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Saturday, December 10, 2016

Business Studies - Class 11: Business Services

Unit – IV: Business Services
Very Short answer types Questions
1. To which insurance Principle if Indemnity is not applicable?
Ans. Life Insurance
2. What is the full name of A.T.M.?
Ans. Automated Teller Machine
3. Who are the central Bank of our country and which is the largest commercial bank of our country?
Ans. Reserve Bank of India is central bank of our country and State bank of India is largest commercial Bank
4. “The Cause for loss must be related to the purpose of insurance” Which principle of insurance is related to this statement?
Ans. Principle of proximate cause
5. “The insured must have an interest in the subject matter of insurance” Which principle of insurance is related to this statement?
Ans. Principle of insurable interest
6. What are the two functions of E- Banking?
Ans. 1. ATM (Automated Teller Machine) 2. EFT (Electronic Fund Transfer)

Short/ Long answer type questions:
Q.1. What are Business services? Explain their characteristics. Distinguish between goods and services.

Ans: Business Services: Auxiliaries to trade are also known as business services. Service sector includes commercial firms engaged in banking, communication, transport, insurance and warehousing. Business cannot be even imagined in the absence of these services. All these services collectively constitute the Service Sector.
Characteristics or nature of Business Services:                                  2015
a)      Intangibility
b)      Inconsistency
c)       Inseparability
d)      Storability
e)      Involvement
Difference between Goods and Services
Basis of Difference
Services are Intangible.
Goods are tangible.
No requirement of inventory.
Inventory must be maintained.
Transfer of ownership
Ownership cannot be transferred.
Ownership can be transferred.
Services are intangible such as doctor’s services.
Goods are tangible such as Medicine.
Q.2. Why are business services needed?        
Ans:   Business services are needed because:
a)      For financing business activities
b)      For distributing the goods
c)       For providing safety against risk
d)      For creating awareness among consumers
Q.3. What is Bank? What are its Features? What are various types of Bank? Mention some important functions of commercial bank.
Ans:  Bank: A bank is an institution, which deals in money and credit. It accepts deposits of money from public for the purpose of lending and investment.
Features of Banks:
a)      Mobilizes Capital
b)      Role of Creditor and Debtor
c)       Role of an intermediary
d)      Creator of money
 Types of Banks:
a)      Commercial Banks
b)      Industrial Banks
c)       Exchange Banks
d)      Agricultural Bank
e)      Regional Rural Banks
f)       Indigenous bankers
g)      Central Bank
Most common functions of commercial banks are:
(1) Accepting the Deposits: A bank accepts deposits from the public through different types of accounts e.g. (i) Fixed Deposit account (ii) Savings deposit account, (iii) Current deposit or current account, (iv) Recurring deposit or recurring account
(2) Lending Money: Bank lends money to Businessmen and other persons through (i) Loans and advances, (ii) Overdraft, (iii) Cash Credit, (iv) Discounting of bills
(3) Agency Functions :( i) Collection of cheques, drafts, bills, hundies, dividend, interest, school fee, rent etc. (ii) Payment of cheques, drafts, hundies, rent, subscription, insurance premium, taxes, fees, electricity and water bills etc (iii) Acts as trustee, executor etc.(iv)Buying and selling securities.(v) Dealing in foreign exchange(vii) Advisory Functions.
(4) Electronic Banking Services :( i) Direct Credit (ii) ATM (iii) Debit Card (iv) Credit Card (v) Tele Banking
Q.4.  What is Insurance? What are its various types? Mentions fundamental principles of Insurance.    2007
Ans: Insurance is a contract in writing under which one party (insurer) promises to compensate the other party (insured) in case of loss as per the premium. It is a protection against risks.
Types of Insurance contract
1) Contract of Indemnity: it includes (a) Fire Insurance (b) Marine Insurance (c) Fidelity insurance (d) Health insurance
2) Contract of Guarantee (Life Insurance Contract): It Includes (a) Whole life assured policy and (b) Endowment Life assurance policy.
Fundamental Principles of Insurance
a)      Principle of utmost faith: refers that no material or important facts should be concealed by both the parties of insurance contract.
b)      Principle of Insurable Interest: There must be some pecuniary interest in the subject matter of the insurance contract.
c)       Principle of Indemnity: Refers that the insured can get only the compensation against actual loss and he cannot make profit out of the insurance.
d)      Principle of proximate cause: It refers to the direct cause and not the remote cause.
e)      Principle of mitigation of loss: states that it is the duty of the insured to take reasonable steps to minimize the loss/damage to the insured property.

Q.5. Distinguish between life, fire and marine insurance.                            1999, 2010
Ans: Difference between life, fire and marine insurance are given below
Basis of difference
Life Insurance
Fire Insurance
Marine Insurance
Subject Matter
The subject matter of insurance is human life.
The subject matter is any physical property or assets.
The subject matter is a ship, cargo or freight.
Life Insurance has the elements of protection and investment or both.
Fire insurance has only the element of protection and not the element of investment.
Marine insurance has only the element of protection.
Insurable Interest
Insurable Interest must be present at the time of effecting the policy.
Insurable interest on the subject matter must be present both at the time of effecting policy as well as when the claim falls due.
Insurable interest must be present at the time when claim falls due or at the time of loss only.
Life Insurance policy usually exceeds a year and is taken for longer period ranging from 5 to 30 years or whole life.
Fire insurance policy usually does not exceed a year.
Marine insurance policy is for one or period of voyage or mixed.
Life insurance is not based on the principle of indemnity.
Fire insurance is a contract of indemnity. The insured can claim only the actual amount of loss from the insurer.
Marine insurance is a contract of indemnity.
Loss measurement
Loss is not measurable.
Loss is measurable.
Loss is measurable.
Surrender value or paid up value
Life insurance policy has a surrender value or paid value.
Fire insurance does not have any surrender value or paid up value.
Marine insurance does not have any surrender value or paid up value.
Contingency of risk
There is an element of certainty.
There is an element of uncertainty and there may be no claim.
The event i.e., loss at sea may not occur and there may be not claim.
Q.6. What is general insurance? Mention some important general insurance contract.
Ans: General Insurance:  It is also known as an all in one policy which covers losses arising from any kind of risks, such as, fire, theft, burglary, third party risks, lightning, explosion of gas in domestic appliances, earthquake, storm etc. Such policies are generally taken by people in connection with their houses and household items.
Types of Insurance
a)      Fire Insurance: A contract of fire insurance is a contract where in the insurer, in consideration of the premium paid, undertakes to compensate the insured for any loss or damage caused by fire. It is a contract of indemnity.
b)      Marine Insurance: Marine insurance covers the loss or damage of ships, cargo, terminals, and any transport or cargo by which property is transferred, acquired, or held between the points of origin and final destination.
c)       Fidelity insurance: Under fidelity insurance, the insurance company undertakes to compensate the insured business firm against loss caused by misappropriation of funds or goods by its employees.
d)      Health insurance: A type of insurance coverage that pays for medical and surgical expenses that are incurred by the insured.
Q.7. What is warehouse and warehousing? Explain the importance (uses/need/function) of warehousing. What are various types of warehouses?                   2000
Ans:  Warehouse: It is a place for the storage and preservation of goods in proper condition. It is an establishment for the accumulation of goods.
Warehousing: Warehousing means retaining the goods for future use. It implies holding or preservation of goods from time of their production or purchase until their consumption or sale. The warehousing service plays an important role in supply and distribution of goods after their manufacture.
Need and importance of warehouses:
a)      To store excess production in anticipation of demand 
b)      To store goods those are produced seasonally 
c)       To store goods those have seasonal demand
d)      Stability in prices
e)      Storage of raw materials 
f)       Basis of Trade 
g)      Processing, curing and packaging of goods.
Types of warehouses: (1) Government warehouses (2) Private warehouses  (3) Public warehouses  (4) Cooperative warehouse  (5) Bonded warehouse (6) Excise Bonded warehouse  (7) Custom Bonded warehouse
Q.8. Write a short note on various functions performed by warehouses.                              2007, 2009
Ans: The functions of warehousing are discussed as follows:-
a)      Consolidation: In this function the warehouse receives and consolidates, materials/goods from different production plants and dispatches the same to a particular customer.
b)      Break the bulk into smaller quantities: The warehouse performs the function of dividing the bulk quantity of goods received from the production plants into smaller quantities.
c)       Stock piling: The next function of warehousing is the seasonal storage of goods to select businesses. They are made available to business depending on customers demand.
d)      Value added services: Certain value added services are also provided by the warehouses, such as in transit mixing, packaging and labeling.
e)      Price stabilization: By adjusting the supply of goods with the demand situation, warehousing performs the function of stabilizing prices.
f)       Financing: Warehouse owners advance money to the owners on security of goods and further supply goods on credit terms to customers.
Q.9. What is E-mail? Write down its advantages.                             2006, 2010
Ans:   E-mail is a short process of communicating written messages on computer through electronic media i.e. Internet. The immediate presence of recipient of message is not necessary in it.                          2010
Advantages of E-mail:
a)      Fastest Mode of communication
b)      Cheapest Mode
c)       Secrecy
d)      Immediate Feedback
e)      Permanent Record for Future Reference
Q.10. Explain the Functions of Insurance.             (Importance of insurance)           2015      
Ans: The functions of insurance can be studied into two parts (i) Primary Functions, and (ii) Secondary Functions.
Primary Functions:
(i) Insurance provides certainty: Insurance provides certainty of payment at the uncertainty of loss. The uncertainty of loss can be reduced by better planning and administration.
(ii) Insurance provides protection: The main function of the insurance is to provide protection against the probable chances of loss. The insurance guarantees the payment of loss and thus protects the assured from sufferings.
(iii) Risk-Sharing: The risk is uncertain, and therefore, the loss arising from the risk is also uncertain. When risk takes place, the loss is shared by all the persons who are exposed to the risk.
Secondary functions: Besides the above primary functions, the insurance works for the following functions:
(i) Prevention of Loss: The insurance joins hands with those institutions which are engaged in preventing the losses of the society because the reduction in loss causes lesser payment to the assured and so more saving is possible which will assist in reducing the premium.
(ii) It Provides Capital: The insurance provides capital to the society. The accumulated funds are invested in productive channel. The industry, the business and the individual are benefited by the investment and loans of the insurers.
(iii) It Improves Efficiency: The insurance eliminates worries and miseries of losses at death and destruction of property. The carefree person can devote his body and soul together for better achievement.
(iv) It helps Economic Progress: The insurance by protecting the society from huge losses of damage, destruction and death, provides an initiative to work hard for the betterment of the masses.
Q.11. Define bonded warehouse.                            2008, 2010
Ans: Bonded warehouses are licensed by the government to accept imported goods prior to payment of tax and customs duty. These are goods which are imported from other countries. Importers are not permitted to remove goods from the docks or the airport tile customs duty is paid.
Q.12. Define Telegraph Services       
Ans:   Telegraph Service. Telegram is an important medium of sending messages speedily to distant places. Government regulates the functioning of telegraph services through its Post and Telegraph Department. It was one of the most important mediums till other high tech media took over.
Q.13. Write down the factors responsible for choice of a suitable mode of transport.
Ans: Choice of a suitable Mode of Transport:
(1) Availability of Means of Transport
(2) Distance and Cost of Transportation
(3) Safety
(4) Flexibility of Service
(5) Regularity of service
Q.14. What is the meaning of Financial Services?           
Ans:  The financial services in a broad sense can be defined as “mobilising savings.” It includes all activities involved in the transformation of savings into productive investments.
Q.15. What is the meaning of Fire Insurance?       
Ans:  A contract of fire insurance is a contract where in the insurer, in consideration of the premium paid, undertakes to compensate the insured for any loss or damage caused by fire. It is a contract of indemnity.
Q.16. What is the meaning of transport? Define Road transport. Mention its merits and demerits.
Ans:   Transport means movement of goods and persons from one place to another. Road transport is the oldest means of transport, which involves conveyance of goods and persons from one place to another by roads and highways.
Advantages of Water Transport: (1) Cheapest means of transport (2) Large carrying capacity (3) Safety (4) Can move products all over the world.
Disadvantages of Rail Transport: (1) Huge Capital Outlay (2) Lack of Flexibility (3) No Door to Door Service (4) Unsuitable for Short Distance (5) Damage and Delay (6) Evils of Monopoly
Q.17. Write the full form of VPP.                                             2010
Ans: Value payable post.
Q.18. Define double and reinsurance.                   2006
Ans: Double Insurance: Double insurance means purchasing more than one policy for the same subject. A person may get two or more policies on his life. He can claim the amount of all these policies.

Re-Insurance: When the insurance company insures the risk with some other insurance company, it is called Re-insurance. The re-insurance may be for the full amount of the policy or for a part of it. In case of loss the first company will get compensation from the second company.