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) State one feature of Joint Hindu Family Business.
Ans: Membership by birth
(b) What do you mean by e-business?
Ans: E – Business: E – Business refers to all business transactions and functions conducted electronically.
(c) Give an example of unethical behaviour in business.
Ans: Providing poor quality products to the customer.
(d) When can a private company commence business?
Ans: A private company can commence business after obtaining Certificate of Incorporation.
(e) Who is promoter?
Ans: A promoter is the person who does the required work before the formation of the company for its incorporation.
(f) Write one feature of cottage industries.
Ans: Use of traditional techniques
(g) Mention one problem of small business.
Ans: Shortage of funds
(h) What is the maximum number of members of a public company?
Ans: No limit or Limited upto number of shares.
2. What is partnership deed? 2
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.
3. Write two features of a public sector enterprise. 2
Ans: (1) It is owned by central or state government. (2) It is managed by persons appointed by government. (3) Its main objective is to provide service to society.
4. State two responsibilities of business towards consumers. 2
Ans: To provide right quality and quantity of goods and services at reasonable prices, To avoid adulteration, hoarding, dishonest and misleading advertisements.
5. Mention two merits of equity shares. 2
Ans: Features of Equity shares:
a) Primary risk-bearers
b) Control over management
c) Higher profits available for equity share holders.
6. State two functions of a retailer. 2
Ans: 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.
7. Explain any three features of business. 3
Ans: Characteristics or features of business are discussed in following points:
a) Exchange of goods and services: All business activities are directly or indirectly concerned with the exchange of goods or services for money or money's worth.
b) Deals in numerous transactions: A businessman regularly deals in a number of transactions and not just one or two transactions.
c) Profit is the main Objective: The business is carried on with the intention of earning a profit.
8. State any three natures of services. 3
Ans: Characteristics or nature of Business Services:
9. Mention three points of distinction between Memorandum of Association and Articles of Association. 3
Ans: The difference between Memorandum of Association & Article of Association is given here:
BASIS OF DISTINCTION
MEMORANDUM OF ASSOCIATION
ARTICLE OF ASSOCIATION
It is the constitution of a company .It defines limits, powers and objects of the company.
It contains rules and regulation for the internal management of the company.
It governs relationship of company with the external world.
It governs internal relationship between the members of the company.
It is the primary document. It is the foundation of the company.
It is the secondary document & it is based on the memorandum of association.
It is a compulsory document for all the companies.
It is compulsory for private companies, unlimited companies and companies limited by guarantee.
Alteration can only be done by the permission of court.
It can be altered according to the need of the management by passing a resolution.
10. What do you mean by outsourcing of services? Why is it important? 1+2=3
Ans: Outsourcing of services means delegation of one or more business processes to an outside agency that would normally have been performed within the organization on a regular basis.
Need for Outsourcing of services:
a) To obtain specialized Services
b) To Get Benefits of latest developments
c) To avoid fixed investment
d) To run business efficiently
11. State three causes of international trade.
Ans: International business is beneficial for firms in the following ways:
a) Prospects of higher profits
b) Increased capacity utilisation
c) Prospects for growth
d) Facing less competition in domestic market by exporting.
e) Improved business vision.
12. “Profit is not the main objective of a business”. In this context give your opinion about this statement. 5
Ans: According to Urwick, “Earning of profits cannot be the objective of a business any more than eating is the objective of living”
Arguments in favour of profit as the sole objective: Earning of profits is essential for a business due to the following reasons:-
a) It is source of income for the business man.
b) It provides funds for expansion
c) It is an indicator of efficiency of business man.
d) It builds up reputation.
Arguments against profit maximization: Profit maximization should not be the sole motive of any business:
a) Profit maximisation ignores the interest of labour, customers, society etc.
b) Unfair means such as hoarding, black marketing or adulteration may be practiced to maximise profit.
c) Long-term interest of the business may be ignored to maximise profits in the short run.
d) In short, a business must pursue not only economic (profit) objectives but also the social and human objectives.
13. Explain the advantages of insurance to the business community.
Ans: The functions of insurance can be studied into two parts (i) Primary Functions, and (ii) Secondary Functions.
14. Discuss the limitations of E-Business. 5
Ans: Limitations of e – Business:
a) Low Personal Touch: Interpersonal touch between businessmen and the consumer is very important. e – Business may be high tech but the lacking interpersonal interaction is truly one of its shortcomings.
b) Delayed Delivery: Sometimes order may be placed at once through internet but delivery may be delayed, which may disturb the customers.
c) Need for technological capability and competence of parties: If any one party – either buyer or seller is not familiar with digital technology, e – Business becomes difficult.
d) Risk of Non-Traceability of parties: Cyber personalities participate in e – Business, when any one is in remote area – Traceability may be one the biggest problem.
e) People’s Resistance: In general, people resist changes and halt will be more if any organization prefers to go fully online.
15. Name of documents necessary for the incorporation of a company. 5
Ans: The documents which are required for the Incorporation of a company:
a) Memorandum of Association
b) Articles of Association
d) Consent of proposed directors
f) Statutory declaration
g) Document evidence of payment evidence fees
16. Discuss the role of business in environment protection. 5
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.
4) Plant and machinery should be modernized to minimise pollution.
5) The business houses should co-operate with the public authorities in their programmes organised for environmental protection
17. Explain the role of small industries in rural areas. 5
Ans: Role of Small Business in India (With Special Reference to Rural Areas)
a) Small industries provide employment opportunities in rural areas
b) They are the second largest employers of human resources
c) They contribute nearly 40% of the gross industrial value added
d) The development of village & rural industries leads to industrialization in rural areas
e) They ensure equitable distribution national income & wealth by reducing income inequalities between rural & urban areas
f) They help in mobilization & utilization of local resources & skills
g) They help generate multiple sources of income to the rural house holds
h) They prevent migrations of rural population to urban areas in search of employment.
18. Distinguish between domestic and international trade. 5
Ans: Difference between domestic business and international business.
Employees, suppliers, middleman, shareholders and partners are usually citizens of the same country.
Employees, suppliers, middleman, shareholders and partners are from different nations.
Mobility of factors of production is more within a country.
Mobility of factors of production is relatively less.
It is subject to political system and risks of a single country.
It is subject to political system and risks of different countries.
Business practices, taxation system and policies of a single country are applicable.
Business practices, taxation system and policies vary considerably across countries.
19. Discuss in detail the reasons for the superiority of Joint-Stock Company over Sole proprietorship and partnership. 8
Ans: Sole Trade business: A sole proprietorship implies a one-man show and in case more partners are taken on to fastens growth, the structure of the firm has to be changed to a partnership firm or a company. Lenders are also unwilling to lend as the business is in the hands of one individual and so, the risk is high. In case of liabilities arising from the conduct of the business, the losses have to be covered by the personal assets of the proprietor. The liability of the proprietor to pay off all creditors is unlimited.
Company: A company may either be a private limited company or may be formed as a public limited company. The members of the company appoint directors who are responsible for the management of the company. The directors are collectively known as the Board of Directors. A private limited company can be formed with a minimum of two members and a public company may be formed with a minimum of seven members. A private limited company can have a maximum of 50 members excluding employee-members; whereas there is no maximum limit on the number of members of a public company.
The major advantage of a company set-up is that the liability of the members is restricted to the extent of the member’s investment in the company; his/her personal property is not put at risk. The company form of organization is most suitable for modern times because it provides a route whereby ownership (members) can be separated from management (directors).
Though members can become directors, it is not always necessary. Even outsiders can be appointed as directors. The funding may be provided by the investor-members and the management may be in the hands of the promoter-members. If required, the investor-members may be appointed as directors.
State the types of business suitable under sole proprietorship with appropriate illustrations.
Ans: To give you an idea what kind of business are suitable sole proprietorships, consider the following business. These would be suitable for a sole proprietorships:
a) Where the market for the product is small & local. For example, selling grocery items, books, stationery, vegetables, etc.
b) Where customers are given personal attention, according to their personal tastes and preferences. For example, making special type of furniture, designing garments, etc.
c) Where the nature of business is simple. For example, grocery, garments business, telephone booth, etc.
d) Where capital requirement is small and risk involvement is not heavy. For example, vegetables and fruits business, tea stall, etc.
e) Where manual skill is required. For example, making jewelery, haircutting or tailoring, cycle or motorcycle repair shop, etc.
20. State the merits and demerits of Statutory Corporation as a form of public sector enterprise. 4+4=8
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.
1) Free from undesirable government
2) The government does not interfere in their financial matters.
3) It is relatively free from red tapes and can take quick decisions.
4) Its policies are subject to parliamentary control which ensures protection of public interest.
1) A statutory corporation’s actions are subject to many rules and regulations.
2) Government and political interference have always been there where huge funds are involved or in major decisions.
3) Where there is dealing with public, corruption exists at a larger level.
4) The Board of Directors may misuse their powers and indulge in undesirable practices.
What is global enterprise? What are its features? 2+6=8
Ans: Ans: Global Enterprises/Multinational Companies: 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.
1) A global enterprise has huge capital resources.
2) It operates through a network of subsidiaries, branches and affiliates in host countries
3) It uses advanced technology to provide world class products and services.
4) It employs professionally trained managers.
5) It uses aggressive marketing strategies.
21. Explain retained earnings and public deposit as sources of corporate finance in India. 4+4=8
Ans: Retained Earnings: Like an individual, companies too, set aside a part of their profit to meet future requirements. The portion of profits not distributed among the shareholders but retained and used in business is called retained earnings. It is also referred to as ploughing back of profit. This is one of the important sources of internal financing used for fixed as well as working capital. Retained earnings increase the value of shareholders in case of a growing firm.
Public deposit refers to the unsecured deposits invited by companies from the public. It can invite for a period of six months to 3 years. Public deposit cannot exceed 25% of its share capital & resources.
Merits of Public Deposits:
a) Simple: The system is very simple in raising the loans.
b) Economical: It is cheap method of raising working capital.
c) Elasticity in capital structure: Public deposits keep the capital structure elastic.
d) No security Requirement Deposits are usually unsecured.
Demerits of Public Deposits:
a) Unsuitable for new concerns: It is very difficult for the new companies to rely on Public deposits.
b) Unreliable- It is very uncertain and unreliable.
c) Unhealthy for Capital Market.
What is preference share? What are the different types of preference share? 2+6=8
Ans: Preference shares are those which carry a preference over dividend and return on capital. The dividend rate on preference shares is fixed. The preference shareholders get the dividend on fixed rate and out of net profits of a company prior to distribution of dividend on equity shares.
Types of Preference shares
a) Cumulative and Non-Cumulative Preference shares.
b) Participating and non-participating preference shares.
c) Convertible and non Convertible preference shares.
d) Redeemable and Irredeemable preference shares.
22. Define wholesaler? Discuss the difficulties which the manufactures will face if wholesalers are eliminated. 2+6=8
Ans: Wholesale trade means buying the goods in large quantity directly from the producers and selling them to retailers in small quantity.
Problems faced by manufacturers if wholesalers are eliminated: Wholesalers provide various services to manufacturers as well as to retailers. If they are eliminated then manufacturer will not get their valuable services. These are the following services offered by the wholesalers to manufactures:
a) Large Scale Production-Wholesalers purchase large quantities and facilitate large scale production
b) Concentration on Production- Wholesalers allow manufacturer to concentrate on production only & wholesaler handle the distribution activities
c) Market Information-Wholesalers provide market information to manufacturer regarding new product ideas, product modification, and competitor’s activities.
d) Financial Assistance- Wholesalers provide financial assistance to manufacturer they purchase goods on cash .Sometimes they give advances to manufacturer.
e) Risk Bearing: Wholesalers undertake the risk of dealing in the goods produced by the manufacturer. He bears the risk of fluctuation in demand and price.
f) Storage Wholesalers provide storage facilitates for finished goods.
Explain the concept of Consumer Co-operative Store. What are its merits? 4+4=8
Ans: Meaning of 'Consumers' Co-operative Stores’: The consumers' co-operative stores are the general shops of selling the consumable items, run on the basis of co-operation by the consumers. In other words, it might be said that the consumer’s cooperative store is a voluntary association of the consumers which are set up with the objective of meeting the needs for things and services. These stores have come up for eradicating the intermediaries from among the distribution system, for distributing the profits mutually, and for making available to the consumers the commodities of common use easily and on reasonable prices. Due to the consumers' cooperative stores, the consumers are able to get the non-adulterated goods easily.
Merits of Consumers' Co-operative Stores: The following are some of the main merits of these stores
(1) Least Chance of Bad Debts. Since in these stores the sales are undertaken only on the cash basis, hence there is very less chance of the bad debts. In other words, it might be said that the consumers' co-operative stores deal in cash business.
(2) Procuring the Un-adulterated Goods. Due to other establishment of the co-operative consumers' stores there has been a total closure of the supply of adulterated goods to the members.
(3) Protection Against the Exploitation by Middlemen. Due to the setting up of these stores, the consumers are saved of the middlemen's exploitation.
(4) Creating the Feeling of Co-operation Among Members. On account of the consumers' co-operative stores, there develops the feeling of co-operative among their members.
(5) Lower Prices of Things. The things are available to the members of the consumers' co-operative stores on a comparatively lower price than those in the open market.
(6) Lower Costs of Running. As compared to the other retail commercial bodies, the running costs of these stores are much lower.
(7) Hold of the Members on Profits. On the annual profits of the stores, oily the members have a total hold for their disposal.