2017
BUSINESS STUDIES
Full Marks – 100
Time: 3 hours
The figures in the margin indicate full marks for the questions
1. Answer as directed: 1x8=8
a) ADRs can be issued in which of the following countries?
Ø Japan
Ø USA
Ø Canada
Ø India
b) Can a public company commence business after obtaining Certificate of Incorporation?
Ans: No, a public company can commence business after obtaining certificate to commence business.
c) Write the full form of EFT.
Ans: Electronic Fund Transfer
d) In which year was the National Small Industries Corporation (NSIC) set up?
Ans: 1955
e) Which document is issued by a company to invite public to purchase its shares?
Ans: Prospectus
f) Write one objective of SIDBI.
Ans: To provide direct and indirect assistance to meet credit needs of small business organisations.
g) What is the full form of E. & O.E.?
Ans: Errors and Omission Excepted
h) Write one disadvantage of mail order business.
Ans: No personal contact with consumer
2. What is limited partnership? 2
Ans: Under this type of partnership some of the partners have unlimited liability while others have limited liability up to their individual share in the capital of the firm.
3. Distinguish between Private Sector and Public Sector. 2
Ans: Difference between public and private sector:
Public Sector | Private Sector |
(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) Managers are accountable for its financial results to the government. | (1) It is owned by private individual or groups (2) It is managed by owners or managers appointed by them. (3) Its main objective is to earn profits. (4)Managers are accountable for its financial result to its owners. |
4. What is bonded warehouse? 2
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.
5. What is e-business? 2
Ans: E – Business: E – Business refers to all business transactions and functions conducted electronically. It is very easy to start e – business because lots of procedures required for traditional business are not required for e – Business.
6. What is Articles of Association? 2
Ans: Article of Association contains the rules & regulation for the internal management of the company. These rules and regulations are framed to carry the objects of the company as stated in the memorandum of association. The articles are subordinate to Memorandum.
7. Briefly explain the benefits of joint venture. 3
Ans: Joint Venture is a contract between two or more parties, with each party contributing their capital to undertake an economic activity which is subject to joint control. No single venturer can unilaterally control the activities.
Benefits of Joint Ventures are as follows:
1) It makes possible to undertake a big project requiring huge capital.
2) The risks involved in the new project are shared by the partners in the joint venture
3) It allows a company to expand its operations in forcing markets.
8. Write three utility functions of a bank. 3
Ans: General Utility functions: These are certain utility functions performed by the modern commercial bank to its customer for the community. These are:
a. Safe custody of valuables.
b. Issuing letters of credit.
c. Gift Cheques.
d. Dealing in foreign exchange.
e. Credit cards.
9. Briefly explain the social responsibilities of a business towards Government. 3
Ans: Responsibility towards the government
a) To respect the laws of the country and
b) To pay taxes regularly and honestly
c) To act according to well accepted values of the society and to protect environment.
10. Write a note on public deposit. 3
Ans: 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.
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.
11. Write about the Bill of Lading. 3
Ans: When goods are sent by ship, shipping company issues a document named as bill of lading. Bill of lading may be defined as a receipt given by the shipping company to the exporter for carrying the goods to the importer. When goods reach the destination, the importer gets them from the shipping company in return of bill of lading.
12. Explain the features of multinational company. 5
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.
Features
a) A global enterprise has huge capital resources.
b) It operates through a network of subsidiaries, branches and affiliates in host countries
c) It uses advanced technology to provide world class products and services.
d) It employs professionally trained managers.
e) It uses aggressive marketing strategies.
13. Explain the functions of warehouse. 5
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.
Functions of warehouse
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.
14. Explain the resources required for successful implementation of e-business. 5
Ans: Resources required for e-business:
a) Adequate computer systems
b) Internet connection and telecommunication system
c) A website
d) Technically qualified workforce
e) Fool-proof system of receiving payments
15. Explain the elements of business ethics. 5
Ans: Elements of Business Ethics
1) Top Management commitment: Higher level managers need to be openly and strongly committed to ethical conduct.
2) Publication of a ‘code’: ‘Code’ refers to the written ethical programs followed by a particular business or industry – which normally covers the areas of honesty, adherence to laws, product’s safety and quality and fairness in all dealings.
3) Establishment of Compliance Mechanism: Simply having a written ‘Code of Ethics’ is not sufficient, the business needs to ensure its effective implementation at all levels & throughout the life of the business.
4) Involving employees at all levels: To make ethical business a reality, employees at all levels must be involved.
5) Measuring Results: Measuring the results of ethics programs maybe difficult but can have an audit at regular intervals to monitor compliance with ethical standards and decide about further course of action.
16. Explain the steps involved in formation of a private limited company. 5
Ans: There are four stages in the formation of a company:
(1) Promotion: 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.
(2) Incorporation: 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) Subscription of Capital: After incorporation, a company takes necessary steps to raise capital from public. For this purpose, a company issue prospectus inviting public to invest in shares or debentures of the company. 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. If a company does not want to issue a prospectus to the public for subscription of the shares, a statement in lieu of prospectus is required to be issued to the public for necessary information. The nature of the information of this document is more or less similar to that given in the prospectus.
(4) Commencement of Business: The company can start its functioning after getting certificate of commencement. The certificate of commencement of business is an evidence to start the operations of the business. A private company can commence business after obtaining Certificate of Incorporation.
17. Explain the role of small-scale 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. Explain the importance of international business. 5
Ans: The benefits of international business to nations are:
a) Optimum use of resources
b) Growth of economy
c) Economies of large scale
d) Increased employment opportunities
e) Stabilisation of prices
f) Increase in standard of living
g) Enhancement of competition
h) Global understanding
i) Opportunity to import the essential goods.
19. What is business risk? Explain its causes. 2+6=8
Ans: Business Risk: Business risk means possibility of some occurrence, which might lead to some loss for the business. No business can run without some element of risk in it. In fact business means assuming risk. “No risk, no gain” is an important principle which is applicable to all types of businesses. The nature of business and the volume of operations determine the degree of risk.
Causes of business risks may be classified as follows:
a) Natural Causes: Human beings have no control over the nature. Unforeseen events like heavy rains, famine, earthquake etc. affects business adversely.
b) Human causes: These include dishonesty, carelessness and negligence of employee, riots, strikes etc.
c) Economic Causes: Economic causes relate to fluctuations in demand and price or changes in the market conditions.
d) Physical Causes: These include all technical or mechanical causes, which affect the working of the business.
Or
Discuss the various types of industries with suitable examples. 8
Ans: Industry: It includes production or processing of goods and services. It is concerned with changing the form of the products. It gives form utility to the products.
Types of industry:
1. Primary Industry: Extraction and production of natural resources and reproduction and development of living organisms, plants etc.
2. Secondary Industry: Processing the materials got in the primary industries
3. Tertiary Industry: Support services to primary and secondary industries. It includes auxiliaries to trade.
Types of Primary industry:
Primary Industry is further divided into two parts:
a. Extractive Industry: E.g. Mining, lumbering, hunting and fishing operations
b. Genetic Industry: E.g. Breeding plants and animals, Poultry farming and fish hatchery
Types of Secondary Industry
Secondary industry is further divided into two parts:
a. Manufacturing Industry: Production and processing of goods creating form utilities.
b. Construction Industry: Construction of Buildings, dams, bridges, etc.
20. Discuss the basic factors to be considered while starting a business. 8
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.
Or
What is Joint Hindu family business? Explain its features. 2+6=8
Ans: A Joint Hindu Family Business may be defined as a form of business organization in which all the male members of a Hindu Undivided Family Carry on business under the management and control of the head of the family called “Karta”. The members of the family are known as 'Co-parceners'.
Features:
a) Formation of Joint Hindu family business by operation of Hindu Law
b) Liability of karta is unlimited in case of joint Hindu family.
c) Joint Hindu family is fully Control by Karta.
d) Joint Hindu family business is assumed to be continued for an indefinite period of time.
e) Minor can also be members.
f) All male members of the family are called co-parceners. They are member by birth.
21. What is preference share? Explain its different types. 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.
Cumulative Preference Shares: When unpaid dividends on preference shares are treated as arrears and are carried forward to subsequent years, then such preference shares are known as cumulative preference shares.
Non-cumulative Preference Shares: Non-cumulative preference shares are those type of preference shares, which have right to get fixed rate of dividend out of the profits of current year only. They do not carry the right to receive arrears of dividend.
b) Participating and non-participating preference shares.
Participating Preference shares: After dividend has been paid to the equity shareholders, holders of participating preference shares have the right to participate in the remaining profits.
Non Participating Preference shares: Preference shares which do not have the right to participate in the profits remaining after equity shareholders have been paid dividend.
c) Convertible and non Convertible preference shares.
Convertible Preference Shares: These preference shares can be easily converted into other preferences shares or equity shares or debentures.
Non-convertible Preference shares: These preference shares cannot be converted into other preferences shares or equity shares or debentures.
d) Redeemable and Irredeemable preference shares.
Redeemable Preference Shares: These Preference Shares are paid off or redeemed after the prescribed period.
Irredeemable Preference Shares: These Preference shares are permanent shares of a company. They are paid back only in the event of winding up of a company.
Or
What is share? Explain its features. 2+6=8
Ans: When the capital of a firm is divided into certain number of units these units are called shares. The share of a company is a movable property, transferable in the manner provided by the articles of the company. The capital of a company is divided into shares which are collectively called ‘Share Capital’. The share capital is regarded as owned capital. It is permanent source of finance.
Shares may be of two types:
a) Preference Shares
b) Equity Shares
According to Indian Companies Act 2013 " an equity share is share which is not preference share". An equity share does not carry any preferential right.
Features of Equity shares:
a) Primary risk-bearers
b) Control over management
c) Higher profits available for equity share holders.
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.
Following are the basic features of preference share:
a) Fixed rate of dividend
b) Preferential payment of dividend
c) Preferential right in redemption of capital in case of winding up of a company.
d) Absence of voting rights
22. What is consumer’s cooperative store? Explain its merits and demerits. 2+3+3=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) Protection Against the Exploitation by Middlemen. Due to the setting up of these stores, the consumers are saved of the middlemen's exploitation.
(3) 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.
(4) 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.
Demerits of Consumers' Co-operative Stores: The following are some of the main demerits of these stores
a) Limited Capital: Consumers' Co-operative Stores are generally formed by the weaker section of the society. The members can invest only a limited capital.
b) Lack of Competent Management: Consumers' Co-operative Stores are managed by the elected representatives of the members who generally possess neither the experience, nor the technical and professional qualification to run a business organisation.
c) Lack of Secrecy: The affairs of a Consumers' Co-operative Stores are openly discussed in the meetings of the members. This makes it very difficult for the societies to keep their secrets closely guarded.
Or
Who is wholesaler? Explain the services rendered by wholesaler towards retailers. 2+6=8
Ans: Wholesaler: A Wholesaler is a person who buys goods in bulk quantity form the manufacturer and sold them in small quantity to the retailers. They do not sell goods to ultimate consumers.
Services of Wholesalers: Wholesalers provide various services to retailers. These are the following services offered by the wholesalers to retailers:
a) Availability of goods to retailers: They make available goods to the retailers for the purpose of sale to the consumers.
b) Marketing support: Wholesalers provide necessary marketing materials and support to the retailers.
c) Credit facilities: They sometimes sale goods on credit to the retailer. It is good source of finance at cheapest cost for the retailers.
d) More knowledge about products: They inform the retailers about the new product manufactured and also inform them about the features of the product.
e) Sharing of risk: A wholesaler share the risk of fluctuation in demand and price of the product with the retailers.
***