CBSE

ADDITIONAL PRACTICE QUESTIONS-Marking Scheme

Business Studies (054)
Class XII | 2023–24
1. This question paper contains 34 questions.
2. Marks are indicated against each question.

3. Answers should be brief and to the point.

4. Answers to the questions carrying 3 marks may be from 50 to 75 words.

5. Answers to the questions carrying 4 marks may be about 150 words.

6. Answers to the questions carrying 6 marks may be about 200 words.

7. Attempt all parts of the questions together.

Section A

Q No. Question Marks

1 (c) Interest Coverage Ratio 1

2 (c) establishing a unique identity 1

3 (c) A traditional brick-and-mortar retailer is forced to close its doors after 1

online retailers offer lower prices and a wider selection of products.

4 (b) Selling and Marketing 1

5 (d) issuing right shares for existing shareholders at a discounted price 1

6 (d) Integrates group efforts 1

7 (d) It monitors and regulates the securities market to protect investors and 1
maintain market integrity.

8 (a) A budget system that sets targets for sales and profits. 1

9 (d) to build relationships with stakeholders 1

10 (b) Both (A) and (R) are true but (R) is not the correct explanation of (A) 1

11 (b) Assignment of duties 1

12 (b) Both A and R are true, and R is the correct explanation of A. 1

13 (c) Both the statements are true 1

14 (b) Foreign policy of the government 1

15 (c) Employees' development 1

16 (a) Statement I is true and II is false 1

17 (a) The cost of doing business will increase, leading to higher prices for 1
consumers.

18 (c) A (4), B (3), C (2), D(1) 1

19 (c) Professional association 1

20 (d) Rationalisation of tariff structure 1

21 As a top-level executive with diverse leadership roles, Elon Reeve Musk is 3

likely performing the following three essential functions in his position

-Founding and leading companies such as SpaceX, Tesla, and The Boring
Company: Musk is involved in creating and establishing these companies
and takes charge of their overall direction, strategy, and vision.

-Assuming the roles of CEO and Product Architect to guide Tesla's

operations and innovations: In his role as CEO and Product Architect of
Tesla, Musk is responsible for overseeing the company's day-to-day
operations, making key decisions, and driving innovation in the
development of Tesla's products.
-Engaging in engineering and technical aspects to drive the development of
SpaceX's projects: As Chief Engineer of SpaceX, Musk actively
participates in the engineering and technical aspects of the company's
projects, leading the way in developing cutting-edge space exploration
technologies and initiatives.

Award 1 mark each for 3 functions

22 (i) Setting performance standards: The first step in the controlling process 3
is to set the performance standards. Standards are those criteria, on which
the actual performances are measured. These standards serve as a
benchmark towards which an organisation strives to work.
 (ii) Measurement of actual performance: After the establishment of
standards, the next step is measuring the actual performance with the set
standards. This can be done by opting several methods like personal
observation, sample checking, performance reports, etc.

(iii) Comparison of actual performance with standards: In this step, the

actual performances are compared with the established standards. Such
comparisons reveal the deviation between planned and actual results.

Award 1 mark each to the corrective measures.

OR
1. Management by Exception:(MBE) is a managerial approach that focuses
on identifying and addressing significant deviations or exceptions from
standard performance. Instead of monitoring all stores equally, the regional
manager prioritizes attention on exceptional cases that deviate significantly
from established benchmarks.

2. Critical Point Control: It involves closely monitoring specific key

performance indicators (KPIs) or KRA's that have a significant impact on
overall sales performance. Managers use this technique to identify critical
points where immediate action is necessary to prevent potential crises or
losses.

Award 1.5 mark to each technique.

23 1. When organisations hire externally, they bring in new talent with fresh 3
perspectives and diverse skill sets. These individuals often possess different
experiences, backgrounds, and knowledge, which can inject creativity and
innovation into the company's operations.
2. Hiring talent from outside the organisation can provide valuable industry
insights and a competitive edge. External recruits may come from rival
companies or different sectors, bringing with them knowledge of market
trends, best practices, and emerging technologies.

3. External recruitment can lead to faster growth and skill development

within the organisation. When experienced professionals join a new
workplace, they often possess a wide range of expertise that can be quickly
shared and disseminated among the existing workforce.

Award 1 mark each for External recruitment advantages.

24 1. Treasury Bills (T-Bills): Treasury Bills are short-term debt instruments

issued by the government to raise funds for a short duration, usually
 ranging from 91 days to 364 days. They are considered one of the safest
investments as they are backed by the government's creditworthiness.

2. Commercial Paper (CP): Commercial Paper is an unsecured, short-term

debt instrument issued by corporations to meet their short-term funding
needs, usually for up to 270 days. CPs are rated by credit rating agencies to
assess their creditworthiness. Compared to T-Bills, CPs generally offer
higher returns due to the credit risk associated with corporations.

3. Certificate of Deposit (CD): Certificate of Deposit is a time deposit

offered by banks with fixed maturity dates, ranging from a few weeks to
several months. CDs have higher interest rates than regular savings
accounts and are insured by the government up to a certain limit.

Award 1 mark each for three instruments of the money market.

OR

Step 1: Preliminary Investigation: SEBI should initiate a preliminary

investigation based on the information received about the suspected
fraudulent activities by the listed company. This involves gathering initial
evidence, identifying potential violations, and assessing the gravity of the
situation.

Step 2: Formal Investigation: Upon finding substantial evidence during the

preliminary investigation, SEBI should launch a formal investigation. This
involves a deeper examination of the company's activities, including
financial records, transactions, and management practices. The
investigation may involve summoning company officials, scrutinising
books, and seeking expert opinions.

Step 3: Inspection of Books and Records: As part of its regulatory function,

SEBI has the authority to inspect the books and records of listed companies
to ensure compliance with securities laws. This step involves a detailed
examination of the company's financial records and transactions.
Award 1 mark each for regulatory function of SEBI.

25 Step 1: Ensure that the basic physiological needs of employees are met, 3
such as providing a comfortable and safe working environment. Address
concerns related to workload, work-life balance, and job security.
Step 2: Encourage team-building activities and collaborative projects to
fulfill social needs. Organise team lunches, outings, or virtual events to
foster a sense of camaraderie among team members.
 Step 3: Address esteem needs by recognising employees' achievements and
contributions. Implement an employee recognition program that
acknowledges outstanding performance and milestones.

Step 4: Promote self-actualisation by encouraging employees to pursue

their passions and interests within their roles.
Award 1 mark each of the points given or any other relevant point.

OR

1. Employee Recognition Program: Introduce an employee recognition

program to acknowledge and appreciate outstanding performance and
achievements. Employees can be recognized through a "Employee of the
Month" program or regular shout-outs in team meetings. Recognition helps
boost self-esteem and encourages a sense of belonging within the
organization.
2. Opportunities for Employee Involvement: Involve employees in
decision-making processes, such as project planning or policy
development. Providing opportunities for employee involvement fosters a
sense of ownership and commitment to the organization's success.

3. Autonomy: Empowering employees with a sense of autonomy and

involvement in decision- making increases their job satisfaction and
commitment to the organization.

4. Employee Development and Growth Opportunities: Providing

opportunities for skill enhancement and career growth demonstrates the
organization's commitment to employee development, encouraging a sense
of loyalty and dedication among employees.

Award 1 mark each for non-financial incentives

26 1. When we invest in training and development, we empower our 4

employees with the skills and knowledge they need to excel in their roles.
Well-trained employees are more confident, efficient, and productive.

2. Investing in training and development allows us to stay ahead of the

competition by adapting to emerging trends, technological advancements,
and changing customer needs.

3. Employees value organisations that prioritise their growth and

development. By investing in training, we show our commitment to their
professional advancement, fostering higher levels of employee engagement
and job satisfaction.
 4. A learning culture encourages employees to think creatively, leading to
innovation and process improvements. By investing in employee
development, we nurture a culture that values continuous learning, enabling
us to adapt swiftly to changing market conditions and customer demands.

Award 1 mark each for points given or any other relevant point.
OR

1. Preliminary Screening: This is the initial stage of the selection process.

Its purpose is to filter out candidates who do not meet the minimum
qualifications and requirements for the management position. The
screening helps save time and resources by focusing only on eligible
candidates.
2. Selection Tests: These tests are assessments that evaluate candidates'
aptitude, skills, and abilities related to the managerial role. These tests help
assess a candidate's cognitive abilities, problem-solving skills, critical
thinking, and domain knowledge.
3. Employment Interview: It is a crucial step in the selection process. It
allows the organization to assess your communication skills, interpersonal
qualities, cultural fit, and enthusiasm for the position. It also provides an
opportunity to learn more about the company and the role.
4. Final Interviews and Decision-making: In the final interviews, the
organization aims to narrow down the candidate pool further and make a
well-informed decision about the best fit for the management position. This
stage often involves interactions with senior management and decision-
makers.

Award 1 mark each for the selection process steps.

27 1. As consumers, it is crucial to make informed decisions before purchasing 4

goods or services. Take the time to research and gather relevant
information about the product or service, its features, pricing, and the
reputation of the seller or service provider. Being well-informed empowers
you to make the right choices and avoid any potential pitfalls.
2. Before entering into any consumer transaction, carefully read and
understand the terms and conditions. This includes contracts, warranties,
and refund policies. By being aware of the terms, you can avoid surprises
and potential disputes later on.

3. Ensure that the information you provide during a transaction, such as

your name, contact details, and payment information, is accurate and
truthful. This helps facilitate smooth transactions and prevents any
complications that may arise from incorrect information.
 4. If you come across a product that is defective, unsafe, or does not meet
the promised standards, it is essential to report the issue to the seller or
manufacturer promptly.

5. As a responsible consumer, exercise caution while sharing personal

information online, and only transact on secure and reputable websites. Be
wary of potential scams and phishing attempts.

6. If you encounter any issues or dissatisfaction with a product or service,

address the concern with the seller or service provider promptly. Delaying
the reporting of grievances may limit your options for redressal.
7. Keep a record of receipts, invoices, warranties, or any other documents
related to your purchases. These documents serve as evidence in case of
disputes or when seeking a refund or replacement.

8. Should a dispute arise, cooperate with consumer redressal forums or

agencies when seeking resolution. Provide necessary information and
attend hearings or proceedings as required.
Award 1/2 mark for each responsibility

28 To determine which company is using trading on equity more effectively, 4

compare their Return on Equity (ROE) ratios. ROE is a key financial ratio
that measures how efficiently a company is using its shareholders' equity to
generate profits.

ROE is calculated as follows:

ROE = (Net Income / Average Shareholders' Equity) * 100

Calculate the ROE for both companies:

For Alfa Ltd :

ROE = (50,000 / (300,000 + 0) / 2) * 100

ROE = (50,000 / 300,000) * 100

ROE = 0.1667 * 100

ROE = 16.67%
For Beltex Ltd :

ROE = (60,000 / (400,000 + 0) / 2) * 100

ROE = (60,000 / 400,000) * 100

ROE = 0.15 * 100

 ROE = 15.00%
Now, let's compare the ROE ratios for both companies:

Alfa Ltd has an ROE of 16.67%, and Beltex Ltd has an ROE of 15.00%.

Answer: Based on the provided financial data, Alfa is using trading on

equity more effectively than Beltex. Alfa's higher ROE of 16.67% indicates
that it is generating a better return on its shareholders' equity compared to
Beltex, which has an ROE of 15.00%.

This suggests that Alfa is utilising its equity more efficiently to generate
profits, making its trading on equity strategy more effective.

Award 2 marks each for both the companies ROE.

29 Here are the identified barriers to effective communication in each 1

scenario:
Scenario 1

Barrier: Status Differences: In this scenario, the different interpretations of

the project's deadline stem from team members' diverse status backgrounds.
Each team member might have different attitudes towards time, varying
work norms, and approaches to meeting deadlines, leading to confusion and
delays in project execution.

Scenario 2
Language and Jargon: The use of technical jargon and industry-specific
terms in the email exchange creates a barrier to effective communication.
Some team members may not fully understand the specialised language,
leading to misinterpretation of the message and causing misunderstandings
and misaligned tasks.

Scenario 3
Lack of Active Listening: The team member's consistent habit of
interrupting others during discussions inhibits open and constructive
communication. This behavior reflects a lack of active listening, as the
individual fails to allow others to express their ideas fully, leading to
frustration among team members and hindering effective collaboration.

Scenario 4
Technological Issues: In this virtual team meeting scenario, poor internet
connectivity causing frequent disruptions and audio glitches is a
technological issue that acts as a barrier to effective communication. Some
 team members may miss crucial information due to the technical problems,
and the overall efficiency of the meeting is reduced.

Award 1 mark each for barrier to communication.

30 As an evaluator of the financial decisions of a manufacturing company, the 4

following scenarios have been presented for analysis:
Scenario 1

Market Demand: Assessing current and projected market demand is

essential to ensure that the expanded production capacity aligns with
potential sales and revenue growth.

Scenario 2
Risk Assessment: The management should conduct a risk assessment to
understand the potential consequences of increased debt, such as interest
rate fluctuations and refinancing risks.

Scenario 3

Cost Analysis: A comprehensive cost analysis is necessary to identify areas

where cost-cutting measures can be implemented without compromising
product quality or customer satisfaction.

Scenario 4

Market Entry Costs: Assessing the expenses associated with market entry,
such as marketing, distribution, and infrastructure setup, is essential for
financial decision-making.
Award 1 mark for each factor or any other relevant point.

31 1. The principle of "Discipline" as proposed by Henry Fayol emphasizes

the importance of establishing clear rules, guidelines, and consequences for
employee conduct within the organization. When applied effectively, this
principle can have several positive impacts like accountability, reduced
absenteeism and consistent performance on employee behavior and
performance in the manufacturing company.
2. The principle of "Remuneration" in Henry Fayol's management
principles pertains to fairly compensating employees for their work and
contributions to the organization. A performance-based remuneration
system is one that ties employee compensation directly to their individual
or team performance. This creates a direct link between efforts and
rewards, motivating employees to be disciplined and put in their best effort
to achieve higher rewards.
 OR
1. The principle of "Division of Work," as proposed by Henry Fayol,
advocates dividing the overall work into specialized tasks and assigning
them to individuals based on their skills and expertise. Implementing this
principle in the retail store can lead to several benefits that improve
efficiency and productivity.

2. As a manager, follow these steps to achieve a balanced approach:

Assess Individual Capabilities
Encourage Input and Involvement
Set Clear Expectations
Foster a Collaborative Culture
Provide Feedback and Recognition
Monitor Progress

Award 1 mark for a detailed explanation of each point.

32 a) Differential Piece Wage Rate System: F.W. Taylor it as a method to 1

incentivize workers and increase productivity. Under this system, workers
are paid different rates for each unit of output they produce. The idea
behind this approach is to reward higher productivity with higher wages.
Taylor believed that by offering financial incentives, workers would be
motivated to work more efficiently and increase their output, leading to
greater overall productivity for the organization. This concept laid the
foundation for modern performance-based pay systems and piece-rate
systems that are still in use today in some industries.
b) Mental Revolution: The term "Mental Revolution" coined by F.W.
Taylor refers to a fundamental change in the mindset and attitudes of both
workers and management towards work. Taylor observed that there was
often a significant divide between workers and management, with both
sides viewing each other with suspicion and distrust. He advocated for a
mental revolution that involved workers acknowledging that their interests
were aligned with those of management, and vice versa. Taylor believed
that through cooperation and understanding, both parties could work
together to achieve common goals, such as increased efficiency and
productivity. This mental revolution was seen as a prerequisite for
successfully implementing scientific management principles in an
organisation.

c) Harmony, not Discord: F.W. Taylor emphasized the importance of

achieving harmony rather than discord in the workplace. He believed that
conflicts and antagonism between workers and management were
detrimental to productivity and hindered organizational success. To achieve
harmony, Taylor proposed the application of scientific management
principles, which involved careful planning, standardization of work
processes, and clear communication between workers and management. By
removing unnecessary frictions and creating an environment of mutual trust
and cooperation, Taylor aimed to establish a harmonious relationship
between employees and management, ultimately leading to increased
productivity and efficiency.
d) Functional Foremanship: Functional Foremanship is a concept
developed by F.W. Taylor as part of his scientific management system.
Under this approach, the traditional role of a single foreman overseeing a
group of workers is divided into multiple specialized foremen, each
responsible for a specific aspect of the production process. Taylor identified
eight distinct functions that were crucial for efficient production, such as
route clerk, instruction card clerk, time and cost clerk, etc.

Award 1 mark for any three

OR

1. One of the primary limitations of planning is the uncertainty of the

future. No one can predict with absolute certainty how the external
environment or internal conditions will change over time. Changes in
market trends, technological advancements, economic conditions, or
political factors can disrupt even the most well-thought-out plans.
2. Planning can be a time-consuming process, especially for complex
organizations and projects. Gathering data, analyzing information, setting
goals, and formulating strategies require considerable time and effort,
which may delay the actual implementation of actions.

3. Strict adherence to plans may lead to rigidity in decision-making. If

managers are unwilling to adapt or deviate from the original plan when
unforeseen circumstances arise, it can hinder the organization's ability to
respond effectively to changing conditions.

4. Planning can be costly, particularly when it involves extensive research,

market surveys, or hiring specialized consultants. Smaller organizations or
those with limited resources might find it challenging to afford
comprehensive planning processes.

5. Planning often relies on forecasts and assumptions about the future.

Overreliance on predictions can lead to unrealistic expectations and
misalignments between actual outcomes and planned goals.

6. Some employees or stakeholders may resist the implementation of new

plans, especially if they perceive the changes as threatening or disruptive to
 their current roles or ways of doing things. This resistance can undermine
the successful execution of the plan.

Award 1 mark each limitation of planning.

33 1. A strategic plan defines our company's long-term vision, mission, and 6

overarching objectives. It involves analyzing market trends, identifying
opportunities, and understanding our strengths and weaknesses.

2. Policies are broad guidelines and principles that guide decision-making

and behavior within the organization. They define acceptable conduct,
standards, and rules for various activities and processes.
3. Programmes are comprehensive plans that encompass multiple projects
or activities with a common goal.
4. Objectives are specific, measurable targets that support the achievement
of the overall strategic plan.

5. Rules are specific and explicit guidelines that govern specific actions or
conduct within the organization. They define the do's and don'ts, ensuring
clarity and uniformity in employee behavior.

6. Procedures are detailed step-by-step instructions on how to perform

specific tasks or processes. They provide consistency and standardization,
ensuring tasks are executed accurately and efficiently.

Award 1 mark for each type of plan.

34 Primary Packaging: it is the layer of packaging that directly encloses the 6
product. It is the first level of packaging that comes into direct contact with
the product and is often the most visible to the consumer.
Real-Life Example: For a consumer electronics company, the primary
packaging for a smartphone would be the box that holds the phone itself,
along with any accessories such as charging cables and earphones.

Secondary Packaging: it refers to the packaging used to group and protect

multiple units of the primary package during distribution. It is designed to
facilitate handling and transportation of the product.

Real-Life Example: Continuing with the smartphone example, the

secondary packaging would be the larger carton that holds multiple
individual phone boxes for shipment to retailers.

Tertiary Packaging: it is the outermost layer of packaging used for bulk

transportation and storage of products. It is designed to protect products
during long-distance transportation and warehousing.
Real-Life Example: In the context of the consumer electronics company,
the tertiary packaging would be the large pallets or crates used to hold and
transport numerous secondary packages filled with smartphones to
distribution centers or retail stores

Award 1 mark to each level of packaging and 1 mark for each example
given.