2018
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) Give an example of statutory corporation.
Ans: Life Insurance Corporation of India
(b) State the level of flexibility of departmental undertakings.
Ans: Less Flexibility
(c) Name one specialised bank in India.
Ans: SIDBI, EXIM Bank
(d) Which banking can provide 365 days 24 hours service?
Ans: Internet Banking
(e) In which year SEBI came into existence?
Ans: It was established in 1988 and powers given to SEBI in 1992
(f) Who is an underwriter?
Ans: An underwriter is an investment bank who buys the newly issued securities from the company and sells them to investors on the secondary market through a stock exchange.
(g) Name a very popular vending machine.
Ans: Let’s Pizza
(h) What is a speciality shop?
Ans: Specialty stores are retail businesses that focus on specific product categories, such as office supplies, men's or women's clothing, or carpet.
2. What do you mean by unlimited liability of a sole-trader? 2
Ans: When the liability of partners exceeds the amount invested by a sole trader in business, such liability is called unlimited liability.
3. Explain the legal status of a co-operative society. 2
Ans: A co-operative Society is a body corporate registered under the applicable state Act with perpetual succession having a common seal. It can acquire, hold and dispose of properties, enter into contracts and it can sue and it can be sued.
4. What is retained earnings? 2
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.
5. What is GDR? 2
Ans: GDR i.e. Global Depository receipts can be issued abroad and can be listed and traded on stock exchange of any country other than America.
6. How are small-scale industries defined in India? 2
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”.
7. State three objectives of business. 3
Ans: The main objective of a business undertaking is to earn profits. Profit earning is considered necessary for the survival of the business. The objectives of the business may be categorised under these headings:
(a) Economic Objectives
(b) Human Objectives
(c) Social Objectives
(a) Economic Objectives: Economic objectives of a business are
1. Profit earning for existence and expansion of business.
2. Production and sale of Goods to earn profit.
(b) Human Objectives: Human objectives of business are that a workable balance should be maintained among the claims of various interested groups like employees, shareholders and consumers.
(C) Social Objectives or Social Responsibility of the Business: The social responsibility of the business can be studied as follows.
1. To make Goods and Services available to meet requirements of the society.
2. To Supply Quality Goods at reasonable price.
8. Mention three distinctive features of Government Company. 3
Ans: Features of a government company
1) It is created by the Indian Companies Act, 2013.
2) 51% of share capital is held by the central or state or both governments.
3) It is having a separate legal identity.
9. Explain three modes of payment in case of on-line transaction. 3
Ans. Credit Card, Debit Card, UPI Wallet, Net Banking
10. State the relationship between social-interest and business interest. 3
11. What is L/C? 3
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. This method is favored by the exporter as it ensures a quick and guaranteed payment from the importer.
12. State five points of distinction amongst business, profession and employment. 5
Ans: Business: Business is an economic activity, which is related with continuous and regular production and distribution of goods and services for satisfying human wants.
Profession: A profession is a specialised occupation, which involves rendering of personal services by using professional knowledge.
Employment: Employment is a type of occupation in which employee has to perform work as per service contract or according to the direction of the employer. 2009
Nature of business, profession and employment: Points given in difference can also be used as their respective nature.
Comparison of Business, Profession and Employment: 2018
Basis | Business | Profession | Employment |
1. How to Start? | Based on owners decision. | Getting membership of a professional body | Getting an appointment letter. |
2. What is its nature? | Providing goods and services to the public. | Rendering of personalized expert services. | Performing work as per service contract |
3. Who can start? | No minimum qualification | Requires qualification and training in a specific field. | Requires qualification and training. |
4. Return/What will we get? | Profit. | Professional Fees. | Salary. |
5. Capital | Requires Capital as per size of the business. | Requires limited capital. | Not capital required. |
6. Risk involved | More risk | Less Risk | No Risk |
13. State the changing role of public-sector enterprises in India. 5
Ans: Changing Role of Public Sector: Public Sector was started to achieve the following objectives:
a) To speed up the economic growth of the country
b) To achieve a more equitable distribution of income
c) To create infrastructure facilities
d) To develop all parts the country equally
Performance of the Public Sector was poor due to unorganized plants, out dated technology, underutilization of capacity, over staffing, trade unionism, political interference etc., So the government, in the Industrial Policy 1991, introduced the following reforms in the public sector.
a) The number of industries reserved for the public sector was reduced from 17 to 3 industries namely atomic energy, arms and rail transport.
b) The Memorandum of Understanding signed between a public sector and its administrative ministry defines its autonomy and the targets to be achieved.
c) Equity shares of public sector units are sold to private sector and the public which is known as disinvestment.
d) Loss making public sectors which are potentially viable will be restructured and revived through the Board of Industrial and Financial Reconstruction (BIFR). Public sector units which cannot be revived will be closed down.
e) A National Renewal Fund was created to retrain and redeploy retrenched labor and to compensate employees seeking voluntary retirement.
14. Discuss the benefits 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.
f) Movement towards paperless society: Cutting thousands and thousands of trees to make paper adversely affects the environment but internet has considerably reduced the dependence on paper.
15. Explain the role of business in protecting environment. 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
16. What are the documents required for the incorporation of a company in India? 5
Ans: The documents which are required for the Incorporation of a company:
a) Memorandum of Association
b) Articles of Association
c) Prospectus
d) Consent of proposed directors
e) Agreement
f) Statutory declaration
g) Document evidence of payment evidence fees
17. Discuss five problems of small-business units in India. 5
Ans: 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.
18. State five basic differences between domestic and international business with relevant information. 5
Ans: Difference between domestic business and international business.
DIFFERENCE | DOMESTIC BUSINESS | INTERNATIONAL BUSINESS |
NATIONALITY | Employees, suppliers, middleman, shareholders and partners are usually citizens of the same country. | Employees, suppliers, middleman, shareholders and partners are from different nations. |
MOBILITY | Mobility of factors of production is more within a country. | Mobility of factors of production is relatively less. |
RISKS | It is subject to political system and risks of a single country. | It is subject to political system and risks of different countries. |
BUSINESS POLICIES | Business practices, taxation system and policies of a single country are applicable. | Business practices, taxation system and policies vary considerably across countries. |
19. Explain the process of registration of a partnership firm. State the effects of non-registration of such a firm. 5+3=8
Ans: Procedure for Registration: In order to get a partnership firm registered an application in the prescribed form must be filed with the Registrar of Firms. The application should contain the following information:
(i) The name of the firm
(ii) The principal place of business of the firm.
(iii) Names of other places where the firm's business is carried on.
(iv) Names in full and permanent addresses of the partners.
(v) The date on which each partner joined the firm,
(vi) Duration of partnership, if any.
The application should be signed and verified by each partner. A small amount of registration fee is also deposited along with the application. The application submitted to the Registrar is examined.
If everything is in order and all legal formalities have been observed, the Registrar shall make an entry in the register of firms. He will also issue a certificate of registration.
An unregistered partnership firm suffers from the following limitations:
a) It cannot enforce its claims against a third party in a court of law.
b) It cannot claim adjustment for any sum exceeding Rs. 100.
c) It cannot file a legal suit against any of its partners.
d) Partners of an unregistered firm cannot file any suit to enforce a right against the firm.
e) A partner of an unregistered firm cannot file a suit against other partners.
Non-registration of a firm, however, does not affect the following rights:
a) The right of a partner to sue for the dissolution of the firm or for the accounts of a dissolved firm.
b) The power of an Official Assignee or Receiver to realise the property of an insolvent partner.
c) The rights of the firm, or its partners, having no place of business.
d) Any suit or set off in which the claim does not exceed rupees one hundred.
e) The right of a third party to sue the unregistered firm or its partners.
Or
Distinguish between public company and private company. State three basic advantages of company form of organisation. 5+3=8
Ans: Difference between Public Limited Company and Private Limited Company
Basis of Difference | Private Company | Public Company |
Number of persons | Minimum number of members is 2 and the maximum 200, excluding its present or past employee members. | Minimum number of members is 7 and there is no limit as to maximum numbers. |
Transfer of Shares | Transfer of shares is generally restricted by the articles of association of a private limited company. | The shares of a public company are freely transferable. |
Number of Directors | A Private Company must have at least two directors. | A Public Company must have at least three directors. |
Name | The word ‘Private Limited’ must be used as a part of the name. | The word ‘Limited’ must be used as a part of the name. |
Advantages of Joint Stock Company
1. Limited Liability: Liability of members of a company is limited upto the amount unpaid on the face value of the shares.
2. Transferability of shares: Shares of a public company are freely transferable.
3. Perpetual Succession: A company has a continuous existence which is not affected by the death of its members.
20. State three functions and five principles of insurance. 3+5=8
Or
Discuss three types and five distinctive nature of services. 3+5=8
21. State the factors affecting the choice of source of fund. 8
Ans: The following points should be kept in mind before selecting the source of finance:
TIME PERIOD | Long term finance is raised through shares and debentures. Short term finance is raised through trade credit, commercial paper, etc. |
RISK | There is least risk on Equity shares as the capital need not be repaid. But in case of loan, interest has to be paid |
CONTROL | Issue of equity shares may lead to dilution of control but debt involves no dilution of control. |
EARNINGS | Stability of earnings are important because loan should be raised only when earning are sufficient. |
TAX IMPACT | Interest on debenture is tax deductible. Dividend is not tax deductible. |
Or
What is debenture? State four different types of debentures. 2+6=8
Ans: Debenture: It constitutes the borrowed funds of the company which is raised against the floating charges on its assets. It is an acknowledgement of debt. Debenture capital may be called DEBT CAPITAL.
Ans: Types of Debentures: Debentures are classified as follows:
1. On the Basis of Repayment
a. Redeemable Debentures: These debentures are paid off or redeemed after the prescribed period.
b. Irredeemable or Perpetual Debentures: These debentures are permanent debentures of a company. They are paid back only in the event of winding up of a company.
2. On the Basis of Transferability
a. Registered Debentures: These are debentures for which the company maintains record of debenture holders.
b. Bearer Debentures: These debentures are transferable by mere delivery. There is no need or registration of transfer with the company.
3. On the Basis of Security
a. Simple or Naked Debentures: These are debentures not secured by any asset of the company.
b. Mortgage Debentures: Mortgage debentures are issued on the security of certain assets of the company.
4. On the basis of Conversion
a. Convertible Debentures: These debentures are issued with an option to debenture holders to convert them into shares after a fixed period.
b. Non Convertible Debentures: These are debentures issued without conversion option.
5. On the Basis of Pre-Mature Redemption Rights:
a. Debenture with “Call” option: A callable debenture is one in which the issuing company has the option of redeeming the security before the specified redemption date at a pre-determined price.
b. Debenture with “Put” option: This is a debenture in which the holder has the option of getting it redeemed before maturity.
22. Discuss the role of chambers of commerce and Industry in promotion of internal trade in India. 8
Or
Explain four advantages and disadvantages of departmental store. 4+4=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”.
Advantages:
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.
Limitations:
a) No personal attention is there.
b) More cost of operating the store.
c) More chances for loss.
d) Far away from home.
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