Full Marks: 100
Time: 3 hours
The figures in the margin indicate full marks for the questions
1. Answer the following questions: 1x8=8
a) Name the head of Joint Hindu Family Business.
b) In which business organization there is separation of ownership and management?
c) Which document is called a charter of the company?
Ans: Memorandum of association
d) Name the partner whose association with the firm is not known to the general public.
Ans: Secret Partner
e) Name the company formed as a result of partnership between two companies.
And: Joint venture
f) Give one example of chain store.
g) As per SEBI guidelines, what is the minimum subscription that a company must receive before issue of shares?
h) Name two sources of funds under owner’s fund.
Ans: Shares, Retained earnings.
2. What is a prospectus? 2
Ans: Prospectus is the circular or invitation given to the general public to subscribe to the shares of the company or invest money in the company.
3. Give the meaning of business ethics. 2
Ans: Business Ethics means the business practices which are desirable from the point of view of the society.
4. What do you understand by letter of credit? 2
Ans: A letter of credit is a proof of the credit worthiness of the importer. The letter of credit is an assurance that bill will be paid by the bank.
5. Mention two characteristics of statutory corporation. 2
Ans: A public corporation, known as Statutory Corporation, is an autonomous corporate body set up under a special act of the Parliament or of State Assembly. The Life Insurance Corporation of India, Air India, Indian Airlines, Food Corporation of India, Oil and Natural Gas Commission and Central Warehousing Corporation are few of the prominent public corporations in India.
6. What is global enterprise? 2
Ans: A global enterprise is one which owns and manages business in two or more countries. E.g.: Unilever Ltd, Coca cola, LG, Samsung, Hyundai Motors, Proctor and Gamble, etc.
7. State any three features of sole proprietorship business. 3
a) Easy to form and close
b) Unlimited Liability
c) One bearer of profit and loss
d) One man Control
e) No separate entity
f) Lack of business continuity.
8. Explain the social responsibilities of a business towards the environment. 3
Ans: Business houses should take the following steps to protect environment:
1) Eco friendly and low waste technology should be used by the industrial organisations.
2) Industrial waste should be recycled as far as possible.
3) There should be scientific treatment of all emissions before they are released into the environment.
9. Mention the non-economic objectives of business. 3
Ans: Non-Economic objectives of business:
1. Welfare of employees by providing physical comfort, material incentives, appreciation, and dignity of labour.
2. Satisfaction of Consumers should be given due weightage.
3. To Supply Quality Goods at reasonable price.
4. Co-operation with the Government.
5. To make proper Financial Planning to make sure that adequate funds are raised at the minimum cost.
10. Explain ‘Inter-Corporate deposit’ as a source of finance. 3
Ans: An Inter-Corporate Deposit (ICD) is an unsecured borrowing by corporates and FIs from other corporate entities registered under the Companies Act’ 2013. The corporate having surplus funds would lend to another corporate in need of funds.
11. State three functions of a promoter. 3
Ans: The functions of promoters are:
a) Identification of Business Opportunity: The promoters identify an opportunity which can be taken by a business firm
b) Detailed Investigation: Detailed examination to satisfy them regarding profitability of the proposition
c) Ensuring availability of resources: The promoter arranges human resources, material, machinery and equipment etc. for the company
12. Discuss five advantages of e-business. 5
Ans: Benefits of E – Business
a) Easy to form: It is very easy to start e – business because lots of procedures required for traditional business are not required for e – Business
b) Requires Less Investment: Both big and small business gets the benefits of internet equally. Thus even one start of small business with less investment can derive the benefit of e – Business.
c) Convenience: Internet offers the convenience of 24 hours X 7 days a week with a less investment – i.e. one can access anything, anywhere, any time.
d) Speed: Any business transaction can be made simply at the click of the mouse button.
e) Global reach/access: In e – Business both businessmen and consumers have no national boundaries because internet is without such boundaries.
13. Explain five principles of insurance. 5
Ans: 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.
14. Discuss the modes of dissolution of partnership business. 5
Ans: Ans: Modes of Dissolution of a Partnership Firm:
i. Compulsory dissolution;
ii. Dissolution on the happening of certain contingencies;
iii. Dissolution by notice of partnership at will;
iv. Dissolution by the court.
i) Compulsory Dissolution: A firm is dissolved compulsorily by the adjudication of all the partners or of all the partners but one as insolvent, or by the happening of any event which makes it unlawful for the business of the firm to be carried on or for the partners to carry it on in partnership.
ii) Dissolution on the Happening of Certain Contingencies: Subject to contract between the partners, a firm is dissolved:
i. if constituted for a fixed term, by the expiry of that term;
ii. if constituted to carry out one or more adventures or undertakings, by the completion thereof;
iii. by the death of a partner; and
iv. By the adjudication of a partner as an insolvent.
iii) Dissolution by Notice of Partnership at Will: Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the other partners of his intention to dissolve the firm. The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so mentioned, as from the date of the communication of the notice.
iv) Dissolution by Court: A court may order a partnership firm to be dissolved in the following cases:
i. When a partner becomes of unsound mind
ii. When a partner becomes permanently incapable of performing his/her duties as a partner,
iii. When partner deliberately and consistently commits breach of agreements relating to the management of the firm;
iv. when a partner’s conduct is likely to adversely affect the business of the firm;
v. when a partner transfers his/her interest in the firm to a third party;
vi. When the court regards dissolution to be just and equitable.
Explain the basic features of services. 5
Ans: Characteristics or nature of Business Services:
15. Briefly explain the problems of International business. 5
Ans: Problems of International business: The major problems faced are as follows:
1. Different currencies: Every country has its own currency. So importer has to make payment in the currency of exporter’s country.
2. Legal Formalities: International business is subject to a large number of legal formalities and restrictions.
3. Distance Barriers: Due to large distance between countries, it is difficult to establish quick and personal contacts between traders from different countries.
4. Language Barrier: Due to different languages in different countries, it becomes difficult for traders to understand the terms and conditions of the contract.
5. Difference in Laws: International business transactions are subject to laws, rule and regulations of multiple countries. International business transactions are subject to laws, rule and regulations of multiple countries.
6. Information Gap: It is difficult to obtain accurate information about foreign markets and about the financial position of foreign merchants.
16. Distinguish between shares and debentures. 5
Ans: The difference between Share & Debenture is given here:
Shareholder is an owner of the company.
Debenture holder is a creditor of a company.
A shareholder receives dividend.
A debenture holder receives interest.
A share is not secured by any charge of assets.
A debenture is secured by a floating charge of assets.
Share Capital cannot be repaid.
Debentures can be repaid by the company.
CONTROL AND RIGHT TO VOTE
A shareholder has control over the company.
A debenture holder does not have right to control or vote.
17. Explain any five factors to be considered for choice of form of business enterprise. 5
Ans: Basic factors to be considered before starting a Business:
a) Selection of Line of Business: Based on the requirements in the market nature and type of business to be selected.
b) Size of the Firm: Based on the amount of funds available and demand for the product in the market size of the firm i.e. small scale or medium or large scale to be decided.
c) Choice of form of ownership: Based on the amount of capital required, legal formalities to be filled in, liability of the owner, etc. the form of ownership is to be decided.
d) Location of the Business enterprise: Based on the availability of raw material and infrastructure facilities location of the Business is to be selected.
e) Financing the Proposition: Requirement of Capital and its sources must be decided.
f) Physical facilities: Availability of physical facilities including machines and equipment, building and supportive services to be considered before starting a business.
g) Plant layout: Plant layout should draw to show the arrangement of these facilities.
h) Competent and committed worked force: Every business needs work force. So careful planning should be about selection, training and motivation of employees.
i) Tax Planning: Tax liability and its impact on business to be considered.
j) Launching the enterprise: After fulfilling the formalities entrepreneur can launch the business.
18. Discuss the functions of a retailer. 5
Ans: Ans: Retail Trade: A retailer is a business enterprise that is engaged in the sale of goods and services directly to the customers.
Services of Retailers: Retailers provide various services to manufacturers as well as to consumers.
Services to Manufacturers/Wholesalers:
a) The services offered by retailers to wholesalers:
b) Wholesalers get a ready market through retailers.
c) Retailers manage the marketing part like advertising, publicity and promote sales.
d) Retail provides the information about market to wholesalers which are downloaded to manufacturer.
e) Retail provides after sales services.
f) Retailers help in distribution of goods to final consumers.
The services offered by retailers to customers:
a) It provides the availability of the goods and services to the final consumers.
b) As retailer holds the stock so the customers don’t have to store the goods.
c) It provides a variety of products and services to the consumers.
d) Retailers provide after sales services.
e) It provides credit facilities to the regular customers.
f) Retailer provides important information to the customers.
19. What is a partnership deed? Explain the contents of a partnership deed? 2+6=8
Ans: Partnership deed: It is a written agreement between the partners of a firm. It contains several clauses regarding name and address of partners, nature of business, Capital, profit sharing ratio etc.
Contents of Partnership Deed:
a) Names and address of partners
b) Nature and scope of business
c) Duration of partnership
d) Contribution of capital by the partners
e) Sharing of profit or loss
f) Loans to and by the partners
g) Commission and salary of partners
h) Amount of drawings and interest on drawings for each partner.
i) Rights, duties and liabilities of partners
j) Admission and retirement of partners
Describe the steps involved in promotion of a company. 8
Ans: There are four stages in the formation of a company:
(3) Subscription of Capital
(4) Commencement of Business.
(1) Promotion refers to the process of establishing new business enterprises .It is grabbing a business opportunity & converting it into a new company. Promotion includes the preliminary work incidental to formation of a company. Following are the steps of promotion:
a) Discovery of Idea
b) Finding the promoters to launch company
c) Assembling the preposition
d) preparing important Documents
e) Formation or getting the company registered.
(2) Incorporation of a company means the registration of company as a corporate body under the provisions of Companies Act’ 2013. A Company comes into existence from the date of incorporation.
(3) Capital subscription: (i) SEBI approval (ii) Filing of prospectus. (iii) Appointment of brokers, bankers etc., (iv) Collection of minimum subscription (v) Application to stock exchange (vi) Allotment of shares.
(4) Commencement of Business: (i) A declaration about meeting minimum subscription requirement. (ii) A declaration regarding the application and allotment money paid by the directors as same as others. (iii) A declaration that no money is payable to the applicants because of the failure of the company. (iv) A statutory declaration that the above particulars are followed. (v) The registrar shall examine the documents if these are found satisfactory a certificate of commencement of business will be issued.
20. Discuss the arguments in favour and against social responsibilities of business. 4+4=8
Ans: Arguments in favour of social responsibility:
1) Business is a creation of society and it uses society’s resources. So business is responsible to the society.
2) It is in the long-term self-interest of the business to assume social responsibilities.
3) Scope for government interference in business will get reduced if the business follows socially responsible policies.
4) There is moral justification to fulfill social obligations of the business.
5) Public image of the business would improve if it fulfills its social obligations.
Arguments against the social responsibility
1) Violation of maximization of profit motive
2) Increase in cost for charitable expenses creates burden on the consumer.
3) Lack of social skills of business man.
4) People’s resistance due to interference from businesses in their problems.
What is a Memorandum of Association? State the contents of Memorandum of Association. 2+6=8
Ans: Memorandum of association is the most important document of a company. It contains the fundamental on which a company is incorporated. The company is bound to act according to the objects and powers contained in its Memorandum of association. It also regulates the relationship of the company with the rest of the world
There are six clauses of Memorandum of Association:
a) Name Clause
b) Registered office Clause
c) Object Clause
d) Liability Clause
e) Capital Clause
f) Association Clause
a) Name Clause: Under this clause the corporate name of the company is stated with the name “limited” or “Private Limited” as the last word in this name. The name should not be identical with the name of any registered company.
b) Registered office Clause: Under this clause the company is required to mention the place in which the company is situated.
c) Objects clause: The object clause must contain the main object of the company and the other objects related with it for the completion of main object. The company is not entitled to carry any of the business which is not mentioned in the object clause.
d) Liability Clause This clause stated that the liability of members is limited to the amount unpaid on their shares.
e) Capital Clause: It shows the amount of share capital with which the company is going to be registered and its division.
f) Association Clause: This clause signifies the desire of the subscribers to form them into a body corporate.
21. What are the different types of co-operative societies? Discuss. 8
Ans: Types of co-operatives:
a) Consumers’ cooperative societies
b) Credit Cooperative societies
c) Producers cooperative societies
d) Marketing cooperative societies
e) Farmers cooperative societies
f) Housing cooperative societies
What is debenture? State the merits and demerits of debenture as a source of finance. 2+6=8
Ans: Debenture: It constitutes the borrowed funds of the company. It is an acknowledgement of debt. Debenture capital may be called DEBT CAPITAL.
Features of Debentures:
a) Debenture holders are the creditors of the company.
b) Debenture is redeemed after a fixed period of time.
c) Debentures may be either secured or unsecured.
d) Debenture holders do not enjoy any voting right.
a) Regular return
b) Safety of investment
c) Economic sources
d) Tax relief
a) Charge on assets
b) No voting rights
c) Permanent burden of interest
22. Define small-scale industry. Explain the problems faced by small-scale industries. 2+6=8
Ans: The definition used by Government of India is “A small scale industry is one in which the investment in fixed assets of plant and machinery does not exceed one crores”.
The problems of Small Business are given here:
a) Small scale industries find it difficult to get loans from banks & other financial institutions.
b) They are not able to get quality raw materials at reasonable prices.
c) They are usually run by people who may not have managerial skills.
d) They cannot pay higher salaries to employees so they leave the business.
e) They face competition from global enterprises.
f) They use outdated machineries & technologies.
g) Their quality of goods is low.
h) Due to lack of marketing skills & lack of demand, half of the capacity is not utilized so the operating cost is more.
What is a departmental store? Discuss its advantages and disadvantages. 2+3+3=8
Ans: According to Thomas “A large retail establishment having in the same building a number of departments each of which confine its activities to one particular branch trade and forms a complete unit in itself”.
a) Attract large number of customers.
b) Buying is made easier.
c) More services are provided.
d) Benefits of large scale operations.
e) Sales get increased by advertising.
a) No personal attention is there.
b) More cost of operating the store.
c) More chances for loss.
d) Far away from home.