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Karnataka 2nd PUC Business Studies Model Question Paper 5 with Answers

Time: 3hrs 1 5 Min.
Max Marks: 100


I. Answer any ten of the following questions in a word or a sentence each.
Each questions carries one mark. (10 × 1 = 10)

Question 1.
Which of the following is not a function of management:

  1. Planning
  2. Staffing
  3. Co-operating
  4. Controlling

3. Co-operating

Question 2.
Henry Fayol was a

  1. Social scientist
  2. Mining engineer
  3. Accountant
  4. Production engineer

2. Mining engineer

Question 3.
Interest rates is an example for …………………… environment.
Economic environment.

Question 4.
What is Planning?
Planning is deciding in advance what to do and how to do it.

Question 5.
What is delegation?
Delegation of authority means the granting of authority to subordinates to operate with prescribed limits.

Question 6.
Mention the first step in selection process.
Preliminary Screening.

Question 7.
What is leadership?
Leadership is the ability of a manager to induce subordinates to work with confidence and goal.

Question 8.
Expand CPM.
Critical Path Method.

Question 9.
Write the meaning of Financial Risk?
Financial Risk refers to a position when a company is unable to meet its fixed financial charges like interest payment etc.

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Question 10.
What is grading of products?
Grading is the process of classification of products into different groups, on the basis of some of its important characteristics such as quality, size, etc.

Question 11.
In which year was the Consumer Protection Act enacted?
The Consumer Protection Act was enacted in the year 1986.

Question 12.
Who is an entrepreneur?
The person who set – up his business is called an entrepreneur.


II. Answer any ten of the following questions in two or three sentences each.
Each question carrier two marks. (10 × 2 = 20)

Question 13.
State any two organizational objectives of management.

  1. Survival
  2. Profit

Question 14.
What is gangplank?
Gangplank is a shorter route in a scalar chain that allows employees at the same level to communicate with each other directly Gangplank is used-in case of emergency.

Question 15.
What is privatization?
The new set of economic reforms aimed at giving greater role to the private sector in the nature building process and a reduced role to the public sector is known as privatisation.

Question 16.
What is Policy?
Policies are general statements that guide thinking in a particular direction.

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Question 17.
Write any two differences between functional and divisional structures.
1. Functional structure:
Grouping the jobs of similar nature and organizing these major functions as separate departments create a functional structure. All departments report to a co-coordinating head. It is more useful for large organisation.

2. Divisional structure:
Grouping of activities on the basis of product is known as divisional structure. Under this structure the top-level delegates extensive authorities to the divisional heads. The divisional head is in charge of manufacturing, purchase, sales, engineering and other departments of the division.

He is also made responsible for the profit or loss of his division. Divisional structure is advantageous for an organisation involved in production of different lines of products.

Question 18.
State any two personal barriers to communication.
1. Fear of challenges to authority: If a superior perceives that a particular communication may adversely affect his authority, he or she may withhold such communication.

2. Lack of confidence of superior on his subordinates: If superiors do not have confidence in the competency of their subordinates, they may not seek their advice or opinion.

Question 19.
What is Responsibility Accounting?
Responsibility accounting is a system of accounting in which different sections, divisions, and departments of an organization are set up as “Responsibility Centres”. The head of the center is responsible for achieving the target set for his center.

Question 20.
Write the formula to calculate Debt Service Coverage Ratio.
2nd PUC Business Studies Model Question Paper 5 with Answers 1

Question 21.
Give the meaning of dematerialization.
Securities held by the investor in the physical form are canceled and the investor is given an electronic entry so that she/he can hold it as an electronic balance in an account. This process of holding securities in an electronic form is called de-materializations.

Question 22.
Give two examples of Convenience Goods.
Convenience Products Those consumer products, which are purchased frequently, immediately and with least time and effort are referred to as convenience goods.

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Question 23.
State any two reasons to emphasise the importance of consumer protection from the point of view of business.

  1. Long term interest of business
  2. Business uses society’s resources

Question 24.
Draw the SVO analogy figure.
2nd PUC Business Studies Model Question Paper 5 with Answers 2


III. Answer any seven of the following questions in 10-12 sentences.
Each question carrier 4 Marks: (7 × 4 = 24)

Question 25.
Give any four grounds to say Management is important.
Management is considered important due to the following reasons:
1. Management helps in achieving group goals:
Management is required to give a common direction to the individual effort, in order to achieve the group goals of the organisation.

2. Management increases efficiency:
The main aim of every manager is to increase efficiency i.e., to maximise output with minimum cost. This is achieved through better planning, organising, directing and controlling the activities of the organisation.

3. Management creates a dynamic organisation:
All organisations have to function in an environment that is constantly changing. Resistance to change is often observed with individuals management helps people adapt to these changes so that an organisation is able to maintain its competitive edge.

4. Management helps for achieving personal objectives:
A manager motivates and leads his team in such a manner that individual members are able to achieve personal goals while contributing to the overall organisational objective. Through motivation and leadership the management helps individuals to develop team spirit, cooperation and commitment to group success.

Question 26.
Discuss the significance of Principles of Management by explaining any four points.
The principles of management derive their significance from their utility. The following is the
importance of principles of management:
1. Provide managers with useful insights into reality:
The principles of management provide the managers with useful insights into real world situations. Following these principles will add knowledge, ability and understandability to the managers of the situations and circumstances. It will also enable managers to learn from their past mistakes and save time by solving repeated problems quickly.

2. Optimum utilisation of resources and effective administration:
Both human and material resources are limited. These resources should be used in such a manner that the company is able to derive maximum benefit with minimum cost Principles equip the managers to foresee the cause and effect relationships of their decisions and actions. Wastage is also avoided.

3. Scientific decisions:
Decisions must be based on facts. They must be timely, realistic and subject to measurement and evaluation. Management principles help in thoughtful decision – making and these decisions will be free from bias and prejudice.

4. Meeting changing environment:
Although the principles of management are in the nature of general guidelines, but they are modified and help the managers to meet changing requirements of the environment.

Question 27.
Explain any four features of Business Environment.
Business environment has the following features:
1. Totality of external forces:
Business environment’s sum total of all things external to business firms and, as such, is aggregative in nature.

2. Specific and general forces:
Business environment includes both specific and general forces. Specific forces such as investors, customers, etc, affect individual enterprises directly and immediately in their day-to-day working. General forces such as social, political conditions have impact on all business enterprises and thus may affect an individual firm only indirectly.

3. Inter-relatedness:
Different elements of business environment are closely interrelated. One element of the environment affects the other. For example, new health-aware products such as diet coke, fat-free cooking oil, etc changed people’s lifestyles.

4. Dynamic nature:
Business environment is dynamic. It keeps on changing whether in terms of technological improvement, shifts in consumer preferences, etc.

5. Uncertainty:
Business environment is largely uncertain because it is difficult to predict future happenings.

6. Complexity:
Since business environment consists of numerous interrelated and dynamic forces that arise from different sources, it is relatively easier to understand in parts but difficult to grasp in its totality.

7. Relativity:
Business environment is a relative concept. It differs from country to country and even from region to region.

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Question 28.
Explain any four limitations of planning.
The major limitations of planning are given below

a. Planning leads to rigidity:
In an organization, a well-defined plan is drawn up with specific goals to be achieved within a specific time frame. These plans then decide the future course of action. The managers may not be in a position to change these plans. This kind of rigidity in plans may create difficulty. This rigidity restricts the individual freedom, initiative, and creativity.

b. Planning may not work in a dynamic environment:
The business environment is dynamic. Planning anticipates future. It takes into consideration the possible changes in economic, political, legal and social dimensions. But it becomes difficult to accurately assess future trends. Competition in the market can also upset the plans. Planning cannot foresee everything and thus, there may be obstacles to effective planning.

c. Planning reduces creativity:
Planning is an activity which is done by the top management. Usually, the rest of the members just implement these plans. Middle management and other decision-makers are neither allowed to deviate from plans nor are they permitted to act on their own. Thus, much of the initiative or creativity inherent in them also get lost or reduced.

d. Planning involves huge costs:
When plans are drawn up, huge costs are involved in their formulation. These may be in terms of time and money. The cost incurred sometimes may not justify the benefits derived from the plans.

Question 29.
Explain briefly the importance of Delegation.
Delegation of authority is necessary for the smooth functioning of a business. It increases the working capacity of a manager. Effective delegation can lead to the following benefits:

1. Effective management:
Delegation enables superiors to assign the routine activities to the subordinates and he can concentrate on other important functions. Thus, a manager can increase his effectiveness by using the skills of subordinates through delegation of authority.

2. Employee development:
Employees get more opportunities to utilize their talent. It motivates them to develop themselves for higher positions, as they are given opportunities to use their skills and talents for gaining excellence in their jobs.

3. Facilitates growth:
Delegation facilitates growth and expansion by providing trained and experienced personnel for taking up leading positions in new project.

4. Basis of management hierarchy:
Delegation of authority determines who has to report to whom. It creates the chain of superior-subordinate relationship which is the basis for hierarchy of management.

5. Better co-ordination:
The elements of delegation namely authority, responsibility and accountability clearly defined powers, duties answerability related to various departments. This helps to avoid overlapping of duties and brings better coordination among various departments and functions of management.

6. Quick decision making:
The subordinates are given authority to take decisions. They need not go to their superiors from time to time for taking decision on routine matters. This increases speed of decision making.

Question 30.
Explain the characteristics of Directing as a managerial process.
a. Directing initiates action:
Directing is an important managerial function. A manager has to perform this function along with planning, organizing, staffing and controlling while discharging his duties in the organization. While other functions prepare a setting for action, directing initiates action in the organization.

b. Directing takes place at every level of management:
Every manager, from top executive to supervisor performs the function of directing. The directing takes place wherever superior-subordinate relations exist.

c. Directing is a continuous process:
Directing is a continuous activity. It takes place throughout the life of the organization irrespective of people occupying managerial positions.

d. Directing flows from top to bottom:
Directing is first initiated at top level and flows to the bottom through organizational hierarchy.

Question 31.
Explain briefly the relationship between planning and controlling.
Planning is a prerequisite for controlling. A system of control can work only when there are certain standards. These standards of performance which serve as the basis of controlling are provided by planning. Once a plan becomes operational, Controlling is necessary to monitor the progress, measure it, discover deviations and initiate corrective measures to ensure that events conform to Plans Thus, planning without controlling is meaningless. Similarly, controlling is blind without planning. Thus, planning and controlling are inseparable twins of management.

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Question 32.
Write any four advantages of Electronic Trading System in stock exchanges.
Electronic trading systems or screen-based trading has the following advantages:
1. It ensures transparency as it allows participants to see the prices of securities in the market while business is being transacted. They are able to see the full market during real-time.

2. It increases efficiency of information being passed on, thus helping in fixing prices efficiently. The computer screens display information on prices and also capital market developments that influence share prices.

3. It increases the efficiency of operations since there is reduction in time cost and risk of error.

4. People from all over the country and even abroad who wish to participate in the stock market can buy or sell securities through brokers or members without knowing each other. This system has enabled a large number of participants to trade with each other, thereby improving the liquidity of the market.

Question 33.
Explain briefly the elements of marketing mix.
The marketing mix consists of various elements, which have been broadly classified into four categories popularly known as four Ps of marketing which is as follows:
1. Product mix:
Product means ‘anything of value’ which is offered to the market for sale. Product is one of the main elements of marketing mix. In marketing terms, product refers to anything that satisfies the needs of the consumers. It may be a good, a service or an idea.

The product mix has the following important components:
Brand, Style, colour, design, product line, Package, warranty, etc. The concept of product also includes the extended product or what is offered to the customers by way of after-sale services, handling complaints, availability of spare parts, etc,

2. Price mix:
Price represents the value of a product expressed in terms of money it is the amount of money customers have to pay to obtain the product. The price mix is concerned with fixing a reasonable price to the product or services that cover the cost and distribution expenses as well gets reasonable profits to the manufacturer. The basic variables related to price mix include pricing strategy, pricing policy, credit – terms, discounts, allowances, etc,

3. Promotion mix:
Promotion of product and services – include activities that communicate availability, features, merits, etc, of the products to the target customer and persuade them to buy it. The promotion mix includes personal selling, publicity, advertising, and sales promotion.

Most marketing organisations, undertake various promotional activities and spend money on the promotion of their goods using promotional tools such as advertising, personal selling, etc, the success of a market offer will depend on how well these ingredients are mixed to create superior value for the customers and also achieve their sale and profit objective.

4. Place:
Place or physical distribution include activities that make firm’s products available to the target customers. It is concerned with making available the goods and services at right time, at right place, in right quantity. It enables the smooth flow of goods and services from the producers to the customers. It creates place, time and possession utilities. The place mix includes distribution channels like agents, wholesalers retailers ect, and physical distribution which includes transport, warehousing, inventory, etc.

The process of marketing involves creating a market offering, to satisfy the needs and wants of the present and potential buyers. From a number of alternatives available a firm chooses a particular combination to develop a market offering the combination of variables chosen by a firm to prepare its market offering is called as marketing mix.

Question 34.
Explain any four ways in which the objective of consumer protection can be achieved.
There are various ways in which the objective of consumer protection can be achieved which are as follows:
1. Self Regulation by Business:
Enlightened business firms realize that it is in their long-term interest to serve the customers well. Socially responsible firms follow ethical standards and practices in dealing with their customers.

2. Business Associations:
The associations of trade, commerce and business like Federation of Indian Chambers of Commerce of India and Confederation of Indian Industries have laid down their code of conduct which lay down their guidelines for their members in dealing with the customers.

3. Consumer Awareness:
A consumer who is well informed about his rights, and the reliefs available, would be in a position to raise his voice against any unfair trade practices or any kind of exploitation by the seller

4. Consumer Organization:
Consumer organizations play an important role in educating consumers about their rights and providing protection to them. They can force business firms to avoid malpractices and exploitation of consumers.

5. Government:
The government can protect the interest of the consumers by enacting various legislations.


III. Answer any seven of the following questions in 20-25 sentences.
Each question carrier 8 Marks: (4 × 8 = 32)

Question 35.
Explain the various objectives of Business Management?
Every organisation is established to achieve certain objectives. Different organisations are having different objectives and management are having different objectives and management has to achieve these objectives effectively and efficiently. Management Objectives can be classified into organisational objectives, social objectives, and personal or individual objectives.

1. Organisation Objectives:
Management is responsible for setting and achieving objectives for the organisation. The main objective of any organisation is to utilise human and material resources to the maximum possible advantage, management of every organisation strives to accomplish the objectives, considering the interest of all the stakeholders, i.e., shareholders, employees, customers, and the government. The economic objectives of an organisation include

a. Survival:
Management must work to ensure the survival of the organisation by earning enough revenue to cover its costs.

b. Profit:
Earning of profit is very essential for meeting the expenses and for successful continuity of business. Therefore, management should ensure that sufficient profits are earned to cover the costs and risks of business.

c. Growth:
For the existence of business organisation for a long period, management should explore all its prospects of growth and development to remain in industry. Growth of a business can be measured in terms of increased sales, increase in the number of employees, the number of products or the increase in capital investment.

2. Social Objectives:
It involves the creation of benefits for society. As a part of society, every organisation has a social obligation to fulfill. This refers to consistently creating economic value for various constituents of society. This includes.

  • Using environmental friendly methods of production.
  • Creating employment opportunities particularly to the under privileged sections of society.
  • Providing amenities to society, like schools and creches to employees children.
  • Providing financial support to society for noble causes.
  • Participating in social service projects of government and non-governmental organisations.

3. Personal (or) Individual objectives:
Organisations are made up of people who have different personal backgrounds, experiences and objectives. It is very important to satisfy their diverse needs by getting their whole hearted support in achieving the organisational objectives. The personal objectives include

  • Financial needs like salaries, incentives, and other benefits.
  • Social needs like recognition in the organisation.
  • Higher level needs include personal growth and development.

Management has to take care of personal needs of its employees while also fulfilling the other objectives.

4. Management helps in achieving personal objectives:
A manager motivates and leads his team in such a manner that individual members are able to achieve personal goals while contributing to the overall organisational objectives. Through motivation and leadership the management helps individuals to develop team spirit, cooperation and commitment to group success

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Question 36.
Explain any four types of plans.
In order to accomplish the targets, the management of a business organization chalks out different types of plans. The important types of plans are explained below:
Types of plans
1. Single-use plans:
A single-use plan is developed for a one-time event or project.
The examples are:

  • Budgets
  • Programmes
  • Projects

2. Standing Plans:
A standing plan is used for activities that occur regularly over a period of time
The examples are:

  • Policies
  • Procedures
  • Methods
  • Rules

3. The other plans include strategies and objectives
2nd PUC Business Studies Model Question Paper 5 with Answers 3

Brief explanation of the various types of plans are as follows:
1. Objectives:
a. Objectives are the end points towards which the activities of an organization are directed. They are said to be the desired future position that the management would like to reach.

b. Objectives are very basic to the organization which the organization wants to achieve by its operations.

c. Objectives are set by the top management. They lay down guidelines for the activities and serves as a bench mark for measuring the performance of an organization.

d. Objectives need to be expressed in specific terms. They should be expressed in quantitative and measurable terms. They are also to be put in the form of written statements and they represent the desired results to be achieved in a given period of time.

2. Strategies:
A strategy provides the broad contours of an organization’s business. Strategies are the specific programmes of action for achieving the objectives of the organization by employing the organization’s resources efficiently and effectively.

A strategy is a comprehensive plan which acts as a guideline to handle specific problems. Major strategic decisions will include decisions like whether the organization will continue to be in the same line of business, or combine new lines of activity with the existing business or seek to acquire a dominant position in the same market.

3. Policy:

  • policies are general statements that guide thinking.
  • Policies provide a basis for interpreting strategy.
  • Policy is a guide to managerial action and decision in the implementation of strategy.
  • Strategies are formulated by the top management.

Formulation of strategy involves the following aspects:

  • Determination of the long term objectives
  • Adopting a course of action to achieve the objectives and
  • Allocating resources necessary to achieve the objectives.

4. Procedure:
Procedures are routine steps on how to carry out activities. They detail the exact manner in which any work is to be performed.

Procedures are the guidelines to action and they are usually intended to the works which are repetitive in nature.
Examples of procedure include procedure for execution of the customer’s order for supply of goods and procedure for recruitment of employees in an organisation.

5. Methods:

  • Methods provide the prescribed ways in which a task has to be performed considering the objective.
  • It deals with a task comprising one step of a procedure and specifies how this step is to be performed.
  • Method has a limited scope compared to the procedure.
  • Examples of methods include training the employees under off the job training method, remunerating the sales men under bonus and commission method etc.

6. Rules:

  • Rules are specific statements that inform what is to be done.
  • Every organization likes to operate in an orderly way. For this purpose it is necessary for the business organization to lay down certain rules.
  • Rules are the specific statements which prescribe the code of behavior to the people of an organization.
  • Rules are rigid. Their violation attracts penalty and disciplinary action.
  • An example of a rule is ‘wear identity cards compulsorily at the work place’.

7. Programmes:

  • Programmes are detailed statements about a project which outlines the objectives, policies, procedures, rules, tasks, human and physical resources required.
  • A program is a precise plan which lays down the operations to be carried out to accomplish a given task within a specified period of time.
  • Programmes are framed for the works which are non-repetitive in nature.
  • An example for a programme includes sale of 5000 cars in the month of March, 2019.

8. Budget:

  • Budget is a statement of expected results expressed in numerical terms.
  • Budget is a plan which expresses the future facts and figures in quantitative terms for a specified period.
  • Budget is considered a control device.
  • An example for a budget is a sales budget which forecasts the sales of different products in each area for a particular period.

The success of the business depends to a large extent on the effective planning. Thus, the logical and scientific planning must go through the above steps.

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Question 37.
Describe the steps involved in selection process.
Employee selection is the process of putting right men on right job. It is a procedure of matching organizational recruitments with the skills and qualifications of people. The following steps are generally followed by all business organizations during selection process.

Steps in selection process:
a. Preliminary Screening
b. Selection Tests

  • Intelligence tests
  • Aptitude tests
  • Trade or proficiency tests
  • Personality tests
  • Interest tests

c. Interview

  • Direct Interview
  • Patterned or structural Interview
  • Board or Panel Interview
  • Reference and background checks
  • Medical Examination
  • Indirect Interview
  • Stress Interview
  • Group Interview
  • Selection Decision
  • Job offer (Issue of Appointment Letter)
  • Contract of Employment (Acceptance of job offer)

1. Preliminary Screening:
After receiving the applications from the candidates through recruitment process, the same must be examined to decide, which ones deserve to be considered and followed up. The main purpose of screening is to prepare a list of eligible candidates who are to be evaluated further. Screening exercise involves checking the contents of the application, so as to find out whether or not the minimum eligibility conditions are fulfilled by the applicants.

2. Selection Tests:
Selection tests are given to discover and measure, the skill and abilities of the candidates in terms of the requirements of the job. The following tests are usually conducted to measure intelligence, aptitude, proficiency, personality, etc.

a. Intelligence tests:
These tests are used to judge the mental capacity of the applicant. Intelligence tests evaluate the ability of an individual to understand instructions and make decisions.

b. Aptitude tests:
Aptitude means the potential which an individual has for learning new skills. Aptitude test indicates the person’s capacity and his potential for development.

c. Trade or proficiency tests:
These tests are designed to measure the skills already acquired by the individuals. They measure the level of knowledge and proficiency in the area of profession or technical training.

d. Personality tests:
These tests probe for the overall qualities of a person as a whole. They provide clues to a person’s emotional reactions, maturity level, value system, etc.

e. Interest tests:
These tests identify the areas in which a candidate has special concern, fascination; involvement, etc. These tests suggest the nature of job liked by a candidate which may bring him job satisfaction.

3. Interview:
Interview is a face to face conversation and observation. Interview helps the employer to evaluate the candidate regarding personality, smartness, intelligence, attitude, etc. There are different kinds of interviews conducted by employers. Some of them are as follows:

a. Direct Interview:
Under this method, direct questions are asked to the applicant, to identify his skills, character, area of interest, attitudes, etc. The in-depth knowledge of applicant is not observed under this type of interview.

b. Indirect Interview:
Under this method, the applicant is asked to express his opinion on any topic he likes. Here the interviewer listens to the views of the applicant without any intervention. This interview helps the interviewer to assess the personality of the applicant.

c. Patterned or Structural Interview:
In this type of interview, the interviewer is looking for information in a particular area of interest of the organization. A number of standard questions are framed in advance which is to be answered by the applicant. These questions focus on the experience, skills, and personality of the ideal candidate would possess.

d. Stress Interview:
In this interview, the interviewer will intentionally try to upset the applicant, to see his reactions under pressure. Uncomfortable or irritating questions may be asked to the applicant to test his patience. This type of interview may be more commonly used in high stress jobs.

e. Board or Panel Interview:
In this interview, a group of persons called interviewers asks the applicant, questions in different subjects or areas of interest of the candidate. Immediately after the interview, they meet, discuss and evaluate the performance of the applicant on the basis of answers given by him. This type of interview is common in case of professional jobs.

f. Group Interview:
A group interview occurs when several candidates for a position are interviewed simultaneously. A common topic presented before the candidates for discussion. Group interview offers candidates to express their leadership potential and style.

4. Reference and Background checks:
In addition to the required educational qualifications, skill and experience, the candidates must also possess other qualities liked honesty, loyalty, etc. These qualities can be judged by the information obtained from the heads of educational institutions where the candidates have studied or from the persons whose names are given by the candidates as reference or from their previous employers.

5. Selection Decision:
After a candidate has cleared all the hurdles in the selection procedure, the employer may take a decision of selection after consulting the concerned manager who is responsible for the performance of the new employee.

6. Medical examination:
Candidates finally selected for the job are asked to undergo medical examination to see whether they are physically fit for the job. The physical fitness of employees reduces labour turnover, absenteeism, accidents, etc., and ensure higher standard of health of employees in the organization.

7. Job Offer:
Candidates finally selected are offered to join the organization, for which a formal appointment order is issued by the organization. It contains the nature of the job, the remuneration, pay scale and other terms and conditions relating to employment. Usually, a reasonable time is given to the candidates to join the organization.

8.Contract of Employment:
If the selected candidate decides to join the organization, he has to report to the concerned authority and formally join the organization by giving his consent in writing. This is known as acceptance of job offer. Then, the organization will open a service register in the name of the candidate and records all details like qualification, particulars of employment, pay scale, etc.

9. Conclusion:
Workers are essential, active and sensitive factor of production. Utmost care should be taken in their selection. The above process assists in proper selection of the workers who will remain the permanent assets of the organization.

Question 38.
Explain any four financial incentives and four non-financial incentives.
Incentive means all measures which are used to motivate people to improve performance. These incentives may be broadly classified as financial and nonFinancial Incentives These refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance. The generally used
1. financial incentives are:

a. Pay and allowances:
For every employee, salary is the basic monetary incentive. It includes basic pay, dearness allowance, and other allowances.

b. Productivity linked wage incentives:
Several wage incentive plans aims at linking payment of wages to increase in productivity at individual or group level.

c. Bonus:
Bonus is an incentive offered over and above the wages or salary to the employees.

d. Profit-sharing:
Profit-sharing is meant to provide a share to employees in the profits of the organization. This serves to motivate the employees to improve their performance and contribute to increase in profits.

e. Co-partnership/stock option:
Under these incentive schemes, employees are offered company shares at a set price which is lower than market price. Sometimes, management may allot shares in line of various incentives payable in cash.

f. Retirement benefits:
Several retirement benefits such as provident fund, pension, and gratuity provide financial security to employees after their retirement. This acts as an incentive when they are in service in the organization.

g. Perquisites:
In many companies perquisites and fringe benefits are offered such as car allowance, housing, medical aid, etc over and above the salary. These measures help to provide motivation to the employees/managers.

2. Non-financial Incentives:
All the needs of individuals are not satisfied by money alone, psychological, social and emotional factors also play important role in providing motivation. Non-financial incentives mainly focus on these needs. Some of the important non-financial incentives are discussed below:

a. Status:
In the organizational context, status means ranking of positions in the organization. The authority, responsibility, rewards, recognition, etc indicate the status given to a person holding a managerial position. Psychological, social and esteem needs of an individual are satisfied by status given to their job.

b. Organisational Climate:
This indicates the characteristics which describe an organization and distinguish one organization from the other. These characteristics describe an organization and distinguish one organization from the other. These characteristics influence the behavior of individuals in the organization. Some of these characteristics are individual autonomy, reward orientation, consideration to employees, risk-taking, etc.

c. Career Advancement Opportunity:
Every individual wants to grow to the higher level in the organization. Managers should provide opportunity to employees to improve their skills and be promoted to the higher level jobs. Appropriate skill development programmes and sound promotion policy will help employees to achieve promotions.

d. Job-enrichment:
It is concerned with designing jobs that include greater variety of work content, require higher level of knowledge and skill; give workers more autonomy and responsibility, and provide the opportunity for personal growth and meaningful work experience. If jobs are enriched and made interesting, the job itself becomes a source of motivation to the individual.

e. Employee Recognition Programmes:
Most people have a need for evaluation of their work and due recognition. They feel that what they do should be recognized by others concerned. When such appreciation is given to the work performed by employees, they feel motivated to perform the work at higher level.

f. Job security:
Employees need their job to be secure. They want certain stability about future income and work so that they do not feel worried on these aspects. Job security acts as a source of motivation to the employees.

g. Employee participation:
It means involving employees in decision making of the issues related to them. In many companies, these programmes are in practice in the form of joint management committees, work committees, etc.

h. Employee Empowerment:
Empowerment means giving more autonomy and powers to subordinates. Empowerment makes people feel that their jobs are important. This feeling contributes positively to the use of skills and talents in the job performance.

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Question 39.
Explain any four factors affecting the working capital requirement of an organization.
a. Nature of Business:
The basic nature of business influences the amount of working capital required. A trading organization usually needs a smaller amount of working capital compared to a manufacturing organization. Similarly, service industries which usually do not have to maintain inventory require less working capital.

b. Scale of Operations:
for organizations which operate on a higher scale of operation, the quantum of inventory and debtors required is generally high. Such organizations, therefore, require large amount of working capital as compared to the organizations which operate on a lower scale.

c. Business Cycle:
Different phases of business cycles affect the requirement of working capital by a firm. In case of a boom, the sales and production are likely to be larger and therefore larger amount of working capital is required. Working capital requirement will be less during the period of depression as the sales and production will be small.

d. Seasonal Factors:
Most business have some seasonality in their operations. In peak season, because of higher level of activity, larger amount of working capital is required. When the level of activity is less, working capital requirement will be less.

Question 40.
Explain the advantages and limitations of advertising?
Advertising is the most commonly used tool of promotion. It is an impersonal from of communication, which is paid for by sponsors to promote some goods or service.

a. Merits of Advertising:
1. Mass Reach:
Advertising is a medium through which a large number of people can be reached over vast geographical area.

2. Enhancing customer satisfaction and confidence:
Advertising creates confidence amongst prospective buyers as they feel more comfortable and assured about the product quality and hence feel more satisfied.

3. Expressiveness:
with the help of computer designs, graphics, etc, advertising has developed into one of the most forceful medium of communication. With the special effects created, even simple product and messages look very attractive.

4. Economy:
Advertising is a very economical mode of communication. A large number of people can be reached at a time. Because of its wide reach, the overall cost of advertising gets spread over numerous communication links established. As a result, the per-unit cost of reach comes low.

b. Limitations of advertising:
1. Less Forceful:
Advertising is an impersonal form of communication. It is less forceful than personal selling as there is no compulsion on the prospects to pay attention to the message.

2. Lack of feedback:
The evaluation of the effectiveness of the advertising message is very difficult as there is no immediate feedback mechanism of the message that is delivered.

3. Inflexibility:
Advertising is less flexible as the message is standardized and cannot be altered according to the requirements of the different customer groups.

4. Low Effectiveness:
As the volume of advertising is getting more and more expanded, it is becoming difficult to make advertising messages heard by the target customers. This affects the effectives of advertising.

c. Objections to Advertising:
1. Adds to cost:
Advertising unnecessarily adds to the cost of product, which is ultimately passed on to the buyers in the form of high prices. The money spent on advertising adds to the cost, which is an important factor in the fixation of the price of a product.

But, advertisement also helps to increase the demand for the product as large number of potential buyer are persuaded to buy more product. Increased demand leads to higher production, which brings in the economies of scale. As a result, the per unit cost of production comes down. This reduces the burden of consumers.

2. Undermines social values:
People argue that advertising undermines social values and promotes materialism. It encourages dissatisfaction among people as they come to known about new products and feel dissatisfied with their present state of affairs.

But, advertisement in fact, helps buyers by informing them about the new products, which may be improvement over the existing products. If the buyers are not informed about these products, they may be using inefficient products.

3. Confuses the buyers:
So many advertisements create confusion among the buyers. All advertisements make similar claims that the buyer gets confused as to which one is true and which product should be purchased. But, the supporters of advertisement argue that buyers can clear their confusion by analyzing the information provided on the advertisements and other sources before taking a decision to purchase a product.

4. Encourages sale of inferior product:
Advertising does not distinguish between superior and inferior products. Hence, it persuades people to buy even the inferior products. But, superiority and inferiority depends on the quality, which is a relative concept. The desired level of quality also depends on the economic status and preferences of the target customers. Hence, advertisements are not solely responsible for the sale of inferior products.

5. Some advertisements are in bad taste:
Another Criticism against advertising is that some advertisements are in bad taste. These show something which is not approved generally by people some advertisement also distort the human relationships. There can be some chances of misuse of adverting as a tool, which can be properly safeguarded by the low or by developing a code of conduct by the advertisers, for their self regulation.

Most of the Criticism against advertising are not entirely true. In the changed are economic environment of globalization, advertising is considered as an important tool of marketing. It helps a firm in effectively communicating with its target market, increasing the sale and thereby reducing the Per unit cost of production.

It is not a social waste it adds value to the social cause by increasing production and generating more employment opportunities. Hence, advertising is a use and not a waste.


V. Answer any two of the following questions.
Each question carrier five marks:  (2 × 5 = 10)

Question 41.
Draw a neat diagram of levels of management.
2nd PUC Business Studies Model Question Paper 5 with Answers 4

Question 42.
State any ten qualities of a successful leader?

  1. Rebate
  2. Discount
  3. Refunds
  4. Product Combinations
  5. Quantity gift

1. Rebate: Offering products at special prices
2. Discount: Offering products at less than list price
3. Refunds: Refunding a part of price paid by customer
4. Product Combinations: Offering another product as gift along with the purchase of a product.
5. Quantity Gift: Offering extra quantity of the product.

KSEEB Solutions

Question 43.
Draw the neat diagram of Efficiency-Desirability Matrix to check the ability and willingness of Entrepreneurs.
2nd PUC Business Studies Model Question Paper 5 with Answers 5

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