ISC

ISC Commerce Previous Year Question Paper 2012 Solved for Class 12

• Candidates are allowed additional 15 minutes for only reading the paper. They must NOT start
  writing during this time.
• Answer Question 1 from Part I and seven questions from Part II.
• The intended marks for questions are given in brackets [ ].

Part – I
(Compulsory)

Question 1.
Answer briefly each of the following questions (i) to (xv): [15 × 2]
(i) Why does a Joint Stock Company enjoy perpetual existence?
(ii) What are the two ways in which a Joint Stock Company can be promoted?
(iii) What is a participating preference share?
(iv) Mention two ways of removal of a Director of a company.
(v) Give two advantages of public deposit from the point of view of a company.
(vi) Write any two features of principles of management.
(vii) Name the elements of directing function of management.
(viii) What does the capital clause of Memorandum of Association contain?
(ix) Give two agency functions of Commercial Banks.
(x) Explain feedback in the process of communication.
(xi) Mention any two limitations of direct mail advertizing.
(xu) State any two devices developed in the recent past for rapid and efficient communication.
(xiii) Expand the terms:
(a) ICICI
(b) IDBI
(xiv) Explain the integration concept of management.
(xv) Name two physical supply functions of marketing.
Answer:
(i) Out of syllabus

(ii) Out of syllabus

(iii) The participating preference shareholder receives stipulated dividend and shares additional earnings with the common shareholders. But this share is usually non-cumulative which confirms the view that preference share does have both protective and profit participating provisions.

(iv) Out of Syllabus

(v) (a) No legal formalities: This system of raising finance is simple as it does not involve legal formalities which are required in the issue of shares and debentures.
(b) Economical: It is economical because the interest paid on deposits is usually less than the interest rate charged by banks and special financial institutions in advancing money. Moreover, deposits are returned whenever their need is not felt.
(c) Higher dividends: The company can adopt the policy of trading on equity if the company is earning more than the fate of interest to its public deposits. The company can pay a higher dividend to its shareholders and create a better reputation in the market.

(vi) (a) Principles of Management are Universal.
(b) Principles of Management are Flexible.

(vii) (a) Supervision
(b) communication
(c) Leadership
(d) Motivation

(viii) Out of syllabus

(ix) (a) Collection and Payment of Credit Instruments:
Banks collect and pay various credit instruments like cheques, bills of exchange, promissory notes, etc.
(b) Purchasing and Sale of Securities:
Banks undertake to purchase and sale of various securities like shares, stocks, bonds, debentures etc. on behalf of their customers. Banks neither give any advice to their customers regarding these investments nor levy any charge on them for their service, but simply perform the function of a broker.

(x) Feedback is essential in communication so as to know whether the recipient has understood the message in the same terms as intended by the sender and whether he agrees to that message or not. Receivers are not just passive absorbers of messages. They receive the message and respond to the subject matter about what they have understood. This response of a receiver to the sender’s message is called Feedback. Sometimes feedback could be a non-verbal, smiles, sighs and other times, it is oral. It can also be written like replying to an e-mail. etc.

(xi) Out of syllabus

(xii) Out of syllabus

(xiii) Out of syllabus

(xiv) The integration concept of management involves coordination of human and non-living resources into effective operating unit for the achievement of organizational objects.

(xv) Two Physical supply functions of marketing are:
(a) Storage
(b) Warehousing and storage.

Part – II
(Answer Any Seven Questions)

Question 2.
(a) Explain any four advantages of a Public Limited Company over a Private Limited Company. [4]
(b) Briefly explain any three merits and any three demerits of a Gov eminent Company. [6]
Answer:
(a) Out of syllabus
(b) Out of syllabus

Question 3.
(a) What are the additional requirements that a public limited company has to fulfil after its incorporation, in order to obtain a certificate of commencement? [4]
(b) Enumerate the functions of a Promoter. [6]
Answer:
(a) Out of Syllabus.
(b) Out of Syllabus.

Question 4.
(a) Give any four difference between a managing director and a manager. [4]
(b) Explain any six circumstances under which the office of a director falls vacant. [6|
Answer:
(a) Out of Syllabus.
(b) Out of Syllabus.

Question 5.
(a) Explain any four advantages of Mutual Funds. [4]
(b) What is fixed capital? Discuss any four factors affecting the fixed capital requirement of a Joint Stock Company. [6]
Answer:
(a) Out of Syllabus.

(b) Fixed capital consists of land, buildings, plant, machinery’, fixtures or any other property that is permanently committed to the business. (Example, for the last item is the regular working capital). These assets are not fixed in the sense of their value but fixed in the sense that they are committed to the business for a long period of time and difficult to be converted into cash in a short period. Fixed capital is usually highly specialized and if the business does not earn the minimum required rate of profits, these assets cannot be disposed of except at a loss. The fixed asset is needed to carry on profitable operations over a long period of time.

Factors affecting the requirement of fixed capital:
1. The scale of Operations:
Larger the spread of business activities, greater is the need for fixed capital. If a manufacturing enterprise is operating on a small scale, it will require less amount of fixed capital. On the other hand, a large-scale manufacturing enterprise will need relatively more amount of fixed capital.

2. Choice of Technique:
Those manufacturing enterprises which make use of modern and automatic machines need a large amount of fixed capital. On the other hand, those enterprises in which production is carried out mainly through manual labour need for fixed capital is very little.

3. Technology Upgradation:
There are some businesses where a fixed asset is used and which does require immediate change. These days computer technology is undergoing rapid changes. Therefore, those companies whose business is computer-based need more fixed capital.

4. Growth Prospects:
There are two types of organisations from the point of view of growth:

• Such organisations, which have no possibility of growth. They do not need additional fixed capital in future,
• Such organisations have more possibilities of growth. They need more additional fixed capital. Such organisations make a choice of the sources of finance well in advance so that in case of need additional finance can be made available.

Question 6.
Explain the steps involved in the process of personal selling. [10]
Answer:
Out of Syllabus.

Question 7.
(a) Define planning. Write any three limitations of planning. [4]
(b) Explain the importance of management in modem times. [6]
Answer:
(a) Planning means looking ahead and chalking out future courses of action to be followed. It is a preparatory step. It is a systematic activity which determines when, how and who is going to perform a specific job. Planning is a detailed programme regarding future courses of action.
Limitations of Planning:
Rigidity

• Planning has a tendency to make administration inflexible.
• Planning implies prior determination of policies, procedures and programmes and strict adherence to them in all circumstances.
• There is no scope for individual freedom.
• The development of employees is highly doubted because of which management might have faced a lot of difficulties in future.
• Planning therefore introduces inelasticity’ and discourages individual initiative and experimentation.

Misdirected Planning

• Planning may be used to serve individual interests rather than the interest of the enterprise.
• Attempts can be made to influence the setting of objectives, formulation of plans and programmes to suit one’s own requirement rather than that of the whole organization.
• The machinery of planning can never be freed of bias. Every planner has his own likes, dislikes, preferences, attitudes and interests which is reflected in planning.

Time-consuming

• Planning is a time-consuming process because it involves the collection of information, it’s analysis and interpretation thereof. This entire process takes a lot of time specially where there are a number of alternatives available.
• Therefore planning is not suitable during emergency or crisis when quick decisions are required.

(b) The significance of management in the modem business world has increased tremendously due to the following challenges.

• Growing size and complexity of the business.
• The increasing specialization of work.
• Cutthroat competition in the market.
• Growing unionization of labour.
• Sophisticated and capital intensive technology.
• The increasing complexity of business decisions.
• Need for research and development.
• Need for optimum utilization of scarce resources

Management is equally important at the national level. It is an agent of change and economic growth. The prosperity, power and prestige of a nation depend upon the competence and dedication of its managers and administrators.

Question 8.
(a) Give any four advantages of written communication. [4]
(b) Explain any six principles of effective communication. [6]
Answer:
(a) Out of syllabus
(b) Out of syllabus

Question 9.
(a) Explain any four objectives of Marketing. [ 4 ]
(b) Describe any four departments of an Advertising Agency. [6]
Answer :
(a) Objectives of Marketing:
(i) To Increase Sales
One of the most important goals of marketing for-profit entities is driving business and increasing sales. Marketing needs a good return on investment – meaning the increase in sales should significantly exceed the cost of marketing – and should, therefore, be specific.

(ii) To Improve Product Awareness
A marketing effort can be focused on reviving or invigorating interest in a product that has been on the market for a long time or about which people have long-standing attitudes.

(iii) To Establish in the Industry
A new organization finds it extremely difficult to be heard in a crowded market place, with a public distracted by many stimuli. It has to induce all efforts by means of marketing activities to be heard in the market place.

(iv) Brand Management
Maintaining a place in the mind of the public takes work, and some marketing efforts are simply aimed to maintain prominence in the public space. Major organizations known worldwide often run ads that simply use images and tone to remind consumers of the brand, rather than promote a particular product or service.

(b) Out of syllabus

Question 10.
Write short notes on:
(a) Marketing Research. [4]
(b) Informal Communication. [3]
(c) Staffing as a function of management. [3]
Answer:
(a) Marketing research is a systematic process. It first collects data about the marketing problem. Secondly, it records this data. Then it analyses this data and draws conclusions about it. After that, it gives suggestions for solving the marketing-problem. So, marketing research helps to solve marketing problems quickly, correctly and systematically.
Marketing research collects full information about consumers. It finds out the needs and expectations of the consumers. So, the company produces goods according to the needs and expectations of the consumers.

(b) Out of syllabus

(c) Staff is an important managerial function -Staffing function is the most important managerial act along with planning, organizing, directing and controlling. The operations of these four functions depend upon the manpower which is available through staffing function.
Staffing is a pervasive activity- As staffing function is carried out by all managers and in all types of concerns where business activities are carried out.

ISC Class 12 Commerce Previous Year Question Papers

ISC Commerce Previous Year Question Paper 2011 Solved for Class 12

• Candidates are allowed additional 15 minutes for only reading the paper. They must NOT start
  writing during this time.
• Answer Question 1 from Part I and seven questions from Part II.
• The intended marks for questions are given in brackets [ ].

Part – I
(Compulsory)

Question 1.
Answer briefly each of the questions (i) to (xv). [15 × 2]
(i) State two advantages of a joint-stock company.
(ii) Mention the steps necessary for the incorporation of a joint-stock company.
(iii) What are the qualification shares?
(iv) What is the statutory requirement regarding the number of Directors of a Public Limited Company?
(v) What is meant by Balanced Mutual Funds?
(vi) What is meant by Universality of Management?
(vii) Give two advantages of press media over audio-visual media of advertising.
(viii) What is the Principle of Equity, as laid down by Henri Fayol?
(ix) Mention any two specific differences between selling and marketing.
(x) Outline the steps involved in the process of communication.
(xi) Write two objectives of a Prospectus of a company.
(xii) How is cash credit different from a loan?
(xiii) Briefly describe any two aims of sales promotion.
(xiv) Explain the meaning of buying and assembling as a function of marketing.
(xv) Mention two circumstances under which a private limited company is deemed to be a public limited company.
Answer:
(i) (a) Joint-stock companies shares are freely transferable. All shareholders are free to transfer their shares without the consent of anyone.
(b) The liability of the members of a Joint-stock co.are limited to the face value of the shares they possess or to the amount of guarantee accepted by them.

(ii) The steps necessary for the incorporation of a joint-stock co. are threefold. Initially, a necessary document has to be prepared and filed, this is followed by payment of necessary fees and lastly by obtaining the certificate of incorporation.

(iii) Qualification shares are the no. of shares that the first directors of the company have to subscribe and pay for. The qualification shares taken by the directors is prescribed in the Articles.

(iv) The size of the Board of Directors varies from company to company however under the Companies Act, the minimum no. of directors for a Public Limited Co. is (3) Three.

(v) Mutual funds that invest in equity shares, as well as bonds, are known as Balanced Mutual Funds. The idea is to provide both growth and income benefits to investors.

(vi) According to F. W. Taylor, the fundamental principles of management are applicable to all human activities and all types of organisation. Managerial knowledge can be transferred from one organisation to another.

(vii) While press media of Advertising has a wide circulation, audio-visual media has a limited circulation. While the cost of press media is moderate, the cost of audiovisual media is high.

(viii) The principle of equity as laid down by Henri Fayol states that there should be equity in dealing with subordinates. There should be no discrimination made between employees. Favouritism should be avoided.

(ix) Marketing is a wide concept including a host of activities while selling is a narrow concept and is a part of marketing. Marketing focus is on the needs of the buyer. While the focus of selling is on the needs of the seller.

(x) The steps involved in the process of communication are:

• Sender – The person sending the message.
• Message – It’s the subject matter of communication.
• Encoding – The matter has to be translated into a mutually known language,
• Channel – A medium has to be chosen to send the message.
• Receiver – The person who is supposed to receive the message.
• Decoding – Interpreting the message to understand it.
• Feedback – It completes the process of communication.

(xi) Two objectives of a prospectus of a company :
(a) To provide information about the company to the public so that they may be attracted to invest in the company’s shares or debentures.
(b) To let the investors know the terms and conditions as well as the guidelines with regards to the company’s shares and other instruments on offer.

(xii) (a) In case of a loan, a specified amount is sanctioned by the bank which the borrower may
withdraw in Lumpsum or by cheques against the sum. In case of cash credit, the bank places the specified amount to the credit of the borrower, the borrower draws the money as and when required.
(b) Interest on the loan is charged on the full amount used or not used. Interest on cash credit is charged only on the amount actually used by the borrower.

(xiii) Two aims of sales promotion are:

• To create demand, to arouse interest in the buyer so that the interest may be converted to a desire for the product ending in the sale of the product.
• To stabilise sales earlier demand must be sustained, these activities reassure the customers about the quality and price of the product and helps in facing competition.

(xiv) Buying is the first step in the process of marketing. It means the procurement of raw materials, components and finished products. It involves several activities such as selecting the source of supply, ascertaining the suitability of goods and negotiating the terms of purchase. Assembling begins after the goods have been purchased. It involves the collection of goods already purchased from different sources at once commonplace. It facilitates standardisation and grading.

(xv) A Private limited company is deemed to be a public limited company under the following circumstances:

• Where a private company holds 25% or more of the paid-up share capital of a public company.
• Where the average sales turnover of a private company for the last three years is more than five crore rupees.

Part – II
(Answer any seven questions)

Question 2.
(a) Explain in brief, any four advantages of a multinational company. [4]
(b) The Memorandum is considered as the prime document in company formation. Give three reasons to justify this statement. [6]
Answer:
(a) The merits of a Multinational company may be stated as follows:
(i) Research and development activities: Multinational corporations have greater capability for research and development activities in comparison to national companies. Multinationals survive in the international market through their advanced research and development activities.

(ii) Foreign capital: Multinationals have huge capital resources at their command. They provide foreign investment by setting up subsidiaries and joint ventures in host countries. They promote capital formation and ensure a sound choice of projects. They have access to external capital markets.

(iii) Lower cost of production: Multinational corporations carry on operations on a large-scale, which ensures economies in material, labour and overhead costs. The lower cost of production has benefitted the consumers since they get better quality goods at cheaper prices.

(iv) Professional managers: Multinationals employ highly sophisticated techniques of management and develop professional managers. These corporations help to increase specialisation, speed up decision-making and improve operational efficiency. They shape the composition and character of world markets.

(b) The Memorandum of Association is the most important document of a company. It defines the objects and powers of a company and the company’s relationship with the outside world.
It is the most essential document for a company due to the following reasons:

• Informing the name, address, object, capital and liability of the company to outsiders is very important as it builds trust and confidence among investors.
• It lays down the objects and scope of activities of the company. It also states the limits up to which a company can move.
• The provision of this document cannot be changed without passing a special resolution (75% majority). In certain cases, the changes can be made by seeking permission from the company Law Board or Central Government.

Question 3.
Distinguish a Public Limited Company from a Private Limited Company. [10]
Answer:
1. Number of members: A private company can be registered with two members while a public company must have at least seven members. A private company cannot have more than fifty members excluding its past and present employees. A public company can have any number of members.

2. Invitation to the public: A private company cannot invite the public by issue of the prospectus to subscribe to its share capital. On the other hand, a public company is free to invite public to subscribe to its share capital. However, it is under no legal binding to invite public to subscribe to its shares or debentures.

3. Transferability of shares: There is a restriction on the transfer of shares in a private limited company. The transfer shall not be allowed unless agreed to by all the existing members of the company.

4 Commencement of business: A private company can start its business immediately after incorporation. A public company must obtain the certificate of commencement of business before starting its business operations.

5. Articles of association: A private limited company must prepare and file its own articles of association. But a public limited company may adopt the model Articles as given in the Companies Act.

Question 4.
(a) Mention any four duties of a Director of a company. [4]
(b) Explain any three methods of appointment of directors. [6]
Answer:
(a) The duties of Directors depends upon the nature and size of the company. It is necessary for the Directors to carefully examine the Articles of the company before exercising the powers and performing their duties.
Statutory Duties:

• Disclosure of relevant facts: It is the duty of the Directors to see that the prospectus issued by the company makes disclosure of all relevant facts and figures.
• Holding qualification shares: It is the duty of the elected Directors to purchase qualification shares and to hold them.
• Attending Board meeting: It is the duty of the Directors to attend Board meetings regularly in the best interest of the company.
• Getting permission for loans from the Central Government: It is the duty of the Directors to get permission from the Central Government while taking loans from the company.

(b) Methods of appointment of Directors:
The appointment of Directors may be made in the following manner:
(i) Appointment of first Directors by promoters of the company [Section 254]: The first Directors of the company are usually appointed by the promoters. Otherwise, the signatories to the Memorandum are deemed to be the Directors, till the first Directors are elected at the first annual general meeting.

(ii) Appointment of Directors by shareholders at the annual general meeting [Section 255]: Subsequent appointment of Directors is made by the shareholders at the annual general meetings. In case of a public company and a subsidiary private company, two-thirds of the total number of Directors must be appointed by the company at the annual general meeting. At every annual general meeting, one-third of the elected Directors shall retire by rotation. The retiring Directors may be re-appointed.

(iii) Appointment of Directors by the Central Government [Section 408]: The Central Gov eminent may appoint some Directors for a period of not more than three years, in the case of mismanagement of company affairs.

Question 5.
(a) Discuss any four advantages of ploughing back of profits from the company’s point of view. [4]
(b) Explain any four sources of working capital of a company. [6]
Answer:
(a) Ploughing back of profits from the company’s point of view offers the following benefits:

• It is the most convenient and economical method of finance, no legal formalities are involved and no negotiations are to be made. No return is to be paid on retained earnings and no fixed obligations are created.
• The financial structure of the company remains fully flexible. No charge is created against the assets and no restrictions are put on the freedom of management to raise further finance by floating new securities in the market.
• Ploughing back of profits adds to the financial strength and creditworthiness of the company. A company with large reserves can face unforeseen contingencies and trade cycles with ease and economy.
• Retained earnings can be used to redeem debts and to replace obsolete assets. A company with large reserves can take advantage of business opportunities.

(b) (i) Nature of Business: Public utilities and service organisations require little working capital as sales are on a cash basis. There is a little time gap between production and sales and these enterprises do not maintain large stock of goods. In trading and manufacturing concerns, on the other hand, a large amount of working capital is needed to maintain stocks and to sell goods on credit.

(ii) Size of the Enterprise: The volume of business has a direct influence on working capital requirements. Large firms require working capital for investment in current assets and to pay current liabilities.

(iii) Length of Operating cycle: Complex and roundabout process about production require a long time to prepare the finished product. Greater is the time and cost involved in production higher is the investment in inventories and wage bill. For instance, a firm manufacturing an aircraft requires a larger amount of working capital than a firm producing confectionery. When the cost of raw materials is a major part of the total cost working capital requirements are high. In the sugar industry sugarcane continues more than two-third of the cost of sugar.

(iv) Terms of purchase and sale: A firm buying raw materials and other resources on credit and selling goods on a cash basis will require less investment in working capital. On the other hand, an enterprise which purchases raw materials on a cash basis but sells the finished product on a credit basis will need greater working capital. The credit policy’ of the firm while selling goods to customers and efficiency in collection of debts also influence the amount of working capital in a firm.

Question 6.
(a) Mention any four functions of IFCI. [4]
(b) State any six utility functions of a commercial bank. [6]
Answer:
(a) (i) To provide medium and long term assistance to industrial concerns for:

• setting up of new industrial undertakings.
• expansion on diversification of existing concerns.
• modernization and renovation of existing concerns.
• meeting working capital requirements.
• meeting existing liabilities.

(ii) To grant loans to industrial concerns repayable within 25 years.
(iii) To underwrite shares stocks, bonds etc. of the industrial enterprise to be disposed of within 7 years.
(iv) To subscribe directly to the shares and debentures of public limited companies.

(b) (i) Safe Custody of valuables: Bank accepts previous articles like gold, silver, insurance policies etc. for safe custody. Bank maintains safe deposits values for these valuables.

(ii) Issues of Letter of Credit: Bank issues a letter of credits, drafts, circular notes etc. to their customers and thus help the customers in making money available to them at the place of requirement.

(iii) Issue of traveller’s cheques: Bank often issue travellers’ cheques for the benefit of tourists travellers’ cheque can be easily encashed in another branch of the same bank. This relieves the tourists from the anxiety of carrying cash during the tour.

(iv) Accepting bills of exchange: Bank often accepts bills of exchange on behalf of its customers for a small commission. This enables the customers to obtain superior credit of the bank,

(v) Underwriting of Capital issues: Bank provides service of understanding capital issues and loans raised by Government and companies. Bank charges a commission at a specified rate for these services.

(vi) Providing Credit Information: Banks are frequently requested to provide information relating to the creditworthiness of their customers. This service is useful to the sellers specially in credit sales.

Question 7.
(a) Why is Coordination considered to be the essence of Management? [4]
(b) Describe the following principles of Management: [6]
(i) Authority and Responsibility.
(ii) Stability of tenure.
(iii) Division of work.
Answer:
(a) Coordination is a conscious and national managerial function of pulling together. Various components of organised activity pre-determined goals. The significance of co-ordination may be understood on the basis of the following factors :
(i) The backbone of Management: Management is essentially a task of co-ordination of all internal as well as external forces and activities that affect the organisation. Co-ordination may be regarded as a mother function of management in which all other functions (like planning, organising directing and controlling) are embedded.

(ii) Unification of activities: Co-ordination reduces diversity among various departments and individual employees. It is not possible to achieve the specialised task of various departments and individual employees. It is not possible to achieve specialist tasks of various departments without perfect co-ordination. Coordination welds the various sequents and parts of the organisation into one entry.

(iii) Core of Group efforts: Co-ordination is indispensable in group efforts for accomplishing common goals. Co-ordination integrates various activities for effective achievement of common goals. Co-ordination reconciles the employee’s goals with both department and organisation goals.

(b) (i) Authority and Responsibility: Authorin’ is a right to give order and power to exert obedience.
Responsibility implies the obligation to perform the work in the manner desired and directed. Authority and responsibility must go by side. There should be parity between authority and responsibility. Authority without responsibility leads to irresponsible behaviour while responsibility without authority makes a person ineffective.

(ii) Stability of Tenure: This principle states that one subordinate should receive orders from one superior only. The subordinate should be accountable to that superior from whom he received orders. In other words every employee should have only one boss. Dual on multiple commands creates chaos in the organisation since it undermines authority. Authority should be delegated in such a manner that a subordinate works under one superior only.

(iii) Division of work: Division of work implies dividing the total task into compact jobs and allocating these compact jobs to different individuals. The object of division work is to facilitate specialisation and improve efficiency. Due to the division of work higher productivity’ and better performance is possible. When an individual does the same job on a repetitive basis he specializes in his task and thus acquires speed and accuracy in the performance.

Question 8.
(a) Explain any four objectives of communication. [4]
(b) Give any six differences between formal and informal communication. [6]
Answer:
(a) (i) Promotion of managerial efficiency: Communication is a lubricant to string the smooth operation of the management process. It keeps people working in accordance with the decisions of the management.

(ii) Co-operation through understanding: It induces human being to put forth genuine efforts in work performances. It inculcates the understanding of employees and leads them to greater efforts. It ensures efficiency in work in all respects.

(iii) The motivation of employees: It helps in moulding employees behaviour favourably. It encourages the employees to accept new ideas for the completion of the works systematically. It leads to better employer-employee relations.

(iv) Basis of leadership action: Effectiveness of leadership is greatly influenced by the adequacy and clarity of communication. Personal communication is essential for maintaining man to man relationships in leadership.
(b)

Question 9.
(a) Explain any four facilitating functions of Marketing. [4]
(b) “Advertising is a social waste.” Comment. [6]
Answer:
(a) (i) Financing: This is the service of providing credit and money necessary for the producer on
the seller to make goods available to the consumers. Financial is the lifeblood of modern business. It is the lubricant that facilitates the marketing of products. The prosperity working and future of a business unit mainly depends on the availability of adequate finance. Finance should also be available in sufficient amounts to face trade cycles, recession etc.

(ii) Price Determination: This is the process of fixing the price of a product on service. Generally, the price of a product is determined by the following factors:

• The demand for the product
• Nature of the product
• Cost of the product
• Extent of competition
• Government regulation if any etc.
• Condition of product

The price of a product should be determined in such a way that it brings in the largest volume of sales with a sufficient margin of profit.

(iii) Grading: This refers to the classification of goods into well-defined classes on the basis of certain standards. The main objective of grading to introduce uniformity. It facilitates the fixation of prices of various grades in advance. It is costly to sell graded goods as consumers.

(iv) Sales Promotion: This is an effort to stimulate consumers to purchase more and more of a particular commodity. It is a marketing effort the function of which is to inform customers about the merits of a product on sen ice. It is used to create; capture and maintain demand. It influences the attitudes of behaviour and the purchase decision of consumers.

(b) Some people consider advertising a social waste. They point out the following limitations and dangers of advertising:
1. Higher Prices: Advertising involves huge expenditure thereby increasing the cost of distribution. Manufacturers and traders charge higher prices from consumers to recover the money spent on advertising. However, excessive and unbalanced advertisements increase cost and prices. Effective advertisement help to reduce costs and price by widening markets and providing economies of large scale operations.

2. Artificial living: Advertising multiplies the needs of people and encourages wasteful consumption. It persuades people to buy products which they do not need or cannot afford. People are encouraged to buy even products which are harmful to their health eg. cigarettes, wine, etc. Advertising promotes artificial living and extravagance by creating demand for trivial goods.

3. Misleading: Advertising often deceptive and misguides consumers. Exaggerated and false claims are made in advertisements to dupe innocent people. Bogus testimonials and other questionable means are used to sell goods of doubtful value.

4. Growth of monopolies: Advertising creates brand preference and restricts free competition. Large and well-established firms spend huge amounts on advertisements to kill new and small concerns. Advertising encourages the survival of the mightest rather than of the best.

5. Wastage of national resources: Manufacturers create trivial and artificial differences in their products to develop brand loyalty through advertising. The natural resources, capital equipment and labour which go into the production of such items amount of waste as these could better be employed in creating new industries, valuable stationery, time and energy used in advertisement go waste because most of the advertisement either escape the attention of people or are ignored by them. It is also regarded as a waste because of most of the advertisement shift demand from the one brand to another instead of increasing the total demand.

6. Unethical many advertisements are highly objectionable because they undermine moral values and ethics. Vulgar advertisements may also spoil the landscape and divert the attention of people driving on roads.

Question 10.
Write short notes on:
(a) Holding company. [2]
(b) The crossing of cheques. [4]
(c) Management – Science and Art. [4]
Answer:
(a) Holding Company: A holding company is one that directly or indirectly holds more than 50% of equity’ share capital or controls the composition of the Board of Directors of some other companies.
A company may become a holding company in any of the following three ways:

• By holding more than 50% of the paid-up equity’ share capital of another company: or
• By holding more than 50% of the voting rights of another company: or
• By holding the right to appoint the majority of the Directors of another company.

(b) A crossed cheque is a cheque, the amount of which is payable through the account of the payee. It cannot be cashed at the counter of the bank. If it is stolen, nobody can encash the cheque. Two parallel lines are to be drawn across the face of the cheque with the words ‘Account Payee’ in order to make a cross cheque.
A cheque is said to be crossed when two transverse parallel lines are drawn across its face (with or without any words):

• The crossing of a cheque ensures security and protection to the true owner of the cheque.
• It helps to detect the bonafide owner of the cheque.

(c) Management as a science: Science is a systematised body of knowledge, which can be acquired through observations and experimentations. The basis of science is to search for information by means of determining the cause-effect relationship through observations and experimentation.
The essential features of science are as follows:

• Systematised body of knowledge.
• Continued observations.
• The universal validity of principles.
• Principles-based on experiments.

Now let us see how far management fulfils these requirements to qualify as a science.

(i) Systematised body of knowledge: Science is a systematised body of knowledge which is based on a cause-effect relationship. Management viewed science as it is also a systematised body of knowledge built up by management make use of scientific methods for observations followed by management practitioners and experts over a period of time. The principles of management make use of scientific methods for observations.

(ii) Continued observations: Science uses the scientific methods of observations which are unbiased and objective. The knowledge of management has been acquired through the continuous efforts of many experts and practitioners over a period of years. The methods of observations followed by management are not completely objective, since management deals with human beings whose behaviour cannot be predicted.

Management as an Art
Art refers to the application of skill and knowledge to attain the desired result. Art is concerned with the practical application of theoretical knowledge. The function of Art is to accomplish concrete ends. It represents the methods of doing specific things and indicates how an objective is to be achieved. Every art is practical and is concerned with the creation of something.
Art has the following five essential features:

• Practical knowledge.
• Personal skills.
• Result – Oriented approach.
• Constructive skill (i.e. creativity).
• Regular practice aimed at further improvement.

Now let us see how far management fulfils these requirements to qualify as an art:
(i) Practical knowledge: Art presupposes the existence of theoretical knowledge. Art is concerned with the application of theoretical knowledge. Therefore, every form of art has both theoretical and practical aspects. Management is an art of getting things done through people to accomplish desired results. Management is concerned with putting the available knowledge into practise so as to accomplish predetermined goals.

(ii) Personal skills: Every manager has his own style of working the taste of management lies in the skillful used of one’s technical knowledge to ensure maximum productivity and profitability. The manager has to use his personal skill and knowledge in solving many complicated problems to accomplish desired results. Therefore, management is a practice and performance.

ISC Class 12 Commerce Previous Year Question Papers

ISC Commerce Previous Year Question Paper 2017 Solved for Class 12

Maximum Marks: 80
Time allowed: Three hours

• Candidates are allowed additional 15 minutes for only reading the paper. They must NOT start writing during this time.
• Answer Question 1 (Compulsory) from Part I and five questions from Part II, choosing two questions from Section A, two questions from Section B and one question from either Section A or Section B.
• The intended marks for questions or parts of questions are given in brackets [ ].
• Transactions should be recorded in the answer book.
• All calculations should be shown clearly.
• All working, including rough work, should be done on the same page as, and adjacent to the rest of the answer.

Part – I (20 Marks)
Answer all questions.

Question 1. [10 × 2]
Answer briefly each of the questions (i) to (x):
(i) What is meant by Macro Environment ?
(ii) What is the importance of finance to a business concern ?
(iii) Give two merits of Inter Corporate Deposits.
(iv) Define Management as a process.
(v) Explain the principle of Authority and Responsibility, as laid down by Henry Fayol.
(vi) What is Demand Draft ?
(vii) State any two features of advertising.
(viii) Give two points of difference between training and development.
(ix) Mention two physical functions of marketing.
(x) Agrim purchased a Diesel Car for ₹ 7 Lakhs from an automobile Company and found its engine to be defective. Despite many complaints, the defect w as not rectified. Suggest the appropriate authority where Agrim under his right as a consumer, could file a complaint
Answer:
(i) A macro environment is the condition that exists in the economy as a whole, rather than in a particular sector or region. In general, the macro environment includes trends in gross domestic product (GDP), inflation, employment, spending and monetary and fiscal policy . The macro environment is closely linked to the general business cycle as opposed to the performance of an individual business sector.

(ii) Finance is an important functional area of business. It deals with timely procurement of funds and their effective utilisation. For optimal procurement, different sources of finance are compared in terms of their costs and associated risks.

(iii) (a) No Procedural Delays
(b) Easy availability of finance.

(iv) As a process, management refers to a series of inter-related functions or elements to achieve stated objectives through the effective utilization of human and other resources. It involves five functions, namely,

• planning,
• organizing,
• staffing,
• directing or leading and
• controlling.

As shown in Fig. 1 it is through the performance of these functions that management is able to effectively utilize manpower and physical resources such as money or capital, machines, materials, methods, etc. to produce goods and services required by the society.

(v) Authority and Responsibility : Authority is the right to give orders to the subordinates and to use the resources of organisation. Responsibility is the duty which the subordinate is expected to perform by virtue of his position in the organisation. Responsibility must be expressed either in terms of functions or in terms of objectives. When a subordinate is asked to control the working of a machine, the responsibility’ is stated in terms of function and when a subordinate is asked to produce a certain number of pieces of a product, the responsibility is created in terms of targets.

(vi) A demand draft is a negotiable instrument similar to a bill of exchange. A bank issues a demand draft to a client (drawer), directing another bank (drawer) or one of its ow n branches to pay a certain sum to the specified party (payee).

(vii) The features of advertising are as follows :
It is a paid form of communication: Advertisements appear in newspapers, magazines, television or on cinema screens because the advertiser has purchased some space or time to communicate information to the prospective customers.

It is a non-personal presentation of message : There is no face to face contact with the customers. That is why. it is described as non-personal salesmanship. It is a non-personal form of presenting products and promoting ideas and it supports personal selling. It simplifies the task of sales-force by creating awareness in the minds of potential customers.

(viii)

(ix) Gathering and Analyzing Information : Gathering and analyzing market information is necessary to identify the needs of the customers and take various decisions for the successful marketing of products and sendees. This is also important for making an analysis of the available opportunities and threats as well as strengths and weaknesses of the marketers and helps in deciding what opportunities can best be pursued by it. For example, rapid growth is predicted in several areas in India including internet, cell phones, cooked foods, ready made garments, etc. These areas offer opportunities to the producers and marketers.

Packaging and Labelling : Packaging is traditionally done to protect the goods from damage in transit and to facilitate easy transfer of goods to customers. But now it is also used by the manufacturer to establish his brand image as distinct from those of his rivals. Patanjali Honey’. ‘Boro Plus’. ‘Amul Butter’, ‘Tata Salt’ and All Out’ are some examples in this regard.

(x) District Forum

Part – II (60 Marks)
Answer any five questions.

Question 2.
(a) Explain three disadvantages of Preference shares from the investors’ point of view. [2]
(b) Effectiveness of leadership depends on the qualities of the Leader. Explain any four qualities that a good leader should possess. [4]
(c) Explain the importance of Business Environment in shaping the future of a business. [5]
Answer
(a) Disadvantages of Preference shares from the investors point of view are :
No voting right: Generally preference shareholders do not have any voting rights. Hence, they cannot have the control over the management of the company.

Fixed dividend only: Preference shares can get only fixed rate of dividend. They may not enjoy more profits of the company.

Taxation : In the taxation point of view, preference shares dividend is not a deductible expense while calculating tax. But, interest is a deductible expense. Hence, it has disadvantage on the tax deduction point of view.

(b) Qualities of a good leader are as follows :
Appreciative: A wise leader values their team and the person. Success is only achieved with the help of others. What’s more, genuine appreciation provides encouragement, develops confidence, and builds on strengths.

Confident: Trust and confidence in leadership is a reliable indicator of employ ee satisfaction. Good leaders aren’t afraid of being challenged. Their confidence inspires.

Compassionate : A good leader uses compassion to perceive the needs of those they leads and to decide a course of action that is of greatest benefit to the person and the team.

Courageous : A courageous leader is prepared to take risks when no one else will. A courageous leader has faith in other people. A courageous leader raises difficult issues, is ready to give difficult feedback, and share unpopular opinions.

(c) To be more specific, proper understanding of the social, political, legal and economic environment helps the business in the following ways :
Determining Opportunities and Threats : The interaction between the business and its environment would identify opportunities for and threats to the business. It helps the business enterprises for meeting the challenges successfully.

Giving Direction for Growth : The interaction w ith the environment leads to opening up new frontiers of growth for the business firms. It enables the business to identify the areas for growth and expansion of their activities.

Continuous Learning : Environmental analysis makes the task of managers easier in dealing with business challenges. The managers are motivated to continuously update their knowledge, understanding and skills to meet the predicted changes in realm of business.

Image Building : Environmental understanding helps the business organisations in improving their image by showing their sensitivity to the environment with in which they are working. For example, in view of the shortage of power, many companies have set up Captive Power Plants (CPP) in their factories to meet their own requirement of power.

Meeting Competition : It helps the firms to analysis the competitors’ strategies and formulate their own strategies accordingly.

Identifying Firm’s Strength and Weakness : Business environment helps to identify the individual strengths and weaknesses in view of the technological and global developments.

Question 3.
(a) Give three differences between advertising and personal selling. [3]
(b) Explain any four features of a budget. [4]
(c) You are the finance manager of a newly established company. The Directors have asked you to determine the amount of fixed capital requirement for the company. Explain any five factors that you w ill consider while determining the fixed capital requirement for the company .[5]
Answer:
(a)

(b) Features of budget are as follows :

• A budget is a statement of expected results expressed in quantitative terms.
• It provides a standard by which actual observation can be measured and by which variations can be checked.
• It is a single use plan since it is prepared for a particular period of time.
• A budget forces an enterprise to make in advance a numerical compilation of expected cash flows, expenses and revenues, capital outlays or machine hour utilization.

(c) The requirement of fixed capital depends upon various factors which are explained below :
Nature of Business : The type of business Co. is involved in is the first factor w hich helps in deciding the requirement of fixed capital. A manufacturing company needs more fixed capital as compared to a trading company, as trading company does not need plant, machinery, etc.

Scale of Operation : The companies which are operating at large scale require more fixed capital as they need more machineries and other assets whereas small scale enterprises need less amount of fixed capital.

Technique of Production : Companies using capital-intensive techniques require more fixed capital whereas companies using labour-intensive techniques require less capital because capital-intensive techniques make use of plant and machinery and company needs more fixed capital to buy plant and machinery.

Technology Up-gradation : Industries in which technology up-gradation is fast need more amount of fixed capital as w hen new technology is invented old machines become obsolete and they need to buy new plant and machinery whereas companies where technological up-gradation is slow they require less fixed capital as they can manage with old machines.

Growth Prospects : Companies which are expanding and have higher growth plan require more fixed capital as to expand, they need to expand their production capacity and need more plant and machinery so more fixed capital is required.

Question 4.
(a) Give three points in support of the statement, ‘’Organizing is an important function of management.” [3]
(b) What is social environment ? Enumerate any three components of social environment. [4]
(c) Briefly discuss any five features of principles of management. [5]
Answer:
(a) The benefits of a sound organisation are discussed below :
Benefits of Specialization : Organisation is based on division of work which leads to specialization. In other words, jobs are created which require special qualifications, training and aptitude. People are appointed on the jobs on the basis of their area of specialization. This would lead to efficiency in performance and better quality’.

Clarity of Working Relationships : Organisation helps in creating well defined job and also clarifying the limits of authority and responsibility of each job. Thus, everybody working in the organisation knows the amount of authority and responsibility associated with his job. This would help in reducing conflicts over use of authority by different people in the enterprise and avoid confusions and duplication of work.

Optimum Utilization of Resources : Organisation leads to creation of distinct jobs and departments by systematic division of various activities. This would help in avoiding duplication of efforts and overlapping of duties among various individuals and departments. As a result, there would be optimum utilization of all kinds of resources.

Social Environment consists of the customs and traditions of the society in which business is existing. It includes the standard of living, taste, preferences and education level of the people living in the society where business exists.

The businessman cannot overlook the components of social environment as these components may not have immediate impact on the business but in the long run the social environment has great impact on the business.

For example, when the Pepsi Cola Company used the slogan of “Come Alive” in their advertisement then the people of a particular region misinterpreted the word “Come Alive” as they assumed it means Coming out of Graves. So, they condemned the use of the product and there was no demand of Pepsi Cola in that region. So, the company had to change its advertisement slogan as it cannot survive in market by ignoring the sentiments of the people.

Some Aspects of Social Environment:

• Quality of life
• Importance or place of w omen in workforce
• Birth and Death rates
• Attitude of customers towards innovation, life style etc.
• Education and literacy rates
• Consumption habits
• Population
• Tradition, customs and habits of people

(c) The principles of management have the following characteristics or features :
Universal Application : The principles of management are universal in nature. They are applicable to all kinds of organisations and situations. For example, the principle of unity of direction is widely applied to all types of activities and to all organisations. Similarly, the principle of division of work has found application in all kinds of organisations in order to achieve the benefits of specialization. However, the extent of division of work may vary from situation to situation.

General Guidelines : Management principles have been evolved by management thinkers out of their experience and analysis. That’s why, they have been expressed in the form of general statements. Management principles cannot be stated as exact as the principles of physical sciences. The obvious reason is that management principles deal with human beings. Thus, no manager can ever be sure about the behavior of human beings who have different backgrounds, perceptions and needs.

Developed by Practice and Experimentation : Many of the management principles have been developed by practitioners including Henry Fayol, F. W. Taylor and L. Urwick. For example, Henry Fayol suggested principles of general management as a result of practice and F.W. Taylor developed principles of scientific management by virtue of his practice and experimentation. In particular. Taylor conducted experiments on time study, motion study and fatigue study to increase the efficiency of workers and reduce their fatigue and Henry Fayol suggested the principles to create conducive environment for people at work.

Flexibility : The principles of management are flexible in nature. Refinements in principles can take place as per need of the situation faced. Thus, they must be accepted as flexible and dynamic guidelines and not as rigid or static rules. They can be accepted as ‘diagnostic guides’. The application of management principles depends upon specific situation being faced by the manager. They can be modified by the manager to meet the needs of the situation. For example, the principle of division of labor may not be applicable in small firms to the same extent as in large firms.

Influence Human Behavior: The principles of management are meant for influencing human behavior and getting higher performance from them. They guide them how to respond under different situations. For example, principles like division of work, unity of command, discipline, unity of direction, etc., help the managers to regulate the behavior of operative employees. However, because of complex nature of human behavior, management principles might have limited application.

Question 5.
(a) What are the objectives of personal selling ? [3]
(b) Explain the following :
(i) SMS alerts
(ii) ATM [4]
(c) Explain any five points of importance of controlling, as a function of management. [5]
Answer
(a) Personal selling is used to meet the following objectives of promotion in the following ways :
Building Product Awareness : A common task of salespeople, especially when selling in business markets, is to educate customers on new product offerings. In fact, salespeople serve a major role at industry trades shows where they discuss products with show attendees. But building awareness using personal selling is also important in consumer markets. As we will discuss, the advent of controlled word-of-mouth marketing is leading to personal selling becoming a useful mechanism for introducing consumers to new products.

Creating Interest : The fact that personal selling involves person-to-person communication makes it a natural method for getting customers to experience a product for the first time. In fact, creating interest goes hand-in-hand with building product awareness as sales professionals can often accomplish both objectives during the first encounter with a potential customer.

Increases Sales : The main objective of all the business firms is to increase sales. Customers can have doubts regarding the quality of the product. The salesman can clarify the doubts and objections raised by the customers on the spot. Hence, sales increases.

(b) SMS Alerts : It is a facility used by some banks or other financial institutions to send messages (also called notifications or alerts) to customers’ mobile phones using SMS messaging, or a service provided by them which enables customers to perform some financial transactions using SMS.

ATM : ATM stands for an automated teller machine and also known as an automatic teller machine is an electronic telecommunications device that enables the customers of a financial institution to perform financial transactions, particularly cash withdrawal, without the need for a human cashier, clerk or bank teller.

(c) The following benefits may be derived from a sound system of control :
Accomplishment of Organisational Goals : Control helps in achieving business objectives. It ensures regular supply of factors of production and production of high quality of goods and services at economical costs. This is how it helps in achieving, the profitability objective of the business. Further, managerial control includes production control, financial control and other controls which are essential to achieve the objectives of the enterprise.

Judging Accuracy of Standards : Through controlling, a manager can judge whether the standards or targets set are accurate or not. An accurate control system revises standards from time to time to match them with environmental changes.
m Making Efficient Use of Resources : Each activity is performed in accordance with predetermined standards. As a result there is better use of resources and wastage’s and inefficiencies arc reduced.

Improving Motivation of Employees : The existence of clear-cut standards performance has a positive impact on the behaviour of the employees. They feel motivated while performing their duties and work as dedicated employees. As a result, there is higher quality and productivity in the organisation.

Ensuring Order and Discipline : Controlling insists on continuous check on the activities of employees and thus creates an atmosphere of order and discipline. The employees are made aware of their duties and responsibilities very clearly . They know clearly the standards against which their performance will be judged. These standards motivate the employees work efficiently.

Question 6.
(a) Distinguish between marketing and selling. [3]
(b) Explain any four objectives of communication. [4]
(c) Explain the first five steps involved in selecting suitable work force in an organisation. [5]
Answer:
(a)

(b) The objectives of communication are as follows :
To Motivate Employees : Communication seeks to make employees interested in their duties and in the company as a whole. Managers inspire workers to work hard towards the achievement of organisational objectives. Good communication can mould employees’ behavior and create cordial industrial relations. It provides information and instills in each employee a sense of pride in the job. It also reflects management’s interest in employees.

To Promote Managerial Efficiency : Communication aims at improving the efficiency of management. Managers provide guidance to employees through communication.

To Implement Decisions Quickly : Effective communication is designed to implement decisions quickly. Subordinates understand managerial decisions and take steps to implement them through communication.

To Carry Out Change : Free flow of ideas and information reduces workers resistance to new technology and other changes. It makes new ideas acceptable to people and they adapt more quickly to the changing circumstances.

(c) Efficient performance of staffing involves the following activities or steps :
Estimating Manpower Requirements or Human Resource Planning : This is the first step in the process of staffing. It is concerned with determining the number and type of staff required for the organisation. It involves the following steps :

• making inventory of current human resources in terms of their qualifications, training and skills, and
• assessing future human resource needs of all the departments.

Job analysis is concerned with finding details related to all jobs. After conducting job analysis, the managers come to know the qualifications and qualities of employees required to perform each job.

Recruitment : It involves attracting suitable people to apply for vacant jobs in the organisation. Recruitment refers to identification of the sources of manpower availability and making efforts to secure applicants for the various job positions in the organisation.

Selection : Selection is the process of choosing and appointing the right candidates for various jobs in the organisation. It includes receiving and screening of applications, employment tests, interviews and medical examination of candidates together with verification of references.

Placement and Orientation : When a new employee reports for duty , he is to be placed on the job for which he is best suited. Placement is a very important process as it can ensure “right person doing the right job”. If a new employee is not able to adjust on his job. he may be given some training or transferred to some other job.

Orientation is concerned with the process of introducing or orienting a new employee to the organisation. The new employees are familiarized with their units, supervisors and fellow employees They are also to be informed about the working hours, tea or coffee breaks, lunch period, procedure for availing leaves, safety precautions, medical facilities, transport facilities, etc.

Training and Development : Systematic training helps in increasing the skills and knowledge of employees in doing their jobs. Various methods of training can be used to enhance the knowledge and skills of the employees. On-the-job methods are more useful for the operative employees and off-the-job methods can also be employ ed for the supervisory personnel.

Question 7.
(a) Explain Buying and Assembling, as function of marketing. [3]
(b) What is meant by R.T.GS ? Give any two features of R.T.GS. [4]
(c) Management is the dynamic, life giving element in every business. In the context of this statement, explain the importance of management in modern times. [5]
Answer
(a) Buying : Buying is the first step in the process of marketing. It involves what to buy. what quality, how much, from whom, when and at. what price. People in business buy to increase sales or to decrease costs. Purchasing agents arc much influenced by quality , sen ice and price. The products that the retailers buy for resale are determined by the need and preferences of their customers.

Assembling : After buying all the materials purchased it should be collected at a central place, it is called assembling. Assembling is required for all kinds of products whether they are agriculture product, consumer product or industrial product.

(b) Real Time Gross Settlement (RTGS) is an electronic form of funds transfer where the transmission takes place on a real time basis. In India, transfer of funds with RTGS is done for high value transactions, the minimum amount being ₹ 2 lakh. The beneficiary account receives the funds transferred, on a real time basis.

Features of R.T.G S.

• An RTGS electronic fund transfer facilitates fund transfer on real time basis. In case of a holiday, the amount gets credited on the next working das.
• RTGS could also be done offline by submission of the remittance form at the bank branch of the remitter.
• RTGS avoids the cost involved in other instruments of fund transfer such as demand draft.

(c) Importance of Management are as follows :
Helps in accomplishment of organisational goals : It is the management which determines the goals of the organisation and of various departments and functional groups. The goals are communicated to the employees to seek their cooperation and to ensure coordination. All organisational activities are directed towards the organisational objectives. Clear-cut definition of goals is essential for the success of any organisation.

Helps in efficient utilization of resources : Management ensures efficient utilization of resources to reduce costs and increase productivity and profitability Through planning and organisation, management eliminates all types of wastage’s and achieves efficiency in all business operations. Management motivates workers to put in their best performance. This would lead to the effective working of the business.

Creates dynamic organisation : All organisations operate in a dynamic environment. In order to survive and grow, each organisation has to adapt itself according to the needs of the environment. Employees generally resist changes in the organisation. Management helps them to adapt to the changes so that the organisation is able to maintain its competitive edge.

Helps in accomplishment of personal objectives : Management leads the group members to motivate them to achieve their personal objectives while working for the organisational objectives. Management helps them to satisfy their physical, social, and psychological needs so as to develop a cooperative and committed team.

Helps in development of society : Efficient management of resources is equally important for the development of society . According to Peter Drucker. “Management is the crucial factor in economic and social development.” The development of a country virtually depends upon the quality of management of its resources. Efficient management of resources helps in the development of nation in the following ways :

• provision of good quality products and services;
• creation of employment opportunities;
• technological innovations for the betterment of society; and
• contribution to economic growth and development.

Question 8.
(a) Give three points of difference between Taylor’s and Fayol’s Principles of Management
(b) Explain four advantages of raising funds from commercial banks.
(c) Discuss any five points of importance of marketing.
Answer:
(a)

(b) Following are the advantages of raising funds from commercial banks :

• Raising funds from commercial banks are available for the specified period.
• It provides benefit of trading on equity.
• Repayment can be made out of future earnings.
• Interest paid on bank loan is deductible for determining taxable profits.

(c) Importance of marketing are as follows :
Standardization and Grading : Standardization means setting quality standards to achieve uniformity’ in the product. Standardization provides consistent quality assurance to consumers. Consumers are assured about the quality of product offered by the seller. Grading means classify ing the product on certain accepted benchmarks or bases. The bases of classification can be size, quality etc. Grading is necessary when a company is not following strictly the technique of standardization. Through grading, the marketer can get higher price for quality product. Grading is generally done in agricultural products like wheat, rice, pulses, apples, mangoes, etc.

Packaging and La belling : Packaging is traditionally done to protect the goods from damage in transit and to facilitate easy transfer of goods to customers. But now it is also used by the manufacturer to establish his brand image as distinct from those of his rivals. ‘Patanjali Honey’, ‘Boro Plus’, ‘Amul Butter’, ‘Tata Salt’ and ‘All Out’ are some examples in this regard.

Another activity’ connected with packaging is labelling. Labelling means putting identification marks on the package. The label is an important feature of a product. It is that part of a product which contains information about the producer of the product. A label may be a part of a package or may be a tag attached directly to the product. The label is used to communicate brand, grade and other information about the product. It works as a silent salesman.

Branding: It is the process of stamping a product with some identifying name or mark or a combination of both. In other words, branding means giving a distinct individuality to a product. A brand name consists of words, letters and/or numbers which may be vocalized. A brand mark is that part of the brand which appears in the form of a symbol, design, or distinctive coloring or lettering. It is recognized by sight. Some of the popular brands include Airtel, Videocon, Lux, Saridon, Nirma, etc.

Customer Support Services : This function relates to developing customer support services such as after sales services, handling customer complaints and adjustments, providing credit facilities, maintenance services, technical services, etc. All these services aim at providing maximum satisfaction to the customers, which is the key to marketing success in modern days. Customer support services prove very effective in bringing repeat sales from the customers and developing brand loyalty’ for a product.

Pricing: Price is the exchange value of a product. Determination of price of a product is an important function of a marketing manager. Price of product is influenced by the cost of product and services offered, profit margin desired, prices fixed by rival firms and Government policy.

Question 9.
Write short notes on :
(a) Publicity. [4]
(b) Secured Debentures. [4]
(c) Programme, as a type of plan. [4]
Answer
(a) Publicity is an effective non-personal promotional tool which has very high credibility . It is any non-paid mention of an organisation and its products in the mass media like newspapers, journals, radio, T.V., etc. Any organisation can come to the attention of the public by doing something which is newsworthy. For example. Tata Motors got wide publicity when it introduced the cost effective Nano Car. The unique features of the car were highlighted in every media, both in and outside the country . Similarly, a company can get coverage in the news media by sponsoring some sports or cultural event. It need not pay anything to the media for publicity, but has to supply the necessary information to the media.
Publicity has the following salient features :

• Publicity’ is a non-paid form of dissemination of some important information. It does not involve any direct payment as in the case of advertisement.
• It is a non-personal form of communication by the media.
• It does not have any sponsor as the information is passed on to the general public as a news item.

(b) These are the debentures that are secured by a charge on the assets of the company . These are also called mortgage debentures. The holders of secured debentures have the right to recover their principal amount with upward amount of interest on such debentures out of the assets mortgaged by the company. In other words, the company makes a default in payment, the debenture holders can recover their dues from the mortgaged property .

(c) A programme is a detailed statement about a project which outlines the objectives, policies, procedures, rules, tasks, human and physical resources required and the budget to implement any course of action. The minutest details are worked out within the policy framework. A programme is action based and result oriented. It prescribes how resources of enterprise should be used. It is also a single use plan because it is not used in the same form time and again once the objectives have been achieved.

A programme is a sequence of activities directed towards the achievement of certain objectives. It lays down the definite steps which will be taken to accomplish a given task. It also lavs down the time to be taken for the completion of each step. For example, a company may have production programme, sales programme, training programme, expansion programme, etc.

ISC Class 12 Commerce Previous Year Question Papers

ISC Commerce Previous Year Question Paper 2010 Solved for Class 12

• Candidates are allowed additional 15 minutes for only reading the paper. They must NOT start
  writing during this time.
• Answer Question 1 from Part I and seven questions from Part II.
• The intended marks for questions are given in brackets [ ].

Part – I (Compulsory)

Question 1.
Answer briefly each of the questions (i) to (xv). [15 × 2]
(i) List any two features of planning as a function of management.
(ii) HOW are the first directors of a company appointed?
(iii) Mention any two limitations of direct mail advertising.
(iv) What is meant by gangplank?
(v) Mention any two drawbacks of public deposits as a source of finance.
(vi) What is horizontal communication?
(vii) State two functions of exchange with reference to marketing.
(viii) What is the significance of the objects clause in the Memorandum of Association of a company?
(ix) What is staffing?
(x) What are Multinational Companies?
(xi) Give any two conditions under which a cheque is dishonoured by a banker.
(xii) Explain any two demerits of a joint-stock company.
(xiii) What are mutual funds?
(xiv) Who is an alternate director?
(xv) What are retained earnings?
Answer:
(i) Planning is selecting priorities and results (goals, objectives, etc.) and how those results will be achieved. Planning typically includes identifying goals, objectives, methods, resources needed to carry out methods, responsibilities and dates for completion of tasks.

(ii) First directors of a company are appointed by the original investors (members or subscribers) usually from among themselves and are named in the Articles of Association. However, mention in the Articles does not constitute a valid appointment until the person gives his or her signed consent to hold the office of the director, and is not disqualified (for any reason) from holding that office.

(iii) (a) There is a relatively high cost per contact.
(b) It may be difficult to obtain updated, accurate mailing lists.

(iv) A Gang Plank is a temporary arrangement between two different points to facilitate quick and easy communication as explained below:

In the figure given, if D has to communicate with G he will first send the communication upwards with the help of C. B to A and then downwards with the help of E and F to G which will take quite some time and by that time, it may not be worth therefore a gangplank has been developed between the two.
Gang Plank clarifies that management principles are not rigid rather they are very flexible. They can be moulded and modified as per the requirements of situations.

(v) (i) Public deposits are an uncertain and unreliable source of finance.
(ii) Public deposits distort the interest rate pattern.
(iii) Public deposits are generally not available to new companies and those with uncertain earnings.

(vi) Horizontal communication is that communication which flows in the same level of management For example – communication between the manager of the sales department and manager of purchases department.

(vii) (a) Exchange helps in the process of marketing.
(b) Exchange creates utility.

(viii) The Objects clause is the most important clause of the company. It specifies the activities which a company can cany on and which activities it cannot carry on. The company cannot carry on any activity which is not authorised by its Memorandum of Association. This clause must be specified.

• Main objects of the company to be pursued by the company on its incorporation
• Objects incidental or ancillary to the attainment of the main objects
• Other objects of the company not included in (i) and (ii) above.

In case of the companies other than trading corporations whose objects are not confined to one state, the states to whose territories the objects of the company extend must be specified.

(ix) Staffing is the management function devoted to acquiring training, appraising and compensatin’- employees.

(x) A multinational company is a company having production and distribution centres located in more than one country. It carries on business not only in the country’ of its incorporation but also in other countries. For example-Sony, HP, etc.

(xi) A cheque can be dishonoured by a banker in the following conditions:

• When there is no sufficient balance in the account on which the cheque has been issued.
• If there is any alteration on the cheque and that alteration has not been authorized by the account holder.
• When the signatures put on the cheque do not match with the signatures stored in the records of the bank.

(xii) (a) Unsatisfactory management
(b) Difference of opinions
(c) Heavy expenses of formation.

(xiii) A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. The mutual fund will have a fund manager that trades the pooled money on a regular basis. Currently, the worldwide value of all mutual funds totals more than $30 trillion.

(xiv) An alternate director is a temporary’ director who can represent an elected director at a meeting of the board of directors, provided (1) the articles of association of the company allow for such arrangement and the other elected directors of the firm do not object.

(xv) Retained earnings are the undistributed profits of the company. These earnings help the company to avoid external borrowings.

Part – II
(Answer Any Seven Questions)

Question 2.
(a) Briefly explain any four demerits of a Government Company. [4]
(a) Briefly explain any four demerits of a Government Company. [4]
(b) What is a private limited company? State any eight privileges enjoyed by it. [6]
Answer:
(a) Demerits of Government Companies are:

• Lack of accountability: A government company is not fully responsive to the parliament or the general public. It enjoys special privileges. It may not act for the public interest.
• Political interference: In actual practice politicians and bureaucrats interfere in the functioning of Government companies. Such interference cause lack of ness in management and adverse effect in proficiency.
• Indifferent management: Government companies are generally managed by Government servants and other Government officers. They are not hard-working and take little personal interest in running the company on a sound business line. The efficiency of operations is low. Operational costs are high.

(b) Private Company means a company which by its articles of association.

• Restricts the right of members to transfer its shares.
• Limits the number of its members to fifty. In determining this number of 50 employee members and ex-employee members are not to be considered.
• Prohibits any invitation to the public to subscribe to any shares in or the debentures of the company.

If a private company contravenes any of the aforesaid three provisions, it ceases to be a private company and loses all the exemptions and privileges which private company is entitled.
Privileges:

• Limited liability,
• The simple and easy formation,
• Immediate commencement of business upon incorporation,
• Liberal payment of remuneration and loans to directors without any restrictions,
• Easier inter-corporate loans
• Lesser disclosure requirements
• Tremendous ease in operation
• Two directors are enough
• Two Shareholders are adequate
• Need not declare a dividend

Question 3.
(a) Explain any four factors which determine the working capital requirement of a business. [4]
(b) What are special financial institutions? Discuss any four advantages of obtaining funds from such institutions. [6]
Answer:
(a) Factors affecting Working Capital

• Type/Nature of Business: Working capital level is generally higher in manufacturing-based versus service-based organisations.
• Depends on the Volume of Sales: The higher the sale, the higher is the level of working capital required.
• Seasonality: Peak seasons like festive seasons require a higher level of working capital.
• Length of Operating And Cash Cycle: A longer operating and cash cycle increases the level of working capital.

(b) Special Financial Institutions: A wide variety of financial institutions have been set up at the national level. They cater to the diverse financial requirements of the entrepreneurs. They include all India development banks like IDBI, SIDBI, IFCI Ltd, UBI; specialised financial institutions like IVCF, ICICI Venture Funds Ltd, TFCI; investment institutions like LIC, GIC, UTI: etc.
Advantages of Special Financial Institutions are:

• They provide finance for the growth of the industry.
• They accelerate the growth of the industrial sector by encouraging them to have better industrial output.

Question 4.
(a) Explain the primary functions of commercial banks.
(b) What is a debenture? Explain any two advantages and any two disadvantages of debentures from the viewpoint of a company. [6]
Answer:
(a) Primary Functions of Commercial Banks
1. To Receive Deposits
Receiving deposits is the most important function of commercial banks. The deposits can be accepted in the form of the following types:
(i) Saving Deposits: The people of middle and lower classes who wish to save a part of their income can invest in Saving Bank Accounts. Deposit in these accounts also earns interest at the rate announce by the RBI from time to time.

(ii) Demand Deposits: These deposits are also called current deposits. The current accounts are meant for big customers. There is no limit on the number of withdrawals, amount, etc. in the current account deposits. There is no provision of paying interest on such type of deposits. These accounts are generally opened by the businessmen.

(iii) Time Deposits: These deposits are accepted by the banks in the form of fixed deposits. These deposits are accepted for a fixed time period. The minimum time period for accepting a time deposit is 14 days. These deposits earn a higher rate of interest as compared to saving deposits. Time deposits are accepted for the maturity period of 1 year, 2 years, 3 years and so on respectively. Customers can take loan up to 75% of their deposit against the security of Fixed Deposit Receipt (FDR).

2. Sanction of Loans and Advances
The income of the banks is generated by sanctioning loans and advances to the eligible persons. The interest is charged at a higher rate. This rate of interest is generally higher than the saving deposit or fixed deposit rate allowed to the customers.
Types of Facilities under Loans and Advances
(i) Overdraft Facility: Banks allow their genuine customers to withdraw up to a certain limit in excess of the borrower’s deposits.
(ii) Advances: Banks generally provide short term and medium-term advances. Short term advances are sanctioned for a period up to 1 year. Medium-term advances are sanctioned for a period of more than 1 year but not exceeding 3 years.
(iii) Discounting Bill of Exchange: Banks provide advances against the bills of exchange even before the customer receives money from the parties. These bills are discounted by the banks and payment is made to the customer. The bill is realised by the bank when a party sends money to it.

(b) A debenture is a document issued by a company as an evidence of a debt from the company with
or without a charge on the assets of the company.

Advantages of Debentures from View Point of a Company:

• Funds raised by the company by way of debentures are required to be repaid during the lifetime of the company at the time stipulated by the company. As such, debenture is not a source of permanent capital. It can be considered as a long term source.
• In financial terms, debentures prove to be a cheap source of funds from the company’s point of view.

Disadvantages of Debentures from View Point of Company:
(i) By issuing the debentures, a company is under two types of risks. These are payment of the interest at a fixed rate, irrespective of the non-availability of profits and repayment of the principal amount at the pre-decided time. If earnings of the company are not stable or if the demand for the products of the company is highly elastic, debentures prove to be a very risky proposition for the company. Any adverse change in the earnings or demand may prove to be fatal for the company.

(ii) Debentures are usually a secured source for raising the long term requirement of funds and usually the security offered to the investors is the fixed assets of the company. A company which requires less investment in fixed assets, may find debentures as a wrong source of raising the long term requirement of funds as it does not have sufficient fixed assets to offer as security.

Question 5.
(a) Write short notes on [4]
(i) Managing director
(ii) Manager
(b) State any six powers of the directors of a company. [6]
Answer:
(a) (i) A managing director means a director who is entrusted with substantial powers of management
which would not otherwise be exercisable by him. The “substantial powers” of management may be conferred upon him by virtue of an agreement with the company, or by a resolution of the company or the Board or by virtue of its memorandum and articles. The powers so conferred are alterable by the company.
A managing director occupies the dual capacity of being a director as well as an employee of the company. The day to day management is entrusted to the managing director who can exercise powers of management without referring to the Board.

(ii) A manager of a company is the in-charge of a team. He makes plans, directs his team, motivates them to achieve their goals. In a company, every department can have a manager, for example, Manager Marketing, Manager Accounts, etc. The duties of different managers may vary according to their assignments.

(b) The Board of Directors is entitled to exercise all such powers and do all such acts and things as the company is authorised to exercise by its Memorandum of Association and Articles of Association. In general, the Board of Directors has the power of superintendent, control and direction over the Managing Director and the Manager who are the persons entitled to manage the affairs of the company. The Board of Directors can exercise the following powers:

1. Powers to be exercised at Board Meetings: The following powers must be exercised in a Board meeting and cannot be delegated to other managerial personnel:
   • To issue debentures;
   • To issue and allot shares;
   • To fill up casual vacancies on the board;
   • To sanction contracts in which one or more directors have an interest;
   • To make calls on shareholders in respect of money unpaid on their shares;
   • To forfeit shares;
   • To recommend dividends;
   • To decide the terms and conditions of issue of shares and debentures;
2. Other powers:
   • To borrow money by means other than through debentures say through public deposits.
   • To invest the company’s funds properly.
   • To make loans.
   • To make contracts for the purchase and sale of the property on behalf of the company.

Question 6.
(a) Describe the importance of communication. [4]
(b) Explain any six differences between written and oral communication. [6]
Answer:
(a) Importance of Communication in Business is mentioned below:

• It can promote managerial efficiency and performance.
• It provides a necessary basis for direction and leadership.
• It is essential for decision-making and planning to achieve the goals.
• It is helpful in planning and coordinating the activities of the business.
• It plays a vital role in achieving maximum production with a minimum of cost.
• It is the foundation for democratic management in the organisation.
• It creates mutual trust and confidence between the management and the workers. Therefore, it is a basis of sound industrial relationships.
• It improves the morale of workers as they can easily communicate their grievances, troubles, problems, etc. to the management.
• It is a tool of effective control in the hands of management.
• It creates a good image of the business in society.

(b) Difference between Written and Oral Communication:

Question 7.
(a) Explain any four techniques of sales promotion. [4]
(b) What is salesmanship? Explain any four qualities a good salesman should possess. [6|
Answer:
(a) Techniques of Sales Promotion.
(i) Free samples: Distributing free samples is one of the most popular techniques of sales promotion. You might have received free samples of shampoo, coffee powder, etc. while purchasing various items from the market. Sometimes these free samples are also distributed by the shopkeeper even without purchasing any item from his shop. These are distributed to attract consumers to try out a new product and thereby create new customers.

(ii) Premium or Bonus offer: In such a technique, the free additional quantity of a product is given to the consumer in the same price of the product or some free related item is given. A milk shaker along with Nescafe, a toothbrush with 500 grams of toothpaste, 25% extra in a pack of one kg. are the examples of premium or bonus is given free with the purchase of a product They are effective in inducing consumers to buy a particular product.

(iii) Exchange scheme: This technique includes offering the exchange of old product for a new product at a price less than the original price of the product. This is useful for drawing attention to product improvement.

(iv) Price-off-offer: Under this offer, products are sold at a price lower than the original price. For Example-Rs. 5 off on purchase of 250 grams of Red Label Tea.

(v) Coupons: Sometimes, coupons are issued by manufacturers either in the packet of a product or through an advertisement printed in the newspaper or magazine or through the mail. These coupons can be presented to the retailer while buying the product. The holder of the coupon gets the product at a discount.

(b) Salesmanship is a personal action or effort on the part of an individual which is intended to bring about the sale of the goods for sale. More broadly speaking, salesmanship is the art of selling something to somebody, and everything which contributes to the consummation of this exchange is necessarily a part of salesmanship.
Qualities of a good salesman are:

• He should have self-confidence.
• He should be persuasive and not of critical temperament.
• He should have qualities of sincerity, maturity and produce a cheerful smile.
• He should be of an analytical mind.

Question 8.
State and explain any five principles of scientific management as laid down by Taylor. [10]
Answer:
The basic principles of scientific management are as follows :
(i) Science not Rule of Thumb: Each and every job and the method of doing it should be based on scientific study and analysis rather than on trial and error. The task to be performed should be scientifically planned. The materials, equipment and working condition should be standardised. The amount of work to be done should be decided through objective study.

(ii) Harmony not Discord: There should be healthy co-operation between employer and employees. Taylor advocated a complete mental revolution on the part of both management and workers. Management should adopt an enlightened attitude and share the gains of productivity’ with workers. Workers on their part should work with discipline and loyalty.

(iii) Maximum not Restricted Output: Conflict between management and workers arises mainly on the division of surplus. Taylor suggested that the best way to resolve the conflict is to increase the size of surplus so that each side can have a larger share. Management and w orkers have a common interest in increasing productivity.

(iv) Division of Work and Responsibility: Taylor suggested separation of planning from operational work. Management should concentrate on planning the job of workers and workers should concentrate on the performance of work.

(v) Scientific Selection, Training and Development of Workers: Workers should be selected and trained to keep in view the job requirements. Each and every worker should be encouraged to develop his full potential.

Question 9.
(a) Explain the steps involved in Organising as a function of management. [4]
(b) Discuss the importance of Management for the successful functioning of an organisation. [6]
Answer:
(a) Steps involved in organizing as a function of management:
1. Identification of activities: All the activities which have to be performed have to be identified first. For example, preparation of accounts, making sales, record keeping, quality’ control, inventory control, etc. All these activities have to be grouped and classified into units.

2. Departmentally organizing the activities: In this step, the manager tries to combine and group similar and related activities into units or departments.

3. Classifying the authority: Once the departments are made, the manager likes to classify the powers and its extent to the managers. This activity of giving a rank in order to the managerial positions is called hierarchy. This helps in achieving efficiency in the running of a concern. This helps in avoiding wastage of time, money, effort, in avoidance of duplication or overlapping of efforts.

4. Co-ordination between authority and responsibility: Relationships are established among various groups to enable smooth interaction toward the achievement of the organizational goal. Each individual is made aware of his authority and he/she knows who they have to take orders from and to whom they are accountable and to whom they have to report.

(b) 1. Management helps in Achieving Group Goals: It arranges the factors of production, assembles and organizes the resources, integrates the resources in an effective manner to achieve goals. It directs group efforts towards achievement of pre-determined goals.

2. Optimum Utilization of Resources: Management utilizes all the physical and human resources productively. This leads to efficacy in management. Management provides maximum utilization of scarce resources by selecting its best possible alternate use in industry from out of various uses. It makes use of experts, professional and these services leads to the use of their skills, knowledge, and proper utilization and avoids wastage.

3. Reduces Costs: Management gets maximum results through minimum input by proper planning and by using minimum input and getting maximum output. Management uses physical, human and financial resources in such a manner which results in the best combination. This helps in cost reduction.

4. Establishes Sound Organisation: To establish sound organisational structure is one of the objectives of management. Management fills up various positions with the right persons, having the right skills, training and qualification.

Question 10.
Write short notes on:
(a) Branding and labelling. [3]
(b) Turnkey Projects. [3]
(c) Role of Promoters. [4]
Answer:
(a) A brand is the idea or image of a specific product or service that consumers connect with, by identifying the name, logo, slogan or design of the company who owns the idea or image. Branding is when that idea or image is marketed so that it is recognizable by more and more people, and identified with a certain service or product when there are many other companies offering the same service or product. Branding is a way to build an important company asset, which is a good reputation. Branding can build an expectation about the company services or products and can encourage the company to maintain that expectation or exceed them, bringing better products and services to the market place.

A label gives the consumer the necessary information on the product he wants to buy. It includes the name of the product, the name of the firm producing it, the price the nutritional information, the ingredients, the instructions of use (if necessary), the date of production and that of minimum durability, and other particulars.

But product labels never give the consumer the whole story of information. The consumer is told what the item is made of, but no information is given about the people who worked on it and the machinery used. Nothing is known on the conditions endured by the workers or maybe the abusive treatment, or forced contraception. So when one thinks of it, no one really knows what he is buying.
Labelling is sometimes too much complicated for certain people to understand and it that is why we need to make it more user-friendly.

(b) Turn-key refers to something that is ready for immediate use, generally used in the sale or supply of goods or services. Since full responsibility for the project rests upon the contractor, the number of interfaces is reduced to the one point of contact instead of a multitude of subcontractors. This gives the customer much greater visibility into the project process as well as leaving the task of coordinating all the subcontractors to the one responsible primary contractor.
Turnkey projects tend to have short project execution times, rapid return on investment, and minimal delays.

(c) Promoters perform the following functions:

• Conceive a business opportunity or the idea of starting a new business.
• Conduct a preliminary analysis of the idea to determine its profitability and feasibility.
• Carry out a detailed investigation in order to determine the nature, scope and requirements of the proposition.
• Appoint brokers, underwriters, solicitors and bankers for the company.

ISC Class 12 Commerce Previous Year Question Papers

ISC Commerce Previous Year Question Paper 2018 Solved for Class 12

Maximum Marks: 80
Time allowed: Three hours

• Candidates are allowed additional 15 minutes for only reading the paper. They must NOT start writing during this time.
• Answer Question 1 (Compulsory) from Part I and five questions from Part II, choosing two questions from Section A, two questions from Section B and one question from either Section A or Section B.
• The intended marks for questions or parts of questions are given in brackets [ ].
• Transactions should be recorded in the answer book.
• All calculations should be shown clearly.
• All working, including rough work, should be done on the same page as, and adjacent to the rest of the answer.

Part – I (20 Marks)
Answer all questions.

Question 1. [10 × 2]
Answer briefly each of the questions (i) to (x):
(i) Name the two dimensions of business environment.
(ii) What is meant by factoring ?
(iii) What is a debit card ?
(iv) Why is management considered to be a discipline ?
(v) Explain any two sources of external recruitment used in today’s world.
(vi) Name the four elements of directing, as a function of management.
(vii) Distinguish between achertisement and publicity.
(viii) Mention two types of markets, on the basis of the position of buyers and sellers.
(ix) The producer of Lime Fresh’ tea introduces ‘Buy one Get one’ scheme on all the products of ‘Lime Fresh’. Identify the promotional strategy’ used by the producer. State any one objective that could be met by this strategy.
(x) Expand the following terms :
(a) RTGS
(b) NEFT
Answer:
(i) The two dimensions of Business Environment are :

• Micro Environment
• Macro Environment

(ii) Factoring implies raising finance through the sale or mortgage of book debts. The finance companies provide finance to business concerns through outright purchase of accounts receivables. The debtors of the firm make payments to it which in turn forwards them to the finance company.

(iii) A people can get a debit card by depositing money in the bank. The card holder can make immediate payment for the goods purchased or sendees availed with the help of debit card availed provided the seller has the terminal facility. Debit card can also be used to withdraw money from the ATM.

(iv) Management is considered to be a discipline because it helps to improving discipline among the employees by exercising authority, assigning responsibility and introducing procedures of evaluation and control.

(v) Two sources of external recruitment used in today ‘s world are :
Advertisement : Advertisement in newspaper, business magazines and journal is very common source for fulfilling the senior positions in an organisation. The advantages of this method is that adequate information about the organisation and the job can be given to allow self-screening by prospective candidates.

Employment Exchange : Employment exchanges register the names of job seekers and maintain records of their qualifications, experience etc. These are run by the government and act as a link between the job-seekers and employers.

(vi) The elements of directing are :

• Supervision
• Motivation
• Leadership
• Communication

(vii) The difference between Advertisement and Publicity :

(viii) Primary and Secondary Market.

(ix) Sales promotion strategy is used by the producers.
Objective: It will increase the immediate sales.

(x) (a) RTGS: Real Time Gross Settlement.
(b) NEFT: National Electronic Funds Transfer.

Part – II (60 Marks)
Answer any five questions.

Question 2.
(a) Explain any three barriers to communication. [3]
(b) Explain any four features of Business Environment. [4]
(c) Discuss the need for the principles of management. [5]
Answer:
(a) Three barriers to Communication are :
Semantic Barriers : These are related with the problems in the process of encoding and decoding of message into words or impressions. People interpret words and symbols in terms of their own experience and thinking. It includes faulty translations, technical jargon, unclarified assumptions etc.

Organisational Barriers : These arc related to organisation’s structure, authority, relationships, rules and regulations etc. Due to long lines of communication, flow of information gets delayed and distorted. Every layer of authority cuts off a bit of information, particularly in upward communication.

Personal Barriers: Personal factors like judgement, emotions and social values create a psychological distance between the sender and the receiver. When there is lack of mutual trust and confidence between sender and receiver of the message, communication is not effective.

(b) Business environment can be defined as the sum total of external factors that influence the functioning of a business enterprise. The main features of Business Environment arc given below:
Specific and general forces: Business environment is made up of both specific and general forces. General forces such as economic, social, political, legal conditions indirectly influence the business operations. Whereas specific forces refers to customers, competitors, investors etc. which have a direct effect on the day-to-day working of the business.

Dynamic nature: Business environment is dynamic in nature i.e., it keeps on changing. Entry of new competitors in the market, development of new technology , shifts in the preferences of consumers are examples of environmental changes.

Complexity: Business environment is complex because it consists of several interrelated elements which keeps on changing. Many forces constitutes the business environment. For example, it is difficult to know the impact of economic, social, political, technological and other forces on changes in demand for a product or service.

Uncertainty : Business environment is very uncertain as one cannot predict future events particularly changes in technology and fashion which occur fast and frequently. Its dynamic nature makes it more challenging to handle uncertainty.

(c) Principles of management are required for the following reasons :
Providing managers with useful sights into reality : With the help of principles of management, the organisation will increase the managerial efficiency by adding to their knowledge and ability to understand the various situations. These principles enables managers to solve problems in a methodical way without wasting time and effort in trial and error. It also help to improve the art of management by suggesting how things should be done to get good results.

To train managers : Principles of management provide a conceptual framework for scientific and systematic training and development of managers. It is central point of management theory . Formal methods of training managers in institutes and univ ersities are possible only when there are fundamental principles and concepts.

To evaluate managerial behaviour: Principles are help to prescribe what one should do to manage things in a given situation. These principles attempt to evaluate the behaviour of managers.

To fulfill the social goals : Management principles enable managers to make optimum use of human and material resources. The principles of management and management theory have been devised in such a way that they help in fulfilling these responsibilities. Managers coordinate efforts of the people so that individual objectives get translated into social attainments.

To improve research : Growing popularity and utility of management principles have attracted experts towards their study and analysis. It also help the managers in taking decisions based on the objective assessment of the situation, free of any bias and prejudice. It will helped in expanding the horizon of knowledge in management.

Question 3. .
(a) Discuss three advantages of ploughing hack of profit, from the company’s point of view. [3]
(b) Explain why management is considered to be a science. [4]
(c) What is labeling ? Explain four advantages of labeling. [5]
Answer:
(a) Ploughing back of profits refers to the process of retaining a part of the net profit year after year and reinvesting the same in business. There are some advantages of ploughing back of profits are :
(i) The company can undertake its plans for expansion, growth and modernization without bothering about conditions in the capital market.
(ii) Ploughing back of profits add to the financial strength and creditworthiness of the company.
(iii) Reserves created by ploughing back of profits can be used to stabilize the rate of dividend on equity shares.

(b) Management is considered to be science because :
Systematic Body of Knowledge : Management is a systematized body of knowledge based on cause and effect relationship e.g., genetic principle derived by Darwin. Like all other organized activity, management has its own vocabulary of terms through which managers communicate with each other.

Observations and Experiments: The principles of management have also been developed over a period of time, on the basis of experimentation and observation. Management experts and practitioners have developed the knowledge after careful analysis, inquiry and experience. Management deals with human beings and human behavior which cannot be scientifically predicted.

Cause and Effect Relationship : Management Principles builds the cause and effect relationship between various factors. For example, dual subordination leads to confusion.

Universal Validity of Principles : The principles of science are universally applicable i.e.. these principles hold tme under each and every situation. These principles have universal validity. These principles have to be modified according to the situation.

(c) La belling refers to designing the label and putting it on the package. A label is a small slip placed on the product to denote its nature, contents, ownership, destination etc. It is a medium through which the manufacturer gives necessary information to the user or consumer.
Various advantages of labeling are:

• A carefully designed label helps in attracting the customers and induces them to purchase the product.
• It avoids price variations by publishing the price on the label.
• It helps in identifying the product from among various products available in the market.
• It is a guarantee for the standard of the product. Hence, it raises the prestige of the product and of the manufacturer.
• It is social service to customers, who very often do not know anything about the product’s characteristics features.

Question 4.
(a) Give three points of difference between a product and a service. [3]
(b) What are the different types of short term financial assistance provided by the commercial banks to business houses ? [4[
(c) Explain any five types of debentures through which a company can collect borrowed capital from the public. [5]
Answer:
(a) Difference between a product and a service :

(b) There are different types of short term financial assistance provided by the commercial banks to business houses :
Cash Credits: It is revolving credit agreement under which a borrower is allowed to borrow upto a certain limit. Cash credit is of two types : Clean Cash Credit and Secured Cash Credit. In both types of cash credit, the borrower has to pay interest only on the amount actually utilized.

Discounting of Bills: Commercial banks provide short term finance to business concerns by discounting their bills of exchange, promissory notes and hundies. Banks pay the price lower than the face value and charge some commission.

Loan and Advances: A loan is a direct advance made in lump sum which is credited to a separate loan account in the name of the borrow er. These are usually secured by pledge of specific assets which are in the actual or constructive possession of the bank.

Bank Overdrafts: Under this arrangement, a customer having a current account with the bank is allowed to overdraw his account uto a specified amount. Interest is charged on the amount actually overdrawn and not on the amount sanctioned by the bank.

(c) Five types of debentures are :
Mortgage and Unsecured Debentures : Mortgage debentures are those debentures which are secured by either a fixed charge or a floating charge on the assets of the company. In case, the company makes a default in payment, the debentureholders can recover their dues from the mortgage property. Whereas unsecured debentures are those debentures which are not secured by a charge.

Redeemable and Irredeemable Debentures: Redeemable debentures are repayable on a predetermined date or at any time prior to their maturity at the option of the company. Irredeemable debentures are those debentures that are not repayable during the lifetime of the company and hence will be repaid only when the company is wound up.

Bearer Debentures : Bearer debentures can be transferred by mere delivery as no record of such debentures is kept in the Register of Debentureholders. Payment of interest is made on production of coupons attached to the debenture. No legal formalities are required for their transfer and no formal notice or intimation to the company is necessary.

Registered Debentures : These arc the debentures, in respect of which the names, addresses and particulars of holdings of the debentureholders are entered in a register kept by the company. Such debentures can be transferred only by transfer deed or intimation to the company and not mere delivery.

(v) Convertible and Non-Convertible Debentures: In case of convertible debentures, the debentureholders arc given the option to convert their debentures into equity shares after a specified period. Debentureholder have an option of exchanging the whole or a part of amount of their debentures for shares. In case of non-convertible debentures, these are those debentures which do not earn the right to be converted into equity shares.

Question 5.
(a) Explain the need for consumer protection. [3]
(b) ‘Planning is not a guarantee of success.’ In this context, explain the limitations of Planning. [4]
(c) Explain the following principles of management, as advocated by Henry Fayol: [5]
(i) Stability of tenure
(ii) Discipline
(iii) Unity of command
(iv) Unit}’of Direction
(v) Order
Answer:
(a) Consumer protection is necessary due to following reasons :
Consumer is the purpose of business : Customer is the foundation of business and keeps it in existence. It is a consumer who not only relates to repeat sale but also provide positive feedback to other customers and thus results in an increased consumer base for business.

Business uses society’s resources : Business exercises considerable power and influence over society . It is the duty of the business to use the resources in such a way that the interests of society in general and consumers in particular are not damaged. Consumer’s protection aims at satisfying them and thus protect the long term interests of the business itself.

Ethics : Leading business houses all over the world have been founded on ethical values and they have followed high standards of ethics. To take care of consumer’s interests and to avoid any form of their exploitation is the moral duty of every business. Therefore, consumer protection is the ethical obligation of business.

(b) “Planning is not a guarantee of success.” It suffers from various limitations :
Planning may not work in dynamic environment: The environment in which a business exists is very dynamic. Changes in technology, changes in government policies, legislative enactments, industrial unrest in the country etc. are important external limitation of planning. Thus, it becomes very difficult to forecast the future when the economic policies of the gov ernment keeps on changing continuously.

Time-Consuming : Considerable time is required for collection, analysis and interpretation of information for planning. Sometimes, a lot of time is taken in formulating the plans, as a result of which very less time is left to implement these plans. Planning is not practicable during emergencies and crisis w hen on the spot decisions are necessary.

Rigidity : In an organisation, a well defined plan is drawn to achieve some specified goals within a specified period of time. Employees become more concerned with observing the programmes and procedures rather than achieving the goals. They have to strictly adhere to the formulated plans irrespectiv e of changes in the environment. Therefore, rigidity in plans may create difficulty in an organisation.

Costly Process : Planning is an expensiv e process. The cost is in terms of money, time and effort. Moreover, sometimes the cost incurred in formulating plans turn out to be higher than the benefits actually received from these plans. Management must exercise intelligent judgement to balance the expenses of preparing plans against the benefits derived from them.

(c) Stability of Tenure: According to Fayol. “Employee turnover should be minimized to maintain organisational efficiency”. Stability of tenure helps to develop loyalty and attachment on the part of employees. If an employee receives transfer order by the time he learns and gets settled in a job it will be leading to wastage of resources.

Discipline : Discipline implies obedience, respect of authority and observance of the established rules and regulations. To achieve proper discipline, skilled superiors at all levels, clear and fair agreements and judicious application of penalities etc. are required.

Unity of Command : According to this principle, an individual employee should have only one superior from whom he should receive orders and to whom he should be responsible. If a subordinate has more than one boss, dual command will undermine authority’, weaken discipline, divide loyalty and create confusion, delays etc.

Unity of Direction : According to this principle, activities having the common goal must have one head and one plan. Each group of activities with the same objective must have one plan of action and must be under the control of one superior.

Order: According to Fayol. “People and material must be in suitable places at appropriate time for maximum efficiency “.

The order can be of two types :

1. Material Order: It implies a proper place for everything and everything in its right place.
2. Social Order: Arrangement of people is referred to as social order.

Question 6.
(a) Explain any three types of training that can be given to an employee. [3]
(b) What is Branding ? Give any three advantages of branding to the marketers. [4]
(c) Explain the various steps involved in the process of organizing. [5]
Answer:
(a) Types of training are :
Films : It helps to provide information and demonstrate skills that cannot be easily presented in lectures. Films in conjunction with conference can be a very effective method.

Vestibule Training: Employees learn their jobs on the equipment’s which they will be using while doing the actual job. This method is costly and it is used in case of sophisticated machinery and equipment.

Lectures : This method is used to convey specific information, rules and procedures. Audio-visuals are used to make lectures more interesting.

(b) Branding is the process of assigning a distinctive name or symbol to a product by which it is to be known and remembered. Branding enables a marketer to distinguish its products from its competitors’ products.
Advantages of branding are:

Product Identification : Branding helps customers in identifying the product. When a customer is satisfied with a particular brand of a product, he repeatedly purchases it. For example, a customer who is satisfied with Lux’ toilet soap need not inspect it every time he buys the product.

Product Differentiation : Branding enables a marketer to distinguish its product from its competitors’ products. This will help the firm to secure and control the market for its product.

Differential Pricing: Branding enables a firm to charge a different price for its product than that charged by its competitors. This is because when the customer becomes habitual or used to any particular brand of a product, they don’t mind paying higher price for it.

(c) The various steps involved in organizing process which are given below :
Division of Work: The first step in organizing is to divide the total work to be done into specific jobs. Division of work facilitates specialization in work and skills which is essential, as no individual can perform the entire work efficiently and effectively. While dividing work, care should be exercised to ensure that all the activities required to achieve organisational goals are identified.

(ii) Grouping Jobs or Activities : The process of grouping the activities of similar nature under same departments is called departmentalization. Work divided into jobs is combined to facilitate unify of effort. The departments so created are linked together on the basis of their interdependence. Following are the various ways of departmentalization:

• On the basis of functions.
• On the basis of type of products manufactured.
• On the basis of territory.

Assigning Duties : Each group of activities is assigned to an individual best suited to perform it. In order to ensure effective performance in an organisation, it is essential that a balance is created between the nature of a job and ability of the employee responsible for that job.

Delegation of Authority: After assignment of duties, appropriate authority is delegated to each individual. A chain of command from the top manager to the individual at the lowest level is created through delegation of authority .

Establishing Reporting Relationships : It creates hierarchy management in which top management enjoys maximum authority and as one moves downward, the authority’ decreases. It establishing reporting relationship facilitates coordination amongst various departments. Interrelationships between different positions are clearly defined so that everybody knows from whom he is to take orders and to whom he can issue orders.

Question 7.
(a) Explain any three disadvantages of borrowing funds from specialized financial institutions. [3]
(b) Briefly explain any four types of working capital required by a business concern. [4]
(c) Explain Maslow’s theory. [5]
Answer:
(a) The three disadvantages of borrowing funds from specialized financial institutions are :

• Certain restrictions such as restriction on dividend payment are imposed on the powers of the borrowing company by the financial institutions.
• The concern requiring finance from special financial institutions has to submit itself to a thorough investigation.
• The high interest rates charged by the financial institutions which makes this form of finance very extravagant.

(b) Working capital means the capital invested in working assets or current assets such as cash, stock of goods, debtors and short term investments etc. The various types of working capital are:
Permanent Working Capital: It refers to the minimum amount of working capital required permanently to operate the minimum level of business activity. It determine the financing requirement in the case of fixed assets is simply the cost of the asset. It is of two types: Initial and Regular working capital.

Variable Working Capital : It is the difference between net working capital and permanent working capital. The amount of temporary’ working capital depends upon the extent of extra demand in season. It is of two types : seasonal and special working capital.

Gross Working Capital : Gross working capital refers to the total amount of funds invested in the current assets.
Gross Working Capital = Book value of current assets

Net Working Capital : Net working capital means the excess of current assets over current liabilities. Current assets include cash at bank, sundry’ debtors, cash in hand, bills receivable etc. Current liabilities include bills payable, sundry creditors, short term loans etc.
Net Working Capital = Current assets – Current liabilities

(c) Maslow Theory: Abraham H. Maslow, an American psychologist has developed a classification of human needs which is known as ‘Hierarchy of Needs’. Needs are those desires, wants or urges of individuals which influence their behavior.
Types of Needs:
Physiological Needs : These are the basic needs which a person is required to satisfy first of all in order to survive in life. These include the need for air. water, food, sleep, sex etc. As these needs are concerned with the sheer survival, they are at the base in the hierarchy of needs. An organisation can satisfy the physiological needs of its employees by offering good salary and comfortable working conditions.

Safety and Security Needs : These needs arise after the satisfaction of physiological needs. These includes physical safety against danger and economic security against old age, sickness etc. An employer can satisfy safety needs of his employees by offering job security, pension, gratuity, housing etc.

Social and Affiliation Needs : These are related to the natural desire to socialise or interact with others. The person needs love, affection, a sense of belonging, association, friendship with others. Once the people get their physiological and safety needs satisfied, the affiliation needs become more active.

Ego Needs : Ego needs include factors like self respect, autonomy status, recognition and attention from others. Organisation can satisfy these needs by offering challenging jobs, recognizing good performance, providing good job titles etc.

Self Actualization Needs : Self actualization needs refers to need to grow and self fulfillment. These needs arise after the satisfaction of all previous needs i.e., physiological, safety, social, ego needs. For example, A manager may provide opportunities for continuous learning, encourage creativity, grant independence and allow risk taking to help employees satisfy their self actualization needs.

Question 8.
(a) Discuss the features of good packaging. [3]
(b) Explain the advantages of equity shares, as a source of finance. [4]
(c) Discuss any five functions of marketing. [5]
Answer:
(a) Packaging plays a very significant role in the marketing success or failure of many product especially for non-durable consumer products. It implies placing products in suitable packages for delivery of the product to customer or for the purpose of storage and transport.
A good package should have following features :

• It should be convenient to handle and use. It should be easy to open and close.
• It should be safe and should be capable of protecting the product.
• It lends individuality and prestige to the product.
• A good package can grab attention, describe the product and induce customers to buy it.

(b) Advantages of equity shares are:

• Equity shares impose no burden on the company resources because the dividend is payable only at the discretion of the management.
• The liability of equity shareholders is limited to the face value of shares subscribed by them.
• A company with substantial equity capital commands prestige in the investment market.
• Equity shareholders have the pre-emptive right to subscribe to new shares issued by company.
• The face value of an equity share is generally low.
• The value of investment in equity shares may increase manifold during boom and prosperity of the company-holders of these shares earn capital gains.
• Equity shares do not create any charge on the assets of the company.
• Shareholders are not required to pay income tax on dividends received from the company.

(c) According to Philip Kotler, “Marketing is a social process by which individual groups obtain what the} need and want through creating offerings and freely exchanging products and sen ices of value with others”.

The various functions of marketing are given below :
Marketing Planning and Product Development: It involves making plans for increasing production and sales, .promotion of product etc. and also laying down a course of action for achieving these objectives. It relates to the decision of quality standards to be used for shape or design of the product, packing etc. in order to make product attractive. Product planning and development involves introduction and development of new products, improvement of the existing product and dropping out unprofitable items from the product line.

Standardization and Grading: Standardization is the general term which includes the establishment of standards for products, the inspection of products in order to determine the standard to which they conform and where necessary the sorting of products into lots conforming to established standards. Grading refers to a process of classifying products into different groups on the basis of their features like size, shape, quality etc. This assures the quality, price and packaging of product to the customers.

Storage or Warehousing: Storage refers to the holding and preservation of goods from . the time of production until the time of consumption. There is a need for storage of adequate stock of goods to meet the demand in case of contingencies and to avoid unnecessary delays in delivery. Warehousing is essential for commodities like wheat, sugar, rice etc. which are produced during the particular seasons but demanded throughout the year.

Transportation : It means physical movement of goods from the place of production to the place of consumption. It serves as a link between the producers and consumers who are located at different places. A business firm analyses its transportation needs on the basis of factors like nature of the product, cost, location of the target market etc. It also removes the barrier of distance and help to stabilize prices by matching supply with demand.

Pricing: The amount of money which a customer is required to pay for purchasing the product is known as product price. It is important function in marketing because it determines the sales volumes and the amount of profits. Thus, while determining the price for a product, various factors like type of customers, their income, product demand etc. should be considered.

Question 9.
Write short notes on the following :
(a) Meaning and Elements of Product Mix.
(b) Core banking solutions.
(c) Coordination, as the essence of management.
Answer:
(a) Product mix refers to the total number of products and items that a business firm offers to the market. It involves decisions concerning the quality; size, range, page. brand name, label, services. It also involves planning, developing and producing the right type of products and sendees to be marketed by the organisation. It includes :
Branding : Branding is the process of assigning a distinctive name or symbol to a product by which it is to be known and remembered.

Packaging: Packaging refers to covering, wrapping, crating, filling or compressing of goods to protect them from spoilage, breakage, leakage etc.

Labelling: Labelling refers to designing the label and putting it on the package. A label is a small slip placed on the product to denote its nature, contents, ownership, destination etc.

(b) Core Banking Solutions: Cofe banking is a banking service provided by a group of networked bank branches where customers may access their bank account and perform basic transactions from any of the member branch offices. Under this system, a customer becomes Customer of the bank’ rather than customer of a branch. Core banking functions will include transaction accounts, loans, mortgages and payments. Basically, it is the software applications for recording transactions, storing customer information, calculating interest and completing the process of passing entries in a single database. The basic goals of core banking are providing greater customer convenience and cutting down on operational expenses. CBS also known as ‘Centralized Banking Solutions’.

It provides following facilities :

• Updating of passbook at all CBS branches.
• Transfer of funds between the accounts in CBS.
• Customer may access their bank account from any of the branch offices.

(c) Coordination is not a separate function but very essence of management. According to George Terry, “Coordination deals with the task of binding efforts in order to ensure successful attainment of an objective. It is accomplishment by means of planning, organizing, staffing, directing and controlling”. It is an integral part of all the functions of management and not a separate function.
Planning requires coordination for:

• purpose and resources at hand.
• master plan of the enterprise and the plans of different divisions.

Organizing requires coordination so that:

• the whole work is systematically allocated and divided into different parts.
• establishing working relationship and clearly defines the lines of communication.
• promotes growth and diversification of an enterprise.
• leads to specialization which brings effectiveness in administration.

Staffing requires coordination for:

• matching the skills of workers with the jobs that should be assigned to them.
• ensures continuous growth and expansion of the business.
• improves job satisfaction and morale of employees.

Directing requires coordination :

• to ensures integration of employees’ efforts towards attainment of organisational goals.
• helps in initiating actions of people towards achieving organisational goals.
• To cope up with the changes in the business environment, directing function guides, initiates and motivates employees.

Controlling requires coordination for:

• proper balance between standards to be achieved and standard that have actually been achieved i.e., planned standards and actual performance.
• to cope with complexities arising out of expansion and diversification of business activities.

ISC Class 12 Commerce Previous Year Question Papers