Class XI – Business Studies – Paper – 1

Ans. a) Shipping bill

Ans. d) All of these

Ans. d) All of these

Ans. b) General stores

Ans. a) 2005

Ans. b) C2C activities

Ans. b) 51 percent

Ans. b) Khadi and Village Industries Commission

Ans. c) Only D is true

Ans. b) Both A and R are true but R is not the correct explanation of A.

Ans. a) middleman

Ans. d) July 1, 2017

Ans. d) Joint Stock Company

Ans. a) District Industries Centers

Ans. b) Complementary

Ans. b) Both A and R are true but R is not the correct explanation of A.

Ans. d) ten crore

Ans. b) Secondary industry

Ans. b) ₹ 10 lakhs

Ans. d) A is correct

Ans. The two kinds of business in which Ramakant is engaged are:

i. Domestic Business

ii. International Business

Ans. The two difference between Domestic Business and International Business are:

i. In the domestic business, both buyers and sellers belong to the same country, whereas in the case of international business, buyers and sellers come from two different countries.

ii. Domestic Business involves less degree of risk as people belong to same country whereas International Business involves a high degree of risk.

Ans. i. Insurance

ii. Advertisement

iii. Banking

iv. Transport

Ans. Pramesh suffered losses due to the negligence of his employees. Thus, ‘Human Causes’ are the reason for it.

Human causes may include the chance of losses due to human resources employed within the organisation. There maybe carelessness, misunderstanding, dishonesty, ill intentions on the part of human beings or stoppage of work due to strikes, riots, management inefficiency, etc.

Ans. Its full name/form is “Errors and Omissions Excepted”. E. & O.E. (Errors and Omissions Excepted): It refers to that term that is used in trade documents to say that mistakes and things that have been forgotten should be taken into account. This term is used in an attempt to reduce legal liability for incorrect or incomplete information supplied in a document such as a price list, invoice, cash memo, quotation, etc. In legal terms, it seeks to make a statement that information can not be relied upon, or may have changed by the time of use.

Ans. The preference shareholders enjoy two preferential rights over equity shareholders:

i. Right to receive a fixed rate of dividend before any dividend is paid to equity shareholders.

ii. Right to receive repayment of capital on winding up of the company, before the capital of equity shareholders is returned.

Ans. This scheme of the bank is known as ‘Cash Credit’.

Cash Credit: Under this facility, a bank grants the right to its customer to borrow money up to a certain limit against security. Out of the sanctioned limit, the customer withdraws the amount according to his need. It may be noted that he pays interest on the amount actually withdrawn by him.

Ans. Internal trade can be classified into two broad categories viz., (i) wholesale trade and (ii) retail trade.

i. Wholesale trade: wholesale trade refers to buying and selling of goods and services in large quantities for the purpose of resale or intermediate use.

ii. Retail trade: A retailer is a business enterprise that is engaged in the sale of goods and services directly to the ultimate consumers. The retailer normally buys goods in large quantities from the wholesalers and sells them in small quantities to the ultimate consumers.

Ans. The type of retail trade being described in the above lines is a Mail Order House.

Ans. The five conditions under which mail-house trading may be considered suitable are as follows:

i. The products can be standardized and graded.

ii. The products can be easily transported at low cost.

iii. The products have ready demand in the market.

iv. The products are available throughout the year and in large quantity.

v. The products can be described through pictures.

Ans. The term ‘business risk’ refers to the possibility of inadequate profits or even losses due to uncertainties e.g. changes in tastes and preferences of consumers, strike, increased competition, change in Government policy etc. It refers to the chance of loss on account of unfavourable or unpredictable happenings. These are of two types

a. Speculative – It involve both the possibility of gain as well as the possibility of loss.

b. Pure – It involve only the possibility of loss. Their occurrence may result in loss whereas non-occurrence may explain absence of loss, instead of gain.

Nature of Business Risks:

i. Business risks arise due to uncertainties: Uncertainties mean when you are not sure of what is going to happen in future. Common examples of uncertainties are: change in demand, government policy, technology etc. Business risk is due to these uncertainties.

ii. Risk is an essential part of every business: A risk is an important characteristic of the business. No business can avoid risk although the degree of risk may vary Risk can be reduced but cannot be eliminated.

iii. Degree of risk depends mainly upon the nature and size of business: For small scale business it is less and for large scale business it is more.

iv. Profit is the reward for risk-taking: The business earns a profit because they are bearing risk. ”No risk no gain” larger the risk more is the profit. An entrepreneur bears

Ans. Objectives represent the purpose for which an organisation has been started. Objectives guide and govern the actions and behavior of businessmen. Business objectives are the ends which a business organisation wants to achieve or accomplish over a specified period of time. These may be to earn profit for its growth and development, to provide quality goods to its customers, to protect the environment, etc.

The objectives of the business are as follows;

a. Economic Objectives are the objectives pursued to achieve the profit motive.

b. Social Objectives are the objectives pursed or desired to be achieved for the benefit of society.

c. Human Objectives refer to the objectives aimed at the well-being as well as the fulfillment of expectations of employees.

d. National Objectives are the objectives in order to serve the nation, business is an important element of the economy should have a goal to fulfill national goals and aspirations of its people.

e. Global Objectives are the aspirations of an entrepreneur to spread business across the borders and supplying quality products at reasonable prices.

f. Global Objectives

Ans. Esha intends to start e-business, whereas her father is following the traditional business.

Ans. The difference between e-business and traditional business is as follow:

Ans. Some of the merits of Statutory corporations are as follows:

i. Operational flexibility: Statutory corporation is able to enjoy a high degree of flexibility in its operations, as it is free from unnecessary government controls and regulations.

ii. Non-interference by the government: Since the funds of these organisations do not come from the central budget, the government generally does not interfere in their financial matters, including their income and receipts.

iii. Autonomous organization: Statutory corporations have the autonomy to frame their own policies and procedures within the authority of the Act granted to them under the Special Act of Parliament or by State or Central Legislature.

iv. A valuable instrument for economic growth: These enterprises are considered to be an effective instrument for economic development because they have the power of the government along with the initiative of private enterprises

Ans. Business should work for the economic and social well-being of the community. The responsibilities of business towards society are as follows:

i. Maximum utilization of natural resources.

ii. To provide opportunities to public for meaningful work.

iii. To preserve social and cultural values.

iv. To uplift the weaker section of the society.

Ans. Small scale industries comprise of small enterprises who manufacture goods or services with the help of relatively smaller machines and a few workers and employees.

Features of the small-scale industry:

i. Both the management and the control generally is with the owner/owners. So the owner is actively involved with the daily running of the business.

ii. These small scale industries tend to use labour and manpower for their production activities. So their dependence on technology is pretty limited.

iii. These units are more adaptable to their changing business environment. So in case of sudden changes or unexpected developments, they are flexible enough to adapt and keep carrying on. Large industries do not have this advantage.

iv. They use local and readily available resources. This also helps the economy with better utilization of natural resources and less wastage.

Ans. The two benefits available to the business firms engaged in leather export are as follows:

i. Prospects for higher profits for the business firms as they get an opportunity to sell their products in countries where prices are high.

ii. Increased capacity utilization may help the business firms to take advantage of economies of scale, which leads to a reduction in the production cost and increases per-unit profit margin.

Ans. The two ways in which different countries engaged in international trade of leather goods stand to gain are as follows:

i. Improving growth prospects and employment potentials as the scope of production activities increase.

ii. Increased standard of living as it provides access to the products with better technology from other countries.

Ans. Selling and sending goods and services from the home country to a foreign country is known as exporting while buying goods and services and bringing them into the home country from a foreign country is known as importing. The import and export of goods can be done either directly or indirectly. When the firm itself approaches the overseas buyers or sellers and performs all the formalities related to import and export of goods, it is referred to as direct importing or exporting. When the firm’s participation in the import and export operations is minimum and most of the formalities are carried out by some middlemen, it is referred to as indirect exporting or importing. In this case, firms don’t directly deal with overseas customers.

Advantages:

i. The easy way: It is the simplest way of gaining entry into international markets and does not involve any complex activity.

ii. Less investment: It does not require much of investment in foreign countries.

iii. Low risk: It does not carry much of the risks and requires less time.

Limitations:

i. Since the goods move from one country to another country, it involves, additional packaging, transportation, and insurance cost is incurred in transferring the goods which increases the cost of the product.

ii. Less knowledge of the foreign market. Basically, the export firms produce goods in the home country and send their goods to foreign countries. Hence, export firms do not have much contact with the foreign market.

iii. No longer feasible when import restrictions exist in a foreign country.

Ans. Sole proprietorship refers to a form of business organisation which is owned, managed and controlled by an individual who is the recipient of all profits and bearer of all risks. This single individual has to supply capital owned or borrowed to the business. This form of organisation is also known as ‘Sole Trader’, ‘Individual Proprietorship’ or ‘Individual Entrepreneurship’.

Benefits of Sole Proprietorship:

i. Ease of formation and dissolution: The sole proprietorship is the simplest form of business ownership. No legal formalities required for starting such firm.

ii. Quick decision making: A sole proprietor enjoys a considerable degree of freedom in making business decisions.

iii. Confidentiality of information: Sole decision-making authority enables the proprietor to keep all the information related to business operations confidential and maintain secrecy. A sole trader is also not bound by law to publish the firm’s accounts.

iv. Direct Incentive: A sole proprietor enjoys all the profits of the business as there is no one else to share earnings of the business.

v. Sense of accomplishment: Sole proprietorship provides personal satisfaction to people who want to be self-employed. As the proprietor is himself responsible for the success of the business, it not only provides him satisfaction but also creates a sense of accomplishment and confidence.

Limitations of Sole Proprietorship:

i. Limited resources: Resources of a sole proprietor are limited to his/her personal savings and borrowings from others. He doesn’t have enough security to acquire big loan.

ii. Limited life of a business concern: In the eyes of law, the proprietor and the owner are considered one and the same. Death, insolvency or illness of a proprietor affects the business and can lead to its closure. In most cases, the business collapses when the owner dies.

iii. Unlimited liability: A major disadvantage of the sole proprietorship is that the owner has unlimited liability. If the business fails, the creditors can recover their dues not only from the business assets but also from the personal assets of the proprietor.

iv. Limited managerial liability: The owner has to assume the responsibility of varied managerial tasks, such as purchasing, selling, financing etc. It is rare to find an individual who excels in all these areas.

Ans. The cooperative society is a voluntary association of persons, who join together with the motive of the welfare of the members.

Ans. Amul was promoted in the form of cooperative by a group of farmers who decided to bring an end to the exploitation of marginal milk producers by traders or agents of the only existing dairy, thereby gaining access to markets and maximizing returns for their efforts. The four merits of a cooperative society form of organization are described below:

i. Equality in Voting Status: Regardless of the amount of capital invested by a member, the principle of ‘one man one vote’ governs the cooperative society.

ii. Limited Liability: The liability of the members of the cooperative society is limited to the extent of capital invested by them. The personal assets of the members cannot be used to settle the claims of the business against outsiders.

iii. Stable Existence: The existence of a cooperative society is not affected by the death, insolvency or insanity of its members. Thus, it is a stable form of business organization

iv. Economy in Operations: The operations of a cooperative society are economical in nature. This is due to multiple factors like the members may work on an honorary basis, elimination of middlemen, etc.

Ans. The four merits of raising funds through equity shares are as follows:

i. The issue of equity shares does not create any fixed burden on the company as the payment of the dividend is not compulsory.

ii. Generally equity capital is to be repaid only at the time of liquidation of a company after settling the other claims. Therefore, it serves as a source of permanent capital for the company.

iii. Equity capital helps to build up creditworthiness of the company as it is the owner’s fund. Thus, it becomes easier for the company to raise loans.

iv. Equity share capital constitutes the part of owner’s fund. Hence, there is no need to provide any security of assets while raising it.

Ans. Ding Dong Ltd. can raise funds through international capital markets through global depository receipts (GDRs).

A global depository receipt (GDR) is a certificate issued by a depository bank, which purchases shares of foreign companies and deposits it on the account. In the Indian context, a GDR is an instrument issued abroad by an Indian company to raise funds in either U.S. dollars or euros. GDRs represent ownership of an underlying number of shares of a foreign company. Normally, one GDR is equal to ten underlying shares, but any ratio can be used. The market price of global depository receipts are based on the values of related shares, but they are traded and settled independently of the underlying share.GDRs are often listed in the Frankfurt Stock Exchange, Luxembourg Stock Exchange, and the London Stock Exchange.

Ans. A banker’s cheque is the most convenient and inexpensive medium of exchange and function of banks for the withdrawal of deposits. There are two types of cheques, mainly (a) bearer cheques, which are encashable immediately at bank counters and (b) crossed cheques which are to be deposited only in the payee’s account.

Ans. A bank draft is a cheque provided on nominal commission charges to a customer of a bank or acquired from a bank for remittance purposes, that is drawn by the bank, and drawn on another bank or payable through or at a bank. Unlike a cheque, a draft is a pre-paid negotiable instrument, wherein the drawee bank acts as a guarantor to make payment in full when the instrument is presented.

Ans. Real-Time Gross Settlement are specialist funds transfer systems where the transfer of money or securities takes place from one bank to another on a ‘real-time’ and on a ‘gross’ basis. It does not require any physical exchange of money. Settlement in ‘realtime’ means a payment transaction is not subjected to any waiting period, with transactions being settled as soon as they are processed. ‘Gross settlement’ means the transaction is settled on a one-to-one basis without bundling or netting with any other transaction. ‘Settlement’ means that once processed, payments are final and irrevocable. RTGS systems are typically used for high-value transactions that require and receive immediate clearing.