11 SM Businessstudy Eng 2019 20
11 SM Businessstudy Eng 2019 20
11 SM Businessstudy Eng 2019 20
SUPPORT MATERIAL
(2019-2020)
Class : XI
BUSINESS STUDIES
Coordinators
Smt. Savita Drall Mrs. Mukta Soni Dr. Raj Kumar Mr. Krishan Kumar
DDE (Exam) Addl. DDE (Exam) OSD (Exam) OSD (Exam)
Production Team
Anil Kumar Sharma
SUPPORT MATERIAL
(2019-2020)
BUSINESS STUDIES
Class : XI
(English Medium)
CLASS-XI
Objectives:
• To inculcate business attitude and develop skills among students to pursue
higher education, world of work including self employment;
• To Develop students with an understanding of the processes of business and
its environment;
• To acquaint students with the dynamic nature and interdependent aspects of
business;
• To develop an interest in the theory and practice of business, trade and industry;
• To familiarize students with theoretical foundations of the process of organizing
and managing the operation of a business firm;
• To help students appreciate the economic and social significance of business
activity and the social cost and benefits arising there from;
• To acquaint students with the practice of managing the operations and
resources of business;
• To enable students to act more effectively and responsibility as consumers,
employers, employees and citizens
ix XI – Business Studies
BUSINESS STUDIES (Code No. 054)
CLASS–XI (2019-20)
Theory: 80 Marks 3 Hours
Project: 20 Marks
Project Work 30 20
x XI – Business Studies
Business, profession and employment- • Understand the concept of business,
Concept profession and employment.
• Differentiate between business,
profession and employment.
Objectives of business • Appreciate the economic and social
objectives of business.
• Examine the role of profit in
business.
Classification of business activities- • Understand the broad categories
Industry and Commerce of business activities- industry and
commerce.
Industry-types: primary, secondary, • Describe the various types of
tertiary Meaning and subgroups industries.
Commerce-trade: (types-internal, • Discuss the meaning of commerce,
external; wholesale and retail) trade and auxiliaries to trade.
and auxiliaries to trade; (banking, • Discuss the meaning of different
insurance, transportation, warehousing, types of trade and auxiliaries to
communication, and advertising) - trade.
meaning
• Examine the nature and causes of
business risks.
Business risk-Concept • Understand the concept of risk as
a special characteristic of business.
• Examine the nature and causes of
business risks.
xi XI – Business Studies
Hindu Undivided Family Business: • Understand the concept of Hindu
Concept Undivided Family Business.
Cooperative Societies-Concept, • Identify and explain the concept,
merits, and limitations. merits and limitations of Cooperative
Societies.
• Understand the concept of consumers,
producers, marketing, farmers, credit
and housing co-operatives.
Company - Concept, merits and • Identify and explain the concept,
limitations, Types: Private, Public and merits and limitations of private and
One Person Company - Concept public companies.
• Understand the meaning of one
person company.
• Distinguish between a private
company and a public company.
Formation of company - Stages, • Highlight the stages in the formation
important documents to be used in of a company.
formation of a compnay • Discuss the important documents
used in the various stages in the
formation of a company.
Choice of form of business organization • Distinguish between the various
forms of business organizations.
• Explain the factors that influence the
choice of a suitable form of business
organization.
Role of small business in India with • Discuss the role of small business
special reference to rural areas in India
xv XI – Business Studies
Suggested Question Paper Design
Business Studies (Code No. 054)
Class Xi (2019-20)
March 2020 Examination
Marks:80 Duration: 3 hrs.
Remembering: Exhibit
memory of previously
learned material by
1 5 1 1 1 1 23
recalling facts, terms,
basic concepts, and
answers.
Understanding:
Demonstrate
2 5 2 1 - 1 21
Understanding of facts
and ideas
Applying: Solve
problems to new
situations by applying
3 5 1 - 1 1 19
acquired knowledge,
facts, techniques and
rules in a different way.
Analysing and
Evaluating: Examine
and break information
into parts by identifying
motives or causes.
Make inferences and
find evidence to support
generalization.
Creating: Compile
information together
in a different way by
combining elements
in a new pattern for
proposing alternative
solutions
Brain Map
– History and Evolution of Business
– Indigenous Banking System
– Transporting
– Trading Communities
– Major Trade Centres
– Business
– Business Activities
– Business Risk
Human Activities
Economic Non-economic
Industry Commerce
1. Sugar 1. Building
2. Cement 2. Roads
3. Textile 3. Bridge
1 XI – Business Studies
Trade and commerce has played an important role in growth of an
economy from time immemorial. Example Harrappa and Mohenjodaro
were commercial cities in 3rd millennium BC in Indian sub contingent.
Physical environment of Indian subcontinent has helped it in evolving
as a major power in economic world from ancient times. The silk route
facilitated its further progress in terms of domestic and interactional
trade.
2 XI – Business Studies
Sah- jog Darshani Payable to a specific person,
someone 'respectable'.
Liability over who received
payment.
3 XI – Business Studies
Transport
Transport by land & water was popular in ancient times
Trading communities strengthened
Different parts of the country had differents communities dominated
trade eg. Punjabi and Multani merchants in narthern India, Bhats in
Gujarat & Rajasthan, Mahajans from western India etc.
Merchant corporations were formed: Merchant communites derived
power & prestige from guilds which were autonomous corporations
formed to protect interest of traders.
These corporabions framed their own rules of membership and
professional code of conduct which even kings were supposed to
accept and respect.
The guild chief dealt directly with long or tax collections and settled the
market toll on behalf of its fellow merchants at a fixed sum of money.
Major Trade Centres: Patliputra, Peshwar, Taxila, Indraprastha,
Mathura, Varanasi, Mithila, Ujjain, Surat, Kanchi, Madura, Broach,
Kaveri pata, Tamralipti.
Major Exports and Imports
Exports: Spices, wheat, sugar, indigo, opium, sebame oil, cotton, live
animals & animal products like hides, furs, pearls etc.
Imports: Horses, animal products, chinese silk flax and liner, gold,
silver, tin etc.
Position of Indian Subcontinents in World Economy (IAD upto 1991)
1 AD: 32% (the largest 1000 AD: 32% (the largest 155 AD: 24.36%
regional contribution regional contribution) (second in regional
share)
1850 AD: 5-10% 1700-1750 AD: 25% of worlds' 1700 AD: 1600 AD:
industrial output 24.46% 24.41%
1970 AD: 9.2% (world 1900 AD: 2% (global 1913 AD: 5.4%
income British Empire) industrial output) (British Empire)
4 XI – Business Studies
After independence five year plans were initiated. Despite these efforts
Indian economy could not develop at a rapid pace, lack of capital
formation, rise in population, huge expenditure on defence and
inadeuate infrastructure were major reasons.
Finally in 1991 India agreed to economic liberalisation. Because of this
now India is one of the fastest economies of the world. Initiatives like
Digital India,' 'Make in India', 'Skill India' are expected to help the
economy in terms fo exports and imports.
Trade and commerce has played an important roel in growth of an
economy from time immemorial eg. Harappa & Mohanjodaro were
commerical cities in 3rd millennium BC in Indian sub continent. Physical
invironment of Indian subcontinent has helped if in evolving as a major
power in economic world from ancient times. The silk route facilitated its
further progress of domestic and international trade.
Q.1. What is Hundi?
Q.2. How were the different types of Hundi in use by trades in ancient
times?
Q.3. Name any two commercial cities of ancient India.
Q.4. Write any four major exports and imports in ancient time.
Q.5. Why do you think Indian subcontinent stood out in terms of trade
and commerce in ancient times?
Q.6. What was the role of Indigenous Banking system in enhancing
trade & commerce?
Q.7. Name any two trading communities of ancient times.
Q.8. How did the position of Indian sub continent in world economy
change form being referred British was ruling India?
5 XI – Business Studies
All Human beings have different types of needs. So in order to
fulfill those needs they have to performs some or the other activity.
Human activities are classified into Economic & non economic
activities.
Concept of Business
Literal meaning of Business is "BUSY".
$
Business is defined as an economic activity.
$
Involved in the production and sales of goods and seniors.
$
Undertaken with a motive os earning profit.
$
by Satisfied human needs in Society.
Characteristics of business :-
1. An economic activity :- Business in considered as an economic
activity as it is undertaken with the objective of earning money.
2. Production or procurement of goods and services :- Business
includes all the activities concerned with the production of
6 XI – Business Studies
procurement of goods & services for sales. Services include
transportation, banking, Insurance etc.
3. Sale or exchange of goods & service 1 :- There should be sale or
exchange of goods and service between the seller & the buyer. If
goods are produced not for the purpose of sale but say for
internal consumption it cannot be called a business activity.
4. Dealing in goods & services an a regular basis :- There should be
regularity of dealings or exchange of goods & services. One
single transaction of sale or purchase does not constitute
business.
5. Profit Earning :- The main purpose of business is to earn profit. A
business cannot survive without making profits. So businessman
try to maximize profit by increasing the volume of sales or
reducing costs.
6. Uncertainly of return : Every business invests money with the
objective of earning profit but the amount of profit earned may
very also there is always a possibility of losses.
7. Element of Risk :- All business activities carry some elements of
risk because future is uncertain and business has no control over
several factors like, strikes, fire , theft, change in consumer taste
etc.
Q.1 Prakash, a farmer went to the market and exchanged his rice
with pulses. It is an economic activity ?
Q.2 Mohan sells his old dressing table on OLX for ` 4000. Is it a
business activity ? Justify.
Q.3 Lalita , a housewife sells old newspaper of two months at ` 300,
will you classify it as business activity ? Why?
7 XI – Business Studies
Economic Activities
Business Profession Employment
It Refers to those economic It includes those activities It refers to the occupation in
activities which are which require special which people work for others
connected with purchase, knowledge be skills in the and get remuneration in
production and/or sale fo occupation. return .
goods & services with the
objective of earning profit.
Examples : Examples :-
Examples:-
- Medical (Doctor) - Worker
- Fishing
- Legal (Lawyer) - Employee
- Manufacturing Goods
- Accountancy (CA) - Salesman
- Mining
- Producing or selling of
electronic goods
- Banking
No minimum Professional
3. Qualification Qualification and
Qualification and
Qualification is training as
necessary. training required. prescribed by the
employer.
Capital needed Limited capital for
4. Capital Investment according to its nature established No capital required.
& size
8 XI – Business Studies
Q.1 Dr. Hussain is operating his own clinic. Classify his economic
activity.
Q.2 Rajana is managing her own bakery. What type of economic
activity is she doing ?
Q. 3 John is working is Ranjana's bakery for a Salary of `10,000 per
month. What is the nature of activity performed by him ?
Business Objectives
9 XI – Business Studies
share in the market & has market standing. It is possible
only when business provides goods and services to satisfy
the needs & wants of customers. Therefore. creation and
satisfaction of customers (market) is an important objective
of business.
(iii) Innovations : Innovation means making new products or
adding new features of old products for making it more
useful. improving methods of production & distribution
exploring new markets, etc. In these days of competition, a
business can he successful only when it creates new
designs. better machines, improved techniques. new
varieties etc.
(iv) Optimum utilisation of resources : It refers to the best use of
men. material, money and machinery employed in
business. The resources of business are scarce so these
must be utilised in the best possible manner so that the
business can get maximum benefit, from their resources.
(v) Improving productivity : it is used as a measure of efficiency.
Every business enterprise must aim at greater productivity -
to ensure continous survival and growth. This objective can
be achieved by reducing wastage and making efficient use
of machines and equipments, human resources, money
etc.
2. Social Objectives
Business is an integral part of society. It makes use of resources
of society. It earns profit by selling its products or services to members
of society. So it becomes obligatory on the part of the businessman to
do something for the society. The important social objective of business
are as follows :
(i) Quality goods and services at Fair Price The first social
objective of business is to provide better quality product at
reasonable rice and in proper quantity on continuous basis
to consumers examples.
Example :- Consumers look for ISI mark on electrical goods.
FPO mark on food products. Hallmark on Jewellery.
10 XI – Business Studies
(ii) Avoidance of Anti-Social and Unfair trade practices : Anti-
Social practices include hoarding. black marketing and
adulteration. Making false claims in advertisements to
mislead and exploit people is an example of unfair trade
practice. Business should not indulge in such practices.
(iii) Generation of Employment : Now a days. employment is the
biggest problem of society. Business should provide
employment to more and more people living in the country.
Handicapped and disabled people should be given extra
care.
(iv) Employee Welfare : Employees are a valuable asset and
they make significant contributions towards the success of
business. Another social objective of business, therefore, is
to ensure welfare of employees by providing good working
conditions. fair wages and facilities such as housing,
medical and entertainment etc. such welfare facilities help
to improve physical and mental health of employees.
(v) Community service : Business should contribute something
to the society where it is established and operated Library,
dispensary, educational institutions etc. are certain
contributions which a business can make and help in the
development of community.
Role of Profit in Business
Business is established for the purpose of earning profit. Profit
plays a very important role in business. The role of profit in business can
be brought out by the following facts :-
(1) For Long Survival :Profit alone help a business to continue
to exist for a long period. In the absence of profit the
establishment of a particular business loses its justification.
(2) For growth & Expansion All businessmen want their
business to expand and to grow. For development of
business additional capital is needed. Retained earnings is
a very good source of capital.
(3) For increasing efficiency : Profit is that power which
motivates both the parties - owner and workers to do their
best. As they know that in case of good profits they will get
good compensation for their efforts so. it finally helps in
increasing the efficiency of business.
11 XI – Business Studies
(4) For Building prestige and Recognition : For gaining prestige
in the Society Business had to satisfy all the parties
concerned. It has to supply good quality product/service at
reasonable price to customers. adequate remuneration to
employees. to pay sufficient dividend to the shareholders
etc. and all these are possible only if the business is earning
good profit.
Industry Commerce
(Deals with production (Deals with distribution
of goods services) of goods & services)
Primary Industry
Extractive Genetic
12 XI – Business Studies
2. Secondary Industry - Under this industry new products are
manufacturing by using the previously produced things e.g.
producing cotton is a primary industry and manufacturing cloth
out of cotton is a secondary industry. It is of two types.
i) Manufacturing - These industries convert raw materials or
semi-finished products e.g. paper from bamboo, sugar from
Sugar cane. It is further divided into four parts.
Manufacturing
Commerce :-
Meaning - Commerce refers to all those activities which are
concerned with the transfer of goods and services from the
producers to the consumers. It embraces all those activities
which are necessary for maintaining a free flow of goods and
services.
13 XI – Business Studies
The functions of commerce are as follows.
Hindrance of person Through Trade
External Trade
15 XI – Business Studies
solved by storing the goods in warehouses from the time of
production till the time they are demanded by customers.
(v) Advertising - Advertising brings goods and services to the
knowledge of prospective buyers. It is through advertising
that the customers come to know about the new products
and their utility.
Business Risk
Business risk refers to the possibility of inadequate profits or
even losses due to uncertainties or unexpected events. For example
demand for a particular prod¬uct may decline due to change in tastes
preferences of consumers, or increase in competition etc. There are
two types of business risks -
16 XI – Business Studies
3. Economic causes - They are related tc a chance of loss due
to change in market condition e.g.. fluctuations in demand
and prices, competition. change in technology etc
4. Physical causes - Mechanical defects or failures may also
lead to losses e g., bursting of boiler or machine may cause
death or destruction.
5. Other causes - These include unforeseen events like
political disturbances. fluctuation in exchange rates etc.
Starting a Business :- Basic Factors
1. Selecting the line of business :- The first thing to be
decided by the entrepreneur is the line and type of business
to be undertaken.
2. Scale or size of business :- After deciding the line of
business the businessman must decide whether he wants to
set up large scale or small scale business.
3. Choice of form of Business organization :- The next
decision must be taken is to finalize the form of business i.e..
to set up sole proprietorship.. partnership or joint stock
company.
4. Location of Business Enterprise :- The entrepreneur has
to decide the place where the enterprise will be located.
Before taking this decision he must find out availability of raw
materials, power, labour, banking, transportation etc.
5. Financial Requirement :- The businessman must analyze
the amount of capital he might require to buy fixed assets and
for working capital (Day to day expenses) Proper financial
planning must be done to determine the amount of funds
needed.
6. Physical facilities :- include machinery equipment building
etc. This decision depends upon the size, scale and type of
business activities he wants to carry on.
7. Plant layout :- Showing the physical arrangement of
machines and equipment needed to manufacture a product.
8. Competent and committed Workforce :- The entrepreneur
must find out the requirement of skilled and unskilled workers
and managerial staff to perform various activities.
17 XI – Business Studies
9. Tax planning :- The entrepreneur must try to analyze the
types of taxes because there are a number of tax laws in the
country which affect the functioning of business.
10. Setting up of the Enterprise :- After analyzing the above
mentioned points carefully the entrepreneur can start the
business which would mean mobilizing various resources
and completing legal formalities.
Points to be remembered
1. Ahmedabad, Lucknow, Kolkata, Takshila, Surat, Ujjain,
Inderprastha were major trade centres in ancient India.
2. In indigenous banking system, loans were given by 'Sahukar' at
high rate of interest.
3. Business — an economic activity which is conducted on regular
basis to earn profit through the production and sale of goods and
services.
4. Profession — An economic activity which is conducted by a
person having some special knowledge to serve.
5. Employment — An economic activity under which people work
for others and received remuneration in lieu there of.
6. Objective of Business are — Profit making, creation of
customers and innovation.
7. Causes of Business Risk — Human, natural, economic
8. Primary Industries — Use natural resources as raw material.
9. Secondary Industry — Use finished goods/product of primary
industry as raw material.
10. Tertiary Industry — Refers to that industry which produce
services.
18 XI – Business Studies
Multiple Choice Questions
1. Which is not an economic activity?
(a) Clerical work in a bank
(b) Teaching in Govt. school
(c) Cooking by a housewife
(d) Car production
2. Which is not included in 'Auxiliary to Trade'?
(a) Animal Husbandry (b) Insurance
(c) Transport (d) Warehousing
3. Which is Extractive Industry?
(a) Building construction (b) Plantation
(c) Mining (d) Textile
4. Which is service industry?
(I) Sugar (ii) Cement
(c) Poultry farm (d) Banking
5. Risk is the result of _____________.
(a) Uncertainty (b) Certainty
(c) Business activities (d) None of the above
6. Which is not the objective of business?
(a) Making profit
(b) creation of customers
(c) Investment
(d) Innovation
7. Capital is required in —
(a) Profession (b) Employment
(c) Business (d) Non-economic activity
8. Code of conduct exist in —
(I) Business (ii) Profession
(iii) Employment (iv) All of the above
19 XI – Business Studies
9. 'Fraud by Employee' is a type of business risk —
(i) Human (ii) Natural
(iii) Economic (iv) All of the above
10. Which economic activity has zero risk?
(i) Business (ii) Profession
(iii) Employment (iv) All of the above
Global Enterprises
Column – I Column – II
Enterprises
20 XI – Business Studies
Q4. Name the economic activity in which specialized knowledge is
required.
Q5. Why is the insurance known as a tertiary industry?
Q6. Mr. Rajnesh sold his furniture & bike on OLX as he was shifting
base to London. Is this a business activity ? Which element of
business is being referred to here ?
Q7. A lawyer is working in a knowledge process outsourcing (KPO)
organization. What type of economic activity is he performing ?
Q8. A company has decided to donate 1% of its sales to an NGO,
serving mentally disabled people. This initiative by the company
was highly appreciated by the public and their sales increased by
10%
i) Identify the objective depicted in the given example.
Ans. i) Social objective
3/4 MARKS
Q9. ABC Ltd. Is planting a tree on roadside. Which objective it is
trying to achieve?
Q10. All human being fulfill their different needs by performing certain
activities. Can you suggest and Explain the activities undertaken
by them.
Q11. Write four differences among business. profession and
employment.
Q12. No business is risk free in the light of this statement. Explain the
concept of business risk and its any three causes.
Q13. Explain any four objectives of business.
Q14. Define commerce. why is it of great importance in modern life?
Q15. Distinguish between primary & secondary industry Give
examples.
Q16. Tea is mainly produced in Assam, while cotton in Gujrat &
Maharastra but they are required for consumption in different parts
of the country. How can this hindrance of place be removed ? Also
under what business activity wit! it be categorized.
21 XI – Business Studies
Q17. It is one of the activities means for assisting trade and help in the
promotion of the product by providing information to the
consumers. Business does not exits in Isolation , it has to
communicate with others and the activity help in making
consumers aware and informed about the product of the company
and inducing them to buy particular items.
i) Which activity is discussed in the above para ?
ii) What are those activities called which are meant for assisting
trade ?
iii) Name and explain the categories into which communication
services can be classified.
Q 18. A factory emits a lot of smoke and pollutants while manufacturing
Sugar. It is overlooking the impact of its activities on the
environment and is engaged in profit maximization.
i) Which objective is not being fulfilled by the manufacturers?
ii) Which type of industry will you classify sugar manufacturing in?
Q 19. Rising Heights Ltd. wants to expand and grow. For this it needs
funds to acquire land, building, machinery etc. Also since these
assets cost a lot they want the risk associated with them to be
reduced. Identify the hindrances and explain how they can be
removed.
[Hint : Hindrance of Finance and Risk]
Q 20. Ramesh sells winter wear in the month of December, January and
February but he is not able to sell his complete stock.
i) Identify the hindrance ii) How can he resolve this hindrance?
iii) Will this hindrance always occur ? Why ?
[Hints : Hindrance of time resolved by warehousing, because
there is time gap between production and consumption.]
Q 21. Rajni, a house wife exchanges utensils for old clothes on a regular
basis. Is it a business and why ?
Q 22. Mr. X and Y are having a discussion. Mr. X fells that business is
based on selfish desire to gain higher and higher profits while Mr. Y
thinks that profit is essential for a business. Can you support Mr.
Y's case by giving strong points in his favour?
22 XI – Business Studies
5/6 MARKS
Q23. Categories the following into business, profession and
employment. (i) A farmer (ii) An advocate (iii) A clerk
(iv) A hawker selling toys for children (v) A doctor
(vi) A person repairing scooter on roadside
Q24. Define business. Explain the characteristics of business, (any
four)
Q 25. Commerce is considered as the backbone of indutry and other
business activities. Discuss the various functions performed by
commerce.
Q 26. Commerce is the sum total of activities that remove hindrances in
the free flow of goods from producers to consumers. Explain.
Q 27. Explain any six factors that are important to be considered while
starting a business.
Q 28. Write difference among industry, commerce and trade on any five
basis.
Q 29. Profit maximization can not be the sole objective of a business.
Explain.
Q 30. ‘Creative Strokes’ is an advertisement agency initiated by Rohit
Shagun & Pratima They have called a meeting to discuss the
below giiven points :-
(i) Increase the profit margin by 10% in May.
(ii) Capturing a bigger share in the market.
(iii) Making use of better cameras & improved techniques.
(iv) Making best use of cameras lights. cameramen. finance etc.
employed by the business.
(v) Improve efficiency in all regards of functioning of business.
(a) Which aspects of business objectives are being referred
to here?
(b) Also develop each point to be discussed in the meeting
by classifying the objective.
[Hint : (a) Economic objectives]
23 XI – Business Studies
Q 31. Nathu Lal prepares 'sonpapri' for customers during Diwali season
every year. He prepared more 'Sonpapari' than he could sell this
year. He employed women and children also arid paid them less
salary manufacturing on the packages. This way he generated
profit for himself.
(a) Do you think he is fulfilling all the objectives of business ?
(b) If not which aspects of this objective are not being fulfilled ?
[Hint : No. Social objectives are not being fulfilled]
Q32. Classify the below given business into different types of
industries.-
(i) Crude oil business
(ii) Producing steel from iron are
(iii) Cosmetics manufacturing
(iv) producing computers
(v) construction of dams.
Q33. In business activities, there are some activities that are involved in
the removal of hindrances in process of exchange i.e. from the
producer to the consumer Identify them. Also classify the activities
which help in removing the following hindrances:-
(i) Hindrance of place
(ii) Hindrance of risk
(iii) Hindrance of time
(iv) Hindrance of finance
(v) Hindrance of information
Q34. Different situations in different business are being elaborated
below:-
(i) Raghunath Gorkha had a match stick factory in Nepal which
got distructed by the recent earthquake.
(ii) Mr Arya. a senior manager in a telecom company shared
confidential information about the company with a
competitor which led to huge losses for the company.
(iii) Vodafone Co was charged with evasion of tax and asked to
pay fine in cross which would lead to heavy losses for the
company.
24 XI – Business Studies
(iv) Type writers becoming redundant because of laptops.
(a) Which characteristic of business is being referred to in
all the above cases ?
(b) How can you classify the different cases based on this
characteristic ?
[Hint : Business Risks - Causes]
Q35. Dr. Kumar is an orthopedic surgeon in Jaipur Golden Hospital and
Dr Mahajan, his friend is a Pediatrician who has set his own clinic.
Dr Mahajan's wife, Ms. Rajni operates her Jewellery store.
Compare & differentiate the nature of tasks undertaken by them.
Q 36. Zainab, Shelly & Ravina are friends. They have just completed a
fashion designing course. They wish to start a business together.
They have r10,00,000 savings put together and are planning to
take a bank loan of additional r10 lakhs. They have found a prime
location in Karol Bagh where they can set their boutique. They
decide that they will initially not take very big orders.
Based on this information, quote the lines associated with
factors affecting the decision to start a business and classify them.
Q37. lmran. Manpreet. Joseph and Priyanka have been classmates in
Class X. After their exams are over. they happen to meet at a
common friend Ruchika's house. Just when they are sharing their
experiences of examination days. Ruchika's father. Mr. Raghuraj
Chaudhury intervenes and asks about their well-being. He also
enquires from each one of them about their career plans. But none
of them has a definite reply. Mr. Raghuraj. who himself is a
businessman. suggests to them that they can opt for business as a
promising and challenging career. Joseph gets excited by the idea
and says, "Yes. business is really good for making lots of money
even more than is possible by becoming an engineer or a doctor."
Mr. Raghuraj opines "Let me tell vou. vaunts man. there is a lot
more to business than merely money ? Do you agree with Mr.
Raghu Raj Chaudahry’s statement? What according to you are
other objectives of business.]
Q 38. A cloth manufacture supplies his clothes to Sri Lanka, Thailand
and Bangladesh. While manufacturing, some defective material
was set asides the manufacturer believes in providing good
quality products only. The defective material was given to
Nari Niketan's women for repairing and later donated to
orphanage for free.
25 XI – Business Studies
i) What kind of business is the cloth manufactures doing ?
ii) Which objectives are being followed by it by donating the
defective material. State them.
Q 39. Naveli, a Home Science graduate from a reputed collage has
recently done a cookery course. She wished to her own venture
with a goal to provide 'health food' at a reasonable price. After
analyzing various option she decides to sell 'ready-made' and
'ready to make' vegetable shakes and milk shakes. She has a
saving of r 5,00, 000 and will bike a loan of r 10 Lakhs.
Based on the above para, identify and quote the factors that she
has considered till now for starting the business.
Also explain other three factors that need to be considered.
Q 40. Classify the following into business, profession and employment.
i) Hari sells mobile phones on behalf on his employer.
ii) It requires minimum academic qualifications.
iii) A hawker sells toys for children outside a function.
iv) Sanjay is teh advocate of High Court.
v) Dhruv is the manager of a company.
vi) A person repairs scooters on road side.
Q 41. Ms. Meena is a lecturer is a college. She gets 72,000 p.m. as
remuneration. Mr. Kund is a farmer producing 20 quintals of wheat
for his own consumption and 2,000 quintals for sale Ms. Kirti, a
journalist in an agency, teachers slum children after her office
hours. She doesn't charge anything from them. This gives her
psychological and mental satisfaction.
i) Teaching in a college by Ms. Meena refers to which type of
human activity.
ii) Production of wheat by Mr. Kunal for his own consumption
refers to which human activity and why ?
[Hints]
Ans. i) Economic Activity.
ii) Economic activity as production of wheat by Mr. Kunal for his
own consumption helps him for his livelihood.
26 XI – Business Studies
Chapter-2
Forms of Business Organization
Forms of Business Organisation
Active
Partner by Sleeping
Holding or
out Dormant
Types of
Partners
Partner by
Estoppel Secret
Nominal
27 XI – Business Studies
Private
company
Public
company
28 XI – Business Studies
Meaning :- A business enterprises is an institutional arrangement to
form any business activity. On the basis of ownership business enterprises
can be divided into following 3 categories.
Sole Proprietorship :-
Meaning : Sole Proprietor
$ $
Only Owner
Sole proprietor means a form organization in which there is only
owner of business. He himself manages and is the only receipt of all
profits and losses (risks).
Features of Sole-Proprietorship :-
1) Single ownership :- He is sole owner of all the assets and
resources of business.
2) No separate Legal Entity :- The Business has no separate
existance or entity that of the business. All the assets and
liabilities of the business are that of the business man.
3) No Legal Formalities :- No Legal Formalities are required to
start, manage and dissolv2e such business organization.
29 XI – Business Studies
4) Control and management :- Sole proprietor has full power
to control and manage such organizations.
5) Unlimited liability :- The liability of owner is unlimited. In
case, the assets of business are not sufficient to meet its
debts, the personal property of owner can be used for paying
debts.
6) Undivided Risk :- Means the owner bears all the losses and
enjoys all the gains.
Unlimited Liability
7) Suitable for some special form It refers that if the business gets
of business :- It is suitable in into difficulty and can't pay its
areas of personalized services debts, the owner of the business is
hold personally liable for those
and small scale activities like debts.
agriculture, the job of stitching,
bakery, beauty parlour etc.
8) Secrecy :- All the important informations concerning the
business rests only with the owner so that no outside party
can take any under advantage of it.
Merits :-
1) Easy Formation :- It can be easily started and closed as
there is no need to observe any legal formalities.
2) Quick Decision :- A Sole trader takes the decision quickly
as he is not required to consult anybody about his decisions.
3) Secrecy :- All the secrets are confined with the owner. They
are not shared with any body.
4) Direct motivation :- Direct relationship between efforts and
reward provide incentive to the sole trader to work hard.
5) Personal touch :- The side trader can maintain personal
contacts with his customers and employees. In this way,
good work is possible at less cost and time.
Limitations :-
1) Limited financial resources :- Funds are limited to the
owner's personal savings (i.e. his capital) and his borrowing
capacity.
2) Limited managerial ability :- Sole trader can't be good in all
aspects of business and he can't afford to employ experts
also.
3) Unlimited liability :- As the sole trader has to face the entire
risk of business, so he compels him to avoid risky and bold
decisions.
30 XI – Business Studies
4) Uncertainty :- Death, insolvency, lunacy or illness of a
proprietor may leads to its closure.
5) Limited scape for expansion :- Due to limited capital and
managerial skills, it can't expand to a large scale.
SUITABILITY :
Sole Trader-ship is suitable.
• Where the personal attention to customer is required as in
tailoring beauty parlour.
• Where goods are unstandardized like artistic jewelery.
• Where modest capital & limited managerial skills are required as
in case or retail store.
• Business where risk is not extensive i.e., lesser fluctuation in
price and demand i.e. stationary shop.
Features:-
1) Formation :- There should be at best two members in a
family and some ancestral property to be inherited by them
to form this type of Business.
2) Membership :- Membership automatically starts by birth in
the family.
3) Control :- In this, Business is managed wholly by Karta only.
31 XI – Business Studies
The others members can suggest him only.
4) Liability :- Liability of Karta is unlimited but of all other
members in limited to the extent of their share in property.
5) Permanent Existence :- The existence is permanent like the
existence of the company. There is no effect of the death,
insolvency or luncy of the members on the business.
6) Minor Members :- A minor can also become full-fledged
member of the family business.
7) Registration :- There is no need of any registration.
Merits
1) Effective Control :- The Karta can prompty take decisions
as he has the absolute decision making power.
2) Continued business Existance :- The death, Lunacy of
Karta will not affect the business as next eldest member will
then take up the position.
3) Limited Liability :- The ilabilty of all members except Karta
is limited. It gives them a relief.
4) Secrecy :- Complete secrecy regarding business decisions
can be maintained by Karta.
5) Loyalty and Co-operation :- It helps in securing better co-
operation and greater loyalty from all the members who run
the business.
LIMITATION
1) Limited capital :- There is shortage of capital as it is limited
to ht ancestral property.
2) Limited Managerial Skill :- In this, all the decision have to be
taken by the Karta but he is not intelligent in all fields of
business. Therefore, sometimes the decisions taken are not
fevourbale to the business.
3) Unlimited Liabilities :- In this, the responsibility of the Karta
is unlimited so, he hesitates in taking new and risky
decisions.
4) Unbalances decision :- As Karta is overburdened, with
work, he may take hart and unbalances decisions.
Note :- The joint Hindu Family business is an decline
because of the diminishing number of joint Hindu families in
the country.
32 XI – Business Studies
Q. Abdul is the sole owner of a shoe manufacturing factory, It
expands and grows, but now it faces the problem of limited
financial and managerial resources.
i) Name the form of organization on which is being carried out
by Abdul.
ii) Give two alternatives to solve the problem.
[Hint : (i) Employ a paid assistant (ii) Admit one or more partners
PARTNERSHIP
Q.1 What is the maximum number of partners in a partnership firm
with :-
i) Banking Business
ii) Non-Banking Business
33 XI – Business Studies
capital in contributed by number of partners.
iii) Balanced Decisions :- As all important decisions are taken
jointly by partners, they are good and balanced.
iv) Sharing of Risks :- Risks get distributes among partners.
Which reduces burden and stress on individual partner.
v) Secrecy :- The accounts of partnership firms are not
presented before public and are not required to publish. So,
business affairs are kept secret.
Limitations :-
i) Limited Resources :- As there is a restriction on the number of
partners so capital contributed by them is also limited.
ii) Unlimited liability :- The liability of all partners is unlimited.
iii) Lock of continuity :- Partnership comes to an end with the
death, retirement, insolvency or lunacy on any of its partner.
iv) Lack of public confidence :- Partnership firms are not
required to publish their reports and accounts. Thus, they lack
public confidence.
v) Lack of Harmony :- Because of more people, there can be
difference of opinions which leads to discard and lack of co-
ordination.
Note : When the business happens to be of medium size and te partners
have mutual understanding and goodwill, then partnership form of
business organisation is the best eg. C.A. firms, hotels and
factories of middle level etc.
Types of Partners
i) Classification on the Basis of Duration
Partnership at Will Particular Partnership
This type of partnership exits at the will of This type of partnership is formed by
partners and continue for unlimited time. specified objective and come to end after
accomplishment of objective.
34 XI – Business Studies
2)
1)
Type Capital Contribution Managing business Profit Sharing Liability
Active Participated in Share its profits & Unlimited Liability
Partner Contribution capital management of firm. losses.
Sleeping/ Doesn't take part in Share its profits & Unlimited Liability
Dormant Contributes capital day to day activities of losses.
Partner business.
Secret Contributes capital Participates in Share its profits & Unlimited Liability
Partner and is unknown to management of firm. losses.
general public.
Do not contribute
Partnership Deed.
Partner by capital but by his Do not participate in Do not share its
Estoppel words or conduct, management of firm. profits & losses.
impress other to be a
Unlimited Liability
partner.
35
Names and Address of Partners.
Do not contribute
Partner by capital. He doesn't Do not participate in Do not share it's
Holding out deny others to management of firm. profits & losses.
XI – Business Studies
specifies the terms and conditions of partnership is called the
Partnership Deed :- The Written agreement on a stamped paper which
3) Duration of Partnership.
4) Scope of Business.
5) Contribution of Capital by Partners.
6) Profit and loss Ratio.
7) Terms relating or salaries, drawing interest on capital and
interest on drawing of partners.
8) Duties & obligations of partners.
9) Terms governing admission, retirement & expulsion of a power.
10) Method for solving disputes.
11) Valuation of goodwill.
Registration of Partnership :- Registration is not compulsory but it is
always beneficial to get the firm registered. The consequences of non-
registration of a firm are as follows :-
i) A partner of an unregistered firm can't file suit against the firm
or the partner.
ii) The firm can't file a suit against third party.
iii) The firm can't file a case against it's partner.
Co-operative Society
Co-operative
Co + Operative
$ $
together Operate for the motive
of welfare.
'Co-operative' means working together and with others for a common
purpose. A Co-operative society means a voluntary organization which
is established by some persons on the basis of co-operative and
equality to safeguard their common economic interests.
Features :-
1) Voluntary Membership :- Every one having a common interest
is free to join a co-operative society.
2) Legal Status :- Its registration is compulsory and it gives it a
separate legal identify.
36 XI – Business Studies
3) Limited Liability :- The liability of the members is limited to the
extent of their capital contribution in the society.
4) Control :- Management and control lies with the managing
committee elected by the members by giving vote.
5) Service motive :- The main aim is to serve it's members and not
to maximize the profit.
6) Cash trading :- They give preference to cash trading.
7) Government control :- They have to sent their annual report
and accounts to the register so that the government exercise it's
control from time to time by checking their accounts.
8) Arrangement of Finance :- They arrange finance from sale of
shares to members, loans obtained from the government etc.
Merits of Co-operative Societies :-
1) Ease of Formation :- Any ten adults having common objective
can establish co-opetative society by getting registered with
register.
2) Stable existance :- Due to registration it is a separate legal
entity and is not affected by the death, lunacy or in solvency of
any of its member.
3) Limited liability :- The liability of members is limited to the
extent of their capital contribution.
4) Supply of Goods ay Cheaper Role :- These societies benefit
their members by supplying them goods at cheaper rates than
the market.
5) Government Support :- Govt. provides support by giving loans
at lower interest rates, subsidies and by charging less taxes.
Limitations :-
1) Shortage of Capital :- It suffers from shortage of capital as it is
usually formed by people with limited means.
2) Inefficient Management :- These are managed by elected
members who may not be competent and experienced. Due to
lack of managerial knowledge. They can't run the society
effectively.
3) Lack of Secrecy :- These have to send their annual reports and
accounts to the registrar of co-oprative societies. In this way, the
secrets of business become public.
37 XI – Business Studies
4) Excessive Govt. Control :- It suffers from excessive rules and
regulations of Good.
5) Conflict among members :- The members are from different
sections of society with different view point. Sometime as when
some members become rigid the result is conflict.
6) Lack of motivation :- Members are not in dined to put their best
efforts as there is no direct link between efforts and rewards.
TYPES OF CO-OPERATIVE SOCIETIES
1. Consumers co-operative Society :- It seeks to eliminate
middleman by establishing a direct link with the producers. It
purchases goods of daily consumption directly from
manufacturer or wholesalers and sells them to the members at
reasonable prices.
2. Producer s Co-operative Society :- The main aim is to help
small producers who cannot easily collect various items of
production and face some problem in marketing. These societies
purchase raw materials, tools, equipments and other items in
large quantity and provide these things to their members at
reasonable price.
3. Marketing Co-operative Society :- It performs various
marketing function such as transportation, warehousing,
packing, grading, marketing research etc. for the benefit of its
members. The production of different members is pooled
together and sold by society at good price.
4. Farmer's Co-operative Society :- In such societies, small
farmers join together and pool their resources for cultivating their
land collectively. Such societies provide better quality seeds,
fertilizers, machinery and other modern techniques for use in the
cultivation of crops. It provides them opportunity of cultivation on
large scale.
5. Credit co-opearative Society :- Such societies protect the
members from exploitation by money lenders. They provide
loans to their members at easy terms and reasonably low rate of
interest.
6. Co-operative Housing Society :- The main aim is to provide
houses to people with limited means/income at reasonable
price.
38 XI – Business Studies
JOINT STOCK COMPANY
Meaning - Joint stock company is a voluntary association of persons
having a separate legal existence, perpetual succession and common
seal. Its capital is divided into transferable shares.
FEATURES
1. Incorporated association :- The company must be
incorporated or registered tender the companies Act 1956.
without registration no companies Act. 1956. Without
registration no company can come into existence.
2. Seperate Legal Existence :- It is created by law and it is a
distinct legal entity independent of its members. It can own
property, enter into contracts, can file suits in its own name.
3. Perpetual Existence :- Death, insolvency and insanity or
change of members as no effect on the life of a company It can
come to an end only through the prescribed legal procedure.
4. Limited Liability :- The liability of every member is limited to the
nominal value of the shares bought by him or to the amt.
guaranteed by him.
5. Transferability of shares :- Shares of public Co. are easily
transferable. But there are certain restrictions on transfer of
share of private Co.
6. Common Seal :- It is the official signature of the company and it
is affixed on all important documents of company.
7. Separation of ownership and control :- Management of
company is in the hands of elected representatives of
shareholders known individually as c.,•rector and collectively as
board of directors.
MERITS
1. Limited Liability :- Limited liability of shareholder reduces the
degree of risk borne by him.
2. Transfer of Interest :- Easy transferability of shares increases
the attractiveness of shares for investment.
3. Perpetual Existence :- Existence of a company is not affected
by the death, insanity. Insolvency of member or change of
membership. Company can be liquidated only as per the
provisions of companies Act.
4. Scope for expansion :- A company can collect huge amount of
capital from unlimited no. of members who are ready to invest
39 XI – Business Studies
because of limited liability, easy transferability and chances of high
return.
5. Professional management :- A company can afford to employ
highly qualified experts in different areas of business
management.
LIMITATIONS
1. Legal formalities :- The procedure of formation of Co. is very
long, time consuming, expensive and requires lot of legal
formalities to be fulfilled.
2. Lack of secrecy :- It is very difficult to maintain secrecy in case
of public company, as company is required to publish and file its
annual accounts and reports.
3. Lack of Motivation :- Divorce between ownership and control
and absence of a direct link between efforts and reward lead to
lack of personal interest and incentive.
4. Delay in decision making :- Red papism and bureaucracy do
not permit quick decisions and prompt actions. There is little
scope for personal initiative.
5. Oligarchic management :- Co. is said to be democratically
managed but actually managed by few people i.e. board of
directors. Sometimes they take decisions keeping in mind their
personal interests and benefit, ignoring the interests of
shareholders and Co.
Types of Companies :-
On the basis of ownership, companies can be divided into two
categories :-
i) Private Company ii) Public Company
Private Company :
Acc to Sec 2(68) of Companies Act, 2013, a Private Company
means a company which :
40 XI – Business Studies
1. Restricts the right of members to transfer shares.
2. Restricts the no. of its members between 2 to 200 excluding
present and previous employees of Co. who are members also.
3. Puts a ban on inviting the public to subscribe to its shares.
4 Puts a ban on inviting the public to subscribe to its public
deposits.
5 Must have a min. paid up share capital of 1 lakh rupees.
Public Company :
Acc to Sec 2 (71) of Companies At, 2013 a Public Company
means a company which is not a private company. A public
Company is one which :
1. has no restriction on the transfer of its shares.
2. has no max limits of its members
3. has no restriction on inviting the public to subscribe to its shares
and debentures
4. has no restriction on inviting public to subscribe to its Public
deposits.
5. has a min. paid up capital of 5 lakh rupees.
41 XI – Business Studies
Difference between A Private and A Public Company.
Basis Private Company Public Company
1. Name It has to write private Ltd. after its It has to write only Ltd. after it'a
name name.
2. No. of Minimum -2 Minimum-7
Members
Maximum-50 Maximum-No Limit
3. No. of
Minimum -2 Directors Minimum - 3 Directors
Directors
5 Lakh
4. Minimum 1 Lakh
paid-up
share
capital
Questions :-
i) How will you identify whether the company is private or Public?
ii) Give two examples of Private companies?
iii) Give two examples of Public companies ?
One Person Company :
One Person Company refers to a company which has only one peron as
a member and which works on the principle of an ordinary company.
Causes of the Formation of OPC
1. Making the unorganised sector as organised - Sole traders have
got a good opportunity to move from the unorganised sector and
enter the organised sector without getting other people to join
him and have all benefits of on organised sector.
42 XI – Business Studies
2. Perpetual Succession.
Formation of A Company
Formation of a company means bringing a company into existence and
starting Its business. The steps involved in the formation of a company
are :-
(I) Promotion
(ii) Incorporation
(iii) Capital subscription
(iv) Commencement of business.
A private company has to under go only first two steps but a
public company has to undergo all the four stages.
I. Promotion :-
Promotion means conceiving a business opportunity and taking an
initiative to from a company.
1. Identification of Business Opportunity :- The First and
foremost function of a promoter is to identify a business idea
e.g. production of a new product Or service.
2. Feasibility Studies :- After identifying a business
opportunity the promoters undertake detailed studies of
technical, Financial, Economic feasibility of a business.
3. Name Approval :- After selecting the name of company the
promoters submit an application to the Registrar of companies
for its approval.
4. Fixing up signatories to the Memorandum of Association
:- Promoters have to decide about the director who will be
signing the memorandum of Association.
5. Appointment of professional :- Promoters appoint merchant
bankers, auditors etc.
6. Preparation of necessary documents :- The promoters
prepare certain legal documents such as memorandum of
Association, Articles of Association which have to be submitted
to the Registrar of the companies.
II. Incorporation
Incorporation means registration of the company as body
corporate under the companies Act 1956 and receiving certificate of
Incorporation.
43 XI – Business Studies
Steps for Incorporation
1. Application for incorporation :- Promoters make an
application for the incorporation of the company to the
Registrar of companies.
2. Filing of necessary documents :- Promoters files the
following documents
(i) Memorandum of Association.
(ii) Articles of Association.
(iii) Statement of Authorised Capital
(iv) Consent of proposed director
(v) Agreement with proposed managing director.
(vi) Statutory declaration.
3. Payment of fees :- Along with filing of above documents,
registration fees has to be deposited which depends on
amount of the authorised capital.
4. Registration :- The Registrar verifies all the document
submitted. If he is satisfied then he enters the name of the
company in his Register.
5. Certificate of Incorporation :- After entering the name of the
company in the register. The Registrar issues a Certificate of
Incorporation. This is called the birth certificate of the
company.
III. Capital Subscription:-
A public company can raise funds from the public by issuing shares and
Debentures. For this it has to issue prospectus and undergo various other
formalities:-
Step required for raising funds from public :-
1. SEBI Approval :- SEBI regulates the capital market of India. A
public company is required to take approval from SEBI.
2. Filing of Prospectus :- Prospectus means any documents which
invites offers from the public to purchase share and Debenture of
the company.
3. Appointment of bankers, brokers, underwriters :- Banker of
the company receive the application money. Brokers encourage
the public to apply for the hares, underwriters are the person who
undertake to buy the shares if these are not subscribed by the
public. They receive a commission for underwriting.
44 XI – Business Studies
4. Minimum subscription :- According to the SEBI guide lines
minimum subscription is 90% of the issue amount. If minimum
subscription is not received then the allotment cannot be made
and the application money must be returned to the applicants
within 30 days.
5. Application to Stock Exchange :- It is necessary for a public
company to list their shares in the stock exchange therefore the
promoters apply in a stock exchange to list company shares.
6. Allotment of Shares :- Allotment of shares means acceptance of
share applied. Allotment letters are issued to the shareholders.
The name and address of the shareholders submitted to the
Registrar.
IV. COMMENCEMENT OF BUSINESS :-
To commence business a public company has to obtain a
certificate of com-mencement of Business. For this the following
documents have to be filled with the registrar of companies.
1. A declaration that 90% of the issued amount has been subscribed.
2. A declaration that all directors have paid in cash in respect of
allotment of shares made to them.
3. A statutory declaration that the above requirements have been
completed and must be signed by the director of company.
Important documents used in the formation of company:-
1. Memorandum of Association - It is the principal document of a
company. No company can be registered without a memorandum
of association and that is why it is sometimes called a life giving
document.
Contents of Memorandum of Association :-
1. Name clause - This clause contains the name of the company.
The proposed name should not be identicator similar to the name
of another exiting company.
2. Situation clause - This clause contains the name of the state in
which the registered office of the company is to be situated.
3. Object clause - This clause defines the objective with which the
company is formed. A company is not legally entitled to do any
business other than that specified in the object clause
4. Liability Clauses - This clause limits the liability of the members
to the amount unpaid on the shares held by them.
5. Capital clause - This clause specifies the maximum capital which
45 XI – Business Studies
the company will be authorized to ranise tough the issue of shares called
authorised capital.
2. Articles of Association :-
The articles of Association are the rules for the internal
management of th( affaires of a company the articles defines the duties,
rights and powers of the officers and the board of directors.
Contents of the Article:-
1. The amount of share capital and different classes of shares.
2. Rights of each class of shareholders.
3. Procedure for making allotment of shares.
4. Procedure for issuing share certificates.
5. Procedure for forfeiture and reissue of forfeited shares.
6. Rules regarding casting of votes and proxy voting
7. Procedure for selection and removal of directors
8. Dividend declaration and payment related rules
9. Procedure for capital readjustment
10. Procedure regarding winding up of the company.
I. Prospectus:
Prospectus means any document which invites deposits form the
public to purchase share or debentures of a company.
46 XI – Business Studies
9. Underwriters to the issue.
10. Merchant bankers to the issue.
4. Statement is Lieu of Prospectus:
A public company having a share capital may sometimes decide
not to funds form the public because it may be confident of obtaining the
required capital privately. In such case it will have to submit a statement in
lieu of prospectus with the Registrar of companies.
It Contains information much similar to that of a prospectus.
47 XI – Business Studies
Choice of Forms of Business Organization :- The following factors
are important for taking decision about form of organization.
i) Cost and ease in setting up the Organization :- Sole
proprietorship is least expensive and can be formed without any
legal formalities to be fulfilled. Formation of a company is
expensive with lot of legal formalities. So, sole proprietorship is
better.
ii) Liability :- The liability of the owners in sole proprietor business
and partnership business is unlimited but the responsibility of the
share holders in a company is limited. So, Company organization
should be selected.
iii) Continuity :- In sole proprietorship and partnership firms death,
lunacy or insolvency of any of its member, business ends but in
Joint Hindu Family Business & Co-oprative Societies company
business is not affected by there above picture. So, company co-
operative society are much better to be chosen.
iv) Managerial Needs :- In sole proprietorship & Joint Hindu Family
Business, experts opinion is not affordable but companies can
afford exports for management. so keeping in view, the nature of
work and managerial needs company is liked.
v) Capital Considerations :- Business activities requiring huge
financial resources prefer company form while for small &
medium size business, partnership or sole proprietorship is
better.
vi) Control :- For direct control & direct decision. Sole proprietor is
liked while where the control has to be shared, they prefer
company.
vii) Nature of Business :- If the work requires personal attention, it
is generally set up as a sole proprietorship Units engaged in
large seals manufacturing are more likely to be organized in
company form or partnership form.
48 XI – Business Studies
Points to be remembered
1. There are different forms of organisation —
– Sole Proprietorship
– Partnership
– Joint Hindu Family Business
– Co-operative Society
– Company
2. There is unlimited liability in sole proprietorship, Joint Hindu
Family Business and Partnership.
3. There is limited liability in co-operative society and company.
4. Registration is not required in sole proprietorship, Joint Hindu
Family Business and Partnership. While it is required in co-
operative society and company.
5. Co-operative society and company are separate legal entity.
6. Schools of Hindu Law —
(I)Mitakshara – It is applicable in all India except Assam, West
Bengal and some parts of Orissa.
(ii) Dayabhag – It is applicable in Assam, West Bengal and some
parts of Orissa only.
7. Stages of formation of company —
(I)Promotion
(ii) Incorporation of registration
(iii) Commencement of Business
8. Main documents of a company —
(i) Memorandum of association
(ii) Articles of association
(iii) Prospectus
9. Clauses of memorandum of Association
(i) Name clause (ii) Situation clause
(iii) Objects clause (iv) Liability clause
(v) Capital clause (vi) Subscription clause
49 XI – Business Studies
Multiple Choice Questions
1. Which forms of business organisation has not the feature of
unlimited liability?
(a) Sole Proprietorship (b) Partnership
(c) Joint Hindu Family Business (d) Company
2. Registration is compulsory in —
(a) Sole proprietorship (b) Co-operative Society
(c) Partnership (d) Joint Hindu Family
Business
3. What are the maximum number of members in a Public
Company?
(a) 50 (b) 10
(c) Unlimited (d) 200
4. What are the main documents required to form a company?
(a) Memorandum of association (b) Article of association
(c) Prospectus (d) All of the above
5. Which of the following in a public company —
(a) Samsung (b) PARLE
(c) BHEL (d) Airtel
6. Which of the following has a separate legal entity?
(a) Co-operative society (b) Partnership
(c) Joint Hindu Family Business (d) All of the above
7. Which of the following statement is true?
(a) Partnership is registered under Partnership Act 1986
(b) A minor can't be partner
(c) Written agreement among partners is called partnership
deed.
(d) There should be minimum 3 directors in one person
company.
8. Partnership is registered under —
(i) Partnership Act 1932
(ii) Partnership Act 1948
50 XI – Business Studies
Active partner
Who is a secret partner?
23. Shiv, Anandi & John were partners John died in a car accident
Both Shiv & Anandi decided to admit his son Ryan who was 16
years old as partner. Can they do so ? Justify.
[Hint : Minor as a partner]
24. Mr. Singh is in 'lighting' business for the post 15 years. To help his
friend, Mr Yadav, a beginner he projected himself as a partner
before Mohd. Abdul, a whole sale dealer of fancy lights. Mohd.
Abdul gave Mr. Yadav the stock without asking for payment and
gave him credit limit of one month. Will Mr. Singh be liable to Md.
Abdul if Mr. Yadav does not pay him on time ? Classify Mr.
Singh's role here along with an explanation.
[Hint : Partner by Estoppel]
25. Akriti, Sonam & Supreeti were friends who started a partnership
business. They did not get their firm registered as it was optional.
Soon, Sonam & Supreeti started having conflicts. Sonam
wanted to approach a lawyer. If you were a lawyer than how
would you guide her ?
26. Mangal, Sazia & Suqhbeer Singh wish to start a business in
partnership. They want to make a partnership deed, Suggest
what aspects of the deed should be included in it ?
27. Explain any four limitations of Joint Stock Company.
28. A, B & C were partners in a financing firm. B&C had gone for a
meeting in America for analysing business prospects in that
country. In the mean while, A invested a huge amount of money
in buying shares of a new company by borrowing money from
Mr. X. This turned out to be a bad deal as the share prices soon
fell. When B&C came back they said they were not liable to pay
to Mr. X as they did not take the money. Were B&C right in doing
so ? Under which aspect of partnership are they bound ?
29. Rohan has a shop of stationary products. He takes assistance
from his brother to handle it and pays him a fixed salary. He also
employed a 11 year old boy for his shop. Both the brothers
regularly abuse him and cut his wages as and when desired.
i) Which form of organization is referred here ?
ii) Write any one feature associated with it.
30. Ravina is a Science teacher in a coaching institute. She is not
satisfied with the salary being received here. So she decides to
start her own coaching institute. But students generally take
53 XI – Business Studies
coaching for Science as well as maths. What do you recommand
Ravina to do ?
[Hint : Go for partnership with a maths expert.]
31. The business assets of a firm are worth $70,000 but debt remain
unpair at worth $1,00,000. What course of action can creditors
take in following cases !
i) The organization is a sole proprietorship firm.
ii) The organization is a partnership with 2 partners A and B
sharing profits and losses equally.
32. Sita and Zoya are two friends belonging to Hindu and Muslim
religion. They start a business of handicrafts together. They
decide to open the factory in rural area and give employment
opportunities to local residents.
i) Which form of business organization have they opted ?
ii) Write any one feature of the form ?
iii) Mention the values involved in this question.
33. Continous exploitation of milkman of charm wood village by the
intermediaries compel them to form a voluntary association to
protects their interest gain access to markets there by ensuring
maximum returns for their efforts and welfare of the members.
i) Name the form of business organization adopted by the
milkman.
ii) Give an example of organization identifies in (i) above
iii) Which principle governs such organization and how
government support them ?
34. All the members of a company are killed in an earthquake. While
holding a general meeting. Will the company wind up ? Why ?
35. Rohit and Mohit are partners dealing in shares. Mohit uses firm's
money to buy shares on his name. He didn't disclose this
information with his friend Rohit.
a) Does Rohit have any share in the profit earned from sale of
these shares?
36. Rohan, Sohan and Mohan are partners of a business of
publishing books. They have adopted three villages which are
educationally backward. Every year they distribute books to
schools established in these villages for free to promote
education. Write any one feature of partnership. Identify three
values followed by the partnership firm.
54 XI – Business Studies
37. Star Ltd. has received applications for 48 crores (issue size was
50 crores). Discuss the documents filled with the register of
companies.
[Hint]:
i) A declaration that 90% of the issued amount has been
subscribed.
ii) A declaration that all the directors have paid in cash in
respect of allotment of shares made to them.
iii) A statutory declaration that the above requirements have
been completed and must be signed by the director of
company.
38. Aditya is promoting a company. Before the company is formed,
he enters into a contract with DLF for purchase of land and also
agreed to pay 10 crores within a period of 2 moths. The company
was formed within 1 month. On the basis of the facts, answer the
following :-
i) Which type of contract is entered by Aditya ?
ii) Is the contract legally binding on the company ?
iii) Can DLF Ltd. hold Aditya liable for the payment money?
iv) What can the company do to prevent Aditya from such a
situation?
5-6 Marks Questions :-
39. Differentiate between private & public company.
40. Mr. Amit Kumar is interested in the floatation of a company.
Briefly discuss the steps he should take.
41. Discuss the reasons of superiority of joint stock company over
sole proprietorship and partnership.
42. Which form of business is suitable for following types of business
and why ?
(a) Beauty Parlour
(b) Coaching Centre for science students
(c) Hotel
(d) Shopping mall
(e) Restaurant
(f) Small retail business.
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43. Dhirubhai Chaurasiya operates a textile business. His family is
joint and has a lot of ancestral property. All the 15 family
members are a part of this business. He is the eldest male
member in the family so he heads the business. He is liable to all
the creditors of the business as he is the decision maker.
Dhirubhai's grandson has just born a few days ago and he is also
the member of the business.
(a) Which form of business is being undertaken by Dhirubhai
Chaurasiya ?
(b) Identify the features of this form of business based on the
information given.
(c) Textile business is part of which type of industry according
to you ?
44. Every day Amul collects milk from 2.12 million farmers (many
illiterate) & converts the milk into branded packaged products &
delivers goods all over the country. The story of Amul started in
Dec, 1946 with a group of farmers been to free themselves from
intermediaries, gain access to the market & there by ensure
maximum returns for their efforts"
(a) From the above information, identify the form of business
organisation used by Amul.
(b) Also quote the line which suggest its features ?
(c) According to you. Amul is part of which type of industry ?
45. Mohan, Sohan and Ramesh are brothers living in a village
Mohan is a farmer. He grows sugar cane in his field sohan is
manufacturer of sugar who is doing the business with his friends
Rohan Singh and Jitender. Ramesh is a transporter. He sells the
sugar in the city using his truck. This year the sugar got spoiled
due to heavy rain. Sohan his friends reduced the wages of his
workers to cut down their losses.
1. Classify the business activity undertaken by Mohan &
Ramesh.
2. What form of business is Sohan doing with his friends. write
any two features of the form ?
3. What type of business risk is faced by them ? Explain
46. Rahul and Sanchali felt that there was an opportunity of business
in providing a service of online grocery stores for working people.
They analysed the idea in terms of technical, financial and
economic liability. Once they found all the aspects satisfactory
56 XI – Business Studies
they decided to start a company called 'convenience @ home'
private Ltd. They got the name registered with the registrar.
(a) Which steps of formation of company are being referred to
here ?
(b) Also write the next 3 steps associated with it.
[Hint : steps in promotion of a company]
47. Lakhvinder Singh is confused as to which form of business he
should follow for his garment business. You are his friend. Help
him by rationally discussing the different factors so that he can
take a sound business decision.
48. Comment on the following :-
i) Meeting of X Ltd. was going on in which all the members of
the company were present suddenly a natural calamity
occurred and all the members of the company X Ltd. died.
What would happen to the existence of the company 'X' Ltd.
Why?
ii) The company being an artificial person acts through its Board
of Directors. All teh agreements on behalf of the company are
entered by the Board of Directors. When is an agreement
entered by the Board of directors not legally binding on the
company.
49. Sachin's father Mahesh was running a small shop selling
accessories such as artificial jewellay, hair caps etc. Over the
past couple of month he has been facing problem in managing it
due to increase demand of the items. Although Sachin also helps
his father but they both fail to attend all the customers due to
space constraint. Non-availability of required finance acts as a
hindrance in expanding their business. Sachin asks his father to
join hands with Raja (his father's friend) to solve the problem. His
father agreed and entered in to agreement with Raja in writing
containing various terms and conditions.
i) Which form of business organization does Mahesh form with
Raja ?
ii) Which documents contains the written agreement specifying
the terms and conditions between Mahesh and Raja ?
iii) In which form of business organization Sachin help his father
to attend customers.
50. Sonu, a tailor by profession was working in a famous boutique in
Kamla Nagar. He was a skilled worker with many years of
experience at and saving worth rupees 5 lakh. He finally decided
57 XI – Business Studies
that he would start his own boutique. He rented a shop in Rohini.
He was not sure about his venture as now he would not have any
security of income. But soon he started getting lot of work due to
his efficiency & his profits increased.
(a) Which type of economic activity was Sonu undertaking when
he was working in a boutique?
(b) Which form of business organization did he opt for later?
(c) Identify any 2 merits & 2 demerits you can recognize of the
form of business opted by him.
51. Aarti is a sole proprietor. Over the part 15 years, her business
has grown from operating a neighbourhood shop selling Kurtis,
bags, cosmetics etc. to a retail chain with four branches in the
branches, she is thinking to form a company to manage the
business better. She also wants to grow further.
a) Explain two merits of Aarti remaining a sole proprietor.
b) Explain two advantages of her converting to a joint stock co.
c) If she wishes to grow further then which of the two options is
better?
52. Identify the type of partner highlighted in the following statements:
i) This partner doesn't take part in the day to day activities of the
business.
ii) He gives an impression of his being partners to others by his
words or conduct.
iii) He allows reuse of his goodwill to benefit the firm and can be
represented as a partner.
iv) He is represented as a partner and in spite of knowing this, he
does not deny such impression.
v) His association with the firm is not disclosed to the general
public.
vi) This takes active part in carrying out business of the firm.
53. Which form of business organization is suitable in the following
cases :-
i) A business organization having stability and continuity.
ii) There should be minimum expenses in starting the business.
iii) The business organization should be suitable from the point
of view of investors.
iv) The ancestral property is to be used for doing the business.
v) More funds and professional services are required.
58 XI – Business Studies
Chapter-3
Private, Public and Global Enterprises
Since the Indian economy consists of both privately owned and
government owned business enterprises, it is known as a mixed
economy.
Indian Economy
Merits
1) It is more effective in achieving the objective laid down by
govt. as it is under the direct control of govt.
2) It is a source of govt. income as its revenue goes to govt.
treasury.
3) It is accountable to parliament for all its actions which
ensures proper utilization of funds.
4) Due to budgetary, Accounting and audit controls, risk of
misuse of public funds is less
5) It is suitable for activities where secrecy and strict control is
require like defence production.
Demerits
1) It Lacks flexibility which is essential for smooth operation of
business.
2) It suffers from political interference in their day to day
working.
3) It suffers from red tapism in day to day work and any
required action is taken after completion of proper process.
4) These organization are usually insensitive to consumer
needs due to absence of competition and monopoly.
5) Such organization are managed by civil servants and govt.
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officials who may not have the necessary expertise and
experience in management.
Suitability :-
1) Where full Govt. control is needed.
2) Where secrecy is very important such as defence Industry.
Box -1
Following Departmental undertakings come under which ministers :-
1) Air India Limited
2) Coal Indian Limited
3) C.B.S.E.
4) Kendriya Vidyalaya Sangathan
5) National Highway Authory of India.
[Hints :]
1) Ministry of Civil Aviation
2) Ministry of Coal
3) Ministry of Human Resources Development
4) Ministry of Road Transport & Highways
Statutory Corporations
It is established under a special Act Passed in parliament or state
legislative assembly. Its objectives, powers and functions are clearly
defined in teh special Act.
Examples :- Unit Trust of India. Life Insurance Corporation, GAIL,
SCI, FCI
Features
1. It is established under a special act which defines its objects,
powers and functions.
2. It has a separate legal entity.
3. Its management is vested in a Board of directors appointed or
nominated by government. There is no govt. interference in day
to day functioning.
61 XI – Business Studies
4. It has its own staff, recruited and appointed as per the provisions
of act.
5. Its initial capital is provided by the govt.
This type of enterprise is usually independently financed. It
obtains funds by borrowing from govt. or form public or through
earnings.
6. It is not subject to same accounting & audit rules which are
applicable to govt. department.
Merits
1. Internal Autonomy :- It enjoys a good deal of autonomy in its
day to day operations and if free from political interference.
2. Quick decision :- It can take prompt decisions and quick actions
as it is tree from the prohibitory rules or govt.
3. Parliaments control :- Their performance is subject to
discussion in parliament which ensures proper use of public
money.
4. Efficient Management :- These are Independent in recruitment
and selection of their employees and Professionals. Experience
and specialists are appointed on important posts.
Demerits
1. In reality, there is not much operational flexibility. It suffers form
lot of political interference from minister, Govt. officials and
political parties.
2. Usually they enjoy monopoly in their field and do not have profit
motive due to which their working times out to be inefficient.
3. Where there is dealing with public, rampant occupation exists.
Thus public corp. is suitable for undertaking requiring monopoly
powers e.g. public utilizes.
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Government Company
A Government company is a company in which not less than
51% of the paid up share capital is held by teh central govt. or state
Govt. or jointly by both. It is registered as per company act, 1956.
Examples :- State Trading Corp. of India, Hindustan Machines
Tools.
Features
1. It is registered of Incorporated under companies Act, 1956
2. It has a separate legal entity.
3. Govt. has minimum 51% of paid up capital.
4. It is managed by board of director selected by Govt. and other
shareholders.
5. Employees are recruited and appointed as per the rules and
regulations contained in its Memorandum and Articles or
Association.
6. The Govt. Co. obtains funds from govt. shareholdings and other
private shareholdings. It can also funds form capital market.
Merits
1. It can be easily formed as per the prevision of companies Act.
There is no need to pass special act in the parliament.
2. It enjoys full autonomy in management decisions and flexibility in
day to day working.
3. It can appoint professional managers on high salaries.
Limitations
1. It suffers from interference from Govt. Official, ministers and
politicians.
2. It evades constitutional responsibility which a company financed
by the govt. should have, as it is not directly answerable to
parliament.
3. The board usually consists of the politicians and civil servants
who are interested more in pleasing their political bosses than in
efficient operation of the company.
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SUITABILITY :
i) Where the Govt. want to work along with private sector.
ii) Where projects need govt. planing and funds.
Box 2
Q. Identify the type of public sector enterprise in the following cases
where.
a) Govt. wishes to bring its own enterprise so that it can
complete with the private sector.
b) Enterprise requires special powers to fulfill a particular
purpose for social cause.
c) Enterprises is required to provide public utilities and to
control the monopoly of private sector in public interest.
Ans. a) Govt. Company b) Statutory Corporation
c) Departmental Undertaking
Features
1. Huge capital Resources :- MNCs posses huge capital
resources and they are able to raise lot of funds from various
sources.
2. International Operations :- MNS do business in several
countries. For this it has business, factories and offices in
several countries.
3. Centralized control:- MNCs have headquarters in their home
countries from where they exercise control over all branches and
subsidiaries. and there is no interference their day to day
operations.
4. Foreign Collaboration:- Usually they enter- into agreements
relating to sale of technology, production of goods, use of brand
name etc. with local firms in the host country.
5. Advanced technology :- These organisations possess
advanced and superior technology which enable them to provide
world class products & services.
6. Product Innovations:- MNCs have highly sophisticated
research and development departments. These are engaged in
developing new products and superior design of existing
products.
7. Marketing Strategic - MNCs use aggressive marketing
strategies. Their brands are well known and spend huge
amounts on advertising and sale promotion.
JOINT VENTURES
Meaning :- When two or more independent firms together
establish a new enterprise by pooling their capital, technology and
expertise, it is known as a joint venture.
Example :- Hero Cycle of India and Honda Motors Co. of Japan
66 XI – Business Studies
jointly established Hero Honda. Similarly Suzuki Motors of Japan and
Maruti of Govt. of India come together to form Maruti Udyog.
FEATURES
1. Capital is provided jointly by the Government and Private Sector
Entrepreneurs.
2. Management may be entrusted to the private entrepreneurs.
3. It combines both social and profit objectives.
4. It is responsible to the Government and the private investors.
BENEFITS
1. Greater resources and Capacity :- In a joint venture the
resources and capacity of two or more firms are combined which
enables it to grow quickly and efficiently.
2. Access to advanced technology :- It provides access to
advanced techniques of production which increases efficiency
and then helps in reduction in cost and improvement in quality of
product.
3. Access to New Markets and distribution network :- A foreign
co. gain access to the vast Indian market by entering into a joint
venture with Indian Co. It can also take advantage of the well
established distribution system of local firms.
4. Innovation :- Foreign partners in joint ventures have the idea
and technology to develop innovative products and service. As a
result, new products and their new uses come in the market.
5. Low cost of production :- Raw material and labour are
comparatively cheap in developing countries so if one partner is
form developing country they can be benefitted by the low cost of
production.
6. Well known Brand Names :- When one party has well
established brands & goodwill, the other party gets its benefits.
New products of such brands names can be easily launched in
the market.
7. Division of Risk :- Inherent risk of new project get divided
among partners of joint venture and it also increases the
competitive powers of small firms.
67 XI – Business Studies
Public Private Partnership (PPP)
It means an enterprise in which a project or service is finance and
operated through a partnership of public and private enterprise.
PPP is a long term partnership between public and private
sector. PPP model is being used in following areas :-
1) Transport - Rad, Railway and Toll Bridge
2) Health - Hospital
3) Water - Collecting, Cleaning and Distributing
4) Education - School and University
Features of PPP
1. Facilities partnership between public sector and private sector.
2. Pertaining high priority project.
3. Suitable for big project (Capital intensive and heavy industries.)
4. Useful in public welfare projects example Delhi Metro Railway
Corporation.
5. Sharing revenue - Revenue is shared between public and
private enterprises in the agreed Ratio.
Box 3
68 XI – Business Studies
Points to be remembered
1. Private Sector’s Business are owned by private individuals or
groups — Reliance Industries, Airtel, LG, Samsung.
2. Public Sector Business are owned by the State.
3. When two or more companies agree to run a business for specific
purpose, it is called joint venture.
4. Departmental undertakings are run as a part of govt. dept under
the direction of the minister concerned.
5. Public corporation is created by a Special Act of Parliament or
State Legislature.
6. Govt. Company is a Public Enterprises which has a minimum 51%
of the paid up capital in the name of the Central Govt. or State
Govt.
7. MNC’s are those companies which run in more than one Country.
8. PPP — Public Private Partnership — refers to the investment of
private sector in the govt. projects aimed at Public Benefit.
MCQ’s
1. LIC is the example of —
(I) Departmental undertaking (ii) Statutory corporation
(iii) Govt. Company (iv) Private company
2. Which of the following is govt. company —
(I) Hindustan Steel Ltd. (ii) Tata Steel Ltd.
(iii) Jindal Steel Ltd. (iv) All the above
3. Which of the following is related to a specific ministry?
(I) Indian Railway (ii) FCI
(iii) Coal India (iv) BHEL
4. Which of the following is not a MNC?
(I) Ranbaxy (ii) Infosys
(iii) Brook Bond (iv) Asian Paint
5. Who works to uplift the sick industries of Public Sector?
(i) MOFA (ii) MOU
(iii) BIFR (iv) NRF
69 XI – Business Studies
6. Govt. holds minimum __________ paid up Capital of a govt.
company.
(i) 49% (ii) 50%
(iii) 51% (iv) 26%
7. When two business enterprises work together for a particular
purpose that is called —
(I) Partnership
(ii) Joint venture
(iii) Company
(iv) Joint Hindu Family Business
8. Which of the following is created by Special Act of Parliament or
State Legislature?
(i) Departmental Undertaking (ii) Statutory Corporation
(iii) Govt. company (iv) Private company
9. Which has not seperate Legal Entity?
(i) Departmental Undertaking (ii) Statutory Corporation
(iii) Govt. company (iv) Private company
10. How many industries are reserved for public sector?
(i) 3 (ii) 4
(iii) 8 (iv) 17
71 XI – Business Studies
(a) Identify the type of public enterprise.
(b) What is the minimum investment Govt. has to make in such
companies.
(c) In whose name shares of this type of company are
purchased.
(d) Explain any two advantages and limitations of such
companies.
3. Explain three merits and three limitations of Departmental
undertaking.
4. Multinational companies establish themselves in developing
countries to enjoy huge profits by selling consumer goods or
luxury items. They start business by offering wide variety of good
at prices cheaper than local retailers offer. But once they are
established they increase prices.
a) State the values the government of a developing country
ignores while allowing MNC's to establish in their country.
b) Which values do the MNC's Violate ?
5. After 1991, government wanted to speed up the infrastructure
development that required huge investment & expertise. In
the coming years, govt. devised a new way for it in which
public sector enterprises, through clear agreements. Like
Terminal 3 of Indira Gandhi International Airport.
i) What such agreement/arrangements are called ?
ii) Write any 3 advantages of such arrangements.
[Hints : Public Private Partnership]
6. It is are enterprises which is organized, financed and controlled
wholly by the centre 4 state Govt. and it is under the control of its
head Mrs. Jeevan Raj (IAS). He is not taking any interest in its
functioning of providing cheap clean water to a large section of
the society as he is busy in the preparation of his son's marriage
coming after 3 months. As a result, important decisions are
getting delayed resulting in the suffering of revenue and well
being of public, as it required the consent of its head.
a) Which type of organization has been described in the
above para ?
b) What social values are achieved by govt, through such
organization.
72 XI – Business Studies
c) What are the limitations of such organization in this case.
[Hints : Departmental Undertaking]
7. It is a public sector enterprises in which Govt. of India held 80%
of paid up share capital and it is registered as per company Act,
1956. It deals in manufacturing of Engineering goods and
compete with private sector enterprises in order to achieve
higher profits.
i) Which type of public sector enterprise is discusses above.
ii) Do the employees of such organization considered as Civil
Employees ?
iii) Write any two characteristics of such organization.
iv) Write any two limitations of such organization.
[Hints : Government Company ]
8. Food Corporation of India (FCI) was established through special
Act. passed in Parliament in 1964 with the objective to create
buffer stocks of foods like wheat, rice etc. for emergency
situations like drought, flood famine etc.
i) Which type of public sector enterprise is discussed above ?
ii) Does such enterprises have separate legal entity ?
iii) Who provided initial capital to such enterprises ?
iv) Write any 2 demerits of such organization.
[Hints : Stationary Corporation]
73 XI – Business Studies
CHAPTER 5
EMERGING MODES OF BUSINESS
Meaning
In this age of Internet, the world commerce has gradually started
linking with it, this has brought a new concept of commerce called e-
commerce/e-business. Now we are capable of reaching the users of
Internet all over the world simply by opening a shop on the Internet. The
Internet users can order for the goods, receive their delivery and make
their payment while sitting at their home on the Internet.
97 XI – Business Studies
Scope of e-Business
It can be understood by the view point of the parties involved and
making transactions:
1. B2B Commerce :- it is that business activity in which two firms
or twobusiness units make electronic transaction. For example-
one can be a producer firm and other a supplier firm. e.g. Maruti
Udyog buying tyres, doors etc. from other firms.
2. B2C Commerce :- Business to customer. In this one party is a
firm and other party is a customer. On one hand a customer can
seek information through Internet about products, place orders,
get some items and make payments and on the other hand the
firm can make a survey any time to know who is buying, and can
also know the satisfaction level of customers. In modem times,
call centers can provide these information.
2. Intra-B Commerce Within business Commerce :- Under it,
the parties involved in the electronic transaction are the two
departments of same business. For Example through internet it
is possible for the marketing department to interact constantly
with the production department and get, the customized goods
made as per the requirement of customers.
3. C2C Commerce :- Customer to Customer Commerce - Under it,
both the parties involved in electronic transaction are customers.
It is required for the buying and selling of those goods for which
there are no established markets. For example-selling old car
through Internet.
4. C2B Commerce :- C2B Commerce provides the Consumers
with the freedom of shopping at will. Customer can make use of
call centers to make toll free calls to make queries and lodge
complaints.
5. B2E Commerce :- Companies reporting to personnel
recruitment, interview arid selection and training etc via B2E
Commerce.
Benefits of e-Business
The major benefits of e-Business are as follows:
Benefits of e-Business
World Movements
Wide Reach towards paper
less society
98 XI – Business Studies
1. World wide reach :- Internet gives businessmen an extended
market. New customers come in contact with them. This results
in increase in sales.
2. Elimination of Middlemen :- Ever since the e-Business came
into existence, the wholesalers and retailers have started
disappearing. Now, most of the producers have started having,
direct contact with customers. As a result the consumer get
goods on less price.
3. Easy Distribution Process :- Many types of information and
services be received on computer through e-business. This has
simplified the system of distribution and has also made it less
costly
4. Lower investment required :- In this. you don't require any big
showroom or huge investment. You need only computer and
Internet.
5. Easy to launch new products :- Any company can launch its
new product in the market through the medium of E-Business. A
complete information about the product is made available on
Internet. In this way the consumer and other businessmen get
information about the new product while sitting at home.
6. Movement towards a paper less Society :- Use of internet has
considerably reduced dependence on paper work.
Limitation of e-Business
Limitations of e-Business
99 XI – Business Studies
v) People Resistance (People have a tendency to resist change
due to insecurity).
Finally, to conclude, despite limitations, e-commerce is gaining
importance as most of the limitations of e-business are in the
process of being overcome.
Q.1 In which type of e-business transaction, both buyers and sellers
are customers ?
Q.2 Identify and discuss the electronic transaction which is the part
of e-business and not of e-commerce. [Hint : Intra B commerce)
Q.3 Mention any one limitation of e-business.
Q.4 Name the essential sources required for e-business.
Difference between Traditional and E-Business
Basis Traditional E-Business
Ease of formation Difficult Simple
Physical Presence Required Not required
Location Near the source of raw material Anywhere
or near the market of the product
Cost of setting up High Low
Operating cost High as investment in Low relies an ??? of
procurement, storage relationship rather than
production, marketing ownership of resources.
distribution facilities.
Nature of contacts Indirect through intermediaries Direct
with the suppliers and the
Customers
Nature of internal Hierarchical from top level mgt to Direct
communication middle level to lower level
management to operatives
Response time for meeting Long Instant
customers.
Shape of the organizational Vertical/ tall due to hierarchy Horizontal/flat due to
structure directness of command.
Business process & length Long Sequential precedence Shorter simultaneous
of the cycle. purchase-production-marketing- different processes
sales
Opportunity for Interpersonal much more. Less
touch.
Ease of going global Less Much
Govt. Patronage Shrinking Much as IT sector is priority
Nature of human capital Semi-Skilled & even unskilled Technically qualified.
manpower
Transaction Risk Low due to face to face contract High due to distance and
anonymity of the parties.
On Line Transactions
On line transaction' means receiving information about goods,
placing an order. receiving delivery and making payment through
medium of internet. Under this system, the sale purchase of every type
of thing, information and service is possible.
Steps involved in Online Purchase
Registration
Placing an Order
Payment Options
Cash on
Delivery Cheque Net-banking Credit/Debit Digital
(COD) Transfer Cards Cash
Payment Mechanism
Payment for the purchases through online shopping may be done in
following ways .
1. Cash on delivery (COD) - Cash payment can be made at the
time of physical delivery of goods.
101 XI – Business Studies
2. Net-banking transfer - The customer can make electronic
transfer of funds (EFT) to account of online vendor over the
internet.
3. Credit or Debit cards - The customer can make payment for
online transaction through debit or credit card by giving the
number and name of bank of card.
1. Transaction Risks
a) Seller or Customer denies that order was placed- Default
on Order placing/ giving.
b) Goods are delivered at wrong address or good delivered
are not as per specification - Default on delivery.
c) Seller does not get payment whereas customer claims to
have made the payment- Default on payment.
Outsourcing
Many activities have fo be performed for the successful conduct
of business like productions, buying, selling, advertising etc. When the
scale of business is small. the businessman used to perform these
activities easily. However. with the enlargement of scale of business,
this job has become tedious. Therefore, in order to, overcome the
difficulties connected with the performance of
Q. How does outsourcing
many activities and to get the benefit of help a business firm.
specialization, these services are now obtained
from outside the organization. This is called
outsourcing of services or BPO.
Scope of BPO
In modern business many outside services are used. Out of
these services, the following are the important ones :
1. Financial Services - These services means those outside
services which help the company in some way or other in the
management of finance.
2. Advertising services - Advertisement is very necessary for
increasing sales. If this service is obtained from outside agency,
it will cost less and the quality of advertisement will also be good.
3. Courier service - These services means delivering goods,
documents. parcels from company to customers and vice-versa.
4. Customer support service - These services means delivering
goods to customers and to give after sale services also.
Generally, the manufacturers of TV, Fridge, AC etc. use these
services.
Need of KPA
In today's competitive environment focus is to concentrate on
core specialization areas and out-sources the rest of activities. Many
companies have come to realize that by outsourcing the non case
activities not only costs are minimized and efficiency improved but the
total business improves because the focus shifts to key growth areas of
business.
Features of KPO
1. It is the up ward shift of BPO
2. It focuses on knowledge expertise instead of process
expertise.
3. It provides all non case activities.
4. It has no pre-determined process to reach a conclusion.
5. It offers an alternative career path for the educated.
Scope of KPO/ Services covered KPO
1. Research and Technical analysis.
2. Business and Technical analysis.
3. Business and Market research.
4. Animation and Design.
Utility
* Works 24x 7 so transactions can be done anytime, anywhere.
* Convenient location -ATM's are located at convenient places.
So customer need not go to bank.
* Reduces workload of bank staff.
* Useful while traveling go not need to carry cash while travelling.
Q.1 Shreya is busy housewife. She has many tasks like depositing,
withdrawing money, payments, mobile recharge, balance inquiry
etc. She want to get the work done at one place. Suggests her
the best alternative.
Q.2 Ramu goes to withdraw money form ATM. He Swaps his card
and payment is debited from his account by he doesn't get the
payment. What can he do now ?
Answers
Multiple Choice Questions
1. (d) 2. (d) 3. (a)
4. (a) 5. (d) 6. (a)
7. (c) 8. (d) 9. (b)
10. (b)
BUSINESS ETHICS:
Refers to the moral values or standards or norms which govern
the activities of a businessman. Ethics define what is right and what is
wrong. By ethic we mean the business practices which are desirable
from the point of view of Society. The purpose of business ethics is to
guide the managers and employees in performing their job. Example of
business ethics are charging fair price from customers, giving fair
treatment to workers, earning reasonable profits and paying taxes to...
the government honestly.
1 MARKS QUESTIONS :-
1. Define social responsibility of a business.
2. Write two examples of business ethics.
3. State two effects of noise pollution?
123 XI – Business Studies
4. What is environmental pollution?
5. To give complete information regarding finance position of the
company is the social responsibility of organization towards
which interest group ?
6. "Responsibility of a business extends beyond its economic
responsibility." Mention the name of this responsibility. (Social
Responsibility)
7. "A business organization has adopted the policy of refraining
from profiteering and hoarding." Mention the interest group for
which this policy is relevant?
8. "An Industrial unit discharges toxic gases from its chemical plant."
Mention the type of pollution created by the unit. (Air Pollution)
9. Mention the element which refers to a set of mass moral
principles which govern the conduct of people in a business
organization. (Business ethics)
10. "Business must focus on the varied interest of the society:. Give
any one reason in support of this statement. (As business is a
part of society)
3/4 MARKS
11. Why is business responsible for Environment Protection?
12. Enumerate any three responsibilities of business towards
employees.
13. Why should a business assume social responsibility?
14. Explain the major cause of environmental pollution?
15. Define business ethics and explain its significance?
16. LMN Ltd. is filing its income tax returns on time. They are also
updating their shareholders about their projects and provide for
return to them. Towards which interest group are they fulfilling
their responsibility? Which values are being followed by the Co.?
17. ABC Ltd. deals in health drinks. It is found that there are
components of pesticides in their drinks. Mention which 2.kinds
of responsibilities and 2 values are missing from this approach.
18. ABC Ltd. while advertising its deodorant range presents females
in a derogatory manner which offends religious group also.
Which kind of social responsibility is being neglected. Also, what
value are being compromised?
19. XYZ Co. is providing facilities for their female staff like day care
124 XI – Business Studies
centre for kids and work form home facility. By doing this they are
following social responsibilities towards which interest group?
Also, what values are they presenting?
20. ABC Ltd. is a small company which makes disposable paper
plates which are environment friendly. They are made from the
bark and dry leaves of tress available in the north east states of
India .
i) Towards which interest group is the business following its
social responsibility ?
ii) Write any two values presented by the company.
21. Maruti Suzuki Ltd. is a car manufacturing company which found
that 7700 Belano Desire cars manufactured by it had some
problems with their engines. By Fulfilling Business Ethics the
company recalled all the cars and corrected the problems. State
any four values followed by the company.
22. It is a complex problem that motivates business managers and
decision makes to face boldly the problem of environmental
population. Environment consists of natural surrounding of the
man as well as conditions developed by man. Environment is
being constantly polluted which is not good for the survival of
human-beings.
i) Recognize the complex problem in the above paragraph.
ii) Enumerate the two points regarding the causes of this
complex problem.
23. Your friend Rajesh runs a factory in you city. His factory is
spreading air, water and noise pollution. What advice would you
give him for keeping the environment pollution free.
24. Besides looking after the interest of its owners a business ought
to look after the interests of other groups as well. These other
groups include employees, consumers, suppliers, competitors
government, the community and the world also. Now a days only
those business are considered good which besides looking after
the interest of its owners also cater to the interests of these
groups also. Which concept of business is explained in this
statement? Recognize that concept and explain its meaning as
well.
25. The owners of Gupta and Gupta pvt. Ltd. are taking special
interest in getting plants planted ground their factory. Apart form
it, they dump the waste water of their factory only after passing
5/6 MARKS
30. Explain the forces which are responsible for increasing concern
of business enterprise towards social responsibility?
31. It is in the interest of business to fulfill its social responsibilities
towards different interest groups. Explain?
32. MNO Ltd., a renowned computer follows the vision of "reaching
new heights with its people on its side". It not only provides
quality products but also provides various facilities to its
employees for 5 years of service. It also provides computer skills
to youth in remote areas for free.
(a) What according to you are the business ethics of the
On the basis
of ownership
Long Term Short-Term Owner's Funds Borrowed Funds Internal Sources External Sources
* Equity Shares * Trade Credit * Equity shares Sources * Equity Shares * Financial Institutional
* Retained Earnings * Factoring * Retained shares * Debentures Capital * Loan form Banks
* Preference shares * Bank * Loan from bank * Retained earning * Preference Shares
* Debentures * Commercial * Loan from financial * Public Deposits
* Loan for Financial Paper Institutions * Debentures
Institutions * Public deposits * Lease financing
* Loan from Banks * Lease Financing * Commercial Papers
* Commercial * Trade credit
Paper * Factoring
Medium-Term
* Loan from banks
* Public Deposits
* Loan from financial
Institutions
* Lease financing
METHODS OF RAISING FINANCE :-
Issue of Share :- The capital obtained by issue of shares is
known as share capital. The capital of a company is divided into small
units called share. If a company issue 10,000 shares of Rs. 10/- each
then the share capital of company is 1,00,000. The person holding the
share is known as shareholder. There are two types of share (I) Equity
share (11) preference share.
(a) Equity Share :- Equity shares represent the ownership of a
company. They have right to vote and right to participate in
the management because.
ADVANTAGES/MERITS :-
1. Permanent Capital :- Equity share capital is important source of
finance for a long term.
2. No charge on assets :- For raising funds by issue of equity
shares a company does not need to mortgage its assets.
3. Higher returns :- Equity share holder get higher returns in the
years of high profits.
4. Control : They have right to vote and right to participate in the
management.
132 XI – Business Studies
5. No burden on company :- Payment of equity dividend is not
compulsory
LIMITATIONS/DEMERITS
1. Risk :- Equity shareholder bear higher risk because payment of
equity dividend is not compulsory.
2. Higher Cost :- Cost of equity shares is greater than the cost of
preference share.
3. Delays :- Issue of Equity shares is time consuming.
4. Issue depends on Share Market Conditions :- Equity
Shareholders are the primary risk bearer therefore the demand
of equity shares is more in the boom time.
B. Preference Share - Preference shares are considered safer in
investment. (as compare to equity shares) They receive dividend
at a fixed rate. Preference shareholder are like creditors. They
have no voting right.
Types of preference shares. :-
1. Cumulative preference shares.
2. Non cumulative preference shares.
3. Participating preference shares.
4. Non participating preference shares.
5. Convertible preference shares
6. Non Convertible preference shares.
MERITS OF DEBENTURES :-
1. Investment is Safe :- Debentures are preferred by those
investor who do not want to take risk and interested in fixed
income.
2. Control :- Debenture holder do not have voting right.
3. Less Costly :- Debentures are less costly as compared to
cost of preference shares.
4. Tax Saving :- Interest on Debentures is a tax deduct able
expense. Therefore, there is a tax saving.
LIMITATION OF DEBENTURES :-
1. Fixed Obligation :- There is a greater risk when there is no
earning because interest on debentures has to be paid if the
company suffers losses.
2. Charge on assets :- The company has to mortgage its
assets to issue secured Debentures.
3. Reduction in Credibility :- With the new issue of
debentures, the company's capability to further borrow funds
reduces.
DIFFERENCE BETWEEN SHARES AND DEBENTURES
Base Shares Debentures
1. Nature Shares are the capital Debentures are a loan
2. Return Dividend Interest
3. Voting Right Full voting right No Voting right
4. Holder Owner is called share holder Creditors called
5. Types There are two types of shares More than two types
6. Security Not secured by any charge Secured and generally carry
a charge on the assets of the
Company.
Q. State one reason why a company earning high profits may choose
debentures over equity shares to raise funds.
For example :-
X Ltd. has total capital of Rs. 50,00,000 which consists of 10%
Debt of Rs. 20,00,000, 8°/o preference share capital Rs. 10,00,000, and
equity share capital Rs. 20,00,000. Tax rate is 40%, company's return
on total capital is 20%. It was decided to provide 10% div. on equity
shares.
Particulars Rs.
Net profit before interest and tax (PBIT) (20% of Rs. 50,00,000) 10.00,000
Less: Int. on debentures (10% of 20,00,000) 2,00,000
Net profit before Tax (PBT) 8,00,000
Less : Tax provision @ 40% 3,20,000
Net profit after Tax (PAT) 4,80,000
Less: pre dividend (8% of 10,00,000) 80,000
Net profit after tax and pre dividend 4,00.000
Less : equity dividend 2,00.000
RETAINED EARNINGS 2,00.000
MERITS
1. No costs :- No costs in the form of interest. dividend,
advertisement arid prospects, to be incurred b' the company to
get it.
2. No charges on assets :- The company does not have to
mortgage its assets.
3. Growth and expansion :- Growth and expansion of business is
possible by reinvesting the retained profits
4. Goodwill :- The market price of the company share will increase.
PUBLIC DEPOSITS :-
The deposits that are raised by company direct from the public
are known as public deposits. The rate of interest offered on public
deposits are higher than the rate of interest on bank deposits. This is
regulated by the R.B.I. and can not exceed 25% of share capital and
reserves.
MERITS:-
1. No charge on assets :- The company does not have to
mortgage its assets.
2. Tax Saving :- Interest paid on public deposits is tax deductable
hence there is tax saving.
3. Simple procedure :- The procedure for obtaining public
deposits is simpler than share and Debenture.
4. Control :- They do not have voting right therefore the control of
the company is not diluted.
LIMITATIONS :-
1. For Short Term Finance :- The maturity period is short. The
company can not depend on them for long term.
Trade Credit
Trade Credit is the credit extended by one trader to another for
the purchase of goods and service. Trade Credit facilities the
purchase of supplies without immediate payment.
Merits
1. Convenient :- It is a convenient and continous source of funds.
2. Purchase without immediate payment :- Trade credit facilities
the purchase of goods and service without immediate payment.
3. Readily Available :- Trade Credit may be readily available in
case the credit worthiness of the customers is known to the
seller.
Demerits
1. More Risk :- Availability of easy and flexible trade credit facilities
may induce a firm to indulge in over trading which may add to the
risks of the firm.
2. Limited Funds :- Only limited amount of funds can be generated
through trade credit.
3. Costly Source :- It is generally a costly source of funds as
compared to most other sources of raising money.
Q. State the most important factor that helps in receiving trade credit.
MERITS
1. Timely financial assistance :- Commercial Bank provide timely
financial assistance to business.
2. Secrecy :- Secrecy is maintained about loan taken from a
Commercial Banks.
3. Easier source of funds :- This is the easier source of funds as
there in no need to issue prospectus for raising funds.
LIMITATIONS/DEMERITS
1. Short or Medium term finance : Funds are not available for a long
time.
2. Charge on assets : Required source security of assets before a
loan is sanctioned
FINANCIAL INSTITUTION
The state and central government have established many
financial institutions to provide finance to companies. They are called
development Bank. These are IFCI. ICICI, IDBI, LIC and UTI. etc.
MERITS
1. Long term Finance :- Financial Institution provide long term
finance which is not provided by Commercial Bank.
2. Managerial Advice :- They provide financial, managerial and
technical advice to business firm.
3. Easy installments :- Loan can be made in easy installments. It
does not prove to be much of a burden on business.
Limitations DEMERITS:-
1. More time Consuming :- The procedure for granting loan is time
consuming due to rigid criteria and many formalities.
2. Restrictions :- Financial Institution place restrictions on the
company's board of Directors.
1. Firstly, a Foreign Co. hands over the shares to OCB (it requires
approval from Finance Ministry to act as a custodian)
2. The OCB request ID to issue shares in the form of IDR.
3. The ID converts the issue which are in foreign currency into IDR
and into Indian rupee.
4. Lastly the ID issues them to intending investors.
Features of IDRs
1. IDRs are issued by any foreign company
2. The IDRs can be listed on any Indian stock exchange.
3 A single IDR can represent more than one share, such as one
IDR , 10 shares.
4. The holders of IDR have no right to vote in the company
5. The IDRS are in rupee denomination
Type of ICDS
1. Three Months Deposits :- These deposits are most popular
type of ICDS. These deposits are generally considered by
borrowers to solve problems of short term capital adequacy. The
annual rate of interest for these deposits is around 12%.
2. Six months Deposits :- It is usually made first class borrowers.
The annual rate of interest for these deposits is around 15%
3. Call deposits :- This deposit can be withdrawn by the lender on
a day's notice. The annual rate of interest on call deposits is
around 10%.
Features of ICDS
1. These transactions takes place between two companies.
2. There are short term deposits.
POINTS TO BE REMEMBER
1. Equity shares are the major source of business finance.
2. Debenture, bond and loans are capital having fixed cost.
3. Dividend will be given to preference shareholder at fixed rate of
dividend
4. Preference shareholder have no right to participate in
management.
5. Trade credit refers to that facility which is extended by one
businessman to another.
6. Debenture holders received interest at a fixed rate of interest.
7. ADR is an instrument which is issued to American by a Non US
company.
8. GDR is an instrument issued in a foreign country by a company
to get US Dollar/foreign capital
9. IDR is an instrument issued by a foreign company to Indians.
10. ICD – Inter Corporate Deposits — are unsecured loans given by
a company to another.
ope
e
rat
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i o
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a
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ion – Helps in increasing profits
Export at
ern n
Fo s in I
– Utilise surplus production capacities
n
Process f Int atio
o N
usin
fits to ade – Improving business vision
ne t. Tr
of In
of b t. Busi
Be
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B e n efits irms
to f
ess ess
Internationa Trade – Exporting & importing
Modes of Entry into IT
– Contract manufacturing
(Manufacturing & trade beyond boundaries of
one’s own country is known as International Trade – Licensing & franchising
– Joint venture
Import Do Role
ess
in cu of W
193
Process im me TO
roc n
po nts
rt
rt P nts i
pr use
o
oc
p
Do
es d
s
Ex cume
– Act as dispute settlement body
– Remove barriers of International
– Export notice – Performa invoice Trade
– Certificate of inspection – Import order or indent – ensure rules & regulations are duly
– Certificate of origin – Shipment advice followed by member countries for
setting of their disputes
– Shipping bill – Bill of lading
– to consult other agencies in global
– Mate’s receipt – Bill of entry economic policy making
– Bill of lading – Letter of credit – take special steps for
– Airway bill – Bill of exchange development of poorest nations
– Marine insurance policy – acting as a forum for trade
– Letter of credit liberalisation
– Bill of exchange
– Bank certificate of payment
XI – Business Studies
Concept of International Business
International Trade
9. Political It has to face the political system It is subjected to political system &
System and risk of only one country. risk of different countries.
Pre-shipment Clearance
Insurance of Goods
Customs Clearance
Payment of Freight
Preparation of Invoice
Securing Payment
Arranging of finance
Arrival of goods