CBSE Class 12 2025 Business Studies 66-1-3 Question Paper Set-3: Download Solutions with Answer Key

A primary market is the financial market where new securities are issued and sold for the first time. It is in this market that the prices of securities are determined by the issuing company — that is, the management decides the price based on various factors like valuation, demand, and future growth expectations.

This is the market where companies raise capital by issuing shares or bonds directly to investors, often through mechanisms like Initial Public Offerings (IPOs). Unlike the secondary market, where investors trade previously issued securities among themselves, the primary market involves a direct transaction between the issuing company and the investor.

Therefore, since it is the company management that decides and determines the price in such offerings, the correct answer is Primary market.

Final Answer: (A) Primary
Quick Tip: The primary market deals with fresh issuance of securities directly from the company to investors. Prices are decided by the management, usually through book-building or fixed pricing.

Statement I is true because one of the primary functions of financial markets is to mobilize savings and channel them to productive investment opportunities. This facilitates economic growth by providing capital to those who need it for productive ventures.

Statement II is also true because financial markets offer a variety of financial instruments such as stocks, bonds, mutual funds, etc., which provide savers with a range of investment options. This variety ensures that surplus funds are invested in sectors where they are most efficiently utilized, thus increasing economic productivity.

Together, both statements explain the essential functions of a financial market: transferring resources efficiently and providing investment choices for better capital allocation.

Final Answer: (C) Both the Statements are true.
Quick Tip: Financial markets are vital for economic efficiency as they match savers with borrowers and help in optimal allocation of resources through diversified investment choices.

The case describes how ‘Dovex’, due to its strong reputation and ethical practices, was able to raise capital easily from the market. This easy access to capital enabled the company to not rely solely on retained earnings for funding future projects or expansions. As a result, it could afford to distribute a larger portion of its profits as dividends.

This scenario represents the factor of “Access to capital market” which influences dividend decisions. When companies have good access to external financing, they may prefer to pay higher dividends because they are less dependent on retained earnings for growth.

Final Answer: (D) Access to capital market
Quick Tip: Easy access to capital markets allows firms to raise external funds easily, which enables them to distribute a larger share of profits as dividends instead of retaining them.

Let’s understand each term:

Placement (1) is when the employee is formally assigned to the job role he/she was selected for. Hence, it matches with (ii).

Recruitment (2) is the process of identifying, attracting, and encouraging potential employees to apply. Thus, it matches (iv).

Orientation (3) introduces the new employee to their colleagues, environment, and organizational policies. So, it matches with (i).

Performance Appraisal (4) is the systematic evaluation of an employee's performance against set standards. Therefore, it matches with (iii).

Hence, the correct match is: 1-(ii), 2-(iv), 3-(i), 4-(iii)

Final Answer: (C) 1-(ii), 2-(iv), 3-(i), 4-(iii)
Quick Tip: Remember: Recruitment attracts people, placement gives them a job, orientation helps them settle in, and appraisal reviews their performance.

The social environment refers to the societal and cultural factors that influence a business. This includes demographics, lifestyle, education levels, societal norms, and workforce-related expectations.

Expectations from the workforce — such as demand for better working conditions, work-life balance, job security, and ethical practices — directly reflect the values and norms of the society. Hence, these expectations form a crucial element of the social environment.

The other options relate to economic (A, D) and political/international (C) environments.

Final Answer: (B) Expectations from the workforce
Quick Tip: Social environment includes societal attitudes, values, and workforce expectations. Understanding this helps businesses align HR and CSR strategies effectively.

In the image provided, Mehta Sons Garments is using a **“HURRY UP — 50% OFF — ONLY FOR 2 days”** tag. Let’s interpret this carefully.

- This is clearly a **short-term incentive** designed to boost sales quickly by offering customers a **limited-time discount**.
- It uses the principle of urgency (“HURRY UP”) and savings (“50% OFF”) to motivate quick purchases.
- Such tools are part of **Sales Promotion**, which includes:
- Discounts
- Coupons
- Buy one get one offers
- Free samples
- Lucky draws

Let’s analyze the other options:
- **(A) Advertising**: This is mass media promotion (TV, radio, digital) with long-term brand objectives. But here, there is **no mass media campaign**, just a store-level short-term offer.
- **(B) Personal selling**: Involves face-to-face interaction between salespeople and customers, which is not evident here.
- **(D) Public relations**: Aimed at building brand image and goodwill through news, events, sponsorships — again, not applicable.

Hence, the correct tool used is:

Final Answer: (C) Sales promotion
Quick Tip: Sales promotion includes limited-time discounts and offers to boost short-term sales — like “50% off for 2 days.”

Public relations (PR) is a strategic communication process that builds mutually beneficial relationships between organizations and their publics. In the given case, Beenu's daughter used television, radio, children's magazines, and other mass communication mediums to promote the bookstore’s warm atmosphere and the joy of reading. She also organized competitions and events, which generated public interest and attracted children and their parents. This is a clear example of using public relations to create a positive image and revive customer interest in the bookstore.

She wasn’t selling the product directly (hence not personal selling), nor was she offering direct incentives like discounts (not sales promotion), nor paid media like traditional advertising. Instead, she was building goodwill and awareness about the bookstore's experience and atmosphere—this is the essence of public relations.

Final Answer: (D) Public relations
Quick Tip: Public relations help create a favorable public image and strengthen the relationship between an organization and its audience, making it perfect for brand-building and community engagement.

The production concept focuses on producing goods that are widely available and affordable. It is based on the belief that consumers prefer products that are inexpensive and easily accessible. Therefore, businesses focusing on the production concept concentrate on achieving high production efficiency, low costs, and mass distribution.

This concept works best in markets where demand exceeds supply or where the product cost is a key buying factor. It assumes that the customer will favor those products that are available and affordable. In contrast, the marketing concept focuses on identifying and meeting customer needs, while the selling concept emphasizes aggressive sales promotion. The product concept believes customers prefer quality and innovation.

Final Answer: (D) Production concept
Quick Tip: The production concept prioritizes efficiency and cost control to ensure availability of products, making it ideal in developing markets or when launching essential commodities.

The democratic leadership style emphasizes participation, collaboration, and input from employees in decision-making. In the case of Ravi Kumar, when he joined ‘Vova Watch Company’, he did not enforce decisions unilaterally. Instead, he opened dialogues with employees, motivated them to take part in discussions, and actively involved them in planning and problem-solving. This is a classic example of democratic leadership.

Autocratic leadership, in contrast, involves leaders making decisions alone without consulting the team, which was the previous scenario at Vova Watch Company. Free-rein (laissez-faire) leadership would mean giving complete freedom to employees, which wasn't the case either. Ravi Kumar provided direction while also valuing employee input.

Final Answer: (B) Democratic leadership style
Quick Tip: Democratic leaders build trust and motivation by involving team members in decisions. It fosters innovation, morale, and a sense of ownership.

Efficiency means performing tasks correctly with the least wastage of resources like time, money, and effort. It is a critical concept in management and business operations because it reflects the ability to maximize output with minimal input. For example, if two workers complete the same amount of work but one uses fewer resources or takes less time, that worker is more efficient.

It is important to distinguish efficiency from effectiveness. While effectiveness is about doing the right tasks to achieve goals, efficiency is about doing tasks right — economically and accurately. Coordination and process are not directly linked to minimizing cost or resource usage.

Final Answer: (D) Efficiency
Quick Tip: Efficiency is about resource optimization — achieving maximum output from minimum input, which is essential for cost control and operational excellence.

A strategy is a comprehensive and integrated plan developed to achieve long-term organizational goals. It defines the overall direction and scope of an organization over the long term and helps allocate resources effectively to meet market demands and gain a competitive advantage.

In the case of 'Best Electronics', the CEO had a long-term vision to become the market leader in electronics. His team conducted thorough market research and crafted a well-defined strategic plan based on emerging trends and competitors. This long-term blueprint helped the company outperform rivals and dominate the market.

Policies and rules are narrower and usually designed to handle recurring problems. Procedures are step-by-step instructions for routine activities. None of these match the scope and long-term planning of a strategy.

Final Answer: (C) Strategy
Quick Tip: A strategy sets the roadmap for long-term success, aligning company resources and vision to achieve competitive dominance.

Many modern companies establish consumer grievance redressal systems to handle complaints and enhance trust. This is because consumers have certain rights under the Consumer Protection Act, including the right to be heard. The presence of grievance cells is a direct implementation of this right.

Hence, both the assertion and the reason are true, and the reason logically explains why enlightened firms have grievance cells.

Final Answer: (A)
Quick Tip: When Assertion and Reason are both correct and logically connected, choose option (A).

N/A Quick Tip: New securities → Primary market.
Stock Exchange → Secondary market = liquidity for existing securities.

N/A Quick Tip: Delegation distributes work, not accountability — the manager is still responsible.

N/A Quick Tip: Training = Short-term, skill-based.
Development = Long-term, capability-building.

N/A Quick Tip: Physical distribution = Order processing + Inventory control + Warehousing + Transportation.
Standardisation/grading = Product decision, not distribution.

N/A Quick Tip: Planning never stops—it adapts with changes. Continuous planning ensures businesses stay relevant and responsive.

N/A Quick Tip: Functional structure = Grouping by similarity in work (e.g., HR, Marketing). Efficient for stable, large firms.

N/A Quick Tip: Think of financial planning as the roadmap for balancing Fund Needs ↔ Fund Sources to ensure smooth business operations.

N/A Quick Tip: Business environment ≠ just threats — it reveals opportunities too. First‐mover advantage often comes from spotting trends early.

N/A Quick Tip: Learning floor = safe hands‑on practice in a replica of the real workplace — great for technical skill development.

N/A Quick Tip: SEBI’s core job is investor protection — think “Disclosures, Regulation, Monitoring, Enforcement, Education.”

N/A Quick Tip: Money market = short-term, safe, liquid. Capital market = long-term, growth, riskier.

N/A Quick Tip: Business environment = Ever‑changing, interlinked, largely uncontrollable, uncertain!

N/A Quick Tip: Demonetization = Old notes banned, new notes issued → cash shortages → digital shift → black money check.

Two relevant factors: 1. **Nature of business/industry** – Capital intensity depends on the type of business. Solar power plants require heavy investment in plant, machinery, technology, etc. 2. **Growth and expansion plans** – Kanav’s expansion for higher capacity meant additional fixed investment to meet demand.
Quick Tip: Fixed capital = Machinery + assets. Required depends on how tech‑heavy the industry is and how much you plan to grow.

The NCDRC is the apex consumer redressal forum for complaints where the value exceeds ₹2 crore. Anuj’s case involves deficiency in service, where a promised property was not delivered, justifying relief under the Consumer Protection Act.

Final Answer:
(i) National Consumer Disputes Redressal Commission (NCDRC)

(ii) Refund + Compensation + Legal costs or delivery directions
Quick Tip: NCDRC handles cases above ₹2 crore. Remedies include refund, compensation, and repair/delivery orders.

N/A Quick Tip: Coordination = glue between functions. Middle managers = bridge between strategy and execution.

N/A Quick Tip: Functional = skill-wise grouping, cheaper. Divisional = product/region-wise, better accountability.

(a) (i) \textbf{Production cycle} – Longer production cycles mean goods take more time to convert into cash, hence more working capital is needed. For example, shipbuilding takes months—more investment in raw materials, labor, and overheads. (ii) \textbf{Availability of raw material} – If raw materials are available easily and regularly, a firm needs to maintain less inventory, thus reducing working capital needs. In contrast, irregular availability forces bulk buying and storage, increasing working capital.
\textbf{OR}
(b) (i) \textbf{Control} – If existing owners wish to retain full control, they prefer equity over debt. Debt doesn't dilute ownership but does add repayment obligations. (ii) \textbf{Return on Investment (ROI)} – If ROI is higher than interest on debt, using debt increases returns to shareholders (due to financial leverage). But if ROI is lower, debt harms shareholder wealth.
Quick Tip: (a) Long cycles & raw material delays = more working capital.
(b) More ROI → prefer debt. Want control? Avoid equity.

N/A Quick Tip: Structured hiring involves filtering candidates step-by-step — from application screening to testing, interviews, and verification — to ensure best fit for the job.

(i) The function of management discussed above is \textbf{Staffing}. (ii) Three points of importance of staffing: \textbf{Efficient utilization of manpower:} Avoids overmanning and optimizes resource use. \textbf{Improves productivity:} Right number of skilled people ensures timely and cost-efficient operations. \textbf{Reduces labour cost:} Prevents excessive workforce, saving unnecessary wage expenses.
Quick Tip: Staffing ensures right number of people with right skills are at the right job — avoiding excess cost and inefficiencies.

(a) (i) \textbf{Fulfilling social responsibility:} Principles guide managers to balance profit with service to society — including fair wages, eco-friendly operations, and community welfare. (ii) \textbf{Meeting changing environment requirements:} Helps in adapting to market, technology, and policy shifts. Principles offer flexibility and guidance during change. (iii) \textbf{Scientific decisions:} Principles enable rational decisions based on facts and analysis, rather than guesswork or tradition.
\textbf{OR}
(b) (i) \textbf{Unity of direction:} All team efforts must align with one plan and one objective for coordinated performance. (ii) \textbf{Subordination of individual interest to general interest:} Organizational goals must take priority over personal motives of employees to ensure teamwork. (iii) \textbf{Esprit de corps:} Promotes team spirit and harmony, reducing conflicts and improving morale.
Quick Tip: (a) Principles = guidance for responsible, adaptable, and logical decisions.
(b) Fayol’s principles = discipline, unity, and motivation in teams.

The three functions of marketing discussed in the case are: \textbf{1. Packaging and Labelling:} “They designed and developed eco-friendly biodegradable bags and reusable containers to courier their products to the customers.” “They also designed and developed product stickers with detailed information about organic certification, nutritional benefits, date of manufacture, date of expiry, etc.” \textbf{2. Branding:} “They named the business ‘Earthy Store’ which indicated the products’ benefits and qualities.” “They chose a ‘logo’ that incorporated elements of nature and used earthy colours to convey their organic commitment.” \textbf{3. Promotion:} “‘Earthy Store’ created a user-friendly website and established strong media presence to inform potential customers about their products and persuading them to buy the same.”
Quick Tip: Packaging attracts; branding builds identity; promotion communicates and persuades.

\textbf{Two Benefits of Planning:} 1. \textbf{Provides direction:} “He ensured that the goals and objectives of the company are clearly stated so that they act as a guide for deciding what action should be taken and in which direction.” This shows how planning gives clarity of action and ensures everyone in the organization works towards the same objective. 2. \textbf{Reduces risk of uncertainty:} “This analysis enabled the company to look ahead and anticipate changes and develop managerial responses, wherever necessary.” Planning helps foresee changes and prepare accordingly. \textbf{Two Limitations of Planning:} 1. \textbf{Rigidity:} “The managers of ‘Stepone Footwear’ did not have the flexibility to change the plan to cope with the changed circumstances.” Once a plan is made, it can be hard to change it when market conditions suddenly shift. 2. \textbf{May not work in dynamic environment:} “By not being able to adjust to the rapidly changing market, ‘Stepone Footwear’ faced inventory surplus.” Planning based on past data may fail when external conditions change rapidly, leading to losses.
Quick Tip: Planning gives vision but needs flexibility; too rigid a plan can fail in a fast-changing market.

(a) \textbf{Merits of Internal Sources of Recruitment:} \textbf{Loyalty and Motivation:} Employees feel motivated when they see opportunities for promotion within the organization. \textbf{Familiarity with Culture:} Internal candidates are already aware of the company’s culture, rules, and policies, hence require less orientation. \textbf{Economical and Time-saving:} It saves costs of advertisement, training, and selection compared to external recruitment. \textbf{Demerits of Internal Sources of Recruitment:} \textbf{Limited Choice:} The scope is restricted to existing employees, which limits the availability of fresh talent. \textbf{Stagnation:} No infusion of new ideas can lead to stagnation and reduced innovation. \textbf{Internal Conflict:} Promotions may lead to jealousy or resentment among co-workers. \textbf{OR} (b) \textbf{Non-Financial Incentives to Motivate Employees:} \textbf{Recognition:} Appreciation of good work boosts morale and increases employee satisfaction. \textbf{Job Security:} A sense of stability encourages employees to focus on performance. \textbf{Career Advancement:} Opportunities for growth and learning drive employees to perform better. \textbf{Working Conditions:} Healthy, safe, and comfortable working environments help improve efficiency and reduce stress.
Quick Tip: Internal recruitment saves time and builds loyalty, but can block innovation. Recognition and growth can often motivate more than money.