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Karnataka 1st PUC Business Studies Previous Year Question Paper March 2018 (South)
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 Extractive Industry.
Agriculture, mining, fishing, forestry, hunting, fruit gathering, etc. are examples of extractive industries.
Kartha is a Joint Hindu Family business has
(a) Limited liability
(b) Unlimited liability
(c) No liability for debts
(d) Joint liability
(b) Unlimited liability
Name the two sectors working in the Indian Economy.
The two sectors working in the Indian economy are:
(a) Public sector
(b) Private sector.
State any one type of Bank account.
What is e-Business?
E-commerce is conducting the activities of industry, trade, and commerce using computer networks, i.e. internet.
Carbon Monoxide emitted by automobiles directly contributes to
(a) Water pollution
(b) Noise pollution
(c) Land pollution
(d) Air pollution
(d) Air pollution
How many members have to sign a Memorandum of Association in the case of a public company.
7 members have to sign a memorandum of association in case of a public company.
ADRs are issued in
(d) the USA
(d) the USA
World Trade Organisation.
Which of the following is not a fixed shop large retailer?
(a) General Stores
(b) Chain Stores
(c) Mail-Order Houses
(d) Super Markets
(a) General Stores
Name any one mode of entering into international business.
Exporting and importing.
Which of the following documents is not required in export trade?
(a) Certificate of Origin
(b) Certificate of Inspection
(c) Mate’s receipt
(d) Bill of Entry
(d) Bill of Entry
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 types of Economic activities.
The different types of economic activities are:
Who is a Nominal Partner?
Partners who only allow the firm to use their name as a partner. They do not have any real interest in the business of the firm such partners knOwn as a nominal partner.
Mention any two merits of Statutory Corporations.
The benefits of the statutory corporation are:
(a) They enjoy independence in their functioning and a high degree of operational flexibility. They are free from undesirable government regulation and control.
(b) Since the funds of these organizations do not come from the central budget, the government generally does not interfere in their financial matters, including their income and receipts.
(c) Since they are autonomous organizations they frame their own policies and procedures within the powers assigned to them by the Act. The act may, however, provide few issues matters which require prior approval of a particular ministry.
(d) A statutory corporation is a valuable instrument for economic development. It has the power of the government, combined with the initiative of private enterprises.
(a) In reality, a statutory corporation does not enjoy as much operational flexibility as stated above. All actions are subject to many rules and regulations.
(b) Government and political interference has always been there in major decisions or where huge funds are involved.
State any two examples for specialized banks.
Foreign Exchange Bank; Industrial Banks.
State any two benefits of e-Business.
Two benefits of e-business are:
(a) Global reach/access
What is business ethics?
Business ethics is defined as a set of moral standards which society expects from businessmen.
Name any two stages in the formation of a company.
(a) Promotion stage.
(b) Incorporation stage.
Name any two internal sources of business finance.
(a) Equity shares
(b) Retained earnings.
Give the meaning of village industries.
Village industry has been defined as any industry located in a rural area that produces any goods, renders any service with or without the use of power, and in which the fixed capital investment per head or artisan or worker does not exceed Rs. 50,000.
What do you mean by Departmental stores?
A Departmental Store is a large-scale retail shop where a large variety of goods are sold in a single building. The entire building is divided into a number of departments or sections. In each department, specific types of goods like stationery items, books, electronic goods, garments, jewelry, etc. are made available.
Write the meaning of “Licensing”.
Licensing is a contractual arrangement in which one firm grant access to its patents, trade secrets, or technology to another firm in a foreign country for a fee called royalty.
Give the meaning to Bill of Lading.
Bill of lading is a document wherein a shipping company gives its official receipt of the goods put on board its vessel and at the same time gives an undertaking to carry them to the port of destination.
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 the business.
(a) 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.
(b) 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 a business.
(c) Profit earning: One of the main purposes 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.
(d) Sale or exchange of goods and services: Directly or indirectly, business involves the transfer or exchange of goods and services for valùe. If goods are produced not for the purpose of sale but say for internal consumption, it cannot be called a business activity.
Explain briefly any four features of Global Enterprises.
(a) Huge capital resources: These enterprises are characterized by possessing huge financial resources and the ability to raise funds from different sources. Because of their financial strength, they are able to survive under all circumstances.
(b) Foreign collaboration: Global enterprises usually enter into agreements with Indian companies pertaining to the sale of technology, production of goods, use of brand names for the final products, etc.
(c) Advanced technology: These enterprises possess technological superiorities in their methods of production. They are able to conform to international standards and quality specifications. This leads to the industrial progress of the country.
(d) Product innovation: These enterprises are characterized by having highly sophisticated research and development departments engaged in the task of developing new products and superior designs of existing products.
Briefly explain any four functions of Warehousing.
Usually, goods are not sold or consumed immediately after production. They are held in stock to be available as and when required. Special arrangements must be made for the storage of goods to prevent loss or damage. Warehousing helps business firms to overcome the problem of storage and facilitates the availability of goods when needed.
Functions of Warehousing
(a) Consolidation: The warehouse receives and consolidates materials/goods from different production plants and dispatches the same to a particular customer on a single transportation shipment.
(b) Break the Bulk: The warehouse divides the bulk quantity of goods received from the production plants into smaller quantities and then transported according to the requirements of clients to their places of business.
(c) Stock Piling Goods or Raw Materials which are not required immediately for sale or manufacturing are stored in warehouses to be made available to business depending on customer’s demand. This type of warehouse is also known as the storehouse of surplus goods.
(d) Value Added Services: Provision of value-added services such as in transit mixing, packaging, and labeling is also a function of modem warehousing.
(e) Price Stabilization: Warehousing performs the function of stabilizing prices by adjusting the supply of goods according to demand. Financing warehouse owners provide loans to the owners on the security of goods and further supply goods on credit terms to customers. The warehouse keepers issue a receipt when goods are kept in the warehouse. This receipt can be used as security to get loans from banks and owners. in this way, it also helps in financing.
Bring out any four distinctions between Traditional Business and e-Business.
Explain briefly any four arguments for social responsibility.
The arguments for social responsibilities are:
(a) Public image: The activities of business towards the welfare of the society earn goodwill and reputation for the business. The earnings of a business also depend upon the public image of its activities.
(b) Government regulation: To avoid government regulations businessmen should discharge their duties voluntarily.
(c) Survival and growth: Every business is a part of society. So for its survival and growth, support from society is very much essential. The business utilizes the available resources like power, water, land, roads, etc. of the society. So it should be the responsibility of every business to spend a part of its profit for the welfare of society.
(d) Employee satisfaction: Besides getting a good salary and working in a healthy atmosphere, employees also expect other facilities like proper accommodation, transportation, education, and training. Employers should try to fulfill all the expectations of the employees because employee satisfaction is directly related to productivity.
Explain briefly any four clauses of the Memorandum of Association.
(a) Name Clause: It contains the name by which the company will be established. The approval of the proposed name is taken in advance from the Registrar of the companies.
(b) Objects Clause: it contains a detailed description of the objects and rights of the company, for which it is being established. A company can undertake only those activities which are mentioned in the objects clause of its memorandum.
(c) Capital Clause: It contains the proposed authorized capital of the company. It gives the classification of the authorized capital into various types of shares, (like equity and preference shares) with their numbers and nominal value. A company is not allowed to raise more capital than the amount mentioned as its authorized capital. However, the company is permitted to alter this clause as per the guidelines prescribed by the Companies Act.
(d) Liability Clause: ¡t contains financial limit up to which the shareholders are liable to pay off to the outsiders in the event of the company being dissolved or closed down.
Explain briefly any four merits of preference shares.
(a) Preference shares provide reasonably steady income in the form of fixed rate of return and safety of the investment.
(b) Preference shares are useful for those investors who want a fixed rate of return with comparatively low risk.
(c) It does not affect the control of equity shareholders over the management as preference shareholders don’t have voting rights.
(d) Payment of fixed rate of dividend to preference shares may enable a company to declare higher rates of dividend for the equity shareholders in good times.
(e) Preference shareholders have a preferential right of repayment over equity shareholders in the event of liquidation of a company.
Write short notes on:
(a) Retained earnings
(b) Trade credit.
Retained Earnings: A company generally does not distribute all its earnings amongst the shareholders as dividends but a portion of the net earnings may be retained in the business for use in the future this is known as retained earnings. It is a source of internal financing or self-financing or ‘plowing back of profits. The profit available for plowing back in an organization depends on many factors like net profits, dividend policy, and age of the organization.
Trade Credit: It is the credit extended by one trader to another for the purchase of goods and services. Track credit facilitates the purchase of supplies without immediate payment. Trade credit is commonly used by business organizations as a source of short-term financing. It is granted to those customers who have a reasonable amount of financial standing and goodwill. The volume and period of credit extended depend on factors such as the reputation of the purchasing firm, the financial position of the seller, volume of purchases, past record of payment, and degree of competition in the market. Terms of trade credit may vary from one industry to another and from one person to another. A firm may also offer different credit terms to different customers.
Explain briefly any four problems faced by Small businesses.
(a) Finance: The most serious problem faced by SSIs is the non-availability of adequate finance to carry out their operations. Small scale sector lacks the creditworthiness and collateral required to raise capital from the capital markets or financial institutions and hence they depend on local money lenders who charge high-interest rates.
(b) Raw materials: Another major problem of small businesses is the procurement of raw materials. If the required materials are not available, they havé to compromise on the quality or have to pay a high price to get good quality materials. They purchase raw materials in small quantities due to a lack of storage capacity and hence their bargaining power is low.
(c) Managerial skills: Small business is generally promoted and operated by a single person, who may not possess all the managerial skills required to run the business. Many small business entrepreneurs possess sound technical knowledge but are less successful in marketing and may not find enough time to take care of all functional activities.
(d) Less productive labor: Small business firms cannot afford to pay high salaries to their employees, which affects employee willingness to work. Thus, productivity per employee is relatively low and employee turnover is generally high. Small business organizations are unable to attract talented people because of lower remuneration. Division of labor cannot be practiced in small-scale units, which results in a lack of specialization and concentration.
Explain briefly any four services of wholesalers to Manufacturers.
Wholesalers services to producers are:
(a) Facilitating large-scale production: Wholesalers collect small orders from a number of retailers and pass on the pool of such orders to manufacturers and make purchases in bulk quantities. This enables the producers to undertake production on a large scale,
(b) Bearing risk: The wholesale merchants deal in goods in their own name, take delivery of the goods and keep the goods purchased in large lots in their warehouses. In the process, they bear lots of risks such as the risk of fall in prices, theft, pilferage, spoilage, fire, etc.
(c) Financial assistance: The wholesalers provide financial assistance to the manufacturers in the sense that they generally make cash payments for the goods purchased by them. To that extent, the manufacturers need not block their capital in the stocks.
(d) Expert advice: As the wholesalers are in direct contact with the retailers, they are in a position to advise the manufacturers about various aspects including customer’s tastes and preferences, market conditions, competitive activities, and the features preferred by the buyers.
Section – D
IV. Answer any four of the following questions in 20-25 sentences each. Each question carries 8 marks: ( 4 × 8 = 32 )
Explain any four merits and four demerits of the Partnership form of business.
Merits of partnership are:
(a) Easy to. form: Like sole proprietorship, the partnership business can be formed easily without any legal formalities.
(b) More funds: In a partnership, the capital is contributed by a number of partners. This makes it possible to raise a larger amount of funds as compared to a sole proprietor and undertake ad4itional operations when needed.
(c) 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.
(d) Secrecy: A partnership firm is not legally required to publish its accounts and submit its reports. Hence it is able to maintain the confidentiality of information relating to its operations.
Demerits of partnership are:
(a) 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.
(b) 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 will of the partners. At any time, they may take a decision to end their relationship.
(c) 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, the public may not have full confidence in them.
(d) 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 briefly the features of Joint Stock Company.
(a) Artificial person: Just like an individual, who takes birth, grows, enters into relationships, and dies, a joint-stock company takes birth, grows, enters into relationships, and dies. However, it is called an artificial person as to its birth, existence, and death are regulated by law arid it does not possess phýsical attributes like that of a normal person.
(b) Legal formation: No single indìvidtial or a group of individuals can start a business and call it a joint-stock company. A joint-stock company comes into existence only when it has been registered after completioñ of all formalities required by the Indian Companies Act., 2013.
(c) Separate legal entity: Being an artificial person a company has its own legal entity separate from its members. It can own assets or property, enters into contracts, sue, or can be sued by anyone in the court of law. Its shareholders cannot be held liable for any conduct of the company.
(d) Perpetual existence: A joint-stock company continues to exist as long as it fulfills the requirements of law. It is not affected by the death, lunacy, insolvency, or retirement of any of its members.
(e) Common seal: A joint-stock company has a seal, which is used while dealing with others or entering into contracts with outsiders. It is called a common seal as it can be used by any officer at any level of the organization working on behalf of the company. Any document, on which the company’s seal ‘is put and is duly signed bý any official of the company, becomes binding on the company.
(f) Association of persons: A company is a voluntary association of persons established for-profit motive. A private company must have at least 2 persons and the public limited company must have at least 7 persons to get it registered. The maximum number of persons required for the registration in the case of a private company is 50 and in the case of a public company, there is no maximum limit.
(g) Limited liability: The liability of the shareholders is limited to the extent of the face value of the shares held by them. The shareholders are not liable personally for the paýment of the debt of the company.
(h) Transferability of shares: The shares of a public limited company are freely transferable and can be purchased and sold through the stock exchanges. A shareholder of a public limited company can transfer his shares without the consent of others except in the case of private companies.
(i) Large capital: A joint-stock company can raise a large amount of capital because the number of persons contributing towards capital is more in number when compared to sole proprietorship or partnership.
(j) Democratic management: Joint stock companies have democratic management and control. That is, even though the shareholders are owners of the company, all of them cannot participate in ‘the management of the company. Normally, the shareholders elect representatives from among themselves known as ‘Directors’ to manage the affairs of the company.
Explain the principles of insurance.
(a) Principle of Utmost Good Faith: According to this principle, the insurance contract must be signed by both parties (i.e. insurer and insured) in 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 the Insurance Company can refuse to pay the compensation as the fact was hidden by the insured.
(b) Principle of Insurable Interest: As per this principle, the insured must have an insurable interest in the subject matter of insurance. It means the 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 factory premises then the lender can take the fire insurance policy of that factory without being the owner of the factory because he has a financial interest in the factory premises.
(c) 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. The insurance contract is not made for making a 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 the 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 a profit.
(d) 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.
(e) 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.
(f) Principle of Mitigation of Loss: According to the Principle of mitigation of loss, the 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 ere, then, in case of fire, he or she should take all possible measures to minimize the damage to the property exactly in the manner he or she would have done in absence of the insurance:
(g) Principle of Causa Proxima: Principle of Causa Proxima (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 accident, then this should already be a part of the contract in order for this person to claim the insurance amount.
Explain four merits and four limitations of equity shares as a source of finance.
From Shareholders Point of View:
(a) The equity shareholders are the owners of the company.
(b) It is suitable for those who want to take risks for higher returns.
(c) The value of equity shares goes up in the stock market with the increase in profits of the concern.
(d) Equity shares can be easily sold in the stock market.
(e) The liability is limited to the nominal value of shares.
(f) Equity shareholders have a say in the management of a company as they are conferred voting rights.
From Management Point of View:
(a) A company can raise capital by issuing equity shares without creating any charge on its fixed assets.
(b) The capital raised by issuing equity shares is not required to be paid back during the lifetime of the company. It will be paid back only when the company is winding up.
(e) There is not binding on the company to pay dividends on equity shares. The company may declare dividends only if there are enough profits.
(d) If a company raises more capital by issuing equity shares, it leads to greater confidence among the creditors.
(a) As equity capital cannot be redeemed, there is a danger of overcapitalization.
(b) The dividend which a shareholder receives is neither fixed nor controllable by him. The management of the company decides how much dividend should be given.
(c) Equity share investment is a risky share compared to any other investment.
(d) Equity shareholders get dividends only if there remains any profit after paying debenture interest, tax, and preference dividends. Thus, getting dividends on equity shares is uncertain every year.
(e) Issue of fresh shares reduces the earnings of existing shareholders.
(f) Cost of equity is high when compared to other sources of finance.
Explain the different types of fixed shop small retailers.
(a) Street stalls holders: These stalls are located in the main streets or street crossings. A stall is an improvised structure made of tin or wood. The street stall holder displays his goods on a temporary platform and sells toys, stationery, hosiery items. etc. at low prices.
(b) Secondhand goods shops: These shops sell used or second-hand articles such as books, clothes, furniture, etc. They cater to the needs of poor people who cannot afford new articles.
(c) General stores: These stores sell a wide variety of products under one roof. For example, a provision store deals in groceries, toothpaste, razor blades, bathing soap. washing powder, soft drinks, confectionery, cosmetics, etc. Consumers can buy most of their daily requirements in one place. Their time and effort are saved.
(d) Single line stores: These stores deal in one line of goods. They keep stock of different sizes, designs, and quality of goods in the same line. Book stores, chemist shops. electrical stores, shoe stores, cloth stores, jewelry shops, etc., are examples of single-line stores.
(e) Speciality shops: These shops generally specialize in one type of product rather than dealing in a line of products. Shops selling children’s garments. educational books, etc. are examples of such shops.
Explain the benefits of International business both to nations and firms.
Benefits of international business to the nation:
(a) Earning of foreign exchange: International business helps a country to earn foreign exchange which it can later use for meeting its imports of capital goods, technology, petroleum products and fertilizers, pharmaceutical products, and a host of other consumer products which otherwise might not be available domestically.
(b) More efficient use of resources: As stated earlier, international business operatçs on a simple principle produce what your country can produce more efficiently, and trade the surplus production so generated with other countries to procure what they can produce more efficiently. When countries trade on this pñnciplejhey end up producing much more than what they can when each of them attempts to produce all the goods and services on its own.
(c) Improving growth prospects and employment potentials: Producing solely for the purposes of domestic consumption severely restricts a country’s prospects for growth and employmeùt. Many cöufltries, especially the developing ones, could not execute their plans to produce on a larger scale, and thus create employment for people because their domestic market was not large enough to absorb all that extra production.
(d) increased standard of living: In the absence of international trade of goods and services, it would not have been possible for the world community to consume goods and services produced in other countries that the people in these countries are able to consume and enjoy a higher standard of living.
(e) Greater variety of goods available for consumption: International trade brings in different varietieš of a particular produèt from different destinations. This gives consumers a wider array of choices which will not only improve their quality of life but as a whole, it will help the country to grow.
(f) Consumption at a cheaper cost: International trade enables a country to consume things that either cannot be produced within its borders or production may cost very high. Therefore it becomes cost cheaper to import from other countries through foreign trade.
(g) Reduces trade fluctuations: By making the size of the market large with large supplies an extensive demand, international trade reduces trade fluctuations. The prices of goods tend to remain more stable.
Benefits of international business to firms
(a) Prospects for higher profits: 1nternatiòna1 business can be more profitable than the domestic business. When the domestic prices are lower, business firms can earn more profits by selling their products in countries where prices are high.
(b) Increased capacity utiI1ation: Many firms set up productioñ capacities for their products which are in exçess of demand in the domestic market. By planning overseas expansion and procuring &n fr foreign çustoiers, they can think of making use of their surplus production capacities also improving the profitability of their operations.
(c) Prospects for growth: Business firms find it quite frustrating when demand for their products starts getting saturated in .the domestic market Such Finns can conšiderably improve prospects of their growth by plunging into overseas markets. This is precisely what has prompted many of the multinationals from the developed countries to enter into markets of developing countries.
(d) Way out to intense competition in the domestic market: When competition in the domestic market is very intense, internationalization seems to be the only way to achieve significant growth. The highly competitive domestic market drives many companies to go international in search of markets for their products.
(e) Improved business vision: The growth of the intçrnational business of many companies is essentially a part of their business policies or strategic management. The vision to become international comes from the urge to grow, the need to become more competitive, the need to diversify, and to gain strategic advantages of internationalization.
Section – E (PRACTICAL ORIENTED QUESTIONS)
V. Answer any two of the following questions: ( 2 × 5 = 10 )
You are planning to start a new business. Make a list of any five factors you consider while selecting a suitable form of business organization.
The five-factor that should be considered while selecting a suitable form of business organization are:
(d) Management ability
(e) Degree of control
(f) Capital consideration
(g) Nature of business.
Suggest any five important sources of finance available for a business organization.
Five important sources of finance are available for a business organization:
(a) Owner’s fund:
- Equity shares
- Retained earnings.
(b) Borrowed funds:
- Loans from banks
- Loans from a financial institution
- Public deposit
- Lease financing.
Give a list of any five institutions which support small businesses in India.
Five institutions that support small businesses in India are:
(a) National Bañk for Agriculture and Rural Development (NABARD)
(b) National Small Industrial Corporation (NSIC)
(e) Small Industrial Development Bank of India (SIDBI)
(d) Rural and Women Entrepreneurship Development (RWED)
(e) District Industries Centres (DICs).