19. State any four functions of ‘stock exchange’. [4]
Ans. 1. Providing Liquidity Securities: Stock exchange provides a ready market for the securities
issued by various institutions. The investors can convert their money into securities and
vice versa very quickly.
2. Pricing of Securities: Stock exchange helps in determining the price of various securities.
The forces of demand and supply act freely in the stock exchange.
3. Mobilisation of Savings: Stock exchange helps in mobilisation of surplus funds of
individuals, business firms and cooperatives for investment in popular securities.
4. Capital Formation: Stock exchange not only mobilises the existing savings but also
induces the public to save money
20. Two years ago Madhu completed her degree in food technology. She worked for sometime in a
company manufacturing chutneys, pickles and murabbas. She was not happy in the company
and decided to have her own organic food processing unit for the same. She set the objectives
and the targets and formulated action plan to achieve the same.
One of her objective was to earn 10% profit on the amount invested in the first year. It was
decided that raw materials like fruits, vegetables, spices etc. will be purchased on the months
credit from farmers cultivating organic crops only. She also decided to follow the steps required
for marketing of the products through her own outlets. She appointed Mohan as a Production
Manager who decides the exact manner in which the production activities are to be carried
out. Mohan also prepared a statement showing the number of workers that will be required in
the factory throughout the year. Madhu informed Mohan about her sales target for different
products, area wise for the forthcoming quarter. While working on the production table a
penalty of ` 100 per day for not wearing the caps, gloves and apron was announced.
Quoting lines from the above para identify and explain the different types of plans discussed.
Ans. Objective: To earn 10% profit on the amount invested in the first year:
Strategy: To sell products through its own retail store.
Policy: Will be purchased on three months credit from farmers cultivating organic crops only.’
Procedure: ‘She also decided to follow the steps required for marketing of the products through
her own outlets.’
Method: ‘She appointed Mohan as a Production Manager who decides the exact manner in
which the production activities are to be carried out.’
Rule: ‘While working on the production table a penalty oft 100 per day for not wearing the
caps, gloves and apron was announced.’
21. Arun is working in a multinational company in Gurgaon. He was running temperature for the
last many days. When his blood was tested, he was found positive for dengue with a very low
platelet count. Therefore, he was admitted in the hospital and a blood transfusion was advised
by the doctors. One of his colleagues sent a text message about in to his immediate superior
‘Mr. Narain’. ‘Mr. Narain’ in turn sent a text message to the employees of the organisation
requesting them to donate blood for Arun’. When the General Manager came to know about it,
he ordered for fumigation in the company premises and cleanliness of the surroundings.
(a) From the above para quote lines that indicate formal and informal communication.
(b) State any two features of informal communication.
(c) Identify any two values that are being communicated to the society in the above case.[5]
Ans. Formal Communication: ‘When the General Manager came to know about it, he ordered for
fumigation in the company premises and cleanliness of the surroundings.’
Informal Communication: ‘One of his colleagues sent a text message about it to his immediate
superior ‘Mr. Narain; ‘Mr. Narain’ in turn sent a text message to the employees of the organisation
requesting them to donate blood for Arun.’
(b) (i) Originates within the formal organisation: Informal organisation is the result
of frequent contact or interactions among employees who are part of the formal
organisation.
(ii) No formal structure: Informal organisation does not follow any organisational
structure. It is self-create.
(c) (i) Help.
(ii) Responsibility
22. Explain any five points which highlight the importance of controlling function of
management. [5]
Ans. Controlling is the function of management which ensure that all plans are effectively
implemented, all resource are optimally utilized and all actions remain directed towards
achievement of Predetermined goals.
An effective controlling system helps on organisation in following ways:
(i) Accomplishment of organisation goals: Controlling measures the progress of all the
activities to ensure that each activity is directed towards achievement of organisational
goals. It highlights deviations if any and indicates the corrective or preventive actions to
remain on the track of progress.
(ii) Judging accuracy of standards: A good controlling not only ensures that all actions are
in accordance to plans but it also help management to review and verity the accuracy and
objectives of standards set at the planning stage.
(iii) Making efficient use of resources: Predetermined norms and standards along with
effective controlling results in efficient utilization of resources, reducing the scope of
wastage and spoilage.
(iv) Improving employee motivation: While planning informs employee, in advance the
standards of performance expected from them, controlling helps them to achieve those
standards. Effective and positive controlling motivates employees to achieve their potential
to the tallest.
(v) Facilitating Coordination in action: Each employee and every department of the
organisation is governed by predetermined standard which need to be well co-ordinated
to achieve overall organisational goals. Controlling ensures that all activities and efforts
of each individual are coordinated with each other to accomplish the common objectives.
23. Explain any four characteristics of ‘principles of management’. [6]
Ans. 1. Universal Applicability: Principle of management are universally applicable they apply
to all types of organisation. But the extent of applicable may vary.
2. General Guidelines: They provide broad guidelines to solve business problems. But a
manager has to use them in judicious manner.
3. Formed by practice and experimentation: The principles of management are formed on
the basis of experiences, observations and analysis of events in the past. The managers
may achieve organisational goals by Applying them effectively and efficiently.
4. Flexible: Managers have the discretion to select the relevant tools and modify the
principles to meet the demands of a given situation.
24. ‘Viyo Ltd.’ is a company manufacturing textiles. It has a share capital of INR 60 lakhs. The earning
per share in the previous year was INR 0.50. For diversification, the company required additional
capital of INR 40 lakhs. The company raised funds by issuing 10% debentures for the same.
During the current year the company earned profit of INR 8 lakhs on capital employed. It paid tax
@40%.
(a) State whether the shareholders gained or lost, in respect of earning per share on
diversification. Show your calculations clearly.
(b) Also, state any three factors that favour the issue of debentures by the company as part
of its capital structure. [6]
Ans. (a) Statement showing calculation of earning for shareholders.
Particulars Amount (INR)
EBIT 8,00,000
Less: Interest 4,00,000
= PBT 4,00,000
Less: Tax 1,60,000
= PAT 2,40,000
EPS = (2,40,000 / 6,00,000) 0.40 per share
Thus the shareholders have lost wealth as earning per share has decreased.
Assuming the face value of share is INR10
(b) (i) Cost of Debt: As external sources of finance are always cheaper then internal
sources of finance, debt helps in producing the overall cost.
(ii) Tax Rate: Interest paid on debt is tax deductible expenses. Due to which real cost
of debt is much lower then the nominal one.
(iii) Control: By rising debt the control of shareholder is not diluted.
25. Ashima purchased a bottle of tomato-sauce from the local grocery shop. The information
provided on the bottle was not clear. She fell sick on consuming it. She filed a case in the
District Forum under Consumer Protection Act and got the relief.
(a) Identify the important aspect neglected by the marketer in the above case.
(b) Explain briefly the functions of the aspect identified in (a) above. [6]
Ans. (a) The important aspect neglected by the marketer in the above case is labelling.
(b) The main functions of labelling are:
(i) Describe the product and specify its contents: The product, its usage, manufacturing
and expiry dates, cautions in use are all specified in the labelling.
(ii) Identification of the product or brand: The label helps the customers to identify the
product or brand: For example: Cadbury chocolate.
(iii) Grading of products: With the help of label, products can be graded in different
categories. For example, Brooke Bond Red Label, Green Label, etc.
(vi) Help in promotion of products: Labels play a very important role in sales promotions
as they are termed as silent sales man.
(v) Providing information required by law: Labelling performs the function of providing
information required by law, e.g., the statutory warning on the packet of cigarettes,
“Smoking is injurious to Health”.
Ans. 1. Providing Liquidity Securities: Stock exchange provides a ready market for the securities
issued by various institutions. The investors can convert their money into securities and
vice versa very quickly.
2. Pricing of Securities: Stock exchange helps in determining the price of various securities.
The forces of demand and supply act freely in the stock exchange.
3. Mobilisation of Savings: Stock exchange helps in mobilisation of surplus funds of
individuals, business firms and cooperatives for investment in popular securities.
4. Capital Formation: Stock exchange not only mobilises the existing savings but also
induces the public to save money
20. Two years ago Madhu completed her degree in food technology. She worked for sometime in a
company manufacturing chutneys, pickles and murabbas. She was not happy in the company
and decided to have her own organic food processing unit for the same. She set the objectives
and the targets and formulated action plan to achieve the same.
One of her objective was to earn 10% profit on the amount invested in the first year. It was
decided that raw materials like fruits, vegetables, spices etc. will be purchased on the months
credit from farmers cultivating organic crops only. She also decided to follow the steps required
for marketing of the products through her own outlets. She appointed Mohan as a Production
Manager who decides the exact manner in which the production activities are to be carried
out. Mohan also prepared a statement showing the number of workers that will be required in
the factory throughout the year. Madhu informed Mohan about her sales target for different
products, area wise for the forthcoming quarter. While working on the production table a
penalty of ` 100 per day for not wearing the caps, gloves and apron was announced.
Quoting lines from the above para identify and explain the different types of plans discussed.
Ans. Objective: To earn 10% profit on the amount invested in the first year:
Strategy: To sell products through its own retail store.
Policy: Will be purchased on three months credit from farmers cultivating organic crops only.’
Procedure: ‘She also decided to follow the steps required for marketing of the products through
her own outlets.’
Method: ‘She appointed Mohan as a Production Manager who decides the exact manner in
which the production activities are to be carried out.’
Rule: ‘While working on the production table a penalty oft 100 per day for not wearing the
caps, gloves and apron was announced.’
21. Arun is working in a multinational company in Gurgaon. He was running temperature for the
last many days. When his blood was tested, he was found positive for dengue with a very low
platelet count. Therefore, he was admitted in the hospital and a blood transfusion was advised
by the doctors. One of his colleagues sent a text message about in to his immediate superior
‘Mr. Narain’. ‘Mr. Narain’ in turn sent a text message to the employees of the organisation
requesting them to donate blood for Arun’. When the General Manager came to know about it,
he ordered for fumigation in the company premises and cleanliness of the surroundings.
(a) From the above para quote lines that indicate formal and informal communication.
(b) State any two features of informal communication.
(c) Identify any two values that are being communicated to the society in the above case.[5]
Ans. Formal Communication: ‘When the General Manager came to know about it, he ordered for
fumigation in the company premises and cleanliness of the surroundings.’
Informal Communication: ‘One of his colleagues sent a text message about it to his immediate
superior ‘Mr. Narain; ‘Mr. Narain’ in turn sent a text message to the employees of the organisation
requesting them to donate blood for Arun.’
(b) (i) Originates within the formal organisation: Informal organisation is the result
of frequent contact or interactions among employees who are part of the formal
organisation.
(ii) No formal structure: Informal organisation does not follow any organisational
structure. It is self-create.
(c) (i) Help.
(ii) Responsibility
22. Explain any five points which highlight the importance of controlling function of
management. [5]
Ans. Controlling is the function of management which ensure that all plans are effectively
implemented, all resource are optimally utilized and all actions remain directed towards
achievement of Predetermined goals.
An effective controlling system helps on organisation in following ways:
(i) Accomplishment of organisation goals: Controlling measures the progress of all the
activities to ensure that each activity is directed towards achievement of organisational
goals. It highlights deviations if any and indicates the corrective or preventive actions to
remain on the track of progress.
(ii) Judging accuracy of standards: A good controlling not only ensures that all actions are
in accordance to plans but it also help management to review and verity the accuracy and
objectives of standards set at the planning stage.
(iii) Making efficient use of resources: Predetermined norms and standards along with
effective controlling results in efficient utilization of resources, reducing the scope of
wastage and spoilage.
(iv) Improving employee motivation: While planning informs employee, in advance the
standards of performance expected from them, controlling helps them to achieve those
standards. Effective and positive controlling motivates employees to achieve their potential
to the tallest.
(v) Facilitating Coordination in action: Each employee and every department of the
organisation is governed by predetermined standard which need to be well co-ordinated
to achieve overall organisational goals. Controlling ensures that all activities and efforts
of each individual are coordinated with each other to accomplish the common objectives.
23. Explain any four characteristics of ‘principles of management’. [6]
Ans. 1. Universal Applicability: Principle of management are universally applicable they apply
to all types of organisation. But the extent of applicable may vary.
2. General Guidelines: They provide broad guidelines to solve business problems. But a
manager has to use them in judicious manner.
3. Formed by practice and experimentation: The principles of management are formed on
the basis of experiences, observations and analysis of events in the past. The managers
may achieve organisational goals by Applying them effectively and efficiently.
4. Flexible: Managers have the discretion to select the relevant tools and modify the
principles to meet the demands of a given situation.
24. ‘Viyo Ltd.’ is a company manufacturing textiles. It has a share capital of INR 60 lakhs. The earning
per share in the previous year was INR 0.50. For diversification, the company required additional
capital of INR 40 lakhs. The company raised funds by issuing 10% debentures for the same.
During the current year the company earned profit of INR 8 lakhs on capital employed. It paid tax
@40%.
(a) State whether the shareholders gained or lost, in respect of earning per share on
diversification. Show your calculations clearly.
(b) Also, state any three factors that favour the issue of debentures by the company as part
of its capital structure. [6]
Ans. (a) Statement showing calculation of earning for shareholders.
Particulars Amount (INR)
EBIT 8,00,000
Less: Interest 4,00,000
= PBT 4,00,000
Less: Tax 1,60,000
= PAT 2,40,000
EPS = (2,40,000 / 6,00,000) 0.40 per share
Thus the shareholders have lost wealth as earning per share has decreased.
Assuming the face value of share is INR10
(b) (i) Cost of Debt: As external sources of finance are always cheaper then internal
sources of finance, debt helps in producing the overall cost.
(ii) Tax Rate: Interest paid on debt is tax deductible expenses. Due to which real cost
of debt is much lower then the nominal one.
(iii) Control: By rising debt the control of shareholder is not diluted.
25. Ashima purchased a bottle of tomato-sauce from the local grocery shop. The information
provided on the bottle was not clear. She fell sick on consuming it. She filed a case in the
District Forum under Consumer Protection Act and got the relief.
(a) Identify the important aspect neglected by the marketer in the above case.
(b) Explain briefly the functions of the aspect identified in (a) above. [6]
Ans. (a) The important aspect neglected by the marketer in the above case is labelling.
(b) The main functions of labelling are:
(i) Describe the product and specify its contents: The product, its usage, manufacturing
and expiry dates, cautions in use are all specified in the labelling.
(ii) Identification of the product or brand: The label helps the customers to identify the
product or brand: For example: Cadbury chocolate.
(iii) Grading of products: With the help of label, products can be graded in different
categories. For example, Brooke Bond Red Label, Green Label, etc.
(vi) Help in promotion of products: Labels play a very important role in sales promotions
as they are termed as silent sales man.
(v) Providing information required by law: Labelling performs the function of providing
information required by law, e.g., the statutory warning on the packet of cigarettes,
“Smoking is injurious to Health”.