2nd PUC Business Studies Previous Year Question Paper March 2019

Students can Download 2nd PUC Business Studies Previous Year Question Paper March 2019, Karnataka 2nd PUC Business Studies Model Question Papers with Answers helps you to revise the complete Karnataka State Board Syllabus and score more marks in your examinations.

Karnataka 2nd PUC Business Studies Previous Year Question Paper March 2019

Time: 3 Hrs 15 Min
Max. Marks: 100

SECTION – A

I. Answer any ten of following questions in a word or a sentence each. While answering Multiple Choice Questions, write the serial number/alphabet of the correct choice and write the answer corresponding to it. Each question carries one mark: (10 × 1 =10)

Question 1.
Which of the following is not a features of management?

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

Answer:
3. cooperating (1 Mark)

Question 2.
Who is known as the father of scientific management?
Answer:
F.W. Taylor (1 Mark)

Question 3.
Give the meaning of “Rule”.
Answer:
Rules are specific statements that inform what is to be done. They are simplest type of plans. (1 Mark)

Question 4.
Which of the following is not an element of delegation?

1. Accountability
2. Authority
3. Responsibility
4. Informal organisation

Answer:
4. Informal organisation (1 Mark)

Question 5.
State anyone internal source of recruitment.
Answer:

1. Transfers and
2. Promotions (Write any one point) (1 Mark)

Question 6.
The software company promoted by Narayana Murthy is

1. Wipro
2. Infosys
3. Satyam
4. HCL

Answer:
2. Infosys (1 Mark)

Question 7.
Give the meaning of controlling. (Question modified as per Kannada version)
Answer:
Controlling means ensuring that activities in an organisation are performed as per the plans.
(1 Mark)

OR

Controlling is the process of ensuring that actual activities conform to planned activities.

Question 8.
What is business finance?
Answer:
Money required for carrying out business activities is called business finance. (1 Mark)

OR

Funds needed to establish, to run, to modernize, to expand and to diversify the business is called business finance.

Question 9.
Primary and secondary markets

1. Compete with each other
2. Complement each other
3. Function independently
4. Control each other

Answer:
2. Complement each other (1 Mark)

Question 10.
What is publicity?
Answer:
Publicity is a non-personal and non paid form of communication of some favourable news presented in the mass media about a product or service. It has more credibility. (1 Mark)

Question 11.
Who can file a complaint in consumer court?
Answer:
Any registered consumers association. (1 Mark)

Question 12.
Who is an Entrepreneur?
Answer:
The person who setup his business is called an entrepreneur. (1 Mark)

OR

According to Richard Cantillon, “Entrepreneur is the agent who buys means of production at certain prices in order to sell the produce at uncertain prices in the future.”

SECTION – B

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

Question 13.
State any two organisational objectives of business (management)
Answer:

1. Survival, (1 + 1 Mark)
2. Profit; and
3. Growth (Any two points)

Question 14.
What is gang plank? (2 Marks)
Answer:
Gang plank is a shorter route in scalar chain which allows employees at the same level to communicate with each other directly to avoid delay in communication. Gang plank can be used only in case of emergency.

Question 15.
What is privatisation?
Answer:
Privatisation is the process of transfer of ownership and management of public sector enterprises to private sector through the process of disinvestment. (2 Marks)

Question 16.
State any two features of planning.
Answer:
Two features of planning:

1. Planning focuses on achieving objectives.
2. Planning is a primary function of management (1 + 1 Mark)

Question 17.
Give the meaning of formal organisation.
Answer:
Formal organisation refers to the organisation structure which is designed by the management to accomplish a particular task. It specifies clearly the boundaries of authority and responsibility and there is a systematic coordination among the various activities to achieve organizational goals. (2 Marks)

OR

The formal organisation is a system of well defined jobs, each bearing a definite measure of authority, responsibility, and accountability. (Louis Allen).

Question 18.
Define leadership.
Answer:
According to Koontz and Weihrich, “Leadership is the art or process of influencing people so that they will strive willingly and enthusiastically towards the achievement of group goals”.
(2 Marks)

OR

According to George Terry, “Leadership is the activity of influencing people to strive willingly for group objectives.”

Question 19.
State any two traditional techniques of management control.
Answer:
Traditional techniques of management control:

1. Personal observation (1 + 1 Mark)
2. Statistical reports
3. Break even analysis
4. Budgetary control (Write anyone)

Question 20.
State any two types of financial decisions.
Answer:
Types of financial decisions:

1. Investment decision (1 + 1 Mark)
2. Financing decision
3. Dividend decision (Write any two)

Question 21.
What is marketing?
Answer:
Marketing is a process whereby people exchange goods and services for money or for something of value to them. (2 Marks)
In other words, marketing is a social process wherein people interact with others in order to persuade them to act in a particular way, say to purchase a product or service.

Question 22.
Write any two Rights of consumers.
Answer:
1. Right to be informed:
A consumer has the right to get true and complete information about the quality, quantity, price, contents, directions for use, date of manufacture and expiry date of the goods and services which he intends to buy. (1 + 1 Mark)

2. Right to choose:
The consumer has the right to choose the product of his choice out of the available alternative products.

Question 23.
State any two characteristics of entrepreneurship.
Answer:
Characteristics of Entrepreneurship.
a. Systematic and purposeful activity:
Entrepreneurship is a systematic, step-by-step and purposeful activity. (1 + 1 Mark)

b. Lawful activity:
The object of entrepreneurship is to run a lawful business.

Question 24.
Expand KASH.
Answer:
KASH
K = Knowledge (1/2 × 4 = 2)
A = Attitude
S = Skills
H = Habits

SECTION-C

III. Answer any SEVEN of the following questions in 10 to 12 sentences. Each question carries 4 marks. (7 × 4 = 28)

Question 25.
Explain any four nature of principles of management.
Answer:
Features or characteristics of principles of management: The main features of principles of management are:

a. Universal applicability:
Management principles have universal applicability. They can be applied in all types of organizations, business as well as non-business, small as well as large, public sector as well as private sector. However, the extent of their application varies from concern to concern. For example, the principle of division of work is applicable to all organizations.

b. General guidelines:
The principles of management act as general guidelines to the managers. They play an advisory role in solving the problems.

c. Formed by practice and experimentation:
The principles of management are formed by experience and collective wisdom of managers as well as experimentation. For example, principle of discipline is formed by experience.

d. Flexible:
The principles of management are flexible and can be modified by the managers according to the situation. For example, the degree of centralization and decentralization may be different in each enterprise depending upon the situations.
(4 × 1 = 4, each point 1 mark) (Write any four relevant points)

Question 26.
Briefly explain any four dimensions of business environment.
Answer:
Dimensions (or factors or elements) of business environment consists of economic, social, technological, political and legal conditions which are considered relevant for decision making and improving the performance of an enterprise.

a. Economic environment:
Interest rates, inflation rates, changes in disposable income of people, stock market indices, and the value of rupee are some of the economic factors that can affect management practices in a business enterprise. For example, in case of construction companies and automobile manufacturers, low longterm interest rates are beneficial because they result in increased spending by consumers for buying homes and cars on borrowed money.

b. Social environment:
The social environment of business include the social forces like customs and traditions, values, social trends, societies expectations from business etc. For example, the celebration of Diwali, Id and Christmas in India provides significant business opportunities for greetings card companies, sweets and confectionary manufacturers, tailoring outlets and many other related business.

c. Technological environment:
Technological environment includes forces relating to scientific improvements and innovations which provide new ways of producing goods and services and new methods and techniques of operating a business. For example, there was shift in demand from typewriters to computers due to technological improvement.

d. Political environment:
It includes political conditions such as general stability and peace in the country and specific attitudes that elected government representatives hold towards business. Political stability builds up confidence among business people, while political instability can shake that confidence.

e. Legal environment:
It includes various legislations passed by the government, administrative orders
issued by government authorities, court judgements as well as the decisions rendered by various commissions and agencies at every level of the government – centre, state or local.

The management of every enterprise has to obey the law of the land. In India a working knowledge of the Companies Act, 2013, Consumer protection Act, 1986, Factories Act, 1948 and host of other legal enactments is important for doing business.
(4 × 1 = 4, each point 1 mark) (Write any four points)

Question 27.
Explain the importance of planning with any four points.
Answer:
Importance of planning:
Planning is deciding in advance what is to be done and how it is to be done. The benefits of planning are:

1. Planning provides direction:
Planning provides direction for action by stating in advance how a work is to be done. Planning ensures that the goals or objectives are clearly stated so that the employees of the organization are aware of what the organization has to do and what they must do to achieve these goals.

2. Planning reduces the risk of uncertainty:
Planning helps business enterprise to predict (i.e., foresee) its future uncertain events and enables the organization to face these uncertainties in the best possible manner. Thus, planning helps to develop a remedial action against future uncertainties and reduce the risk of business.

3. Planning reduces overlapping and wasteful activities:
Planning facilitates the co-ordination of the activities and efforts of different divisions, departments and individuals and avoids duplication of activities. Thus, useless and wasteful activities are minimized or eliminated.

4. Planning promotes innovative ideas:
Planning is basically thinking and decision making process. During the process of planning, many new ideas come to the minds of managers. These innovative ideas can take the shape of concrete plans leading to growth and prosperity of the business.
(4 × 1 = 4, each point 1 mark) (Write any four relevant points)

Question 28.
Explain the four methods of “on the job” training.
Answer:
Training is any process by which the aptitudes, skills and abilities of employees to perform specific jobs are increased. There are various methods of training, they are:

I. On the job training methods: (Where workers learn by doing the work under the guidance and supervision of superiors).

a. Apprenticeship programmes:
Apprenticeship or ‘Understudy’ is a method of training under which the trainee is required to work under the supervision and guidance of a master worker (an expert) for a specified period of time. This method helps the employees to know about the complications and complexities of the job.

This type of training is commonly used to train up employees like electricians, plumbers, iron workers or carpenters who require a higher level of skill.

b. Coaching:
Under this method, the superior guides and instructs the trainees (employees) as a coach. The superior familiarises the employee with the methods of using the equipments, tools, and materials. This helps the learner to pick up the skill and speed in work. The coach or counselor (i.e., superior) sets goals and suggests how to achieve these goals.

He also reviews the work and provides regular feedback to the trainee on his performance and offers him suggestions for improvement.

c. Internship training:
It is a joint programme of training in which educational institutions and business firms cooperate. Under this internship training, professional institutes send their students to big industrial or business enterprises to gain practical work experience.

E.g. Engineering students may be sent to industrial enterprises from time to time to gain practical work experience. Internship training is common in medical, engineering, management, auditing, and legal profession.

d. Job-Rotation:
Job rotation is a method of training which involves rotation (or movement or shifting) of the employee (trainee) from one department to another or from one job to another so that he may learn the working of various departments or jobs. Under this method, the trainee gets a chance to test his/her own aptitude and abilities. It allows trainees to interact with other employees. (4 × 1 = 4, each point 1 mark) (Write all the four points)

Question 29.
Explain the limitations of controlling.
Answer:
Although controlling is an important function of management, it suffers from the following limitations:

a. Difficulty in setting quantitative standards:
Control system loses some of its effectiveness when standards cannot be defined in quantitative terms. Employee morale, job satisfaction and human behaviour are such areas where this problem might arise. This makes measurement of performance and their comparison with standards a difficult task.

b. Little control / No control:
Generally an enterprise cannot control external factors such as govt, policies, technological changes, competition, etc.

c. Resistance from employees:
Control is often resisted by employees. They see it as a restriction on their freedom. For instance, employees may object the setting up of CCTV.

d. Costly affair:
Control is a costly affair as it involves a lot of expenditure, time and effort. A small enterprise cannot afford to install an expensive control system. (4 × 1 = 4, each point 1 mark)

Question 30.
Explain any four factors affecting financing decision. (Question modified based on Kannada Version)
Answer:
Factors affecting financing decisions:
The important factors affecting financing decisions are:

1. Cost:
The cost of raising funds through different sources is one of the factors affecting financing decisions. Usually, a prudent financial manager chooses a source which is the cheapest.

2. Risk:
Risk associated with each of the sources is to be evaluated and the source with least risk should be preferred.

3. Floatation costs:
The floatation or fund raising costs are to be considered. The source with lower floatation costs are to be preferred.

4. Cash flow position of the company:
An enterprise with stronger cash flow position can go for debt financing than funding through equity. (4 × 1 = 4, each point 1 mark) (Write any four points)

Question 31.
State any four differences between capital market and money market.
Answer:

(4 × 1 = 4, each point 1 mark) (Write any four relevant points)

Question 32.
Briefly explain any four characteristics of industrial product.
Answer:
Characteristics of industrial products.

a. Number of buyers:
The number of buyers of industrial products is limited. E.g. sugarcane is purchased by a few producers of sugar.

b. Channel levels:
The sale of industrial products is generally made with the help of shorter channels of distribution i.e., direct selling or one level selling.

c. Derived demand:
The demand for industrial products is derived from the demand for consumer products
e. g, the demand for leather (i.e., industrial product) will be derived from demand for shoes (consumer product)

d. Role of technical considerations:
Technical considerations assume greater significance in the purchase of industrial products because these products are complex products bought for use in business operations. (4 × 1 = 4, each point 1 mark) (Write any four relevant points)

Question 33.
Explain the elements of marketing mix.
Answer:
Marketing mix consists of the following elements (popularly known as 4 Ps of marketing):

1. Product
2. Price
3. Place, and
4. Promotion

1. Product:
Product means goods or services or ‘anything of value’ which is offered to the market for sale. For example, Amul milk, ghee, butter, cheese, chocolates, etc. are the food products offered to the market for sale by

AMUL. The concept of product relates to not only the physical product but also the benefits offered by it. It also includes other aspects like after sales services, availability of spare parts, handling complaints, etc. The important product decisions include, deciding about the features, quality, packaging, labeling, and branding of the products.

2. Price:
Price is the amount of money that the customers have to pay to obtain the product. Marketers have to analyse the factors determining the price such as, cost of the product, profit expected, elasticity of demand, competitors price, etc. and fix a price for the firms products. Decisions have also to be taken in respect of discounts to customers, credit terms, etc.

3. Place:
Place or physical distribution include activities that make firm’s products available to the target customers. Important decision areas in this respect include selection of dealers (e.g., wholesaler, retailers, etc) to reach the customers and providing support to the intermediaries (e.g. by way of discounts, etc). The other decision areas include managing inventory, storage, and transportation of goods from the place it is produced to the place it is required by the buyers.

4. Promotion:
Promotion of products and services include activities that communicate availability, features, merits, etc. of the products to the target customers and persuade them to buy it. Most marketing organizations undertake various promotional activities through using number of tools such as advertising, personal selling, and sales promotion techniques (like price discounts, free samples, etc)

The success of a market offer will depend on how well these ingredients are mixed to create superior value for the customers and simultaneously achieve their sale and profit objectives. (4 × 1 = 4, each point 1 mark)

Question 34.
State any four consumer responsibilities.
Answer:
Consumer responsibilities:
A consumer should keep in mind the following responsibilities while purchasing, using and consuming goods and services.

a. Be aware about various goods and services available:
in the market so that an intelligent and wise choice can be made.

b. Buy only standardized goods:
as they provide quality assurance. Thus, look for ISI mark on electrical goods, FPO mark on food products, Hallmark on jewelry, etc.

c. Read labels carefully:
so as to have information about prices, net weight, manufacturing and expiry dates, etc.

d. Ask for a cash memo:
on purchase of goods or services. This would serve as a proof of the purchase made. (4 × 1 = 4, each point 1 mark) (Write any four relevant points)

SECTION-D

IV. Answer any FOUR of the following questions in 20 – 25 sentences each. Each question carries 8 marks. (4 × 8 = 32)

Question 35.
Management is considered to be both an art and a science. Explain.
Answer:
Management is considered to be both a science and an art. They are not mutually exclusive but complement to each other. The following explanation justifies this point.

Management as an art:
Art is the skillful and personal application of existing knowledge to achieve desired results.

Management is said to be an art since it has the following features of an art:
1. Existence of theoretical knowledge:
Like any other art (e.g., dancing or music), in management, there is existence of theoretical knowledge. Lot of literature is available in various areas of management like marketing, finance and human resources. Further, various theories of management were developed by management thinkers, which prescribe certain universal principles.

2. Personalised applications:
Like an artist (e.g., dancer or actor), every manager has his own way (style and approach) of managing the things depending upon his knowledge and experience. A manager applies management principles to a given situation, or a problem in his own unique manner.

Thus, the ability of managers to put management principles into practice distinguishes a successful manager from a less successful one.

3. Based on practice and creativity:
Like any art, management involves the creative practice of existing theoretical knowledge. A good manager works through a combination of practice, creativity, imagination, initiative and innovation. A manager achieves perfection after long practice.

4. Goal oriented:
Like any other art, management is also directed towards completion of the predetermined goals. Therefore, we can conclude that management is an art.

Management as a science:
Science is a systematic body of knowledge. Management is considered to be a science since it has the following features of science:

1. Systematised body of knowledge:
Like science, management has a systematized body of knowledge. It has its own theory and principles. Management has its own vocabulary of terms and concepts.

2. Principles based on experimentation:
Like scientific principles, management principles are also based on repeated experiments and observations in different types of organizations. E.g., Scientific Management principles by F.W. Taylor.

3. Universal validity:
Since management deals with human beings and human behaviour, application and use of management principles is not universal. They have to be modified according to a given situation. However, they provide managers with certain standardized techniques that can be used in different situations.

4. Cause and effect relationship:
Like principles of science, management principles also establish cause and effect relationship in dealing with various situations in the organization. E.g., Division of labour (Cause) results in increased productivity (effect) Since management deals with human beings and human behaviour, management can be called an inexact science.

Conclusion:
The practice of management is an art. The practice of manager is based on the principles – it is a
science. Thus, management is both a science and an art. Further, management as an art and a science are not mutually exclusive, but complement each other. (4 marks for points + 4 marks for explanation)

Question 36.
What is organising? Explain the importance of organising.
Answer:
Organising is a process which coordinates human efforts, assembles resources and integrates both into a unified whole to be utilized for achieving specified objectives. (2 + 6 Marks) (3 marks for points + 3 marks for explanation)

OR

Organising is a process that initiates implementation of plans by clarifying jobs and working relationships and effectively deploying resources for attainment of identified and desired results (goals).

Organising function helps in the survival and growth of an enterprise and equips it to meet various challenges. Proper performance of organising function enables a business enterprise to successfully meet its goals.

The following points highlight the importance of organising in any business enterprises.
1. Benefits of specialization:
Organising leads to a systematic allocation of jobs among the workforce (employees). Right person is placed in the right job. It leads to specialization and increases the efficiency and productivity of employees.

2. Clarity in working relationship:
Organising helps in establishing working relationships. It clearly defines the authority and responsibility of each individual in an organization. Every individual has clarity as to whom he can give orders and from whom he has to receive orders.

3. Optimum utilization of resources:
Organising ensures proper allocation of jobs. It leads to optimum (i.e., efficient) use of material, financial and human resources. This also avoids duplication of work and helps in minimising the wastage of resources.

4. Adaptation to change:
The process of organising allows a business enterprise to accommodate changes in the business environment. It allows the organization structure to be suitably modified.

5. Effective administration:
Organising provides a clear description of jobs. This helps to avoid confusion and duplication. Clarity in the working relationships enables proper execution of work. Thus, management of an enterprise becomes easy and this brings effectiveness in administration.

6. Development of personnel:
Organising stimulates creativity among managers. By providing well defined areas of work and ensuring delegation of authority, organising provides sufficient freedom to the managers and encourages their initiative and creativity. Thus, it helps the managers to grow and develop to their full potential.

7. Expansion and growth:
Organising promotes growth and diversification of an enterprise. It enables the enterprise to take up new challenges. It allows a business enterprise to add more job positions, departments, new products and new geographical territories. This will help to increase customer base, sales and profit.

Thus, organising is a process by which the manager brings order out of chaos, removes conflict among people over work or responsibility sharing and creates an environment suitable for team work.

Question 37.
Explain the external sources of recruitment.
Answer:
External recruitment provides wide choice and brings new blood in the organisation. The commonly used external sources of recruitment are:

a. Direct recruitment:
Under the direct recruitment, a notice is placed on the notice board of the enterprise specifying the details of the jobs available. Job seekers assemble outside the premises of the organisation on the specified date and selection is done on the spot. The practice of direct recruitment is followed usually for casual vacancies of unskilled or semiskilled jobs.

b. Casual callers:
Many qualified persons visit the offices of reputed companies and apply for jobs on their own. Management preserves such unsolicited applications and the candidates may be called for interview, whenever the need arises.

c. Advertisement:
Advertisement of vacancies in newspapers and trade journals, is one of the popular external sources of recruitment. The advertisements give information about the number of vacant posts, nature of jobs, required qualifications, skills needed and remuneration offered for the jobs. Advertisement brings response from many number of suitable candidates and gives the management a wider range of candidates for selection.

d. Employment Exchanges:
Employment exchanges run by the government are an important source of recruitment of personnel for unskilled and skilled operative jobs. Job seekers register their names with the employment exchanges. The employment exchanges supply the names of suitable persons to the business enterprises when there is a requisition from them.

e. Placement Agencies and management consultants:
Placement agencies are private agencies which collect bio-data of a large number of candidates and recommend suitable candidates to the business enterprises on their request. Management consultancy firms help the organizations to recruit technical, professional and managerial personnel. They specialize in middle level and top level executive placements.

f. Campus recruitment (Educational institutions):
Universities, colleges and institutes of management and technology are a popular source of recruitment for technical, professional and managerial jobs. These institutions offer an opportunity to the business enterprises to conduct interview of the qualified students for various jobs in their campus, i.e., campus recruitment.

g. Recommendations of employee:
Applications introduced by present employees or their friends and relatives may also prove to be a good source of recruitment.

h. Labour contractors:
Labour contractors are generally employees of the organisation, who maintain close contacts with labourers and can provide the required number of unskilled workers at short notice.

i. Advertising on television:
Telecasting of vacant posts over television is a widely used source of recruitment these days. Information about number of vacant posts, required qualifications, job description and remuneration offered etc. is given in these advertisements. Generally, this type of telecasting is popular in big cities.

j. Web publishing:
Internet is becoming a common source of recruitment these days. There are certain websites which are specifically meant for providing information about both job seekers and jobs available. Websites such as www.naukri.com, www.jobstreet.com etc. are very commonly visited by job seekers and the organizations searching for suitable people.

Conclusion:
Thus, different external sources are available for recruitment of staff. The management must select an appropriate source for recruiting its staff. (Eight points 4 marks + 4 marks for explanation)

Question 38.
Explain the qualities of good leader.
Answer:
A good leader can influence the behaviour of his/her subordinates positively and can take the organisation to the success. To be a good (successful) leader, a person should possess certain qualities. Some of these qualities are:

a. Physical features:
Physical features like height, weight, health and appearance determine the physical personality of an individual. A leader with good physical features can attract people. Health and endurance help a leader to work hard which inspires others to work with same spirit.

b. Knowledge:
A good leader should have required knowledge and competence. He/she should have knowledge about the organisation, procedure of work, products and other details. Only such person can instruct subordinates correctly and influence them.

c. Integrity:
A leader should possess high level of integrity and honesty. He should be a role model to others regarding the ethics and values.

d. Initiative:
A leader should have courage and initiative. He should not wait for opportunities come to his way, rather he should grab the opportunity and use it to the advantage of organisation.

e. Communication skills:
A leader should be a good communicator. He should have the capacity to clearly explain his ideas and make the people to understand his ideas. Also, he should be a good listener. He should have the patience to listen to both the superiors and the subordinates.

f. Motivation skills:
A leader should be an effective motivator. He should understand the needs of people and motivate them through satisfying their needs.

g. Self confidence:
A leader should have high level of self confidence and should be able to create confidence in his subordinates. He should not loose his confidence even in most difficult times.

I. Decisiveness:
Leader should be decisive in managing the work. Once he is convinced about a fact, he should be firm and should not change opinions frequently.

i. Social skills:
A leader should be sociable and friendly with his colleagues and followers. He should understand people and maintain good human relations with them.

All good leaders may not necessarily possess all the qualities of a good leader. But they can try to acquire them through training and conscious efforts. A good leader can see that work is completed on time and goals are achieved at minimum cost. Thus, a good leader can bring effectiveness and efficiency in the organisation. (8 points 4 marks + 4 marks for explanation)

Question 39.
What is stock exchange? Explain the functions of the stock exchange
Answer:
A stock exchange is an institution which provides a platform for buying and selling of existing securities. According to Securities Contracts (Regulation) Act, 1956, Stock exchange means,

“anybody of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying and selling or dealing in securities”. (2 + 6 Marks) (3 marks for points + 3 marks for explanation)

Functions of Stock Exchange:
Following are some of the important functions of a stock exchange.

1. Providing liquidity and marketability to existing securities:
The basic function of a stock exchange is the creation of a continuous market where securities are bought and sold. It gives investors the chance to disinvest and reinvest. This provides both liquidity and easy marketability to already existing securities in the market.

2. Pricing of securities:
Share prices in a stock exchange are determined by the forces of demand and supply. A stock exchange is a mechanism of constant valuation through which the prices of securities are determined. Such a valuation provides important instant information to both buyers and sellers in the market.

3. Safety of transaction:
The membership of a stock exchange is well regulated and its dealings are well defined according to the existing legal framework. This ensures that their vesting public gets a safe and fair deal on the market.

4. Contributes to economic growth:
Stock exchange is a market in which existing securities are resold or traded. Through this process of disinvestment and reinvestment savings get channalised into the most productive investment avenues. This leads to capital formation and economic growth.

5. Spreading of equity cult:
The stock exchange can play a vital role in ensuring wider share ownership by regulating new issues, better trading practices and taking effective steps in educating the public about investments.

6. Providing scope for speculation:
The stock exchange provides sufficient scope within the provisions of law for speculative activity in a restricted and controlled manner. It is generally adopted that a certain degree of healthy speculation is necessary to ensure liquidity and price continuity to the stock market.

Thus, “efficient functioning of a stock exchange creates a positive environment among investors and leads to the growth of primary market for new issues.

Question 40.
Explain the importance of personal selling to customers and society
Answer:
Importance of personal selling to customers:
I. The customers are benefited by personal selling in the following ways:

1. Help in Identifying Needs:
Personal selling helps the customers in identifying their needs and wants and in knowing how these can best be satisfied. (4 + 4 marks)

2. Latest Market Information:
Customers get latest market information regarding price changes, product availability and shortages and new product introduction, which help them in taking the purchase decisions in a better way.

3. Expert Advice:
Customers get expert advice and guidance in purchasing various goods and services, which . help them in making better purchase.

4. Induces customers:
Personal selling induces customers to purchase new products that satisfy their needs in a better way and thereby helps in improving their standards of living.

II. Importance of personal selling to society:

1. Converts latent demand:
Personal selling converts latent demand into effective demand. It is through this cycle that the economic activity in the society is fostered, leading to more jobs, more incomes and more products and services. That is how economic growth is influenced by personal selling.

2. Employment opportunities:
Personal selling offers greater income and employment opportunities to the unemployed youth.

3. Career opportunities:
Personal selling provides attractive career with greater opportunities for advancement and job satisfaction as well as security, respect, Variety, interest, and independence to young men and women.

4. Mobility of sales people:
There is a greater degree of mobility in sales people, which promote travel and tourism in the country.

5. Product Standardisation:
Personal selling increases product standardization and uniformity in consumption pattern in a diverse society.

SECTION-E
(Practical Oriented Questions)

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

Question 41.
Assuming that you are the manager, of an organisation, draw the neat diagram of different levels of management to specify that authority responsibility relationships create different levels of management. (5 Marks)
Answer:
Diagram showing levels of management

Question 42.
Draw the organisation chart showing divisional and functional structure. (5 Marks)
Answer:
Organisation Chart Showing Divisional and Functional Structure.

Question 43.
As a financial consultant, give the list of any 10 factors which affect the choice of capital structure.
Answer:
Following is the list of factors which affect the choice of capital structure. (10 × 1/2 = 5)

1. Cash flow position
2. Interest coverage ratio (ICR)
3. Debt service coverage ratio (DSCR)
4. Return on investment (ROI)
5. Cost of debt
6. Tax rate
7. Cost of equity
8. Floatation costs
9. Risk consideration
10. Flexibility
11. Control
12. Regulatory framework
13. Stock market conditions
14. Capital structure of other companies (Write any ten points)