Business Studies: 2018: CBSE: [Delhi] Set 3
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Q1
In the paint industry, various raw materials are mixed in different proportions with petroleum for manufacturing different kinds of paints. One specific raw material is not readily and regularly available to the paint manufacturingcompanies. Bonler Paints Company is also facing this problem and because of this there is a time lag betweenplacing the order and the actual receipt of the material. But, once it receives the raw materials, it takes less time inconverting it into finished goods.Identify the factoraffecting the working capital requirements of this industry.
Marks:1View AnswerAnswer:
The factor affecting the working capital requirement here is:
Availability of raw materials: If the raw material is easily available, then lower stock levels are required. But if the raw material isnot regular in supply, then high stock level are required, which also leads to more working capital.
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Q2
Saurabh decided to start a chocolates manufacturing business. He set the target of earning 10% profit on sales inthe first year. As a good businessman, he was concerned about the future of the business, which was uncertain. Hegathered information that the demand for chocolates is increasing day-by-day. He used this information as the basefor future planning and shared it with his team. On the basis of the gathered information, he scheduled a meeting inthe following week to find innovative ways to achieve the objectives.
List the first two steps, which have been followed by Saurabh that are related to the process of one of the functionsof management.
Marks:1View AnswerAnswer:
The steps describe above relate to planning function of management.
The steps followed by Saurabh are:
1. Setting objectives- it is the first step of planning. Objectives provide direction to all departments of an organisation.
2. Developing premises- Involves development of certain assumptions in order to plan future course of action
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Q3
Give the meaning of 'Method' as a type of plan.
Marks:1View AnswerAnswer:
Method is a formalised and standardised way of accomplishing repetitive and routine jobs. It describes how one particular step of a procedure is to be performed.
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Q4
Define 'Decentralisation'.
Marks:1View AnswerAnswer:
Decentralisation is the result of policy decision of the top management. It refers to a systematic delegation of authority at all the levels of management and in all the departments of an organisation to take decision.
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Q5
'Buy one get one free' is printed on the label of the package of a mosquito repellant.State the labelling function being performed by this statement.
Marks:1View AnswerAnswer:
The labelling function performed here is:
Promotion of goods: With the help of promotional messages like ‘Buy one get one free’, customers are attracted in buying the product. Use of attractive Labels is one of the marketing strategies adopted by the companies.
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Q6
Give the constitution of the District Consumer Disputes Redressal Forum under the Consumer Protection Act, 1986.
Marks:1View AnswerAnswer:
District Forum consists of a president and two other members, one of whom shall be woman. President shall be a working or retired judge of District Court. President is appointed by the State Government on the recommendation of the selection committee.
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Q7
An investor wanted to invest `20,000 in Treasury Bills for a period of 91 days. When he approached the ReserveBank of India for this purpose he came to know that it was not possible.Identify the reason why the investor could not invest in the Treasury bill.
Marks:1View AnswerAnswer:
The investor could not invest in the Treasury bill as the minimum amount required for such instrument is `25,000 and its multiples thereof.
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Q8
Why is the understanding of 'Marketing Management Philosophies' important?
Marks:1View AnswerAnswer:
It is important to understand the marketing management philosophies as it helps to know the level of attention to be given to different factors to achieve the desired outcome in the target market.
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Q9
Explain briefly any two points of importance of consumer protection from the point of view of business.
Marks:3View AnswerAnswer:
Consumer protection is important for businesses due to following reasons:
- Long term interest: It is the businesses' long term interest to satisfy their customers. Satisfied customers lead to repeat sales, goodwill and thus lead to profit maximization for the firm.
- Social responsibility: Business has social responsibility towards different interest groups, mainly consumers. Business needs to supply good quality products and reasonable prices to consumers.
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Q10
The Return on Investment (ROI) of a company ranges between 10 – 12% for the past three years. To finance itsfuture fixed capital needs, it has the following options for borrowing debt:
Option 'A' : Rate of interest 9%
Option 'B' : Rate of interest 13%
Which source of debt, 'Option A' or 'Option B', is better? Give reason in support of your answer. Also state theConcept being used in taking the decision.
Marks:3View AnswerAnswer:
The company should use Option ‘A’ as the ROI is higher than cost of debt, which implies that the company can increase its EPS and ability to use more debt and incur higher returns.
If the company opts for option ‘B’, then it has to incur more rate of interest as compared to the ROI i.e. it has to pay more debts and incur 13% interest rate as compared to ROI being earned between 10%-12%.
Hence, the concept referred above is called Trading on equity. It refers to the increase in profit of the company due to presence of fixed financial charges like interest rate. ROI is an important factor that affects the company’s ability to use trading on equity.
