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Karnataka 1st PUC Business Studies Model Question Paper 4 with Answers
Time: 3.15 Hours
Max Marks: 100
Instructions to candidates:
- Write the serial number of questions properly as given in the question paper while answering
- Write the correct and complete answers.
Section – A
I. Answer any ten of following questions in a word or a sentence each. While answering Multiple Choice Questions, write the serial number/alphabet of the correct choice and write the answer corresponding to it. Each question carries one mark: ( 10 × 1 = 10 )
Give an example for Genetic Industry.
Seeds and nursery company, poultry farms.
Question 2. The head of the Joint Hindu Family business is called.
Mention any one feature of Global Enterprise.
Huge financial resources.
State any one type of warehouses.
Business Process Outsourcing.
‘A business enterprise must behave as a good citizen’- is an example of its responsibility towards’
Directors of which type of company have to subscribe qualification shares?
State any one type of Debentures.
Who is an entrepreneur?
The person who set up his business is called entrepreneur.
The goods not suitable for Mail Order Business are
(a) Those which can be graded and standardized
(b) Those which can be transported at low cost
(c) Those which have ready demand in the market
(d) Those which are perishable and bulky
(d) Those which are perishable and bulky.
Give an example of a business organization that has entered into international business through franchising system.
Which of the following documents is not required in Import Procedure?
(a) Trade Enquiry
(b) Bill of Entry
(c) Import General Manifesto
(d) Certificate of Origin
(d) Certificate of Origin.
Section – B
II. Answer any ten of the following questions in two or three sentences each. Each question carries 2 marks: ( 10 × 2 = 20 )
State any two Auxiliaries to Trade.
- Banking and Finance.
- Transport and Communication.
Compare Active Partner with Partner by Estoppel.
- Active partners contributes capital where as partner by estoppel does not contributes capital.
- Active partners participates in management where as partner by estoppel does not participates in management.
State any two merits of Departmental Undertakings.
The two benefits of departmental undertakings are:
- These ensure a high degree of public accountability.
- The revenue earned by the enterprise goes directly to the treasury and hence is a source of income for the government.
Name any two types of Telecom Services.
- Cellular mobile services.
- Radio paging services.
Give the meaning of Cookies in online transactions.
A cookie is information that a website puts on your hard disk so that it can remember something about you at a later time. In other words, it is information for future use that is stored by the server on the client side of a client/server communication.
State any two arguments for Social Responsibility of Business.
The arguments for social responsibilities are:
- Public image: The activities of business towards the welfare of the society earn goodwill and reputation for the business. The earnings of business also depend upon the public image of its activities.
- Government regulation: To avoid government regulations businessmen should discharge their duties voluntarily.
State any two important documents for the incorporation of a company.
- Memorandum of Association.
- Articles of Association.
Who are the parties to a Lease Contract?
Lessor and Lessee.
What is the meaning of Cottage Industries?
Cottage industries are those industries which are organised by individual using family labour indigenous technology, etc.
State any two types of itinerant retailers commonly seen in our country.
- Hawkers and Peddlers.
- Market readers.
State any two reasons for International Business.
- To earn higher profit.
- To improve business vision.
Name any two Commodity Boards established by the Government of India.
- Coffee Board.
- Rubber Board.
Section – C
III. Answer any seven of the following questions in 10-12 sentences. Each question carries 4 marks: ( 7 × 4 = 28 )
Explain briefly any four characteristics of Business.
1. An economic activity: Business is considered to be an economic activity because it is undertaken with the object of earning money or livelihood and not because of love, affection, sympathy or any other sentimental reason.
2. Dealings in goods and services on a regular basis: Business involves dealings in goods or services on a regular basis. One single transaction of sale or purchase does not constitute business.
3. Profit earning: One of the main purpose of business is to earn income by way of profit. No business can survive for long without earning profit. That is why businessmen make all possible efforts to maximize profits, by increasing the volume of sales or reducing costs.
4. Sale or exchange of goods and services: Directly or indirectly, business involves transfer or exchange of goods and services for value. If goods are produced not for the purpose of sale but say for internal consumption, it cannot be called a business activity.
State any two merits and two limitations of Statutory Corporations.
- They enjoy independence in their functioning and a high degree of operational flexibility. They are free from undesirable government regulation and control.
- Since the funds of these organisations do not come from the central budget, the government generally does not interfere in their financial matters, including their income and receipts.
- In reality, a statutory corporation does not enjoy as much operational flexibility as stated above. All actions are subject to many rules and regulations.
- Government and political interference has always been there in major decisions or where huge funds are involved.
What is E-Banking? State the benefits of e-banking to banks.
E – banking or Electronic banking means conduct of banking operations through electronic means or devices such as computers, telephone, mobile phone, ATM, etc.
Benefits of E-Banking Services:
- E-Banking provides 24 hours, 365 days a year services to the customer of the bank.
- The operating cost per unit services is lower for the banks.
- It offers convenience to customers as they are not required to go to the bank’s premises.
- There is very low incidence of errors.
- The customer can obtain funds at any time from ATM machines.
- The customer can easily transfer the funds from one place to another place electronically.
Explain the concept of Outsourcing.
Outsourcing is the process by which a company of contracts another company to provide particular services. In other words. it refers to getting the work done through outside expert agencies.
Features of Outsourcing:
1. Outsourcing involves contracting out: Many companies have started outsourcing processes to outside expert agencies (i.e. to other organisations) on a contractual basis. The outsources charges fees for performing his services on a contract basis.
2. Generally non-core business activities are outsourced: Depending upon what business a company is in, there will be some activities that are central and critical to its basic business purpose. Other activities may be regarded as secondary or incidental to fulfilling that basic purpose. Only those activities (other activities) are outsourced to outside agencies.
3. Processes may be outsourced to a third party: The processes are outsourced to service provider (i.e. third party) who operates independently in the market and provides services to other firms too.
Explain briefly any four elements of Business Ethics.
The various elements of business ethics are as under:
1. Top management’s commitment: Top management has a crucial role in guiding the entire organization towards ethically upright behavior. To achieve results, the Chief Executive Officer and other higher level managers need to be openly and strongly committed to
2. Publication of a code: Enterprises with effective ethics programs define the principles of conduct for the whole organization in the form of written documents which is referred to as the code. This involves areas such as fundamental honesty and adherence to laws; product safety and quality; health and safety in the workplace. etc.
3. Establishment of compliance mechanisms: Company must ensure that actual decisions and actions comply with the firm’s ethical standards by establishing suitable mechanisms.
4. Involving employees at all levels: Involvement of employees in ethics programs is a must as at different levels they are the ones who implement ethics policies to make ethical business a reality.
5. Measuring results: Although it is difficult to accurately measure the end results of ethics programs, the firms can certainly audit to monitor compliance with ethical standards. The top management team and other employees should then discuss the results for further
course of action.
State any four privileges of a Private Company as against a Public Company.
- A private company is simpler to form than a public company. It needs two directors while a public company needs three.
- It can start business immediately after incorporation, no certificate to commence is required but in a public company it is necessary to have a certificate to commence business.
- Since a private company collects the requisite capital by private arrangement and does not invite the general public to buy its shares by the issue of a prospectus, it may allot shares without following the formalities of a public company.
- As no outsiders are its shareholders it is not required, unlike a public company, to hold a statutory meeting.
Explain the financial needs of a business.
- To purchase fixed assets: Every type of business needs some fixed assets like land and building, furniture, machinery, etc. A large amount of money is required for purchase of these assets.
- To meet day-to-day expenses: After establishment of a business, funds are needed to carry out day-to-day operations.
- To fund business growth: Growth of business may include expansion of existing line of business as well as adding new lines. To finance such growth, one needs more funds.
- To bridge the time gap between production and sales: The amount spent on production is realised only when sales are made. Normally, there is a time gap between production and sales and also between sales and realisation of cash. Hence during this interval, expenses continue to be incurred, for which funds are required.
- To meet contingencies: Funds are always required to meet the ups and downs of business and for some unforeseen problems.
Write short note on:
(a) Equity shares
(b) Preference Shares
1. Equity shares represent the ownership of a company and thus the capital raised by issue of such shares is known as ownership capital or owner’s funds.
2. Equity shares are shares, which do not enjoy any preferential right in the matter of claim of dividend or repayment of capital.
3. Equity shareholders are regarded as the owners of the company who exercise their authority through the voting rights they enjoy.
1. The capital raised by issue of preference shares is called preference share capital.
2. The preference shareholders enjoy a preferential position over equity shareholders in two ways:
(i) Receiving a fixed rate of dividend, out of the net profits of the company, before any dividend is declared for equity shareholders.
(ii) Receiving their capital after the claims of the company’s creditors have been settled, at the time of liquidation.
3. In other words, as compared to the equity shareholders, the preference shareholders have a preferential claim over dividend and repayment of capital. Preference shares resemble debentures as they bear fixed rate of return. Also as the dividend is payable only at the discretion of the directors and only out of profit after tax, to that extent, these resemble equity shares.
4. Thus, preference shares have some characteristics of both equity shares and debentures. Preference shareholders generally do not enjoy any voting rights.
Explain any four ways to fund startups.
- Boot strapping : Commonly known as self financing, it is considered as the first funding option because by stretching out your personal savings and resources, you are tied to your business.
- Crowd funding : It is the pooling of resources by a group of people for a common goal.
- Angel investment: Angel investors are individuals with surplus cash who have keen interest to invest in upcoming startups. They also offer mentoring or advice alongside capital.
- Venture capital : There are professionally managed funds which are invested in companies that have huge potential.
Explain briefly any four services of retailers to consumers.
Services of retailers towards customer are:
- Regular availability of products: The most important service of a retailer to consumer is to maintain regular availability of various products produced by different manufacturers.
- New products information: By arranging for effective display of products and through their personal selling efforts, retailers provide important information about the arrival, special features, etc. of new products to the customers.
- Convenience in buying: Retailers generally buy goods in large quantities and sell these in small quantities, according to the requirements of their customers.
- Wide selection: Retailers generally keep stock of a variety of products of different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.
Section – D
IV. Answer any four of the following questions in 20-25 sentences each. Each question carries 8 marks: ( 4 × 8 = 32 )
Explain the merits and demerits of Sole Proprietorship form of business organization.
- Ease of formation and closure: Like sole proprietorship, the partnership business can be formed easily without any legal formalities.
- More funds: In a partnership, the capital is contributed by a number of partners. This makes it possible to raise larger amount of funds as compared to a sole proprietor and undertake additional operations when needed.
- Sharing risks: The risks involved in running a partnership firm are shared by all the partners. This reduces the anxiety, burden and stress on individual partners.
- Secrecy: A partnership firm is not legally required to publish its accounts and submit its reports. Hence it is able to maintain confidentiality of information relating to its operations.
- Limited capital: Since the total number of partners cannot exceed 20, the capital to be raised is always limited. It may not be possible to start a very large business in partnership form.
- Lack of continuity of business: A partnership firm comes to an end in the event of death, lunacy or retirement of any partner. Even otherwise, it can discontinue its business at the partners. At any time, they may take a decision to end their relationship.
- Lack of public confidence: There is no governmental supervision over the affairs of the business of a partnership and publishing accounts is also not necessary. Hence, public may not have full confidence in them.
- Unlimited liability: The liability of each partner is not limited to the amount invested but his private property is also liable to pay the business obligations.
Explain the types of Co-operative Societies.
Types of co-operative society:
1. Consumer’s cooperative societies:
- The consumer cooperative societies are formed to protect the interests of consumers.
- The members comprise of consumers desirous of obtaining good quality products at reasonable prices.
- The society aims at eliminating middlemen to achieve economy in operations.
- It purchases goods in bulk directly from the wholesalers and sells goods to the members directly.
- Profits, if any, are distributed on the basis of either their capital contributions to the society or purchases made by individual members.
2. Producer’s cooperative societies:
- These societies are set up to protect the interest of small producers.
- The members comprise of producers desirous of procuring inputs for production of goods to meet the demand of consumers.
- The society aims to fight against the big capitalists and enhance the bargaining power of the small producers.
- It supplies raw materials, equipment and other inputs to the members and also buys their output for sale.
- Profits among the members are generally distributed on the basis of their contributions to the total pool of goods produced or sold by the society.
3. Marketing cooperative societies:
- Such societies are established to help small process in selling their products.
- The members consist of producers who wish to obtain reasonable prices for their output.
- The society aims to eliminate middlemen and improve competitive position of its members by securing a favourable market for the products.
- It pools the output of individual members and performs marketing functions like transportation, warehousing, packaging, etc.
- Profits are distributed according to each member’s contribution to the pool of output.
4. Farmer’s cooperative societies:
- These societies are established to protect the interests of farmers by providing better inputs at a reasonable cost.
- The members comprise of farmers who wish to jointly take up farming activities.
- The aim is to gain the benefits of large scale farming and increase the productivity.
- Such societies provide better quality seeds, fertilizers, machinery and other modern techniques.
5. Credit cooperative societies:
- Credit cooperative societies are established for providing easy credit on reasonable terms to the members.
- The members comprise of persons who seek financial help in the form of loans.
- The aim of such societies is to protect the members from the exploitation of lenders who charge high rates of interest on loans.
- Such societies provide loans to members out of the amounts collected as capital and deposits from the members and charge low rates of interest.
6. Cooperative housing societies:
- To help people with limited income to construct houses at reasonable costs.
- The members of these societies consist procuring residential accommodation at lower costs.
- The aim is to solve the housing problems of the members by constructing houses and giving the option of paying in installments.
- These societies construct flats or provide plots to members on which the members themselves can construct the houses as per their choice.
Explain briefly the principles of Insurance.
1. Principle of utmost good faith: According to this principle, the insurance contract must be signed by both parties (i.e. insurer and insured) in an absolute good faith or belief or trust. The person getting insured must willingly disclose and surrender to the insurer his complete true information regarding the subject matter of insurance.
Example: If any person has taken a life insurance policy by hiding the fact that he is a cancer patient and later on if he dies because of cancer then Insurance Company can refuse to pay the compensation as the fact was hidden by the insured.
2. Principle of insurable interest: As per this principle, the insured must have insurable interest in the subject matter of insurance. It means insured should gain by the existence or safety and lose by the destruction of the subject matter of insurance.
Example: If a person has taken the loan against the security of a factory premises then the lender can take fire insurance policy of that factory without being the owner of the factory because he has financial interest in the factory premises.
3. Principle of indemnity: According to the principle of indemnity, an insurance contract is signed only for getting protection against unpredicted financial losses arising due to future uncertainties. Insurance contract is not made for making profit else its sole purpose is to give compensation in case of any damage or loss.
Example: A person insured a car for 5 lakhs against damage or an accident case. Due to accident he suffered a loss of 3 lakhs. then the insurance company will compensate him 3 lakhs not only the policy amount i.e., 5 lakhs as the purpose behind it is to compensate not to make profit.
4. Principle of contribution: According to this principle, the insured can claim the compensation only to the extent of actual loss either from all insurers in a proportion or from any one insurer.
Example: A person gets his house insured against fire for 50,000 with insurer A and for 25,000 with insurer B. A loss of 37,500 occurred. Then A is liable to pay 25,000 and B is liable to pay 12,500.
5. Principle of subrogation: According to the principle of subrogation, when the insured is compensated for the losses due to damage to his insured property, then the ownership right of such property shifts to the insurer.
Example: If a person receives Rs. 1 lakh for his or her damaged stock, then the ownership of the stock will be transferred to the insurance company and the person will hold no control over the stock.
6. Principle of mitigation of loss: According to the Principle of mitigation of loss, insured must always try his level best to minimize the loss of his insured property, in case of uncertain events like a fire outbreak or blast, etc. The insured must not neglect and behave irresponsibly during such events just because the property is insured.
Example: If a person has insured his house against fire, then, in case of fire, he or she should take all possible measures to minimise the damage to the property exactly in the manner he or she would have done in absence of the insurance,
7. Principle of Causa Proxima: Principle of Causa Proxrna (a Latin phrase), or in simple English words, the Principle of Proximate (i.e. Nearest) Cause, means when a loss is caused by more than one causes, the proximate or the nearest cause should be taken into consideration to decide the liability of the insurer.
Example: If an individual suffers a loss in A fire accent, then this should already he a part of the contract in order for this person to claim the insurance amount.
What are Public Deposits? Explain the merits and limitations of Public Deposits.
- The deposits that are raised by organisations directly from the public are known as public deposits.
- The procedure of obtaining deposits is simple and does not contain restrictive conditions as are generally there in a loan agreement.
- Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions.
- Public deposits do not usually create any charge on the assets of the company. The assets can be used as security for raising loans from other sources.
- As the depositors do not have voting rights, the control of the company is not diluted.
- New companies generally find it difficult to raise funds through public deposits.
- It is an unreliable source of finance as the public may not respond when the company needs money.
- Collection of public deposits may prove difficult, particularly when the size of deposits required is large.
Explain the role of Chambers of Commerce in promoting internal trade in the country.
1. Transportation or interstate movement of goods: The Chambers of Commerce and Industry help in many activities concerning interstate movement of goods which includes registration of vehicles, surface transport policies, construction of highways and roads.
2. Marketing of agro products and related issues: The associations of agriculturists and other federations play an important role in the marketing of agro products. Streamlining of local subsidies and marketing policies of organisations selling agro products are some of the areas where the Chambers of Commerce and Industry can really intervene and interact with concerned agencies like farming cooperatives.
3. Weights and measures and prevention of duplication brands: Laws relating to weights and Measures and protection of brands are necessary to protect the interest of the consumers as well as the traders. They need to be enforced strictly. The Chambers of Commerce and Industry interact with the government to formulate such laws and take action against those who violate rules and regulations.
4. Promoting sound infrastructure: A sound infrastructure like road, port, electricity, railways, etc. plays a catalytic role in promoting trade. The Chambers of Commerce and Industry in collaboration with the government needs to take up heavy investment projects.
5. Labour legislation: A simple and flexible labour legislation is helpful in running industries, maximising production and generating employment. The Chambers of Commerce and Industry and the government are constantly interacting on issues like labour laws, retrenchment. etc.
6. Octroi and other local levies: Octroi and local taxes are the important sources of revenue of the local government. These are collected on the goods and from people entering the state or the municipal limits. The government and Chambers of Commerce should ensure that their imposition is not at the cost of smooth transportation and local trade.
7. Harmonisation of sales tax structure and value added tax: The Chambers of Commerce and Industry play an important role in interacting with the government to harmonise the sales tax structure in different states.
8. Excise duty: Central excise is the chief source of the government revenue levied across states by the central government. The excise policy plays an important role in pricing mechanism and hence the associations need to interact with the government to ensure streamlining of excise duties.
Explain the steps to be followed in Export Procedure up to excise clearance.
1. Receipt of enquiry and sending quotations: The prospective buyer of a product sends an enquiry to different exporters requesting them to send information regarding price, quality and terms and conditions for export of goods.
2. Receipt of order or indent: In case the prospective buyer finds the export price and other terms and conditions acceptable, it places an order for the goods to be dispatched. This order, also known as indent, contains a description of the goods ordered, prices to the paid, delivery terms, packing and marking details and delivery instructions.
3. Assessing importer’s credit’worthiness and securing a guarantee for payments: After receipt of the indent, the exporter makes necessary enquiry about the creditworthiness of the importer. The purpose underlying the enquiry is to assess the risks of non-payment by the importer once the goods reach the import destination. To minimise such risks, most exporters demand a letter of credit from the importer.
4. Obtaining export licence: Having become assured about payments, the exporting firm initiates the steps relating to compliance of export regulations. Export of goods in India is subject to custom laws which demand that the export firm must have an export licence before it proceeds with exports.
5. Obtaining pre-shipment finance: Once a confirmed order and also a letter of credit have been received, the exporter approaches his banker for obtaining pre-shipment finance to undertake export production. Pre-shipment finance is the finance that the exporter needs for procuring raw materials and other components. processing and packing of goods and transportation of goods to the port of shipment.
6. Production or procurement of goods: Having obtained the pre-shipment finance from the bank, the exporter proceeds to get the goods ready as per the specifications of the importer.
7. Pre-shipment inspection: he Government of India has initiated many steps to ensure that only good quality products are exported from the country. One such step is compulsory inspection of certain products by a competent agency as designated by the government. The government has passed Export Quality Control and Inspection Act, 1963 for this purpose.
8. Excise clearance: As per central excise tariff act. excise duty is required to he paid on the materials used in the production of goods meant for export. So if the exporter desires to produce the goods meant for export by himself, he has to pay the excise duty on the material materials used in production of goods for export and obtain export clearance from the concerned excise commissioner. For obtaining export clearance from the concerned excise commissioner exporter has to follow following steps:
(i) The exporter has to apply, to the concerned Excise Commissioner in the region with an invoice because according to the Central Excise Tariff Act, excise duty is payable on the materials used in manufacturing goods. If the Excise Commissioner is satisfied, he may issue the excise clearance.
(ii) But in many cases the government exempts payment of excise duty or later on refunds it if the goods so manufactured are meant for exports. This is done to provide an incentive to the exporters to export more and also to make the export products more competitive in the world markets.
Section – E
V. Answer any two of the following questions: ( 2 × 5 =10 )
As the owner of a business unit, what risks you may face in running it?
The risk faced by owner while running a business unit are:
- Market information risk
- Consumer taste and preferences risk
- Government policy risk
- Capital risk
- Operational risk.
As a businessman having concern for environment protection, suggest any five steps which can be taken by you for environment protection.
Five measures to control environment pollution are:
- Definite commitment by top management of enterprise to create, maintain and develop work culture for environmental protection and pollution prevention.
- Complying with laws and regulations enacted by the government for prevention of pollution.
- Participation in government programmes relating to management of hazardous substance, plantation of trees and checking deforestation.
- Ensuring that commitment to environmental protection is shared throughout the enterprise by all divisions and employees.
- Arranging educational workshop and training materials to share technical information and experience with suppliers, dealers and customers to get them actively involved in pollution control programmes.
Give a list of any five institutions which support small business in India.
Five institutions which support small business in India are:
- National Bank for Agriculture and Rural Development (NABARD).
- National Small Industrial Corporation (NSIC).
- Small Industrial Development Bank of India (SIDBI).
- Rural and Women Entrepreneurship Development (RWED).
- District Industries Centres (DICs).