CBSE Class 12 Business Studies: sample paper 2026-27

Section A

No section labels printed; Q1-20 MCQ 1 mark, Q21-24 3 marks, Q25-30 4 marks, Q31-34 6 marks (Q24, Q26-27, Q29-30, Q32-33 have no internal choice)

1. Q1 · 1 mark · MCQCompetency-basedNature and Significance of Management

   Ms Pratima Bhanot is working as Quality Control Supervisor in a company. Identify the function that she will not be performing at the level at which she is working:

   1. (A)Ensuring the quality of output of workers.
   2. (B)Confirming that safety standards are maintained in the organisation.
   3. (C)Analysing the business environment and its implications for the survival of the firm.
   4. (D)Minimising the wastage of materials.

   Try it first, then show our solutionSolution

   1. A Quality Control Supervisor is a first-line (supervisory/operational) manager. Supervisors look after the quality of output, safety standards and wastage of materials on the shop floor.

   2. Analysing the business environment and its implications for the survival of the firm is a top-level management function, so she will not perform it. Option (C).

      1 mark

   Answer: (C) Analysing the business environment and its implications for the survival of the firm.

   Where the marks are

   • Environment analysis is a top-level function (1 mark)

   Open Q1 on its own page

2. Q2 · 1 mark · MCQPrinciples of Management

   Name the technique of Scientific Management that relates the compensation system to the efficiency of workers.

   1. (A)Motion Study
   2. (B)Differential Piece Wage System
   3. (C)Standardisation and Simplification of work
   4. (D)Fatigue Study

   Try it first, then show our solutionSolution

   1. Taylor's differential piece wage system pays a higher rate per piece to workers who reach the standard output and a lower rate to those who fall short.

   2. It links wages (compensation) directly to efficiency. Option (B).

      1 mark

   Answer: (B) Differential Piece Wage System

   Where the marks are

   • Wages linked to efficiency (1 mark)

   Open Q2 on its own page

3. Q3 · 1 mark · MCQCompetency-basedOrganising

   Raja is the Managing Director of Shraddha Ltd.,a firm manufacturing Environment Friendly products. As the firm grows in size he has decided to pay attention to the organisation structure. Which of the following organization structures should he choose in order to make managerial development easier, by providing autonomy and the chance to perform multiple functions?

   1. (A)Functional Structure
   2. (B)Span of management
   3. (C)Divisional Structure
   4. (D)Informal organisation

   Try it first, then show our solutionSolution

   1. In a divisional structure each product division has its own production, finance, marketing and other functions, headed by a divisional manager who enjoys autonomy.

   2. Running a whole division gives managers varied, multi-functional experience, so it helps managerial development. Option (C).

      1 mark

   Answer: (C) Divisional Structure

   Where the marks are

   • Autonomy and multiple functions per division (1 mark)

   Open Q3 on its own page

4. Q4 · 1 mark · MCQStaffing

   Read the following statements very carefully:

   Statement I: Trade tests evaluate the potential of a candidate for acquiring new skills.

   Statement II: Training prepares employees to take charge of higher positions in case of an emergency.

   Choose the correct option from the following:

   1. (A)Statement I is true and Statement II is false.
   2. (B)Statement II is true and Statement I is false.
   3. (C)Both the statements are true.
   4. (D)Both the Statements are false.

   Try it first, then show our solutionSolution

   1. Statement I is false: trade tests measure the existing knowledge and skills of a candidate; the potential to learn new skills is measured by aptitude tests.

   2. Statement II is true: training equips future managers who can take over higher positions in an emergency. Option (B).

      1 mark

   Answer: (B) Statement II is true and Statement I is false.

   Where the marks are

   • Trade test vs aptitude test; training prepares replacements (1 mark)

   Open Q4 on its own page

5. Q5 · 1 mark · MCQCompetency-basedBusiness Environment

   Dash n Dip' was established in 2022 as one of the first fast-food chains in India introducing the concept of family-style restaurants. However, within two years, the business started losing customers to multinational food chains and eventually had to shut down its operations.

   The owner of the restaurant, Ms Kamya Kulkarni realized that she had been unable to identify, understand, evaluate and respond to the external environmental trends like changes in customer's preferences and increasing competition. This had resulted in hindering the firm's performance.

   Identify the importance of understanding the business environment highlighted in the above case.

   1. (A)It helps in tapping useful resources.
   2. (B)It helps the firm to identify threats and early warning signals.
   3. (C)It helps in assisting in planning and policy formulation
   4. (D)It enables the firm to identify opportunities and get the first mover advantage.

   Try it first, then show our solutionSolution

   1. Kamya failed to read the signals of changing customer preferences and rising competition from multinational chains, and the business shut down.

   2. Understanding the environment helps a firm to identify threats and early warning signals in time to respond. Option (B).

      1 mark

   Answer: (B) It helps the firm to identify threats and early warning signals.

   Where the marks are

   • Missed threats and warning signals (1 mark)

   Open Q5 on its own page

6. Q6 · 1 mark · MCQControlling

   Choose the correct statement about controlling function of management:

   1. (A)Controlling completes one cycle of management process and improves planning in the next cycle.
   2. (B)Controlling is the function of management that initiates action by people in the organisation.
   3. (C)Controlling involves only looking back and not looking ahead.
   4. (D)Standards in the Controlling process must be set in quantitative terms only.

   Try it first, then show our solutionSolution

   1. (B) describes directing, which initiates action; (C) is wrong because controlling also looks ahead; (D) is wrong because standards may be qualitative as well.

   2. Controlling closes one cycle of the management process and its findings improve planning in the next cycle. Option (A).

      1 mark

   Answer: (A) Controlling completes one cycle of management process and improves planning in the next cycle.

   Where the marks are

   • Controlling is backward- and forward-looking and links to planning (1 mark)

   Open Q6 on its own page

7. Q7 · 1 mark · MCQFinancial Markets

   Match the terms given in column 1 with their meaning given in column2:

   Column1	Column2
   1. Financial Intermediation	(i) Facilities and institutional arrangements through which long term funds both equity and debt are raised and invested
   2. Primary market	(ii) the process by which allocation of funds is done
   3. Capital market	(iii) market for creation and exchange of financial assets
   4. Financial market	(iv) Securities are sold by the company to the investor directly (or through an intermediary).

   Choose the correct option from the following

   1. (A)1 (i), 2 (ii), 3 (iii), 4 (iv)
   2. (B)1 (ii), 2 (iv), 3 (i), 4 (iii)
   3. (C)1 (ii), 2 (iii), 3 (i), 4 (iv)
   4. (D)1 (iv), 2 (ii), 3 (i), 4 (iii)

   Try it first, then show our solutionSolution

   1. Financial intermediation is the process of allocating funds (ii); the primary market is where a company sells new securities to investors directly or through an intermediary (iv).

   2. The capital market is the arrangement for raising and investing long-term funds, equity and debt (i); a financial market is a market for creating and exchanging financial assets (iii). Option (B).

      1 mark

   Answer: (B) 1 (ii), 2 (iv), 3 (i), 4 (iii)

   Where the marks are

   • Matching definitions of financial market terms (1 mark)

   Open Q7 on its own page

8. Q8 · 1 mark · MCQConsumer Protection

   Who is a consumer under the Consumer Protection Act, 2019?

   1. (A)It includes any user of such goods or beneficiary of services if such use is made with the disapproval of the buyer.
   2. (B)It applies to online transactions only which are made through electronic means or by teleshopping or direct selling or multilevel marketing.
   3. (C)Any person who obtains goods or avails services for resale or commercial purpose.
   4. (D)A person who buys any goods or avails services for a consideration, which has been paid or promised, or partly paid and partly promised, or under any scheme of deferred payment.

   Try it first, then show our solutionSolution

   1. Under the Consumer Protection Act, 2019 a person who buys for resale or a commercial purpose is not a consumer, use with the buyer's disapproval is excluded, and online buyers are included but the Act is not limited to them.

   2. A consumer is a person who buys goods or avails services for a consideration paid, promised, partly paid and partly promised, or under a deferred payment scheme. Option (D).

      1 mark

   Answer: (D) A person who buys any goods or avails services for a consideration, which has been paid or promised, or partly paid and partly promised, or under any scheme of deferred payment.

   Where the marks are

   • Definition of consumer under the CPA, 2019 (1 mark)

   Open Q8 on its own page

9. Q9 · 1 mark · MCQCompetency-basedPrinciples of Management

   Choose the incorrect statement about the principle of management illustrated by the above picture:

   1. (A)Absence of this principle will result in loss of coordination.
   2. (B)The principle should be promoted in all organisations otherwise objectives would be difficult to realise.
   3. (C)The principle helps avoid dual subordination.
   4. (D)The principle promotes a spirit of unity and harmony among employees.

   Figure in the paper: Illustration titled 'Teamwork': several people cooperating, one on a ladder and others holding up a large glowing light bulb, on a maroon background. See it in the official paper.

   Try it first, then show our solutionSolution

   1. The picture shows teamwork: people cooperating to hold up a light bulb. This illustrates Fayol's principle of esprit de corps (union is strength), which builds team spirit, harmony and coordination.

   2. Avoiding dual subordination is the purpose of unity of command, not of esprit de corps, so statement (C) is incorrect. Option (C).

      1 mark

   Answer: (C) The principle helps avoid dual subordination.

   Where the marks are

   • Esprit de corps; dual subordination belongs to unity of command (1 mark)

   Open Q9 on its own page

10. Q10 · 1 mark · Assertion-reasonCompetency-basedFinancial Management

    Assertion (A): Capital budgeting decisions have a long-term impact on the profitability and growth of a business.

    Reason (R): Capital budgeting decisions deal only with short-term revenue expenditures.

    Choose the correct options:

    1. (A)Both A and R are true and R is the correct explanation of A.
    2. (B)Both A and R are true but R is not the correct explanation of A.
    3. (C)A is true but R is false.
    4. (D)A is false but R is true.

    Try it first, then show our solutionSolution

    1. Assertion: True. Capital budgeting decisions involve large amounts in long-term (fixed) assets and affect the earning capacity and growth of the business over the long run.

       Reason: False. Capital budgeting deals with long-term capital expenditure, not short-term revenue expenditure.

    2. A is true but R is false. Option (C).

       1 mark

    Answer: (C) A is true but R is false.

    Where the marks are

    • Truth of A and R and the link between them (1 mark)

    Open Q10 on its own page

11. Q11 · 1 mark · MCQCompetency-basedConsumer Protection

    The Consumers Affairs Minister met with the representatives from various E-Commerce firms on the subject of "dark patterns", warning them that app designs that are intended to deceive and nudge users to spend more or compromise their privacy are considered unfair trade practices. Which authority under the Consumer Protection Act, 2019 would regulate matters relating to violation of rights of consumers, unfair trade practices and take necessary action?

    1. (A)Central Consumer Protection Authority
    2. (B)Non-Governmental Organisations
    3. (C)Supreme Court
    4. (D)Consumer affairs Ministry

    Try it first, then show our solutionSolution

    1. The Consumer Protection Act, 2019 set up the Central Consumer Protection Authority (CCPA).

    2. The CCPA regulates matters relating to violation of consumer rights, unfair trade practices and false or misleading advertisements, and can take action against them. Option (A).

       1 mark

    Answer: (A) Central Consumer Protection Authority

    Where the marks are

    • CCPA regulates unfair trade practices (1 mark)

    Open Q11 on its own page

12. Q12 · 1 mark · MCQFinancial Management

    Select the statement that does not correctly describe working capital.

    1. (A)It consists of funds invested in current assets of the business.
    2. (B)It helps in carrying out regular business activities smoothly.
    3. (C)It is calculated as the difference between current assets and current liabilities.
    4. (D)It is usually less liquid but contributes more to the profits than fixed assets.

    Try it first, then show our solutionSolution

    1. Working capital is the investment in current assets (or current assets minus current liabilities) and keeps day-to-day operations running.

    2. Current assets are more liquid and contribute less to profit than fixed assets, so statement (D) is the incorrect description. Option (D).

       1 mark

    Answer: (D) It is usually less liquid but contributes more to the profits than fixed assets.

    Where the marks are

    • Current assets: more liquid, less profitable (1 mark)

    Open Q12 on its own page

13. Q13 · 1 mark · MCQCompetency-basedConsumer Protection

    A ₹2 lakh fine has been imposed on an online pharmacy Medisimple for automatically renewing a three-month membership subscription of the customers for ₹99 without obtaining explicit user consent. The order passed by the Concerned Authority stated that the promotion design used by the pharmacy amounted to an unfair trade practice called "basket sneaking", and directed the company to refund consumers who had not consented to the renewal. Where can the appeal be filed in case any of the parties is not satisfied with the order, on the grounds of facts or rules of Consumer Protection Act,2021?

    1. (A)District Commission
    2. (B)State Commission
    3. (C)National Commission
    4. (D)Supreme Court

    Try it first, then show our solutionSolution

    1. The amount involved (a ₹2 lakh fine and refunds of ₹99 subscriptions) is far below ₹50 lakh, so under the pecuniary limits notified in 2021 the matter lies with the District Commission, the first tier of the redressal machinery.

    2. An appeal against an order of the District Commission lies with the State Commission (the Act in force is the Consumer Protection Act, 2019). Option (B).

       1 mark

    Answer: (B) State Commission

    Where the marks are

    • Appeal against a District Commission order goes to the State Commission (1 mark)

    Open Q13 on its own page

14. Q14 · 1 mark · MCQCompetency-basedPlanning

    Arijit and Ananya started a small business selling Eco-Friendly home decoration items made from recycled materials under the name 'EcoComfort'. Ananya carefully analysed market conditions and predicted that there will be an increasing awareness about sustainability among urban consumers and the competition from conventional home decor brands will be moderate.

    They decided to achieve ₹2 lakh monthly sales by the end of first year.

    Arijit explored the following innovative courses of action to achieve the target:
    1. Selling through online platforms like E-Commerce market places and social media stores.
    2. Including local retail outlets to reach the local target market.
    3. Partnering with cafes, gyms, wellness stores for product placements.

    Identify the steps which have not been performed by Arijit and Ananya in carrying out the planning function of management.
    (i) Setting objectives
    (ii) Follow up action
    (iii) Implementing the plan
    (iv) Developing premises
    (v) Identifying alternative courses of action
    (vi) Selecting an alternative
    (vii) Evaluating alternative courses

    Choose the correct option:

    1. (A)(i),(iv),(v)
    2. (B)(ii),(iii),(iv),(vi)
    3. (C)(i),(iv),(v),(vii)
    4. (D)(vii),(vi),(iii),(ii)

    Try it first, then show our solutionSolution

    1. Performed: setting objectives (₹2 lakh monthly sales), developing premises (forecast of sustainability awareness and moderate competition) and identifying alternative courses (online, local retail, partnerships).

    2. Not yet performed: evaluating alternatives (vii), selecting an alternative (vi), implementing the plan (iii) and follow-up action (ii). Option (D).

       1 mark

    Answer: (D) (vii), (vi), (iii), (ii)

    Where the marks are

    • Steps of planning not yet performed (1 mark)

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15. Q15 · 1 mark · MCQCompetency-basedFinancial Management

    Astrio Ltd. is a fast-growing company engaged in manufacturing consumer goods. The management noticed that despite good demand for its products, the company often faced delays in certain activities, while at other times money remained unused for long periods. To address this issue, the finance department decided to prepare a comprehensive plan before undertaking future activities. The company carefully assessed its upcoming business requirements and tried to determine how much money would be needed for different activities and at what stage these requirements would arise. At the same time, the management examined various ways through which funds could be arranged so that financial requirements could be met without disruption.
    Identify the concept discussed in the above lines.

    1. (A)Capital structure
    2. (B)Financial control
    3. (C)Investment
    4. (D)Financial planning

    Try it first, then show our solutionSolution

    1. The firm estimated how much money would be needed, when it would be needed and from which sources it could be raised.

    2. Estimating fund requirements and deciding their sources in advance is financial planning. Option (D).

       1 mark

    Answer: (D) Financial planning

    Where the marks are

    • Estimating amount and timing of funds and their sources (1 mark)

    Open Q15 on its own page

16. Q16 · 1 mark · MCQMarketing

    Raahat has started a diagnostic centre in Gurgaon and decided to offer a salary of ₹10,000 plus a commission of ₹ 200 for each sample collected, to the employees appointed for the purpose. Name the cost being discussed above.

    1. (A)Fixed cost
    2. (B)Variable cost
    3. (C)Semi Variable cost
    4. (D)Total cost

    Try it first, then show our solutionSolution

    1. A fixed salary of ₹10,000 does not change with the number of samples, while the commission of ₹200 per sample rises with activity.

    2. A cost with a fixed part and a variable part varies with activity but not in direct proportion: a semi-variable cost (product cost as a factor in pricing). Option (C).

       1 mark

    Answer: (C) Semi Variable cost

    Where the marks are

    • Fixed salary plus per-unit commission (1 mark)

    Open Q16 on its own page

17. Q17 · 1 mark · MCQCompetency-basedFinancial Management

    Delicious Beverages Ltd. is a company manufacturing packaged fruit juices. Initially, the company enjoyed a monopoly in the local market, and customers readily bought its products. However, in recent years, several new beverage companies have entered the market. To retain customers, Delicious Beverages Ltd. started offering attractive credit terms, discounts, and promotional schemes. The company also increased its inventory to ensure uninterrupted supply. Identify the factor affecting the working capital requirement of Delicious Beverages Ltd. being discussed above:

    1. (A)Growth prospects
    2. (B)Level of competition
    3. (C)Production Cycle
    4. (D)Scale of operations

    Try it first, then show our solutionSolution

    1. New competitors forced the company to offer credit terms and hold more inventory, which raises debtors and stock.

    2. Higher competition means more liberal credit and larger inventories, so the factor is level of competition. Option (B).

       1 mark

    Answer: (B) Level of competition

    Where the marks are

    • Competition raises credit and stock (1 mark)

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18. Q18 · 1 mark · MCQCompetency-basedConsumer Protection

    Rama purchased a breakfast cereal "Healthme", which her friend Sapna had recommended. Sapna told her that consuming the cereal for breakfast had helped her in losing 5 kgs in 6 months. Rama had also seen the advertisement for the cereal which suggested weight loss and fitness. Rama did not lose any weight even after one year. She approached the helpline of the company to file a complaint. The employee on the helpline asked her to read the general instructions on the package, which said that the "results may vary". Rama realised that she had not read the information written on the tag attached to the product before buying it. Which consumer right did Rama exercise and which consumer responsibility had she ignored?

    1. (A)Right to be heard, Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.
    2. (B)Right to be assured, Be aware about various goods and services available in the market so that an intelligent and wise choice can be made.
    3. (C)Right to be assured, Buy only standardised goods as they provide quality assurance
    4. (D)Right to be heard, File a complaint in an appropriate consumer forum in case of a shortcoming in the quality of goods purchased or services availed.

    Try it first, then show our solutionSolution

    1. By approaching the company's helpline with a complaint, Rama exercised her right to be heard.

    2. She had not read the label, which said "results may vary", so she ignored the responsibility to read labels carefully. Option (A).

       1 mark

    Answer: (A) Right to be heard, Read labels carefully so as to have information about prices, net weight, manufacturing and expiry dates, etc.

    Where the marks are

    • Complaint = right to be heard; label not read (1 mark)

    Open Q18 on its own page

19. Q19 · 1 mark · MCQFinancial Management

    A company has an existing equity share capital of ₹20,00,000. It proposes to raise an additional ₹10,00,000 either by issuing equity shares or by issuing 10% debentures. If the Earnings Before Interest and Tax (EBIT) of the company is ₹4,50,000 and the corporate tax rate is 30%, which of the following financing options will result in a higher Earnings Per Share (EPS)?

    1. (A)Issue of equity shares
    2. (B)Issue of debentures
    3. (C)Both financing options will result in the same EPS
    4. (D)EPS cannot be determined with the given information

    Try it first, then show our solutionSolution

    1. With equity: PAT = 4,50,000 × 70% = ₹3,15,000 on ₹30,00,000 of equity. With 10% debentures: interest ₹1,00,000, EBT ₹3,50,000, PAT = ₹2,45,000 on ₹20,00,000 of equity.

    2. Taking a face value of ₹10, EPS = ₹1.05 with equity and ₹1.225 with debentures. Return on investment (4,50,000 ÷ 30,00,000 = 15%) exceeds the 10% interest, so trading on equity makes debentures give the higher EPS. Option (B).

       1 mark

    Answer: (B) Issue of debentures

    Where the marks are

    • ROI 15% > interest 10%: trading on equity (1 mark)

    Open Q19 on its own page

20. Q20 · 1 mark · MCQCompetency-basedControlling

    The management of Pure Foods Pvt.Ltd. noticed that in spite of timely salaries and satisfactory working conditions, employees seemed disengaged and less committed to their work.

    The management conducted regular performance reviews and introduced a system where supervisors monitored work progress closely. Thus, the employees knew well in advance the standards of performance on the basis of which they will be appraised. Feedback was provided regularly, and employees who performed well were appreciated publicly during monthly meetings. Underperforming employees were given guidance and training instead of punishment.

    After a few months, employee confidence improved, and performance levels increased significantly.

    Identify the point of importance of controlling function discussed in the above case.

    1. (A)Judging accuracy of standards
    2. (B)Improving employee motivation
    3. (C)Ensuring order and discipline
    4. (D)Both A and B

    Try it first, then show our solutionSolution

    1. Employees knew the standards in advance, received regular feedback and were appreciated for good performance.

    2. Knowing in advance the standards on which they will be appraised, with rewards linked to performance, motivates employees: improving employee motivation. Option (B).

       1 mark

    Answer: (B) Improving employee motivation

    Where the marks are

    • Known standards and appreciation motivate (1 mark)

    Open Q20 on its own page

21. Answer one of these 2 alternatives.

    Q21(A) · 3 marks · Short answerStaffing

    State the first three steps involved in selecting the most suitable candidate for a job.

    Try it first, then show our solutionSolution

    1. Preliminary screening: Applications are scrutinised and preliminary interviews held to reject unqualified or unfit candidates, including misfits for reasons not visible in the forms.

       1 mark

    2. Selection tests: Employment tests (written or practical) measure characteristics such as aptitude, intelligence, personality and skill.

       1 mark

    3. Employment interview: A formal, in-depth conversation that evaluates the applicant's suitability for the job; the interviewer seeks information and the applicant provides it.

       1 mark

    Answer: The first three steps of selection are preliminary screening, selection tests and employment interview.

    Where the marks are

    • Each correctly named and stated step (1 mark × 3)

    Open Q21(A) on its own page

    OR

    Q21(B) · 3 marks · Short answerStaffing

    State any three benefits of training and development to the organisation.

    Try it first, then show our solutionSolution

    1. Systematic learning: Training is planned learning, better than trial and error, which wastes effort and money.

       1 mark

    2. Higher productivity: It improves the quantity and quality of employees' output, leading to higher profits.

       1 mark

    3. Prepares future managers: Trained employees can take over higher positions in an emergency. (Also: higher morale, lower absenteeism and turnover; effective response to a fast-changing environment.)

       1 mark

    Answer: Benefits to the organisation: systematic learning, higher productivity and profits, and trained replacements for emergencies (also higher morale, lower turnover, better response to change).

    Where the marks are

    • Any three benefits to the organisation (1 mark each)

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22. Q22 · 3 marks · Short answerCompetency-basedDirecting

    After completing a diploma in sales and marketing, Supreet joined as a tele sales representative in a French Insurance Company in Paris. Although he was fluent in English language and a friendly, knowledgeable person, he was unable to meet the sales target. Mr. Pierre, his supervisor, called a meeting to discuss the reason for his under performance. Mr. Pierre came to know that Supreet had only done a basic course in French language and therefore, due to lack of proficiency in the French language he made mistakes while communicating with French clients.

    1. a)

       Name the barrier of communication due to which Supreet was unable to meet the target.

       1 mark
    2. b)

       Apart from the barrier identified in part a) briefly explain any two barriers of communication from the same group.

       2 marks

    Try it first, then show our solutionSolution

    1. a) The barrier is faulty translation, a semantic barrier: Supreet's weak French led to mistakes when he translated and conveyed messages to French clients.

       1 mark

    2. b) Badly expressed message: The intended meaning is not conveyed because of inadequate vocabulary, wrong words or omitted words.

       1 mark

    3. Technical jargon: Specialists use technical terms that listeners outside the field do not understand. (Also: symbols with different meanings, unclarified assumptions, body language and gesture decoding.)

       1 mark

    Answer: a) Faulty translation. b) Any two other semantic barriers, e.g. badly expressed message and technical jargon.

    Where the marks are

    • a) Naming the barrier (1)
    • b) Two semantic barriers: ½ heading + ½ explanation each

    Open Q22 on its own page

23. Answer one of these 2 alternatives.

    Q23(A) · 3 marks · Short answerFinancial Management

    Explain the following factors affecting financing decision of a company :
    (a) Control considerations
    (b) State of capital market

    Try it first, then show our solutionSolution

    1. (a) Control considerations: Issuing more equity can dilute the existing management's control, while debt does not; firms that fear a takeover prefer debt to equity.

       1½ marks

    2. (b) State of capital market: When the stock market is rising, more people invest in equity and shares are easy to issue; a depressed market makes equity issues difficult, so firms lean on debt.

       1½ marks

    Answer: Control considerations favour debt when dilution of control is feared; a buoyant capital market makes equity easier, a depressed one makes it harder.

    Where the marks are

    • Each factor: ½ heading + 1 explanation

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    OR

    Q23(B) · 3 marks · Short answerFinancial Management

    Explain the following factors affecting the fixed capital requirements of a company:
    (a) Choice of technique
    (b) Growth prospects

    Try it first, then show our solutionSolution

    1. (a) Choice of technique: A capital-intensive organisation relies on plant and machinery and needs more fixed capital; a labour-intensive one needs less.

       1½ marks

    2. (b) Growth prospects: Higher expected growth needs more fixed assets; firms may even build capacity in advance to meet anticipated demand, raising fixed capital needs.

       1½ marks

    Answer: Capital-intensive techniques and higher growth prospects both raise the fixed capital requirement.

    Where the marks are

    • Each factor: ½ heading + 1 explanation

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24. Q24 · 3 marks · Short answerCompetency-basedStaffing

    Mr Bhavik Bhavnani was recently appointed as the Human Resource Manager of 'Sorbit informations'. Till now, the company had been advertising all its vacancies in a local newspaper publication called' Climb Heights'. However, many times, it would bring a flood of responses from unsuitable candidates.
    The General Manager, Mr Raman Kalia, called Mr Bhavnani for a meeting to take his suggestions about alternative ways of searching for prospective employees. Mr. Bhavnani suggested that the company should maintain a close liaison with leading management institutes of the country. He also advised hiring private agencies and professional bodies who would recommend suitable candidates to the company. Also, as a database of unsolicited applicants was kept in the organisation, it was discussed that a list of such job-seekers could be prepared and screened to fill the vacancies.
    State the various sources suggested by Mr Bhavnani in the above case study, by which potential candidates may be located and stimulated to apply for jobs in the organisation.

    Try it first, then show our solutionSolution

    1. Campus recruitment: Liaison with management institutes to recruit qualified people for technical, professional and managerial jobs.

       1 mark

    2. Placement agencies and management consultants: Private agencies and professional bodies compile candidates' bio-data and recommend suitable names for a fee.

       1 mark

    3. Casual callers: A database of unsolicited applicants is kept and screened to fill vacancies as they arise.

       1 mark

    Answer: Sources suggested: campus recruitment, placement agencies and management consultants, and casual callers.

    Where the marks are

    • Each source correctly stated (1 mark × 3)

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25. Answer one of these 2 alternatives.

    Q25(A) · 4 marks · Short answerPrinciples of Management

    Explain the following points of nature of Principles of Management:
    a) Cause and effect relationship
    b) Universal applicability

    Try it first, then show our solutionSolution

    1. a) Cause and effect relationship: Principles link a cause with its likely effect, so they can be applied in similar situations. Because they deal with human behaviour and situations are never identical, exact cause-effect links are hard to establish.

       2 marks

    2. b) Universal applicability: Principles apply to all types of organisations: business and non-business, small and large, public and private, manufacturing and services, though the extent of application varies with the nature and size of the organisation.

       2 marks

    Answer: Principles establish (inexact) cause-effect relationships and apply to all kinds of organisations, to varying extents.

    Where the marks are

    • Each point: ½ heading + 1½ explanation

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    OR

    Q25(B) · 4 marks · Short answerPrinciples of Management

    Explain the following Principles of Management:
    a) Harmony not discord
    b) Science not rule of thumb

    Try it first, then show our solutionSolution

    1. a) Harmony, not discord: Taylor called for a complete mental revolution: management should share gains with workers and workers should work hard and accept change, so that both see their interests as one and there is no conflict.

       2 marks

    2. b) Science, not rule of thumb: Methods should be developed by scientific study and analysis (work study) to find the one best way of doing a job, which then replaces rule of thumb throughout the organisation.

       2 marks

    Answer: Harmony, not discord means mental revolution and shared interests; science, not rule of thumb means replacing guesswork with a scientifically developed best method.

    Where the marks are

    • Each principle: ½ heading + 1½ explanation

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26. Q26 · 4 marks · Short answerMarketing

    "Important decision areas in this respect include selection of dealers or intermediaries to reach the customers, providing support to the intermediaries (by way of discounts, promotional campaigns, etc.)." Explain any two components of the element of marketing mix discussed above.

    Try it first, then show our solutionSolution

    1. The element described (selecting and supporting intermediaries to reach customers) is place / physical distribution. Its components include transportation, warehousing, inventory control and order processing.

    2. Transportation: Moves goods and raw materials from the point of production to the point of sale; without it goods cannot reach buyers and the sale cannot be completed.

       2 marks

    3. Warehousing: Storing and assorting goods to create time utility, bridging the gap between the time of production and the time of consumption. (Also: inventory control, order processing.)

       2 marks

    Answer: Element: place (physical distribution). Two components: transportation and warehousing (also inventory control, order processing).

    Where the marks are

    • Any two components: ½ heading + 1½ explanation each

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27. Q27 · 4 marks · Short answerCompetency-basedControlling

    HK Metals Limited has set clear standards for production output, defect rate and operating costs. During a monthly review, Mr Himank, the Chairman, received a report from the Accounts Manager, Mr Akhil. He reported that most expenses were within the approved budget. However, the maintenance expenses had exceeded the permissible limit set by management.
    Mr Himank did not interfere in routine matters but instructed Mr Akhil to investigate the cause of increase in maintenance expenses.

    1. A)

       Name and explain the principle of managerial control applied by Mr Himank in the above case.

       2 marks
    2. B)

       Identify and state the subsequent step in the controlling process that must be undertaken by Mr Akhil to ensure that standards are accomplished.

       2 marks

    Try it first, then show our solutionSolution

    1. A) The principle applied is Management by Exception: trying to control everything results in controlling nothing, so only significant deviations beyond the permissible limit (here, maintenance expenses) are brought to top management's notice.

       2 marks

    2. B) The next step is Taking Corrective Action: as the deviation is beyond the acceptable range in an important area, its cause must be removed so it does not recur and standards are achieved; if it cannot be corrected, the standards may be revised.

       2 marks

    Answer: A) Management by Exception. B) Taking Corrective Action.

    Where the marks are

    • A) 1 naming + 1 explanation
    • B) 1 identification + 1 explanation

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28. Answer one of these 2 alternatives.

    Q28(A) · 4 marks · Short answerDirecting

    'Leaders play a key role in the success and excellence of any organisation'.
    a) Elucidate the term 'leadership'.
    b) Explain any two styles of leadership based on the use of authority.

    Try it first, then show our solutionSolution

    1. a) Leadership is the process of influencing the behaviour of people so that they strive voluntarily towards achieving organisational goals.

       1 mark

    2. b) Autocratic (authoritarian) leadership: The leader gives orders and expects obedience; communication is one-way and decisions are quick; rewards and punishments are used.

       1½ marks

    3. Democratic (participative) leadership: The leader makes plans and decisions in consultation with subordinates and encourages their participation, respecting their opinions. (Also: laissez faire / free-rein leadership.)

       1½ marks

    Answer: a) Leadership: influencing people to work willingly towards organisational goals. b) Any two of autocratic, democratic and laissez faire styles.

    Where the marks are

    • a) Meaning (1)
    • b) Each style: ½ heading + 1 explanation

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    OR

    Q28(B) · 4 marks · Short answerDirecting

    'Maslow's Need Hierarchy Theory of Motivation is based on human needs. He felt that within every human being, there exists a hierarchy of needs'
    a) Define the term motivation.
    b) Explain any two needs of human beings that according to Maslow formed part of the hierarchy.

    Try it first, then show our solutionSolution

    1. a) Motivation is the process of inducing subordinates to act in a desired manner to achieve organisational goals.

       1 mark

    2. b) Basic physiological needs: The most basic needs such as food, shelter and sleep; in an organisation, basic salary satisfies them.

       1½ marks

    3. Safety / security needs: Protection from physical and emotional harm, such as job security, stable income and pension. (Also: belonging, esteem and self-actualisation needs.)

       1½ marks

    Answer: a) Motivation: inducing people to act in a desired way towards goals. b) Any two of physiological, safety, belonging, esteem and self-actualisation needs.

    Where the marks are

    • a) Meaning (1)
    • b) Each need: ½ heading + 1 explanation

    Open Q28(B) on its own page

29. Q29 · 4 marks · Short answerCompetency-basedBusiness Environment

    Lisha Fabric Private Limited is a company manufacturing cotton garments. The Marketing Manager of the company notices a shift in Generation Z' expectations as they are becoming aware of ethical fashion. The company decides to collaborate with Hridyansh, a Tech Enthusiast who has invented an innovative machine that recycles plastic bottles to manufacture sustainable fabrics.
    Identify and explain the dimensions of the business environment highlighted in the above case.

    Try it first, then show our solutionSolution

    1. Social environment: the shift in Generation Z's expectations towards ethical fashion is a social trend.

       1 mark

    2. Social environment covers social forces such as customs, traditions, values, social trends and society's expectations from business; these create opportunities and threats.

       1 mark

    3. Technological environment: the machine that recycles plastic bottles into sustainable fabric is an innovation.

       1 mark

    4. Technological environment covers scientific improvements and innovations that provide new ways of producing goods and services and new methods of operating a business.

       1 mark

    Answer: Social environment (changing expectations of Gen Z) and technological environment (recycling machine).

    Where the marks are

    • Each dimension: 1 identification + 1 explanation

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30. Q30 · 4 marks · Short answerCompetency-basedNature and Significance of Management

    Guruji Garments Ltd., a leading apparel manufacturing company in Ludhiana, produces winter wear for domestic and international markets.

    During the peak season, the Production Department increased output to meet rising demand. However, the Sales Department had not secured enough confirmed orders, leading to excess stock. At the same time, the Finance Department delayed releasing funds for raw materials, causing interruptions in production. As a result, confusion and conflict arose among different departments.

    The General Manager noticed that the departmental heads were not sharing the information regularly thus leading to lack of synchronisation of activities of different departments.

    1. 1.

       The problem faced by Guruji Garments Ltd. mainly indicates absence of an important concept of management. Name the concept.

       1 mark
    2. 2.

       State any three characteristics of the above identified concept.

       3 marks

    Try it first, then show our solutionSolution

    1. 1. The concept missing is Coordination.

       1 mark

    2. 2. Continuous process: Coordination is not a one-time act; it begins at planning and continues till controlling.

       1 mark

    3. All-pervasive function: It is needed at all levels and between all departments because their activities are interdependent.

       1 mark

    4. Integrates group efforts: It unifies diverse interests into purposeful work and gives a common focus to group effort. (Also: ensures unity of action, responsibility of all managers, deliberate function.)

       1 mark

    Answer: 1. Coordination. 2. Any three: continuous process, all-pervasive, integrates group efforts, ensures unity of action, responsibility of all managers, deliberate function.

    Where the marks are

    • 1) Naming the concept (1)
    • 2) Any three characteristics (1 mark each)

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31. Answer one of these 2 alternatives.

    Q31(A) · 6 marks · Long answerMarketing

    Describe Product cost, Utility and demand and Marketing Methods used as factors determining the price of a product.

    Try it first, then show our solutionSolution

    1. Product cost: The cost of producing, distributing and selling sets the floor price. Firms try to cover all costs and earn a margin, at least in the long run, though a new product may at first be priced below cost.

       2 marks

    2. Utility and demand: The utility to the buyer and the intensity of demand set the upper limit of price; buyers pay up to the point where utility equals the price sacrificed, and usually buy more at lower prices.

       2 marks

    3. Marketing methods used: Other marketing elements such as distribution, salesmen, advertising, sales promotion, packaging, product differentiation, credit and customer service affect the price; uniqueness in any of them gives freedom in pricing.

       2 marks

    Answer: Product cost sets the lower limit, utility and demand the upper limit, and other marketing methods influence where the price is fixed.

    Where the marks are

    • Each factor: ½ heading + 1½ explanation

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    OR

    Q31(B) · 6 marks · Long answerMarketing

    Describe the concepts of branding, packaging and labelling as elements of product mix.

    Try it first, then show our solutionSolution

    1. Branding: Giving a product a name, sign or symbol so that it can be identified and distinguished from competitors' products instead of being sold under a generic name.

       2 marks

    2. Packaging: Designing and producing the container or wrapper of a product; it plays a major role in the success of many products, especially consumer non-durables.

       2 marks

    3. Labelling: Designing the label on the package, from a simple tag to complex graphics, which gives information about the product, its contents and method of use.

       2 marks

    Answer: Branding identifies and distinguishes the product, packaging designs its container or wrapper, and labelling gives information about it.

    Where the marks are

    • Each concept: ½ heading + 1½ explanation

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32. Q32 · 6 marks · Long answerCompetency-basedFinancial Markets

    Astrick Ltd., a fast-growing FMCG company, decided to expand its operations by setting up a new manufacturing unit. To raise funds, the company issued shares to the public. After the issue, the company participated in a market which provided a platform for buying and selling of existing securities.

    Soon, Astrick Ltd. noticed that the market price of its shares was constantly changing based on the company's performance reports, economic conditions, and demand and supply. Investors felt confident because its dealings were well defined according to the existing legal framework. It also ensured that they could easily convert their investment into cash whenever needed and the savings of the investors could get channelised into the most productive investment opportunities.

    1. (a)

       Name and give a suitable definition of the institution which as a market provides the platform referred to in the above case.

       2 marks
    2. (b)

       Explain the functions of the institution identified in part a) discussed in the case.

       4 marks

    Try it first, then show our solutionSolution

    1. (a) The institution is the Stock Exchange.

       1 mark

    2. Under the Securities Contracts (Regulation) Act, 1956, a stock exchange is any body of individuals, incorporated or not, constituted to assist, regulate or control the business of buying, selling or dealing in securities.

       1 mark

    3. (b) Liquidity and marketability: A continuous market lets investors convert investments into cash whenever needed.

       1 mark

    4. Pricing of securities: Prices are set by demand and supply, reflecting company performance and economic conditions.

       1 mark

    5. Safety of transactions: Dealings are well defined under the legal framework, giving investors a safe and fair deal.

       1 mark

    6. Contributes to economic growth: Disinvestment and reinvestment channel savings into the most productive investments.

       1 mark

    Answer: (a) Stock Exchange (defined under the SCRA, 1956). (b) Liquidity and marketability, pricing of securities, safety of transactions, contribution to economic growth.

    Where the marks are

    • (a) 1 naming + 1 definition
    • (b) Four functions: ½ heading + ½ explanation each

    Open Q32 on its own page

33. Q33 · 6 marks · Long answerCompetency-basedOrganising

    India's IT services companies saw a sharp decline in the share prices on February 12, 2026 over persistent fears that the artificial intelligence (AI)-led disruption will affect their profits in the coming years. Awino, one of India's top IT solutions providers, in order to face the challenge, has decided to separate itself into several subsidiaries by product line: telecommunications, engineering, financial services, etc. Each subsidiary brings in about $300 million in annual earnings and is self-sufficient with their own accounting books, personnel and administrative functions. The decision making authority is shared with lower levels and is consequently placed nearest to the points of action. Explain briefly any four benefits Awino will get from this selective dispersal of authority.

    Try it first, then show our solutionSolution

    1. Awino has adopted decentralisation (selective dispersal of authority to lower levels). Its benefits:

    2. Develops initiative among subordinates: Freedom to decide builds self-reliance and confidence.

       1½ marks

    3. Develops managerial talent for the future: Handling independent assignments builds a pool of managers for promotion.

       1½ marks

    4. Quick decision making: Decisions are taken nearest to the points of action without approvals from many levels.

       1½ marks

    5. Relief to top management: Less direct supervision frees top managers for strategic work. (Also: facilitates growth, better control.)

       1½ marks

    Answer: Any four benefits of decentralisation: initiative, managerial talent, quick decisions, relief to top management (also growth, better control).

    Where the marks are

    • Any four benefits: ½ heading + 1 explanation each

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34. Answer one of these 2 alternatives.

    Q34(A) · 6 marks · Long answerPlanning

    Explain a) Procedure b) Strategy c) Rule as types of plans

    Try it first, then show our solutionSolution

    1. a) Procedure: Routine steps, in chronological order, describing the exact manner in which an activity is to be performed; meant mainly for insiders and used to enforce policies.

       2 marks

    2. b) Strategy: A comprehensive plan for accomplishing organisational objectives, covering long-term objectives, a particular course of action and allocation of resources, formulated in view of the business environment.

       2 marks

    3. c) Rule: A specific statement of what must or must not be done, allowing no flexibility or discretion; the simplest type of plan.

       2 marks

    Answer: Procedure: routine sequential steps; strategy: comprehensive plan for long-term objectives; rule: rigid statement of what to do or not do.

    Where the marks are

    • Each type: ½ heading + 1½ explanation

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    OR

    Q34(B) · 6 marks · Long answerPlanning

    Explain the following benefits of planning:
    a) Planning facilitates decision making
    b) Planning reduces the risk of uncertainty
    c) Planning establishes standards of controlling

    Try it first, then show our solutionSolution

    1. a) Facilitates decision making: Planning looks ahead, sets targets and predicts conditions, helping the manager evaluate alternatives and choose the most viable one.

       2 marks

    2. b) Reduces the risk of uncertainty: By anticipating changes and deciding tasks in advance, planning prepares responses to uncertain events, though changes cannot be eliminated.

       2 marks

    3. c) Establishes standards for controlling: Planning sets goals that act as standards against which actual performance is measured and deviations corrected.

       2 marks

    Answer: Planning aids rational choice among alternatives, prepares for uncertainty and provides the standards for control.

    Where the marks are

    • Each benefit: ½ heading + 1½ explanation

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