Class 12 Business Studies Sample Paper 10 with Solutions (MCQs, Case-Based & Descriptive Questions)

Free CBSE Class 12 Business Studies Sample Paper (Solved)

Imagine you are managing a school fest: you must plan the budget, organise volunteers, promote tickets and solve last-minute problems. These everyday decisions are exactly what you study in Class 12 Business Studies.

Our free CBSE Class 12 Business Studies sample paper helps you turn BST textbook concepts into exam-ready answers.

On this page, you can begin practising 34 questions covering the following Class 12 BST chapters: Principles of Management

• Business Environment
• Planning
• Organising
• Staffing
• Directing
• Controlling
• Financial Management 
• Financial Markets
• Marketing Management
• Consumer Protection 

Type of questions in the below sample paper/worksheet:

• Multiple-choice questions (MCQs)
• Assertion–reason questions
• Case-based questions
• Descriptive questions

Before you proceed further, below are the quick details:

• Class: 12
• Subject: Business Studies
• Sample Paper Number: 10
• Time Allowed: 3 Hours
• Maximum Marks: 80
• Sample Paper Status (Solved/Unsolved): Solved

Table of Contents

Questions

Answers

The worksheet begins from here.

Questions

General instructions:

• This question paper contains 34 questions.
• Answers to the questions carrying 3 marks may be from 50 to 75 words.
• Answers to the questions carrying 4 marks may be about 150 words.
• Answers to the questions carrying 6 marks may be about 200 words.
• Attempt all parts of the questions together.

Q1. The selection test to measure individual potential for learning new skills is:

1. Trade test
2. Aptitude test
3. Intelligence test
4. None of these

Q2. Darshit is a very intelligent planner. He knows the market pretty well. For the last 10 years, he has been leading several successful projects for his company. The company gives him the responsibility to start a new project in Russia. With his experience, he makes assumptions about all the possible future scenarios, such as market demand, competition, government policies, etc.

Identify the step of the planning process to which the given paragraph is related.

1. Setting objectives
2. Developing premises
3. Implementing the plan
4. Follow-up action

Q3. Which financial decision is concerned with the appropriation of profits?

1. Investment decision
2. Financing decision
3. Dividend decision
4. Pay-off decision

Q4. Shimona Ltd. is a company dealing in office furniture. The company chose to diversify its operations to improve its growth potential and increase market share. As the project was important, many alternatives were generated for the purpose and were thoroughly discussed amongst the members of the organisation. After evaluating the various alternatives, MP Singh, the Managing Director of the company, decided that they should add 'Home Interiors and Furnishings' as a new line of business activity.

Name the framework which the diversified organisation should adopt to enable it to cope with the emerging complexity.

1. Functional structure
2. Divisional structure
3. Formal structure
4. None of these

Q5. Financial leverage is favourable if:

1. Return on investment is lower than the cost of debt.
2. Return on investment is higher than the cost of debt.
3. Debt is easily available.
4. Degree of existing financial leverage is low.

Q6. The label of a health drink did not disclose the presence of soya content, to which many people are allergic. Which consumer right is being violated?

1. Right to safety
2. Right to seek redressal
3. Right to be assured
4. Right to be informed

Q7. __________ refers to a process of influencing other people to work willingly for group objectives.

1. Leadership
2. Supervision
3. Communication
4. Motivation

Q8. Which of the following statements is false about FW Taylor and Henry Fayol?

1. Fayol was a mining engineer whereas Taylor was a mechanical engineer.
2. Fayol's principles are applicable in specialised situations whereas Taylor's principles have universal application.
3. Fayol's principles were formed through personal experience whereas Taylor's principles were formed through experimentation.
4. Fayol's principles are applicable at the top level of management whereas Taylor's principles are applicable at the shop floor.

Q9. Complete __________ implies concentration of all decision-making functions at the apex of the management hierarchy.

1. Decentralisation
2. Centralisation
3. Training
4. Development

Q10. Read the following statements—Assertion (A) and Reason (R)—and choose the correct option from the alternatives given below:

Assertion (A): Efficiency aims at performing a task with the least wastage of time and effort.

Reason (R): Efficiency is about doing the job in a cost-effective manner, i.e., getting maximum output with minimum input.

Alternatives:

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

Q11. Identify the marketing management philosophy which focuses on paying attention to the social, ethical and ecological aspects of marketing.

1. Product concept
2. Selling concept
3. Marketing concept
4. Societal marketing concept

Q12. Beta Ltd. manufactures files and folders from old clothes to discourage the use of plastic files and folders. For this, they employ people from nearby villages where very few job opportunities are available. An employee, Satish, designed a plan for cost reduction, but it was not welcomed by the production manager. Another employee gave some suggestions for improvements in design, but these were also not appreciated by the production manager.

State the principle of management that is violated in the above paragraph.

1. Initiative
2. Discipline
3. Order
4. Equity

Q13. Match the features of the business environment in Column I with their explanations in Column II and choose the correct alternative:

Column I	Column II
A. Differs from country to country	(i) Complexity
B. Difficult to grasp the change in its totality	(ii) Relativity
C. Keeps on changing in terms of competition, technological improvements, etc.	(iii) Dynamic nature

1. (i), (ii), (iii)
2. (ii), (i), (iii)
3. (ii), (iii), (i)
4. (iii), (ii), (i)

Q14. Which of the following statements is correct?

1. Planning and controlling are one function.
2. Controlling is a part of planning.
3. Controlling is meaningless without pre-determined goals.
4. Controlling can be substituted by a good plan.

Q15. 'While planning the layout of a factory, orderliness would require that workflows are matched by the flow of materials and movement of men.' Which feature of principles of management is reflected through this?

1. Universally applicable
2. Flexible
3. General guidelines
4. Mainly behavioural

Q16. Crackers Ltd., a fire-cracker manufacturing company, launched some new products on the eve of Diwali which attracted many buyers. To meet the increased demand, the company employed children from nearby villages. Although the product was in great demand, appropriate safety warnings for use were not mentioned on the packets, which led to many accidents.

Identify the important product-related decision that was not taken into consideration by the company.

1. Branding
2. Packaging
3. Labelling
4. None of these

Q17. DT Ltd. targeted the production of 20,000 shirts per month at a cost of ₹150 per shirt. The production manager could achieve this target within the month at ₹170 per shirt. The production manager is:

1. Efficient and effective
2. Efficient but not effective
3. Effective but not efficient
4. Neither efficient nor effective

Q18. For the given two statements, choose the correct option:

Statement I: Advertising is an impersonal form of communication.

Statement II: Advertising lacks direct feedback.

Choose the correct option from the options given below:

1. Statement I is true and II is false.
2. Statement II is true and I is false.
3. Both the statements are true.
4. Both the statements are false.

Q19. Which of the following is a non-financial incentive?

1. Employee empowerment
2. Job enrichment
3. Job security
4. All of these

Q20. Profits can be maximised by attracting and persuading customers to buy the product. Which concept of marketing management is being referred to?

1. Marketing concept
2. Product concept
3. Production concept
4. Selling concept

Q21. Indian equity markets are going through a phase of boom. There is huge growth potential for innovative technologies. This has resulted in lots of new ventures vying for a market share and old enterprises trying to keep up with the pace at which changes are taking place in the economy. This technological innovation has helped even smaller businesses to compete on a global scale.

Identify and explain the three factors highlighted above which affect the working capital requirements of such enterprises.

Q22. Differentiate between On-the-job training and Off-the-job training.

Or

What do you mean by performance appraisal?

Q23. Passion Cosmetics entered the market with a complete range of lipsticks. It established its production unit in Panipat and the head office in Noida. After making its presence felt in the market and capturing a good market share, it decided to launch a range of nail paints and eyeliners. It also purchased some new hi-tech machines for the production of its entire range of products.

1. Which type of organisation structure would you suggest for Passion Cosmetics and why?
2. State any two limitations of the structure identified in part (a) above.

Q24. 'Controlling is both a backward-looking and forward-looking function.' Do you agree? Give a reason.

Or

Explain any three financial incentives used by an organisation to motivate its employees.

Q25. Explain the following functions of marketing:

1. Product designing and development
2. Standardisation and grading

Or

State any four reliefs available to a consumer under the Consumer Protection Act, 2019.

Q26. Organising involves a series of steps that need to be taken in order to achieve the desired goals. Explain these steps.

Q27. Differentiate between Money Market and Capital Market on the following bases:

1. Expected return
2. Safety
3. Liquidity
4. Instruments

Or

What is meant by 'Long-term Investment Decision'? State any three factors which affect long-term investment decisions.

Q28. 'Life', a brand of clothing catering to upper-middle-class consumers, decided to enter the segment of Premium Clothing. For this, it studied the demand pattern, the tastes and preferences of prospective consumers through a series of surveys conducted by its expert team. It also decided to have an app named 'Your Look' to provide customized services to this group of consumers.

1. State, by quoting the line, the dimension of business environment studied by 'Life'.
2. Discuss any three points highlighting the importance of Environment Scanning to the firm.

Q29. The monthly production target of a company for the year was 5,000 units. The Production Manager had two supervisors under him. He gave them the task of maintaining the daily production statements so that they could easily identify whether the work was going in the right direction or not. The Production Manager had weekly meetings with the supervisors to know about the deviations, if any, and to decide the future course of action. Since the supervisors had one-to-one interaction with the workers daily, the Production Manager always took into consideration the suggestions given by the supervisors.

Identify and explain the leadership style displayed by the Production Manager in the above case. Also, explain any one leadership style other than that identified above.

Q30. The Indian Pharmaceutical industry has realised that different types of bacteria have become resistant to the existing antibiotics. To ensure that this may not lead to major medical issues in the future, they have started working on this issue. If things go as anticipated, then a new antibiotic for such bacteria, based upon the Made-In-India compound, would hit the market by 2025.

1. Which function of Management is being performed in the given situation?
2. Discuss any three points of importance of the function identified in part (a) above.

Q31. AS Ltd. is a large company engaged in the assembly of air-conditioners. Recently, the company conducted a 'Time' and 'Motion' study and concluded that, on average, a worker can assemble ten air-conditioners in a day. The target volume of the company in a day is the assembly of 1,000 units of air-conditioners. The company is providing attractive allowances to reduce labour turnover and absenteeism. All the workers are happy. Even then, the assembly of air-conditioners per day is only 800 units. To find out the reason, the company compared the actual performance of each worker and observed through CCTV that some of the workers were busy gossiping.

1. Identify and explain the function of management discussed above.
2. State those steps in the process of the function identified above which are discussed in the above paragraph by quoting lines.

Q32.

1. Explain any two techniques of Taylor from the following:
   1. Differential Piece Wage System
   2. Standardisation and Simplification
   3. Method Study
2. Differentiate between Unity of Command and Unity of Direction on any three bases.

Or

1. Explain any two principles of management given by Henry Fayol from the following:
   1. Esprit de Corps
   2. Initiative
   3. Remuneration of employees
2. Differentiate between contributions made by FW Taylor and Henri Fayol on any three bases.

Q33. 'It refers to the use of communication with the twin objective of informing the potential customers about the product and persuading them to buy the product.'

1. Which element of Marketing Mix is being referred to? Explain it.
2. Discuss its different tools.

Q34. The directors of a company decided to issue debentures worth ₹70,00,000 in order to finance their expansion plans. This would lead to an increase in the debt-equity ratio from 2:1 to 3:1 but, at the same time, would increase the earnings per share.

1. Which financial decision is being taken by the directors? Explain it.
2. Which concept of Financial Management is being referred to?
3. Discuss four factors that they need to consider before taking this decision.

Or

'Stock exchange not only contributes to economic growth but also performs many other functions.' Explain any four such functions.

Answers

Q1. (b) Aptitude test

Q2. (b) Developing premises

Q3. (c) Dividend decision

Q4. (b) Divisional structure

Q5. (b) Return on investment is higher than the cost of debt.

Q6. (d) Right to be informed

Q7. (a) Leadership

Q8. (b) Fayol's principles are applicable in specialised situations whereas Taylor's principles have universal application.

Q9. (b) Centralisation

Q10. (a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Q11. (d) Societal marketing concept

Q12. (a) Initiative

Q13. (b) A – (ii), B – (i), C – (iii)

Q14. (c) Controlling is meaningless without pre-determined goals set.

Q15. (d) Mainly behavioural

Q16. (c) Labelling

Q17. (c) Effective but not efficient

Q18. (c) Both the statements are true.

Q19. (d) All of these

Q20. (d) Selling concept

Q21. The factors affecting the requirement of working capital are:

1. Business cycle: The different phases of the business cycle affect the requirement of working capital. At the boom time, the sales and production of the business are more and so is the requirement of working capital. At the time of depression, sales as well as production are less and hence the working capital requirement is small.
2. Growth prospects: A concern having high growth potential will require a larger amount of working capital to meet its higher production and sales targets. But a concern with no or less growth prospects does not require additional working capital. It can work on its existing working capital.
3. Level of competition: Higher competition in the market forces a firm to keep larger stock of finished goods to meet urgent orders of customers. Further, to be competitive, there may be a need to give liberal credit to the customers. This increases the need for working capital requirement.

Q22. Differences between On-the-job Training and Off-the-job Training:

Basis	On-the-job Training	Off-the-job Training
(a) Meaning	It is the training method in which employees 'learn while doing'.	It is the training method in which employees 'learn before doing'.
(b) Training Place	This type of training is provided at the actual workplace itself.	This type of training is provided away from the actual workplace itself.
(c) Trainer	This training is generally provided by the immediate superior.	This training is generally provided by an expert in the concerned field who may not be the immediate superior.

Or

Performance appraisal is a systematic evaluation of an individual with respect to his performance on the job and his potential for development. Performance appraisal rates the person and not the job, as it is concerned with evaluating the characteristics, ability and aptitude of the individuals. In fact, it measures the employee's worth to the organisation to which he belongs. Performance appraisal includes analysing the strengths and weaknesses of current employees and placing the right man on the right job and identifying employees who have the potential for future growth and advancement.

Q23.

1. Passion Cosmetics should opt for Functional Structure because they are launching another product of the same category which requires the same type of specialised activities and is targeting the same group of consumers.
2. Limitations of functional structure are:
   1. It places less emphasis on overall organisational goals.
   2. There exists conflict of interest between the departments.

Q24. Controlling is both a backward-looking and forward-looking function of management.

1. Controlling is concerned with the comparison of actual results with the standards set in the past, so it is called the backward-looking process.
2. Controlling aims to find the deviations and take corrective action so that future performance can be improved, making it a forward-looking function.

Hence, Controlling is both a backward-looking and forward-looking function.

Or

The financial incentives used by an organisation to motivate its employees are:

1. Bonus: Bonus is an incentive offered over and above the wages/salary to the employees. It is a reward for good performance.
2. Profit sharing: Many organisations share their profits with their employees, who are the key resource for generating it. This incentive motivates the employees to improve their performance and contribute to increase in profits.
3. Stock option: A company may offer its shares to its employees at a set price, which is less than the market price. Allotment of shares to them creates a feeling of ownership among them and motivates them to contribute to the growth of the organisation.
4. Retirement benefits: Retirement benefits such as provident fund, provision and gratuity provide financial security to the employees. This acts as a motivating factor for them.

(Any three)

Q25.

1. Product designing and development: An attractive product design is the key to effective marketing. Therefore, the product should be designed in such a way that it not only improves its performance but also gives the firm a competitive edge over its competitors.
2. Standardisation and grading: Standardisation refers to the process of producing the goods and services with predetermined specifications, which helps in achieving uniformity and consistency in output. It reduces the need for inspection, testing and evaluation of the products. Grading is the process of classification of the products into different groups, on the basis of some parameters like quality, quantity, size, etc. It is very useful for agricultural products.

Or

If the consumer court is satisfied about the genuineness of the complaint, it can issue the following directions to the opposite party:

1. To remove the defect in goods or deficiency in services.
2. To replace the defective product with a new one, free from any defect.
3. To refund the price paid for the product or the charge paid for the service.
4. To pay a reasonable amount of compensation for any loss or injury suffered by the consumer due to negligence of the opposite party.
5. Not to offer hazardous goods for sale.
6. To pay punitive damages in appropriate circumstances.
7. To discontinue the unfair/restrictive trade practice and not to repeat it in future.

(Any four)

Q26. The steps in the process of organising are:

1. Identification and division of work: It is the first step in the process of organising, wherein the work is identified and divided into manageable activities, so that duplication of work is avoided and the burden of work can be shared among the employees.
2. Departmentalisation: After dividing the work into smaller and manageable activities, departments are created by grouping together the activities of similar nature. This grouping can be done on the basis of territory, product or function, etc.
3. Assignment of duties: After departmentalisation, each department is placed under the charge of an individual. This job allocation is done to the individuals considering their skills and competencies. The work must be assigned to those who are best suited to perform it well.
4. Establishing reporting relationships: After allocation of work, an individual should be made clear as to whom he is accountable and from whom he should take orders. The establishment of such relationships creates structure and enhances coordination among the various departments.

Q27. Differences between Capital Market and Money Market:

Basis	Capital Market	Money Market
(a) Expected return	It yields higher return to investors.	It yields lower return to investors.
(b) Safety	The instruments are riskier both with respect to returns and principal repayment.	The instruments are much safer due to shorter duration of investment and financial soundness of the issuer.
(c) Liquidity	The instruments are liquid; however, a share may not be actively traded.	The instruments are highly liquid. The Discount Finance House of India provides a ready market for money market instruments.
(d) Instruments	Equity shares, bonds, debentures, preference shares, etc.	Treasury bills, commercial paper, certificate of deposit, etc.

Or

Long-term investment decisions are also known as Capital Budgeting Decisions. It involves committing the finance on a long-term basis on fixed assets or various projects of an organisation.

The factors affecting capital budgeting decisions are:

1. Cash flows of the project: When a company takes an investment decision involving a huge amount, it expects to generate some cash flows over a period. These cash flows are in the form of a series of cash receipts and payments over the life of an investment. The amount of these cash flows should be carefully analysed before considering a capital budgeting decision.
2. The rate of return: The most important criterion is the rate of return of the project. These calculations are based on the expected returns from each proposal and the assessment of risk involved.
3. The investment criteria involved: The decision to invest in a particular project involves a number of calculations regarding the amount of investment proposals which are known as capital budgeting techniques. These techniques are applied to each proposal before selecting a particular project.

Q28.

1. 'Life' had studied the following dimensions of Business Environment:
   1. Social dimension: 'For this, it studied the demand pattern, the taste and preferences of the prospective consumers through a series of surveys conducted by its expert team.'
   2. Technological dimension: 'It also decided to have an app named Your Look to provide customised services to this group of customers.'
2. The importance of environment scanning to the firm is as follows:
   1. Helps to identify opportunities and get the first mover advantage: The knowledge of the business environment helps the firm to take benefit of the new opportunities appearing in the market in the form of new technology or innovation, new resources, etc.
   2. Helps to identify the threats: Environmental scanning helps the firms to identify any threats or warning signals in future and prepare themselves in advance to tackle it.
   3. Helps in planning and policy formulation: Planning is deciding in advance the future course of action. Through environmental scanning, one can make scientific forecasts about the future and develop the plans accordingly.

Q29. The production manager is a democratic leader. Democratic leadership (Participative) is also known as participative leadership. It is the most effective leadership style. Democratic leaders offer guidance to group members, but they also participate in the group and allow input from other group members. Participative leaders encourage group members to participate, but retain the final say over the decision-making process. Group members feel engaged in the process and are more motivated and creative.

The other leadership styles may be:

1. Autocratic leadership: In this style of leadership, the leader gives orders and expects that they are obeyed. The policies for the group are made by him without consulting them. The power is centralised with the leader.
2. Laissez-faire leadership: In this style of leadership, the leader acts as a contact man with the outsiders to bring information and the resources the group requires. The group members have a high degree of freedom and they work as per their own choice and competence.

(Any one)

Q30.

1. Planning
2. The importance of Planning is as follows:
   1. Facilitates decision-making: Planning being an intellectual process helps in making decisions. It helps in identifying and evaluating the different alternatives so that the best alternative may be selected.
   2. Establishes standards for controlling: Controlling involves the comparison of the actual performance with the standards. The standards required for it are laid down at the stage of planning.
   3. Reduces overlapping and wasteful activities: By clearly specifying in advance the different aspects of a job, i.e., what, when, how and by whom, Planning ensures that there is neither any duplication of work nor are the resources wasted.
   4. Promotes innovative ideas: Planning being the primary function of Management, innovative ideas are therefore introduced at this stage itself. It aims to discover new ways of solving the business problems or to find better ways of achieving the objectives.

   (Any three)

Q31.

1. The function of management discussed in the given case is Controlling. It is the process of comparing the actual performance with the standards, finding out deviations, if any, and taking the necessary corrective action to prevent the reoccurrence of these deviations in future.
2. Steps of Controlling:
   1. Setting performance standards: 'The target volume of the company in a day is assembling 1,000 units of air-conditioners.'
   2. Measurement of actual performance: 'Assembling of air-conditioners per day is 800 units only.'
   3. Comparing actual performance with standards: 'The company compared actual performance of each worker.'
   4. Analysing deviations: 'Observed through CCTV that some of the workers were busy in gossiping.'

Q32.

1. 1. Differential piece wage system: It is a piece wage system wherein the efficient and inefficient workers are paid at different rates. As financial incentives act as motivators, so first a standard task is established with the aid of time and motion study, then two different wage rates are established: higher rate for the one achieving the target and lower for those not achieving. The difference in wage rates will motivate the workers. Efficient ones will work harder to get more wages and the inefficient will try to reach the standard to get higher wages.
   2. Standardisation and simplification: It is the base of Scientific Management. According to Taylor, standards should be set for every area and every activity in the organisation. This would help in establishing the standards of quality and excellence. Through Simplification he wanted to eliminate all the unwanted unnecessary varieties, sizes and grades of products manufactured in the organisation. This will help in optimum utilisation of resources and remove the unwanted diversity in the products.
   3. Method study: This study determines the best way of doing a job. Right from procurement of raw materials to the delivery of final product, every activity is studied carefully. The best method is devised to minimise the cost of production and maximise the quality to the satisfaction of the customer.

   (Any two)

2. Differences between Unity of Command and Unity of Direction:

Basis	Unity of Command	Unity of Direction
(i) Meaning	It means that one subordinate should receive orders from and should be responsible to only one superior.	It means that each group of activities having the same objective must have one head and one plan.
(ii) Aim	It prevents dual subordination.	It prevents overlapping of activities.
(iii) Implications	It affects an individual employee.	It affects the entire organisation.

(Or any other relevant point)

Or

1. 1. Esprit de Corps: According to Fayol, management should promote the spirit of teamwork and harmony among employees, as it will enhance coordination amongst them. A manager should use 'we' in all his conversations instead of 'I'. This will foster a spirit of mutual trust and belongingness among the members and minimise the use of penalties.

      For example, on timely delivery of the order, the manager should appreciate the efforts of all the workers and give its credit to them.

      When esprit de corps is present, the need to use penalties of default is minimised. If the degree of discipline is higher, desire to contribute to the best of ability increases. Managers should not use subordinates for their personal ends. They should not try to take the credit for the work done by lower levels.

   2. Initiative: It means taking the first step with self-motivation. Management should encourage initiative among workers. They should be encouraged to develop and carry out their plans for improvements. The initiative or suggestion which results in substantial reduction in time/cost should be rewarded. This will motivate workers to work harder.

      For example, the salesman suggested a sales promotion technique to the sales manager. The manager listened to it and implemented it after due consideration. On successful accomplishment of target, the salesman was rewarded for his suggestion.

   3. Remuneration of Employees: Fayol, through this principle, said that overall pay and compensation should be fair to both employees and the organisation. The pay should give the employees a reasonable standard of living. At the same time, it should be within the paying capacity of the company. The remuneration should be just and equitable.

      This will create a congenial atmosphere in the organisation which will lead to smooth working in the organisation.

   (Any two)

2. Differences between Henri Fayol and FW Taylor:

Basis	Henri Fayol	FW Taylor
(i) Applicability	His principles are applicable universally.	His principles are applicable to specialised situations.
(ii) Focus	His principles are focused on improving overall administration.	His principles are focused on increasing productivity.
(iii) Perspective	Top level of management	Shop floor level of a factory

(Or any other relevant point)

Q33.

1. Promotion Mix: 'It refers to all activities through which a marketer persuades his target customers to buy the products. Communication is the core activity of promotion mix. There is a need for developing proper communication with the market. In the absence of it, the consumer will not be able to know about the product and its utility and benefits.'
2. Different tools of Promotion Mix are as follows:
   1. Advertising: It is defined as any paid form of non-personal presentation or promotion of ideas, goods or services by an identified sponsor. It is the best way to give a standardised message to the mass consumer spread throughout the world.
   2. Sales promotion: It refers to short-term incentives used by the marketer to motivate the consumer to make immediate purchase of the product. These include rebates, refunds, quantity gifts, etc.
   3. Personal selling: It involves face-to-face interaction between the seller and the prospective buyer. It is very effective in the introduction stage and provides immediate feedback.
   4. Public relations: It means managing public opinion of an organisation. It involves a variety of programmes designed to promote or protect a company's image and views about its products among the people.

Q34.

1. Financing decision (Capital structure decision)
2. Trading on equity or financial leverage
3. Factors that they need to consider before taking this decision are:
   1. Cash flow position: Size of projected cash flows must be considered before taking this decision. Better the cash flow position, more can be the use of debt.
   2. Interest coverage ratio: The interest coverage ratio refers to the number of times earnings before interest and taxes of a company cover the interest obligation. Higher the ratio, more is the capacity of an organisation to raise debt.
   3. Return on investment: If the RoI of the company is higher than the cost of debt, it can choose to use trading on equity to increase its EPS, i.e., its ability to use debt is greater.
   4. Cost of debt: A firm's ability to borrow at a lower rate increases its capacity to employ higher debt. Thus, more debt can be used if debt can be raised at a lower rate.

Or

The functions of a stock exchange are:

1. Provides liquidity and marketability to existing securities: The main function of stock exchange is to provide a ready and continuous market for the sale and purchase of securities. The presence of a continuous market is an assurance to investors that their investments can be converted into cash as and when required by them. This provides both liquidity and marketability to already existing securities.
2. Pricing of securities: The prices of shares on a stock exchange are determined by the forces of demand and supply. The valuation of securities is useful for investors, government and creditors. Such a valuation provides instant information to both buyers and sellers in the market.
3. Safety of transactions: Stock exchanges are subject to severe rules and regulations. Companies whose securities are traded here have to undergo strict scrutiny before they are permitted to transact dealings. This ensures that the investing public gets a safe and fair deal on the market.
4. Spreading of equity cult: The stock exchange plays 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.
5. Providing scope for speculation: Healthy speculation is undertaken within the provisions of Law which is considered necessary for liquidity and price continuity.

(Any four)

The End

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A List of Notes:

Chapter 1  |  Chapter 2  |  Chapter 3  |  Chapter 4  |  Chapter 5  |  Chapter 6  |  Chapter 7  |  Chapter 8  |  Chapter 9  |  Chapter 10  |  Chapter 11  |  Chapter 12

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