Students can access the CBSE Sample Papers for Class 11 Business Studies with Solutions and marking scheme Set 1 will help students in understanding the difficulty level of the exam.
CBSE Sample Papers for Class 11 Business Studies Set 1 with Solutions
Time : 3 Hours
Maximum Marks : 80
General Instructions:
- This question paper contains 34 questions.
- Answers should be brief and to the point.
- Answers to the questions carrying 3 marks may be from 50 to 75 words.
- Answers to the questions carrying 4 marks may be about 150 words.
- Answers to the questions carrying 6 marks may be about 200 words.
- Attempt all parts of the questions together.
Question 1.
Orza Limited is the manufacturer and trader of electrical goods. The company’s efficient management team, and effective marketing strategies have enabled it to carve a niche in the industry, allowing it to stand out. But, over the past few years, its profit margins and customer loyalty have been going down. After analysis of the reasons for lowering performance, the company executives suggested how CSR can improve profits. They understand that CSR can promote respect for their company in the marketplace which can result in higher sales, and enhance employee loyalty. Also, CSR activities focusing on sustainability issues may lower costs and improve efficiency as well. The company followed the CSR initiatives and is able to regain its market position and increase its goodwill.
Which objective will be fulfilled by the company through CSR? [1]
(A) Economic
(B) Social
(C) Legal
(D) Personal
Answer:
Option (B) is correct.
Explanation: The scenario mentions that the company’s executives understand that CSR can promote respect for their company in the marketplace, resulting in higher sales and enhancing employee loyalty. These outcomes are associated with the social objective of CSR.
By engaging in CSR initiatives, the company is not only addressing social and environmental concerns but also improving its reputation and relationships with customers and employees. This social aspect of CSR can positively impact the company’s market position and increase its goodwill.
Question 2.
Naresh runs a shop by himself in the Main Bazar of Chandni Chowk, Delhi. While working he realised that the
size of sole proprietorship firms rarely grows much due to which of the following factors: [1]
(A) Limited resources
(B) Unlimited liability
(C) Limited managerial ability
(D) All of the above
Answer:
Option (D) is correct.
Explanation: Limited resources, unlimited liability, and limited managerial ability are all factors that can restrict the growth potential of sole proprietorships.
Question 3.
International corporations invest in India because cost of production is low. Which of the following factors do not
contribute to low cost of production? [1]
(A) Low cost of raw materials
(B) Low product quality
(C) Low cost of labour
(D) Technically qualified workforce in different cadres
Answer:
Option (B) is correct
Question 4.
This facility ensures the sender of the mail that in case the mail is not delivered to the addresses, it comes back to
the sender. Name such kind of facility provided by Post office. [1]
(A) Registered post
(B) Courier
(C) Speed Post
(D) Parcel
Answer:
Option (A) is correct.
Explanation: Registered post is an Indian Postal Department service, similar to an ordinary post, providing additional facilities like safe delivery, the signature of the recipient at the time of delivery, extra cover (insurance) and proof of delivery.
Question 5.
Which is the document prepared by the exporter on the basis of which the customs office gives the permission for export: [1]
(A) Certificate of origin
(B) Commercial invoice
(C) Export order
(D) Shipping bill
Answer:
Option (D) is correct.
Explanation: The shipping bill is the main document on the basis of which customs office grants permission for the export. The shipping bill contains particulars of the goods being exported, the name of the vessel, the port at which goods are to be discharged, country of final destination, exporter’s name and address, etc.
Question 6.
The following is an example of: [1]
(A) Itinerant Retailer
(B) Speciality shop
(C) Pavement vendor
(D) Market trader
Answer:
Option (A) is correct.
Explanation: Retailers who do not have any fixed place to carry out their business activities are known as itinerant traders. They have to move from one place to another along with their goods in search of consumers.
Question 7.
NABARD was set up in the year …………….. .
(A) 1983
(C) 1984
(B) 1982
(D) 1985
Answer:
Option (B) is correct.
Explanation: NABARD established by the government in 1982 to give action and to promote the rural industries.
Question 8.
Rajan opened a current account with the State Bank of India. Mostly the customers can only withdraw the money from the account up to the amount deposited in it. However, one day he needed money more than the balance in his account. He was worried and asked his friends for some help. None could help him but Arjun told him that the customers who have a current account in the bank can withdraw money more than the amount in their account after making an arrangement with the bank. Which facility is being provided by the bank to Rajan in the
above case?
(A) Bank Overdraft
(B) Loan
(C) Credit card
(D) None of the above
Answer:
Option (A) is correct.
Explanation: Bank Overdraft is a facility provided by banks to their customers who hold current accounts. It allows the account holder to withdraw more money from the account than the actual balance available, up to a certain limit agreed upon with the bank. In other words, it allows customers to have a negative balance in their current account temporarily.
In Rajan’s case, when he needed money more than the balance in his account, he can arrange with the bank for an overdraft facility. This means the bank will allow him to withdraw an amount exceeding the balance in his account, up to the agreed overdraft limit. This can be a helpful facility for customers who face temporary cash flow issues or unexpected expenses.
Question 9.
Which of the following issues faced by small businesses is incorrect regarding the raw materials required by them
(A) Compromise on the quality as they have to pay high prices to get good quality materials
(B) Required raw materials are not available easily
(C) Low bargaining power due to the small quantity of purchases made by them
(D) Large storage facilities to store the materials
Answer:
Option (D) is correct.
Explanation: Large storage facilities to store the materials is not an issue typically faced by small businesses. Small businesses may not have the need for extensive storage facilities if their production scale and volume are relatively smaller compared to larger enterprises.
Question 10.
Read the following statements: Assertion (A) and Reason(R). Choose the correct alternative from those given below:
Assertion (A): It is the moral obligation of business to get involved in solving social problems, instead of merely expecting that other social agencies will deal with them on their own.
Reasoning (R): A lot of social problems have either been created or perpetuated by business enterprises themselves.
Alternatives:
(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 [1]
Answer:
Option (A) is correct.
Explanation: Businesses are responsible for a lot of social problems. Hence, it is the duty of the businesses to take care and deal with the social problems as a part of their social responsibility.
Question 11.
Social interests and business interests are ………………. . [1]
(A) Contradictory
(B) Complementary
(C) Conflicting
(D) Counteractive
Answer:
Option (B) is correct.
Explanation: Business enterprises have started realising the fact that social interest and business interest are not contradictory. Instead, these are complementary to each other. The feeling that business can grow only through exploitation of society has given way to the belief that long-term benefit of business lies in serving the society well. So also, a useful institution like business is recognised as an essential element of a modern civilised society.
Question 12.
Whose involvement is most important in guiding the entire organization towards ethically upright behaviour
and giving continuous leadership for developing and upholding the values of the organization? [1]
(A) Top level management
(B) Middle level management
(C) Lower-level management
(D) Workforce
Answer:
Option (A) is correct.
Explanation: Top management has a crucial role in guiding the entire organisation towards ethically upright behaviour. To achieve results, the Chief Executive Officer (CEO) and other higher-level managers need to be openly and strongly committed to ethical conduct. They must give continuous leadership for developing and upholding the values of the organisation.
Question 13.
Statement I: e-bidding involves trading of securities like shares and other financial instruments. The securities are
bought and sold online. [1]
Statement II: e-bidding involves sales transactions between business firms through internet. It includes ‘reverse _
auctions’ and ‘digital market places.
Choose the correct option from the following:
(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
Answer:
Option (D) is correct.
Explanation: Under e-bidding one can bid for the goods and services online. It also provides the facility for e-tendering under which quotation can be submitted online. E-trading involves trading of securities like shares and other financial instruments. The securities are bought and sold online.
Question 14.
Mr. Mehra is working at the post of General Manager in AU Small Finance Rajasthan. He is transferred to
Hyderabad. So, he sold his old sofa, and bed through OLX. In Hyderabad, he bought a new sofa and small
bed of his choice according to the space of the room placing online order to Godrej Furniture. On receiving the
delivery of the items, he found colour defect in the sofa so he filed an online complaint with customer care cell of
Godrej Furniture. The head of customer grievances cell forwarded this complaint mail to the Marketing manager
and Production manager for further action. In enquiry, it was found that M/s Touchwood Furniture Dealers,
distributor of Godrej Furniture in Hyderabad made the ‘default on delivery’ while taking online order from
Godrej Furniture for making delivery to its online customers. [1]
‘So, he sold his old sofa, and bed through OLX.’ Identify in the type of e-business model involved in the
transaction mentioned here.
(A) Business to Customer
(B) Business to Business
(C) Customer to Customer
(D) Customer to Business
Answer:
Option (C) is correct.
Question 15.
Which of the financial facilities are not provided by post offices in India? [1]
(A) Recurring deposits
(B) Savings account
(C) Loans
(D) Time deposits
Answer:
Option (C) is correct.
Explanation: Post offices in India offer various financial services to the public, including recurring deposits (A), savings accounts (B), and time deposits (D). These services allow individuals to save and invest their money with the post office.
However, post offices in India do not provide loans to customers. Unlike banks and some other financial institutions, post offices do not offer lending services or provide loans to individuals or businesses.
Question 16.
Statement I: In case of Life Insurance, the subject matter of life insurance is human life. [1]
Statement II: In life insurance, the insurable interest must be present at the time of contract.
Choose the correct option from the following:
(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
Answer:
Option (C) is correct.
Explanation: In case of Life Insurance, the subject matter of life insurance is human life. This statement is true because life insurance policies are designed to provide financial protection to the beneficiaries in the event of the insured person’s death. The life of the insured person is the subject matter of the life insurance contract. In life insurance, the insurable interest must be present at the time of the contract. This statement is also true. Insurable interest refers to a financial interest that a person has in another person’s life. In life insurance, the policyholder must have an insurable interest in the insured person’s life at the time the insurance contract is entered into. This ensures that the policy is based on a legitimate financial interest and prevents the possibility of speculative insurance contracts.
Question 17.
Mr. Gajendra is a businessman dealing in the sale of electronic items. His daughter Gauri is working in Kotak Mahindra Bank and his son, Sarvesh is working in State Electricity Board. Mr. Gajendra applied for a home loan with Kotak Mahindra. He was impressed with the efficient work culture of the bank as he got the loan in a short period of time, much before his expectations. He also applied for electricity connection in State Electricity Board. Even after six months, he could not get any satisfactory response for the delay in getting his connection from concerned authorities. Gauri told her father that public sector and its work culture is different from that of private sector. It could not compete with private sector in terms of efficiency and in terms of profits as well. [1]
What is the reason behind delay in decision making in the form of business employing Sarvesh ?
(A) Red-tapism
(B) Employee absenteeism
(C) Mismanagement
(D) Conflict of interest
Answer:
Option (A) is correct.
Explanation: Red-tapism refers to excessive bureaucratic procedures and paperwork that often lead to delays and inefficiencies in decision-making processes. In the given scenario, Sarvesh is working in the State Electricity Board, which is a public sector organization. Public sector organizations are often associated with a more bureaucratic and slow decision-making process due to various factors such as organizational structure, government regulations, and hierarchical systems.
The delay in getting the electricity connection, as mentioned in the scenario, indicates a bureaucratic and slow process, which is characteristic of red- tapism. This delay contrasts with Mr. Gajendra’s experience with Kotak Mahindra Bank, a private sector organization, where he received a home loan quickly and efficiently.
Question 18.
Match the following forms of business organisation with their suitable example. [1]
| Column I | Column II |
| 1. Sole Proprietorship | (i) Raghu & Siya Book Store |
| 2. Cooperative Society | (ii) Sharma General Store |
| 3. Private Company | (iii) Idea Tele Communication Pvt. Ltd. |
| 4. Partnership | (iv) Amul Milk Union Ltd. |
(A) 1. (ii), 2. (iv), 3. (iii), 4. (i)
(B) 1. (iii), 2. (iv), 3. (ii), 4. (i)
(C) 1. (ii), 2. (iv), 3. (i), 4. (iii)
(D) 1. (ii), 2. (iii), 3. (iv), 4. (i)
Answer:
Option (A) is correct
| Column I | Column II |
| 1. Sole Proprietorship | (ii) Sharma General Store |
| 2. Cooperative Society | (iv) Amul Milk Union Ltd. |
| 3. Private Company | (iii) Idea Tele Communication Pvt. Ltd. |
| 4. Partnership | (i) Raghu & Siya Book Store |
Question 19.
Which of the following is a source for raising borrowed funds: [1]
(A) Equity Shares
(B) Preference Shares
(C) Loans from financial institutions
(D) Retained Earnings
Answer:
Option (C) is correct.
Explanation: The deposits that are raised by organisations directly from the public are known as public deposits. Rates of interest offered on public deposits are usually higher than that offered on bank deposits. Any person who is interested in depositing money in an organisation can do so by filling up a prescribed form.
Question 20.
Business ethics refer to the socially determined ……………… principles which govern business activities. [1]
(A) Amoral
(B) Moral
(C) Immoral
(D) None of these
Answer:
Option (B) is correct.
Explanation: Business ethics refer to the socially determined moral principles which should govern business activities. A few examples of business ethics are: charging fair prices from customers, using fair weights for measurement of commodities, giving fair treatment to workers and earning reasonable profits. A businessperson behaves ethically when her or his actions are upright and serve the interests of society.
Question 21.
Ram, karta of a family business, died in a road accident. His son received compensation from the insurance company. Can this income be treated as HUF income. [3]
Answer:
No, insurance compensation cannot be treated as the income of HUF. It is an individual asset. On the death of Mr. Ram, this money should be handed over to his son, as this will be a compensation for the loss of his father.
Question 22.
‘E-business can be handled effectively by suitably qualified personnel and a well-designed system’. Comment this statement. [3]
OR
Describe briefly any two applications of e-business. [3]
Answer:
This statement indicates that the following systems are necessary for successful e-business implementation:
-
- (i) Proper computerised system: There should be a proper computerised system consisting of computer hardware and matching computer software.
- Effective telecommunication: Effective telecommunication should be used as a channel of communicating with others.
- Well-designed websites: Websites meant for e-business should be designed in such a way that it is effective in providing information to customers and serves as a means of product promotion.
OR
The two applications of e-business are:
(i) B2B: Business to Business commerce involves business transactions between business organisations. All business firms buy (or sell) raw materials, machines and other inputs and services to carry out their business processes. In doing so, firms have to maintain a good relationship with their distributors, suppliers and vendors. In this context, B2B e-commerce enables businesspersons to strengthen their communication and distribution networks, facilitating the smooth transfer of information, technological know-how and money.
(ii) B2C: Business-to-Customers involves transactions between a business firm and its customers. B2C e-commerce transactions not only include activities such as sale or purchase of goods and services but also other marketing activities through the online mode. It basically involves pre-sale activities (such as promoting products through advertisements) and pre-sale services (such as providing product information and cash-on-delivery services) besides postsale services (such as customer care services). e-commerce enables business firms to conduct these activities faster and at much lower costs.
Question 23.
Ram Steel Ltd. has excellent prospects of growth. Next year, the company is planning to expand their business in two more states. For this, the company will need additional funds. According to the finance manager, the company is not in a position to bear any extra financial burden in the form of interest or dividend. They don’t even want to bear any floatation costs. The equity shareholders don’t want to issue any further shares as that would lead to dilution.
(a) Explain the source of finance which will be most suitable for them.
(b) State any two merits of the identified source. [3]
Answer:
(a) Retained earnings will be most suitable for them.
(b) The merits of retained earnings are:
- Retained earnings is a permanent source of funds available to an organisation;
- It does not involve any explicit cost in the form of interest, dividend or floatation cost.
Question 24.
Briefly explain three advantages of issuing debentures. [3]
OR
Who issues bonds? How are they different from debentures? [3]
Answer:
Three advantages of issuing debentures are:
-
- The issue of debentures is suitable in the situation when the sales and earnings are relatively stable.
- As debentures do not carry voting rights financing through debentures does not dilute control of equity shareholders on management.
- Debentures are fixed charged funds and do not participate in profits of the company.
OR
Bonds are issued as long-term financial instruments by the Central Government, State Government or any specialised financial institution.
These are some fine differences between debentures and bonds:
- A debenture may be issued by creating charge on the company’s assets or without this charge. A bond can be issued only by creating charge on the assets.
- A debenture may be redeemed in instalments while a bond is redeemed in lump sum
Question 25.
Explain the following nature of Business risk: [4]
(i) Business risks arise due to uncertainties
(ii) Risk is an essential part of every business
OR
Explain the following characteristics of business:
(a) Economic activity
(b) Uncertainty of return [4]
Answer:
(i) Business risks arise due to uncertainties: Uncertainty refers to the lack of knowledge about what is going to happen in future. Uncertainty creates risks for business because the outcomes of these future events are not known. Examples: Natural calamities, change in demand and prices, changes in government policies and prices, improvement in technology, etc.
(ii) Risk is an essential part of every business: Every business has some risk. No business can avoid risk. The amount of risk may vary from business to business. Risk can be minimised, but cannot be eliminated.
OR
(a) An economic activity: Business is considered to be an economic activity because it is undertaken with the objective of earning money or livelihood and not because of love, affection, sympathy or any other sentimental reason.
(b) Uncertainty of return: Uncertainty of return refers to the lack of knowledge relating to the amount of profit that the business is going to earn during a given period.
Question 26.
Explain the types of pollution. [4]
OR
Do you think small business units can survive in a competitive market ? Explain any three factors which make way for the scope of small business enterprises. [4]
Answer:
Types of Pollution :
-
- Air Pollution : Air Pollution occurs when air contains harmful substances such as gases, fumes, dust and odour in harmful amount which causes damage to living organisms.
- Water pollution : It may be defined as presence of chemicals, industrial waste and other contaminants in such amount that lowers the water quality, which is harmful to living organisms or impairs the beneficial use of water.
- Land pollution : It is caused by dumping of toxic wastes on land which damages the quality of land, making it unfit for agriculture or plantation.
- Noise Pollution : It may be defined as unpleasant, unwanted and disagreeable sounds which causes damage or harm to living organisms. It may be machines, factories, vehicles etc.
OR
Yes, small business units can survive in a competitive market. Factors which make way for the scope of small business enterprises are as follows:
- Limited resources: Individuals with entrepre¬neurial spirit but with limited economic means and resources always have an option of starting a small business.
- Flexibility: Small firms are usually owner- operated and this allows them to expand orreduce the scale of operation, try new products, new ideas without requiring lengthy approval procedures.
- Personal touch: Small enterprises are more likely to succeed in areas requiring personal touch in handling customers.
Question 27.
Aarav Ltd., an enterprise, is registered in USA and has its business operation cf production, marketing etc. in many countries. Its headquarter is located in USA which exercises control over its branches and subsidiaries in various countries. The company employs trained and professional managers. To face international competition, it uses sophisticated technology that leads to greater productivity and better quality.
(i) Identify the type of enterprise.
(ii) Explain three features of the enterprise identified above in by quoting lines from the above case. [4]
Answer:
(i) The type of enterprise is Global enterprise/MNCs.
(ii) The four features of Global enterprises with lines quoted are:
(a) Line – ‘Its business operation of production, marketing, etc. in many countries.’
Feature → International operation – An MNC operates in more than one country. It has its branch factories, offices in several counties. It operates through a network of branches and subsidiaries in host country.
(b) Line – It headquarter is located in USA which exercises control over its branches and subsidiaries in various countries.
Feature → Centralised control – The branches of MNCs spread in different countries are controlled and managed from the headquarters located in their home country. All the branches operate within the broad policy framework of the parent company. There is no interference in day- to-day operations.
(c) Line – ‘The company employs trained and professional managers.’
Feature → Professional Management → An MNC employs professional experts, trained, specialised human resources and keep updating their knowledge and skills by imparting training from time to time to handle the advancements in technology.
(d) Line – ‘To face better quality’
Feature → Advanced Technologies → These enterprises possess technological superiorities in their methods of production so that they can conform to international standards and quality specifications with their innovative techniques of production that help them to come out of a place in global markets. (Any three)
Question 28.
Explain the following types of Itinerant traders: [4]
(a) Peddlers and Hawkers
(b) Cheap Jacks
Answer:
(a) Peddlers and hawkers: These are the oldest form of retailers. They deal in non-standardised and low value goods like fruits, vegetables, ice-creams, toys, fabrics, etc., which they carry on bicycle, hand cart, cycle rickshaw or on their head. They are small traders who move from one place to another to sell their products.
(b) Cheap jacks: They are small retailers who deal in consumer items. They have shops in business localities on a temporary basis. They change their business place from one locality to another on the basis of potentiality of the area.
Question 29.
Identify the following responsibilities related to the given examples:
(a) Providing employment to physically challenged people
(b) Using environment friendly methods of production
(c) Payment of GST
(d) Production of good quality product and services [4]
Answer:
(a) Discretionary responsibility: This responsibility is completely voluntary in nature. It means that a business enterprise may choose to open a charitable school or hospital for the poor, grant aid to people affected by natural calamities, provide employment opportunities to the physically challenged and so on.
(b) Ethical responsibility: This includes the behaviour of the firm that is expected by society but not codified in law. For example, respecting the religious sentiments and dignity of people while advertising for a product.
(c) Legal responsibility: Every business has a responsibility to operate within the laws of the land. Since these laws are meant for the good of the society, a law-abiding enterprise is a socially responsible enterprise as well.
(d) Economic responsibility: A business enterprise is basically an economic entity and, therefore, its primary social responsibility is economic i.e., produce goods and services that society wants and sell them at a profit. There is little discretion in performing this responsibility.
Question 30.
Jagjit is running an artificial jewellery store. He sells on the basis of advertisement only. He is not operating any shop and send all the goods to his customers through VPE
Identify the type of retail trade. Write three features of the type of trade identified. [4]
Answer:
Mail order houses are the retail outlets that sell their merchandise through mail. There is generally no
direct personal contact between the buyers and the sellers in this type of trading.
Three features of Mail Order house are:
- Limited Capital Requirement: They do not require heavy expenditure on building and other infrastructural facilities. They can be started with low amount of capital.
- Wide Reach: Under this system the goods can be sent to all places which have a postal reach.
- Convenience: The goods are delivered at the doorsteps of the consumers which ensures convenience for them. This results in great convenience in buying the products.
Question 31.
(i) Explain the following types of industries:
(a) Analytical industry
(b) Synthetic industry
(c) Processing industry
(ii) Differentiate between business, profession and employment. [3 + 3 = 6]
OR
(i) Explain the following types of industry:
(a) Primary Industry
(b) Secondary Industry
(c) Tertiary Industry
(ii) Differentiate between Industry, commerce and trade. [3 + 3 = 6]
Answer:
(i)
(a) Analytical industry: This industry includes activities which are involved in analysing and separating basic materials into a number of products, for example, processing crude oil to produce petrol, diesel, etc.
(b) Synthetic industry: In this industry, two or more materials are mixed together to create a new product. For example, producing soap, biscuits, etc.
(c) Processing industry: In this industry, raw materials are processed to produce finished goods through a series of manufacturing operations. For example, sugar from sugarcane, textile products, etc.
(ii) Difference between business, profession and employment
| Basis | Business | Profession | Employment |
| (i) Nature of work | Providing goods and service-es to satisfy human wants. | Rendering of personalised services. | Performing work as per service- es contract or rules of services. |
| (ii) Reward | In the form of profits earned. | In the terms of professional fee. | Employees earn wages or salaries. |
| (iii) Risk | Is subject to maximum risk. | Fee is generally regular and certain, hence limited risk. | No or little risk as wages or salaries are fixed. |
OR
(i) (a) Primary industry: A type of industry that includes all those activities which are concerned with the extraction and production of natural resources, reproduction and development of living organisms, plants etc.
(b) Secondary industry: A type of industry that is concerned with using the materials According to L.H. Haney, “Partnership is the relation between which have already been extracted at the primary stage to produce goods for final consumption.
(c) Tertiary industry: A type of industry that is concerned with providing support services to primary and secondary industries as well as activities assisting trade e.g., transport, communication, etc.
| Basis | Industry | Commerce | Trade |
| Meaning | It means production of goods & services | It means distribution of goods and services produced by industry | It means sale, transfer or exchange goods and services. |
| Utility creation | It creates form utility by changing the form of materials into finished goods. | It creates time and place utility by transporting and warehousing the raw material and finished goods. | It creates possession utility through the process of exchange. |
| Capital | It requires huge fixed and working capital | It requires limited fixed capital but huge working capital. | It requires comparatively more of working capital and less fixed capital. |
Question 32.
Why is partnership considered by some to be a relatively unpopular form of business ownership? Explain the merits and limitations of partnership. [6]
OR
Briefly explain the following types of co-operative societies:
(a) Consumer’s cooperative society (b) Producer’s cooperative society
(c) Farmer’s cooperative society [6]
Answer:
According to L.H. Haney, “Partnership is the relation between persons competent to make contracts who have agreed to carry on a lawful business in common with a view to private gain”.
Partnership is considered by some to be a relatively unpopular form of business ownership, because the partners of a firm have unlimited liability. Personal assets may be used for repaying debts in case the business assets are insufficient.
Merits:
- Ease of formation and closure: A partnership firm can be formed easily by putting an agreement between the partners. There is no compulsion with respect to registration of the firm. Closure of the firm too is an easy task.
- Balanced decision making: The partners can oversee different functions according to their areas of expertise. Because an individual is not forced to handle different activities, consequently decisions are likely to be more balanced.
- More funds: In a partnership, the capital is contributed by a number of partners, so large amount of funds is available as compared to sole proprietorship. (Any two)
Limitations -:
- Unlimited liability: Partners are liable to repay debts even from their personal resources in case the business assets are not sufficient to meet the debts, so there is unlimited liability.
- Limited resources: There is a restriction on the number of partners, and hence contribution in terms of capital investment is limited.
- Possibility of conflicts: Partnership is run by a group of persons wherein decision-making authority is shared. Difference of opinion on some issues may lead to disputes between partners. (Any two)
OR
(a) Consumers’ co-operative societies: These societies are formed to protect the interests of the consumers. Basically, its members are the customers who want to get better quality products at reasonable prices. The main aim of the society is to achieve economy of sales by eliminating middlemen. Goods are purchased in large quantities directly from the wholesalers and are sold to the members.
(b) Producers’ co-operative societies: These societies are formed to protect the interests of small producers. Such a society consists of the small producers who find it difficult to obtain inputs like raw material, equipment, etc. to sell their output. These societies are formed to achieve two objectives –
- To supply inputs to the members and also to purchase their output for sale.
- To protect small producers from big capitalists in order to increase the bargaining power of the small firm
(c) Farmers’ co-operative societies: These societies are formed to protect the interests of the farmers. The members are those farmers who want to carry on farming activities jointly. The basic purpose of forming these societies is to obtain benefits of large-scale farming thereby increasing the productivity. These societies provide better quality seeds, fertilisers, manures and other equipment for use in the cultivation of crops. These societies help the farmers in solving the problems of doing farming on fragmented holdings.
Question 33.
i. “A Government Company is established under the Indian Companies Act, 2013 and is registered and
governed by the provisions of the Indian Companies Act, 2013.”
(a) Write one feature of a government company.
(b) State one merit and one demerit of a government company.
ii. “It is one of the oldest and most traditional form of organising public sector enterprises.”
(a) Identify and define the type of organisation mentioned above.
(b) State one merit and one limitation of such enterprise. [3 + 3 = 6]
Answer:
(i) (a) A government company obtains its funds from government shareholding.
(b) Merit:It has a separate legal entity.
Demerit: The management and the
administration rests in the hands of the government.
(ii)
(a) It is a departmental undertaking. These are established as departments of ministries.
(b) Merit: Revenue earned by the enterprise goes directly to the government treasury which serves as a source of revenue for the government.
Limitation: The employees or heads of the departments of such undertakings are not allowed to take independent decisions, without the approval of the ministry concerned
Question 34.
“Earning of profit cannot be the objective of business any more than eating is the objective of living. A person
cannot survive for a long-time and cannot lead a healthy life only by eating. A person has to perform other activities also such as social activities, religious, patriotic activities. Similarly, a business with the sole objective of earning profit cannot survive for a long-time to capture a big share in market to create the goodwill, to have durable profits; businessman must have social and individual objectives of business.” [6]
(i) In the context of above discussion, state any four social and individual objectives of business.
(ii) State any two reasons other than mentioned in the paragraph why profit is requirement of business.
Answer:
(i) Social objectives:
(a) Supply of desired quality of products
(b) Avoidance of unfair trade practices
(c) Employment generation
(d) Social service or community service.
Personal or individual objectives:
(a) Providing good working conditions,
(b) Payment of competitive and satisfactory wages and salaries
(c) To provide various financial and non- financial incentives in order to motivate the workers
(d) To provide opportunities for personal growth and development of employees.
(ii) Profit is required in the business for:
(a) Expansion and growth: When profit is large, a part of it can always be reinvested for expansion or diversification of production and other operations.
(b) An index of performance: Profits indicate whether a business is being managed efficiently or not. Higher profits indicate the efficiency of management and lower profits indicate inefficiency of management. The success of a business can be judged by its ability to earn profit.