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CBSE PRACTICE PAPER 2026–27 · BUSINESS STUDIES (SET – 1)
General Instructions
- This question paper contains 31 questions. All questions are compulsory. (Theory : 80 marks; Project : 20 marks is assessed separately.)
- Section A : Q. 1 to 14 are MCQs and Q. 15–16 are Assertion–Reason questions, 1 mark each (16 marks).
- Section B : Q. 17 to 20 are short answer questions of 3 marks each (12 marks). Answer in about 60–80 words.
- Section C : Q. 21 to 23 are short answer questions of 4 marks each (12 marks). Answer in about 80–100 words.
- Section D : Q. 24 to 27 are long answer questions of 5 marks each (20 marks). Answer in about 120 words.
- Section E : Q. 28 and Q. 29 are long answer questions of 6 marks each (12 marks). Answer in about 150 words.
- Section F : Q. 30 and Q. 31 are case-based questions of 4 marks each, with four sub-parts of 1 mark each (8 marks).
- The paper follows the CBSE 2025–26 design : Part A (Principles and Functions of Management) 50 marks and Part B (Business Finance and Marketing) 30 marks; typology 40% remembering/understanding, 30% applying, 30% analysing/evaluating. Internal choice (OR) is provided in some questions.
- Detailed Answer Key & Solutions with marking points are given at the end of this paper.
SECTION A (16 × 1 = 16 Marks)
Q. 1 to Q. 14 : Multiple Choice Questions (choose the correct option)
1. Which of the following is NOT a feature of management?
(a) Management is goal oriented(b) Management is pervasive(c) Management is a tangible force(d) Management is a continuous process
2. Formulating the overall objectives and strategies of an organisation is the function of
(a) top level management(b) middle level management(c) supervisory level management(d) operational level workers
3. Meena receives instructions for the same task from both the Production Manager and the Marketing Manager. Which principle of Fayol is violated?
(a) Unity of Direction(b) Scalar Chain(c) Order(d) Unity of Command
4. Under the differential piece wage system of F. W. Taylor
(a) all workers are paid the same piece rate(b) a higher piece rate is paid to workers who produce at or above the standard(c) workers are paid on the basis of time spent(d) workers are paid a share in profits
5. A change in the repo rate by the Reserve Bank of India most directly affects which dimension of the business environment?
(a) Social environment(b) Technological environment(c) Economic environment(d) Legal environment
6. Which one of the following is different from the other three?
(a) Programme(b) Policy(c) Rule(d) Method
7. An organisation structure in which activities are grouped on the basis of product lines, each division having profit responsibility, is
(a) functional structure(b) line structure(c) informal structure(d) divisional structure
8. Which of the following is an internal source of recruitment?
(a) Campus placement(b) Transfer(c) Advertisement in newspapers(d) Employment exchange
9. A company gives a “Best Employee” award, a trophy and a promotion to a salesman who already has a good salary and job security. Which need of Maslow’s hierarchy is being addressed?
(a) Safety needs(b) Social needs(c) Esteem needs(d) Basic physiological needs
10. A manager compares actual production with the standards and uses the deviations to prepare a better plan for the next quarter. This shows that controlling is
(a) only a backward looking function(b) only a forward looking function(c) a function of top management only(d) both a backward looking and a forward looking function
11. A company is deciding whether to buy a new plant or to acquire a rival firm. This decision is
(a) an investment decision(b) a financing decision(c) a dividend decision(d) an operational decision
12. Which one of the following does not belong with the other three?
(a) Treasury bills(b) Debentures(c) Commercial paper(d) Call money
13. Brand name, logo and trademark together are part of
(a) packaging(b) labelling(c) pricing(d) branding
14. The Consumer Protection Act, 2019 provides for the establishment of
(a) the Consumer Dispute Redressal Forum(b) the Competition Commission(c) the Central Consumer Protection Authority(d) the Securities Appellate Tribunal
Q. 15 and Q. 16 : Assertion–Reason Questions
Options: (a) Both A and R are true and R is the correct explanation of A. (b) Both A and R are true but R is not the correct explanation of A. (c) A is true but R is false. (d) A is false but R is true.
15. Assertion (A): Planning is the primary function of management.
Reason (R): Planning provides the basis for all other functions such as organising, staffing, directing and controlling.
Reason (R): Planning provides the basis for all other functions such as organising, staffing, directing and controlling.
16. Assertion (A): The Consumer Protection Act, 2019 provides for the establishment of the Central Consumer Protection Authority (CCPA).
Reason (R): The CCPA cannot take any action against misleading advertisements.
Reason (R): The CCPA cannot take any action against misleading advertisements.
SECTION B (4 × 3 = 12 Marks) — Short Answer Questions
17. “Principles of management are universal, but their application differs from organisation to organisation.” Explain the statement with a suitable example.(3)
18. Explain any three points of importance of understanding the business environment.(3)
19. Explain any three functions of a stock exchange.(3)
20. “FreshSip”, a company, launches a packaged fruit juice. Explain any three functions of packaging that the company can expect its package to perform.(3)
SECTION C (3 × 4 = 12 Marks) — Short Answer Questions
21. Explain any four points of importance of management.(4)
22. Identify the method of training in each of the following situations : (i) A bank trainee works in the cash department for one month and then in the loans department for the next month; (ii) New machine operators practise on dummy machines in a separate workshop that replicates the actual shop floor; (iii) A trainee gets a stipend and learns the trade over three years under a master craftsman; (iv) A final-year engineering student works in a company for two months as part of the course.(4)
23. A company needs ₹ 10,00,000 and has two plans : Plan A – 1,00,000 equity shares of ₹ 10 each; Plan B – 50,000 equity shares of ₹ 10 each and ₹ 5,00,000 of 10% debentures. The company expects an EBIT of ₹ 1,20,000 and the tax rate is 30%. Calculate the Earnings per Share (EPS) under both plans and state which plan is better and why.(4)
SECTION D (4 × 5 = 20 Marks) — Long Answer Questions
24. Identify the principle of management (given by Henri Fayol) involved in each situation, with a reason : (i) Mr. Suresh, a production manager, gets quality orders from both the Quality Head and the General Manager; (ii) A company trains its staff well but transfers them to a new city every six months, and many employees resign; (iii) A company gives branch managers the right to decide discounts on products; (iv) A company pays its employees a fair salary that satisfies both the company and its employees; (v) A manager organises a festival gathering so that the team members feel they belong to one family.(5)
25. Explain Maslow’s need hierarchy theory of motivation with one example of each need and state how a manager can use it.(5)
26. Explain any five steps in the process of selection of employees.(5)
27. Explain any five functions of marketing.(5)
SECTION E (2 × 6 = 12 Marks) — Long Answer Questions
28. Distinguish between formal organisation and informal organisation on any six points.(6)
OR
Distinguish between functional structure and divisional structure of organisation on any six points.
29. The finance manager of a newly formed company has to decide its capital structure. Suggest and explain any six factors that he should consider.(6)
OR
Distinguish between money market and capital market on any six points.
SECTION F (2 × 4 = 8 Marks) — Case-Based Questions
30. Read the case and answer the questions.
“GreenWheels Pvt. Ltd.” manufactures electric scooters. After the government announced a subsidy on electric vehicles and reduced the GST rate on them, and as petrol prices kept rising, the demand for its scooters increased sharply. The managers studied the pricing of competitors, the growing preference of consumers for eco-friendly vehicles and the new battery technology available in the market. The company then decided to open 10 new showrooms in the next two years and listed the actions to be taken month by month. Soon a rival launched a cheaper model and the company had to revise its price and features quickly.
“GreenWheels Pvt. Ltd.” manufactures electric scooters. After the government announced a subsidy on electric vehicles and reduced the GST rate on them, and as petrol prices kept rising, the demand for its scooters increased sharply. The managers studied the pricing of competitors, the growing preference of consumers for eco-friendly vehicles and the new battery technology available in the market. The company then decided to open 10 new showrooms in the next two years and listed the actions to be taken month by month. Soon a rival launched a cheaper model and the company had to revise its price and features quickly.
(i) Identify any two dimensions of the business environment mentioned in the case. (1)
(ii) Identify the features of the business environment reflected in the last sentence of the case. (1)
(iii) State any one benefit of understanding the business environment that GreenWheels obtained. (1)
(iv) Name the type of plan represented by “open 10 new showrooms in two years” and give one reason. (1)
(4)31. Read the case and answer the questions.
Anaya purchased a smart TV online for ₹ 48,000 from “TechMart”. The TV developed a fault within a week. The seller refused to repair or replace it, saying “goods once sold will not be taken back”. She had kept the bill and the warranty card. She filed a complaint before the District Consumer Disputes Redressal Commission. After hearing both sides, the Commission directed the seller to replace the TV and pay her compensation for mental agony.
Anaya purchased a smart TV online for ₹ 48,000 from “TechMart”. The TV developed a fault within a week. The seller refused to repair or replace it, saying “goods once sold will not be taken back”. She had kept the bill and the warranty card. She filed a complaint before the District Consumer Disputes Redressal Commission. After hearing both sides, the Commission directed the seller to replace the TV and pay her compensation for mental agony.
(i) Name the Act under which Anaya filed the complaint. (1)
(ii) Which consumer right did Anaya exercise by filing the complaint? (1)
(iii) State any two reliefs that a consumer can get from the Consumer Commission. (1)
(iv) Which responsibility of a consumer did Anaya follow by keeping the bill and warranty card? (1)
(4)ANSWER KEY & SOLUTIONS · BUSINESS STUDIES PRACTICE PAPER (SET – 1)
SECTION A — Answer Key (1 mark each)
| Q.1 | (c) | Q.2 | (a) | Q.3 | (d) | Q.4 | (b) |
| Q.5 | (c) | Q.6 | (a) | Q.7 | (d) | Q.8 | (b) |
| Q.9 | (c) | Q.10 | (d) | Q.11 | (a) | Q.12 | (b) |
| Q.13 | (d) | Q.14 | (c) | Q.15 | (a) | Q.16 | (c) |
Hints for Q.1–16. (1) Management is an intangible force, felt through results. (2) Top level management sets objectives and strategies. (3) Two bosses for one task violate Unity of Command. (4) Differential piece wage : higher rate for those at/above standard. (5) Repo rate is a monetary policy tool ⇒ economic environment. (6) Policy, procedure and rule are standing plans, whereas a programme is a single-use plan. (7) Product-wise grouping with profit responsibility ⇒ divisional structure. (8) Transfer is internal. (9) Award, recognition and promotion for a person whose lower needs are met ⇒ esteem needs. (10) Past deviations are used to improve future plans ⇒ both backward and forward looking. (11) Whether to buy a plant or a firm is an investment decision (long-term assets). (12) Treasury bills, commercial paper and call money are money market instruments; debentures belong to the capital market. (13) Brand name, logo, trademark ⇒ branding. (14) CPA 2019 set up the CCPA. (15) (a) : both true and R explains A. (16) (c) : A is true; R is false because the CCPA can act against misleading advertisements.
SECTION B — Solutions (3 marks each)
17. Management principles are universal because they can be applied to all types of organisations – business or non-business, small or large – (1). However, they are not rigid rules; their nature is flexible and the degree of application must be modified by the manager according to the situation, size, nature of work and the people involved (1). Example : The principle of “Unity of Command” is followed in a factory, a school and a hospital, but in an emergency ward a nurse may take instructions from a doctor on duty and also from the senior doctor, i.e. its application differs (1).
18.
(Any three points, 1 mark each)
| Basis | Training | Development |
|---|---|---|
| Meaning | Increases the knowledge and skill of employees for doing a particular job | Overall growth of the employee’s personality and potential |
| Focus / Scope | Job oriented, narrow | Career oriented, wider |
| Who is concerned | Mostly non-managerial staff (operatives) | Mostly managerial personnel |
| Duration | Short term | Long term (continuous) |
| Motivation | Initiated by the organisation / supervisor | Self-motivated, personal desire for growth |
19. (Any three, 1 mark each) (i) Providing liquidity and marketability to existing securities – investors can sell or buy securities easily. (ii) Pricing of securities – continuous interaction of demand and supply determines fair prices. (iii) Safety of transactions – trading is governed by rules and regulations, SEBI supervises. (iv) Contributes to economic growth – savings are channelised into productive investment. (v) Spreading of equity cult – popularises investment in shares. (vi) Providing scope for speculation within legal limits.
20. (Any three, 1 mark each, with reference to juice) (i) Protection – the package protects the juice from spoilage, leakage and contamination during storage and transport. (ii) Convenience – a handy, easy-to-open, easy-to-carry tetra pack or bottle with a straw. (iii) Promotion – an attractive, colourful design and brand logo draw attention and differentiate it from other brands. (iv) Identification – helps the customer to identify the product and its brand on the shelf. (v) Information – ingredients, price and expiry can be printed.
SECTION C — Solutions (4 marks each)
21. (Any four, 1 mark each) (i) Management helps in achieving group goals – it gives a common direction to the efforts of all members. (ii) Increases efficiency – by reducing costs and increasing productivity through better use of resources. (iii) Creates a dynamic organisation – helps the firm to adapt to changes. (iv) Helps in achieving personal objectives – motivates and leads employees to achieve personal goals along with organisational goals. (v) Helps in the development of society – good quality products, employment, new technology.
22. (i) Job rotation (on-the-job training) – the trainee is moved from one job to another (1). (ii) Vestibule training (off-the-job) – practice on equipment in a replica workshop (1). (iii) Apprenticeship training – learning under a master with a stipend (1). (iv) Internship training – practical work experience linked to academic study (1).
23.
(Calculation 3) Plan B is better because EPS (₹ 0.98) is higher than in Plan A (₹ 0.84). The company earns a return on investment (ROI = 12%) higher than the cost of debt (10%), so use of debt (trading on equity) raises the EPS of equity shareholders; also interest is tax-deductible (1).
| Particulars | Plan A (₹) | Plan B (₹) |
|---|---|---|
| EBIT | 1,20,000 | 1,20,000 |
| Less : Interest (10% × 5,00,000) | 0 | (50,000) |
| Profit before tax (PBT) | 1,20,000 | 70,000 |
| Less : Tax @ 30% | (36,000) | (21,000) |
| Profit after tax (PAT) | 84,000 | 49,000 |
| Number of equity shares | 1,00,000 | 50,000 |
| EPS = PAT ÷ No. of shares | ₹ 0.84 | ₹ 0.98 |
SECTION D — Solutions (5 marks each)
24.
(1 mark each : principle + reason)
| Situation | Principle | Reason |
|---|---|---|
| (i) | Unity of Command | Employee should receive orders from one superior only |
| (ii) | Stability of Personnel | Employees should be given reasonable job security; frequent transfers cause turnover |
| (iii) | Centralisation and Decentralisation | Decision-making authority is shared with lower levels (decentralisation) |
| (iv) | Remuneration of Employees | Pay should be fair and satisfy both employer and employee |
| (v) | Esprit de Corps | Team spirit and sense of belonging / unity among members |
25. Abraham Maslow said human needs form a hierarchy; a lower-level need must be reasonably satisfied before the next need becomes a motivator; a satisfied need is not a motivator (1).
(Needs with examples 3) Use by a manager : a manager should identify the level at which the employee is placed and offer the matching incentive (1).
| Level | Need | Example |
|---|---|---|
| 1 | Basic physiological needs | Food, clothing, shelter – fair salary, rest rooms |
| 2 | Safety / security needs | Job security, pension, insurance, provident fund |
| 3 | Affiliation / social needs | Friendship, belonging – friendly work groups, cafeteria |
| 4 | Esteem needs | Status, recognition, respect – awards, promotion, designation |
| 5 | Self-actualisation needs | Realising one’s full potential – challenging jobs, creative work |
26. Steps in the selection process (any five, 1 mark each) : (1) Preliminary screening – applications are scanned to eliminate unqualified candidates. (2) Selection tests – intelligence, aptitude, personality, trade/proficiency and interest tests. (3) Employment interview – face-to-face interaction to judge suitability. (4) Reference and background checks – verification of the information given. (5) Selection decision – the best candidates are selected. (6) Medical examination – physical fitness is verified. (7) Job offer – an appointment letter is given. (8) Contract of employment – terms and conditions are put in writing.
27. Functions of marketing (any five, 1 mark each) : (1) Gathering and analysing market information – about customers’ needs and competitors. (2) Marketing planning – planning to achieve marketing objectives. (3) Product designing and development – improving features and designing new products. (4) Standardisation and grading – uniform quality and classification. (5) Packaging and labelling. (6) Branding – name, logo, trademark. (7) Customer support services – after-sales service, handling complaints. (8) Pricing of products. (9) Promotion – advertising, personal selling, sales promotion, publicity. (10) Physical distribution – transportation, warehousing, inventory control.
SECTION E — Solutions (6 marks each)
28. Formal vs informal organisation (any six, 1 mark each)
OR Functional vs divisional structure (any six, 1 mark each)
| Basis | Formal organisation | Informal organisation |
|---|---|---|
| Meaning | Structure of defined authority–responsibility relations created by management | Network of social relationships arising out of interaction among people |
| Origin | Deliberately created by top management | Arises spontaneously within the formal organisation |
| Authority | Flows from top to bottom (hierarchy) | Flows from the group; may be in any direction |
| Communication | Through the scalar chain, in writing | Through the grapevine, informal |
| Behaviour / rules | Rules and procedures are fixed; behaviour is prescribed | No fixed rules; behaviour is guided by group norms |
| Leaders | Appointed leaders (managers) | Group-chosen leaders |
OR Functional vs divisional structure (any six, 1 mark each)
| Basis | Functional structure | Divisional structure |
|---|---|---|
| Formation | Grouping of jobs of similar nature (functions) – production, marketing, finance | Grouping on the basis of products/product lines or territories (divisions) |
| Specialisation | Functional specialisation | Product specialisation |
| Responsibility | Difficult to fix for profit/loss; no single division is accountable | Easy to fix profit/loss responsibility on a division |
| Cost | Economical – no duplication of functions | Costly – duplication of functions in each division |
| Coordination | Difficult across functions | Easy within a division; difficult across divisions |
| Suitable for | Large organisations with one or few similar products | Organisations with many diverse products |
| Managerial development | Limited to functional skills | Gives general managerial skills; encourages initiative |
29. Factors for a newly formed company (any six, 1 mark each, with reasoning) : (1) Cash flow position – a new firm’s cash flows are uncertain, so it should avoid heavy debt. (2) Interest coverage ratio and (3) Debt service coverage ratio – low coverage in the early years makes debt risky. (4) Return on investment (ROI) – use debt only if ROI is higher than the cost of debt. (5) Cost of debt, (6) Tax rate – interest is deductible, so a high tax rate favours debt. (7) Cost of equity. (8) Floatation cost – high for a small issue. (9) Risk consideration – financial risk rises with debt. (10) Flexibility, (11) Control – debt avoids dilution of promoters’ control, (12) Regulatory framework, (13) Stock market conditions, (14) Capital structure of other companies.
OR
(Any six, 1 mark each)
OR
| Basis | Money market | Capital market |
|---|---|---|
| Nature of instruments | Short-term, e.g. treasury bills, commercial paper, call money, certificates of deposit | Long-term, e.g. equity shares, preference shares, debentures, bonds |
| Duration | Up to one year | More than one year |
| Participants | RBI, banks, financial institutions, large companies, mutual funds | Individual investors, banks, insurance companies, FIIs, financial institutions |
| Liquidity | Highly liquid | Less liquid than money market |
| Safety / return | Relatively safe; lower returns | Higher risk; higher returns |
| Purpose | Meets working capital needs | Meets fixed capital needs |
SECTION F — Solutions (4 marks each)
30. (i) Political/legal environment (government subsidy, GST reduction); Economic environment (rising petrol prices); Social environment (consumers’ preference for eco-friendly vehicles); Technological environment (new battery technology) (any two, ½ each). (ii) Dynamic nature (changes constantly – the rival launched a cheaper model) and uncertainty (changes are difficult to predict); also relativity (1). (iii) Identification of opportunities (the company seized increased demand after subsidy) or coping with rapid changes (1). (iv) Programme (single-use plan) – it is a one-time plan listing the objectives, the steps, resources and time for opening new showrooms (½ + ½).
31. (i) The Consumer Protection Act, 2019 (1). (ii) Right to seek redressal (1). (iii) Any two : removal of defect in goods; replacement of goods; refund of the price paid; compensation for loss or injury/mental agony; discontinuation of unfair trade practice; withdrawal of hazardous goods; payment of punitive damages/costs (½ each). (iv) Responsibility to insist on a cash memo/bill and to keep the warranty card (proof of purchase) (1).
DESIGN OF THE PAPER — Unit-wise Weightage and Typology (as per CBSE 2025–26)
| Part / Units | Marks (CBSE) | Marks in this paper | Questions |
|---|---|---|---|
| Part A – Units 1–2 : Nature and Significance of Management; Principles of Management | 16 | 16 | Q.1, 2, 3, 4, 17, 21, 24 |
| Units 3–5 : Business Environment; Planning; Organising | 14 | 14 | Q.5, 6, 7, 15, 28, 30 |
| Units 6–8 : Staffing; Directing; Controlling | 20 | 20 | Q.8, 9, 10, 18, 22, 25, 26 |
| Total – Part A | 50 | 50 | |
| Part B – Units 9–10 : Financial Management; Financial Markets | 15 | 15 | Q.11, 12, 19, 23, 29 |
| Units 11–12 : Marketing Management; Consumer Protection | 15 | 15 | Q.13, 14, 16, 20, 27, 31 |
| Total – Part B | 30 | 30 | |
| Grand total | 80 | 80 |
| Typology of questions | Marks (CBSE) | Marks in this paper | Questions |
|---|---|---|---|
| Remembering and Understanding | 32 (40%) | 32 | Q.1, 2, 4, 7, 8, 13, 14, 18, 19, 21, 25, 26, 27 |
| Applying | 24 (30%) | 24 | Q.3, 5, 9, 10, 11, 17, 20, 22, 23, 24 |
| Analysing, Evaluating and Creating | 24 (30%) | 24 | Q.6, 12, 15, 16, 28, 29, 30, 31 |
| Total | 80 (100%) | 80 |
