Students can access the CBSE Sample Papers for Class 11 Business Studies with Solutions and marking scheme Set 3 will help students in understanding the difficulty level of the exam.
CBSE Sample Papers for Class 11 Business Studies Set 3 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.
Manish is a student pursuing final year B.Tech. from IIT Kharagpur. His father Mr. Sambal Singh who owned a small general store in Jaipur had a heart attack and became completely paralysed. There was no other source of income for the family, so, Manish left his studies and decided to take charge of his father’s general store. While checking the books of accounts, he found that his father had taken a loan of ?2 lakhs from Bank of Baroda to be repaid this year only, but the business is running into losses due to his father’s illness. Hence, his mother advised him to close the business and to look for a job outside.
The form of business organisation formed by Sambal Singh is: [1]
(A) Joint Stock Company
(B) Partnership
(C) Sole Proprietorship
(D) Co-operative Society
Answer:
Option (C) is correct.
Explanation: Sambal Singh’s business is a sole proprietorship because he is the sole owner and operator of the general store in Jaipur. In a sole proprietorship, the business is owned and managed by a single individual, who has unlimited liability for the business’s debts and obligations. In this case, Sambal Singh is the sole proprietor of the general store and is personally responsible for the loan taken from the Bank of Baroda.
A joint stock company involves multiple shareholders, a partnership involves two or more individuals as co-owners, and a cooperative society is formed by a group of individuals with a common interest. None of these forms of business organization apply to the situation described.
Question 2.
Which of the following is not true about profit earning as an essential objective of business? [1]
(A) It is a source of income
(B) It is a source of finance for meeting expansion requirements
(C) It builds reputation of the firm
(D) It does not indicate the efficiency of working of business
Answer:
Option (D) is correct.
Explanation: Profit earning is considered an essential objective of business, and it serves various purposes. However, it is important to note that while profit is a measure of financial success, it does not directly indicate the efficiency of the business’s operations or its overall performance. Efficiency and profitability are related but distinct concepts. A business can generate profits without necessarily being efficient in its operations.
Question 3.
Funding for Departmental Undertakings comes from which of the following sources ? [1]
(A) Shares
(B) Debentures
(C) Government Treasury
(D) Loans from Financial Institutions
Answer:
Option (C) is correct.
Explanation: The funding of these enterprises come directly from the Government Treasury and are an annual appropriation from the budget of the Government. The revenue earned by these is also paid into the treasury.
Question 4.
Global enterprises are become quite popular these days. However, they have certain disadvantages. Which of the
following is incorrect in the light of this statement: [1]
(A) Gives rise to the growth of monopolies
(B) Always concentrate on selling items desirable for developing countries
(C) Leads to concentration of power in few hands
(D) Concentrates more on selling consumer goods and luxury items
Answer:
Option (B) is correct.
Explanation: Global enterprises are indeed popular and have certain disadvantages. However, it is not accurate to say that they always concentrate on selling items desirable for developing countries. Global enterprises cater to a wide range of markets and consumer preferences worldwide. Their product offerings and marketing strategies are influenced by various factors, including market demand, consumer preferences, and profitability.
Question 5.
The foreign exchange banks, industrial banks, development banks, export-import banks, etc. which cater to the
specific needs in the economy fall under which of the following categories ? [1]
(A) Commercial banks
(B) Co-operative banks
(C) Specialized banks
(D) Central bank
Answer:
Option (C) is correct.
Explanation: Explanation : Central banks, such as the Reserve Bank of India (RBI), are responsible for overseeing the monetary system and implementing monetary policy in a country. They act as the bank of banks and are typically responsible for issuing currency, regulating commercial banks, and maintaining price stability in the economy. Central banks play a crucial role in managing a country’s overall financial system and are distinct from commercial banks, co-operative banks, and specialized banks, which serve different functions within the economy.
Question 6.
What does this image indicate? [1]
(A) Employees of the organisation cleaning up after a party.
(B) Employees of an organisation wearing same T-shirts.
(C) Employees of the organisation fulfilling their social responsibility.
(D) All of these.
Answer:
Option (C) is correct.
Explanation: The image shows that the employees are fulfilling their social responsibility by cleaning the waste from the parks/ forests.
Question 7.
Auxiliaries to trade play a …………….. role for trade and industry. [1]
(A) Non-essential
(B) Supportive
(C) Unsupportive
(D) Negative
Answer:
Option (B) is correct.
Explanation: Activities which are meant for assisting trade are known as auxiliaries to trade. These activities are generally referred to as services because these are in the nature of facilitating the activities relating to industry and trade. Transport, banking, insurance, warehousing, and advertising are regarded as auxiliaries to trade, i.e., activities playing a supportive role. In fact, these activities support not only trade, but also industry and, hence, the entire business activity.
Question 8.
To pool resources and expertise of Tech Top Computer Ltd. India, Shezuka Computers Ltd. of Japan has signed an agreement with Tech Top Computers Ltd. to form a new business entity Techzuka Computer Ltd. in India. Both the business parties have subscribed the shares of new company in agreed ratio. The new venture has proved to be in interest of both the companies. Such an alliance has enabled both the companies to take advantage of new opportunities by pooling their resources. Tech Top Computers Ltd. is benefitted by cheap and abundant raw material of India, learning professional management practices, and technically qualified workforce of Shezuka Computers Ltd. Tech Top Computers Ltd. is able to find markets both in India as well as Japan because their products are innovative, and available at competitive rates.
Identify the kind of business enterprise formed by Shezuka Computers Ltd. and Tech Top Computers Ltd. [1]
(A) Cooperative Society
(B) Partnership
(C) Joint Venture
(D) MNC
Answer:
Option (C) is correct.
Explanation: A joint venture is a business arrangement where two or more companies come together to form a new entity and collaborate on a specific project or objective. In this case, Shezuka Computers Ltd. and Tech Top Computers Ltd. have formed a new business entity called Techzuka Computer Ltd. in India. By pooling their resources and expertise, they are able to take advantage of new opportunities and benefit from each other’s strengths. Joint ventures are often formed to access new markets, share risks and costs, and leverage complementary skills and resources.
Question 9.
Which of the following is incorrect regarding the limitations of e-business? [1]
(A) Less time involved in conducting business
(B) Difficulty in acceptance by people as they hesitate to adjust new technology
(C) Low personal touch as it lacks interpersonal interactions.
(D) All statements are correct.
Answer:
Option (A) is correct.
Explanation: There is less time involved in conducting business in the online mode. This is an advantage and not a limitation.
Question 10.
Read the following statements: Assertion (A) and Reason(R). Choose the correct alternative from those given below: Assertion (A): Borrowed funds are not permanent source of capital.
Reasoning (R): Borrowed funds are raised from external sources due to which they have to be paid back after a stipulated period. [1]
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
Answer:
Option (A) is correct.
Explanation: It states that borrowed funds are not a permanent source of capital. This is true because borrowed funds are raised from external sources, such as loans or credit, and they have to be paid back to the lenders within a stipulated period of time. It states that borrowed funds have to be paid back after a stipulated period because they are raised from external sources. This reasoning supports the assertion that borrowed funds are not a permanent source of capital.
Question 11.
Speed post service in India was started in the year ………………. . [1]
(A) 1985
(B) 1986
(C) 1987
(D) 1980
Answer:
Option (B) is correct.
Explanation: The ‘Speed Post service was started by the Indian Department of Posts way back in 1986, to provide time bound delivery of posts.
Question 12.
Which is the e-business application that involves the online buying and selling of shares and other financial instruments? [1]
(A) e-Delivery
(B) e-Promotion
(C) e-Bidding
(D) e-Trading
Answer:
Option (D) is Correct
Question 13.
Statement I: Virus stands for Vital Information Resource Under Siege.
Statement II: It is a program which replicates itself on the other computer systems but does not pose data transmission and storage risk. [1]
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 (A) is correct.
Explanation: Virus replicates itself on the other computer systems and poses data transmission and storage risk.
Question 14.
Name the principle of insurance where it is the right of the insurer to stand in the place of the insured after settlement of a claim as far as the right of insured in respect of recovery from an alternative source is involved. [1] (A) Proximate Cause
(B) Insurable Interest
(C) Subrogation
(D) Contribution
Answer:
Option (C) is correct.
Explanation: It refers to the right of the insurer to stand in the place of the insured, after settlement of a claim, as far as the right of insured in respect of recovery from an alternative source is involved. After the insured is compensated for the loss or damage to the property insured by him/her the right of ownership of such property passes on to the insurer. This is because the insured should not be allowed to make any profit, by selling the damaged property or in the case of lost property being recovered.
Question 15.
“But opening of new branch proved to be a wrong decision and the business suffered heavy losses.” Which of the following reasons best suits the given statement? [1]
(A) Control by Karta
(B) Limited managerial skills of Karta
(C) Dominance by Karta
(D) Limited liability of coparceners
Answer:
Option (B) is correct.
Explanation: The statement suggests that the decision to open a new branch resulted in heavy losses for the business. This indicates that there may have been deficiencies in the managerial skills of the Karta, who is responsible for managing and making decisions for the business. Limited managerial skills can lead to poor decision-making, inadequate planning, and ineffective management, which can ultimately result in financial losses for the business.
Question 16.
Statement I: Long term sources of finance includes those sources which are required by the business firms for a period exceeding 5 years.
Statement II: Shares and debentures are examples of long-term sources of finance.
Choose the correct option from the following: [1]
(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.
Question 17.
As per the Companies Act, Corporate Social Responsibility (CSR) provisions are applicable to which companies? [1]
(A) Companies with an annual turnover of ₹1,000 crore and more
(B) Companies with a net worth of ₹500 crore and more
(C) Companies with a net profit of crore and more
(D) All of the above
Answer:
Option (D) is correct.
Explanation: Corporate sustain ability refers to the role that companies can play in meeting the agenda of sustainable development and entails a balanced approach to economic progress, social progress and environmental protection. The CSR provisions within the Act is applicable to companies with an annual turnover of Rs. 1,000 crore and more, or a net worth of Rs. 500 crore and more, or a net profit of Rs. 5 crore and more.
Question 18.
Match the following sources of finance given in column I with their merits given in column II. [1]
| Column I | Column II |
| 1. Large Scale Industry | (i) More than ₹25 lakh and up to ₹5 crores |
| 2. Medium scale industry | (ii) More than ₹10 crores |
| 3. Small scale industry | (iii) More than ₹5 crores and up to ₹ 10 crores. |
| 4. Micro enterprise | (iv) Up to ₹25 Lakhs |
(A) 1. (iii), 2. (i), 3. (iv), 4. (ii)
(B) 1. (ii), 2. (iii), 3. (i), 4. (iv)
(C) 1. (iv), 2. (i), 3. (ii), 4. (iii)
(D) 1. (i), 2. (iv), 3. (ii), 4. (iii)
Answer:
Option (B) is correct
| Column I | Column II |
| 1. Large Scale Industry | (ii) More than ₹10 crores |
| 2. Medium scale industry | (iii) More than ₹5 crores and up to ₹ 10 crores. |
| 3. Small scale industry | (i) More than ₹25 lakh and up to ₹5 crores |
| 4. Micro enterprise | (iv) Up to ₹25 Lakhs |
Question 19.
Wholesalers sell goods and services on a large scale. Wholesalers engage in buying and selling of goods for which purposes? [1]
(A) Only resale or intermediate use
(B) Only consumption
(C) Both resale or intermediate use and consumption
(D) Neither resale or intermediate use and consumption
Answer:
Option (A) is correct.
Explanation: Purchase and sale of goods and services in large quantities for the purpose of resale or intermediate use is referred to as wholesale trade.
Question 20.
Small business units in India have ………………. access to markets of developed countries. [1]
(A) Unlimited
(B) Limited
(C) Unrestricted
(D) Total
Answer:
Option (B) is correct.
Explanation: Marketing is one of the most important activities as it generates revenue. Effective marketing of goods requires a thorough understanding of the customer’s needs and requirements. In most cases, marketing is a weaker area of small organisations. These organisations have, therefore, to depend excessively on middlemen, who at times exploit them by paying low price and delayed payments. Further, direct marketing may not be feasible for small business firms as they lack the necessary infrastructure
Question 21.
Mr. Rajesh is head of the family. He is taking care of the family 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 new equipment which soon got-obsolete and the business suffered the heavy loss. [3]
(i) Identify the form of business organisation and explain its two limitations.
(ii) What are the options available to coparceners to avoid this situation?
Answer:
(i) Joint Hindu Family business
Limitations of JHF are:
- Dominance of Karta: The karta individually manages the business and takes all the decision and coparceners can’t go against his decision.
- Unlimited Liability: If the business fails, the creditors, can recover their dues not only from the business assets but also from the personal assets of karta.
(ii) If the coparceners are not satisfied with the performance of Karta, with the mutual consent of members business can be terminated.
Question 22.
It refers to creations of mind such as inventions; literacy and artistic works, designs and symbols names and images used in commerce. Name and explain the term mentioned in the above lines. [3]
OR
State any two preferential rights which are enjoyed by preference shareholders? [3]
Answer:
Intellectual Property: It means providing property rights through patents, copyrights and trademarks. Holders of intellectual property rights have a monopoly on the usage of property or items for a specified time period.
OR
Preferential rights that are enjoyed by preference shareholders are as follows:
- Receiving a fixed rate of dividend out of the net profits of the company before any dividend is declared for equity shareholders.
- Receiving their capital after the claims of the company’s creditors have been settled at the time of liquidation.
Question 23.
Sigma Ltd. took insurance cover of ₹3,00,000 from company A and ₹7,00,000 from company B, against the goods lying in godown. Later goods were damaged due to fire and the loss was estimated at ₹1,50,000. [3]
State and explain the underlying principle.
Answer:
Fire Insurance is a contract, where by insurer agrees to make goods the loss of insured, caused to good or property due to fire during the specified period of time and up to a specified amount, in return of a premium. The principle of contribution allows the insurer the right to call on other insurers liable for the cost to share the claim payment.
Question 24.
Multinational corporations are of great advantage but they are not free from ill effects. Explain the ill effects of multinational corporations. [3]
OR
“Main objective of Public-Private Partnership (PPP) is to combine the skills, expertise and experience of both the public and private sector.” In the light of this statement, specify its main advantages. [3]
Answer:
Limitations of multinational corporations are as follows:
- Disregard of national objectives: Sometimes, the multinational companies disregard the national objectives. As a result, planning done by the government goes in vain.
- Depletion of national resources: Multinational companies are set up with profit motive only. They exploit the natural resources in an unbalanced manner. So, it is harmful for the economies.
- Threat of obsolete technology: Sometimes in the ‘technology transfer’ process, obsolete technology is transferred as a result of which the diseconomies of scale prevail.
OR
Public-Private Partnership refers to the involvement of private sector in the Government projects aimed at public benefit in the form of management expertise and monetary contribution.
Advantages offered by PPP are:
- The PPP approach enables the Government to overcome its budgetary and financial constraints.
- Leads to faster implementation of infrastructural projects with high degree of efficiency.
- Benefits of combined expertise of private and public sector. Public-Private Partnership’s (PPP). (Any two)
Question 25.
Explain the following types of business services: [4]
(a) Management services
(b) Consulting services
OR
Explain the following types of banks: [4]
(a) Co-operative bank
(b) Specialised bank
Answer:
(a) Management services Management services cater to various aspects of managing the independent services. Management services or of different types for example finance industries requires asset Management Service, Debt Management services or stock Management services. Some sectors would require facility Management services horrible people Management ser-vices.
(b) Consulting services Consulting Services which are used by many organizations irrespective of industry. Consulting ser-vices can be for financial projects, business expansion projects or for a particular sector of business. Consultations are an integral part of corporate giants like Accenture who provide services to almost every industry
OR
(a) Co-operative banks: These banks are formed to provide/grant loans to its members on easy terms. These are controlled by the State Co-operative Societies Act. E.g.: Bharat co¬operative bank, Janata co-operative bank etc.
(b) Specialised banks: These banks are formed with the purpose of providing specific needs of the industry. E.g.: EXIM Bank, Rural Credit Bank etc.
Question 26.
Write about the administrative setup for small scale, agro and rural industries. [4]
OR
Explain the role of small business in India. [4]
Answer:
Administrative setup for small scale, agro and rural industries is as follows:
- The ministry of small-scale industries and agro and rural industries has been created by the government of India for formulation of policy for the promotion and development of small- scale industries in India.
- In September 2001, this ministry was separated into two ministries i.e., ministry of small-scale industries and ministry of agro and rural industries.
- Ministry of agro and rural industries is concerned with designing of policies, programmes and schemes for growth and development of village and khadi industries, tiny and micro enterprises both in urban and rural areas.
- Many development projects and schemes to provide a number of supporting incentives for the development and promotion of small- scale industries are executed by the state governments in their respective states.
OR
The role of small business in India is as follows:
- Major portion in industrial units: About 95% of the industrial units in the country consists of small industries and 40% of the total industrial output is contributed by these industries. 45% of the total exports (direct and indirect) from India are contributed by them.
- Low cost of production: The cost of production in these industries is very low. Because of low overhead expenses, both establishment and running costs are low.
- Quick decisions: small size of the organisations enables the business firms to take quick and timely decisions and to capture new business opportunities at the right time.
- Good personal relations: Inherent strengths like adaptability and personal touch enables the small-scale industries to maintain good personal relations with both the customers and the employees.
Question 27.
Rajhans Ltd. took a loan of ₹60 Lakh from a bank to complete their goal of business expansion. However, the business suffered losses and they were unable to pay back the loan amount. The management of the company decided to call over the shareholders of the company to pay the loans as they are also the owners of the company. But the shareholders refused saying that they have already paid the full amount due on their shares. The Bank in turn filed a case on Rajhans Ltd. or non-payment of dues. The court said that the shareholders were not liable to pay back the loans as they had no unpaid amount on the shares.
(a) Is the court7s judgement justified?
(b) Which characteristic of a company protected the shareholders from the loss? [4]
Answer:
(a) Yes, the judgement of the court is justified because the shareholders have a limited liability in the company form of organisation. The liability of the shareholders is limited to the extent of their capital contributed by them. In case of losses, the members are held liable only to the extent of the unpaid amount of shares held by them.
(b) The business has a separate Legal Entity. Company takes birth on the date of its incorporation and from the date of its incorporation, it acquires a separate legal entity distinct from its members. Business assets and liabilities are separate from those of its members.
Question 28.
Explain the following objectives of doing a business: [4]
(a) Market standing
(b) Earning profits
Answer:
(a) Market standing: Market standing refers to the position of an enterprise in relation to its competitors. A business enterprise must aim at stronger market standing in terms of offering competitive products to its customers and serving them to their satisfaction.
(b) Earning profits: One of the main objectives of business is to earn profits on the capital employed. Profitability refers to profit in relation to capital investment. Every business must earn a reasonable profit which is crucial for its survival and growth.
Question 29.
Identify the following documents related to the shipment: [4]
(a) The document on the basis of which permission is granted for the export of goods by the customs office.
(b) The document which acts as evidence regarding the acceptance of the shipping company to carry the goods
to the port of destination. .
(c) The document issued by the airline company on receiving the goods on board its aircraft and at the same time giving its acceptance to carry them to the port of destination.
(d) The document that certifies that the goods to be exported are originally from the home country only or exporter’s country only.
Answer:
(a) Shipping Bill. It is the main document on the basis of which permission is granted for the export of goods by the customs office. It contains full details regarding the goods being exported, name of the vessel, exporter’s name and address, country of final destination, etc.
(b) Bill of lading: It is a document issued by the shipping company. It acts as evidence regarding the acceptance of the shipping company to carry the goods to the port of destination. It is also referred to as document of title to the goods and is freely transferable by endorsement and delivery
(c) Airway bill: An airway bill is a document issued by the airline company on receiving the goods on board its aircraft and at the same time giving its acceptance to carry them to the port of destination. It is also referred to as document of title to the goods and is freely transferable by endorsement and delivery.
(d) Certificate of origin: This certificate is issued by the Chamber of Commerce or by Export Promotion Council or by a government department. This document certifies that the goods to be exported are originally from the home country only or exporter’s country only.
Question 30.
‘Businessmen are responsible for aggravating the problem of pollution. So, it becomes their moral duty to take steps for controlling pollution’. In the light of this statement, explain any six steps to be taken by the businessmen ih checking pollution. [6]
Answer:
The environment is the sum total of all the surroundings both natural and man-made. The quality of the environment is fast deteriorating because of the business activities. The smoke, effluents and other wastes released from the industries pollute the environment and hence affect the health of the people. Therefore, it is essential that we should protect our environment.
Role of business in environmental protection:
(i) Preventive role: It concentrates on preventing pollution from different activities. This includes:
(a) Use of CNG vehicles.
(b) Recycling of industrial waste.
(c) Scientific treatment of emission before their release.
(d) Installation of pollution resistant machinery.
(ii) Curative role: Steps must be taken to rectify the damage caused to the environment:
(a) Promoting afforestation.
(b) Assisting government agencies and other NGOs in cleaning polluted rivers and management of harmful substances.
(iii) Awareness role:
(a) Promoting awareness about ecological balance.
(b) Creating awareness about various causes and effects of environmental pollution.
Question 31.
(i) Explain any two from the following:
(a) Owner’s Fund
(b) Borrowed funds
(c) Preference shares
(ii) Differentiate between Equity shares and Preference shares. [3 + 3 = 6]
OR
(i) Explain any two from the following:
(a) Participating and non-participating preference shares
(b) Cumulative and non-cumulative preference shares
(c) Convertible and non-convertible preference shares
(ii) Differentiate between ADR and GDR. [3 + 3 = 6]
Answer:
(a) Owner’s funds:
- The funds provided by the owner of an enterprise are known as owner’s funds.
- These funds remain invested in the business for a longer period of time and are not refunded during the lifetime of the business.
- The owners have control over the working of the company and are paid dividend after the payment of dividend to preference shares.
- For example, equity shares, retained earnings, etc. (Any two)
(b) Borrowed funds:
- The funds raised through loans or borrowings are known as borrowed funds.
- It is a combination of funds that are raised either by the way of credit or loan.
- They are permitted to fixed amount of interest.
- Borrowed funds are generally raised by issuing debentures through credit or loans. It is also termed as debt financing. (Any two)
(c) Preference share:
The capital raised by issue of preference shares is called preference share capital. The preference shareholders enjoy a preferential position over equity shareholders in two ways:
- receiving a fixed rate of dividend, out of the net profits of the company, before any dividend is declared for equity shareholders; and
- receiving their capital after the claims of the company’s creditors have been settled, at the time of liquidation.
(ii) Difference between equity shares and preference shares:
| S.No. | Basis | Equity shares | Preference shares |
| (i) | Nominal value | The nominal value of equity shares is generally low. | Nominal value of preference shares is generally high. |
| (ii) | Payment of Dividend | Payment of equity dividend is made after the payment of preference dividend | Payment of preference dividend is made before the payment of equity dividend. |
| (iii) | Refund of capital | Refund of equity share capital is made after the refund of preference share capital. | Refund of preference share capital is made before the refund of equity share capital |
| (iv) | Accumulation of Dividends | In case of equity shares, arrears of dividend cannot accumulate in any case | In case of preference shares, arrears of dividend may accumulate |
| (v) | Voting Rights | They generally carry voting rights | No voting rights except when dividend remains unpaid for specific period. |
(Any three) [3]
OR
(i) (a) Participating and non-participating preference shares: Participating preference shares are those shares which provide the holder a right to participate in the surplus of the company after a certain rate of divi¬dend has been paid to equity shareholders. Preference shares that do not enjoy such right of participation provided to the hold¬er in the profits of the company are known as nonparticipating preference shares.
(b) Cumulative and non-cumulative preference shares: The preference shares whose dividend, if not paid during a year, gets accumulated are known as cumulative preference shares, while the preference shares which do not enjoy such right are known as non-cumulative preference shares.
(c) Convertible and non-convertible preference shares: Convertible preference shares are those which can be converted into equity shares after a specified period of time while the preference shares which cannot be converted into equity shares are known as non-convertible preference shares.
(ii)
| Basis | ADR | GDR |
| Meaning | The depository receipts which are issued by a company in the USA are called American Depository Receipts. | It is a negotiable instrument issued by international depository bank and can be traded freely like any other security. |
| Negotiation | It can only be negotiated in America. | They are valid all over the world. |
| Listed | It can only be issued to American citizens and listed and traded on a stock exchange of USA. | They are listed on non-US stock exchanges like London Stock exchange. |
Question 32.
What are the incentives provided by the government for setting up industries in backward and hilly areas ? [6]
OR
Explain the following characteristics of entrepreneurship: [6]
(a) Innovation
(b) Risk-taking
(c) Lawful and purposeful activity
Answer:
The incentives provided by the government are as follows:
- (i) Land: Developed plots are offered by every state for establishing industries.
- Power: Some states supply power at a concessional rate of 50%, while some give it free of cost during the initial years.
- Water: Water is either supplied at 50% concession or is totally free for a period of 5 years.
- Finance: Small business units are offered loans at a very low rate of interest i.e.; 10 to 15% subsidy is given for building capital assets.
- Raw material: Units located in backward areas get preferential treatment in the matter of allotment of scarce raw materials like cement, iron, steel, etc.
- Octroi: Many states have abolished Octroi.
OR
(a) Entrepreneurship must bring innovation. It involves creation of value for the customers. Entrepreneurship is creative in the sense that it involves innovation or introduction of new products, discovery of new markets and sources of supply of inputs, technological breakthroughs as well as introduction of newer organisational forms for doing things better, cheaper, faster and in a manner that causes the least harm to the ecology/ environment.
(b) Risk taking: Entrepreneurs take high level of risk while entering the market as the pay-offs are not assured. They leave behind their fixed employment and earnings and put in their savings to start something innovative which involves huge risk. They might succeed and earn huge money or they might fail completely leading to losses.
(c) Lawful activity: The objective of entrepreneurship is to do a lawful business. The purpose of entrepreneurship is creation of value for personal profit and social gain. Illegal activities are illicit businesses and can involves huge punishments and fines.
Question 33.
(a) “Amrita went to buy shoes for hiking from Decathlon in a big store in North Delhi. When she showed the . shows to her sister in Mumbai, she also loved the shoes and went to a Decathlon store in Mumbai.”
(i) Identify the type of retail outlet opened by Decathlon.
(ii) State one merit and one demerit of such a store.
(b) “Akshita doesn’t have any store. She shares the catalogue of her jewellery online and receives order from the customers.” [3 + 3 = 6]
(i) Identify the type of retail business done by Amrita.
(ii) State any one advantage and one disadvantage of the same.
Answer:
(a) (i) Decathlon is a chain store. Chain stores or multiple shops are networks of retail shops, which are owned by the single business enterprise. Under this type of arrangement, a number of shops with similar appearance are established in localities, spread over different parts of the country.
(ii) Merit: Low cost of goods due to avoidance of middle man.
Demerit: There is often a delay in decision making.
(b)
(i) Mail Order House.
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. For obtaining orders, potential customers are approached through advertisements in newspapers or magazines, circulars, catalogues, samples and bills, and price lists sent to them by post.
(ii) Merit: They require limited capital input as all the work is done online with no requirement of a physical store.
Demerit: There is high dependence on postal services for delivery of products.
Question 34.
The full form of LIC is life insurance corporation and it was established in 1956 under the LIC Act, 1956. The act defines its powers, duties and functions. The main aim behind the establishment was to spread the message of life insurance in the country. Also,it was required to mobilize people’s savings. This was done particularly for various nation-building activities. It is a separate legal entity and is fully controlled by the government of India. However, it is not subjected to any audit control. The annual report is presented in the parliament every year. [6]
(i) Identify the type of public sector enterprise referred in the above paragraph.
(ii) State any four features of such organisation which are mentioned in the paragraph.
Answer:
(i) It is a statutory corporation.
(ii) The features are:
- Formation: It is created by or pursuant to, a special law, defining its powers, functions, privileges, form of management and its relationship with government departments.
- Separate legal entity: It is a corporate body and can sue and be sued, enter into contract and acquire property in its own name.
- Public accountability: It is ordinarily not subject to the budget, accounting and audit laws and procedure that it applicable to government departments.
- Valuable instrument for economic growth: These enterprises are considered to be an effective instrument for economic development because they have the power of the government along with the initiative of private enterprises.