Business Studies Question paper

SECTION – A

01. Meena’s Farm Expansion

  • Question: Meena owns a small farm to grow fruits. She wants to purchase a neighboring land and convert it to a farm for increasing the variety of fruits. She wishes to purchase a tractor and some other machines for the same. She will also need money to purchase the land. Which source of finance is required by Meena? Give reason. (2)

  • Answer: Meena requires long-term financing. The purchase of land, a tractor, and other machinery are significant investments that require a substantial amount of capital. These are long-term assets that will be used in the business for many years. Therefore, Meena would likely seek a loan or mortgage with a repayment period of several years.

02. Funding a Project by Raising Money

  • Question: __________ is the funding of a project by raising money from a large number of people for a common goal. Explain the same. (2)

  • Answer: Crowdfunding is the funding of a project by raising money from a large number of people, typically online, for a common goal. Individuals contribute small amounts of money, and the collective amount funds the project. Crowdfunding platforms connect project creators with potential funders. It allows individuals and startups to raise capital without relying on traditional financial institutions.

03. Internal Trade

  • Question: Explain Internal Trade. Identify its types. (2)

  • Answer: Internal trade refers to the buying and selling of goods and services within the boundaries of a country. It is also known as domestic trade.

    • Types:
      • Wholesale Trade: Involves buying goods in large quantities from manufacturers or producers and selling them in smaller quantities to retailers.
      • Retail Trade: Involves selling goods and services directly to consumers for their personal, family, or household use.

04. Manufacturing and Trade Beyond Boundaries

  • Question: Manufacturing and trade take place beyond the boundaries of one’s own country. Identify the concept and state any one merit of the same. (2)

  • Answer: The concept is International Trade or Foreign Trade.

    • Merit: Increased market access: Businesses can access larger markets for their goods and services, leading to potential growth and higher profits. It also allows consumers access to a wider variety of products.

05. Mortgaging Assets for Finance

  • Question: For which source of finance, a company is required to mortgage its assets? Explain the same. (2)

  • Answer: A company is required to mortgage its assets for secured loans or mortgage loans. In this type of financing, the company pledges its assets (such as property, equipment, or inventory) as collateral to the lender. If the company fails to repay the loan, the lender has the right to seize and sell the mortgaged assets to recover the outstanding amount.

06. M/s ABS Industry Classification

  • Question: M/s ABS is a small enterprise engaged in the production of springs. It supplies its entire output to tractor manufacturers. M/s ABS can be classified as a __________ industry. Write briefly about it. (2)  

  • Answer: M/s ABS can be classified as a secondary or manufacturing industry, and more specifically, as a component or ancillary industry.

    • Explanation: Secondary industries are concerned with transforming raw materials or semi-finished goods into finished products. Since M/s ABS manufactures springs (a component used in tractors), it fits this classification. The fact that they supply their output to tractor manufacturers makes them a component or ancillary industry, as they are part of the supply chain for a larger manufacturing process.

07. Mercury Ltd.’s Social Responsibility

  • Question: Mercury Ltd. decided to donate 2% of its sales to Child Rights and You (CRY) for improving the condition of children in India. This initiative by the company was highly appreciated by the public and their sales increased by 10%. Identify the interest group towards which Mercury Ltd. is discharging its social responsibility? State one more responsibility towards this group. (2) 

  • Answer: Mercury Ltd. is discharging its social responsibility towards society or the community.

    • Other Responsibility: Supporting community development programs, promoting education, or engaging in environmentally sustainable practices.

08. Petty Retailers with Temporary Shops

  • Question: They are petty retailers who have independent shops of a temporary nature and change their business from one locality to another. Explain the same. (2)  

  • Answer: These retailers are known as Itinerant Retailers or Mobile Retailers. They do not have a fixed location and move from place to place, selling their goods. Examples include hawkers, peddlers, and market vendors who set up temporary stalls.

 

 SECTION – B

09. Lakshmi Ltd.’s Financial Presentation

  • Question: Lakshmi Ltd. is an IT company having many shareholders. In reality, the financial position of the company is weak. But in the meeting with the shareholders, it presented a very good picture of the financial affairs of the company to attract more of them. (2+1)

    (a) Is the company showing socially desirable behavior? Give reason.

    (b) Social responsibility towards which group is ignored in the above para.

  • Answer:

    (a) No, the company is not showing socially desirable behavior. By misrepresenting its financial position to shareholders, Lakshmi Ltd. is acting unethically and potentially illegally. This deception can lead to shareholders making poor investment decisions based on false information. It breaches trust and violates the principles of transparency and honesty in business.

    (b) The company is ignoring its social responsibility towards its shareholders/investors.

10. Karan’s Investment Choice

  • Question: Karan wants higher and more certain returns and also the safety of capital. What will he choose: equity shares, preference shares, or debentures? Explain the same and mention the period of finance which it belongs to. (1+2)

  • Answer: Karan should choose debentures.

    • Explanation: Debentures offer a fixed rate of interest, providing a more certain return than equity shares (which depend on company profits). Debentures also represent a debt for the company, making them safer than preference shares in terms of repayment in case of liquidation. While not as high potential return as equity, they offer a balance of return and safety.
    • Period of Finance: Debentures typically belong to long-term financing.

OR

  • Question: What are debentures? What is the return on debentures called? What is the relation of debenture holders to the company? (1×3)

  • Answer:

    • Debentures: Debentures are debt instruments issued by a company to raise funds. They are essentially a loan taken by the company from the debenture holders.
    • Return: The return on debentures is called interest.
    • Relation: Debenture holders are creditors of the company. They are not owners like shareholders but have a claim against the company’s assets for the repayment of their loan with interest.

11. Advantages of International Business

  • Question: Discuss any three advantages of international business. (3)

  • Answer:

    1. Increased Market Access: Businesses can expand their market reach beyond domestic borders, accessing a larger customer base and increasing sales potential.
    2. Economies of Scale: Producing goods for a larger international market can lead to economies of scale, reducing per-unit costs and increasing profitability.
    3. Diversification: International business can diversify a company’s operations, reducing reliance on a single market and mitigating risks associated with economic downturns or political instability in one country.
    4. Access to Resources: Companies can access raw materials, specialized skills, or technology that may not be available in their home country.

12. Payal Food Industries

  • Question: (Details of Payal Food Industries are provided in the image) (1+1+1)

    (a) Name the Act of industries which is applicable to the above industry. (b) Which category of part (a) will the above industry come? (c) State the investment limits in this category.  

  • Answer:

    (a) The applicable act is the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. (b) Payal Food Industries would likely fall under the Micro or Small enterprise category, depending on their investment in plant and machinery. (c) Note: Investment limits have been revised since the question was likely written. You’ll need to refer to the current MSMED Act for the most up-to-date investment limits for micro and small enterprises. These limits are based on both investment in plant and machinery/equipment and annual turnover.

OR

  • Question: (a) What do you mean by Intellectual Property Rights? (b) Mention the categories of Intellectual Property. (1+2)

  • Answer:

    (a) Intellectual Property Rights (IPR) are legal rights granted to creators or inventors to protect their original works or inventions. These rights give the creators exclusive control over the use and commercial exploitation of their creations for a certain period. (b) Categories of Intellectual Property: * Patents: Protect inventions. * Trademarks: Protect brand names and logos. * Copyrights: Protect literary and artistic works. * Trade Secrets: Protect confidential business information. * Industrial Designs: Protect the aesthetic aspects of a product. * Geographical Indications: Identify goods as originating from a specific region.

13. Britannia Industries Ltd.

  • Question: (Details of Britannia Industries Ltd.’s social initiatives are provided in the image) (1½ x2 = 3)

    (a) Identify the kind of social responsibility being discharged by Britannia Industries Ltd. Explain it. (b) Briefly explain the remaining kinds of social responsibilities.

  • Answer:

    (a) Britannia Industries Ltd. is primarily discharging its social responsibility towards society/community and potentially towards consumers (by promoting nutrition and good food habits). Their work with GAIN and the Nandi Foundation to provide fortified biscuits to schools directly benefits children’s health and well-being, which is a community-focused initiative.

    (b) Other kinds of social responsibilities: * Responsibility towards shareholders/investors: Ensuring fair returns on investment, transparency in operations, and ethical business practices. * Responsibility towards employees: Providing fair wages, safe working conditions, opportunities for growth and development, and a positive work environment.

14. Shares vs. Debentures

  • Question: Write the difference between shares and debentures on the basis of: (a) Nature of fund, (b) Voting rights, (c) Status of holders. (3)

  • Answer:

Feature Shares Debentures
Nature of Fund Represents ownership capital Represents borrowed capital (debt)
Voting Rights Shareholders have voting rights Debenture holders typically do not
Status of Holders Owners of the company Creditors of the company

15. Briefly explain the following:

(a) Bootstrapping (b) Angel Investors (c) Entrepreneurship

  • Answer:

    (a) Bootstrapping: Financing a business using personal savings, revenue generated, and minimal external funding. It emphasizes self-reliance and cost-effectiveness. (b) Angel Investors: Individual investors who provide capital to early-stage startups in exchange for equity. They often bring experience and mentorship along with funding. (c) Entrepreneurship: The process of designing, launching and running a new business, which is often initially a small business. People who create businesses are called entrepreneurs.  

16. Fixed Shops: Easy Day, Big Bazaar, D Mart

  • Question: Easy Day, Big Bazaar, D Mart, etc., are examples of which type of fixed shops? Give any two merits of the same. (1+2)

  • Answer: These are examples of large-scale retail stores or supermarkets/hypermarkets.

    • Merits:
      1. Wide Variety: They offer a vast range of products under one roof, providing convenience to shoppers.
      2. Competitive Pricing: Due to large volumes and efficient operations, they can often offer competitive prices.
      3. Organized Layout: They usually have a well-organized layout, making shopping easier and more efficient. (Any two of the above)

 SECTION – C

17. Prakriti Ltd.’s Retail Outlet

  • Question: Prakriti Ltd. sells organic products through a chain of outlets in populated areas, controlled by the head office. (a) Identify the retail outlet being described. (b) State four features of this type of outlet besides location and centralized control.

  • Answer: (a) The retail outlet being described is a chain store or multiple shops. (b) Four features of chain stores: 1. Standardized Merchandise: They typically offer a consistent range of products across all branches. 2. Uniform Pricing: Prices are usually the same at all locations. 3. Brand Identity: They maintain a consistent brand image and customer experience. 4. Economies of Scale: Bulk purchasing and centralized management can lead to cost savings.

18. Retained Earnings

  • Question: What are Retained Earnings? Explain two merits and demerits. (1+4)

  • Answer: Retained earnings are the accumulated profits of a company that have not been distributed to shareholders as dividends but are reinvested back into the business for growth and expansion.

    • Merits:

      1. Cost-Effective: Retained earnings are a source of internal financing that doesn’t incur interest or dividend payments, making it a cost-effective option.
      2. Business Growth: Reinvesting profits can fuel business expansion, research and development, and asset acquisition.

    • Demerits:

      1. Limited Funds: The amount of retained earnings available for reinvestment depends on the company’s profitability and dividend policy, which might not always be sufficient for large projects.
      2. Shareholder Dissatisfaction: If a company retains a significant portion of profits, shareholders might be dissatisfied if they receive lower dividends.

OR

  • Question: What are equity shares? Write about four merits. (1+4)

  • Answer: Equity shares represent ownership in a company. Holders of equity shares are part-owners and have voting rights in company matters.

    • Merits of Equity Shares:
      1. High Return Potential: Equity shares offer the potential for high returns through dividends and capital appreciation (increase in share price).
      2. Ownership and Control: Shareholders have voting rights, allowing them to participate in company decisions.
      3. Liquidity: Equity shares can be easily bought and sold on the stock exchange (for listed companies).
      4. No Fixed Obligation: Unlike debt, there is no fixed obligation to pay dividends. Dividends are declared based on company performance.

19. Ajay’s Retail Trade

  • Question: Ajay is a trader selling footwear in different markets on fixed days. (1+1+3) (a) How would you classify Ajay? (b) Name the category of retail trade. (c) Explain other retailers in the same category.

  • Answer: (a) Ajay is a mobile retailer or itinerant retailer. (b) He falls under the category of itinerant retailers. (c) Other types of itinerant retailers: 1. Hawkers: Carry goods on their head or in handcarts and sell them door-to-door or in public places. 2. Peddlers: Similar to hawkers, but often carry goods on bicycles or in small vehicles. 3. Street Vendors: Set up temporary stalls on streets or in market areas.

20. Supreme Ltd.’s Social Responsibility

  • Question: Supreme Ltd. is committed to fair treatment, participatory work environment, abides by laws, and is involved in social issues. (5) Identify the interest groups towards which the company is fulfilling its social responsibilities.

  • Answer: Supreme Ltd. is fulfilling its social responsibilities towards:

    • Employees: “participatory work environment where trust and confidence between team members is spontaneous.”
    • Society/Community: “actively involved in social issues and activities.” “committed to achieving and participating in every conceivable way in the progress and integrity of the nation.”
    • Government: “not only abides by all the laws governing in India.”
    • Consumers: “constantly reviews and revises all its print and electronic promotional materials… clear, precise and free from any kind of misrepresentation(s).”
    • Shareholders/Investors: “maintains financial records and follows strict accounting control to ensure… maximizing returns to their shareholders.”

OR

  • Question: What is Social Responsibility? Explain the social responsibility towards Shareholders and Employees (two points each). (1+4)

  • Answer: Social Responsibility is a business’s obligation to act in a way that serves the interests of all stakeholders, not just shareholders, encompassing economic, legal, ethical, and discretionary expectations that society has of organizations.

    • Social Responsibility towards Shareholders:

      1. Fair Return on Investment: Ensuring shareholders receive a reasonable return on their investment through dividends and capital appreciation.
      2. Transparency and Accountability: Maintaining transparent and ethical business practices, providing accurate financial information, and being accountable for decisions.

    • Social Responsibility towards Employees:

      1. Safe and Healthy Working Conditions: Providing a safe and healthy work environment, free from hazards and discrimination.
      2. Fair Wages and Benefits: Offering competitive wages, benefits, and opportunities for professional growth and development.

21. Preference Shareholders

  • Question: State the preferential rights of Preference shareholders. What are the different types of Preference Shares? (2+3)

  • Answer:

    • Preferential Rights: Preference shareholders have preferential rights over equity shareholders in:

      1. Dividend Payment: They receive dividends at a fixed rate before any dividend is paid to equity shareholders.
      2. Repayment of Capital: In the event of company liquidation, they have a prior claim to the return of their capital before equity shareholders.

    • Types of Preference Shares:

      1. Cumulative and Non-Cumulative: Cumulative preference shares are entitled to receive any arrears of dividends from past years before dividends are paid to equity shareholders. Non-cumulative preference shares do not have this right.
      2. Participating and Non-Participating: Participating preference shares are entitled to participate in surplus profits of the company along with equity shareholders. Non-participating preference shares do not have this right.
      3. Convertible and NonConvertible: Convertible preference shares can be converted into equity shares after a certain period. Non-convertible preference shares cannot be converted.  

      4. Redeemable and Irredeemable: Redeemable preference shares are repaid by the company after a specified period. Irredeemable preference shares are not repaid during the lifetime of the company.

OR

  • Question: What do you mean by debentures? Explain the different types of debentures. (1+4)

  • Answer: Debentures are debt instruments issued by a company to raise funds. They are essentially a loan taken by the company from the debenture holders.

    • Types of Debentures:
      1. Secured and Unsecured: Secured debentures are backed by a charge on the company’s assets as collateral. Unsecured debentures do not have any such security.
      2. Convertible and Non-Convertible: Convertible debentures can be converted into equity shares after a certain period. Non-convertible debentures cannot be converted.
      3. Redeemable and Irredeemable: Redeemable debentures are repaid by the company after a specified period. Irredeemable debentures are not repaid during the lifetime of the company.
      4. Registered and Bearer: Registered debentures are recorded in the company’s register, and interest is paid to the registered holder. Bearer debentures are transferable by mere delivery, and interest is paid to the bearer.

22. Incentives for Industries in Backward Areas

  • Question: What are the incentives provided by the Government for industries in backward and hilly areas? (5)

  • Answer: The government provides a range of incentives to encourage industrial development in backward and hilly areas, including:

    1. Financial Incentives: Tax holidays, subsidies on capital investment, concessional interest rates on loans.
    2. Land and Infrastructure: Provision of land at concessional rates, development of industrial infrastructure (roads, power, water supply).
    3. Exemptions and Concessions: Exemptions from certain taxes, concessions on electricity and water charges.
    4. Manpower Training: Support for training local manpower to meet the needs of industries.
    5. Special Economic Zones: Designation of specific areas as SEZs with relaxed regulations and additional incentives.

OR

  • Question: What is the role of small business in India? (5)

  • Answer: Small businesses play a vital role in the Indian economy:

    1. Employment Generation: They are a major source of employment, especially for semi-skilled and unskilled workers.
    2. Economic Growth: They contribute significantly to the country’s GDP and industrial output.
    3. Innovation and Entrepreneurship: They foster innovation and entrepreneurship, leading to new products and services.
    4. Balanced Regional Development: They promote balanced regional development by setting up businesses in rural and backward