1st PUC Business Studies Model Question Paper 1 with Answers

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Karnataka 1st PUC Business Studies Model Question Paper 1 with Answers

Time: 3.15 Hours
Max Marks: 100

Instructions to candidates:

1. Write the serial number of questions properly as given in the question paper while answering
2. Write the correct and complete answers.

Section – A

I. Answer any TEN of following questions in a word ora 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 )

Question 1.
Give an example of extractive industry.
Answer:
Mining.

Question 2.
Which law governs Hindu Undivided family in India?
Answer:
Hindu Law.

Question 3.
Centralized control in MNC’s implies control exercised by
(a) Branches
(b) Subsidiaries
(c) Head Quarters
(d) Parliament
Answer:
(c) Head Quarters.

Question 4.
Which of the following is not a type of banks?
(a) Commercial Bank
(b) Central Bank
(c) Co-operative Bank
(d) Savings Banks
Answer:
(d) Savings Bank.

Question 5.
Expand BPO.
Answer:
Business Process Outsourcing.

Question 6.
How is land pollution caused?
Answer:
Chemicals and pesticides in cultivation are causes of land pollution.

Question 7.
A prospectus is issued by
(a) A private company
(b) A public company seeking investment from public
(c) A public enterprise,
(d) A public company
Answer:
(d) A public company

Question 8.
For which purpose fixed capital is needed in business?
Answer:
Fixed capital is needed for acquisition of fixed assets to the firm.

Question 9.
In which year the MS MED Act was enacted?
Answer:
June 16, 2006, the MSMED Act was enacted.

Question 10.
Carry ‘Needle to an Aeroplane’ this statement applies to which ty pe of Fixed shop large retailers.
Answer:
Departmental stores.

Question 11.
What is import trade?
Answer:
Import trade refers to the purchase of goods from other countries for domestic use.

Question 12.
A receipt issued by the commanding officer of the ship when the eargo is loaded on the ship is known is
(a) Shipping Receipt,
(b) Mate’s receipt
(c) Cargo Receipt,
(d) Charter Receipt
Answer:
(b) Mate’s Receipt.

Section – B

II. Answer any ten of the follow ing questions in two or three sentences each. Each question carries 2 marks: ( 10 × 2 = 20 )

Question 13.
what is Commerce?
Answer:
Commerce is a branch of business it is concerned with the distribution of goods and services.

Question 14.
Give the meaning of Partnership deed.
Answer:
It refers to written agreement which specifies the terms and conditions that govern the partnership.

Question 15.
State any two merits of Government companies.
Answer:

1. It has a separate legal entity, apart from the government.
2. The ownership of these companies is in the hands of the government.

Question 16.
Give the meaning of insurance.
Answer:
Insurance is a contract between 2 parties where one party agrees to pay the compensation to another party against the loss which may arise due to uncertainly.

Question 17.
Distinguish between e-business and e-commerce.
Answer:

Question 18.
State any two elements of business cthies.
Answer:
The elements of business ethics are

1.  Publication of a code
2. lop management commitment.

Question 19.
What is prospectus?
Answer:
Prospectus is any document described or issued as a prospectus and includes any notice, circular, advertisement, inviting deposits from the public for purchase of shares or debentures of a company or a body corporate.

Question 20.
Mention the two preferential rights enjoyed by preference share holders.
Answer:

1. Preference share holders get fixed rate of return.
2. Preference share holders don’t have voting rights.

Question 21.
State any two features of cottage industries.
Answer:

1. These are organised by individuals with private resources.
2. Normally use family labour and locally available talent.

Question 22.
State any two types of Itinerant retailers.
Answer:
Two types of itinerant retailers are:

1. Hawkers.
2. Peddlers.

Question 23.
What is meant by foreign direct investment?
Answer:
Direct investment takes place when, a company directly invests in properties such as plant and machinery in foreign countries with a view for undertaking production and marketing of goods and services in those countries.

Question 24.
Write the meaning of bill of entry.
Answer:
Bill of entry is a form supplied by the customs office to the importer. It is to be filled in by the importer at the time of receiving the goods.

Section – C

III. Answer any seven of the following questions in 10-12 sentences. Each question carries 4 marks. ( 7 × 4 = 28 )

Question 25.
Explain Ihc any four auxiliaries to trade.
Answer:

1. Transport and communication: Transport removes the hindrances of place. Transport facilitates through road, rail or coastal shipping facilitate movement of raw material to the place of production and the finished products from factories to the place of consumption.

2. Banking and finance: Business activities cannot be undertaken unless funds are available for acquiring assets and meeting the day-to-day expenses. Necessary funds can be obtained by businessmen from a bank. Thus, banking helps business activities to overcome the problem of finance.

3. Insurance: The risk of loss or damage to the factory building, machinery, furniture, goods held in stock or goods in course of transport due to theft, fire, accidents, etc. is removed by insurance of goods.

4. Warehousing: Usually, goods are not sold or consumed immediately after production. They are held in stock to be available as and when required. Special arrangement must be made for storage of goods to prevent loss or damage.

Question 26.
Briefly explain any four features of departmental undertakings.
Answer:

1. Formation: These enterprises are established as departments of the ministry and are considered part or an extension of the ministry itself.
2. Control: The administration of these undertakings is directly under the control of concerned ministry or minister.
3. Capital: The required capital is provided by the government in the annual budget.
4. Income: The income of these departments should be deposited daily into government treasury.
5. Management: The employees of the enterprise are government servants and they are headed by Indian Administrative Service (IAS) officers and civil servants who are transferable from one ministry to another.

Question 27.
What are the benefits of e-banking lo customer?
Answer:

• E-banking provides 24 hours, 365 days a year services to the customer of the bank.
• It offers convenience to customers as they are not required to go to the bank’s premises.
• The customer can obtain funds at anytime from ATM machines.
• The customer can easily transfer the funds from one place to another place electronically.

Question 28.
Explain the ways of payment in online (ransaction.
Answer:
The different ways of online payment are:

1. Cash-on Delivery: As is clear from the name, payment for the goods ordered online may be made in cash at the time of physical delivery of goods.
2. Cheque: The buyer may send a cheque to the online vendor. In this case, the goods are delivered upon realisation of the cheque.
3. Net-banking Transfer: The buyer may instruct his bank to electronically transfer the amount from his account to account of online vendor.
4. Debit Card or Credit Card: Popularly referred to as ‘plastic money,’ these cards are the most widely used medium for online transactions. Credit card allows its holder to make purchase on credit. Later the issuing bank transfers the amount to the online vendors’ account and buyers account is debited.
5. Digital Cash: This is a form of electronic currency that exists only in cyberspace. This type of currency has no real physical properties, but offers the ability to use real currency in an electronic format.

Question 29.
Explain briefly any four reasons which justify the need for pollution control.
Answer:
Protection of the environment is a serious issue that confronts business managers and decision makers. Business enterprises need to adopt pollution control measures due to following reasons:

1. Reduction of health hazards: There is increasing evidence that many diseases like cancer, heart attacks and lung complications are caused by pollutants in the environment. Pollution control measures can not only check the seriousness of such diseases but can also be supportive of a healthy life on earth.

2. Reduced risk of liability: It is possible that an enterprise is held liable to pay compensation to people affected by the toxicity of gaseous, liquid and solid wastes it has released into the environment. Therefore, it is sound business policy to install pollution control devices in its premises to reduce the risk of liability.

3.  Cost savings: An effective pollution control programme is also needed to save costs of operating business. Cost savings are particularly noticeable when improper production technology results in greater wastes which lead to higher cost of waste disposal and cost of cleaning the plants.

4. Improved public image: A firm that promotes the cause for environment will be able to enjoy a good reputation and will be perceived as a socially responsible enterprise.

5. Other social benefits: Pollution control results in many other benefits like clearer visibility, cleaner buildings, better quality of life, and the availability of natural products in a purer form.

Question 30.
Explain any four clauses of Memorandum of Association.
Answer:
1. 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.

2. Objects Clause: It contains detailed description of the objects and rights of the company, for which it is being established.

3. Capital Clause: It contains the proposed authorised capital of the company. It gives the classification of the authorised 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 authorised capital. However, the company is permitted to alter this clause as per the guidelines prescribed by the Companies Act.

4. Liability Clause: It contains financial limit up to which the shareholders are liable to pay off to the outsiders on the event of the company being dissolved or closed down.

Question 31.
Explain briefly the merits of retained earnings as sources of business finance.
Answer:
Company generally does not distribute all its earnings amongst the shareholders as dividends. A portion of the net earnings may be retained in the business for use in the future. This is known as retained earnings.

Merits:

1. Retained earnings is a permanent source of funds available to an organisation.
2. It does not involve any explicit cost in the form of interest, dividend or floatation cost.
3. As the funds are generated internally, there is a greater degree of operational freedom and flexibility.
4. It enhances the capacity of the business to absorb unexpected losses.
5. It may lead to increase in the market price of the equity shares of a company.

Question 32.
Describe different avenues for organisation to raise funds internationally.
Answer:
1. Commercial Banks: Commercial banks all over the world extend foreign currency loans for business purposes. They are an important source of financing non-trade international operations. The types of loans and services provided by banks vary from country to country.

2. International Agencies and Development Banks: A number of international agencies and development banks have emerged over the years to finance international trade and business. These bodies provide long and medium term loans and grants to promote the development of economically backward areas in the world. These bodies were set up by the Governments of developed countries of the world at national, regional and international levels for funding various projects. The more notable among them include International Finance Corporation (IFC), EXIM Bank and Asian Development Bank.

3. International Capital Markets: Modern organizations including multinational companies depend upon sizeable borrowings in rupees as well as in foreign currency. Prominent financial instruments used for this purpose are:

(i) Global Depository Receipts (GDR’s)

• Global depository receipts or certificate created by the overseas bank outside India dominated in dollars and issued to non-resident investors against the issue of ordinary shares of issuing company.
• The depository receipts are marketed in Europe and United States of America or both.

(ii) American Depository Receipts (ADR’s)

• The depository receipts which are issued by a United States of America Bank for trading only in American Stock markets are known as American Depository Receipts.
• Securities of a non-U.S. company that traded in the U.S. financial markets.

(iii) Foreign Currency Convertible Bonds (FCCB’s)

• Foreign currency convertible bonds are equity linked debt securities that are to be converted into equity or depository receipts after a specific period. Thus, a holder of FCCB has the option of either converting them into equity shares at a predetermined price or exchange rate, or retaining the bonds.
• The FCCB’s are issued in a foreign currency and carry a fixed interest rate which is lower than the rate of any other similar non convertible debt instrument. FCCB’s are listed and traded in foreign stock exchanges.

Question 33.
Stale any eight major industry groups in the small scale sector.
Answer:
Major Industry Groups in the Small Scale Sector are:

• Food Products.
• Chemical and Chemical Products.
• Basic Metal Industries.
• Electrical Machinery and Parts.
• Rubber and Plastic Products.
• Paper Products and Printing.
• Transport Equipment and Parts.
• Leather and Leather Products.
• Beverages, Tobacco and Tobacco Products
• Wool, Silk, Synthetic Fibre and Textiles.
• Jute, Hemp and Mesta Textiles.

Question 34.
State any lour differences between departmental stores and chain stores.
Answer:
Departmental stores are different from multiple shops or chain stores for following reason:

1.  Location: A departmental store is located at a central place, where a large number of customers can be attracted to it. However, the multiple stores are located at a number of places for approaching a large number of customers. Thus, central location is not necessary for a multiple shop.

2. Range of products: Departmental stores aim at satisfying all the needs of customers under one roof. As such, they have to carry a variety of product of different types. However, the multiple stores aim to satisfy the requirements of customers relating to a specified range of their products only.

3. Services offered: The departmental stores lay great emphasis on providing maximum service to their customers. Some of the services, provided by them include post office, restaurant and so on. As against this, the multiple shops provide very limited service confined to guarantees and repairs if the sold out goods turn out to be defective.

4. Pricing: The multiple shop chains sell goods at fixed prices and maintain uniform pricing policies for all the shops. The departmental stores, however, do not have uniform pricing policy for all the departments; rather they have to occasionally offer discounts on certain products and varieties to clear their stock.

Section – D

IV. Answer any four of the following questions in 20-25 sentences each. F.ach question carries 8 marks. ( 4 × 8 = 32 )

Question 35.
Explain any four merits and demerits of Sole Proprietorship.
Answer:
Advantages of Sole Proprietorship:

1. Quick decision making: A sole proprietor enjoys considerable degree of freedom in making business decisions. Further, the decision making is prompt because there is no need to consult others.
2. Confidentiality of information: Sole decision making authority enables the proprietor to keep all the information related to business operations confidential and maintain secrecy.
3. Direct incentive: The need to share profits does not arise as he/she is the single owner. This provides maximum incentive to the sole trader to work hard.
4. Sense of accomplishment: There is a personal satisfaction involved in working for oneself. The knowledge that one is responsible for the success of the business not only contributes to self-satisfaction but also instils in the individual a sense of accomplishment and confidence in ones abilities.

Limitations of sole proprietorship:

1. Limited resources: Resources of a sole proprietor are limited to his/her personal savings and borrowings from others. Banks and other lending institutions may hesitate to extend a long term loan to a sole proprietor.

2. Limited life of a business concern: In the eyes of the law the proprietorship and the owner are considered one and the same. Death, insolvency or illness of a proprietor affects the business and can lead to its closure.

3. Unlimited liability: If the business fails, the creditors can recover their dues not merely from the business assets, but also from the personal assets of the proprietor. A poor decision or an unfavourable circumstance can create serious financial burden on the owners.

4. Limited managerial ability: The owner has to assume the responsibility of varied managerial tasks such as purchasing, selling, financing, etc. It is rare to find an individual who excels in all these areas. Thus, decision making may not be balanced in all the cases.

5. Competition of big industries: Now-a-days in a modem world demands are more. To full fill those numerous demands big industries were formed. By producing goods in large scale, supply them at low rates and also provide other number of facilities. As such sole trading concern unable to complete with them.

Question 36.
Explain the features of Joint Stock Company.
Answer:
1. 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 its birth, existence and death are regulated by law and it does not possess physical attributes like that of a normal person.

2. Legal formation: No single individual 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 completion of all formalities required by the Indian Companies Act, 2013.

3. 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.

4. Perpetual existence: A joint stock company continues to exist as long as it fulfils the requirements of law. It is not affected by the death, lunacy, insolvency or retirement of any of its members.

5. Common seal: Ajoint 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 organisation working on behalf of the company. Any document, on which the company’s seal is put and is duly signed by any official of the company, become binding on the company.

6. 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 case of private company is 50 and in case of public company there is no maximum limit.

7. 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 payment of debt of the company.

8. 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 other except in case of private companies.

9. Large capital: A joint stock company can raise large amount of capital because the number of persons contributing towards capital are more in number when compared to sole proprietorship or partnership.

10. 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.

Question 37.
Give the meaning of warehousing. Explain the different types of warehousing.
Answer:
The warehouse was initially viewed as a static unit for keeping and storing goods in a scientific and systematic manner so as to maintain their original quality, value and usefulness.

1. Private Warehouses: These are operated, owned or leased by a company handling their own goods, such as retail chain stores or multi-brand, multi-product companies. As a general rule, an efficient warehouse is planned around a material handling system in order to encourage maximum efficiency of product movement.

2. Public Warehouses: It can be used for storage of goods by traders, manufacturers or any member of the public after the payment of a storage fee or charges. The government regulates the operation of these warehouses by issuing licences for them to private parties.

3. Bonded Warehouses: These are licensed by the government to accept imported goods prior to payment of tax and customs duty. These are goods which are imported from other countries. Importers are not permitted to remove goods from the docks or the airport till customs duty is paid.

4. Government Warehouses: These warehouses are fully owned and managed by the government. The government manages them through organisations set up in the public sector.

Question 38.
Discuss the factors that affects while making the decision for the choice of an appropriate source of funds by business organisation.
Answer:
1. Cost: There are two types of cost viz., the cost of procurement of funds and cost of utilising the funds. Both these costs should be taken into account while deciding about the source of funds that will be used by an organisation.

2. Financial strength and stability of operations: The financial strength of a business is also a key determinant. In the choice of source of funds business should be in a sound financial position so as to be able to repay the principal amount and interest on the borrowed amount.

3. Form of organisation and legal status: The form of business organisation and status influences the choice of a source for raising money.

4. Purpose and time period: Business should plan according to the time period for which the funds are required. A short-term need for example can be met through borrowing funds at low rate of interest through trade credit, commercial paper, etc. For long term finance, sources such as issue of shares and debentures are more appropriate.

5. Risk profile: Business should evaluate each of the sources of finance in terms of the risk involved. For example, there is a least risk in equity as the share capital has to be repaid only at the time of winding up and dividends need not be paid if no profits are available.

6. Control: A particular source of fund may affect the control and power of the owners on the management of a firm. Issue of equity shares may mean dilution of the control.

7. Effect on credit worthiness: The dependence of business on certain sources may affect its credit worthiness in the market.

8. Flexibility and ease: Another aspect affecting the choice of a source of finance is the flexibility and ease of obtaining funds. Restrictive provisions, detailed investigation and documentation in case of borrowings from banks and financial institutions.

9. Tax benefits: Various sources may also be weighed in terms of their tax benefits. For example, while the dividend on preference shares is not tax deductible, interest paid on debentures and loan is tax deductible and may, therefore, be preferred by organisations seeking tax advantage.

Question 39.
Who is wholesaler? Explain services of wholesalers to manufacturer.
Answer:
A wholesaler is an intermediary entity in the distribution channel that buys in bulk and sells to resellers rather than to consumers:
1. Facilitating large scale production: Wholesalers collect small orders from 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.

2. 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.

3. Financial assistance: The wholesalers provide financial assistance to the manufacturers in the sense that they generally make cash payment for the goods purchased by them. To that extent, the manufacturers need not block their capital in the stocks.

4. Expert advice: As the wholesalers are in direct contact with the retailers, they are in a position to advice the manufacturers about various aspects including customer’s tastes and preferences, market conditions, competitive activities and the features preferred by the buyers.

5. Help in the marketing function: The wholesalers take care of the distribution of goods to a number of retailers who, in turn, sell to large number of customers spread over a large geographical area. This relieves the manufacturers from marketing activities and enables them to concentrate on the production activity.

6. Facilitate continuity: The wholesalers facilitate continuity of production activity throughout the year by purchasing the goods as and when these are produced.

7. Storage: Wholesalers take delivery of goods when these are produced in factory and keep them in their godowns. This reduces the burden of manufacturers of providing for storage facilities for the finished products.

Question 40.
What is exporting and importing? State its advantages and limitalions.
Answer:
Exporting refers to sending of goods and services from the home country to a foreign country. In a similar vein, importing is purchase of foreign products and bringing them into one’s home country.

Major advantages of exporting include:

• As compared to other modes of entry, exporting/importing is the easiest way of gaining entry into international markets.
• Exporting/importing is less involving in the sense that business firms are not required to invest that much time and money.
• Since exporting/importing does not require much of investment in foreign countries, exposure to foreign investment risks is nil or much lower.

Major limitations of exporting/importing:

• Since the goods physically move from one country to another, exporting/importing involves additional packaging, transportation and insurance costs.
• Exporting is not a feasible option when import restrictions exist in a foreign country. In such a situation, firms have no alternative but to opt for other entry modes such as licensing/franchising or joint venture, etc.
• Export firms basically operate from their home country. They produce in the home country and then ship the goods to foreign countries. Except a few visits made by the executives of export firms to foreign countries to promote their products, the export firms, in general, do not have much contact with the foreign markets.

Section – E
(Practical Oriented Questions)

V. Answer any TWO of the following questions: ( 2 × 5 = 10 )

Question 41.
As the owner of a business unit, what risks do you face in running it?
Answer:
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.

Question 42.
As a promoter, state five important documents to be prepared for the incorporation of a joint stock company.
Answer:
Five documents to be prepared for the incorporation of a joint stock company:

• Memorandum of association.
• Articles of association / Statement in lieu of the prospectus.
• Written consent of the proposed directors.
• A copy of the registrar’s letter approving the name of the company.
• A statutory declaration affirming that all legal requirements for registration have been
  complied with.

Question 43.
Give a list of any five Institutions which support smalt business in India.
Answer:
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).