BUSINESS STUDIES MASTER

BUSINESS STUDIES (CODE 054)

CLASS XI – SA 2 (ANNUAL EXAMINATION) - SET 1

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

Q1. The occupation in which people work for others and get remunerated in return is known as:
(a) Business    (b) Profession    (c) Employment    (d) Trade

(1)

Q2. Which of the following does not characterize business activity?
(a) Production of goods and services    (b) Presence of risk
(c) Sale or exchange of goods and services    (d) Salary or wages

(1)

Q3. The maximum number of members in a private company is limited to:
(a) 50    (b) 200    (c) 100    (d) Unlimited

(1)

Q4. Disinvestment of shares means:
(a) Selling of shares of private companies to the public.
(b) Selling of shares of public sector enterprises to the private sector.
(c) Investing in new areas.
(d) Buying shares of foreign companies.

(1)

Q5. Which of the following enterprises is established by a Special Act of Parliament?
(a) Departmental Undertaking    (b) Statutory Corporation
(c) Government Company    (d) Sole Proprietorship

(1)

Q6. [Image Based Question] Observe the image of a vendor displaying a large variety of low-priced items (like toys, plastic buckets, and utensils) on a temporary folding table at a busy crossroad. At the end of the day, he packs everything up. Identify the specific type of itinerant retailer shown.
(a) Hawkers    (b) Peddlers    (c) Street traders    (d) Market traders

(1)

Q7. Which principle of insurance states that the insured should not make a profit out of the insurance contract?
(a) Principle of Contribution    (b) Principle of Indemnity
(c) Principle of Mitigation    (d) Principle of Subrogation

(1)

Q8. RTGS stands for:
(a) Real Time Gross Settlement    (b) Ready Time Gross Settlement
(c) Real Transaction Gross Settlement    (d) Regular Time Gross Settlement

(1)

Q9. B2B Commerce means transactions taking place between:
(a) Business and Customers    (b) Two business firms
(c) Business and Government    (d) Customers to Customers

(1)

Q10. An enterprise must respect the laws of the country and pay taxes regularly. This fulfills its:
(a) Economic responsibility    (b) Ethical responsibility
(c) Legal responsibility    (d) Discretionary responsibility

(1)

Q11. Funds required for purchasing fixed assets like land, building, and machinery are called:
(a) Working capital    (b) Fixed capital
(c) Floating capital    (d) Loan capital

(1)

Q12. Assertion (A): Equity shareholders are called the primary risk bearers of the company.
Reason (R): They are paid dividend only when profits are left after paying interest on debentures and dividend on preference shares.
(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)

Q13. Internal sources of capital are those that are:
(a) Generated through outsiders such as suppliers.
(b) Generated through loans from commercial banks.
(c) Generated within the business (e.g., retained earnings).
(d) Generated through issue of shares to the public.

(1)

Q14. Which of the following is not a characteristic of small business?
(a) Labour intensive    (b) Requires huge capital
(c) Quick decision making    (d) Personal touch with customers

(1)

Q15. NSIC was established in the year:
(a) 1955    (b) 1965    (c) 1975    (d) 1985

(1)

Q16. The retail organization where the same type of products are sold at uniform prices all over the country through multiple shops is called:
(a) Departmental store    (b) Chain store / Multiple shop
(c) Mail order business    (d) Super market

(1)

Q17. Which of the following documents is not required for obtaining an export license?
(a) IEC number    (b) RCMC
(c) Letter of Credit    (d) Bank account details

(1)

Q18. Assertion (A): International business involves a higher degree of risk compared to internal trade.
Reason (R): Factors like foreign exchange fluctuations, distant markets, and different legal systems make international trade more complex.
(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)

Q19. The document containing the guarantee of a bank to honor drafts drawn on it by an exporter is:
(a) Bill of Entry    (b) Letter of Credit    (c) Bill of Lading    (d) Mate's Receipt

(1)

Q20. A receipt issued by the commanding officer of the ship when the cargo is loaded on the ship is known as:
(a) Shipping bill    (b) Mate's receipt    (c) Cargo receipt    (d) Bill of lading

(1)

SECTION B

Q21. Manish, a talented software developer, has recently decided to quit his high-paying corporate job. He wants to start his own mobile app development firm. However, he wants to maintain absolute control over every business decision, keep all the profits to himself, and does not want to share his proprietary trade secrets with any partners. Identify the most suitable form of business organization for Manish. State any two distinct advantages he will enjoy by choosing this specific form.

(3)

Q22. 'Sunrise Chemicals Ltd.' has been discharging its untreated industrial effluents directly into a nearby river for several years. The local villagers have repeatedly complained about the contaminated drinking water and the severe loss of aquatic life. The management ignores these complaints, arguing that their only legal duty is to pay corporate taxes and maximize dividends for their shareholders. Critically evaluate the management's perspective. Identify and explain the specific category of social responsibility the company is blatantly violating towards the community.

(3)

Q23. Ravi runs a small handicraft manufacturing unit in a rural village in Rajasthan. He creates beautiful wooden artifacts using traditional methods. Recently, he received a bulk order from a city-based retailer, but he severely lacks the financial resources to purchase the required raw materials and modern tools to fulfill the order on time. He approaches a local business advisor who suggests that he should seek help from the National Small Industries Corporation (NSIC). Based on this scenario, state any three major functions or supportive measures provided by NSIC that can directly help Ravi's small business.

(3)

OR

Meena wants to start a small-scale fruit processing unit in her district. She has the basic skills but is completely unaware of the government schemes, training programs, and the procedure to obtain a bank loan and industrial electricity connection. A friend advises her to visit the District Industries Center (DIC) in her area. Explain any three significant roles or functions of the District Industries Centers (DICs) that will assist Meena in successfully setting up her enterprise.

Q24. Mr. Gupta is a prominent wholesaler dealing in readymade garments in Delhi. He purchases large quantities of garments directly from manufacturers in Ludhiana and sells them in smaller lots to various local retailers across the city. Retailers heavily rely on him for credit facilities and prompt delivery. Describe any three crucial services that a wholesaler like Mr. Gupta provides specifically to the retailers.

(3)

SECTION C

Q25. 'Aarav Textiles' was a flourishing business known for its high-quality winter wear. However, this year, due to an unusually warm winter season and the sudden entry of a massive foreign brand offering cheaper synthetic alternatives, Aarav's sales plummeted by 60%. Aarav incurred heavy losses and had to shut down two of his factory units. This situation deeply illustrates the inherent nature of business risks. Based on the given case, identify and explain the specific causes of business risk that Aarav faced. Also, state any two essential characteristics of business risks highlighted in this scenario.

(4)

Q26. The Government of India wishes to establish a massive power generation project. Because the project requires immense capital, technological flexibility, and quick decision-making, the government decides not to form a Departmental Undertaking. Instead, it forms an enterprise under the Indian Companies Act, where the President of India holds 85% of the paid-up share capital. The board of directors consists of both government officials and highly skilled private sector professionals. Identify the exact type of public sector enterprise formed. Explain three major merits of establishing this specific type of enterprise.

(4)

Q27. 'Books & Beyond' is a traditional bookstore that has been operating in a local market for thirty years. Recently, the owner noticed a massive decline in footfall because young readers prefer buying books from online platforms like Amazon, which offer massive discounts, home delivery, and a global variety of titles. To survive, the owner decides to launch his own e-commerce website to sell books online. Compare the traditional business model of 'Books & Beyond' with their new e-business model on the basis of: (i) Ease of formation, (ii) Physical presence, (iii) Cost of setting up, and (iv) Global reach.

(4)

Q28. 'Pioneer Electronics Ltd.' is planning a massive expansion project to manufacture semiconductor chips. They require ₹200 Crores for a long period of 15 years. The financial manager advises the Board of Directors to raise the entire amount by issuing Equity Shares instead of taking a bank loan or issuing Debentures. He argues that Equity Shares will save the company from the financial burden of mandatory interest payments during the initial years when the project might not generate high profits. Evaluate the financial manager's advice by explaining any four distinct advantages of raising long-term funds through the issue of Equity Shares.

(4)

OR

'Ganga Cement Ltd.' wants to upgrade its manufacturing machinery, which requires a capital injection of ₹50 Crores. The Board of Directors strictly does not want to dilute their control over the company's management by issuing new equity shares. Furthermore, they are confident that the new machinery will generate a steady and high rate of profit immediately. Therefore, they decide to issue Debentures to the public. Analyze this decision by stating four major merits of issuing Debentures from the company's perspective.

Q29. 'BigMart' is a huge retail establishment located in the heart of the city. It operates under a single roof, offering an incredibly wide variety of products ranging from groceries, clothing, electronics, to cosmetics, all organized in separate sections. Customers can buy everything they need without leaving the building. In contrast, 'Bata Shoes' operates through hundreds of uniform shops spread across different localities in the country, strictly selling only their own branded footwear. Identify the specific type of large-scale retail outlets represented by 'BigMart' and 'Bata Shoes'. Differentiate between these two types of retail outlets on the basis of: (i) Location, and (ii) Range of products.

(4)

Q30. An Indian exporter, Mr. Roy, has successfully manufactured a large consignment of leather jackets for a buyer in London. He has completed the pre-shipment inspection and obtained the excise clearance. Now, he needs to transport the goods to the port and load them onto the ship. He approaches the shipping company and is asked to fill out a specific document containing details of the vessel, port of destination, and cargo. Once the goods are loaded, the captain issues a receipt, which is then exchanged for the final official document of title to the goods. Identify and briefly explain these three crucial documents involved in the shipping stage: (i) Shipping Bill, (ii) Mate's Receipt, and (iii) Bill of Lading.

(4)

SECTION D

Q31. Five friends, all engineering graduates, have designed a revolutionary water purification system. They want to set up a massive manufacturing plant, which requires a capital of ₹100 Crores. They decide to form a Public Limited Company named 'AquaPure India Ltd.' to raise the required funds from the general public. However, they are completely unaware of the legal formalities required to bring the company into existence and successfully start its business operations. As a business consultant, guide them by comprehensively explaining the four main stages involved in the formation of a Public Limited Company: (i) Promotion, (ii) Incorporation, (iii) Capital Subscription, and (iv) Commencement of Business. Briefly highlight the key activity performed in each stage.

(6)

Q32. Mr. Vikram owns a large logistics company. He purchased a fleet of new delivery trucks worth ₹2 Crores and immediately took a comprehensive insurance policy for them. A few months later, one of his trucks, worth ₹20 Lakhs, collided with a poorly maintained government barricade on the highway and was completely destroyed. The insurance company thoroughly investigated the incident, found it to be a genuine accident covered under the policy, and paid Mr. Vikram the full claim of ₹20 Lakhs. Following the settlement, Mr. Vikram successfully sued the highway authority for negligence and received an additional compensation of ₹5 Lakhs from the court. When the insurance company learned about this court compensation, they legally demanded that Mr. Vikram hand over the ₹5 Lakhs to them. Mr. Vikram refused, arguing that he fought the legal battle and the money belongs to him.
(a) Identify and deeply explain the specific principle of insurance under which the insurance company is demanding the ₹5 Lakhs.
(b) Is Mr. Vikram legally justified in keeping the court compensation? Give a clear reason to support your answer based on insurance law.
(c) Explain the Principle of Utmost Good Faith and why it is considered the foundation of every insurance contract.

(6)

Q33. 'Dynamic Steels Ltd.' is a highly profitable, well-established company in the manufacturing sector. It plans to undertake a massive modernization project that requires ₹500 Crores. The Board of Directors held a meeting to discuss the sources of finance. Director A suggested that they should use their accumulated, undistributed profits from the past ten years, as it involves no explicit cost and no dilution of control. Director B vehemently opposed this, arguing that relying solely on internal funds is insufficient and they should issue Preference Shares, as it carries a fixed rate of dividend but does not create a mandatory legal obligation to pay if the company suffers a loss in a particular year, unlike debentures. Director C suggested a mix of both.
(a) Identify the source of finance suggested by Director A. Explain two major merits and one demerit of this specific source.
(b) Explain the concept of Preference Shares as suggested by Director B. State two reasons why investors might prefer investing in Preference Shares over Equity Shares.

(6)

OR

'Horizon Infrastructures' is undertaking a long-term bridge construction project. They need substantial capital but are heavily divided on whether to issue Equity Shares or Debentures. The CEO wants to maintain absolute voting control and maximize the Earnings Per Share (EPS) for the existing owners, hence he strongly favors Debentures. The CFO, however, is highly risk-averse; he fears the strict legal consequences of defaulting on fixed interest payments if the project faces unexpected delays and revenue drops, so he pushes for Equity Shares.
(a) Analyze the CEO's perspective by explaining the concept of "Trading on Equity" and how issuing Debentures helps in retaining control.
(b) Analyze the CFO's perspective by explaining the specific financial risks associated with issuing Debentures.
(c) In your opinion, what is a balanced capital structure, and why shouldn't a company rely entirely on just one source of long-term finance?

Q34. The landscape of international business has been drastically transformed by the establishment of the World Trade Organization (WTO). Prior to its existence, global trade was governed by GATT, which had several limitations. Today, WTO stands as the only global international organization dealing with the rules of trade between nations. India, as a founding member, actively participates in WTO negotiations. However, participating in international business brings its own set of complexities that are vastly different from domestic trade.
(a) State the primary objective of the World Trade Organization (WTO) and explain any three major functions it performs to facilitate smooth international trade.
(b) Despite the WTO's efforts to liberalize trade, a business firm entering the international market faces severe complexities. Elaborate on any three specific complexities of International Business (such as differences in legal systems, language barriers, and currency fluctuations) that domestic businesses generally do not encounter.

(6)

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