CLASS XII - BUSINESS STUDIES (054)

COMMON PRE-BOARD EXAMINATION (2023-2024)

Time: 3 Hours Max. Marks: 80
General Instructions:
1. This question paper contains 34 questions.
2. Marks are indicated against each question.
3. Answers should be brief and to the point.
4. The answers to the questions carrying 3 marks may be from 50-75 words.
5. The answers to the questions carrying 4 marks may be about 150 words.
6. The answers to the questions carrying 6 marks may be about 200 words.
7. Attempt all parts of the question together.
S.N. QUESTIONS MARKS
Anne is involved in manufacturing dark chocolates. She adopted environmental friendly methods
of production. Which management objective is achieved here?
(a) Individual
1 1
(b) Organisational
(c) Social
(d) Economic
Functional foremanship is an extension of .
(a) Division of work
(b) Discipline 1
(c) Subordination of individual interest to general interest
(d) Espirit de corps
‘After implementation of plan, planning ends.’
3 1
Write whether the given statement is true/false. Justify your answer with a valid sentence.
Which of the following is a policy matter?
(a) Delegation
4 (b) Decentralisation 1
(c) Formal organisation
(d) Informal organisation
KFC does not give its franchise to any other company, which is running a food business. This is
related to which type of plan?
(a) Policy
5 1
(b) Procedure
(c) Rules
(d) All of the above
"It is used for inter-bank transactions. It is short-term finance repayable on demand with a
maturity period of one day to fifteen days". Name the instrument.
(a) Commercial paper
6 1
(b) Treasury bill
(c) Call money
(d) None of the above
SEBI recently called for information and issued a show cause notice to NSE and its 14 officials
seeking explanation on the Preferential Access allegations at the Exchange’s co­location facility.
State the related function of SEBI in the given case.
7 (a) Protective function 1
(b) Regulatory function
(c) Development function
(d) All of the above
 "To promote orderly and healthy growth of securities market and protection of investors, SEBI
was set up". Identify the objective of SEBI in the given statement.
(a) Fair and proper functioning
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(b) Prevention of malpractices
(c) Protection to the investors
(d) All of the above
Suman is the CEO of F&Y corporations. She wants to finance capital with the cheapest source.
Suggest her the source of finance to choose.
(a) Debenture
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(b) Equity share capital
(c) Preference share
(d) Retained earnings
Identify the incorrect statement:
(a) Consumer protection has a moral justification for business.
(b) In addition to rights, a consumer also has some responsibilities.
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(c) A legal heir or representative of a deceased customer cannot file a complaint in the appropriate
consumer forum.
(d) The Consumer Protection Act provides for six consumer rights.
A decision to acquire a new and modern plant to upgrade an old one is a .
(a) financing decision
11 (b) working capital decision 1
(c) investment decision
(d) None of the above
Which of the following refers to the need for consumer protection?
(a) Widespread exploitation of consumers
12 (b) Unorganized consumers 1
(c) Social responsibility
(d) All of the above
is the only element of marketing mix, which generates revenue.
(a) Product
13 (c) Place 1
(b) Price
(d) Promotion
Shobhit, an experienced stockbroker advised his client to invest in share of High Rise Limited, as
the company has declared high dividends since an increase in dividends is perceived as good news
and stock prices react positively to it.
Identify the related factor of dividend decision being described in the above lines:
14 1
(a) Tax rate
(b) Growth opportunities
(c) Stock market reactions
(d) Access to capital market
is the central point in the marketing philosophy.
(a) Customer satisfaction
15 (b) Customer welfare 1
(c) Quality of the product
(d) Quantity of the product
ABC Limited has Debt Equity ratio of 3:1, whereas XYZ Limited has Debt Equity ratio of 1:1. Name
the advantage ABC Limited will have over XYZ Limited when the rate of interest is lower than the
rate of return on investment of the company.
16 (a) Trading on equity 1
(b) Low risk
(c) Low cost of equity
(d) Greater flexibility
Statement I: The consumer has a right to seek redressal.
17 Statement II: The consumer has a right to be protected against goods and services which are 1
hazardous to life and health.
 Choose the correct option from the options given below:
(a) Statement I is true and II is false.
(b) Statement II is true and is false.
(c) Both the statements are true.
(d) Both the statements are false.
Match the concept in column I with the respective concept in column II.
Column A Column B
(A) Implementing a plan (i) Middle level management
(B) Formulating policies (ii) Supervisory level management
18 (C) Interpret plans & develops action plans (iii) Top level management 1
(a) (i), (iii), (ii)
(b) (ii), (iii), (i)
(c) (i), (iii), (ii)
(d) None of the above
"These agencies are run by government and help to match personnel demand and supply by
serving as link between job seekers and employers." Name the source of the recruitment.
(a) Promotion
19 1
(b) Direct recruitment
(c) Campus recruitment
(d) Employment Exchange
Identify the characteristic of the management in the given
diagram in which together everyone achieves more as a team.
(a) Management is a continuous process
20 (b) Management is a dynamic activity 1
(c) Management is all pervasive
(d) Management is a group activity
Explain the objectives of Financial Planning.
21 OR 3
What is meant by Financial Management? State its primary objectives clearly.
State the three components of physical distribution.
OR
Singapore Airlines announced discounted fares, starting as low as 1,099 for domestic destinations
operated by its Indian Joint Venture carrier and 2,099 for international flights operated by other
22 3
group airlines under a limited period offer.
(a) Identify the medium of promotion which can be used by the firm to inform a large number of
people about the new fares.
(b) Also, state any two merits of the promotional tool, apart from the one discussed above.
23 What is meant by a 'consumer' as per the provisions of Consumer Protection Act, 2019? 3
"A leader who has only good physical feature and required knowledge and competence cannot
24 3
inspire others." In the light of this statement explain three qualities of a good leader.
The Government of India has recently come up with an amendment to Section 6 of the "Payment
of Wages Act, 1936" to allow employers of certain industries to I make payment through various
electronics modes of payments. The amendment will be applicable to all the public sector
undertakings for wages disbursement using e-payment options. This is another milestone in the
direction to further push to cashless economy. Identify and explain any two dimensions of
business environment which relate to the above-mentioned case.
OR
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It is heartening that the implementation of compliance requirements of the "Companies Act, 2013"
has progressed substantially with NIFTY 500 companies. Data shows a significant increase in
women's participation in the top management of Indian Companies from 5% few years ago to 13%
now. Even companies which are not in NIFTY 500 have undertaken drives to increase women's
participation across different areas of work. The government had also announced that it would
support such companies. Identify and explain the dimensions of business environment discussed
above which brought about the change.
 "Some learning opportunities are designed and delivered to improve skills and abilities of
employees whereas some other are designed to help in the growth of the individuals in all
respects." Identify and explain the concept to which this statement relates.
OR
26 4
"Human Resource Management has evolved the traditional concepts in labour management. It
includes many specialized activities and duties which the human resource personnel must
perform." In the light of this statement, explain the evolution of HRM and the duties performed by
Human Resource Manager.
27 State any two methods of floatation of new issues in the primary market. 4
“It is deciding in advance what to do and how to do. It is one of the basic managerial functions.”
28 4
Identify this function. Explain any two features of this function.
Ravi works as a Junior Assistant in the Production department and Karan is the Assistant Manager
in the Sales department. During a weekend they meet with their families and Karan shares with
Ravi about the complaints made by customers about the product produced in their company. He
29 4
also conveys the confidential plan of the Sales department to overcome this issue. Identify and
explain the element of directing in the given case. Discuss its types with clear diagrams.

What is the rule-of-thumb approach? What is Taylor’s recommendation to managers who follow
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indigenous rules of thumb in decision-making? Discuss his scientific principle relating to this topic.
‘Safal Hain Hum’ is a company having a very good HR department. It provides learning
opportunities that are designed to assist the employees to achieve targets. With the passage of
time the organisation has learned several methods of training. In one of their best methods is that
the trainee is put under the guidance of a master worker for skilled jobs.
(a) Which broad category of training is provided here to the employees and identify its specific
31 type? 6
(b) Explain the other types of training to employees under the same broad category identified by
you in (a).
OR
"Internal sources of recruitment are more economical for an organisation but it has some
drawbacks too". Discuss the two types of the referred type of recruitment and its limitations.
Neeraj, a sales representative of ‘Omida Ltd.’ has changed seven jobs in the last one year. He is a
hardworking person but is not able to finalize deals with the customers due to his inadequate
vocabulary and omission of needed words. Sometimes he uses wrong words because of which
intended meaning is not conveyed. All this created a misunderstanding between him and his
clients. Identify the communication barrier discussed above and state the category of this
communication barrier. Explain three more types of barriers under the same category.
OR
M/s Beta Ltd. deals in consumer goods. It employs 100 workers and 10 operative managers who
give guidance and support to the workers while operating the machinery. The company has a
policy of granting leave as per the requirement of the workers, Workers are generally granted
32 6
leave on festivals and special occasions. Recently on Puja festival, it received an order. Workers
are keen to take Puja holidays while management is pressing hard for overtime. This matter was
placed before the Personnel Manager who called the meeting of operative managers and workers
to inform them about the changes in the incentive plan which states payment of double wages for
working overtime and triple wages for working on holidays. Workers without any pressure
voluntarily took limited holidays and were able to increase their earning by working overtime and
on holidays. During Board of Directors meeting, Personnel Manager was asked to update the
management for achieving higher output, meeting timely supplies without any confrontation with
workers. Personnel Manager replied, "I just used a carrot with no sticks approach".
By quoting the lines from above paragraph state any two elements of directing.
Ramco limited is a company dealing in dairy products. It procures these products from Rajasthan
and sells them to various parts of Delhi. A month before, Merlo limited, which is a Haryana based
33 company entered Delhi market with similar range of product. 6
(a) Identify the factor affecting the working capital requirement of the firm.
(b) Also, explain three more factors affecting working capital requirement.
34 Tabulate any six differences between advertising and personal selling. 6
 Class XII (2023-2024)
BUSINESS STUDIES (054)
MARKING SCHEME
S.NO. QUESTIONS MARKS
1 (c) Social 1
2 (a) Division of work 1
3 False. After implementation of plan, follow up action is required. 1
4 (b) Decentralisation 1
5 (a) Policy 1
6 (c) Call money 1
7 (b) Regulatory function 1
8 (c) Protection to the investors 1
9 (d) Retained earnings 1
(c) A legal heir or representative of a deceased customer cannot file a complaint in the
10 1
appropriate consumer forum.
11 (c) investment decision 1
12 (d) All of the above 1
13 (b) Price 1
14 (c) Stock market reactions 1
15 (a) Customer satisfaction 1
16 (a) Trading on equity 1
17 (c) Both the statements are true. 1
18 (b) (ii), (iii), (i) 1
19 (d) Employment Exchange 1
20 (d) Management is a group activity 1
The objectives of financial planning are as follows:
(i) To ensure availability of funds whenever required which involves estimation of the funds
required, the time at which these funds are to be made available and the sources of these
funds.
(ii) To see that the firm does not raise resources unnecessarily as excess funding is almost
21 as bad as inadequate funding. Financial planning ensures that enough funds are available at 3
right time.
OR
Financial Management means planning, organising, directing, and controlling the financial
activities of an organisation. The primary objective of financial management is to maximize
shareholders wealth. i.e., to maximize the market price of equity shares of the company.
The following are the components of physical distribution (Any three)
Transportation is the means of carrying goods and raw material from the point of production
to the point of sale.
Warehousing refers to the act of storing and assorting products in order to create time utility
in them.
Inventory Control: A very important decision in respect of inventory is deciding the level of
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inventory.
Order Processing: A good physical distribution system should provide for an accurate and
speedy processing of orders.
OR
(a) Advertising.
(b) Merits of advertising: (Any two)
 (i) Advertising enhances customer satisfaction and confidence, as they feel more
comfortable and assured about the product quality and hence feel more satisfied.
(ii) With the developments in art, computer designs, and graphics, advertising has developed
into one of the most forceful and expressive medium of communication.
(iii) Advertising is a very economical mode of communication if a large number of people are
to be reached.
Under the Consumer Protection Act, 2019, a consumer is defined as:
(a) Any person who buys any goods for a consideration, which has been paid or promised,
or partly paid and partly promised, or under any scheme of deferred payment. It includes
any user of such goods, when such use is made with the approval of the buyer, but does not
include a person who obtains goods for re-sale or any commercial purpose.
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(b) Any person who hires or avails of any service, for a consideration which has been paid
or promised, or partly paid and partly promised, or under any system of deferred payment.
It includes any beneficiary of services when such services are availed of with the approval of
the person concerned, but does not include a person who avails of such services for any
commercial purpose.
Apart from good physical features, a leader should possess the following qualities (Any
three):
Integrity: A leader should have high level of integrity and honesty. He should be a role model
to others regarding the ethics and values.
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
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organisation.
Motivation skills: A leader should be an effective motivator. He should understand the needs
of people and motivate them through satisfying their needs.
Self Confidence: A leader should have high level of self-confidence. He should not lose his
confidence even in most difficult times. In fact, if the leader lacks self-confidence, he cannot
provide confidence to his followers.
In the above case various dimension of business environment is discussed. These
dimensions are given underneath: (Any two)
(a) Political Environment: Political environment includes political conditions such as general
stability and peace in the country and specific attitudes that elected government
representatives hold towards business.
(b) Legal Environment: Legal environment includes various legislations passed by the
Government administrative orders issued by government authorities, court judgments as
well as the decisions rendered by various commissions and agencies at every level of the
government centre, state or local. It is imperative for the management of every enterprise to
obey the law of the land.
(c) Technological Environment: Technological environment includes forces relating to
scientific improvements and innovations which provide new ways of producing goods and
25 services and new methods and techniques of operating a business. 4
OR
The dimensions of Business environment discussed above which brought about the above
change are:
(a) Legal environment: Legal environment includes various legislations passed by the
Government, administrative orders issued by government authorities, court judgments, as
well as the decisions rendered by various commissions and agencies at every level of
government- Center, State, Local Non-Compliance of laws can land the business enterprises
into legal problems.
(b) Political environment: Political environment includes political conditions such as general
stability and peace in the country and specific attitudes that elected government
representatives hold towards business. Attitudes of the government officials may have
either positive or negative impact upon business.
"Some learning opportunities are designed and delivered to improve skills and abilities of
26 4
employees"- the given statement is related with training.
 Training is any process by which the aptitudes, skills, and abilities of employees to perform
specific jobs are increased. It is a process of learning new skills and application of knowledge.
It attempts to improve their performance on the current job or prepare them for any
intended job.

"Some other are designed to help in the growth of the individuals in all respects"- the given
statement is related to development.
Development refers to the learning opportunities designed to help employees grow. It
covers not only those activities which improve job performance but also those which bring
about growth of the personality, help individuals in the progress towards maturity and
actualization of their potential capacities so that they become not only good employees but
better men and women.
OR
Human resource management has replaced the traditional concept of labour welfare and
personnel management. Human Resource Management (HRM) in its present form has
evolved from a number of significant inter-related which date back to the era of industrial
revolution. Emergence of trade union movement led to the need of a person who could act
as an effective link between the owners and workers. Thus, the concept of labour welfare
officer came into being. His role was limited to the bare minimum welfare activities of
employees. In fact, he was looked down by both the workers and the owners.

With the introduction of factory system, thousands of persons began to be employed under
one roof. The job of hiring people for the organisation was given to one man, who later on
was assigned the responsibility of recruitment, selection, and placement of personnel. This
led to the emergence of personnel officer in the first place and personnel manager, later on.

Human resource management activities and duties which the human resource personnel
must perform. These duties are:
o Recruitment i.e., search for qualified people
o Analyzing jobs, collecting information about jobs to prepare job descriptions
o Developing compensation and plans
o Training and development of employees for efficient performance and career growth
o Maintaining labour relations and union management relations
o Handling grievances and complaints
o Providing for social security and welfare of employees
o Defending the company in lawsuits and avoiding legal complications
There are various methods of floating new issues in the primary market: (Any two)
(a) Offer through Prospectus: Offer through prospectus is the most popular method of
raising funds by public companies in the primary market. This involves inviting subscription
from the public through issue of prospectus. A prospectus makes a direct appeal to investors
to raise capital, through an advertisement in newspapers and magazines. The issues may be
underwritten and also are required to be listed on at least one stock exchange. The contents
of the prospectus have to be in accordance with the provisions of the Companies Act and
SEBI disclosure and investor protection guidelines.
(b) Offer for sale: Under this method securities are not issued directly to the public but are
27 offered for sale through intermediaries like issuing houses or stockbrokers. In this case, a 4
company sells securities enbloc at an agreed price to brokers who, in turn, resell them to the
investing public.
(c) Private Placement: Private placement is the allotment of securities by a company to
institutional investors and some selected individuals. It helps to raise capital more quickly
than a public issue. Access to the primary market can be expensive on account of various
mandatory and non-mandatory expenses. Some companies, therefore, cannot afford a public
issue and choose to use private placement.
(d) Rights issue: This is a privilege given to existing shareholders to subscribe to a new issue
of shares according to the terms and conditions
 of the company. The shareholders are offered the ‘right’ to buy new shares in proportion to
the number of shares they already possess.
(e) e-iPOs: A company proposing to issue capital to the public through the on-line system of
the stock exchange has to enter into an agreement with the stock exchange. This is called an
Initial Public Offer (IPO). SEBI registered brokers have to be appointed for the purpose of
accepting applications and placing orders with the company. The issuer company should
also appoint a registrar to the issue having electronic connectivity with the exchange. The
issuer company can apply for listing of its securities on any exchange other than the
exchange through which it has offered its securities. The lead manager coordinates all the
activities amongst intermediaries connected with the issue.
The planning function of the management has certain special features. These features throw
light on its nature and scope. (Any two)
(i) Planning focuses on achieving objectives: Organizations are set up with a general
purpose in view. Specific goals are set out in the plans along with the activities to be
undertaken to achieve the goals. Thus, planning is purposeful. Planning has no meaning
unless it contributes to the achievement of predetermined organisational goals.
(ii) Planning is a primary function of management: Planning lays down the base for other
functions of management. All other managerial functions are performed within the
framework of the plans drawn. Thus, planning precedes other functions. This is also referred
to as the primacy of planning. The various functions of management are interrelated and
equally important. However, planning provides the basis of all other functions.
28 4
(iii) Planning is pervasive: Planning is required at all levels of management as well as in all
departments of the organisation. It is not an exclusive function of top management nor of
any particular department. But the scope of planning differs at different levels and among
different departments. For example, the top management undertakes planning for the
organisation as a whole. Middle management does the departmental planning. At the lowest
level, day-to-day operational planning is done by supervisors.
(iv) Planning is continuous: Plans are prepared for a specific period of time, may be for a
month, a quarter, or a year. At the end of that period there is need for a new plan to be drawn
on the basis of new requirements and future conditions. Hence, planning is a continuous
process. Continuity of planning is related with the planning cycle. It means that a plan is
framed, it is implemented, and is followed by another plan, and so on.
Communication that takes place without following the formal lines of communication is said
to be informal communication. Informal system of communication is generally referred
to as the ‘grapevine’ because it spreads throughout the organisation with its branches going
out in all directions in utter disregard to the levels of authority. The informal communication
arises out of needs of employees to exchange their views, which cannot be done through
formal channels. Workers chit chating in a canteen about the behaviour of the superior,
discussing about rumours that some employees are likely to be transferred are some
examples of informal communications.
The grapevine/informal communication spreads rapidly and sometimes get distorted. It is
very difficult to detect the source of such communication. It also leads to generate rumours
which are not authentic. People’s behaviour is affected by rumours and informal discussions
and sometimes may hamper work environment. Sometimes, grapevine channels may be
29 4
helpful as they carry information rapidly and, therefore, may be useful to the manager at
times. Informal channels are used by the managers to transmit information so as to know
the reactions of his/her subordinates. An intelligent manager should make use of positive
aspects of informal channels and minimise negative aspects of this channel of
communication.
 Grapevine communication may follow different types of networks. In single strand network,
each person communicates to the other in sequence. In gossip network, each person
communicates with all on non-selective basis. In probability network, the individual
communicates randomly with other individual. In cluster, the individual communicates with
only those people whom he trusts. Of these four types of networks, cluster is the most
popular in organisations.
In the earlier days of the Industrial Revolution, in the absence of an established theory of
factory organisation, factory owners or managers relied on personal judgment in attending
to the problems they confronted in the course of managing their work. This is what is
referred to as ‘rule of thumb’. Managing factories by rule of thumb enabled them to handle
the situations as they arose but suffered from the limitation of a trial-and-error approach.
For their experiences to be emulated, it was important to know what works and why does it
work. For this, there was a need to follow an approach that was based on the method of
science- defining a problem, developing alternative solutions, anticipating consequences,
measuring progress, and drawing conclusions.
In this scenario, Taylor emerged as the ‘Father of Scientific Management’. He proposed
scientific management as opposed to rule of thumb. He broke up human activity into small
parts and found out how it could be done effectively, in less time and with increased
productivity. It implies conducting business activities according to standardized tools,
30 methods, and trained personnel in order to increase the output, improve its quality and 4
reduce costs and wastes.
Science not Rule of Thumb: Taylor pioneered the introduction of the method of scientific
inquiry into the domain of management practice. As different managers would follow their
indigenous rules of thumb, it is but a statement of the obvious that all would not be equally
effective. Taylor believed that there was only one best method to maximise efficiency. This
method can be developed through study and analysis. The method so developed should
substitute ‘Rule of Thumb’ throughout the organisation. Scientific method involved
investigation of traditional methods through work-study, unifying the best practices and
developing a standard method, which would be followed throughout the organisation.
According to Taylor, even a small production activity like loading pigs of iron into boxcars
can be scientifically planned and managed. This can result in tremendous saving of human
energy as well as wastage of time and materials. The more sophisticated the processes,
greater would be the savings.
(a) On-the-Job methods refer to the methods that are applied to the workplace, while the
employee is actually working. It is learning while doing.
Apprenticeship Program: These put the trainee under the guidance of a master worker.
These are designed to acquire a higher level of skill. People seeking to enter skilled jobs, to
become, for example, plumbers, electricians or iron-workers, are often required to undergo
apprenticeship training. These apprentices are trainees who spend a prescribed amount of
time working with an experienced guide, or trainer. A uniform period of training is offered
to trainees, in which both fast and slowly learn here, are placed together. Slow learners may
require additional training.
(b) (i) Coaching: In this method, the superior guides and instructs the trainee as a coach.
The coach or counselor sets mutually agreed upon goals, suggests how to achieve these
31 6
goals, periodically reviews the trainees progress and suggests changes required in behavior
and performance. The trainee works directly with a senior manager and the manager takes
full responsibility for the trainee’s coaching. Classically the trainee is being groomed to
replace the senior manager and relieve him from some of his duties. This gives a chance for
the trainee to learn the job also.
(ii) Internship Training: It is a joint programme of training in which educational institutions
and business firms cooperate. Selected candidates carry on regular studies for the
prescribed period. They also work in some factory or office to acquire practical knowledge
and skills.
(iii) Job Rotation: This kind of training involves shifting the trainee from one department to
another or from one job to another. This enables the trainee to gain a broader understanding
 of all parts of the business and how the organisation as a whole function. The trainee gets
fully involved in the departments and suggests changes required in behavior and
performance. The trainee works directly with a senior manager and the manager takes full
responsibility for the trainee’s coaching. Classically the trainee is being groomed to replace
the senior manager and relieve him from some of his duties. This gives a chance for the
trainee to learn the job also.
OR
There are two important sources of internal recruitment, namely, transfers and promotions,
which are discussed below:
(i) Transfers: It involves shifting of an employee from one job to another, one department
to another or from one shift to another, without a substantive change in the responsibilities
and status of the employee. It may lead to changes in duties and responsibilities, working
condition etc., but not necessarily salary. Transfer is a good source of filling the vacancies
with employees from over-staffed departments. It is practically a horizontal movement of
employees. Shortage of suitable personnel in one branch may be filled through transfer from
another branch or department. Job transfers are also helpful in avoiding termination and in
removing individual problems and grievances. At the time of transfer, it should be ensured
that the employee to be transferred to another job is capable of performing it. Transfers can
also be used for training of employees for learning different jobs.
(ii) Promotions: Business enterprises generally follow the practice of filling higher jobs by
promoting employees from lower jobs. Promotion leads to shifting an employee to a higher
position, carrying higher responsibilities, facilities, status and pay. Promotion is a vertical
shifting of employees. This practice helps to improve the motivation, loyalty, and satisfaction
level of employees. It has a great psychological impact over the employees because a
promotion at the higher level may lead to a chain of promotions at lower levels in the
organisation.
The limitations of using internal sources of recruitment are as follows:
(i) When vacancies are filled through internal promotions, the scope for induction of fresh
talent is reduced. Hence, complete reliance on internal recruitment involves danger of
‘inbreeding’ by stopping ‘infusion of new blood’ into the organisation.
(ii) The employees may become lethargic if they are sure of time-bound promotions.
(iii) A new enterprise cannot use internal sources of recruitment. No organisation can fill
all its vacancies from internal sources.
(iv) The spirit of competition among the employees may be hampered; and
(v) Frequent transfers of employees ay often reduce the productivity of the organisation.
Semantic barriers: Semantics is the branch of linguistics dealing with the meaning of words
and sentences. Semantic barriers are concerned with problems and obstructions in the
process of encoding and decoding of message into words or impressions. Normally, such
barriers result on account of use of wrong words, faulty translations, different
interpretations etc. These are discussed below:
(i) Badly expressed message: Sometimes intended meaning may not be conveyed by a
manager to his subordinates. These badly expressed messages may be an account of
inadequate vocabulary, usage of wrong words, omission of needed words etc.
(ii) Symbols with different meanings: A word may have several meanings. Receiver has to
perceive one such meaning for the word used by communicator. For example, consider these
32 three sentences where the work ‘value’ is used: 6
(a) What is the value of this ring?
(b) I value our friendship.
(c) What is the value of learning
computer skills?
You will find that the ‘value’ gives different meaning in different contexts. Wrong
perception leads to communication problems.
(iii) Faulty translations: Sometimes the communications originally drafted in one language
(e.g., English) need to be translated to the language understandable to workers (e.g., Hindi).
If the translator is not proficient with both the languages, mistakes may creep in causing
different meanings to the communication.
 (iv) Unclarified assumptions: Some communications may have certain assumptions which
are subject to different interpretations. For example, a boss may instruct his subordinate,
“Take care of our guest”. Boss may mean that subordinate should take care of transport, food,
accommodation of the guest until he leaves the place. The subordinate may interpret that
guest should be taken to hotel with care. Actually, the guest suffers due to these unclarified
assumptions.
(v) Technical jargon: It is usually found that specialists use technical jargon while explaining
to persons who are not specialists in the concerned field. Therefore, they may not
understand the actual meaning of many such words.
(vi) Body language and gesture decoding: Every movement of body communicates some
meaning. The body movement and gestures of communicator matters so much in conveying
the message. If there is no match between what is said and what is expressed in body
movements, communications may be wrongly perceived.
OR

Directing may broadly be grouped into four categories which are the elements of directing.
These are: (i) Supervision (ii) Motivation (iii) Leadership (iv) Communication
The term Supervision can be understood in two ways. Firstly, it can be understood as an
element of directing and secondly, as a function performed by supervisors in the
organisational hierarchy. Supervision being an element of directing, every manager in the
organisation supervises his/her subordinates. In this sense, supervision can be understood
as the process of guiding the efforts of employees and ther resources to accomplish the
desired bjectives. It means overseeing what is being done by subordinates and giving
instructions to ensure optimum utilisation of resources and achievement of work targets.
Motivation means incitement or inducement to act or move. In the context of an
organisation, it means the process of making subordinates to act in a desired manner to
achieve certain organisational goals.
Leadership is the process of influencing the behaviour of people by making them strive
voluntarily towards achievement of organisational goals. Leadership indicates the ability
of an individual to maintain good interpersonal relations with followers and motivate them
to contribute for achieving organisational objectives.
Communication plays key role in the success of a manager. How much professional
knowledge and intelligence a manager possesses becomes immaterial if he is not able to
communicate effectively with his subordinates and create understanding in them. Directing
abilities of a manager mainly depend upon his communication skills. That is why
organisation always emphasise on improving communication skills of managers as well as
employees.
(a) Level of competition: Higher level of competitiveness may necessitate larger stocks of
finished goods to meet urgent orders from customers. This increases the working capital
requirement. Competition may also force the firm to extend liberal credit terms.

(b) The various other factors that affect working capital requirements are as follows: (Any
three)
Nature of business: The basic nature of a business influences the amount of working capital
required. A trading organisation usually needs a smaller amount of working capital
compared to a manufacturing organisation. This is because there is usually no processing.
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Therefore, there is no distinction between raw materials and finished goods. Sales can be
affected immediately upon the receipt of materials, sometimes even before that. In a
manufacturing business, however, raw material needs to be converted into finished goods
before any sales become possible. Other factors remaining the same, a trading business
requires less working capital. Similarly, service industries which usually do not have to
maintain inventory require less working capital.

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

Business cycle: Different phases of business cycles affect the requirement of working capital
by a firm. In case of a boom, the sales as well as production are likely to be larger and,
therefore, larger amount of working capital is required. As against this, the requirement for
working capital will be lower during the period of depression as the sales as well as
production will be small.

Seasonal Factors: Most business have some seasonality in their operations. In peak season,
because of higher level of activity, larger amount of working capital is required. As against
this, the level of activity as well as the requirement for working capital will be lower during
the lean season.

Production cycle: Production cycle is the time span between the receipt of raw material and
their conversion into finished goods. Some businesses have a longer production cycle while
some have a shorter one. Duration and the length of production cycle, affects the amount of
funds required for raw materials and expenses. Consequently, working capital requirement
is higher in firms with longer processing cycle and lower in firms with shorter processing
cycle.
Any six only:

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