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CBSE
ANNUAL PAPER - 1999
BUSINESS
STUDIES
(SET-I)
Time allowed : 3
Hours
M.M. :
100
General Instructions :
(iii) Marks are indicated against
each question.
(iv) Answers should be brief and
to the point. |
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PART-I
(PRINCIPLES AND
FUNCTIONS OF MANAGEMENT) |
Q.1. |
What is meant by 'motion study'? (2) |
Ans. |
Motion Study : It is the study of the movement of a
machine operator and his machine on the job. The purpose is to
eliminate useless motions and thereby establish standards of
performance, for developing a more efficient and less time-consuming
system of operation. |
Q.2. |
Give the meaning of 'supervision'
(2) |
Ans. |
According to Vitels,
" Supervision refers to direct and immediate guidance and
control of subordinates in the performance of their tasks."
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Q.3. |
Explain the term 'management' in brief.
(2) |
Ans. |
Management is the
process of planning, organising, staffing, directing and controlling
the efforts of the organisation members and of using all the
resources ( not only labour, capital etc., but also technology and
information to achieve organisational goods effectively.
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Q.4. |
Distinguish between authority and responsibility on the basis
of : (3) (i)
Direction or flow,
(ii)
Delegation, and
(iii)
Meaning |
Ans.
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Distinction between Authority and Responsibility
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Basis |
Authority |
Responsibility |
1.
Direction or Flow |
Authority flows from top to bottom i.e.,
downwards. |
Responsibility moves upward i.e. from subordinate
to superior. |
2.
Delegation |
Authority can be delegated. |
Responsibility is absolute and cannot be
delegated. When a superior delegates his authority to a
subordinate, he continues to be responsible to his own
superior. |
3.
Meaning |
It is
the right of the superior to command his
subordinate. |
It is
the obligation of the subordinate to perform the job
assigned to him by his superior.
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Q.5. |
State any three circumstances in which functional organisation
is more suitable. (3) |
Ans. |
The circumstances in
which functional organisation is more suitable are stated as follows
: (i) When there are large scale
operations :
(ii) When expert knowledge is
necessary in certain field.
(iii) It should be practiced only
at higher levels. |
Q.6. |
The production manager of Sanjay Ltd., an organisation
manufacturing scooters, asked his foreman to achieve a target
production of 250 scooters per day. but he does not give him the
authority to requisition tools and materials from stores department.
Can the production manager blame his foreman if he is not able to
achieve the desired target ? Explain, in brief, the principle
relating to this situation in support of your answer.
(4) |
Ans. |
No, the production
manager cannot blame the foreman because he was not given the
authority to requisition tools and materials from the stores
department to achieve a target production of 250 scooters per day.
There is a violation of the principle of parity of authority and
responsibility. According to this principle, authority and
responsibility should go hand in hand. Responsibility without
authority in meaningless. Every individuals in the organisation
should be given corresponding authority to enable him to carry out
the assigned task effectively. |
Q.7. |
As a representative of workers, you want to impress upon the
management the need for introducing time-wage system in place of
existing piece - rate system. what reasons will you give to justify
your view point ? Explain briefly. (5) |
Ans. |
Time-rate system
should be introduced in place of existing piece rate system due to
the reasons that follows :
(i) IT is simple to
calculate and easy to understand. Calculation of wages in piece-rate
system is complex and confusing.
(ii) The quality of
product is better maintained than in piece-rate
system.
(iii) Time-rate system
is favoured by trade union leaders as it brings about labour unity.
Piece-rate system provokes rivalries.
(iv) There is
certainty of income to the wage earners in time-rate system whereas
it is no so in case of piece-rate system. |
Q.8. |
Explain in brief any five features of a good control system.
(5) |
Ans. |
A good control system
must have the following features :
1. It must be
appropriate to suit the requirements of an organisation.
2. It should be
economical in cost as well as in time.
3. It must be simple
and easily understandable to all managers and employees.
4. It should be based
on the objectives of the organisation. The objectives should be
accurate.
5. It should be
flexible in nature, with the change in environment conditions,
objectives, and plans, the process of controlling should also
change.
6. An effective
control system should be forward looking. IT should check the
current performance and provide easy information to achieve the
result in accordance with the standards. |
Q.9. |
"Co-ordination is needed at all levels of
management." Explain this statement
briefly.(5) |
Ans. |
Co-ordination - There are three levels of management
-top level, middle level and lower level of management. In order to
achieve the business goals, there must be co-ordination in all three
levels i.e. all these levels work towards the achievement of the
common goals. It means harmony between top, middle and lower levels
of management. It is rightly said that co-ordination is the essence
of management. The object of co-ordinate is to unify, integrate and
harmonise the different activities of these levels to achieve the
common goal. Achievement of harmony between top level and lower and
middle levels of management helps to achieve the group goals.
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Q.10. |
Explain briefly the principle of 'Espirit -de-Corps' and
principle of 'Equity'. (5) |
Ans. |
Principle of 'Esprit de Corps' : This principle
states that 'union is strength', and emphasizes on team-spirit.
Fayol defines Esprit de-corps as unity of effort through harmony of
interests. An organisation can succeed only by means of collective
effort in a team spirit. Team work is possible through effective
communication.
Equity : Equity means fair dealing, equality of
treatment and accommodative or co-operative attitude among the
personnel in the undertaking. Equity results from a combination of
kindness and justice. Employees expect equity from management. The
application of equity requires good sense, experience and good
nature on the part of the manager. The managerial treatment of the
subordinates should be free from the influence of prejudices and
personal likes or dislikes.
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Q.11. |
Explain briefly the various steps involved in the planning
process. (6) |
Ans. |
The major steps
involved in the planning process are discussed below :
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1. The first step in
the planning-process is the determination of the objectives; the
objectives serve as the basic of planning. The objectives must be
clearly spelled-out and communicated to employees at all levels.
2. Planning is based
on forecasting or estimating future trends. The next step is to
identify the assumptions - known as planning premise, on which the
planning is based.
3. The manager must
plan keeping in mind the organisational conditions and limitations;
these limitations may as well be external or operative outside. The
management should assess intelligently key factors such as power,
stocks, materials, finance and labour.
4. The next step in
planning is to develop alternative plans of action. This practice
broadens the vision of the manager.
5. The various
alternatives are then evaluated in terms of various factors like
coast, risk etc. The manager analysis the various plans to decide as
to which offers the best chance of reaching the predetermined
objectives.
6. Lastly, after
choosing a particular plan, it should be put into action. Plans are
converted into action by establishing policies, schedules, standards
of performance, budgets etc. |
Q.12. |
What is meant by the term 'incentive' ? Discuss the role of
financial and non-financial incentives to increase the efficiency of
workers. (8) |
Ans. |
An incentive is
something which stimulates a person towards some goal. It activates
human needs and creates the desire to work. Thus, an incentive is a
means to motivation. Incentives generally have a direct influence on
the degree of motivation. In organisations, increase in incentive
leads to better performance and vice - versa. Role
of Incentive : Two kinds of incentives may be provided to
the employees, namely, (i) financial or monetary incentives, and
(ii) non-financial incentives. The role of both types of incentive
is discussed below :
Financial incentives : Financial incentives motivate
the workers through external factors which are primarily of
financial nature or are related to money. These can be in the form
of wages, piece-work or any other incentive pays, bonuses, company
paid insurance, profit sharing schemes, pension, paid vacations etc.
Monetary incentives are extrinsic motivators because the satisfy
off-the-job needs of the workers. They satisfy most of the basic
survival and many of the safety and social needs. Money acts both as
a motivator and maintenance factor, depending upon each individual's
current need level.
Non-financial incentives : Financial incentive do not
work for ever to motivate the people at work. The employees do not
always run after money as it can't satisfy all their needs. They
want status and recognition in the society. They want to satisfy
their egoistic needs and achieve something in their lives.
Management can use non-financial incentives to satisfy such needs of
workers. Non-monetary incentives can't be expressed in terms of
money. Such incentives may include grant of higher status,
recognition, assignment of challenging jobs, participation in
management decisions, opportunity of growth, suggestion system etc.
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PART-II
(FUNCTIONAL
MANAGEMENT) |
Q.13. |
What is meant by 'promotion mix' ? (2)
|
Ans. |
Promotion Mix : It refers to all marketing activities
to increase the volume of sales of the product of an enterprise. It
consists of all means of marketing communication with a view to
informing and persuading the prospective buyers to buy a certain
product. It involves decisions about advertising, procedures of
giving free articles for purchase of the particular commodities,
conducting contests, role of personal selling by the salesman and
other sales promotion techniques. Advertising and personal selling
are important tools to promote the sale of products of a firm.
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Q.14. |
What are the objectives of sales promotion ? (3)
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Ans. |
Objectives of Sales Promotion : The following are the
main objectives of all sales promotion activities
:
(i) Creation of Demand : The primary
objective of sales promotion is to influence, stimulate, maintain
and create demand for a product.
(ii) Educating Consumers : Products
communicate information to the consumers about new products or new
uses of the old products to increase their sales. They high-light
the main features and use of the products to the prospective buyers
and secure brand preference.
(iii) Securing Response in the Desired
Manner : -It aims at changing the attitude and behaviour of
the people. It is intended to encourage the consumers to continue
with their purchasing habits and persuade others to buy them.
(iv) It must add value
of the product by creating an image for them. |
Q.15. |
Explain briefly the steps involved in the process of financial
planning. (3) |
Ans. |
Following are the
three steps involved in financial planning :
1. Estimating the
amount of capital to be raised.
2. Determining the
form and proportionate amount of securities to issue.
3. Formulating
policies and procedures for the administration of capital.
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Q.16. |
State in brief the role of personnel manager. (3)
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Ans. |
Role of Personnel Manager : A personnel manager plays
an important role in the success of an organisation. The most
important role of a Personnel Manager is to maintain adequate
working force. His other roles revolve round this basic role. These
are given below
(i) Estimating
manpower requirements,
(ii) Establishing job
satisfaction,
(iii) Determining
labour sources, recruitment and selection,
(iv) Placement - put the right man
at the right place,
(v) Training to workers,
(vi) Keeps personnel records etc.
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Q.17. |
Give any three points of difference between recruitment and
selection.(3) |
Ans. |
Recruitment and selection are two different
stages of the personal management. They are distinct but related to
each other. Following are the points of distinction between the two
:
(a) Meaning : Recruitment means searching
for prospective employees and encouraging them to apply for the jobs
in the organisation while selection means choosing candidates
possessing the required qualification.
(b) Objective : The objective of
recruitment is to create a large pool of applicants for the jobs,
whereas the objective of selection is to eliminate as many
candidates as possible until the most competent and suitable
candidate is available.
(c) Process Involved : In recruitment the
process involved is simple and candidates are not required to cross
certain hurdles whereas the process involved in the selection is
complex and consists of a number of hurdles created by the
management deliberately.
Nature of Activity - The recruitment is known as
positive activity as it seeks to persuade people to apply for the
jobs whereas selection tends to be a somewhat negative process
because it rejects a good proportion of those who apply.
Both help in
appointing the various employees in different jobs held under the
same organisation. |
Q.18. |
Explain any three effects of under-capitalisation on
shareholders. (3) |
Ans. |
Effects of
under-capitalisation on shareholders :
(i) High share price
may encourage the management of the company to speculate in its
shares. It may show either more or less than the actual profits.
This may result in the exploitation of uninformed shareholders.
(ii) Heavy profits may
attract heavier taxes and controls by the government.
(iii) It may limit
marketability of shares due to which the shares may bot enjoy so
high a market value as is justified by the earnings.
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Q.19. |
A newly appointed personnel manager does not feel the
necessity of maintaining the personal records of the workers as he
is of the opinion that maintaining personal records is merely a
wastage of time. Do you agree with him ? Give reasons in support of
your answer. (4) |
Ans. |
This statement does
not hold true as it looks only at the negative side of personal
records. IT is true that maintaining personnel records involves
heavy expenditure. Going through them regularly is a time consuming
job as well. But if we try to understand their objectives and their
importance both to the employee and the employer, we would certainly
disagree with opinion of a newly appointed personnel manager.
Maintenance of
personal records is necessary to achieve the following objectives
:
1. To provide complete and correct
information about all the employees of the organisation.
2. To determine the suitability of
the employees for specific jobs and decide their transfer and
promotions.
3. To decide the training and
development requirements of the employees.
4. To determine wage structure,
cost of living, various labour policies and future manpower needs
etc. |
Q.20. |
State any five situations in which piece-wage system may be
suitable. (5) |
Ans. |
Suitability of Piece
Rate System : Piece rate system is suitable in
the following situations :
(a) When methods of production are
standardised and the job is of repetitive nature.
(b) When productivity of the
workers is to be increased.
(c) Where the job involves more
physical work than the mental work.
(d) Where output can be measured
and quality control system exists to discourage low quality
production.
(e) Where work does not require
personal skills of higher order. |
Q.21. |
Explain in brief the following rights of consumers : (5)
(i)
The right to safety, and
(ii)
The right to seek redressal of
grievances. |
Ans. |
(i) The Right to Safety : Certain goods
like electrical goods and pressure cookers can cause serious injury,
if there is any manufacturing defect. There is also a risk to life.
Consumers have the right to be protected against any such danger.
(ii) Right to seek redressal of grievances
: The consumers must have a right to get their claims settled
against the manufacturer if they are cheated. A number of consumer
courts courts have been set up specifically for this
purpose. |
Q.22 |
Explain briefly the nature of capital budgeting. (5
) |
Ans. |
Capital investment
decisions also known as capital budgeting decisions which pertain to
long term assets. These are decisions which involve investment of
current funds in long-term assets an thus, capital budgeting is the
technique of making long-term decisions for investment and their
finance. Nature of capital budgeting is summarized below :
(i) Capital
budgeting is exchange of current funds for future
benefits.
(ii) It is the
investment of funds in long term assets.
(iii) Future benefits
will occur over a series of years in future.
(iv) A relatively
high degree of risk regarding the future benefits.
(v) A relatively
long-time periods between investments of funds and the expected
return. |
Q.23. |
What are the principal sources of long-term finance for a
business enterprise ? Explain. (6) |
Ans. |
The major sources
of long-term finance include :
1. Equity Share Capital
2. Preference Share Capital
3. Retained Earnings
4. Debentures
5. Term loans from financial
institutions.
We discuss below
the feature of these sources of finance along with their evaluation
from the point of view of the business enterprise as well as
investor.
1. Equity Share Capital : Equity Share
Capital also known as ordinary Capital represents ownership capital.
The holders of equity shares are the legal owners of the company.
They are entitled for the dividends on the Capital contributed by
them. The rate of dividend is not fixed and is dependent upon the
quantum of profit available after the income claims of others have
been meet.
Advantages of Equity Share Capital
:
(a) It is a source of permanent
capital.
(b) It does not
involves any fixed obligation for payments of
dividends.
(c) It increases
the company's financial base and thus its borrowing limit.
Disadvantages of
Equity Share Capital
(a) The cost of
equity share capital is higher than other sources. The rate of
return required by equity shareholder is generally higher than the
rate of return required by other investors.
(b) Equity
dividends are not deductible payments and are payable from past-tax
earnings.
(c) If the company
issues only equity shares, it will lose the opportunity of trading
on equity by issuing other securities.
(d) Higher dividends
on equity shares during prosperous periods push up their market
values and generally lead to awkward speculation.
2. Preference Share Capital : Section 85
(I) of the Companies Act defines preference shares as those which
carry preferential rights as to the payment of dividend at a fixed
rate and as to the repayment of capital. Thus, preference
shareholders enjoy two preferential rights over the other category
of shares :
(i) They are
entitled to receive a fixed rate of dividend out of the net profits
of the company prior to declaration of dividend on equity
shares.
(ii) The assets
remaining after the payment of debts of the company under
liquidation are first appropriated for returning the capital
contributed by the preference shareholders.
Advantages of
preference Share Capital
(i) The preference
share attract funds from those investors who prefer safety of their
investments and a fixed rate of return on their
investments.
(ii) The management
can retain control over the company by issuing preference share to
outsiders because the preference shareholdlers have only restricted
voting rights.
(iii) Preference
shareholders are entitled to a fixed rate of dividend which enables
the equity shareholders to get higher dividend.
(iv) Redeemable
preference shares may be issued to bring flexibility in the
financial structure of the company as they can be redeemed whenever
it is necessary.
3. Retained Earnings : Sometimes
companies retain some profits to finance their requirements. It is
an internal source of finance. Normally, companies do not distribute
its entire earning in the form of dividend. Such a practice helps
the company to build up reserves which can be used for financing
long term requirements.
4. Debentures : According to Justice
Chitty, "Debenture means a document which acknowledges a
debt". A debenture is an instrument issued under the common
seal of the company, acknowledging its debt to the holder under the
terms and conditions specified in the instrument. The terms may
relate to the rate of interest, mode of repayment of principal and
the security offered. A debentures holder is a creditor of the
company.
Debenture have two characteristics :
(a) Debentures
carry a fixed rate of interest.
(b) Generally,
debentures are repayable after a certain period which is specified
at the time of issue.
Advantages of Debentures
(i) A debenture
holder cannot interfere in the management and control of the
company.
(ii) Debenture are
suitable for meeting the company's special financial requirements.
Company can refund the surplus money.
(iii) Debentures bear
less cost as compared to public deposits and bank loans.
(iv) The profits
and losses of the company do not effect the interest payable to the
debenture holders.
(v) Debenture
holders have a safe investment and fixed and regular income.
Disadvantages of Debentures
(i) Debentures
involve legal obligation to pay interest and principle amount.
Failure to meet these obligation can fore the company into
liquidation.
(ii) The issue of
debentures may bot be possible beyond a certain limit due to the
inadequacy of assets to be offered as security.
5. Term Loans from Banks and financial
Institutional : Term loans are a source of long-term
finance financial institutions, like IFCI, IDBI, ICICI, UTI et. The
loans are utilised for purchase of fixed assets and expansions
purposes. They are repaid in more than a year but less than 10
years. Borrowers have to offer security in the form of asset which
is financed by term loan. Rate of interest on such loans is
fluctuating as per credit policy. |
Q.24. |
Explain briefly the various media of advertising. (8)
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Ans. |
The media of
advertising include the following :
1. Newspapers : Newspapers is a part of
press advertising. It is commonly employed by sellers to transmit
product related messages. Newspapers reach all places and are read
by all types of people. Therefore, newspaper advertising has a
general and wide appeal.
2. Magazines : Magazines and journals are
good medium of advertisement when a high quality of printing and
coour are desired in an advertisement. Selective appeal to specific
segments of the market is possible. Magazines of general interest
like Sarita, Women Era, India Today and Caravan could be used for
advertising products common household goods. A particular Journal
may be selected to suit the goods offered for sale. The circulation
of magazines and Journal is usually limited. Moreover, these
advertisement are quite costly.
3. Radio advertising : Radio has
established itself as a very powerful media of advertising. Radio
advertising refers to the conveying of the advertising message
through the radio. Such advertisements reach far off places and are
listened to by the illiterate people also.
4. Television advertising : Television
advertising is the recent media of advertising. Television uses both
visual (sight) and audio (sound) signals. It has all the advantages
of radio, namely sound and explanation, plus the added advantage of
sight. It can appeal through the ears as they eyes. Products could
be demonstrated with explanation.
5. Film advertising : Films have become
an important media of advertising in these days. Business concerns
get short films or slides prepared by advertising agencies and
distribute them to selected cinema houses for display. these short
advertising films are shown before the regular shows or during
intermission. A running commentary on the features, uses and
superiority of the product is also provided.
6. Outdoor advertising : Out door
advertising assumes the form of posters, bill boards, electrical at
crossing and in buses. IT attracts the attention of the people
quickly.
7. Direct mail advertising : It involves
the preparation of a mailing list of persons or firms to whom the
message is to be sent. The message is then sent through sales
letter, folders, pamphlets booklets, catalogues and the like. The
important merits of advertisement by direct mail are its
selectivity, personal touch, secrecy and flexibility.
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