CBSE Class 11 Business Studies Sample Paper 3

Class 11 Business Studies Chapter Sample Question Paper

Our team of expert Business Studies teachers knows the difficulty in finding a reliable sample paper for Class 11. 

 After receiving positive responses to our CBSE Class 11 BST sample papers 1 and 2, we decided to develop a new question paper for our Class 11 students. 

While solving this new sample paper, you can cover key CBSE topics including forms of business organisation, business services, sources of finance, MSMEs, internal trade, international business, e-business, insurance, social responsibility, and company formation. 

Boost your confidence before BST school tests/exams with this unique worksheet. 

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Table of Contents

Question Paper Answers

CBSE Class 11 Business Studies Question Paper

Maximum Marks: 80

Time: 3 Hours

General Instructions

  1. This question paper contains 34 questions.
  2. Marks are indicated against each question.
  3. Answers should be brief and to the point.
  4. Answers to the questions carrying 3 marks may be from 50 to 75 words.
  5. Answers to the questions carrying 4 marks may be about 150 words.
  6. Answers to the questions carrying 6 marks may be about 200 words.
  7. Attempt all parts of a question together.

Q1. Aurora Cooling Systems Ltd., a leading manufacturer of premium air conditioners, operates its factory at full capacity during the winter months to prepare for the summer demand. Due to limited storage space and high inventory costs, it sells the air conditioners in bulk to an intermediary, Summit Distribution House. The intermediary stores the products in regional warehouses and supplies them to local appliance stores during the summer season as demand rises. Identify the combination of utilities created by Summit Distribution House in the above case. (1 Mark)

  1. Place Utility, Time Utility
  2. Time Utility, Form Utility
  3. Form Utility, Place Utility
  4. Time Utility, Knowledge Utility

Q2. Arjun, a skilled graphic designer, wanted to start a business without sharing ownership or decision-making authority with anyone else. At the same time, he wanted his business to have a separate legal identity and the benefit of limited liability. He incorporated the business under the Companies Act, 2013, as its sole member and nominated his sister to take over the membership in the event of his death or incapacity. Arjun alone manages the affairs of the business and takes all strategic decisions. Identify the form of business organisation established by Arjun. (1 Mark)

  1. Sole Proprietorship
  2. Limited Liability Partnership
  3. Private Company
  4. One Person Company

Q3. LoomVista Textiles Ltd. is an established garment export house. The company wants to raise ₹15 crores to modernize its weaving machinery. The promoters of the company want to raise capital from the public but are strictly against sharing their management control with the new investors. At the same time, the finance department does not want to borrow as it wants to avoid creating a legal charge on the company’s assets. They decide to issue a type of security that pays a fixed return to investors without granting them voting rights. Name the source of finance which LoomVista Textiles Ltd. has chosen to raise the required funds. (1 Mark)

  1. Equity Shares
  2. Public Deposits
  3. Preference Shares
  4. Retained Earnings

Q4. Choose the correct statement with respect to a cooperative society:

  1. The liability of members is limited to the extent of the amount contributed by them as capital.
  2. In a cooperative society, voting rights depend on the capital contributed by members.
  3. Change in membership does not affect the operations of the society.
  4. Formation of a cooperative society is governed by the provisions of the Cooperative Societies Act, 1910.

Choose the correct option: (1 Mark)

  1. 1, 3 and 4
  2. Only 3
  3. 2 and 4
  4. 1 and 3

Q5. 'Roast & Crumb' is a renowned European café chain known not only for its signature coffee blends but also for its standardised store layout, employee training, operating procedures, pricing policy, and customer service standards. Kunal, an entrepreneur in Mumbai, entered into an agreement with the company to establish its outlets in India. Under the agreement, he is permitted to use the company's brand name and is required to operate the café strictly according to the business format and quality standards prescribed by the café chain 'Roast & Crumb'. In return, he pays a regular royalty. The agreement between Kunal and 'Roast & Crumb' illustrates which way of operating the business internationally? (1 Mark)

  1. Merchandise exports and imports
  2. Service exports and imports
  3. Licensing and Franchising
  4. Foreign Investments

Q6. Identify the correct statement regarding the form of public sector enterprise depicted in the image. (1 Mark)

Indian Railways electric passenger train representing a public sector enterprise in India

  1. It is established under a special Act of Parliament which defines its powers, functions, and rules of operation.
  2. Its employees are government servants, and its funding comes directly from the government treasury through annual budget allocations.
  3. It enjoys complete operational autonomy and is free from any direct ministerial control or political interference.
  4. It is registered under the Indian Companies Act, and the government holds at least 51% of its paid-up share capital.

Q7. Match the following and choose the correct option. (1 Mark)

COLUMN 1 COLUMN 2
I Savings account A. Amount is withdrawn regularly, especially for business
II Current account B. Additional interest of 0.50% is offered to senior citizens on deposits placed for a year and above
III Multiple option deposits account C. Two free cheque books will be issued each year
IV Fixed deposits account D. A kind of deposit scheme introduced by different banks, where excess amount in the savings bank account is transferred to fixed deposit account
  1. I-D, II-C, III-A, IV-B
  2. I-C, II-B, III-A, IV-D
  3. I-C, II-A, III-D, IV-B
  4. I-C, II-D, III-B, IV-A

Q8. Statement I: MSMED Act, 2006 covers medium-scale enterprises and service-related enterprises also.

Statement II: MSMEs are complementary to large-scale industry as ancillary units and form an integral part of the value chain for building a conducive environment for indigenous skills, grassroots innovation and entrepreneurship development. (1 Mark)

  1. Both the statements are true
  2. Both the statements are false
  3. Statement I is true, Statement II is false
  4. Statement II is true, Statement I is false

Q9. Kabir wants to make an online payment directly from his bank account while purchasing raw materials for his business. Arnav, on the other hand, wants to buy a laptop online immediately and prefers to pay now but settle the amount with the bank at a later date. Identify the e-banking services that are most appropriate for Kabir and Arnav, respectively. (1 Mark)

  1. Net Banking for Kabir; Debit Card for Arnav
  2. Debit Card for Kabir; Credit Card for Arnav
  3. Credit Card for Kabir; Debit Card for Arnav
  4. Credit Card for Kabir; Net Banking for Arnav

Q10. Read the following statements: Assertion and Reason. Choose one of the correct alternatives given below:

Assertion (A): Debentures put a burden on the earnings of a company.

Reason (R): Debentures are fixed charge instruments and the risk increases when the earnings of the company fluctuate. (1 Mark)

  1. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
  2. Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).
  3. Assertion (A) is true but Reason (R) is false.
  4. Assertion (A) is false but Reason (R) is true.

Q11. Meera, a young entrepreneur, has designed a portable water purification device that uses a completely new filtration technology. Before launching the product in the market, she wants to obtain exclusive legal rights so that no other company can manufacture or sell the same invention without her permission. However, during scrutiny, the authorities found that her design was merely a minor modification of an existing technology with no additional technical advantage. As a result, the exclusive rights were not granted by the authorities. Identify the condition which has not been fulfilled due to which the exclusive rights were not granted to Meera. (1 Mark)

  1. The invention should be capable of industrial application.
  2. The invention should be new and involve an inventive step. It should not be obvious to a person skilled in that field.
  3. The invention should be commercially profitable.
  4. The invention should not have been disclosed to the public before filing the patent application.

Q12. AgriPack Innovations, an agro-processing and packaging enterprise based in Punjab, recently expanded its operations by installing additional automated processing and packaging machinery. As a result, its investment in plant and machinery increased to ₹9 crore, while its annual turnover reached ₹45 crore during the current financial year. The management plans to register the enterprise under the government's Udyam Registration system. Based on the latest MSME classification criteria, under which category will AgriPack Innovations be classified? (1 Mark)

  1. Micro Enterprise
  2. Small Enterprise
  3. Medium Enterprise
  4. Large Enterprise

Q13. Out of the following, select the incorrect statement about the Public-Private Partnership Model. (1 Mark)

  1. Contract with private party to design and build public facility
  2. Facility is financed and owned by the private sector
  3. Key driver is transfer of design and construction risk
  4. Suited to capital projects with small operating requirement

Q14. ________ is a large establishment offering a variety of products, aimed at satisfying practically every customer's needs under one roof. (1 Mark)

  1. Departmental Store
  2. Multiple Shops
  3. Mail Order House
  4. Chain Stores

Q15. Harvest Spice Foods, a manufacturer of packaged spices in Kerala, sold a large consignment of its products to a supermarket chain in Delhi. The company's accountant explained that under the present GST system, the tax revenue from this transaction would accrue to the state where the goods are finally consumed rather than to the state where they were produced. Identify the key feature of GST highlighted in the case. (1 Mark)

  1. GST is applicable only to the manufacture of goods
  2. GST is based on the principle of origin-based taxation
  3. GST is a direct tax collected from consumers
  4. GST is based on the principle of destination-based consumption tax

Q16. Statement I: Wholesale trade is a business that is engaged in the sale of goods and services directly to the ultimate consumers.

Statement II: Itinerant retailers are traders who do not have a fixed place of business to operate from. (1 Mark)

  1. Both the statements are true
  2. Both the statements are false
  3. Statement I is true, Statement II is false
  4. Statement II is true, Statement I is false

Q17. Name the organization that was the direct predecessor to the World Trade Organization (WTO) established in 1995. (1 Mark)

  1. International Monetary Fund (IMF)
  2. General Agreement on Tariffs and Trade (GATT)
  3. World Bank
  4. United Nations Conference on Trade and Development

Q18. Nivara Textiles Ltd., a garment manufacturer in New Delhi, planned to import premium cotton from an overseas supplier. After finalising the terms of purchase, the company sent a detailed order mentioning the specifications of the goods, quantity required, packing instructions, shipping schedule, and the port at which the goods were to be delivered. The document sent by Nivara Textiles Ltd. is known as: (1 Mark)

  1. Export Invoice
  2. Indent
  3. Letter of Credit
  4. Bill of Entry

Q19. Companies generally invite public deposits for a maximum period of: (1 Mark)

  1. 2 years
  2. 3 years
  3. 4 years
  4. 5 years

Q20. It is an insulating material or an inside part of a computer chip designed to perform an electronic circuitry function. Name the type of intellectual property right reflected in the above statement. (1 Mark)

  1. Semiconductor integrated circuits layout design
  2. Patent
  3. Plant Variety
  4. Design

Q21. (A) Micro, Small and Medium Enterprises (MSMEs) are considered a powerful instrument for realising the twin objectives of 'accelerated industrial growth and creating additional productive employment potential in rural and backward areas.' Elaborate on the contribution of MSMEs to the socio-economic development of the country.

OR

(B) With a view to promoting startups in the country, various ways of funding are available in the market. Explain any three such ways of funding. (3 Marks)

Q22. A transport company obtained an accident insurance policy for all its vehicles. One of its trucks, carrying a consignment of oranges, met with an accident. Although the oranges were not damaged in the accident, they had to be unloaded from the damaged truck and reloaded onto another vehicle. The delay caused by unloading and reloading resulted in the oranges getting spoiled.

  1. Is the company entitled to receive compensation from the insurance company for the loss of oranges?
  2. Identify and explain the principle of insurance applicable to this case. (3 Marks)

Q23. Nexora Machinery Corporation is a foreign company registered in Japan. It manufactures advanced machinery and tools used in the paper manufacturing industry. The company is known for its high-quality products and technological superiority in its methods of production. Encouraged by a favourable business environment, growing market and skilled workforce, the company decided to establish a branch manufacturing unit in India, aiming to occupy a dominant position in the Indian market. The company plans to spend ₹10 crores on research and development projects in order to develop superior designs.

Identify and state the features of a global enterprise discussed in the case study. (3 Marks)

Q24. 'Business risk refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events.' With reference to the given statement, state any three characteristics of business risk.

OR

'Objectives are needed in every area that influences the survival and prosperity of business.' Using the given statement as a basis, state any three objectives of business. (3 Marks)

Q25. JuiceCraft, initially a trading company, was selling bottled juices manufactured by other companies. Seeing an increase in demand for packaged beverages, the company decides to enter into juice manufacturing. It plans to distribute its products across different states of India through a network of wholesalers and retailers. To ensure that its products reach consumers at the right place and at the right time, JuiceCraft has appointed distributors in major cities and is supplying goods to retailers through wholesalers. As the wholesalers are directly connected with the retailers, they are in a position to advise JuiceCraft about various aspects like customers' tastes and preferences, market conditions, etc. Wholesalers take delivery of goods when these are produced in factories and keep them in their own warehouses.

  1. Identify the type of trade being carried out by JuiceCraft when it sells its products across different states of India.
  2. Name and state the services provided by wholesalers to JuiceCraft as mentioned in the case. (4 Marks)

Q26. After completing a specialised entrepreneurship programme in sustainable production, three friends—Arjun, Neha and Kavya—decided to establish their own ventures.

  • Arjun launched a business that procures solar panels, batteries, charge controllers, metal frames, and wiring from different manufacturers and integrates them into portable solar power stations.
  • Neha started a venture that manufactures advanced insulation panels by combining ingredients like cork granules, recycled paper fibres, and natural binders in carefully measured proportions.
  • Kavya set up a factory where discarded fruit peels are converted into natural cleaning liquid through a series of sequential operations involving extraction, filtration, concentration, and packaging.
  1. Identify the type of Secondary Industry highlighted in the case.
  2. On the basis of the method of operation of business, explain the sub-type of industry under the type identified in part A to which Arjun, Neha and Kavya belong. (4 Marks)

Q27. (A) State any four features of a mail order house.

OR

(B) State any four benefits of international business to firms. (4 Marks)

Q28. PaperNest Stationers, a company that manufactures eco-friendly notebooks, pens, and office supplies, has decided to expand its business in different markets. The company collaborates with schools, offices, and corporate organizations through its PaperNest BizConnect portal. Corporate buyers can place bulk orders, customize products with company logos, and make digital payments. This helps PaperNest Stationers build long-term business relationships and increase bulk sales.

It sells its products directly to customers through the PaperNest Store e-commerce website and PaperNest App. Customers can browse products, compare prices, place orders online, choose digital payment options, and get home delivery.

To attract more consumers, the company offers festive discounts, cashback offers, and free delivery on selected purchases. Within six months, the company has been able to successfully expand its customer base and increase its market reach while promoting sustainable products.

Identify and explain the modes of e-business used by PaperNest Stationers that have enabled it to expand its market operations and increase its sales. (4 Marks)

Q29. (A) Describe the four main elements of a life insurance contract.

OR

(B) Explain any four types of telecom services in India. (4 Marks)

Q30. 'JUICEVA' is a trading company selling bottled juices made by other manufacturers. Now, it plans to sell its juices across India. For this, 'JUICEVA' decides to enter into juice manufacturing. It also has ambitious plans to export its juices to other countries in the future. To meet anticipated higher demand in the future, the company decides to set up a larger manufacturing unit. The Chief Executive Officer, Mohit, plans to order automatic juice-filling and bottling machines to increase speed, improve hygiene, and ensure consistency in production. The company decides to make use of a permanent source of funds without involving any explicit cost. To manage the expenses arising due to seasonal surges in demand during the peak season, such as higher costs of inventory and packaging, the company enters into an agreement with its supplier, Orchard Fresh Supplies, which makes the supplies readily available to 'JUICEVA' as its creditworthiness is already known.

  1. Identify the financial needs of 'JUICEVA' by quoting the lines from the case.
  2. Identify and explain the various sources of funds that 'JUICEVA' has used to manage its financial needs. (4 Marks)

Q31. Aster Electronics Ltd., a leading manufacturer of consumer appliances, detected that its manufacturing unit was releasing hazardous effluents into a local drainage system and using non-recyclable plastic packaging. Acknowledging its Social Responsibility, the CEO, Ms. Ananya Mehta, immediately resolved the commitment to create, maintain and develop a work culture for pollution prevention. The company shifted to biodegradable packaging materials, collaborated with the State Government to clean polluted water bodies and manage hazardous waste, and trained its dealers and suppliers to actively support pollution control initiatives.

  1. Identify the organizational concern being discussed above in the context of Social Responsibility of business.
  2. State any five steps that business enterprises can take to address this concern. (6 Marks)

Q32. (A) Explain Financial Institutions as a source of long-term finance. State any four features of this source.

OR

(B) Explain how Commercial Banks serve as a source of business finance. State any four of their features. (6 Marks)

Q33. Karan and Nikhil have finalised the name of their garment manufacturing venture and decide to register it as a public company. Before investing their savings, they want to define the purpose of the company and ensure that the business does not undertake activities beyond its intended purpose. They also want investors and other stakeholders to know the company’s identity, financial structure and extent of members' liability so as to avoid any ambiguity in the future.

  1. Identify and state the legal document that should be prepared to provide the above details.
  2. Explain any four important clauses contained in this document. (6 Marks)

Q34. (A) Explain the significance of 'Obtaining Certificate of Origin', 'preparation of invoice' and 'obtaining mate's receipt' as steps in the export procedure.

OR

(B) Explain the significance of 'receipt of shipment advice', 'procurement of import licence' and 'obtaining foreign exchange' as steps in the import procedure. (6 Marks)

Answers

Q1. A) Place Utility, Time Utility

Q2. D) One Person Company

Q3. C) Preference Shares

Q4. D) 1 and 3

Q5. C) Licensing and Franchising

Q6. B) Its employees are government servants, and its funding comes directly from the government treasury through annual budget allocations.

Q7. C) I-C, II-A, III-D, IV-B

Q8. A) Both the statements are true

Q9. B) Debit Card for Kabir; Credit Card for Arnav

Q10. A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Q11. B) The invention should be new and involve an inventive step. It should not be obvious to a person skilled in that field.

Q12. B) Small Enterprise

Q13. B) Facility is financed and owned by the private sector

Q14. A) Departmental Store

Q15. D) GST is based on the principle of destination-based consumption tax

Q16. D) Statement II is true, Statement I is false

Q17. B) General Agreement on Tariffs and Trade (GATT)

Q18. B) Indent

Q19. B) 3 years

Q20. A) Semiconductor integrated circuits layout design

Q21. (A) Contribution of MSMEs – any three points:

  1. The contribution of these industries to the balanced regional development of our country is noteworthy. Small industries in India account for 95 per cent of the industrial units in the country.
  2. MSMEs are the second-largest employers of human resources after agriculture. They generate more employment opportunities per unit of capital invested compared to large industries. They are, therefore, considered to be more labour-intensive and less capital-intensive. This is a boon for a labour-surplus country like India.
  3. MSMEs in our country supply an enormous variety of products which include mass consumption goods, readymade garments, hosiery goods, stationery items, soaps and detergents, domestic utensils, leather, plastic and rubber goods, processed foods and vegetables, wood and steel furniture, paints, varnishes, safety matches, etc.
  4. MSMEs which produce simple products using simple technologies and depend on locally available resources, both material and labour, can be set up anywhere in the country. Since they can be widely spread without any locational constraints, the benefits of industrialisation can be reaped by every region. They, thus, contribute significantly to the balanced development of the country.
  5. MSMEs provide ample opportunity for entrepreneurship. The latent skills and talents of people can be channelled into business ideas which can be converted into reality with little capital investment and almost nil formalities to start a small business.
  6. MSMEs also enjoy the advantage of low cost of production. Locally available resources are less expensive. Establishment and running costs of small industries are on the lower side because of low overhead expenses.
  7. Due to the small size of the organisations, quick and timely decisions can be taken without consulting many people, as happens in large-sized organisations.

OR

(B) Ways to provide financial assistance to start-ups – any three:

  1. Bootstrapping: Commonly known as self-financing, it is considered the first funding option. At a later stage, investors also consider it as a merit. However, it is a good option of funding only if the initial requirement is small and manageable.
  2. Crowdfunding: It is the pooling of resources by a group of people for a common goal. Crowdfunding is not new to India. There are many instances of organisations reaching out to common people for funding. These platforms help start-ups or small businesses meet their funding requirements.
  3. Angel investment: Angel investors are individuals with surplus cash who have a keen interest in investing in upcoming start-ups. They also offer mentoring or advice alongside capital.
  4. Venture capital: There are professionally managed funds which are invested in companies that have huge potential. Venture capitalists provide expertise and mentorship and act as a litmus test of where a business organisation is going, evaluating the business from sustainability and scalability points of view.
  5. Business incubators and accelerators: Early-stage businesses can consider incubator and accelerator programmes as a funding option. These programmes assist hundreds of start-up businesses every year. Incubators and accelerators connect start-ups with mentors, investors and fellow start-ups using this platform.
  6. Microfinance and NBFCs: Microfinance is access to financial services for those who either do not have access to conventional banking services or have not qualified for a bank loan. Similarly, NBFCs (Non-Banking Financial Corporations) provide banking services without meeting the legal requirement or definition of a bank.

Q22.

  1. No, the company will not receive compensation for the loss of the oranges.
  2. Principle of Proximate Cause (Causa Proxima): According to this principle, an insurance policy is designed to provide compensation only for such losses as are caused by the perils stated in the policy. When the loss is the result of two or more causes, the proximate cause means the direct, most dominant and most effective cause of which the loss is the natural consequence. In case of loss arising out of any mishap, the most proximate cause of the mishap should be taken into consideration.

Q23. Three features of global enterprises are:

  1. 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 industrial progress of the country in which such corporations operate since they are able to optimally exploit local resources and raw materials. Computerisation and other inventions have come due to the technological advancements provided by MNCs.
  2. Product innovation: These enterprises are characterised by having highly sophisticated research and development departments engaged in the task of developing new products and superior designs of existing products. Qualitative research requires huge investment which only global enterprises can afford.
  3. Expansion of market territory: Their operations and activities extend beyond the physical boundaries of their own countries. Their international image also builds up and their market territory expands, enabling them to become international brands. They operate through a network of subsidiaries, branches and affiliates in host countries. Due to their giant size, they occupy a dominant position in the market.

Q24. (A) Characteristics of business risk – any three:

  1. Risk is an essential part of every business: Every business has some risk. No business can avoid risk, although the amount of risk may vary from business to business. Risk can be minimised, but cannot be eliminated.
  2. Business risks arise due to uncertainties: Uncertainty refers to the lack of knowledge about what is going to happen in future. Natural calamities, changes in demand and prices, changes in government policies, improvement in technology, etc., are examples of uncertainty which create risks for business because the outcomes of these future events are not known.
  3. Degree of risk depends mainly upon the nature and size of business: Nature of business, i.e., type of goods and services produced and sold, and size of business, i.e., volume of production and sale, are the main factors which determine the amount of risk in a business.
  4. Profit is the reward for risk taking: 'No risk, no gain' is an age-old principle which applies to all types of business. Greater the risk involved in a business, higher is the chance of profit. An entrepreneur undertakes risks under the expectation of higher profit. Profit is thus the reward for risk taking.

OR

(B) Objectives of business – any three:

  1. Market standing: Maintaining goodwill and reputation of one's business is paramount to succeed and prosper. It helps in forming a distinct identity in the market and is referred to as market standing in relation to its competitors. A business enterprise must aim at standing on a stronger footing in terms of offering competitive products at reasonable prices to its customers and serving them to their satisfaction.
  2. Productivity: Productivity is ascertained by comparing the value of output with the value of inputs. It is used as a measure of efficiency. In order to ensure continuous survival and progress, every enterprise must aim at greater productivity through the best use of available resources.
  3. Physical and financial resources: Any business requires physical resources, like plants, machines, offices, etc., and financial resources, i.e., funds, to be able to produce and supply goods and services to its customers. The business enterprise must aim at acquiring these resources according to its requirements and use them efficiently.
  4. Innovation: Innovation is central to the growth of any business enterprise. It helps businesses scale up and gives a competitive edge to the enterprise in the market. Innovation is defined as an introduction of new ideas or methods in the way something is done or made. There are two kinds of innovation in every business: innovation in products or services and innovation in various skills and activities needed to supply products and services.
  5. Earning profits: One of the objectives of business is to earn profits on the capital employed. Profitability refers to profit in relation to capital investment. Every business must earn a reasonable profit, which is important for its survival and growth.
  6. Social responsibility: Social responsibility refers to the obligation of business firms to contribute resources for solving social problems and work in a socially desirable manner.

Q25.

(A) Internal trade: Buying and selling of goods and services within the boundaries of a nation are referred to as internal trade.

(B) Services provided by wholesalers to JuiceCraft are:

  • 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 customers' tastes and preferences, market conditions, competitive activities and the features preferred by the buyers. They serve as an important source of market information on these and related aspects.
  • Storage: Wholesalers take delivery of goods when these are produced in factories and keep them in their godowns or warehouses. This reduces the burden on manufacturers of providing storage facilities for finished products. They thus provide time utility.

Q26.

(A) Manufacturing industry: These industries are engaged in producing goods through the processing of raw materials and, thus, creating form utilities.

(B) The sub-types of industry are:

  • Arjun – Assembling industry: It assembles different component parts to make a new product.
  • Neha – Synthetical industry: It combines various ingredients into a new product.
  • Kavya – Processing industry: It involves successive stages for manufacturing finished products.

Q27. (A) Features of mail order houses – any four:

  1. Limited capital requirement
  2. Elimination of middlemen
  3. Absence of bad debts
  4. Wide reach
  5. Convenience

Any other point with suitable explanation.

OR

(B) Benefits of international business to firms – any four:

  1. Prospects for higher profits
  2. Increased capacity utilisation
  3. Prospects for growth
  4. Way out of intense competition in the domestic market
  5. Improved business vision

With suitable explanation.

Q28.

B2B Commerce: Here, both the parties involved in e-commerce transactions are business firms, and hence the name B2B, i.e., business-to-business. Creation of utilities or delivering value requires a business to interact with a number of other business firms which may be suppliers or vendors of diverse inputs, or they may be a part of the channel through which a firm distributes its products to consumers.

B2C Commerce: B2C (business-to-customers) transactions have business firms at one end and their customers at the other end. Although what comes to one's mind instantaneously is online shopping, it must be appreciated that 'selling' is the outcome of the marketing process. Marketing begins well before a product is offered for sale and continues even after the product has been sold.

Q29. (A) The main elements of a life insurance contract are:

  1. The life insurance contract must have all the essentials of a valid contract. Certain elements like offer and acceptance, free consent, capacity to enter into a contract, lawful consideration and lawful object must be present for the contract to be valid.
  2. Utmost good faith: The contract of life insurance is a contract of utmost good faith. The insured should be honest and truthful in giving information to the insurance company. The insured must disclose all material facts about his or her health to the insurer. It is the duty of the insured to accurately disclose all material facts known to him or her even if the insurer does not ask.
  3. Insurable interest: In life insurance, the insured must have an insurable interest in the life assured. Without insurable interest, the contract of insurance is void. In case of life insurance, insurable interest must be present at the time when the insurance is effected. It is not necessary that the insured should have an insurable interest at the time of maturity also.
  4. Not a contract of indemnity: A life insurance contract is not a contract of indemnity. The life of a human being cannot be compensated and only a specified sum of money is paid. That is why the amount payable in life insurance on the event is fixed in advance. The sum of money payable is fixed at the time of entering into the contract.

Any other suitable point.

OR

(B) The various types of telecom services are – any four:

  1. Cellular mobile services: These are all types of mobile telecom services including voice and non-voice messages, data services and PCO services utilising any type of network equipment within their service area. They can also provide direct interconnectivity with any other type of telecom service provider.
  2. Fixed line services: These are all types of fixed services including voice and non-voice messages and data services to establish linkages for long-distance traffic. These utilise any type of network equipment primarily connected through fibre optic cables laid across the length and breadth of the country. They also provide interconnectivity with other types of telecom services.
  3. Cable services: These are linkages and switched services within a licensed area of operation to operate media services, which are essentially one-way entertainment-related services. Two-way communication, including voice, data and information services through cable networks, would emerge significantly in the future. Offering services through the cable network would be similar to providing fixed services.
  4. VSAT services: VSAT (Very Small Aperture Terminal) is a satellite-based communications service. It offers businesses and government agencies a highly flexible and reliable communication solution in both urban and rural areas. Compared to land-based services, VSAT offers the assurance of reliable and uninterrupted service that is equal to or better than land-based services. It can be used to provide innovative applications such as tele-medicine, newspapers online, market rates and tele-education even in the most remote areas of our country.
  5. DTH services: DTH (Direct to Home) is a satellite-based media service provided by cellular companies. One can receive media services directly through a satellite with the help of a small dish antenna and a set-top box. The service provider of DTH services provides a bouquet of multiple channels. It can be viewed on television without being dependent on services provided by a cable network service provider.

Q30.

(A)

  1. Fixed capital requirements: "To meet anticipated higher demand in the future, the company decides to set up a larger manufacturing unit."
  2. Working capital requirements: "To manage the expenses arising due to seasonal surges in demand during the peak season, such as higher costs of inventory and packaging, the company enters into an agreement with its supplier, Orchard Fresh Supplies, which makes the supplies readily available to 'JUICEVA' as its creditworthiness is already known."

(B)

  • Trade credit: Trade credit is the credit extended by one trader to another for the purchase of goods and services. Trade credit facilitates the purchase of supplies without immediate payment. Such credit appears in the records of the buyer of goods as 'sundry creditors' or 'accounts payable'.
  • Retained earnings: A 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. It is a source of internal financing or self-financing or 'ploughing back of profits'.

Q31.

(A) Environmental Protection

(B) Some of the specific steps which can be taken by business enterprises for environmental protection are as stated below – any five:

  1. A definite commitment by top management of the enterprise to create, maintain and develop a work culture for environmental protection and pollution prevention.
  2. Ensuring that commitment to environmental protection is shared throughout the enterprise by all divisions and employees.
  3. Developing clear-cut policies and programmes for purchasing good-quality raw materials, employing superior technology, using scientific techniques of disposal and treatment of wastes and developing employee skills for the purpose of pollution control.
  4. Complying with the laws and regulations enacted by the Government for prevention of pollution.
  5. Participation in government programmes related to management of hazardous substances, clearing up polluted rivers, plantation of trees and checking deforestation.
  6. Periodical assessment of pollution control programmes in terms of costs and benefits so as to increase the progress with respect to environmental protection.

Q32. (A) Loans from financial institutions: The government has established a number of financial institutions all over the country to provide finance to business organisations. These institutions are established by the Central as well as State Governments. They provide both owned capital and loan capital for long- and medium-term requirements and supplement traditional financial agencies like commercial banks. As these institutions aim at promoting the industrial development of a country, these are also called 'development banks'. In addition to providing financial assistance, these institutions also conduct market surveys and provide technical assistance and managerial services to people who run enterprises. This source of financing is considered suitable when large funds for a longer duration are required for expansion, reorganisation and modernisation of an enterprise.

Any other suitable point.

OR

(B) Commercial banks: Commercial banks occupy a vital position as they provide funds for different purposes as well as for different time periods. Banks extend loans to firms of all sizes and in many ways, like cash credits, overdrafts, term loans, purchase or discounting of bills, and issue of letters of credit. The rate of interest charged by banks depends on various factors such as the characteristics of the firm and the level of interest rates in the economy. The loan is repaid either in a lump sum or in instalments. Bank credit is not a permanent source of funds. Though banks have started extending loans for longer periods, generally such loans are used for medium to short periods. The borrower is required to provide some security or create a charge on the assets of the firm before a loan is sanctioned by a commercial bank.

Any other suitable point.

Q33.

(A) Memorandum of Association: Memorandum of Association is the most important document as it defines the objectives of the company. No company can legally undertake activities that are not contained in its Memorandum of Association. As per Section 2(56) of the Companies Act, 2013.

(B) Memorandum of Association contains different clauses, which are given as follows:

  1. The Name Clause: This clause contains the name of the company with which the company will be known, which has already been approved by the Registrar of Companies.
  2. Registered Office Clause: This clause contains the name of the state in which the registered office of the company is proposed to be situated. The exact address of the registered office is not required at this stage, but the same must be notified to the Registrar within thirty days of the incorporation of the company.
  3. Objects Clause: This is probably the most important clause of the memorandum. It defines the purpose for which the company is formed. A company is not legally entitled to undertake an activity which is beyond the objects stated in this clause. The main objects for which the company is formed are listed in this sub-clause. It must be observed that an act which is either essential or incidental for the attainment of the main objects of the company is deemed to be valid, although it may not have been stated explicitly.
  4. Liability Clause: This clause limits the liability of the members to the amount unpaid on the shares owned by them.
  5. Capital Clause: This clause specifies the maximum capital which the company will be authorised to raise through the issue of shares.

Any four points.

Q34. (A)

  • Obtaining Certificate of Origin: Some importing countries provide tariff concessions or other exemptions to goods coming from a particular country. For availing such benefits, the importer may ask the exporter to send a Certificate of Origin. The Certificate of Origin acts as proof that the goods have actually been manufactured in the country from where the export is taking place. This certificate can be obtained from the trade consulate located in the exporter's country.
  • Preparation of Invoice: After sending the goods, an invoice of the despatched goods is prepared. The invoice states the quantity of goods sent and the amount to be paid by the importer. The C&F agent gets it duly attested by customs.
  • Obtaining Mate's Receipt: The goods are then loaded on board the ship for which the mate or captain of the ship issues the mate's receipt to the port superintendent. A mate's receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board and contains information about the name of the vessel, berth, date of shipment, description of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship, etc. The port superintendent, on receipt of port dues, hands over the mate's receipt to the C&F agent.

OR

(B)

  • Receipt of Shipment Advice: After loading the goods on the vessel, the overseas supplier dispatches the shipment advice to the importer. A shipment advice contains information about the shipment of goods. The information provided in the shipment advice includes details such as invoice number, bill of lading or airway bill number and date, name of the vessel with date, port of export, description of goods and quantity, and date of sailing of the vessel.
  • Procurement of Import Licence: There are certain goods that can be imported freely, while others need licensing. The importer needs to consult the Export Import (EXIM) policy in force to know whether the goods that he or she wants to import are subject to import licensing. In case goods can be imported only against a licence, the importer needs to procure an import licence. In India, it is obligatory for every importer, and also for an exporter, to get registered with the Directorate General of Foreign Trade (DGFT) or Regional Import Export Licensing Authority and obtain an Import Export Code (IEC) number. This number is required to be mentioned on most of the import documents.
  • Obtaining Foreign Exchange: Since the supplier in the context of an import transaction resides in a foreign country, he or she demands payment in a foreign currency. Payment in foreign currency involves the exchange of Indian currency into foreign currency. In India, all foreign exchange transactions are regulated by the Exchange Control Department of the Reserve Bank of India (RBI). As per the rules in force, every importer is required to secure the sanction of foreign exchange. For obtaining such a sanction, the importer has to make an application to a bank authorised by RBI to issue foreign exchange. The application is made in a prescribed form along with the import licence as per the provisions of the Exchange Control Act. After proper scrutiny of the application, the bank sanctions the necessary foreign exchange for the import transaction.

The End

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A List of Notes:
Chapter 1  |  Chapter 2  |  Chapter 3  |  Chapter 4  |  Chapter 5  |  Chapter 6  |  Chapter 7  |  Chapter 8  |  Chapter 9  |  Chapter 10
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