Students can access the CBSE Sample Papers for Class 11 Business Studies with Solutions and marking scheme Set 4 will help students in understanding the difficulty level of the exam.
CBSE Sample Papers for Class 11 Business Studies Set 4 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.
Madhu, Himanshu and Mayank, after completing B.E. in civil engineering, have jointly taken a project of constructing three government school buildings in a village near Agra within the time period of 6 months. As per the written agreement between them, only Madhu and Mayank will contribute the capital, and take all managerial decisions, whereas Himanshu will contribute capital only but will not be actively involved in management. What type of a partner Himanshu is? [1]
(A) Active
(B) Dormant
(C) Nominal
(D) Secret
Answer:
Option (B) is correct.
Explanation: A dormant partner is one who contributes capital to the partnership but does not actively participate in the management or decisionmaking of the business. In this case, Himanshu is contributing capital but not involved in the managerial decisions.
Question 2.
“Due to financial crises, Ramkrishna had to pay a part of the loan amount from his self-acquired property.”
Identify the reason which made him use his personal property to repay the loan. [1]
(A) Unlimited liability of Karta
(B) Unlimited liability of Coparceners
(C) Loan is taken in Karta’s name
(D) Coparceners not ready to sell ancestral property
Answer:
Option (A) is correct.
Question 3.
Cattle breeding farms, poultry farms and fish hatchery come under which industry? [1]
(A) Genetic
(B) Extractive
(C) Manufacturing
(D) None of these [1]
Answer:
Option (A) is correct.
Explanation: These industries are engaged in breeding plants and animals for their use in further reproduction. Seeds and nursery companies are typical examples of genetic industries. In additional, activities of cattle breeding farms, poultry farms, and fish hatchery come under genetic industries.
Question 4.
Which of the following utilities are provided by the wholesalers : [1]
(A) Only time utility
(B) Only place utility
(C) Both time and place utility
(D) Neither time nor place utility
Answer:
Option (C) is correct.
Explanation: Wholesalers provide various services to manufacturers as well as retailers and provide immense help in the distribution of goods and services. By making the products available at a place where these are needed and at a time when they are needed.
Question 5.
Which of the following documents contains a guarantee from the importer bank to the exporter’s bank that it undertakes to honour the payment up to a certain amount of the bills issued by the exporter : [1]
(A) Bill of exchange
(B) Letter of credit
(C) Sight draft
(D) Usance draft
Answer:
Option (B) is correct.
Explanation: A letter of credit is a guarantee issued by the importer’s bank that it will honour up to a certain amount the payment of export bills to the bank of the exporter. Letter of credit is the most appropriate and secure method of payment adopted to settle international transactions.
Question 6.
The following picture indicates production of sugar. It is an example of which industry? [1]
(A) Analytical industry
(B) Synthetic Industry
(C) Processing Industry
(D) Assembling Industry
Answer:
Option (C) is correct.
Explanation: The processing industry involves transforming raw materials or inputs into finished or semi-finished goods through various processes such as refining, manufacturing, or processing. In the case of sugar production, sugarcane or sugar beets undergo processing to extract sugar, which involves several stages such as crushing, boiling, filtering, and drying.
Question 7.
…………………. are accountable to the …………………. for the working of the company. [1]
(A) Shareholders, Directors
(B) Employees, Directors
(C) Directors, Shareholders
(D) Directors, Employees
Answer:
Option (C) is correct.
Explanation: Directors are accountable to the shareholders for the working of the company. Directors are responsible for managing the affairs of the company and making decisions on behalf of the company. Shareholders, on the other hand, are the owners of the company who invest their capital and have a financial interest in the company’s performance. They have the right to hold the directors accountable for their actions and decisions.
Question 8.
Rachit a student of XI standard was asked by his Business Studies teacher to write an article on ‘Role of Public Sector Enterprises in Indian economy’, where both private sector and public sector exists. While writing the article he learned about various types of PSUs through which government achieves its objective of establishing socialistic pattern of society. There are various Public Sector Enterprises, formed by the government in strategic areas like Defence, Railways, etc. under the direct control of ministries and on the other hand for various public utility services it created PSE to work as an autonomous body by passing a Special Act in the Parliament. To run on commercial lines and to compete with companies in private sector, the PSEs like ONGC, BHEL, etc. are successfully working with the ownership shared with private sector but the private sector can have maximum 49% of ownership only. As per the needs of economy, and industrial policies, the government has to change its policies for PSEs.
Identify the nature of Indian economy highlighted in the case [1]
(A) Capitalistic Economy
(B) Socialistic Economy
(C) Mixed Economy
(D) Developed Economy
Answer:
Option (C) is correct.
Explanation: A mixed economy refers to an economic system that includes elements of both capitalism and socialism. In a mixed economy, there is a Co¬existence of private sector enterprises and public sector enterprises. The case mentions the presence of both private sector and public sector enterprises in India. The government establishes public sector enterprises to achieve the objective of establishing a socialistic pattern of society, while private sector enterprises operate on commercial lines. The ownership of certain public sector enterprises is shared with the private sector, but with a maximum limit of 49%. This combination of private and public sector participation reflects the mixed nature of the Indian economy.
Question 9.
Which of the following does not cause any pollution? [1]
(A) Dumping of toxic wastes on land
(B) Dumping waste into rivers, streams and lakes
(C) Recycling waste instead of disposal
(P) Smoke and other chemicals from manufacturing plants
Answer:
Option (C) is correct.
Explanation: Recycling waste instead of disposing of it helps in reducing pollution by reusing materials and reducing the need for new production, thereby conserving resources and minimizing pollution associated with extraction and manufacturing processes.
Question 10.
Read the following statements: Assertion (A) and Reason(R). Choose the correct alternative from those given below: Assertion (A): A business needs finance to overcome problems in business during difficult times.
Reasoning (R): In the periods of recession and depression, the sales are affected due to which the profit of the firm goes down. [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.
Question 11.
…………….. is an important source of providing rural credit in India. [1]
(A) Public Sector Banks
(B) Co-operative Banks
(C) Private Sector Banks
(D) Specialized Banks
Answer:
Option (B) is correct.
Explanation: Cooperative Banks are governed by the provisions of State Cooperative Societies Act and meant essentially for providing cheap credit to their members. It is an important source of rural credit, i.e., agricultural financing in India.
Question 12.
Both the insurer and the insured should believe in each other and in the contract signed by them. Example: Rahul, if he is a heart patient, should inform his insurance company about his health issues while buying a life insurance policy.
Which principle of insurance is discussed over here? [1]
(A) Insurable Interest
(B) Indemnity
(C) Utmost Good Faith
(D) Subrogation.
Answer:
Option (C) is correct.
Explanation: Utmost Good Faith, also known as Uberrimae Fidei, requires both the insurer and the insured to disclose all relevant information honestly and accurately. It emphasizes the importance of transparency and trust between the parties involved in the insurance contract. In the given example, Rahul is expected to disclose his health issues as a heart patient to the insurance company while buying a life insurance policy, as this information is essential for assessing the risk and determining the terms of the policy. Failure to provide accurate information may lead to a breach of the principle of Utmost Good Faith.
Question 13.
Statement I: The funds that are invested in the business for a longer period of time are known as fixed capital.
Statement II: The funds required for day-to-day operations of the business are known as working capital.
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 14.
Mr. Shailesh owns an oil factory in Rajasthan. Due to illness of his parents living in the UK, he had to go to UK. There he joined a job. He asked his friend Mr. Vijay Arora to take charge of his company till he returns to India. Mr. Vijay took a fire insurance policy for this factory from Zokhim Free Insurance Pvt. Ltd. A month before he got the fire insurance policy, he received a notice from electricity department to get the wiring of the company repaired. He didn’t inform the insurance company about it. He didn’t get the wiring of the factory repaired. After five months of taking the policy, the factory caught fire due to faulty wiring.
“He didn’t get the wiring done…”. Name the related principle not followed by Mr. Vijay Arora in the above-stated lines. [1]
(A) Subrogation
(B) Mitigation
(C) Indemnity
(D) Contribution
Answer:
Option (B) is correct.
Explanation: : Mitigation refers to taking necessary steps to minimize the potential loss or damage in the event of an insured risk. In this case, Mr. Vijay Arora failed to fulfill his obligation to get the wiring of the factory repaired despite receiving a notice from the electricity department. By neglecting to address this issue, he disregarded the principle of mitigation, which requires taking proactive measures to reduce the risk of loss or damage.
As a responsible insured party, Mr. Vijay Arora should have taken immediate action to rectify the faulty wiring, which could have potentially prevented the fire and minimized the extent of the damage. By neglecting this responsibility, he violated the principle of mitigation.
Question 15.
“Public Sector Enterprises formed by the government in strategic areas like Defence, Railways, etc. under the direct control of ministry’. Name the type of PSEs stated here: [1]
(A) Departmental Undertakings
(B) Statutory Corporation
(C) Government Company
(D) Public Company
Answer:
Option (A) is correct.
Explanation: Departmental Undertakings are PSEs that are established as departments or divisions of the government ministries or departments. They operate directly under the control and administration of the concerned ministry or department. Examples of departmental undertakings include entities like Defense Research and Development Organization (DRDO) and Indian Railways, which are directly managed and controlled by the respective government departments.
In departmental undertakings, the government retains direct control over the operations and decision-making processes, and the management is typically composed of civil servants or government officials.
Question 16.
Statement I: A firm is required by law to fulfil its social obligations also known as social responsibility.
Statement II: CSR stands or Company Social Responsibility.
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 (D) is correct.
Explanation: It is not legally mandatory to fulfil the social responsibility. Social responsibility of business refers to its obligation to take those decisions and perform those actions which are desirable in terms of the objectives and values of our society. The assumption of social responsibilities by business enterprises implies that they respect the aspirations of society and would try their best to contribute to the achievement of these aspirations along with their profit interests. CSR stands for Corporate Social Responsibility.
Question 17.
Utsav Sharma, an entrepreneur is planning to enter into a new business of manufacturing laptop bags with an inbuilt lock facility and solar charger. Being highly complex and tedious, its manufacturing operations need to be well planned. He decides that the complete bag will be manufactured at his own factory but its advertisement campaign can be given to Vigyapan Agency so that he can focus on key functions. Identify the mode of business followed by Utsav to focus on key functions of business. [1]
(A) Outsourcing
(B) e-business
(C) Agency
(D) Joint venture
Answer:
Option (A) is Correct.
Explanation: Outsourcing refers to the practice of contracting out specific business functions or operations to external parties or specialized agencies. In this case, Utsav Sharma is planning to manufacture laptop bags at his own factory but outsourcing the advertisement campaign to Vigyapan Agency. By doing so, Utsav can focus on the key functions of manufacturing the bags while entrusting the advertising responsibilities to a specialized agency.
Outsourcing allows businesses to leverage the expertise and resources of external entities, enabling them to focus on their core competencies and streamline their operations. It helps businesses save time, effort, and resources by assigning non-core activities to external parties who are specialized in those areas.
Question 18.
Match the types of pollution given in column I with the relevant causes given in column II.
| Column I | Column II |
| 1. Land poflution | (i) Industrial and commercial activities done by businessman |
| 2. Air pollution | (ii) Dumping of water bodies |
| 3. Noise pollution | (iii) Smoking, chemicals of manufacturing plants created a hole in the ozone Iayer which is created pollution. |
| 4. Water pollution | (iv) Dumping of toxic wastes on land |
(A) 1. (iv), 2. (iii), 3. (i), 4. (ii)
(B) 1. (ii), 2. (i), 3. (iv), 4. (iii)
(C) 1. (iii), 2. (iv), 3. (ii),4. (i)
(D) 1. (iv), 2. (ii), 3. (i), 4. (iii)
Answer:
Option (A) is correct
| Column I | Column II |
| 1. Land poflution | (iv) Dumping of toxic wastes on land |
| 2. Air pollution | (iii) Smoking, chemicals of manufacturing plants created a hole in the ozone Iayer which is created pollution. |
| 3. Noise pollution | (i) Industrial and commercial activities done by businessman |
| 4. Water pollution | (ii) Dumping of water bodies |
Question 19.
Which of the following is incorrect regarding the limitations of e- business? [1]
(A) Economical in nature
(B) Difficulty in acceptance by people as they hesitate to adjust to new technology.
(C) Low personal touch as it lacks interpersonal interactions.
(D) All statements are correct
Answer:
Option (A) is correct.
Explanation: E-business can involve significant costs, including investments in technology infrastructure, website development, cybersecurity measures, and ongoing maintenance. While e-business can offer cost-saving opportunities in certain areas, it is not inherently economical in nature.
Question 20.
Payment of dividend to the equity shareholders is …………………. . [1]
(A) Compulsory
(B) Not compulsory
(C) Mandatory
(D) Fixed
Answer:
Option (B) is correct.
Explanation: : Payment of dividend to the equity shareholders is not compulsory. It is a decision made by the company’s board of directors based on various factors such as the company’s financial performance, profitability, retained earnings, cash flow, and future investment opportunities. The board of directors has the discretion to decide whether to distribute dividends to shareholders or retain the profits within the company for reinvestment or other purposes.
Question 21.
Saksham Ltd., a firm manufacturing textile, needs to finance its day-to-day expenses, like, wages, rent, maintain stock of raw material, etc. Other than this, the company also decides to set up a new plant at an estimated cost of ₹5″crores. The finance manager of the company, Mr. Ramakant was asked by the management to do the financial planning by identifying most suitable source of raising long-term funds for financing the investment decision and short-term sources for working capital decision. As per the suggestions of Mr. Ramakant, the company approached their raw material supplier to give them credit for three months, so that the company can get cloth for making garments without making immediate payment. For long-term investment, the company had issued equity and preference shares to meet its requirement. This decision resulted in payment of large amount of taxes to government as dividend on shares is not deducted from total income of the company before calculating income tax. But this situation could be avoided if company had chosen borrowed funds as a source of finance.
(i) Identify the source of fund referred in the case above. [3]
(ii) State two merits of the identified source.
Answer:
(i) Trade Credit. Trade credit refers to the credit provided by one firm to another for the purchase of goods and services. It is a source of short-term finance and facilitates purchase of goods and services without immediate payment.
(ii) The merits of trade credit are:
(a) It promotes the sales of an organisation. It is a continuous and convenient source of funds.
(b) It does not create any charge on the assets of the business. This source is very easily available when the credit worthiness of the customers is known to the sellers.
Question 22.
According to India Partnership Act 1932, it is not compulsory for a partnership firm to get itself registered, then
why do partners prefer to get the firm registered? [3]
OR
Explain any three advantages of consumer cooperative societies. [3]
Answer:
Legally it is not compulsory for a partnership firm to get itself registered. Nevertheless, partners prefer to get the firm registered to overcome the following limitations –
- The partner of an unregistered firm cannot file a suit against any other partner to settle the disputes.
- The partner of an unregistered firm cannot file a suit against the partnership firm.
- The partner of an unregistered firm cannot file a suit against an outsider or third party for recovery of any claim.
- Outsiders can file a suit on an unregistered firm for claim. (Any three)
OR
The advantages of consumer co-operative societies are as follows :
- Equality in voting right: A co-operative society is governed by the principle of ‘one man one vote’. Each member has equal voting right irrespective of his capital contribution in the society.
- Ease of formation: Minimum ten members are required to form a co-operative society. The procedure for the registration of the society is very simple and involves a few legal formalities.
- Limited liability: The members have limited liability to the extent of the capital contributed by them. Therefore, they cannot be held personally liable for the payment of debts.
Question 23.
In order to promote infrastructural development in the country with active participation of private sector which
type of business partnership would you suggest to the government? Also enumerate three features of such partnership. [3]
Answer:
I would suggest for Public-Private Partnership. The features of PPP are as follows:
- It is a contractual relationship between government and private sector organisation for implementing a project for public benefit.
- PPP is confined to a particular project for a specific area like its operation or maintenance or management.
- Selection of the private partner is done by the government through competitive bidding or competitive negotiations.
Question 24.
State three features of a departmental undertaking. [3]
OR
Enlist three advantages of PPP to the economy? [3]
Answer:
Three features of a departmental undertaking are as follows:
- Part of the Government: Departmental Undertaking is a part of the Government and is organised as a unit of the concerned ministry. For example, Ministry of Railways is accountable for the working of Diesel Locomotive Work (DLW).
- Government financing: Since the Government fully owns a departmental undertaking; the concerned ministry is responsible for financing it from the budget allotted to it. Its surpluses are also part of the concerned budget.
- Accounting and audit: Departmental Undertakings are subject to same accounting and audit rule pattern which are relevant for other government departments.
OR
Advantages offered by PPP are as follows:
- 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.
Question 25.
Explain the following functions of insurance: [4]
(i) Protection
(ii) Distribution of Risk
OR
Explain the following: [4]
(i) Bank Overdraft
(ii) Speed Post
Answer:
(i) Protection: Insurance provides protection against risk of loss due to an uncertain reason. It provides a sense of security in the minds of the businessmen. Therefore, they can concentrate more on the important business decisions in order to increase profitability.
(ii) Distribution of risk: Insurance is an arrangement pooling of risk. Insurance spreads the risk over a large number of persons who contribute premium, which is used to compensate the person suffering loss.
OR
(i) Bank Overdraft: Is a temporary arrangement under which a depositor is allowed to draw by cheque more than the amount to his credit up to a specified limit.
(ii) Speed Post: This service provides fast time bound and guaranteed delivery of mail by the post offices on payment of extra charge than normal postal charges.
Question 26.
What are the responsibilities of business towards its employees ? Explain any four. [4]
OR
Mention four steps taken by the business to adopt fair trade practices. [4]
Answer:
The responsibilities of a business towards employees are as follows:
- To provide them fair wages and full employment.
- They should be provided good working conditions.
- They should be provided suitable opportunities of advancement.
- There must be security of service and job satisfaction.
- To develop a sense of belonging and dignity of labour. (Any four)
OR
Following steps can be taken by the business to do fair trade practices:
- Use of standard weights and measures.
- Payment of reasonable and fair remuneration to workers.
- Not manufacturing and selling adulterated goods.
- Production of good quality products.
- Earning reasonable and justifiable profits.
- Complying by the laws of the land. (Any four)
Question 27.
Ravi has a reputed company which manufactures phones. The company is doing well and earning great profits. The owner and the employees are putting their maximum efforts to make good quality products available to the consumers at best prices. They are also paying good dividend to their shareholders. With great profits and excellent sales, the company has earned a good reputation. It plans to utilize its profits to finance the growth and expansion requirements.
Explain the role of profit in the business of Ravi. [4]
Answer:
(i) Source of income: It is the most important source of income and provides livelihood for the businessman. Everyone has to satisfy his/ her needs and hence no one is expected to undertake business activities without any earnings for the same.
(ii) Source of finance: Profit is a source of finance for expansion and diversification of business activities. A part of the profits can be retained for increasing the volume of the business. Retention of profit is always considered the best way for carrying out business activities.
(iii) Efficient working: Profit is required for efficient and smooth functioning of the business. It is considered as a barometer for judging the performance of the business.
(iv) Goodwill: Profit helps in building the reputation or goodwill of the business firms. With profit increasing over time, a business enterprise gains reputation. Such goodwill creates market standing which ultimately helps to raise loans and thereby obtain credit more easily.
Question 28.
Write detailed note on the following services offered by Indian Postal department: [4]
(i) Financial facilties
(ii) Mail facilities
Answer:
(i) Financial facilities: These facilities are provided through the post office’s savings schemes like Public Provident Fund (PPF), Kisan Vikas Patra, and National Saving Certificates in addition to normal retail banking functions of monthly income schemes, recurring deposits, savings account, time deposits and money order facility.
(ii) Mail facilities: Mail services consist of parcel facilities that is transmission of articles from one place to another; registration facility to provide security of the transmitted articles and insurance facility to provide insurance cover for all risks in the course of transmission by post.)
Question 29.
Identify the following institutions:
(i) Institution to develop clusters of traditional industries in various parts of the country.
(ii) Institution meant to support the early phase of entrepreneurship development.
(iii) Institution which is meant to solve the problems of industries like feasibility reports, credit, etc.
(iv) Institution meant for providing training manuals for women entrepreneurship and training them. [4]
Answer:
(i) SFURTI- Scheme of Fund for Regeneration of Traditional Industries
(ii) Start-up scheme. It was developed to help the entrepreneurs in early stages.
(iii) DIC- To make available all necessary services required to start and manage rural industries at one place.
(iv) RWED- Rural and Women Entrepreneurship Development . The main objective of this development programme is to promote a conducive business environment and to build institutional and human capacities that will encourage the entrepreneurial initiatives of rural people and women.
Question 30.
A, B and C are three friends from the same village. They completed their education from Delhi University. Now they want that their country should benefit from the education. With this vision in mind, they want to start a business that will generate more employment and output, mobilise the local resources and at the same time, contribute to balanced regional development of the nation. They plan to start a small-scale unit in their village. Do you think by this way they will be able to contribute to the growth and development of the country? [6]
Answer:
Yes, they will be able to contribute towards the growth of the nation.
- Employment opportunities: Cottage and rural industries create a lot of employment opportunities in the rural areas especially for the traditional artisans and the weaker sections of society.
- Reduces inequalities: Cottage and rural industries help in reducing inequalities in income, disperse development of industries and establish link with other sectors of the economy.
- Output generation: 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.
- Prevents migration: Establishment of these industries in the rural areas prevent migration of rural population to urban areas in search of employment.
Question 31.
(i) Explain any two out of the following:
(a) Partnership at Will
(b) Particular Partnership
(c) General Partnership
(ii) Differentiate between Co-operative society and a company form of business organisation. [3 + 3 = 6]
OR
(iii) Explain any two out of the following
(a) Private company
(b) Public Company
(c) One person company
(iv) Differentiate between Memorandum of Association and Articles of Association. [3 + 3 = 6]
Answer:
(i) (a) Partnership at will: Terminated when any partner gives a notice of withdrawal from partnership to the firm.
(b) Particular partnership : Dissolves automatically when the purpose for which it was formed is fulfilled or when the time duration expires.
General partnership: The liability of partners is unlimited and joint.
(c) General partnership: The liability of partners is unlimited and joint.
(ii) Difference between Co-operative society and Company :
| Basis | Co-operative society | Company |
| Regulations | Co-operative societies are governed by the Co-operative Societies Act, 1912. | Companies are governed by the Companies Act, 2013. |
| Transfer of share | The members of co-operative societies cannot transfer their shares. | Shares can be easily transferred in case of a public company but not in case of a private company. |
| Aim | The main aim of a co-operative society is to render services to its members. | The main aim of a company is to earn profit. |
| Number of members | Minimum 10 members are required to form a co-operative society, while there is no limit on the maximum number of members | In case of a private company: Minimum—2 Maximum—200 In case of a public company – Minimum—7 Maximum—No limit. |
| Management | The business is managed and controlled by the elected managing committee | The business is managed and controlled by the Board of Directors. |
| Government support | Generally, support in the form of low taxes, subsidies, loans at low rate of interest, etc. is provided by the government. | Generally, no government support is provided to companies. |
OR
(i)
(a) Private Company: A company which
- restricts the right of members to transfer its shares
- has a minimum of 2 and a maximum of 200 members, excluding the present and past employees
- does not invite public to subscribe to its share capital
- it is necessary for a private company to use the word private limited after its name
(b) Public Company: A company which :
- has a minimum of 7 members and no limit on maximum members
- has no restriction on transfer of shares
- is not prohibited from inviting the public to subscribe to its share capital or public deposits.
(c) One-person company: A is the one where a single shareholder holds 100 percent shareholding. Only a natural person who is a resident of India and also a citizen of India can form a one-person company. person can be a shareholder in only single One Person Company at any given time. The person forming the One Person
Company has to nominate a Nominee with his written consent who, in the event of death or inability to contact the owner of the One Person Company, shall come forward and take over the reins of the one- person company.
(ii) Following are the differences between MOA and Article of Association:
- Nature: Memorandum of Association is the charter of a company indicating the objects and conditions on which the company is granted incorporation. It defines nature of business, objects, capital structure of the company. On the other hand, Article of Association specifies rules and regulations of the company which are observed in conducting its internal affairs.
- Contents: Contents of Memorandum of Association basically specify areas of operations of the company beyond which it cannot go. Contents of Article of Association deal with internal matters, laws, by-laws of the company.
- Relationships defined: Memorandum of Association defines external relationship i. e., the relationship between the company and the outsiders. Article of Association defines internal relationship i.e., the relationship between the company and its members.
- Status: Memorandum of Association, being the charter or constitution of the company, is subordinate only to the Companies Act while Article of Association is subject to subordination to both the Companies Act and Memorandum of Association.
- Violation: Any act of the company in violation of Memorandum of Association is ultra vires and void even if it is ratified by all members of the company. Any act of the company in violation of the Article of Association can be ratified by majority of members of the company.
Question 32.
Discuss the sources from which a large industrial enterprise can raise capital for financing modernisation and
expansion. [6]
OR
What is commercial paper ? What are its advantages and limitations ? [6]
Answer:
Sources are as follows :
- Industrial Finance Corporation of India : It was established in July 1948. IFCI has contributed a lot to the development of management education in the country. The main function is to provide finance to private sector units.
- State Financial Corporations : It was established in the year 1951 by SFC Act. It provides short term loans to the business units.
- Industrial Credit and Investment Corporation of India (ICICI) : It was formed in the year 1955 as a private limited company. It provides long term finance to private sector units.
- Unit Trust of India : It was established by government of India in 1964 under the Unit Trust of India Act 1963. Its main objective is to mobilise the community’s savings into the productive ventures. Other important financial institutions are LIC, IDBI, SIDBI, SIDC etc.
OR
Commercial paper: Commercial paper is an unsecured promissory note issued by a firm to raise funds for a short period, varying from 90 days to 364 days. It is issued by one firm to another business firms, insurance companies, pension funds and banks.
Advantages :
- It is sold on an unsecured basis.
- Companies can earn some good return on C.P
- It provides a continuous source of funds.
- It provides more funds compared to other sources.
Limitations :
- Only financially sound and highly rated firms can raise money through C.P
- Limited amount of finance can be raised through C.P
- It is an impersonal method of financing means maturity is not a surety for it.
Question 33.
(i) “The fundamental reason behind international business is that the countries cannot produce equally well or
cheaply all that they need.” [3 + 3 = 6]
(a) Mention one advantage of International trade.
(b) Mention two common problems faced by traders in international trade.
(ii) “Before dispatching the goods, the exporter assesses the credit worthiness of the importer”.
(a) Which step of export process is being referred here?
(b) Which is the next step in the process of export?
Answer:
(i) (a) International trade leads to international specialisation. Each country finds it advantageous to produce the goods in which it is specialised at home and procuring the rest through trade with other countries which the other countries can produce at lower cost due to specialisation.
(b) (i) Many countries put import and export restrictions either directly or by imposing high customs duty and tariffs creating problems for conducting international trade.
(ii) Trade dealing practices of traders located in different countries are vary widely which may result in a lot of difficulties in concluding the trade agreement.
OR
(ii) (a) Obtaining letter of credit: Before dispatching the goods, the exporter assesses the credit worthiness of the importer. For this the importer is requested to send a ‘letter of credit in favour of exporter. It contains an undertaking of importer’s bank that bills drawn by the exporter up to a specified amount shall be honoured by the importer.
(b) The next step is obtaining export license and completing other formalities. For exporting goods from India exporters are required to obtain export license, Import Export Code Number, registration membership certificate, RBI code number and registering with ECGC.
Question 34.
Seema has completed her BBA degree from Delhi University and wants to start her own enterprise in a remote
area of Uttrakhand so that she could contribute to Government’s effort to develop backward areas. She decided to open an enterprise producing handicrafts items in Rudrapur to showcase the local talent and traditional art of local artist of that area. But she is worried and confused as she has no idea as to how and from where she should obtain funds to buy land plot, arrange for utilities like power connection, water connection, raw material, etc as it is totally new area and new experience for her. One of her friend Rashmi told her about ‘WASME’ which was set up for the sustained growth of rural enterprises. She fixed a meeting with the chairperson of this institution who told her about other institutional supports and special incentives given by Government to the entrepreneurs starting their business in backward, tribal and hilly areas. Now Seema is successfully running a network of 20 branches of her enterprise in different parts of Uttrakhand contributing to the socio-economic growth of the economy. [6]
(i) Name the apex Bank set up in 1982 to promote cottage and village industries and rural entrepreneurs.
(ii) Give full form of RWED, SFURTI, WASME, RSBDC, the organisations set up for promotion of entrepreneurship among rural people and women for development of rural area.
(iii) State any five incentives offered by Government for enterprises set up in rural, backward and hilly areas.
Answer:
(i) National Agricultural Bank for Rural Development.
(ii) RWED: Rural and Woman Entrepreneurship Development.
SFURTI: Scheme of Fund for Regeneration of Traditional Industries
WASME: World association for Small and Medium Enterprise
RSBDC: The Rural Small Business Development Centre
(iii) Five incentives offered by the Government for SSIs set up in Rural, backward and hilly areas are:
(a) Land: Every state offers developed plots of land at concessional rates and allows the payment in easy instalments
(b) Power: Power is supplied to small business enterprise at concessional rates or the firms are even exempted from payment in their initial years of set-up.
(c) Water: Is supplied on a no-profit no-loss basis or at a discount of 50% some cases, water charges are exempted for a period of 5 years.
(d) Tax holiday: Tax holiday is given to the industries established in backward, hilly Tribal areas for a period of 5 – 10 years.
(e) Finance: Loans are given at concessional interest rates. Finance subsidy of 10 – 15% is given for building capital assets.