SECTION – A (Long answer questions)
1. What do you mean by soletrading business? Discuss its merits and demerits.
Explanation:
A sole trading business, also known as a sole proprietorship, is a type of business owned and run by a single individual. The owner is solely responsible for all aspects of the business, including decision-making, financing, and operations.
Merits:
- Full Control: The owner has complete control over all business decisions.
- Simplicity: Easy to start and operate without complex procedures.
- Direct Profits: The owner keeps all profits from the business.
- Tax Benefits: The business income is taxed as the owner’s personal income, which can sometimes result in tax benefits.
Demerits:
- Unlimited Liability: The owner is personally liable for all debts and obligations, risking personal assets.
- Limited Capital: The business depends on the owner’s savings or loans, which can restrict growth.
- Workload and Stress: The owner has to manage all tasks, which can be overwhelming.
- Limited Expertise: The business may suffer from a lack of diverse skills and expertise.
2. What is meant by partnership? Explain merits and demerits.
Explanation:
A partnership is a business structure where two or more individuals share ownership and responsibilities of a business. Each partner contributes to the business and shares in its profits or losses.
Merits:
- Shared Responsibility: Partners share the workload, reducing stress.
- Access to Capital: Partnerships can raise more capital compared to sole proprietorships.
- Diverse Skills: Partners can bring different skills and expertise to the business.
- Flexibility: Partnerships have fewer formalities compared to corporations.
Demerits:
- Unlimited Liability: Partners are personally liable for business debts.
- Disputes: Differences between partners may lead to conflicts that affect business operations.
- Shared Profits: Profits must be shared between the partners, reducing individual earnings.
- Limited Life: The partnership may dissolve if one partner leaves or dies.
3. Distinguish between private company and public company.
Explanation:
A private company and a public company are both forms of business organizations, but they differ in terms of ownership, regulatory requirements, and access to capital.
Distinctions:
| Private Company | Public Company |
|---|---|
| Owned by a small group of investors. | Owned by shareholders who can buy and sell stock on public markets. |
| Shares are not publicly traded. | Shares are publicly traded on stock exchanges. |
| Fewer regulatory requirements. | Must comply with stringent regulatory standards. |
| Limited ability to raise capital. | Easier access to capital through public investment. |
| Typically smaller in size. | Generally larger with more extensive operations. |
4. What is memorandum of association? Describe its clauses.
Explanation:
The Memorandum of Association is a legal document that defines the company’s relationship with the outside world. It outlines the scope of the company’s activities and its objectives.
Clauses of Memorandum of Association:
- Name Clause: Specifies the company’s name.
- Registered Office Clause: Indicates the location of the company’s registered office.
- Object Clause: States the purpose of the company.
- Liability Clause: Details the liability of the members.
- Capital Clause: Specifies the company’s capital and the number of shares.
- Association Clause: Declares the intention of the members to form the company.
5. What is Prospectus? State the contents of Prospectus.
Explanation:
A Prospectus is a formal document issued by a company inviting the public to subscribe to its shares or debentures.
Contents of a Prospectus:
- Company’s Background: Includes details like the company’s name, registered office, and objectives.
- Capital Structure: Information on the company’s share capital, including types of shares offered.
- Company’s Financial Position: Includes the company’s audited financial statements.
- Risk Factors: Discloses potential risks that investors should be aware of.
- Terms of Issue: Details about the terms of subscription, pricing, and allotment of shares.
- Use of Funds: Explains how the funds raised will be utilized.
6. What is Business Finance? Explain its need and significance in the business organizations.
Explanation:
Business finance refers to the funds and financial resources used by a business to carry out its operations, expansion, and investments.
Need and Significance:
- Operational Needs: To pay for day-to-day operations like salaries, inventory, and utilities.
- Growth and Expansion: To fund new projects, expand operations, or enter new markets.
- Liquidity Management: Ensures the business can meet its short-term obligations.
- Investment Decisions: Helps in making informed decisions on investments and capital expenditure.
- Risk Management: A stable financial base helps mitigate business risks.
7. Define preference shares? Explain types of preference shares.
Explanation:
Preference shares are a type of stock that provides shareholders with preferential treatment in terms of dividend payments and asset distribution in case of liquidation.
Types of Preference Shares:
- Cumulative Preference Shares: If dividends are not paid in a given year, they accumulate and are paid in the future.
- Non-Cumulative Preference Shares: Dividends are not carried over if not paid in a particular year.
- Convertible Preference Shares: Can be converted into equity shares at a later date.
- Participating Preference Shares: Holders receive a fixed dividend and may participate in additional profits.
- Non-Participating Preference Shares: Holders only receive a fixed dividend, without additional profits.
8. Explain different types of Debentures and its features.
Explanation:
A Debenture is a debt instrument issued by companies to raise capital. Debenture holders receive fixed interest payments and have priority over equity shareholders in case of liquidation.
Types of Debentures:
- Secured Debentures: Backed by a company’s assets as collateral.
- Unsecured Debentures: Not backed by any collateral.
- Convertible Debentures: Can be converted into equity shares after a certain period.
- Non-Convertible Debentures: Cannot be converted into equity shares.
- Redeemable Debentures: Can be redeemed after a specified period.
- Irredeemable Debentures: Cannot be redeemed, and are issued for a perpetual term.
9. What are the differences between shares and debentures?
Explanation:
Shares represent ownership in a company, while debentures are a form of debt.
| Shares | Debentures |
|---|---|
| Represents ownership in the company. | Represents a loan made by the investor to the company. |
| Shareholders have voting rights. | Debenture holders do not have voting rights. |
| Shareholders earn dividends, which are not fixed. | Debenture holders earn fixed interest. |
| Dividends are paid only if there are profits. | Interest is paid regardless of profit. |
| Shareholders are last in line during liquidation. | Debenture holders are paid before shareholders in case of liquidation. |
10. What do you mean by Equity shares? Explain the features and Merits and demerits of it?
Explanation:
Equity shares represent the ownership in a company, and the holders are entitled to vote in company decisions and receive dividends, which are paid out of the company’s profits.
Features of Equity Shares:
- Voting Rights: Shareholders have the right to vote at general meetings.
- Dividend: Dividends are paid out of the profits of the company, but are not fixed.
- Capital Appreciation: Equity shareholders may benefit from the increase in the value of shares.
- Risk: Equity shareholders are the last to be paid in case of liquidation.
Merits:
- Ownership Rights: Equity shareholders have control over company decisions.
- Dividend Potential: They have the opportunity to earn high dividends if the company performs well.
- Capital Appreciation: There is potential for share price increases.
- No Obligation for Fixed Payments: No fixed payments like debentures, so financial flexibility is greater.
Demerits:
- Risk: The risk of losing the entire investment in case of liquidation.
- No Guaranteed Dividends: Dividends depend on the company’s profitability.
- Dilution of Control: Issuing more shares may dilute the control of existing shareholders.
SECTION – B ( Short answer questions )
1. Define Business? What are its characteristics?
Definition:
Business refers to an organized effort of individuals to produce and sell goods and services for profit. It involves the exchange of goods and services for money or other goods, aiming to meet the needs of consumers.
Characteristics of Business:
- Economic Activity: Business involves economic activities aimed at earning profits.
- Production and Sale of Goods and Services: It includes the production, distribution, and sale of goods and services.
- Profit Motive: The primary goal of business is to earn profit.
- Risk: Business involves a degree of risk, as profits are not guaranteed.
- Continuous Process: Business is a continuous activity that requires ongoing operations.
2. Explain the objectives of a business?
Explanation:
The objectives of a business can be classified into two broad categories:
- Economic Objectives:
- Profit Maximization: The primary goal of most businesses is to maximize profits.
- Wealth Creation: Businesses aim to generate wealth for owners, employees, and stakeholders.
- Efficiency: Achieving the maximum output with minimum input.
- Social Objectives:
- Providing Employment: Businesses create job opportunities for people.
- Improving Quality of Life: By offering goods and services that fulfill the needs of consumers.
- Contributing to Society: Engaging in corporate social responsibility (CSR) activities like charity work, environmental sustainability, etc.
3. Discuss the social responsibility of business?
Explanation:
The social responsibility of business refers to the ethical obligations businesses have towards society. It goes beyond profit-making and includes activities that benefit the community, environment, and other stakeholders.
Key Aspects:
- Environmental Protection: Reducing pollution and conserving resources.
- Ethical Practices: Ensuring fair treatment of employees, consumers, and suppliers.
- Philanthropy: Contributing to social causes through donations, sponsorships, or charity work.
- Fair Trade: Promoting fair wages and working conditions, especially in developing countries.
4. What is meant by Industry? Explain various types of industries with suitable examples?
Explanation:
Industry refers to the production of goods or services within an economy. Industries are generally classified based on their nature of operations.
Types of Industries:
- Primary Industry: Involves the extraction and harvesting of natural resources (e.g., mining, agriculture).
- Example: Coal mining, farming.
- Secondary Industry: Involves the processing of raw materials into finished goods (e.g., manufacturing).
- Example: Automobile manufacturing, textile industry.
- Tertiary Industry: Provides services rather than goods.
- Example: Healthcare, education, finance, tourism.
- Quaternary Industry: Involves knowledge-based activities involving services such as IT, research, and development.
- Example: Information technology, scientific research.
5. Define trade and explain the various types of aids to trade?
Explanation:
Trade refers to the exchange of goods and services between businesses or individuals. It can be domestic or international.
Aids to Trade:
- Banking: Provides financial services like loans, deposits, and money transfers that facilitate business transactions.
- Transportation: Ensures goods are moved from one place to another, both domestically and internationally.
- Insurance: Protects businesses against potential risks such as theft, damage, or liability.
- Warehousing: Provides storage facilities for goods until they are sold or distributed.
- Advertising: Helps businesses promote their products to potential customers.
6. What is Joint Hindu Family business and discuss its main features?
Explanation:
A Joint Hindu Family business is a form of business organization run by members of a Hindu Undivided Family (HUF) under the management of the Karta (head of the family).
Main Features:
- Family Ownership: The business is owned by family members who are lineally descended from a common ancestor.
- Karta and Coparceners: The Karta (head) manages the business, while coparceners (other family members) share in the profits and losses.
- Limited Liability of Coparceners: The liability of the coparceners is limited to the extent of their share in the family property.
- No Formal Agreement: No written agreement is required for forming a joint Hindu family business.
7. Explain the advantages and disadvantages of Joint Hindu Family firm?
Explanation:
Advantages:
- Simple to Form: The business is formed automatically upon the birth of a new member in the family.
- Limited Liability: The liability of the coparceners is limited to their share in the family property.
- Control by Karta: The Karta has full control over the business operations, which can lead to quick decision-making.
- Flexibility: The business can easily adjust to changing circumstances within the family.
Disadvantages:
- Limited Capital: The scope for raising capital is limited to the family’s resources.
- Limited Expertise: The business may lack specialized knowledge or skills.
- Risk of Family Disputes: Conflicts among family members can disrupt business operations.
- Continuity Issues: If the Karta dies, the business may be affected, especially if no suitable successor is chosen.
8. Define Co-operative society. Explain the features of co-operative societies.
Explanation:
A Co-operative Society is a voluntary association of individuals who come together for mutual benefit, typically to improve their economic and social conditions.
Features of Co-operative Societies:
- Voluntary Membership: Anyone can join or leave voluntarily.
- Democratic Control: Each member has one vote, regardless of the amount of capital invested.
- Profit Sharing: Profits are distributed among members based on their contribution or usage of services.
- Limited Liability: Members’ liabilities are limited to their share in the capital.
- Service-Oriented: The main objective is to provide services to members rather than making profits.
9. Explain the different types of a co-operative society?
Explanation:
Types of Co-operative Societies:
- Consumer Co-operative Society: Members buy goods in bulk at discounted prices.
- Example: Consumer stores like grocery co-ops.
- Producer Co-operative Society: Producers join together to process and market their goods.
- Example: Agricultural co-operatives that sell produce collectively.
- Credit Co-operative Society: Provides financial services such as loans to members.
- Example: Credit unions or co-operative banks.
- Marketing Co-operative Society: Helps members market their products collectively.
- Example: Agricultural marketing co-operatives.
10. Discuss different types of Partners?
Explanation:
Types of Partners in a Partnership:
- Active Partner: Actively participates in the day-to-day operations of the business and has management responsibilities.
- Sleeping Partner: Invests capital but does not take part in the management of the business.
- Nominal Partner: Lends their name to the partnership without contributing capital or taking part in management.
- Partner by Estoppel: Someone who acts or behaves like a partner but isn’t officially one.
- Minor Partner: A minor who enters into a partnership with the consent of their guardian.
11. What is Partnership Deed? Explain its contents?
Explanation:
A Partnership Deed is a legal document that outlines the rights, responsibilities, and duties of each partner in a partnership business.
Contents of a Partnership Deed:
- Name and Address of the Partnership: Details of the business name and office address.
- Nature of Business: The business activities the partnership will engage in.
- Capital Contribution: The amount of capital each partner is contributing.
- Profit and Loss Sharing: The ratio in which profits and losses will be shared.
- Rights and Duties: The duties, powers, and obligations of each partner.
- Duration of the Partnership: Whether the partnership is for a fixed term or indefinite.
- Settlement of Disputes: Procedures to resolve any disagreements between partners.
12. What is Articles of Association and also explain its contents?
Explanation:
The Articles of Association are the rules and regulations that govern the internal management of a company.
Contents of Articles of Association:
- Share Capital: Details about the issue and transfer of shares.
- Board of Directors: Powers, responsibilities, and procedures for appointing directors.
- Meetings: How and when general meetings and board meetings will be conducted.
- Dividend Distribution: How profits will be distributed to shareholders.
- Borrowing Powers: The powers of the company to borrow funds.
13. Discuss the differences between Memorandum of Association and Articles of Association?
Explanation:
Memorandum of Association and Articles of Association are both essential documents for a company, but they serve different purposes.
| Memorandum of Association | Articles of Association |
|---|---|
| Defines the external relationship of the company with the outside world. | Deals with the internal management of the company. |
| Contains the fundamental rules and objectives of the company. | Contains the rules for the company’s day-to-day operations. |
| It is a public document and cannot be altered easily. | It is a private document and can be amended by the company’s shareholders. |
14. Differences between preference shares and equity shares?
Explanation:
Preference Shares and Equity Shares are both forms of company stock, but they differ in terms of rights and financial benefits.
| Preference Shares | Equity Shares |
|---|---|
| Shareholders have preferential rights over dividends and liquidation. | Shareholders have voting rights but no preference for dividends. |
| Dividends are fixed. | Dividends are variable and paid after preference shares. |
| Limited voting rights. | Full voting rights at shareholder meetings. |
| Priority in liquidation. | Last to be paid in case of liquidation. |
15. What are the sources of short term finance?
Explanation:
Short-term finance is required to meet immediate operational expenses. Sources include:
- Bank Overdrafts: Allows businesses to withdraw more money than what is available in their accounts.
- Trade Credit: Suppliers provide goods or services on credit with payment deferred to a later date.
- Short-Term Loans: Loans with a short repayment period, typically under one year.
- Bills of Exchange: Written promises to pay a specific amount at a future date.
- Commercial Paper: Unsecured, short-term debt instruments issued by companies to meet immediate financial needs.
16. Discuss the privileges enjoyed by MSMEs?
Explanation:
Micro, Small, and Medium Enterprises (MSMEs) enjoy several privileges to foster their growth:
- Financial Assistance: MSMEs have easier access to credit and loans with lower interest rates.
- Tax Benefits: They receive tax exemptions or reductions in some countries.
- Government Support: MSMEs may benefit from various government schemes, grants, and subsidies.
- Priority Sector Lending: Banks are encouraged to lend to MSMEs as part of priority sector lending requirements.
17. Define Multinational Corporations? (MNC’s) Explain its features?
Explanation:
A Multinational Corporation (MNC) is a company that operates in more than one country, with subsidiaries, branches, or affiliates in different regions.
Features of MNCs:
- Global Presence: Operates in multiple countries across the globe.
- Centralized Management: Management is usually centralized in the home country.
- Large Scale Operations: MNCs operate on a large scale, often controlling significant market share.
- Foreign Investment: MNCs make significant investments in foreign markets.
18. Define MNC’s. Explain advantages and disadvantages?
Explanation:
MNCs are large corporations that operate in multiple countries, typically with their headquarters in one nation.
Advantages:
- Economies of Scale: MNCs benefit from larger production volumes and cost savings.
- Access to Global Markets: They can sell products in many countries.
- Increased Investment: MNCs bring capital and technology to host countries.
Disadvantages:
- Exploitation: MNCs may exploit resources and labor in developing countries.
- Cultural Imperialism: They can dominate local markets and cultural practices.
- Environmental Impact: MNCs might harm the environment in host countries.
19. What is Globalisation and explain the necessity of Globalisation?
Explanation:
Globalisation refers to the process of increased interconnectedness and interdependence among countries, driven by trade, technology, and cultural exchange.
Necessity:
- Market Expansion: It opens new markets for businesses to grow.
- Technology Transfer: Facilitates the exchange of technology and knowledge.
- Cultural Exchange: Promotes cultural understanding and diversity.
20. Explain the benefits of E-business?
Explanation:
E-business involves conducting business activities over the internet.
Benefits:
- Global Reach: Businesses can reach customers worldwide.
- Cost Efficiency: Reduces costs related to physical stores and infrastructure.
- Convenience: Allows customers to shop 24/7 from anywhere.
- Speed: Increases the speed of transactions and communication.
Here are the answers to the 2-mark questions:
SECTION – C ( 2 Marks questions )
1. Define Business?
Business refers to any economic activity that involves the production, distribution, and exchange of goods or services for the purpose of earning profit. It includes activities like manufacturing, buying, selling, and providing services.
2. What is a Profession?
A Profession is a specialized occupation that requires specialized knowledge, skills, and training. Examples include doctors, lawyers, and accountants. A profession is usually governed by ethical codes and standards set by professional bodies.
3. What is Employment?
Employment refers to the state of having a job or work where an individual provides services or labor to an employer in exchange for a salary or wage. It is a contract between an employer and an employee.
4. Define Commerce?
Commerce refers to the activities involved in the buying and selling of goods and services, including the distribution and financing required to facilitate the exchange of goods and services. It plays a key role in supporting trade.
5. What is an Entreport Trade?
Entreport trade refers to the process of importing goods to a country for the purpose of re-exporting them to other countries, often without significant alteration. This type of trade is used to capitalize on favorable trade policies or tariffs in the entreport country.
6. Trade?
Trade involves the exchange of goods and services between parties. It can be domestic (within a country) or international (between countries), and is a central component of commerce and economic activity.
7. Genetic Industries?
Genetic industries are industries involved in the production and processing of raw materials directly obtained from nature, like agriculture, fishing, and forestry. They work with naturally available resources.
8. Extractive Industries?
Extractive industries involve the extraction of natural resources from the earth, such as mining, oil extraction, and quarrying. These industries focus on obtaining raw materials like minerals, petroleum, and metals.
9. Kartha?
The Kartha is the head or manager of a Joint Hindu Family business. He is responsible for managing the business and has full control over its operations, but he also has unlimited liability.
10. Mitakshara Law?
The Mitakshara Law is a Hindu law governing the inheritance of property within a Hindu family. It primarily applies to the system of joint family property and inheritance, where the property is shared among the family members and passes through generations.
11. Dayabhaga Law?
The Dayabhaga Law is another system of Hindu law related to inheritance, mostly practiced in Bengal. Unlike Mitakshara, Dayabhaga allows individual ownership of property, meaning property can be divided among family members according to their wishes.
12. Define Joint Hindu Family?
A Joint Hindu Family is a family business structure in which members of the family share ownership and profits from the business. It is governed by Hindu law and typically involves a head (Kartha) who manages the affairs of the business.
13. Consumer’s Cooperative Society?
A Consumer’s Cooperative Society is a type of cooperative organization where members pool their resources to buy goods in bulk and at discounted prices. The aim is to provide essential goods at lower prices to its members.
14. What are Co-operative Societies?
A Co-operative Society is a voluntary association of individuals who come together to achieve common economic, social, or cultural goals. It operates on the principles of mutual help, democratic control, and profit-sharing among members.
15. What is Minor Partner?
A Minor Partner is a person who is under the age of majority (18 years in most countries) but enters into a partnership agreement with the consent of their guardian. They are not personally liable for the debts of the business.
16. Active Partner?
An Active Partner is a partner in a partnership who actively participates in the daily management and operations of the business. They are also liable for the debts of the business.
17. Partnership Deed?
A Partnership Deed is a legal document that outlines the terms and conditions governing a partnership, including the roles and responsibilities of each partner, profit-sharing ratios, capital contributions, and other relevant rules.
18. Registered Company?
A Registered Company is a company that is officially registered with the relevant governmental authority, like the Registrar of Companies. It has a legal identity separate from its owners and is bound by specific regulations.
19. Government Company?
A Government Company is a company in which the government holds at least 51% of the share capital. It is controlled by the government, and its purpose is often to provide public goods or services.
20. Define Public Limited Company?
A Public Limited Company (PLC) is a company whose shares are publicly traded on the stock market and can be bought and sold by the general public. It must meet specific regulatory requirements and is required to disclose financial information to the public.
21. Promotion?
Promotion refers to the initial process of setting up a company or business. It involves tasks such as identifying a business idea, forming a team, obtaining legal permissions, and raising capital.
22. Promoter?
A Promoter is an individual or group that takes the initiative to establish a company. They are responsible for promoting the company, obtaining necessary capital, and taking legal actions to set the company in motion.
23. What do you mean by a Prospectus?
A Prospectus is a legal document issued by a company inviting the public to subscribe to its shares or debentures. It contains detailed information about the company’s financial position, business activities, risks, and other relevant data.
24. What is a certificate of commencement of business?
A Certificate of Commencement of Business is a certificate issued by the Registrar of Companies, which is required for a public company to begin its operations. It certifies that the company has met all legal and regulatory requirements to start business activities.
25. Fixed Capital?
Fixed Capital refers to the long-term capital invested in assets that are used for a long period, such as machinery, buildings, and equipment. Fixed capital is essential for setting up the business infrastructure and operations.