Business Studies (319)


Tutor Marked Assignment (TMA)


Max. Marks: 20


(i) All questions are compulsory. The marks allotted for each question are beside the questions.

(ii) A Write your name enrollment numbers, AI name, subject on the top of the first page of the answer sheet.

1. Answer any one of the following questions in about 40-60 words:

(a) Your friend Sumit wants to start a new business. Therefore, he is interested in knowing about the business risks and their causes. Explain him the meaning and causes of business risks. (See Lesson 1)

Ans: Business risk means possibility of occurrence of some uncertain events, which might lead to some loss for the business.

Causes of business risks may be classified as follows:

a)      Natural Causes: Natural causes include 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.

(b) Ethics has become a buzzword in the business world. Explain briefly the elements of business ethics with examples. (See Lesson 3)

Ans: Business Ethics means the business practices which are desirable from the point of view of the society. The elements of business ethics are as follows:

1.       Business ethics create self imposed discipline on the part of the business firms.

2.       Business ethics make a business honest and responsible.

3.       Business ethics aims at fair and reasonable treatment to customers, employees, suppliers etc.

4.       Business ethics co-exist with law which will help in the perfection of the conduct of life.

5.       Business ethics covers all business practices which are desirable from the point of view of the society.

A few examples of ethical business practices are:

1.       To charge fair prices from the customer.

2.       To use fair weights for commodities.

3.       To pay taxes to government correctly and promptly.

4.       To ensure supply of safe products for the public.

5.       To give fair treatment to the workers.

6.       Not to indulge in unfair trade practices, mal practices, black marketing and hoarding.

2. Answer any one of the following questions in about 40 to 60 words.

(a) Your business partner feels that it is not important to get the business insured. Explain him the importance of insurance for business. (See Lesson 2)

Ans: For every business, insurance is must because it provides many benefits to any business some of the them are listed below:

(i) Insurance provides certainty: Insurance provides certainty of payment at the uncertainty of loss.

(ii) Insurance provides protection: The insurance guarantees the payment of loss and thus protects the assured from sufferings.

(iii) Risk-Sharing: The risk is uncertain, and therefore, the loss arising from the risk is also uncertain. When risk takes place, the loss is shared by all the persons who are exposed to the risk.

(iv) It Provides Capital: The insurance provides capital to the society. The accumulated funds are invested in productive channel. The industry, the business and the individual are benefited by the investment and loans of the insurers.

(b) You are a successful businessman dealing in goggles. You have heard a lot about e-business from your friends. Now you want to expand your business through online shopping. Find out the various resources available for successful implementation of e-business. (See Lesson 4)

Ans: Present world is E-World. To survive in the market, every business must have online presence. E – Business refers to all business transactions and functions conducted electronically. In order to conduct e-business, the following resources are necessary:

a)      Adequate computer systems with advanced features.

b)      Internet connection and telecommunication system

c)       An e-commerce website

d)      Technically qualified workforce having complete knowledge of website maintenance.

e)      Fool-proof system of receiving payments.

3. Answer any one of the following questions in about 40 to 60 words.

(a) Your father wants to start a business of his own. Which form of business organisation would you suggest him? Explain. (See Lesson 7)

Ans: Decision of form of business organisation is very important before starting a business. While selecting a form of business organisation, the below mentioned points must be taken into consideration. If any form has all the essential elements, it must be selected.

(i) Ease of formation: An ideal form of organisation is one which can be brought into existence with the least difficulty and expenses (alike sole trade business).

(ii) Ease of financing: Another important feature of a good form of organisation is the facility of raising the required amount of capital (alike partnership and company).

(iii) Limited liability: From the point of view of risk, the businessman will naturally prefer that form of business orgnisation where his liability is limited (alike companies).

(iv) Direct relationship between ownership and control of management: There must be direct relationship between ownership and control of management. If the control is not with the owners, the management may not show required interest in maximising profits through increase in efficiency (alike sole trade)

(v) Flexibility of operations: A good form of organisation offers the maximum flexibility and adaptability. The organisation should be such which can be changed easily if situation so demands (alike sole trade).

(b) You have to appear as a candidate in an interview. Discuss the entire procedure describing the different aspects of a personal interview. (See Lesson 9)

Ans: Procedure of personal interview: The main purpose of holding personal interview is to assess the suitability of the candidate for a particular post. So it is very important for you to prepare for the interview physically, mentally and psychologically. In this section you shall learn about the different aspect of personal interview that would help in to face the interview board comfortably and confidently. Let us discuss those points by classifying the entire procedure into three different stages:

(i) Preparing for the Interview at this stage you are advised to do the following:

1. Improve your GK including Current affairs

2. Gather complete information about the organisation.

3. Know the job profile of the post applied and keep all your documents ready.

4. List out your strength and weakness.

5. Prior Visit the site of interview, if possible.

(ii) On the Day of the Interview

1. Have a good sleep in the previous night and wake up early in the morning.

2. Do your daily chores.

3. Ensure that your appearance is neat and tidy.

4. Carry your document folder and reach the interview site on time.

5. Then wait at the interview place for your turn.

6. During the waiting time you can even ask for the literature of the company and read it

(iii) During the Interview Take care of the following points inside the interview chamber.

1. Entry to the interview room is most important. Knock, greet, and close the door while facing the interviewer as gently as possible.

2. Walk confidently because the body language of the candidate is observed carefully.

3. While answering questions the following points need to be observed.

• Listen, think and then talk.

• Do not be in hurry to answer. Take your own time.

• If you have not heard or understood the question, politely ask for a repeat.

4. Answer any one of the following questions in about 100 to 150 words.

(a) Your cousin is tensed and exhausted most of the time due to work. So he decides to start a business of his own. Discuss the various avenues of self employment keeping in view the advantages and disadvantages of each of them. (See Lesson-8)

Ans: Self employment is best mode of employment in present world. It not only provides good reward but also gives adequate for self and family. There are various avenues available for self employment. But before doing self employment, one most aware about advantages and disadvantages of various avenues of self employment:

1. Trading: You know that trade involves buying and selling of goods and services. With small amount of investment one can start and run a small trading unit. You can think of starting a small grocery or stationery shop in your locality. If you are able to invest more capital and ready to take risk, then wholesale business is good option for you. One can also take up some agency business or become a stockist. The real estate business which is booming now-a-days can also be a lucrative alternative.

2. Manufacturing: One can start a small industry of manufacturing bricks, or producing bakery items or confectionery. All these businesses require small amount of capital and simple equipment. Farming is another such area in which a person can work all alone or take the help of one or two persons. This is an age-old area of self-employment. Orchards, dairy, poultry, sericulture, fisheries, horticulture, etc. are good examples of avenues of self-employment.

3. Professionals: Occupations that require special knowledge and training in a particular field also provide opportunities of self-employment. Lawyers, doctors, chartered accountants, architects and journalists fall in this category. However one has to follow certain code of conduct framed by their association and need specialised knowledge and training.

4. Individualised Services: Tailoring, motor repairing, hair cutting, fashion designing, interior decoration etc. are some of the business activities, which provide individualised services to the consumers. These can be easily started and run by individuals. These activities are based on the personal skills of those who perform them. Blacksmiths, carpenters, goldsmiths are all self-employed persons. You choose the area of your interest to pursue the career in self-employment. If you decide to start a small business of your own, you must have complete knowledge about the line you choose and the scope and importance of small business in our country, including the government policy and institutional support for its promotion.

(b) 'Social responsibility of business means social commitment of business towards different groups'. Elaborate
Ans: Responsibilities towards Different Interest Groups

It needs to be noted that the responsibilities of those who manage the business cannot be limited to the owners. They have to take into account the expectations of other stakeholders like the workers, the consumers, the government and the community and public at large. Let us now look at the responsibilities of the business towards all these groups.

(a) Responsibility towards the shareholders or owners: The shareholders or owners are those who invest their money in the business. They should be provided with a fair return on their investment. The responsibilities of business towards owners or investors are as follows:

1. To ensure safety of investment.

2. To provide regular, correct and adequate information on the financial aspects.

3. To provide fair and regular dividend.

4. To ensure capital appreciation.

5. To protect the assets of the business.

(b) Responsibility towards the Employees: A business enterprise must ensure a fair wage or salary to the workers based on the nature of work involved and the prevailing rates in the market. The working conditions must be good in respect of safety, medical facilities, canteen, housing, leave and retirement benefits etc. The responsibilities of business towards its employees are as follows:

1. To provide reasonable and fair wages and salaries.

2. To maintain good working conditions for the good health of the workers.

3. To provide services such as housing, medical care, recreation etc.

4. To develop a sense of belonging.

5. To win the cooperation of the workers by creating better human relations in the business.

(c) Responsibility towards the Consumers: A business enterprise must supply quality goods and services to the consumers at reasonable prices. It should avoid adulteration, poor packaging, misleading and dishonest advertising, and ensure proper arrangement for attending to customer complaints and grievances. The products produced by the business are used by consumers. The responsibilities of business towards consumers are as follows:

1. To ensure regular supply of goods/services.

2. To provide goods at reasonable prices.

3. To provide goods this will help to meet the needs of consumers of different classes.

4. To provide goods of standard quality.

5. To ensure that advertisements made are true.

6. To provide prompt and continuous service.

(d) Responsibility towards the Government: A business enterprise must follow the guidelines of the government while setting up the business. It should conduct the business in lawful manner; pay the taxes honestly and in time. It should not indulge in any corrupt practices or unlawful activities. The responsibilities of business towards government are as follows:

1. To abide by the laws of the nation.

2. To pay taxes honestly and in time.

3. To refrain from corrupting government employees.

4. To discourage the tendencies of concentration of economic power and monopoly.

5. To adapt fair dealings in foreign trade.

(e) Responsibility towards the Community: Every business is a part and parcel of our community. So it should contribute towards the general welfare of the community. It should preserve and promote social and cultural values, generate employment opportunity and contribute towards the upliftment of weaker sections of the society. It must take every step to protect the physical and ecological environment of the society. It should contribute to the community development programmes like public health care, sports, cultural programmes.

5. Answer any one of the following questions in about 100 to 150 words.

(a) A news about a government company made you think what it is all about. You and your friend explored on internet the features of a government company. Mention them. (See Lesson 7)

Ans: Government Company: According to The Indian Companies Act, 2013, a government company is a company in which not less than 51% of the paid up capital is held by the central or state government or both. Subsidiary of a government company is also considered as a government company.  E.g.:

1) Hindustan Machine Tools Ltd. (HMT) 

2) Bharat Heavy Electricals Ltd (BHEL) 

3) Steel Authority of India Ltd.

The main features of Government companies are as follows:

(a) It is registered under the Companies Act, 2013.

(b) It has a separate legal entity. It can sue and be sued, and can acquire property in its own name.

(c) The annual reports of the government companies are required to be presented in parliament.

(d) The capital is wholly or partially provided by the government. In case of partially owned company the capital is provided both by the government and private investors. But in such a case the central or state government must own at least 51% shares of the company.

(e) It is managed by the Board of Directors. All the Directors or the majority of Directors are appointed by the government, depending upon the extent of private participation.

(f) Its accounting and audit practices are more like those of private enterprises and its auditors are Chartered Accountants appointed by the government.

(g) Its employees are not civil servants. It regulates its personnel policies according to its articles of associations.

(b) There are numerous threats to the security of e-commerce from the customer's side as well as the vendor's side. Therefore, it is must to ensure security in online transactions. Mention the steps undertaken to ensure this. (See Lesson-4)

Ans: There are numerous threats to the security of e-Commerce from the customer’s side as well as the vendor’s side. The following steps are usually taken to ensure security in on-line transactions.

(a) Passwords: In on-line shopping, one has to register with the on-line vendor to have an account with him. This provides for a password to avoid login by an unauthorised person.

(b) Authentication: Sender of the message must be identified precisely using the off-line validation, if necessary. This avoids any possibility of fraud or misuse of the password.

(c) Encryption: It refers to the conversion of data into a code so that it cannot be read by other users. The data is converted into the code by the sender and then decoded by the receiver. For this purpose, they use an encryption algorithm and binary numbers. The other alternative is the private (secret) key system.

(d) Digital Signatures: A digital signature may be used to authenticate the sender of the message and check the integrity of the message so that no alteration takes place in transit. In terms of transmission, authentication and integrity, the digital signature is considered very secure provided it is created in a manner or by using a means under the exclusive control of the person using it.

(e) Trusted Third Parties: Another way to ensure security is to transmit a copy of the transaction to a third party trusted by both sides and where the record of the transaction could be used to settle any dispute. However, the provision of encryption, digital signatures and trusted third parties cannot provide full proof security against the use of stolen credit cards or the setting up of fraudulent web site by a bogus trader. Hence, the parties have to be highly vigilant and take all possible precautions to ensure security in e-Commerce dealings, whatever may be the cost.

6. Prepare any one project of the following projects given below.

(a) Priyank wants to start a small business but he is unaware of the government support available. Help him to gather necessary information by explaining him the characteristics of small business and scope of small business. Also mention the steps taken by the government for the development of small business in India. (See Lesson 7)

Ans: A small business can be defined as a business which is actively managed by its owners, operating within the local area and relatively small in size. 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”.

Features of small scale business are listed below:

a)      Personal Touch: The management and organisation is personal in nature. The managers and owner are the same.

b)      Capital: The amount of capital required is less as compared to large scale industries.

c)       Employment-Small business is labour intensive and it does not require huge amount of capital because its scale is small.

d)      Technology: The technology used is simple in nature.

e)      Area of operations: A small business firm generally has local area of operations.

f)       Limited Finance: Small business enterprises require limited financial resources in comparison to large scale industries because they are less capital intensive.

g)      Limited Demand: Small business enterprises are suitable for goods and services have limited market.

h)      Low Cost of Production: Small business use locally available resources and raw material.

Steps taken by the government for the development of small business in India:

a)      Land is supplied at a concessional rate to industries setup in back ward areas.

b)      Power is supplied at a concessional rate.

c)       Water is supplied on no profit no loss basis.

d)      In all union territories SSI’s are exempted from sales tax.

e)      Scarce raw materials are supplied on priority basis.

f)       Loans are offered at concessional rate.

g)      They are exempted from payment of tax for 5 or 10 years.

h)      800 items are reserved for exclusive production by SSI’s.

(b) If you get an opportunity to start your own business, which form of business organisation would you choose? Justify your answer explaining the merits and demerits of different forms of business organisation. (See Lesson-5)

Ans: There are various forms of business organisation. Before starting any business, one must know about the merits and demerits of various forms of business organisation which are listed below:

a)      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.

b)      Partnership Firm: Two or more people can come together to form a partnership firm. It is required to draft a partnership deed, which is signed by all the partners indicating the formation of the partnership. The advantage of the partnership firm is that two or more people can come together to start a business and the regulatory and disclosure norms are relatively simple. The main disadvantage is that even in this form of business, the partners’ liability to pay off creditors is unlimited.

c)       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.

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