Question 1:
Himanshu has been running a textile mill. He wants to expand his business for which he is recruiting a huge manpower force. Which objective of business is being discussed in the above lines?
Answer:
Option (D) is correct.
Explanation: Social Objective by recruiting manpower and Economic Objective by growing the business.
Options:
(A) Social objective
(B) Economic objective
(C) Political objective
(D) Both (A) and (B)
Question 2:
Mr. Himanshu is the karta of HUF business. He has the absolute power of taking business decisions, and his decisions are binding on the other members. Once he took a wrong decision of buying machinery which soon got obsolete and the business suffered the heavy loss. Identify the limitation of HUF highlighted here.
Answer:
Option (B) is correct.
Explanation: Unlimited liability of Karta – The Karta has unlimited liability, and his decisions affect the business directly.
Options:
(A) Limited resources
(B) Unlimited liability of Karta
(C) Dominance of Karta
(D) Limited managerial skills
Question 3:
What is the maximum amount that can be invested in equipment by a Medium enterprise engaged in rendering services?
Answer:
Option (D) is correct.
Explanation: A medium enterprise can invest up to ₹5 crore in equipment when engaged in services.
Options:
(A) ₹2 crore
(B) ₹3 crore
(C) ₹4 crore
(D) ₹5 crore
Question 4:
Which is the e-business application that involves the online buying and selling of shares and other financial instruments?
Answer:
Option (D) is correct.
Explanation: e-Trading involves online buying and selling of shares and financial instruments.
Options:
(A) e-Delivery
(B) e-Promotion
(C) e-Bidding
(D) e-Trading
Question 5:
The Head of the joint Hindu family business is called:
Answer:
Option (C) is correct.
Explanation: The head is known as Karta, who holds authority over the family business.
Options:
(A) Proprietor
(B) Director
(C) Karta
(D) Manager
Question 6:
Identify the economic activity depicted in the picture.
Answer:
Option (B) is correct.
Explanation: Professional activity – A doctor treating a patient is a professional activity.
Options:
(A) Business
(B) Profession
(C) Employment
(D) All of the above
Question 7:
Business finance refers to the requirements of funds by business to carry out its various activities. Hence, finance is called the life ……………….. of any business.
Answer:
Option (A) is correct.
Explanation: Finance is called the life blood of any business.
Options:
(A) Blood
(B) Brain
(C) Heart
(D) None of these
Question 8:
The business assets of a firm amount to ₹22,000 but the liabilities stand at ₹47,000. What course of action can the creditors take if it is a sole proprietorship firm?
Answer:
Option (B) is correct.
Explanation: In a sole proprietorship, creditors can use the personal property of the owner to recover the remaining ₹25,000.
Options:
(A) Creditors can settle their account only to the extent of business assets available i.e. ₹22,000.
(B) Besides using business assets of ₹22,000, creditors can use the personal property of the owner to the extent of ₹25,000.
(C) Creditors can settle their account only to the extent of owner’s personal assets available.
(D) None of these
Question 9:
Which of the following is incorrect regarding social responsibility?
Answer:
Option (D) is correct.
Explanation: All statements about social responsibility are correct, as it involves voluntary actions, moral responsibility, and contributions to society.
Options:
(A) It involves an element of voluntary action on the part of business.
(B) It involves the question of what is morally right or wrong in relation to the firm’s responsibilities.
(C) It involves the obligation to take decisions and perform actions which are desirable in terms of the objectives and values of our society.
(D) All the statements are correct.
Question 10:
Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from those given below:
Assertion[A]: Commerce refers to all those activities which are concerned with the transfer of goods and services from the producers to the consumers.
Reason[R]: Commerce embraces all those activities which are considered necessary for maintaining free flow of goods and services. It includes trade and auxiliaries to trade.
Answer:
Option (A) is correct.
Explanation: Both the assertion and the reason are true, and the reason explains the assertion.
Options:
(A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true but Reason (R) is False.
(D) Assertion (A) is False but Reason (R) is True.
Question 11:
This Bank has the largest market capitalisation and most number of branches in India as compared to any other banking company. Name the bank that is being mentioned above.
Answer:
Option (A) is correct.
Explanation: State Bank of India (SBI) has the largest market capitalization and most branches.
Options:
(A) State Bank of India
(B) ICICI Bank
(C) Reserve Bank of India
(D) Punjab National Bank
Question 12:
Which of the following is a source for raising borrowed funds?
Answer:
Option (C) is correct.
Explanation: Loans from financial institutions are a source of borrowed funds.
Options:
(A) Equity Shares
(B) Preference Shares
(C) Loans from financial institutions
(D) Retained Earnings
Question 13:
Statement I: e-business is more comprehensive than e-commerce.
Statement II: e-Commerce includes not only e-business but also comprises various other business transactions. Choose the correct option from the following:
Answer:
Option (A) is correct.
Explanation: e-business is more comprehensive and includes e-commerce and several other business activities.
Options:
(A) Statement I is true and II is false.
(B) Statement II is true and I is false.
(C) Both the statements are true.
(D) Both the statements are false.
Question 14:
Raising money through retained earnings involves which of the following explicit costs?
Answer:
Option (D) is correct.
Explanation: No explicit cost is incurred when raising funds through retained earnings.
Options:
(A) Interest
(B) Dividend
(C) Flotation cost
(D) No explicit cost is incurred
Question 15:
These shareholders do not get the right to participate in the annual meeting of the company but get the preferential right for the payment of dividend. Name the type of shareholders that are being mentioned in the above lines.
Answer:
Option (C) is correct.
Explanation: Preference Shares have preferential rights for dividend but no voting rights.
Options:
(A) Equity Shares
(B) Debentures
(C) Preference Shares
(D) None of the above
Question 16:
Statement I: Entrepreneurship is the process of setting up one’s own business as distinct from pursuing any other economic activity.
Statement II: Entrepreneurship development is the means of enhancing the knowledge and skill of entrepreneurs through several classroom coaching and programs, and training.
Choose the correct option from the following:
Answer:
Option (C) is correct.
Explanation: Both statements are true.
Options:
(A) Statement I is true and II is false
(B) Statement II is true and I is false
(C) Both the statements are true
(D) Both the statements are false
Question 17:
Which of the following are fixed shop retailers?
Answer:
Option (D) is correct.
Explanation: Speciality shops are fixed shop retailers, specializing in a specific product category.
Options:
(A) Market traders
(B) Pavement vendors
(C) Cheap jacks
(D) Speciality shops
Question 18:
Match the following:
- Large Scale Industry
- Medium Scale Industry
- Small Scale Industry
- Micro Enterprise
Answer:
Option (B) is correct.
Explanation:
- Large Scale Industry – (B) More than ₹10 crores
- Medium Scale Industry – (C) More than ₹5 crores and up to ₹10 crores
- Small Scale Industry – (A) More than ₹25 lakh and up to ₹5 crores
- Micro Enterprise – (D) Up to ₹25 Lakhs
Options:
(A) 1. (C), 2. (A), 3. (D), 4. (B)
(B) 1. (B), 2. (C), 3. (A), 4. (D)
(C) 1. (A), 2. (B), 3. (D), 4. (C)
(D) 1. (D), 2. (A), 3. (C), 4. (B)
Question 19:
e-commerce offers many benefits to the consumers. Which of the following is not a benefit resulting from e-commerce?
Answer:
Option (D) is correct.
Explanation: Narrow outreach is not a benefit of e-commerce, as it generally offers a wide outreach.
Options:
(A) Lower transaction cost
(B) Wide range of products
(C) Quick and convenient shopping
(D) Narrow outreach
Question 20:
Proforma invoice contains information about the product. It is sent by ……………… to ………………… ?
Answer:
Option (B) is correct.
Explanation: A proforma invoice is sent by the exporter to the importer, containing details about the product and the terms of the export.
Options:
(A) Exporter, Exporting country
(B) Exporter, Importer
(C) Importer, Exporter
(D) Importer, Importing country
Question 21. India has emerged as a low-cost back office, manufacturing, and research base, thanks to its skilled but relatively cheap manpower. Thus, in recent times, India has become an attractive destination for MNCs. But it is said that multinational corporations are of great advantage but they are not free from ill effects. Explain any three ill effects of multinational corporations. [3]
Answer: Limitations or ill-effects of multinational corporations (MNCs) are as follows:
- Disregard of National Objectives: MNCs sometimes disregard national objectives, leading to conflicts with government policies, which can harm the country’s economic planning.
- Depletion of National Resources: MNCs exploit natural resources in an unbalanced manner, focusing primarily on profits, often leading to environmental degradation and unsustainable resource usage.
- Threat to National Sovereignty and Integrity: MNCs can influence or control national policies and decisions, posing a threat to national sovereignty. In the past, companies like the East India Company played a significant role in the subjugation of nations.
Question 22. Mention three special features of Inter-corporate deposits. [3]
Answer: The main features of Inter-Corporate Deposits (ICDs) are as follows:
- Period of Deposit: The minimum period for which an ICD is deposited is 90 days, and the maximum period is 180 days. After the period ends, it can be renewed if both parties agree.
- Amount of Deposit: The minimum deposit amount is ₹1 lakh, and there is no upper limit.
- Interest Rate: The interest rate for ICDs ranges from 12% to 17% per annum, depending on the terms agreed upon between the parties.
Question 23. Naresh took a fire insurance policy from NICL of ₹50 Lakh for his factory at the annual premium of ₹75,000. In order to avoid premium more than his amount, he did not disclose that highly explosive chemicals are being manufactured in his factory. Due to fire, his factory was damaged. The insurance company, NICL refused to make the payment for the claim as it came to know about the highly explosive chemicals. Is Naresh entitled to claim? Explain the principle of insurance violated by Naresh. [3]
Answer: No, Naresh is not entitled to receive the claim because he violated the principle of ‘Utmost Good Faith’.
- Good Faith/Disclosure of Material Facts: An insurance contract is based on absolute honesty. Both the insurer and the insured must disclose all material facts that could affect the contract. Since Naresh did not disclose the presence of highly explosive chemicals, it is a violation of this principle, and as a result, the insurance company can refuse the claim.
Question 24. A factory owner gets his stock of goods insured, but he hides the fact that the electricity board has issued him a statutory warning letter to get his factory’s wiring changed. Later on, the factory catches fire due to a short circuit of wiring. Can he claim compensation? If yes, explain. [3]
Answer: No, he cannot claim compensation because he has violated the principle of ‘Utmost Good Faith’. The factory owner should have disclosed the statutory warning letter about the faulty wiring to the insurance company. Since he did not disclose this material fact, the insurance company can deny the claim.
Question 25. Explain any two merits and two demerits of raising funds through preference shares. [4]
Answer:
Merits:
- Permanent Capital: Preference share capital is a permanent source of capital as it cannot be redeemed during the life of the company.
- Cost-Effective: The cost of issuing preference shares is generally lower compared to equity shares, as dividends are fixed.
Demerits:
- No Tax Deduction: The dividend paid to preference shareholders is not tax-deductible, unlike interest paid on debentures.
- Limited Appeal to Risk-Taking Investors: Preference shares offer fixed returns, so they are not appealing to investors looking for high returns from equity investments.
Question 26. Explain the following features of a Multinational Company. [4] (A) Centralised control (B) Modern Technology and management practices
Answer:
(A) Centralized Control: MNCs maintain centralized control over their operations. The headquarters in the home country makes major decisions, and these decisions are implemented in subsidiary branches or operations across the world.
(B) Modern Technology and Management Practices: MNCs typically employ advanced technologies and efficient management practices. They are key players in transferring modern technology across countries, helping improve global productivity and industry standards.
Question 27. In order to promote infrastructural development in the country with active participation of the private sector, which type of business partnership would you suggest to the government? Also enumerate three features of such a partnership. [4]
Answer: I would suggest Public-Private Partnership (PPP).
Features of PPP:
- Contractual Relationship: It is a contractual arrangement between the government and a private sector entity for the development, operation, and management of public services or infrastructure.
- Risk Sharing: Both the government and the private sector share the financial, operational, and other risks associated with the project.
- Long-Term Commitment: PPP agreements typically last for a long period, ensuring continuity of service and maintenance.
Question 28. Identify and explain the features of sole proprietorship shown in the following statement sentences: [4] (i) He can carry out his plans without any interference from others. (ii) He receives all the business profits which become a direct reward for his risk-bearing.
Answer:
(i) Control: The sole proprietor has complete control over his business. He can take decisions without consulting anyone else, as he is the sole owner and decision-maker.
(ii) Sole Risk Bearer and Profit Recipient: The sole proprietor bears all the risks of the business, and he is the only one entitled to the profits. Any losses or gains solely affect him.
Question 29. Identify the economic activities in the following case and classify them into Primary, Secondary, and Tertiary industries. [4]
(i) Mohan, a farmer producing wheat. (ii) Raj, the owner of a cotton textile firm. (iii) Ramesh, is working as a peon in an oil refinery. (iv) Krishna, is running her advertisement agency.
Answer: (i) Primary Industry: Mohan is engaged in agriculture, which is a primary industry.
(ii) Secondary Industry: Raj, who owns a cotton textile firm, is involved in manufacturing, which is a secondary industry.
(iii) Secondary Industry: Ramesh works in an oil refinery, which is part of the secondary industry as it involves processing raw materials.
(iv) Tertiary Industry: Krishna runs an advertisement agency, which falls under the tertiary (service) industry as it provides services.
Question 30. Rashmi wants to set up a co-operative society which can protect the farmers in rural areas from the exploitation of money lenders who charge high rates of interest on loans. Through this, she will also promote saving habits in them. [4]
(i) Identify the type of co-operative society she will form. What are the functions of such a co-operative society? (ii) What two values are communicated to society by setting up such societies?
Answer: (i) Rashmi will form a Credit Co-operative Society. The functions of such a society include providing loans to members at reasonable interest rates and promoting savings among them.
(ii) The values communicated are:
- Mutual Help: Co-operatives are based on the principle of mutual help, where members support each other.
- Promotion of Savings Habits: The society encourages members to save regularly, thereby increasing capital formation.
Question 31. (i) Explain the types of international business: (a) Export (b) Import (c) Entrepot (ii) Point out any three disadvantages of international trade for underdeveloped and developing countries. [6]
Answer:
(i) Types of International Business:
- Export: Selling goods or services produced in one country to other countries.
- Import: Purchasing goods or services from other countries.
- Entrepot: Importing goods into one country for the purpose of re-exporting them to other countries.
(ii) Disadvantages of International Trade:
- Economic Dependence: Developing countries rely on exports, leading to economic vulnerability.
- Dumping of Goods: Developed countries may dump their goods at lower prices, undermining local industries.
- Balance of Payments Issues: Persistent trade deficits can cause economic instability and unfavorable effects on a country’s balance of payments.
Question 32. Explain the demerits of sole proprietorship firms. [6]
(a) Unlimited Liability
(b) Limited Managerial Capacity
(c) Limited Life of a Business Concern
Answer:
(a) Unlimited Liability: The sole proprietor is personally liable for all business debts. This means that if the business fails, the proprietor’s personal assets can be used to pay off debts.
(b) Limited Managerial Capacity: A sole proprietor may lack the skills needed for every aspect of the business, leading to inefficient management or poor decision-making.
(c) Limited Life of a Business Concern: The business depends on the sole proprietor’s health and life. In case of the proprietor’s death, the business may end, causing a lack of continuity.
Question 33. Explain the role of Government in Business in a mixed economy. [6]
Answer: In a mixed economy, both the private sector and the government play important roles in business activities. The government’s role includes the following:
- Regulation of Private Sector: The government regulates private business through various laws, such as those related to consumer protection, competition, and industrial policies.
- Public Enterprises: The government owns and operates public sector enterprises in key areas like defense, transportation, energy, and communications, where private businesses may not be interested or where the government has social objectives.
- Economic Planning: The government formulates and implements economic plans for the development of various sectors of the economy, ensuring balanced growth.
- Promoting Fair Competition: The government ensures that businesses do not engage in anti-competitive practices, promoting fair trade and healthy competition.
- Infrastructure Development: The government invests in infrastructure (like roads, power, and education) to support businesses and economic growth.
- Taxation: The government imposes taxes on businesses, which are used for the welfare of society and to fund public services.
Question 34. What is Corporate Social Responsibility (CSR)? Explain its importance to businesses. [6]
Answer: Corporate Social Responsibility (CSR) refers to the practice of businesses taking responsibility for their impact on society, the environment, and the economy. It involves going beyond profit-making to consider the broader effects on stakeholders, including customers, employees, communities, and the environment.
Importance of CSR to businesses:
- Improves Brand Image: Businesses that engage in CSR are seen as responsible and ethical, which helps to build consumer trust and loyalty.
- Attracts Talent: Employees prefer working for companies that are socially responsible, thus CSR helps in attracting skilled and motivated employees.
- Compliance with Regulations: Many governments require businesses to follow certain CSR practices, ensuring compliance with national and international laws.
- Community Development: CSR activities contribute to social welfare, such as supporting education, healthcare, or environmental sustainability.
- Enhances Competitiveness: Companies known for CSR can differentiate themselves from competitors, gaining an edge in the marketplace.
Question 35. What is Franchise? Explain the advantages and disadvantages of franchising. [6]
Answer: A franchise is a business model where the owner of a brand or business (franchisor) grants another individual or company (franchisee) the right to operate a business using the franchisor’s brand name, products, and operating methods in exchange for a fee or royalty.
Advantages of Franchising:
- Established Brand Recognition: The franchisee benefits from the brand’s existing reputation and customer base.
- Reduced Risk: Franchising offers a proven business model, reducing the risk of failure compared to starting an independent business.
- Support and Training: The franchisor provides training, marketing support, and business guidance to the franchisee.
- Easier Financing: Lenders are more likely to provide loans to franchisees due to the established nature of the business.
Disadvantages of Franchising:
- Lack of Control: The franchisee must follow the franchisor’s rules and regulations, which limits flexibility in business operations.
- Ongoing Costs: The franchisee must pay ongoing royalties or fees to the franchisor, which can reduce profitability.
- Dependence on Brand: The success of the franchise is highly dependent on the brand’s reputation. If the franchisor faces a crisis, it impacts the franchisee as well.
- Limited Innovation: Franchisees cannot innovate or change business processes without approval from the franchisor.
Question 36. Explain any four qualities of an entrepreneur. [6]
Answer: The four qualities of an entrepreneur are:
- Innovation: Entrepreneurs are known for their ability to innovate and come up with new ideas, products, or services that fulfill market needs.
- Risk-taking: Entrepreneurs take calculated risks in business to create opportunities and reap potential rewards.
- Leadership: Entrepreneurs need strong leadership skills to inspire, motivate, and lead a team toward achieving business goals.
- Decision-Making Ability: Entrepreneurs must make quick and effective decisions, often in situations of uncertainty, to steer the business toward success.
Question 37. What do you understand by ‘Business Environment’? Explain its importance for business organizations. [6]
Answer: Business Environment refers to the external and internal factors that affect the operations and performance of a business. These factors can be economic, social, political, technological, and legal. It includes everything outside the business that influences its decisions, operations, and performance.
Importance of Business Environment for Business Organizations:
- Decision-Making: Understanding the business environment helps organizations make informed decisions regarding production, marketing, and strategy.
- Adaptation: Businesses need to adapt to changes in the environment, such as new regulations or changes in consumer preferences.
- Opportunities and Threats: The business environment presents both opportunities (e.g., emerging markets, technological advances) and threats (e.g., competition, economic downturns), and understanding it helps organizations plan accordingly.
- Strategic Planning: Knowledge of the environment helps businesses in strategic planning and in aligning their operations with market demands and conditions.
Question 38. Discuss the concept of business ethics and explain any four elements of business ethics. [6]
Answer: Business Ethics refers to the moral principles and standards that guide behavior in the business world. It involves ensuring that a business operates with fairness, integrity, and respect for stakeholders, including customers, employees, shareholders, and the community.
Four Elements of Business Ethics:
- Honesty: Businesses should be honest in their dealings with customers, suppliers, and employees, avoiding deceitful practices.
- Integrity: Businesses should adhere to moral values and principles, ensuring that they are transparent and accountable in all operations.
- Fairness: Ethical businesses treat all stakeholders fairly, avoiding discrimination or exploitation.
- Responsibility: Businesses should take responsibility for their actions and their impact on the environment, society, and the economy.
Question 39. What are the objectives of marketing? Explain any four objectives of marketing. [6]
Answer: The primary objectives of marketing are to identify customer needs and create products or services that satisfy those needs while maximizing profit. Four objectives of marketing include:
- Customer Satisfaction: The goal is to meet or exceed customer expectations by providing value through products or services.
- Brand Awareness: Marketing aims to create awareness about a product or brand to build recognition and attract potential customers.
- Profit Maximization: The ultimate aim of marketing is to generate revenue and maximize profit for the business by promoting and selling its products effectively.
- Market Share Growth: Marketing strategies aim to increase a company’s share of the market by attracting new customers and retaining existing ones.
Question 40. What is Advertising? Discuss the different types of advertising. [6]
Answer: Advertising is a paid, non-personal form of communication intended to inform, persuade, or remind potential customers about products, services, or ideas. It involves the use of various media channels to reach a large audience.
Types of Advertising:
- Print Advertising: Includes newspapers, magazines, brochures, and other printed materials.
- Broadcast Advertising: Involves TV and radio ads, reaching a large audience through visual and auditory means.
- Outdoor Advertising: Billboards, posters, and signage placed in public spaces to capture attention.
- Digital Advertising: Includes ads on websites, social media, search engines, and mobile apps.