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Business Studies · 2024 · 6 marks
CBSE 2024 · Region 5 · Set 2 · Q32
(a) Explain the following factors affecting the working capital requirements of a business: (i) Inflation (ii) Business cycle (iii) Nature of business
(a)
Explain the following factors affecting the working capital
requirements of a business:
(i)
Inflation
(ii)
Business cycle
(iii)
Nature of business
OR
(b)
Explain the following factors affecting the dividend decision of a
company:
(i)
Access to capital market
(ii)
Legal constraints
(iii)
Taxation policy
Marking-scheme solution
(i)
Inflation
§ With rising prices, larger amounts are required even to maintain a constant
volume of production and sales.
§ The working capital requirement of a business thus, become higher with
higher rate of inflation.
(ii)
Business cycle
§ 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.
§ During the period of depression, the requirement for working capital will be
lower as the sales as well as production will be small.
(iii)
Nature of business
§ Trading organisations require lesser working capital than manufacturing
organisations as there is no processing involved.
§ Service industries require the least working capital as they do not have to
maintain inventory.
OR
Q. (b) Explain the following factors affecting the dividend decision of a
company:
(i)
Access to capital market
(ii)
Legal constraints
(iii)
Taxation policy
(i)
Access to capital market
§ Large and reputed companies generally have easy access to the capital
market and, therefore, may depend less on retained earning to finance their
growth.
§ These companies tend to pay higher dividends than the smaller companies
which have relatively low access to the market.
(ii)
Legal constraints
§ Certain provisions of the Companies Act place restrictions on payouts as
dividend.
§ Such provisions must be adhered to while declaring the dividend.
(iii)
Taxation policy
§ If tax on dividend is higher, it is better to pay less by way of dividends.
§ As compared to this, higher dividends may be declared if tax rates are
relatively lower.
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CBSE Class 12 Business Studies past-paper question from the 2024 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.