Business Environment & Planning

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Business Environment & Planning — solved practice questions

8 Class 12 Business Studies questions with step-by-step solutions. Attempt each, then reveal the answer.

1. Q1easy

   'Business environment' is best defined as:

   • AOnly the internal factors of a firm
   • BThe sum total of external forces, factors and institutions that affect a business but are beyond its control
   • COnly the economic factors affecting a business
   • DThe physical office premises of a business
   Show answer & solution

   Correct answer: (B) The sum total of external forces, factors and institutions that affect a business but are beyond its control

   Business environment refers to the sum total of all individuals, institutions and other forces outside the control of a business enterprise that may affect its performance.

2. Q2easy

   The economic reforms of 1991 (LPG) stand for:

   • ALiberalisation, Privatisation and Globalisation
   • BLand, Population and Growth
   • CLiberty, Progress and Government
   • DLoans, Profit and Goods
   Show answer & solution

   Correct answer: (A) Liberalisation, Privatisation and Globalisation

   The New Economic Policy of 1991 was based on Liberalisation (freeing business from controls), Privatisation (greater role for the private sector) and Globalisation (integration with the world economy).

3. Q3medium

   Which of the following is a feature of business environment?

   • AIt is static and never changes
   • BIt is dynamic and keeps on changing
   • CIt is fully within the control of the firm
   • DIt is completely certain and predictable
   Show answer & solution

   Correct answer: (B) It is dynamic and keeps on changing

   Business environment is dynamic—it keeps changing due to shifts in technology, consumer preferences, government policy and competition, so firms must continuously monitor it.

4. Q4medium

   A rise in the disposable income of middle-class families that increases demand for consumer goods relates to which dimension of the business environment?

   • ASocial Environment
   • BPolitical Environment
   • CTechnological Environment
   • DEconomic Environment
   Show answer & solution

   Correct answer: (D) Economic Environment

   Disposable income, interest rates, inflation and price levels are part of the Economic Environment, which directly affects the purchasing power and demand faced by a business.

5. Q5medium

   Changes in customs, traditions, festivals and lifestyle that affect the demand for products relate to which dimension of the environment?

   • ALegal Environment
   • BSocial Environment
   • CTechnological Environment
   • DEconomic Environment
   Show answer & solution

   Correct answer: (B) Social Environment

   Social environment includes social customs, traditions, values, festivals and lifestyle changes of society, which influence what and how much people buy.

6. Q6hard

   The demonetisation of Rs 500 and Rs 1000 currency notes in India was announced in:

   • ANovember 2016
   • BNovember 2014
   • CAugust 2017
   • DJanuary 2015
   Show answer & solution

   Correct answer: (A) November 2016

   The Government of India announced demonetisation of Rs 500 and Rs 1000 notes on 8 November 2016 as a measure against black money, corruption and counterfeit currency.

7. Q7easy

   Planning is best described as:

   • AArranging physical resources in advance
   • BDeciding in advance what to do and how to do it
   • CDirecting employees towards goals
   • DMeasuring actual performance against standards
   Show answer & solution

   Correct answer: (B) Deciding in advance what to do and how to do it

   Planning is deciding in advance what to do, how to do it and who is to do it; it bridges the gap between where we are and where we want to reach.

8. Q8medium

   The statement 'planning is the primary function of management' means that:

   • APlanning is done only once a year
   • BPlanning is the most difficult function
   • CPlanning precedes all other functions of management
   • DPlanning is done only by top management
   Show answer & solution

   Correct answer: (C) Planning precedes all other functions of management

   Planning is the primary or first function because organising, staffing, directing and controlling are all performed only after plans have been made; it lays the foundation for other functions.

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