developing the skills of communication, a manager can be a real leader of his subordinates. A good system of communication brings them in close contact with each other and removes misunderstandings.
OR
Yes, I do agree with this statement. Directing may be regarded as the heart of the management process. Its importance may be explained under the following points:
1. Initiates action: Directing helps to initiate action by people in the organisation towards attainment of desired objectives, e.g., if a supervisor guides his subordinates and clarifies their doubts in performing a task, it will help workers to achieve work targets given to them.
2. Integrates employees’ efforts: Directing integrates employees’ efforts in the organisation in such a way that every individual effort contributes to the attainment of organisational objectives. Thus, it ensures that the individuals work for organisational goals.
3. Improves efficiency: Directing guides employees to fully realise their potential and capabilities by motivating and providing effective leadership. A good leader can always identify the potential of his employees and motivate them to extract work up to their potential.
4. Brings balance and stability in the organisation: Effective directing helps to bring stability and balance in the organisation since, it fosters cooperation and commitment among the people and helps to achieve balance among various group activities and the departments.
Question 32.
Briefly explain the steps in the process of controlling.
OR
Briefly explain any four traditional techniques of managerial control.
Answer:
Controlling refers to the process of evaluation and assessment of the work done. Under the process of controlling, standards are set for various tasks and activities.
The following are the steps involved in the controlling process:
1. Setting standards: Setting standards is the first stage. Standards are the benchmarks against which real or actual performance is compared.
Standards can be both qualitative and quantitative in nature. It is important to remember that the established criteria should allow for easy comparison.
2. Measuring actual performance: The next step in the controlling process is to measure the performance of various activities. This measurement should be exact and reliable such that it facilitates easy comparison with the set standards.
Moreover, the measurement of performance can be at various stages in the activity or the completion of the activity.
3. Comparing performance: This step involves a comparison of actual performance with the standards set. If the performance matches the standards, it may be assumed that everything is under control.
4. Analysing deviation: With the comparison of the actual performance with the set standards, the deviations in performance are identified. For analysing deviations, the following methods can be used:
(a) Critical Point Control: Management should only focus on key result areas (KRAs) that are critical to the organisation’s performance. These are the critical points which can cause huge loss to the company if not controlled.
(b) Management by Exception: Management by exception is often called control by exception, which is an important principle of management control, based on the belief that any attempt to control everything results in controlling nothing. In short, everything cannot be controlled at the same time.
Deviations should be identified and their causes must be recognised. Some causes for deviations can be infeasible standards, deficiencies in the process, and a dynamic business environment.
5. Taking corrective action: In case deviations are beyond the acceptable range, it becomes necessary to take corrective action. These corrective actions can be in terms of revising the standards, providing training, settling the issues related to raw material, machinery etc.
OR
Traditional techniques are those which have been used by the companies for a long time now. However, these techniques have not become obsolete and are still being used by companies. These include:
1. Personal observation
2. Statistical reports
3. Breakeven analysis
4. Budgetary control
1. Personal observation: This is the most traditional method of control. Personal observation enables the manager to collect first-hand information.
It also creates a psychological pressure on the employees to perform well as they are aware that they are being observed personally on their job. However, it is a very time-consuming exercise and cannot effectively be used in all kinds of jobs.
2. Statistical reports: Statistical analysis in the form of averages, percentages, ratios, correlation, etc., present useful information to the managers regarding performance of the organisation in various areas.
Such information when presented in the form of charts, graphs, tables, etc., enables the managers to read them more easily and allow a comparison to be made with performance in previous periods and also with the benchmarks.
3. Breakeven analysis: Breakeven analysis is a technique used by managers to study the relationship between costs, volume and profits. It determines the probable profits and losses at different levels of activity.
The sales volume at which there is no profit, no loss is known as breakeven point. It is a useful technique for the managers as it helps in estimating profits at different levels of activities. Breakeven point can be calculated with the help of the following formula:
\(\text { Breakeven Point }=\frac{\text { Fixed Costs }}{\begin{array}{c}\text { (Selling price per unit- } \\
\text { Variable cost per unit) }
\end{array}}\)
4. Budgetary control: Budgetary control is a technique of managerial control in which all operations are planned in advance in the form of budgets and actual results are compared with budgetary standards.
This comparison reveals the necessary actions to be taken so that organisational objectives are accomplished. A budget is a quantitative statement for a definite future period of time for the purpose of obtaining a given objective.
It is also a statement which reflects the policy of that particular period. It will contain figures of forecasts both in terms of time and quantities.
Question 33.
What is meant by a ‘long-term investment decision’? State any three factors which affect the long-term investment decisions.
Answer:
Long-term investment decisions, also known as capital budgeting decisions, refer to the decisions regarding the allocation of fixed capital to different competent projects. It involve investment decisions regarding acquisition of new assets, expansion, modernisation and replacement.
The following are the factors that affect long-term investment decisions:
1. Cash flows: Whenever a project involves the investment of huge funds, the organisation expects some amount of regular cash flow from the investment so as to meet its daily requirements.
The amount of such cash flows must be properly analysed before taking the investment decision if expected cash flow is lower than initial investment than, those project must be ignored.
2. Rate of return: The rate of return forms the most important criteria for investment in any project. The returns that a project is expected to bring in the form of income to the organisation must be carefully analysed.
In this regard, investment projects associated with higher rate of return are preferred over those that offer lesser rate of return. If the project expected return is sufficient then, that project is accepted.
3. Investment criteria: Before selecting a particular project for investment, a company evaluates various projects based on criteria such as total amount of investment, expected rate of return, expected cash flows and interest rate. Thus, the final decision to invest in a project involves a series of meticulous calculations.
Question 34.
“Joy Ltd.” are the manufacturer of vegetarian frozen dessert food products made with coconut milk, agave syrup and other certified ingredients. The founders of the company Shreya and Malini originally developed this treat to meet their own needs but found that their friends and families around were also keen to use the products.
It was not only the vegetarians, but also those who could not get enough environment friendly sustainable food, that appreciated the product. It did not take long for Shreya and Malini to recognise the potential of their little venture.
In the beginning they started from their home with the product being sold through local family parties that enable guests to personally meet the owner. This helped to establish strong connections with the prospective buyers and the company could put the product on shelves of natural food store.
The company used all marketing activities to grow and expand. The company began sponsoring booths at festivals, drawing attention to its newly created vegetarian products. It also disseminated relevant information to media about its products and the people who helped in building the company’s reputation.
Shreya and Malini were invited for an interview with one of the leading TV channels in which they talked about their environment friendly vegetarian products.
To show its gratitude to customers, local business and government officials who supported the company from the beginning, “Joy Ltd.” hosted a gala event and involved all of them to raise funds for a few local NGO’s.
The company also asked its fans and customers to send songs and poetry conveying their impression about “Joy’s Ltd.” products. Identify and explain the communication tool used by “Joy Ltd” and briefly explain the role of the tool identified above.
Answer:
1. Public relations is the communication tool used by “Joy Ltd”. Public relations refers to the practice of managing communication between an organisation and its publics in order to create and maintain a positive image about itself and its products.
2. The role of public relations department is described below: Press Relation: It manages relations with the press to present true and correct information about the company.
Thus, public relations helps to create a positive image about the company in the eyes of various interest holders like consumers, government, suppliers etc.
Product Publicity: It undertakes product publicity for new products through sponsorships. Thus, it helps in launching new products as they may be accepted easily because of good reputation of business.
Corporate Communication: It promotes image of the company through different ways of corporate communication like publication of newsletters, brochures, articles or arranging for talk shows or speeches of high officials of the company.
Lobbying: It is proactive in promoting or defending regulations that affect business by maintaining healthy relationships with associations of commerce and industry, government officials and different ministers in charge of corporate affairs etc.