BUSINESS STUDIES MASTER

BUSINESS STUDIES (CODE 054)

CLASS XI – SA 2 (ANNUAL EXAMINATION) - SET 2

Time Allowed: 3 Hours Maximum Marks: 80

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General Instructions:

1. This question paper contains 34 questions.
2. Marks are indicated at the right side of 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.

SECTION A (PART A)

Q1. Which of the following broad categories of industries covers oil refinery and sugar mills?
(a) Primary Industry    (b) Secondary Industry    (c) Tertiary Industry    (d) None of the above

(1)

Q2. The maximum number of partners allowed in a general business under the Companies Act, 2013 is:
(a) 10    (b) 20    (c) 50    (d) 100

(1)

Q3. A government company is any company in which the paid-up capital held by the government is not less than:
(a) 49%    (b) 50%    (c) 51%    (d) 100%

(1)

Q4. Which principle of insurance states that the insured must have a financial interest in the subject matter of insurance?
(a) Principle of Mitigation    (b) Principle of Insurable Interest
(c) Principle of Indemnity    (d) Principle of Contribution

(1)

Q5. [Image Based Question] Observe the image of an employee sitting at home, accessing their office computer network through a secure VPN connection to complete their daily tasks. Which specific component of e-business does this represent?
(a) B2B Commerce    (b) B2C Commerce    (c) Intra-B Commerce    (d) C2C Commerce

(1)

Q6. Protecting the environment from pollution and preserving ecological balance is the social responsibility of business towards:
(a) Shareholders    (b) Government    (c) Community    (d) Employees

(1)

Q7. Which of the following removes the hindrance of knowledge?
(a) Transport    (b) Warehousing    (c) Insurance    (d) Advertising

(1)

Q8. The minimum number of members required to start a cooperative society is:
(a) 2    (b) 7    (c) 10    (d) 20

(1)

Q9. Centralized control by the headquarters and huge financial resources are features of:
(a) Statutory Corporations    (b) Multinational Corporations (MNCs)
(c) Departmental Undertakings    (d) Government Companies

(1)

Q10. Assertion (A): E-business reduces the cost of setting up and operating a business compared to traditional business.
Reason (R): It eliminates the need for physical showrooms, large inventory displays, and extensive middleman networks.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.

(1)

SECTION A (PART B)

Q11. Which of the following is considered an external source of finance?
(a) Retained Earnings    (b) Ploughing back of profits
(c) Issue of Debentures    (d) Depreciation funds

(1)

Q12. ADRs (American Depository Receipts) are issued by non-US companies to investors in:
(a) Any country in the world    (b) Only European countries
(c) Only the United States of America    (d) Only Asian countries

(1)

Q13. Which institution was set up in 1990 to specifically promote, finance, and develop micro, small, and medium enterprises in India?
(a) NABARD    (b) SIDBI    (c) RBI    (d) EXIM Bank

(1)

Q14. The retailers who do not have a fixed place of business to operate from are called:
(a) Departmental stores    (b) Multiple shops
(c) Itinerant retailers    (d) Supermarkets

(1)

Q15. A proforma invoice is a document sent by the exporter to the importer detailing the:
(a) Final exact bill to be paid    (b) Estimated price, quality, and terms of goods
(c) Proof of shipment    (d) Customs clearance fee

(1)

Q16. What is the primary advantage of 'Trade Credit'?
(a) It requires issuing shares.    (b) It is a convenient and continuous source of short-term funds.
(c) It is provided by commercial banks.    (d) It carries a very high rate of interest.

(1)

Q17. A major limitation of small scale industries is:
(a) High employment generation    (b) Personal touch with customers
(c) Lack of adequate finance and credit    (d) Quick decision making

(1)

Q18. Which document serves as the official receipt of cargo issued by the commanding officer of the ship?
(a) Shipping Bill    (b) Bill of Lading    (c) Mate's Receipt    (d) Consular Invoice

(1)

Q19. Assertion (A): Wholesalers act as a vital link between manufacturers and retailers.
Reason (R): They buy in bulk from manufacturers and sell in small lots to retailers, providing storage and credit facilities to both.
(a) Both A and R are true and R is the correct explanation of A.
(b) Both A and R are true but R is not the correct explanation of A.
(c) A is true but R is false.
(d) A is false but R is true.

(1)

Q20. The World Trade Organization (WTO) was officially established in the year:
(a) 1947    (b) 1991    (c) 1995    (d) 2001

(1)

SECTION B

Q21. 'Natura Dairy' collects fresh milk from village farmers, processes it into cheese and butter using heavy machinery, and finally transports these products to various retail supermarkets using their own refrigerated trucks. Identify and explain the three different types of economic activities (Primary, Secondary, Tertiary) highlighted in the operations of Natura Dairy.

(3)

Q22. Aakash started a small online business selling customized t-shirts. He doesn't have the budget to set up a secure payment gateway on his website yet. He wants his customers to be able to pay him instantly from their smartphones directly into his bank account without entering complex bank details. He also needs a facility to transfer funds to his raw material suppliers instantly, 24/7. Suggest and briefly explain two specific modern digital banking services that Aakash can use to solve his problems.

(3)

Q23. 'Apex Industries' needs short-term finance of ₹10 Lakhs to purchase raw materials for a sudden large order. The finance manager suggests approaching their regular suppliers to grant them a 60-day credit period rather than taking a high-interest bank loan. Identify the source of finance suggested by the finance manager. Explain any two merits of this source of finance.

(3)

OR

'Global Logistics Ltd.' urgently needs a fleet of 10 new delivery trucks. Buying them outright will severely deplete their cash reserves. The CFO suggests entering into a specific contractual agreement with a finance company, where the finance company buys the trucks and allows Global Logistics to use them for 5 years in exchange for periodic payments. Identify this source of finance and state two of its major advantages.

Q24. In the busy weekly markets of rural India, one can frequently observe traders who move from one marketplace to another, displaying their low-priced daily utility goods on temporary mats or folding tables. They do not have permanent shops. Identify the specific category of retail trade discussed here. Explain any two characteristics of these types of retailers.

(3)

SECTION C

Q25. Three friends, Ram, Shyam, and Mohan, decided to form a partnership business to run a restaurant. To save on legal fees, they verbally agreed on the profit-sharing ratio and did not formally register their partnership firm. The restaurant became very successful. However, recently, a raw material supplier supplied them with rotten vegetables, causing food poisoning to several customers. The firm suffered financial losses and bad reputation. Ram wants to file a lawsuit against the supplier for damages. Can the unregistered firm file a suit against the supplier? Explain the legal consequences of non-registration of a partnership firm, detailing three specific disabilities they will face.

(4)

Q26. 'Zenith Solutions', an American insurance company, handles thousands of customer claims daily. Processing these claims requires heavy data entry and basic verification, which consumes a lot of their expensive employees' time. To cut costs and focus on their core business of designing insurance policies, Zenith Solutions signs a contract with 'DataServe India', a company based in Bengaluru, to handle all their data entry work. DataServe provides this service efficiently using high-speed internet. Identify the specific business concept adopted by Zenith Solutions. Explain any three benefits Zenith Solutions will achieve by adopting this practice.

(4)

Q27. A prominent cement manufacturing company, 'BuildWell Cement', realizes that its factory operations are generating massive amounts of dust and smoke, affecting the health of the local village community. The management decides it is time to fulfill their ethical and social obligations. They install expensive electrostatic precipitators to filter the smoke, ensure fair and timely wages to all their factory workers, and regularly publish transparent, accurate financial reports for their investors. Based on the scenario, identify and explain the company's social responsibility towards three specific interest groups mentioned above.

(4)

Q28. 'Pinnacle Technologies Ltd.' requires ₹50 Crores to expand its operations. The management is debating between issuing Equity Shares or Preference Shares. The CEO prefers Equity Shares as they do not carry any fixed obligation to pay dividends, allowing the company to retain cash during tough times. The CFO, however, argues that issuing Preference Shares is safer because it won't dilute the voting rights of existing shareholders, and preference shareholders do not interfere in the management. Based on the arguments presented, differentiate between Equity Shares and Preference Shares on the basis of: (i) Right to Dividend, (ii) Voting Rights, (iii) Risk involved, and (iv) Refund of Capital.

(4)

OR

'SteelStrong Ltd.' is a highly stable company with consistent, high profits. They need long-term funds but want to take advantage of 'Trading on Equity' to maximize the earnings per share for their existing equity shareholders. Therefore, they decide to issue Debentures carrying a fixed interest rate of 9%. Explain the concept of Debentures. Furthermore, explain three major limitations or risks 'SteelStrong Ltd.' must be prepared to face by choosing Debentures as a source of finance.

Q29. Wholesalers are often criticized for adding unnecessary profit margins, leading to higher prices for the final consumers. However, eliminating them completely from the distribution chain is highly impractical due to the massive invisible functions they perform. A manufacturer located in Gujarat producing millions of pens cannot individually supply to thousands of small stationery shops across India. Elaborate on any four vital services provided by wholesalers to the manufacturers that make them an indispensable link in the chain of internal trade.

(4)

Q30. Mr. Anil, a garments manufacturer in Tirupur, receives his first major export order from a buyer in the USA. He is thrilled but nervous about the complex procedures. After receiving the confirmed order and a Letter of Credit, he immediately starts manufacturing the garments. Once production is complete, he is told he cannot simply load the goods onto a ship; he must first prove to the government that the garments meet international quality standards and then clear the customs formalities. Explain the steps of "Pre-shipment Inspection" and "Customs Clearance" in the context of export procedures.

(4)

SECTION D

Q31. Mr. Sharma and his associates have a brilliant idea to set up a massive solar panel manufacturing company. They act as the 'Promoters' of the company, undertaking all the preliminary steps from conducting feasibility studies to arranging initial capital and preparing legal documents. They are ready to file the two most crucial documents with the Registrar of Companies to get their business incorporated. The first document will define the company's name, objectives, and its relationship with the outside world. The second document will contain the internal rules and regulations for managing the company's day-to-day affairs. However, they discover that one of the internal rules they drafted strictly contradicts a clause in the primary document.
(a) Identify the two crucial legal documents being discussed in the case.
(b) Differentiate comprehensively between these two documents on the basis of: (i) Nature/Status, (ii) Scope/Contents, (iii) Alteration difficulty, and (iv) Legal effect of acts done beyond their scope.

(6)

Q32. Mr. Gupta owns a large chemical storage facility. He took a massive fire insurance policy for ₹5 Crores. During the application process, the insurance agent specifically asked if the facility was equipped with functional fire sprinklers. Mr. Gupta lied and said yes, knowing well that the sprinklers were broken for months, because he wanted to pay a lower premium. Six months later, a massive fire broke out due to a short circuit, completely destroying the facility. When the insurance investigators arrived, they easily discovered that the sprinklers were non-functional and that Mr. Gupta had intentionally hidden this material fact. Consequently, the insurance company formally rejected his entire claim of ₹5 Crores. Mr. Gupta threatens to sue the company, claiming that the fire was caused by a short circuit, not by the broken sprinklers, so they must pay the claim.
(a) Identify and deeply explain the specific principle of insurance violated by Mr. Gupta when he lied about the fire sprinklers.
(b) Explain the 'Principle of Proximate Cause'.
(c) Is the insurance company legally justified in rejecting Mr. Gupta's claim? Give a detailed reason to support your answer based on insurance laws.

(6)

Q33. 'Future Vision Ltd.', an expanding telecommunications company, needs ₹100 Crores to upgrade its network infrastructure across the country. The Board of Directors is evaluating two different sources. Director X strongly suggests relying entirely on the company's 'Retained Earnings', as it is the most dependable source, carries no explicit cost like interest, and prevents any outside interference in the management. Director Y, however, argues that their retained earnings are barely ₹20 Crores, which is grossly insufficient for the massive project. He proposes taking a long-term 'Loan from Commercial Banks', arguing that banks can provide the exact large sum required quickly and the interest paid will be tax-deductible.
(a) Define 'Retained Earnings'. Do you agree with Director X that it carries absolutely no cost? Explain one major limitation of relying on this source.
(b) Explain the concept of 'Loans from Commercial Banks'. Highlight two specific merits of this source as pointed out by Director Y or otherwise.
(c) As a financial consultant, why would you advise 'Future Vision Ltd.' to use a balanced combination of both sources rather than relying exclusively on just one?

(6)

OR

'Bharat Pharmaceuticals Ltd.', a highly reputed Indian company, wants to raise massive capital to set up a new research facility in Europe. Since the domestic capital market is currently sluggish, the management decides to tap into international financial markets. They specifically want to raise funds from American investors in US Dollars. To achieve this, they plan to issue their local Indian shares to a designated depository bank, which will then issue dollar-denominated receipts against these shares to the investors in the American stock exchanges.
(a) Identify the specific international financial instrument being utilized by 'Bharat Pharmaceuticals Ltd.' to raise funds in the USA.
(b) Explain the concept of the instrument identified in part (a) and detail the step-by-step process of how it is issued.
(c) If the company wanted to raise funds from European investors in London instead of the USA, which equivalent financial instrument should they have used?

Q34. 'Heritage Spices' is a well-established company selling premium Indian spices. After dominating the domestic market for twenty years, the CEO noticed that their sales growth had stagnated because the local market was completely saturated with fierce competition. To find new growth avenues, the company boldly decided to enter International Business and started exporting their spices to the Middle East and European countries. Initially, they faced massive challenges regarding foreign exchange fluctuations and complex customs laws, but within three years, their profits skyrocketed. They utilized their excess production capacity efficiently, earned valuable foreign exchange, and built an incredible global brand reputation. The government of India also felicitated them for contributing to the nation's economic growth.
Based on the scenario presented above:
(a) Explain any three major benefits that 'Heritage Spices' (the firm) achieved by entering into international business.
(b) Explain any three major benefits that international business provides to the 'Nation' (India), highlighting why the government would felicitate such companies.

(6)

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