11 SM Businessstudy Eng 2019 20

DIRECTORATE OF EDUCATION
Govt. of NCT, Delhi
SUPPORT MATERIAL
(2019-2020)
Class : XI
BUSINESS STUDIES
Under the Guidance of
Mr. Sandeep Kumar

Secretary (Education)
Mr. Binay Bhushan

Director (Education)
Dr. Saroj Bala Sain

Addl. DE (School & Exam.)
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
Published at Delhi Bureau of Text Books , 25/2 Institutional Area, Pankha

Road, New Delhi-110058 by Anil Kaushal, Secretary, Delhi Bureau of
Text Books and Printed by Arihant Offset, New Delhi-110043
.
DIRECTORATE OF EDUCATION
Govt. of NCT, Delhi
SUPPORT MATERIAL
(2019-2020)
BUSINESS STUDIES
Class : XI
(English Medium)
NOT FOR SALE
PUBLISHED BY : DELHI BUREAU OF TEXTBOOKS

LIST OF GROUP LEADER AND SUBJECT EXPERTS
FOR PREPARATION/REVIEW OF SUPPORT MATERIAL
CLASS-XI
S.No. Subject Subject Expert Designation School
1. Business Kumkum Kumar Vice-Principal GGSSS, A Block,

Studies Saraswati Vihar
Geetika Antil Lecturer (Commerce) RPVV, Sector-11,
Rohini
Urmila Garg Lecturer (Commerce) SKV, D-Blk,
Kamdhenu, M.P.
Rakesh Kumar Lecturer (Commerce) SBV, Peeragarhi
viii XI – Business Studies

BUSINESS STUDIES (Code No. 054)
Rationale
The courses in Business Studies and Accountancy are introduced at + 2 stage of
Senior Secondary Education as formal commerce education is provided after first ten
years of schooling. Therefore, it becomes necessary that instructions in these subjects
are given in such a manner that students have a good understanding of the principles
and practices bearing in business (trade and industry) as well as their relationship with
the society.
Business is a dynamic process that brings together technology, natural resources
and human initiative in a constantly changing global environment. To understand
the framework in which a business operates, a detailed study of the organisation
and management of business processes and its interaction with the environment is
required. Globalisation has changed the way organizations transact their business.
Information Technology is becoming a part of business operations in more and more
organisations. Computerised systems are fast replacing other systems. E-business
and other related concepts are picking up fast which need to be emphasized in the
curriculum.
The course in Business Studies prepares students to analyse, manage, evaluate and
respond to changes which affect business. It provides a way of looking at and interacting
with the business environment. It recognizes the fact that business influences and is
influenced by social, political, legal and economic forces.
It allows students to appreciate that business is an integral component of society and
develops an understanding of many social and ethical issues.
Therefore, to acquire basic knowledge of the business world, a course in Business
Studies would be useful. It also informs students of a range of study and work options
and bridges the gap between school and work.
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
Units Periods Marks

Part A Foundation of Business
1 Nature and Purpose of Business 18 16
2 Forms of Business organisations 24 14
3 Public, Private and Global Enterprises 18 10
4 Business Services 18
5 Emerging Modes of Business 10 10
6 Social Responsibility of Business and 12
Business Ethics
Total 100 40
Part B Finance and Trade
1 Sources of Business Finance 30 20
2 Small Business 16
3 Internal Trade 30 20
4 International Business 14
Total 90 40
Project Work 30 20
Part A: Foundation of Business

Concept includes meaning and features
Unit 1: Evolution and Fundamentals of Business
Content • After going through this unit, the

student/learner would be able to:
History of Trade and Commerce in • To acquait the History of Trade and
India: Indigenous Banking System, Rise Commerce in India
of Intermediaries, Transport, Trading
Communities: Merchant Corporation,
Major Trade Centres, Major Imports and
Exports, Position of India Sub-Continent
in the World Economy.
Business–meaning and characteristics • Understand the meaning of business
with special reference to economic
and non-economic activity.
• Discuss the characteristics of
business
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.
Unit 2: Forms of Businesss organizations

Sole Proprietorship-Concept, merits • List the different forms of business
and limitations. organizations and understand their
meaning.
• Identify and explain the concept,
merits and limitations of Sole
Proprietorship.
Partnership-Concept, types, merits and • Identify and explain the concept,
limitation of partnership, registration of merits and limitations of a Partnership
a partnership firm, partnership deed. firm.
Types of partners • Understand the types of partnership
on the basis of duration and on the
basis of liability.
• State the need for registration of a
partnership firm.
• Discuss types of partners-active,
sleeping, secret, nominal and partner
by estoppel.
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.
Unit 3: Public, Private and Multinational Company

Public sector and private secotr • Develop an understanding of Public
enterprises—Concept sector and private sector enterprises
Forms of public sector enterprises: • Identify and explain the features,
Departmental Undertaking, Statutory merits and limitations of different
Corporation and Government Company forms of public sector enterprises
Multinational Company — Features. • Develop an understanding of
Joint concept multinational company, joint ventures
and public private partnership by
studying their meaning and features.
Unit 4: Business Services
Business services — meaning and • Understand the meaning and types of
types. Banking: Types of bank account- business services.
savings, current, recurring, fixed • Discuss the meaning and types of
deposit and multiple option deposit Business service Banking
account
• Develop an understanding of different
types of bank account
xii XI – Business Studies

Banking Services with particular • Develop an understanding of the
reference to Bank Draft, Bank different services provided by banks
Overdraft, Cash credit. E-Banking
meaning, Types of digital payments
Insurance — Principles. Types – life, • Recall the concept of insurance
health fire and marine insurance – • Understand Utmost Good Faith,
concept Insurable Interest, Indemnity,
Contribution, Doctrine of Subrogation
and Causa Proxima as principles of
insurance
• Discuss the meaning of different
types of insurance-life, health, fire,
marine insurance.
Postal SErvice - Mail, Registered Post, • Understand the utility of different

Parcel, Speed Post, Courier - meaning telecom services
Unit 5: Emerging Modes of Business
E - business: concept, scope and • Give the meaning of e-business.
benefits • Discuss the scope of e-business.
• Appreciate the benefits of
e-business
• Distinguish e-business form
traditional business.
Business Process Outsoucing (BPO) • Understand the concept of
Concept, need and scop outsourcing.
• Examine the scope of outsourcing
appreciate the need of outsourcing.
• Discuss the meaning of Business
Process Outsourcing and
Knowledge Process Outsourcing
Unit 6: Social Responsibility of Business and Business Ethics
Concept of social responsibility • State the concept of social
responsibility.
Case of social responsibility • Examine the case for social
responsibility.
Responsibility towards owners, • identify the social responsibility
investors, consumers, employees, towards different interest groups.
government and community.
Role of business in environment • Appreciate the role of business in
protection environment protection.
Business Ethics - Concept and • State the concept of business ethics.
Elements • Describe the elements of business
ethics.
xiii XI – Business Studies

Part B: Finance and Trade
Unit 7: Sources of Business Finance
Concept of business finance • State the meaning, nature and
importance of business finance
Owners funds- equity shares, • Classify the various sources of
preference share, retained earnings, funds into owner's funds
Global Depository receipt (GDR), • State the meaning of owners'
American Depository Receipts (ADR) funds.
and International Depository Receipt
• Understand the meaning of
(IDR) - concept
Global Depository receipts,
American Depository Receipts and
International Depository Receipts.
Borrowed funds: debentures and bonds, • State the meaning of borrowed
loans from financial institutions and funds.
commercial banks, public deposits, • Discuss the concept of debentures,
trade credit, Inter Corporate Deposits bonds, loans from financial
(ICD) institutions and commercial banks,
Trade credit and inter corporate
deposits.
• Distinguish between owner's funds
and borrowed funds.
Unit 8: Small Busines and Enterprises
Entrepreneurship Development • Understand the concept of

(ED): Concept, Characteristics and Entrepreneurship Development
Need. Process of Entrepreneurship (AND), Intellectual Property Rights
Development: Startup. Intellectual
Property Rights and Entrepreneurship
Small scale enterprise and defined by • Understand the meaning of small

MSMED Act 2006 (Micro, Small and business
Medium Enterprises Development Act)
Role of small business in India with • Discuss the role of small business
special reference to rural areas in India
Government schemes and agencies for • Appreciate the various Government

small scale industries: National Small schemes and agencies for
Industries Corporation (NSIC) and development of small scale
District Industries Centre (DIC) with Industries. NSIC and DIC with
special reference to rural, backward special reference to rural, backward
areas area
xiv XI – Business Studies

Unit 9: Internal Trade
Internal trade - meaning and types • State the meaning and types of internal
services rendered by a wholesaler trade.
and a retailer • Appreciate the services of wholesalers
and retailers.
Types of retail-trade-itinerant and • Explain the different types of retail
small scale fixed shop retailers trade.
Large scale retailers-Departmental • Highlight the distinctive features of
store, chain store-concept departmental store, chain stores and
mail order business.
GST (Goods and Services Tax): • Understand the concept of GST
Concept and key-features
Unit 10: International Trade

International trade: concept and • Understand the concept of international
benefits trade.
• Describe the scope of international
trade to the nation and business firms.
Export Trade - Meaning and • State the meaning and objectives of
procedure export trade.
• Explain the important steps involved in
executing export trade.
Import Trade - Meaning and • State the meaning and objectives of
procedure import trade.
• Discuss the important steps involved in
executing import trade.
Documents involved in international • Develop an understanding of
Trade; indent, letter of credit, the various documents used in
shipping order, shipping bill, mate's international trade.
receipt (DA/DP) • Identify the specimen of the various
documents used in international trade.
• Highlight the importance of the
documents needed in connection with
international trade transactions
World Trade Organization (WTO) • State the meaning of World Trade
meaning objectives Organization.
• Discuss the objectives of World Trade
Organization in promoting international
trade.
Unite 11 : Project Wordk
As per CBSE guidelines.
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.
Objective Short Short Long Long

G\Typology of
SN Type/MCQ Answer I Answer II Answer I Anser II Marks
Questions
1 Mark Marks 4 Marks 5 Marks 6 Marks
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.
Present and defend

opinion by making
judgments about
4 information, validity 5 1 1 1 - 17
of ideas, or quality of
work bases on a set of
criteria.
Creating: Compile
information together
in a different way by
combining elements
in a new pattern for
proposing alternative
solutions
Total 20×1=20 5×3=15 3×4=12 3×5=15 3×6=18 80(34)
There will be internal choice in questions of 3 marks (1 choice), 4 marks (1 choice),

5 marks (2 choices) and 6 marks (2 choices). In all, total 6 internal choices.
xvi XI – Business Studies

Chapter-1
Evolution and Fundamentals of Business
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
Profession Business Employment
Industry Commerce
Primary Secondary Tertiary Trade Auxiliary

to Trade
Genetic Extractive 1. Transport 1. Transport

1. Animal 1. Mining 2. Banking 2. Banking
Husbandry 2. Quarring 3. Insurance 3. Insurance
2. Poultry Farm 3. Agriculture 4. Advertising 4. Advertising
3. Plantation 5. Warehousing 5. Warehousing
Manufacturing Constructive Internal External
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.
Spread of trade and Commerce
After Barter Diverse Metal began Documents

System types of to supplement such as
coins and other Hundi & Chitti
weighting commodities were used
practices of money
stated
Trading Transport Rise of Indigenous

communities inland and intermediaries banking
strengthened maritime helped took place system played
important role
Hundi: It was an instrument of exchange which was used in Indian

subcontinent. It involved a contract which
(i) Warrants the payment of money, the promise or order which is
unconditional
(ii) Capable of change through transfer by valid negotiation.
Hundi as practised by Indian Merchant Communities

Name of Hundi Broader Functions of Hundi
Classification
Dhani-jog Darshani Payable to any person-no
liability over who received
payment.
Sah- jog Darshani Payable to a specific person,
someone 'respectable'.
Liability over who received
payment.
Firman-jog Darshani Hundi made payable to order.
Dekhan-har Darshani Payable to the presenter or

bearer.
Darshani-jog Muddati Payable to any person-no
liability over who received
payment, but payment over a
fixed term.
Firman-jog Muddati Hundi made payable to order

following a fixed term.
Jokhmi Muddati Drawn against dispatched

goods. If goods lost in transit,
the drawer or holder bears the
costs, and the Drawee carries
no liability.
Indigenous banking system

— Helped in lending money and financing domestic and foreign
trade with currency & letter of credit.
— People began to deposit precious metals with bankers called
seths.
— Money become an instrument for supplying the manufacturers
with a means of producing more goods.
Rise of Intermediaries (Brokers, commission agents, distributions) for
whole sale & retail goods
(i) Intermediaries provided security to the manufactures by taking
responsibility for risk involved.
(ii) Emergence of credit transactions and availability of loans &
advances enhanced commercial operations.
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)
1991 AD: Economic 1973 AD: 1952 AD: 3.8% of the

Liberalisation 3.1% world income
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?
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.
Basic Meaning Economics Non-Economic
Meaning T h o s e a c t i v i t i e s w h o s e Those activities whose aim is

Objective is to earn money not to earn money but to satisfy
and to create Wealth. social psychological and
emotional needs. For example
love, sympathy, patriotism etc.
Main objective is to achieve

Objective Main aim to generals Good or Mental satisfaction.
services to earn profit.
- A house Wife cooking food
Examples - People working in factories. for her family.
- C o o k i n g f o o d i n a - A teacher training his
restaurant. daughter at home.
- A teacher teaching in a
school.
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
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?
Comparison of Business Profession and Employment
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
S.N. Basis of Destruction Business Profession Employment

1. Mode of Establishment Starts after completing Membership of a Start after getting
some legal formalities it professional body appointment letter.
needed. and certificate of
practical required.
2. Nature of Work Provision of goods and Personalized services Work allotted by the
services to the public. of expert nature. employer according
to the contract.
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
5. Reward/Return Profits Professional Fee Salary or wage
6. Risk It involves high risk No risk in it

The degree of risk is
low
7. Code of conduct No code of conduct Professional code of The terms and

conduct is to be conditions of
followed. services contract are
to be followed.
Transfer possible with Not Possible Not Possible

8. Transfer of interest
some formalities
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 ?
Objectives of Business :- The objectives of business means the

purpose for which a business is established and carried on. Proper selection
of objectives is essential for the success of a business.
The Businessman always have multiple objectives. All objective
may be classified into two broad categories. These are (1) Economics
objectives and (2) Social objectives.
Business Objectives
Economic Objectives Social Objectives
Quality goods &

Earning Profit
services at fair price
Market Standing Avoidance of antisocial &

unfair fords practices
Innovation
Generation of employment
Optimum Utilization
of resources Employee welfare
Improving Productivity
Community service
1. Economic Objectives
Business is an economic activity and therefore, its purpose is to
show economic results. The economic objectives of business are
follows:-
(i) Earning profit : Profit means excess of income over the
expenditure. The foremost and prime objective of every
businessman is to earn profit. A business cannot service
without earning profit. Not only for survival but it is also
required for growth and expansion of business.
(ii) Market standing/creation of customer : Business can
survive for a longer period only if is able to capture a big
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.
(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.
(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.
Classification of Business Activities

Business Activities
Industry Commerce
(Deals with production (Deals with distribution
of goods services) of goods & services)
Primary Secondary Tertiary or Trade Aids/Auxilliaries

Industries Industries Service to Trade
1. Extractive 1. Manufacturing Internal Trade External 1. Transportation
2. Generic 2. Construction 1. Wholesale 1. Import & Trade
Trade 2. Export 2. Banking &
2. Retail Trade 3. Entrepot Finance
3. Insurance
4. Warehousing
5. Advertising
1. Primary Industry - The primary industry includes those

activities through which the natural resources are used to
provide raw material for other industries.
Primary Industry
Extractive Genetic
Industry under which something is Industries under which the breed of

extracted out of earth, water or air animals and vegetables are
eg. Coal, Iron, gas improved and made more useful.
- Mining, Lumbering, Hunting & - Poultry Farms, dairy Farming, Fish

Fishing Hatching, cattle breeding etc.
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
Analytic Processing Synthetic Assembling

Different things are Industries wherein Many raw materials Where in the parts
manufactured out of useful things are are mixed to produce manufactured by
one material eg. manufactured by more useful products different industries are
petrol, diesel, gasoline making raw material to eg. paints, cosmetics assembled to produce
out of crude oil. pass through different cement. new and useful product
production process. eg. computers, watches
e.g. steel from iron or, cars, television etc.
Sugar and paper
industries.
ii) Construction Industries - Industries that are involved in the

construction of building, dams, bridge, roads as well as
tunnels and canals.
iii) Tertiary or Service Industry - Includes those services which
help business to move smoothly e.g. transport, bank,
insurance, storage and Advertising.
Classify the industry under which the following come under :-

i) Mining project undertaken in Chota Nagpur Plateau region.
ii) Oil refineries in Gujrat.
iii) Cement industry based in Mangalore (Karnatka)
iv) In Uttar Pradesh there are many factories where Sugar is
created from Sugarcane.
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.
The functions of commerce are as follows.
Hindrance of person Through Trade
Hindrance place Through Transportation
Hindrance of time Through Warehousing

Removal Through
of Hindrance of risk Insurance
Hindrance of finance Through Banking & Finance
Hindrance of information Through Advertising
1. Removing the hindrance of person by making goods available to

consumers from the producers. through trade.
2. Transportation removes hindrance of place by moving goods from
the place of production to the markets for sale.
3. Storage and warehousing activities remove the hindrance of time
by facilitating holding of stock of goods to be sold as and when
required.
4. Insurance removes hindrance of risk of loss or damage of goods
due to theft. fire. accidents etc.
5. Banking removes hindrance of finance - by providing funds to a
businessman for acquiring assets. purchasing raw materials and
meeting other expenses.
6. Advertising removes hindrance of information by informing
consumers about the goods and services available in the market.
Commerce includes two types of activities .-
Trade :- Refers to buying and selling of goods and services with
the objective of earning profit. It is classified into two categories :-
1. Internal Trade:- Takes place within a country. Internal Trade is
classified into two categories :-
(i) Wholesale Trade :- Refers to buying and selling o goods in
large quantities. A wholesaler buys goods in large quantities
from the producers and sell them to other dealers. He serves
as a connecting link between the producer and retailer.
(ii) Retail Trade :- Refers to buying of goods and services in
relatively small quantities & selling them to the ultimate
consumers.
2. External Trade :- Trade between two or more countries.
External trade can he classified into three categories:-
(i) Import trade :- If goods are purchased from another country.
if is called import trade.
(ii) Export Trade :- If goods are sold to other countries it is called
export trade.
(iii) Enterpot :- Where goods are imported for export to other
countries eg. Indian firms may import some goods from
America and export the service to Nepal
External Trade
Buying soft toys Selling Basmati Buying electronic

from China and Rice to USA from items from Japan
selling its here in India. and selling them
India. in Thailand.
Import Trade Export Trade Entrepot Trade
2. Auxiliaries to Trade: - All those activities which help in

removing various hindrances which arise in connection with the
production and distribution of goods are called auxiliaries to
trade. An overview of these activities is given below.
(i) Transportation and Communication - The production of
goods takes place at one place where as these are
demanded in different parts of the country The obstacle of
place is removed by the transport. Along with transport
communication is also an important service. It helps in
exchange of information between producers. consumers
and traders. The common communication services are
postal service, telephone, fax, Internet etc
(ii) Banking and Finance - Business needs funds for acquiring
assets, purchasing raw materials and meeting other
expenses. Necessary funds can be obtained from a bank.
(iii) Insurance - It provides a cover against the loss of goods, in
the process of transit, storage, theft, fire and other natural
calamities.
(iv) Warehousing - There is generally a time lag between the
production and consumption of goods. This problem can be
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 -
Nature of Business Risks

1. Business risks arise due to uncertainties: Lack of knowledge
of what is going to happen in future create uncertainties in
business. It may be due to natural calamities, change in
demand and prices. strikes etc.
2. Risk is an essential part of every business : No business can
avoid risk although the amount of risk may vary from
business to business. Risk can he minimised but cannot be
eliminated.
3. Degree of risk depends mainly upon the nature and size of
business : Level of risk is lower for small scale business while
it is higher for large scale organization.
4. Profit is the reward for risk taking : A business gets profit as
return for undertaking risk. Greater the risk involved in a
business higher is the chance of profit.
Causes of Business Risks
1. Natural Causes - Human beings have little control over
natural calamities like flood, earthquake, famine etc. They
result in heavy losses of life. property & income in business. •
2. Human Causes - Human causes include such unexpected
events like dishonesty. carelessness or negligence of
employees. strikes. riots, management inefficiency etc.
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.
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.
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
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
Match the following
Global Enterprises
Column – I Column – II
Enterprises
1. Manufacturing Industries 1. Mining

2. Genetic 2. Building
3. Secondary Industry 3. Import
4. Trade Center 4. Technical change
5. Code of conduct 5. Honesty
6. Business Risk 6. Advertising
7. External Trade 7. Kolkata
8. Constructive Industry 8. Cement
9. Extractive Industry 9. Textile
10. Service Industry 10. Poultry Farm
EXPECTED QUESTIONS (ONE MARK QUESTION)

Q1. Give an example of activity which is economic in one side and non
economic on other side.
Q2. Why is business considered an economic activity?
Q3. If is a person sells his domestic computer at a profit. will it be
considered a business? Also explain the characteristic of
business which is being stressed upon in the above said example.
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.
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?
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]
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.
(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.
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.
Chapter-2
Forms of Business Organization
Forms of Business Organisation
Sole Joint Co-operative Company

Proprietorship Hindu Society
Family 1. Consumer's Co-operative
Business Society
2. Producer's Co-operative
Society
3. Marketing Co-operative
Society
4. Farmers Co-operative
Partnership Society
5. Credit Co-operative Society
6. Co-operative Housing
Society
One Person Public Private

Company Company Company
One the basis of duration One the basis of Liability

1. Partnership at Will 1. General Partnership
2. Particular Partnership 2. Limited Partnership
Active
Partner by Sleeping
Holding or
out Dormant
Types of
Partners
Partner by
Estoppel Secret
Nominal
Private
company
Public
company
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.
Forms of Business Enterprise

$
$ Joint Sector
Private Enterprises Public Enterprises Enterprises
Owned, Managed and Owned, managed Owned managed
controlled by and controlled and controlled
Private person by Government by Private &
Govt. Enterprises
Types of Private Enterprises Types of Public Enterprises

1. Sole proprietorship 1. Departmental under taking.
Non-Corporate
2. Partnership 2. Statutory corporation
form
3. Hindu (Joint)family business 3. Govt. Company
4. Co-operative society
Corporate Form
5. Joint stock Company
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.
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.
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.
Joint Hindu Family Business

It is owned by the members of undivided joint Hindu Family and
managed by the eldest member or manager of teh family known as
KARTA. It is governed by the provisions of Hindu Law. The basis of
membership is birth in a particular family. The common properties
include-
a) There should be at least two member in a family.
b) Ancestral property to be inherited by them.
There are two systems which govern membership:-
Dayabhaga System Mitakshara System

i) It prevails in West Bengal. i) It prevails all over India except
West Bengal.
ii) It allows both male and female
member to co-parceners . ii) It allows only male members to
be co-parceners
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.
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.
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
Definition :- According to Indian Partnership Act 1932. "Partnership is the

relation between persons who have agreed to share profits of a business
carried on by all or any of them acting for all."
Characteristic of Partnership :-
i) More than one person :- Partnership needs a minimum
number of two persons and maximum 20.
ii) Agreement :- It is an outcome of an ord or written
agreement.
iii) Profit motive and sharing of profit :- Main characteristic
of partnership into earn profit in business and divide it
among the partners.
iv) Decision making and control :- Every partner has a right
to participate in management and decision making.
v) Unlimited Liability :- Partners have unlimited liability.
vi) Lock of continuity :- Firms existance comes to end by the
death, Lunacy and insolvency of any of its partner.
vii) Principal Agent Relationship :- Every partner plays double
role of an owner and an agent.
Merits of Partnership :-
i) Ease of Formation and closure :- It can be easily formed and
closed without any legal formalities.
ii) Large financial Resources :- There are more funds as
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.
ii) Classification on the basis of Liability :-
General Partnership Limited Partnership

i) Liability of partnership is limited and i) Liability of at best one partner is
joint. unlimited where as the others may
ii) Each partner participates actively in have limited.
business management. ii) They do not have right to manage
business management.
iii) Registration in optional. iii) Registration is compulsory.
iv) The continuity of business is affected iv) Continuity of limited partnership
by the death, lunacy, insolvency or doesn't get affected by the death,
retirement of the partners. lunacy or in solvency of the partner
with limited liability.
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.
Name and address of the firm.
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.
It generally includes the following aspects :–

represent him as Unlimited Liability
partner.
Nominal Do not contribute Do not participate in Generally do not

Partner capital. He allows the managerial activities. share its profits & Unlimited Liability
use of his name. losses.
Minor Do not participate in

Partner Do not contribute management of firm. Share its profits & not
Partner of capital. the losses. Unlimited Liability
age
below 18
year
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.
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.
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.
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
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 :
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.
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
5. Invitation Public Company can invite public

to public Pvt. Co. can't invite public for for issuing its shares &
issuing shares and debentures. debentures.
6. Transfer of No restriction on transfer of
shares No freedom to transfer shares. shares.
7. Index of If no. of members exceeds 50,

members Not essential to prepare an index
then it is necessary to prepare
of members.
index of members
8.Commence After obtaining certificate of
After getting certificate of commencement of business
-ment
Incorporation.
business
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.
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.
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.
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
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.
Main contents of the Prospectus:-

1. Company's name and the address of its registered office.
2. The main object of the company
3. The number and classes of shares.
4. Qualification shares of the directors
5. The name and addresses of the directors, managing director or
manager.
6. The minimum subscription which is 90% fo the size of the issue.
7. The time of opening and closing of the subscription list.
8. The amt. payable on the application and allotment of each class of
share.
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.
Q. 1 Name the documents :-

i) Which document defines the objectives of joint stock company
?
ii) In which document are the rules for attaining the internal
objectives mentioned in the Memorandum of Association.
Difference between Memorandum and

Articles of Association
Basis Memorandum of Association Articles of Association
(M.O.A) (A.O.A.)
It defines the objectives of the It defines the rules for attaining the
1. Objectives
company. objectives mentioned in
memorandum of association.
2. Position Very Important document. Subsidiary document.
The activities beyond the power Activities beyond the powers of

3. Validity of M.O.A. are not considered to A.O.A. are also void . Bus their
be performed by the company rectification in possible by the
and even all the members can't members.
rectify them.
4. Relationship D e f i n e s t h e r e l a t i o n s h i p Defines the relationship between

between the company & the members and the company.
outsides.
5. Necessity It's preparation is necessary to Necessary for private company

get the company registered. but not necessary to prepare for
Public company.
It can't be easily altered many It can be easily. altered by a
6. Alteration matters require approval of special resolution.
court.
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.
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
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
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
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.
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.
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
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
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.
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
Public Sector Private Sector Global Enterprises

Enterprises Enterprises Enterprises
1. Department 1. Sole Proprietorship 1. MNC’s
undertakings 2. Joint Hindu Family Ranbaxy, Lipton
Indian railways, Business 2. Joint Venture
Indian Post, Maruti Suzuki
3. Partnership
Doordarshan
4. Co-operative 3. PPP
2. Statutory
Societies
Corporation
LIC, FCI 5. Company
3. Govt. Company
Hindustan Tools Ltd.,
BHEL
Private sector Enterprises

It consist of business owned by individuals or a group of
individuals whose main objective is to earn profit and growth of
business. For example Reliance Industries limited, ITC limited, HDFC
Bank limited etc.
Public sector Enterprises

It consists of various organization owned, managed and
controlled by central or state of by both government. For example-
Indian Railway, Indian Post, Doordarshan, Bharat Heavy electricals
Limited (BHEL) etc. Its main objective is public welfare or service.
FORMS OF PUBLIC ENTERPRISES

1. Department Undertaking
These are established as departments of the ministry and are
financed, managed and controlled by either central govt. or state
govt. or jointly by both. For examples-Indian Railways, Post &
Telegraph, Doordarshan, Prasar Bharti.
Features
1) It is establish as department of concerned ministry under
central of State Govt.
2) No Separate Entity :- It has no Separate legal entity.
3) Finance :- It is financed by annual budget allocation of the
govt. and all its earnings go to govt. treasury.
4) Accounting & audit :- The Govt. rules relating to audit &
accounting are applicable to it.
5) Staffing :- Its employees are govt. employees & are
recruited & appointed as per govt. rules.
6) Accountability :- These are accountable to the concerned
ministry.
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.
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.
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.
Suitability : Public enterprise is suitable when :–

i) The enterprise requires special powers under on Act.
ii) The enterprise requires a huge amount of capital
investment.
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.
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
Changing role of Public Sector

Public sector in India was created to achieve two types of
objective-
(1) to speed up the economic growth of the country and
(2) to achieve a more equitable distribution of income and
wealth among different sections of society.
The role and importance of public sector in the society has been
changing with time. Its role in the development of the country over a
period of time can be summarized as following :-
1. Development of Infrastructure :- At the time of
Independence, India suffered from acute shortage of heavy
industries such as transport, communication, Electricity,
Generation, iron and Steel, oil refineries, heavy engineering
etc. Because of huge investment requirement and long
gestation period, private sector was not willing to enter these
areas. The duty of development of basic infrastructure was
assigned to public sector which it discharged quite
efficiently.
2. Regional Balance :- Earlier private sector was hesitant to
establish industries in backward or remote areas due to lack
of infrastructure. To provide employment to the people and to
accurate the economic development of backward areas,
many new industries were set up by Govt. in these areas.
3. Economies of scale :- In certain industries (like Eclectic
power plants. natural gas, petroleum etc.) huge capital and
large base are required to function economically. Such areas
were taken up by public sector.
4. Restricting Economics Concentration :- Only few
industrial houses in private sector had invested at large
scale, resulting in concentration of capital in few hands. As a
result, monopoly increased and leads to inequality of
income. To stop such practices, industries were established
in public sector so that large scale division of income and
money among workers and labour is done.
5. Import Substitution :- Firstly Public Enterprises were
established in production of capital equipments which were
earlier imported from other countries. And several
enterprises were also established to promote export of
goods. It increase the foreign currency reserves a lot. Very
important role was assigned to public sector but is
performance was far from satisfactory which forced govt. to
do rethinking on public enterprises.
Public Sector Reforms

In the industrial policy 1991, the govt, of India introduced four
major reforms in public sector.
i) Reduction in No. of Business reserved for public Sector from
17 to 8 and to 3 only in 2001. These three industries are
atomic energy, arms and rail transport.
ii) Memorandum of Understanding (MOU) :- Under this
public sector was provided with greater autonomy govt. lays
down performance target for the management and gives
greater autonomy these units to hold the management
accountable for the results.
iii) Disinvestment :- Equity Shares of some public sector
enterprises were sold to private sector and the public. It was
expected that this would lead to improved managerial
performance and better financial discipline.
iv) Re- structural and Revival :- All public sector sick units
were referred to Board of Industrial and financial RE-
Construction (BIFR). Units which were potentially viable
were restructured and which could not be reviewed were
closed down by the board.
Multinational Companies/Global Enterprises
Multinational company may be defined of a company that has
business operation in several countries by having its factories,
branches or office in those countries. But it has its headquarter in that
country where it is incorporated. Examples :- Coca Cola, Sony, Reebok
etc.
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
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.
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
Q. Identify the enterprises :-

a) Such enterprises brings in advance Technology form home
country.
b) Such enterprises helps in completing public utilities project
at much higher speed, with the help of private sector.
c) Such organization is formed by 2 or more business
organization, pooling their resources to achieve particular
goals.
d) In such organizations at least 51% capital is held by Govt.
Ans. a) Global Enterprises (MNCs)
b) Public Private Partnership
c) Joint Venture
d) Government Company
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
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
Answer the following in one or two words :-

1. Write the name of a govt. company?
2. ‘Toyota Motors’ is a company of which country?
3. When private sector involves in public sector for public benefit
then it is called?
4. What is main objective of a private company?
5. Write the name of a bank of public sector.
6. What percentage of capital held by govt. in govt. company?
7. Write the name of two MNC’s.
8. FCI is an example of ________ form of public enterprises
9. Write one drawback of govt. company.
10. Who is the owner of public sector enterprises?
Very Short Answer Question (1 Mark)

1. Name the type of business enterprise which operates in more
than one country.
2. Which type of organization is most suitable if it is concerned with
National Security and public interest.
3. Atomic Energy is one of the three sectors that are reserved for
public sector in spite of its huge potential for electricity
production. Give one reason.
4. Which type of business enterprise would emerge when two
business firms agree to join together to achieve a common
purpose and mutual benefit.
5. Mention any two objective of public sector enterprises.
Short Answer Questions (3/4 Marks)

1. Explain any three features of Public Private Partnership.
2. How does the govt. maintain regional balance in the country.
3. Identify the form of public sector enterprise in the following
cases:-
(a) This is the oldest and traditional form of public enterprise.
(b) Special act of the parliament brings this public enterprise
into existence.
(c) Minimum 51% of the paid up capital is held by Government.
4. Explain three differences between Departmental undertakings
and Government Company.
Long Answer Questions (5/6 Marks)

1. Define Joint Venture and explain its major benefits.
2. It is a public enterprise established under Indian Companies Act
and conducts business in competition with companies in private
sector.
(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.
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]
CHAPTER 5
EMERGING MODES OF BUSINESS
Mode of Business :- The manner of conducting business is

refereed to as the "mode of Business."
The new modes of business are not new business. They are simply the
new ways of doing business.
E-Business :- It may be defined as the conduct of industry trade
and commerce using the computer networks. E-business mean
electronic business.
E-Business ans E-commerce

* E-business is a more boarder term than e-Commerce.
* E-Commerce course a firm's interactions with its customer's and
supplies over the internet.
* E-Business includes not only e-commerce but also other
electronically conducted business functions such as production ,
inventory management, product development accounting and
finance and human resources management.
VPN :- Virtual Private Network Technology would Name the essential

mean than employees do not have to come to office. sources required
Instead in a way the office goes to them and they for e-business.
can work from where ever they are.
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.
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
Elimination Easy Distribution Lower Investment Easy to launch

of Middlemen Process Required new products
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
Low Need for

Delayed Increased People’s
personal technological
delivery risk resistance
touch capabilities
i) Low personal Touch :- (Lacks personal touch with customer as it

is conducted over the internet.)
ii) Incongruence between Order taking/giving and order fulfillment
speed. (fast in order taking but slow in order fulfillment)
iii) Need for Technology Capability and competence of parties to e-
business. (fairly high degree of families with computer working,
internet facility required.)
iv) Increased risk due to Anonymity and Non-tracebility of Parties :-
(Difficult to establish/check identity & location, someone else
may transact in your name risk of leakage of confidential
information such as credit card details.)
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.

Identify the types of business given below :-
i) Ram, a wholesaler sells bangles, accessories etc. in Chandni
Chowk.
ii) Mohan, a businessman sells his products e.g. purses, necklace
etc . through www.amazon.in
Resources Required for Successful e-Business Implementation

The resources required for the e-Business are :
1. Computer system - The presence of computer system is the
first requirement of e-Business. The computer can be linked with
Internet by just pressing its keys.
2. Internet connection - Internet connection is very essential and
nowadays we can get this facility by sitting at home.
3. Preparing the web Page - web page has the greatest
importance in the use of e-Business. It is also known as Home
Page. Any product that is to be shown on Internet is displayed on
web page.
4. Effective telecommunication system - e-business requires an
effective telecommunication system in the form of telephone
lines etc.
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.
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.
Security and Safety of e-Transactions

The following methods can be used to ensure security and
safety of online transactions.
1. Confirming the details before the delivery of goods - The
customer is required to furnish the details such as credit card
no.. card issuer and card validity online.
2. Anti Virus Programmes - Installing and timely updating anti
virus programmes provides protection to data files, folders and
system from virus attacks.
3. Cyber crime cells - Govt. may setup special crime cells to look
into the cases of hacking and take necessary action against the
hackers.
Risks associated with of e-transactions

1. Transaction Risks.
2. Data storage and transmission risk.
3. Threat to intellectual property and privacy risks.
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.
2. Data Storage :- Virus / hacking

Data/information may be hacked.
3. Threat to intellectual property and privacy risks.

Data may be supplied to others who may start dumping a list of
advertisement & promotional literature into your e-mail box.
Identify the risks associated with e-business transactions
given below :-
i) Ranjita ordered a badminton racket and received shuttles
instead.
ii) www.specialresearch.com's website was hacked and all the
records were corrupted.
Some e-busines application

e- procurement
e-bidding/ a-cuction
e-communication/ e-promotion
e- delivery
e-trading
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.
1. It involves contracting out to a specialized agency.

2. Generally non-core activities are outsourced, so that company
can focus on main activities.
3. Process may be outsourced to a capture unit or a third party.
[Captive unit is a part of parent company. Third party operates
independently.]

Scope of outsourcing
1. Contract manufacturing
2. Contract Research All these activities can
be outsourced to get
3. Contract sales excellence & economies.
4. Informatics
Need for Outsourcing

1. Focusing of Attention :- Provides opportunities to the
organization to concentrate on main business activity.
2. Quest for excellence :- Excellence is achieved as organization
can concentrate on core business.
3. Cost reduction :- Due to Economies of large scale, the
company to whom work is outsourced provides quality work at
less cost of organization doesn't have to invest in related fields.
4. Growth through alliance :- Money saved through outsourcing
can be utilized for expansion of business.
5. Fillip/Boost to economic development :- outsourcing
promotes entrepreneurship employment and exports in the
countries form where out securing is done.
Concerns over outsourcing

1. Confidentiality :- Outsourcing involves sharing of vital
information & knowledge
2. Sweat Shopping :- The firm which out source their work tries to
get benefit of low cost manpower host countries.
3. Ethical Concern :- It is unethical to out-source the work
because to cheap labour (child labour) due to weak laws.
4. Resentment in the home countries :- Outsourcing indirectly
shifts employment opportunities to other countries, so local
population objects.
B. P.O. (Business Process Out-sourcing)

BPO is a subject of outsourcing that involves the controlling of
specific business task to a third party .

If Reliance Industries Ltd. wants to advertise its 'Vimal' brand of
clothing, it may appoint Anmol Advertising Co. to design, prepare and
release advertisements on its behalf.
Need for BPO

BPO is essential for following reasons:
1. Obtaining Good Quality services - If a company attempts to
perform all the activities itself, there is every possibility of quality
of services being affected adversely. In order to avoid this
difficulty, the need for obtaining services from outside is felt.
2. Avoiding Fixed Investment in Services - If a company
attempts to get these services from within the organisation itself,
it has to establish different departments for this purpose which
involves huge investment. Therefore it appears justified to get
these services from outside the organisation at a little cost.
3. Smooth running of business - outsourcing of services is
needed in order to run the business smoothly. The attention of
businessman gets distracted from various small things and will
be focused on the main activity.
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.

KPO (Knowledge Process Outsourcing)
KPO refers to obtaining high end knowledge from outside the
organization in order to run the business successfully and in cost
effective manner Unlike conventional BPO where the focus is on
process expertise, in KPO the focus is on knowledge expertise.
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.
Smart Card And ATM's (Automated Teller Machine)

Meaning :- Smart card is a pocket sized card that contains an
embedded computer chip, that stores and transacts data.
Utility :-
1. Smart Cards can store and process lots of data.
2. They provide security as can be used by using unique pin
numbers only.
3. Smart card maintain data integrity i.e. information stored in
a card can not be erased or removed accidently.
4. For banking & retail (for withdrawal making payments.)
5. Can replace paper notes as payment can be done using
smart cards.
ATM - Meaning and Utility

ATM is a computerized machine that provides the customers of
banks the facility of accessing their accounts with a magnetically
encoded plastic card a card number.
* To use an ATM, a customer uses that card, inserts/swipe it in the
ATM and used the password.
* A customer can perform many function on ATM's like withdrawal
of money, making payments/ bills get accounts information etc.
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 ?

Key-terms
E-business — Process of performing business activities

electronically (Internet)
VIRUS — Vital Information and Resources Under Siege
e-Trending — Online buying and selling of securities
Digital Cash — Electronic cash existing in cyberspace
e-commerce — Firms interactions with its customers and
suppliers over internet
BPO — Process of contracting out non-core business
activities to third parties
B2B Commerce — Electronically conducted business transactions
between business to business.
B2C Commerce — Electronically conducted business transactions
to customers
Intra B Commerce — Business transactions within a given business
firm
C2C Commerce — Business transactions between consumer to
consumer
Digitisation — Transmission of text, sound, images etc.,
electronically

1. e-Business includes
(a) e-commerce (b) Production
(c) Product development (d) All of the above
2. Digitisation means transmission of __________.
(a) text (b) sound
(c) images (d) all of the these
3. Complaint lodged by a customer at the company’s call centre is a
type of ____________ of e-business transaction
(a) C2B Commerce (b) B2C Commerce
(c) Intro B Commerce (d) C2C Commerce

4) B2B Commerce means:
(a) Firm’s interactions with other business
(b) Firm’s interactions with its customers
(c) Firm’s internal processes
(d) None of the above
5. The payment mechanism typical to e-business
(a) Cash on Delivery (COD) (b) Cheques
(c) Credit & Debit Cards (d) e-cash
6. It is not an application of e-business
(a) Online bidding (b) Online procurement
(c) Online trading (d) Contract R & D
7. Use of ATM to withdrew money is an example of
(a) B2B Commerce (b) B2C Commerce
(c) C2C (d) C2B Commerce
8. Level-2 Virus means
(a) Annoyance in terms of some on-screen display
(b) Damage to target data files
(c) destruction of the system
(d) disruption of functioning
9. Outsourcing
(a) Restricts only to the contracting out of Information
Technology Enabled Services (ITES)
(b) Restricts only to the contracting out of non-care business
processes.
(c) Restricts contracting out of manufacturing
(d) Includes off-sharing
10) Factoring facility is _________ type of outsourcing services
(a) Advertising Services
(b) Financial Services
(c) Courier Services
(d) Customer Support Services

One Word Answer
1. What does ‘e’ stand for in e-business?
2. How much of the BPO industry’s revenue comes from ‘call
centres’?
3. Write full form of VIRUS.
4. Captive BPO unit provides services of a given kind to how many
firms?
5. Write an advantage of e-commerce.
True & False

1. e-business provides customer’s wider choice.
2. Sweet-shopping means benefit of low cost manpower.
3. Outsourcing means ‘do it all by yourself’.
4. ‘Converting the message into a code so that unauthorised
persons may not understand it’ is called Encryption.
5. A website means a firm’s location on the www.
6. Digital cash is also called ‘Plastic Money’.
7. Generally, core activities are outsourced.
8. Verticals are the firms which provide their services to wide base
of clients, cutting across industries.
9. Outsourcing firms may use child labour in order to cut costs. It is
an ethical concern.
10. An unauthorised entry into a website refers to ‘Hacking’.
Answers
1. (d) 2. (d) 3. (a)
4. (a) 5. (d) 6. (a)
7. (c) 8. (d) 9. (b)
10. (b)

One Word Answer
1. Electronic
2. 70%
3. Vital Information Resources Under Sieze
4. Only one
5. World Wide Reach
True & False

1. T 2. T 3. F
4. T 5. T 6. F
7. F 8. F 9. T
10. T
VERY SHORT ANSWER QUESTIONS (I MARKS)

Q.1 What does e stand for in e-business
Q.2 What is 'e' commerce?
Q. 3 Jyoti Wanted to set her Mobile phone but does not get any buyer.
On her friends suggestion she posted the mobile on sale on
www.olx.com and found a buyer within two days. Name the type
of e-business.
Q.4 Give the full form of COD
Q.5 What is outsourcing?
Q.6 Ram stays in a hostel in USA and his parents stay in Mumbai
Ram birthday is in five days and his parents wish to gift him a pair
of branded shoes. How can they gift?
Q.7 Which programme imitates itself on other computers systems
and can damage the data and can even lead to complete
destruction of the system.
Q.8 Why is India a preferred destination for BPO ?
Q.9 Out of e-business and traditional business, which one enjoys
ease of going global ?

Q.10 Which method of payment is mostly used for making online
transactions.
Q.11 Name two services that can be outsourced.
Q.12 Name some things whose possessions can be taken via
computer.
Q.13 Can the possession of a car be taken by computer transaction?
Q.14 A person orders pizza online and makes the payments also but
he doesn't get the delivery. What type of risk is being referred
here?
Short Answer Questions 3/4 Marks

Q.15 Distinguish between e-commerce and e-business.
Q.16 What do you mean by:-
i) B2B Commerce ii) B2C Commerce
iii) Intra B- Commerce iv) C2C Commerce
Q.17 Justify the need for business process outsourcing by giving any
three points ?
Q. 18 Why are e-business and outsourcing referred to as the energing
modes of business ? Discuss the facts responsible for the
growing importance of these trends ?
Q.19 Briefly discuss the various modes of payment for goods
purchased through online shopping.
Q. 20 www.xyz.com an e-business portal sells clothes and
accessories. Nisha buys some clothes from them and makes e-
payment for it. But when the clothes arrive, they are found to be
defective. The e-business portal takes the clothes and refunds
her payment. What values according to you are being presented
by the portal ?
Q. 21 A shoe co. in order to cut costs, out sources manufacturers to
developing countries where they use child labour in the factories.
By Outsourcing its work is the company ethically right ? What
values are being neglected by him ?
Q. 22 A Firm uses services of another form for advertising courier
service, factoring services and customer support service for its
firm. Identify the emerging mode of business used.

Where as another firm uses another firm's services for Research
and development. Are both the modes used of same category. If
no identify the modes used and explain.
Q.22 Mr. Supriyo who is from West Bengal wants to send some books
to his brother in Delhi. Which mode will he use ? Why are these
services getting popular? Explain any 3 points.
LONG ANSWER QUESTION (5/6 MARKS)

Q 23. Elaborate the steps involved in online trading?
Q24. Explain Nature and need for outsourcing service?
Q.25 www.olx.in, www.quicker.com etc are examples of websites
used to conduct business. Dipti's sofa set got spoiled in rain. Her
friend suggested that she should change the fabric so that it
looks new and put it for sale on www.olx.com Dipti followed her
friend's advice and got her sofa repaired so that it looks better
and uploaded nicely clicked pictures on www.olx.com in without
disclosing the fact that it was damaged from inside. She found a
customer and sold it for Rs. 9,000. After one week the buyer
found the real state of sofa set and called Dipti but she did not
answer any of the call.
(i) Name the type of business in above case.
(ii) Which values did Dipti ignore while selling her sofa set?
(iii) Explain two advantages and disadvantages of e-
commerce
Q.26 What do you understand by e-business. Explain briefly any tour
benefits of e-business.
Q. 27 Explain any four limitations of electronic mode of doing business.
Are these limitations severe enough to restrict its scope? Give
reasons for your answer.
Q. 28 Discuss the various points of difference between e-business and
traditional business.
Q.29 Ravi, the manufacturer of watches, hands over the promotional
job to some advertising agency after manufacturing it to avoid
time wastage and concentrate on core activities of business.
a) What is being done here by handing over the job to some
other agency ?

b) Which work is being outsourced here ? Why ?
Q.30 Which type of e-business transaction is depicted below :-
i) Selling of old clothes on e-bay.
ii) Managing stock and cash accounts of an organization.
iii) Maruti Udyog buying security lock system from Autocops.
iv) Withdraws money form ATM.
v) Collecting daily report of employees on e-mail.
vi) Registering complants online in company's call centre.

CHAPTER 6
SOCIAL RESPONSIBILITIES OF BUSINESS
AND BUSINESS ETHICS
CONCEPT OF SOCIAL, RESPONSIBILITY

A business is apart of society. So, a business enterprise should
do business and earn money in ways that fulfil the aspirations of the
society. Thus social responsibility relates to the voluntary efforts on the
part of the businessmen to contribute to the social well being. The
businessmen make use of resources of society and earn money from
the members of society so they must do something for the society.
Arguments in favour of Social Responsibility:

There is a need for Social Responsibility of business for
Existence and Growth :-
1. Justification for Existence and Growth :- Business is the
creation of society therefore it should respond according to the
demands of the. society. To survive and grow in society for long
run the business must provide continuous services to the
society.
2. 'Long term Interest of the firm : A firm can improve its image
and goodwill in the long run when its highest goal is to serve the
society . it indulges in unfair Trade Practices e.g. adulteration,
hoarding black marketing it may not be able to exist for long.
3. Avoidance of government regulations :- Business can avoid
the problem', of government regulations by voluntarily assuming
social responsibilities.
4. Availability of resources with business :- Business has
valuable and human resources which can be effectively used for
serving problems of the society.
5. Better environment for doing business :- Social responsibility
Quality of life and standard of living of people. So, business will
get better community to conduct business.
6. Contribution to social problems :- Some of the social

problems have beer created by business firms themselves such
as pollution, creation of unsafe work places, discrimination etc,
Therefor, it is the moral obligation of business to solve such
social problems.
Arguments Against Social Responsibility : major arguments against

social responsibility are:
1. Profit Motive :- A business is an economic entity that is guided
by profit motive. It should not waste its energies and resources in
fulfilling social responsibility.
2. Burden on consumers :- Involvement of business in social
responsibilities involve a lot of expenditure which will ultimately
be borne by the customers.
3. Lack of Social Skills :-The business firms and managers have
the skills to handle business operation. They are not expert to
tackle the social problems like poverty over population etc.
Therefore, social problems must r e tackled by social experts.
4. Lack of public support :- Generally public does not like
business involvement in social problems. Therefore, business
cannot fulfil social responsibility because of lack of public
confidence & cooperation.
SOCIAL RESPONSIBILITY TOWARDS DIFFERENT INTEREST

GROUPS
Business has interaction with several interest groups such a
shareholders, workers. consumers, government and community
Business is responsible to all these groups.

1. Responsibility towards shareholders:-
(i) To ensure a fair and regular return on the investment of
shareholders.
(ii) To ensure the safety of their investment
(iii) To strengthen financial position of the company.
(iv) To safeguard the assets of the business.
(v) To protect the interest of all types of investors in the
business.
2. Responsibility Towards workers :-
(i) Providing fair compensation and benefits,
(ii) Providing good and safe Working conditions, iii) To develop
a sense of belonging-ness.
3. Responsibility toward consumers :-
(i) To supply right quality of goods & services at reasonable
prices.-
(ii) To ensure regular and adequate supply of products.
(iii) To inform them about new products and new uses of exist in
products.
(iv) To handle the customers grievance promptly.
4. Responsibility Towards Government -
(i) To pay taxes honestly
(ii) To observe rules laid down by the government,
(iii) to avoid corrupting government employees.
5. Responsibility towards community -
(i) To make available opportunities for employment,
(ii) To avoid polluting the environment,
(iii) To up lift the weaker sections of society
BUSINESS AND ENVIRONMENTAL PROTECTION:-

Meaning of Environment : - The environment is defined as the
totality of man's surroundings - both natural and man made. Natural
Resources-all land, water, air and man made - cultural heritage. socio
economic institutions and the people.
Meaning of Environmental pollution :- It means injection of harmful
substances into the environment. The greatest problem that industries

and businessmen are creating is that of pollution - which is the result of
industrial production. So, section of environment is must.
Causes of Pollution :- Many industrial organizations have been
responsible for .using air, water and noise pollution.
1. Air Pollution :- Due to smoke, chemical emitted by factories,
vehicle. It has created a hole in the ozone layer leading to global
warming.
2. Water pollution :- Due to chemicals and waste dumped into the
rivers, streams & lakes. It has led to the death of several animals
and posed a serious problem to human life.
3. Land Pollution :- Due to dumping of garbage and toxic wastes
which affect the fertility of land and makes it unfit for agriculture.
4. Noise Pollution : Caused by the running factories and vehicles.
Noise pollution can be responsible for many diseases like loss of
hearing, violent behaviour and mental disorder.
NEED FOR POLLUTION CONTROL :-

1. To ensure healthy life :- Many diseases like cancer, heart
attack and lung complications all caused by pollutants in the
environment. Pollution control is must to keep a check on these
diseases.
2. To ensure safety :- Due to environmental pollution and smoke
the visibility is reducing due to which chances of accidents have
been increasing. To reduce the number of accidents there must
be a check on pollution.
3. Economic Losses :- Pollutants in the environment bringing
heavy economic losses for the country, for example Taj Mahal is
losing its beauty due to pollution.
4. Improved Public Image :- A firm that adopts pollution control
measures enjoys a good reputation as a socially responsible
enterprise.
ROLE OF BUSINESS ENVIRONMENTAL PROTECTION:

1. Eco-friendly and clean or low waste technology should be used
by industrial organization.
2. Industrial Wastes should be recycled as far as possible.
3. Plant and machinery should be modernized to minimize
pollution.
4. The business houses should comply with the laws and
regulations enacted for prevention of pollution.
5. Positive steps should be taken to save environment. These
include, plantation of trees, cleaning of rivers, ponds etc.
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.
ELEMENTS OF BUSINESS ETHICS

1. Top management commitment :- The CEO and higher level
managers must be committed to ethical norms of behavior. This
would set an example for all employers and encourage them to
follow ethical practice.
2. Publication of code :- Code of ethics is a formal written
document of the principles, values and standards that guide a
firms actions. It may cover areas like honesty, quality, safety,
health care etc.
3. Establishment of compliance mechanism :- A suitable
mechanism should be developed to comply with the ethical
standards of the enterprise. , The mechanism should be properly
communicated to all in the organisation.
4. Employee involvement :- It is the employees of the lower levels
who implement ethical principal so they must be involved in the
process of developing ethical code.
5. Measuring results : Although it is difficult to measure ,the
ethical results but it mist be verified and audited that have for
work is being carried according to ethical standards.

Key terms
Social Responsibility — Obligation of business firms to contribute
resources for solving social problems and
work in a socially desirable manner
Environment — Totality of natural and man-made things
existing around us.
Business Environment — Totality of all external forces with which
business interacts.
Environmental Protection— Deliberate process of protecting the
environment from threats of any nature.
Pollution — Process of emission or release of harmful
substances into environment which harm
human life.
Ethics — Based on moral values and beliefs.
Business Ethics — Socially determined moral principles
which govern the business activities.

1. Which of the following are examples of socially responsible
Indian companies:-
(a) Asian Paint (b) Pepsi
(c) TISCO (d) All of these
2. Which of the following is not the social responsibility of business
towards investors?
(a) To ensure safety of capital
(b) To ensure proper dividend
(c) To ensure the proper utilisation of capital
(d) To give appropriate salary
3. Which of the following is the social responsibility of managers
towards the employees:
(a) Providing clean working atmosphere
(b) Giving security of service
(c) Adopting incentive - giving system
(d) All of the above

4. Which causes land pollution —
(a) Chemical & waste dumping into rivers & lakes
(b) Dumping of garbage and toxic wastes
(c) Noise caused by running of factories & vehicles
5. Elements of Business Ethics are —
(a) Publication of a ‘Code’
(b) Establishment of compliance mechanism
(c) Measuring results
6. Which is the example of economic responsibility —
(a) Not to create pollution
(b) Charity to an orphanage
(c) Producing goods and services according to the needs of
the customers and selling them at a profit
(d) Respecting the religious sentiments of people.
7. Social responsibility is
(a) Same as legal responsibility
(b) Narrower than legal responsibility
(c) Broader than legal responsibility
8. If business is to operate in a society which is full of diverse and
complicated problems, it may have
(a) Little chance of success
(b) Good, chance of success
(c) Little chance of failure
(d) No relation with success.
9. Ethics is important for
(a) Top management
(b) Middle-level managers
(c) Non-managerial employees
10. Environmental protection can best be done by the efforts of
(a) Business people (b) Government
(c) Scientists (d) All of the above

One Word Answer
1. Give an example of ethical responsibility of business.
2. Out of medical, law and business, ethics are related to which
activity.
3. In business ethics what does ‘equality’ mean?
4. Give an example of discretionary responsibility of business.
5. “An enterprise must provide good quality and unadulterated
goods and services” It is an example of its responsibility towards
which group?
6. Give an argument in favour of social responsibility of business.
7. Name the Greek word from which the ‘ethics’ has been derived.
8. Mention anyone factor which make a case for pollution control.
9. Give one example of business activity which are considered
unethical.
10. Which is capable of doing maximum good to society?
True & False

1. The only obligation of a business towards its employees to pay
them well so that they work to their maximum capacity.
2. legal responsibility means compliance with the law i.e. payment
of taxes regularly and honestly.
3. A business is a socio-economic institution.
4. The principle of ‘Caveat Vendor’ means ‘let the buyer beware’.
5. Business ethics is not related to law.
6. Water pollution is caused by dumping of garbage and toxic
wastes.
7. What is good for the society is also good for the business.
8. Providing accurate and up-to-date information on the financial
position of the company is a responsibility of the business
towards government and community.
9. High moral values lead to higher ethics.

10. To work and contribute towards the rescue and relief work in
case of flood, earthquake, etc. is the social responsibility of
business towards shareholders/investors/owners.

1. (d) 2. (d) 3. (d)
4. (b) 5. (d) 6 (c)
7. (c) 8 (c) 9. (a)
10. (a)
One Word Answer

1. To respect religious sentiments of people.
2. Related to all activities.
3. Means no distinction between, rich-poor, religion and caste
4. To help the flood/earthquake affected people.
5. Consumers
6. Long-term interest of the firm/avoidance of govt. regulations.
7. Ethos.
8. Cost savings/improved public image.
9. Exploitation of workers/making deceptive advertisements.
10. Ethics.
True & False

1. F 2. T 3. T 4 .
F 5. T 6. F 7. T
8. F 9. T 10. F
1 MARKS QUESTIONS :-
1. Define social responsibility of a business.
2. Write two examples of business ethics.
3. State two effects of noise pollution?
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
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

through the efficient treatment plant. Explain the value which this
company is following.
26. This is the speciality of the Rajdhani Floor Mills that it gives
handsome remuneration to its employees. The employees of the
mill are a happy lot and they motivate their friends to work here.
Enumerate which values are being affected here?
27. The Chief manager of Surya Ltd. Mr. Mohan is taken huge
interest in fulfilling his social responsibilities towards the
government. Explain the company is showing its commitment,
regarding the fulfilment of its social responsibility. Give any three
points.
28. XYZ Ltd. is a cigarette manufacturing company. It does not put
the mandatory disclaimer that Cigarette smoking is injurious to
health.
i) Towards which interest groups is it not following its
responsibility.
ii) What are the values lacking here ?
29. LMN Ltd. Co., a car manufacturing company, found that 100 cars
of a particular batch had some problem with their engines. It
recalled all the cars and corrected the specified problem.
i) What values are being followed by the company?
ii) Towards which interest group are they being responsible
here?
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

company?
b) It is fulfilling its social responsibilities towards which interest
groups?
33. There is a group discussion taking place in class XI regarding
social responsibility of business' Ravi feels that a business
should be socially responsible towards the society it exists in v,
bile shama is against it as basic objective of a business is to earn
project. Whom do you think, you favuor? Write points with
respect to you opinion.
34. ABC bank is providing e-banking facility to its customers. A group
of employees of the bank are sharing the personal Financial
details of the customers with some unscrupulous individuals to
back their accounts.
(a) From the above given information what risks of e-business
do you identify.
(b) Towards which interests group is the bank not paying-
attention?
35. A BPO is providing 24 x 7 handing of customer queries and
grievances. But in this process. it is making its employees
work for 16 hours a day.They are not even provided a rest
period of more than 45 minutes in a day.
(a) What is a BPO? What services does it provided to its
customers?
(b) Which responsibility is not being taken care of by the BPO?
(c) Interests of which group are not being catered to here?
36. An organization manufacturing paints has been enjoying a
prominent market position since many years. It has been
dumping its untreated poisonous waste on the river bank which
has created many health problems for the nearby villages.
a) What kind of pollution is caused by the above cited
organization.
b) Which responsibility is not being taken care by the
concerned organization.
[Hints : (a) Water pollution (b) Social Responsibility towards
community (c) Environment Protection, compliance of legal
laws]
37. A Vehicle manufacturing company has adopted the following
practice.
i) Only those components will be used by the company which
are environment friendly.
ii) There will be discharge of harmful wastes only after their
proper treatment.
iii) Pollution level of every vehicle will be maintained as per
international standards.
Identify and explain the aspect of business with which the above
actions are related
Mention any 2 values which are involved in above care.

[Hint : Environmental protection, values (a) Concern for
environmental protection, Social welfare.
38. "Bhardwaj & Sons is a partnership firm. Anil and Sunil are two
partners. Sunil's liability is unlimited where as Sunilt's liability is
limited, its is given in partnership dead. Sunil wants to instal a
pollution control device in its factory but Anil is against it. All the
transactions are done only on the internet by this firm. This
specializes in selling its products only to other business units.
This firms get her research and development work done through
another firm. This another firm has specialization in research
and development work.
On the basis the above paragraph answered the following
questions.
i) Tell the type of partnership.
ii) Recognize the unethical behaviour of the firm and which
two values are being neglected here.
iii) Which type of e-business the firm is running ?
iv) Name that process by which the use of which quality of this
another firm is being made?
[Hint : Limited and unlimited liability partnership]
39. According to which principle Business forms should carry on
business activities and earn profits keeping in mind social
aspirations of the society ? My explaining the need of the concept
of social responsibility give four points in its favour.
[Hints : Social Responsibility]
40. HCL is a well known computer company. It has the ambition of
touching new heights with the help of its employees. It provides
quality products and offers various facilities and incentives to its

employees such as cab facility, after completing five years
employees are given company shares also. It provides free
computer skills to the youths of backward areas.
a) In your view what is the Business Ethics of the company ?
b) It is fulfilling its responsibility to which interest group?
41. XYZ bank is providing e-banking facilities to its customers. Some
employees of this bank have been sharing the personal details
of some customers to some the with unethical tendencies. The
accounts of these customers can be haked my these dishonest
customers. On the basis of the above paragraph answer the
following questions :-
i) To which e-business risk you can recognize on the basis of
the above information ?
ii) The bank is not fulfilling its responsibility towards which
interest group ?
[Hint : Dishonest Trade Practice a Unethical Trade Practice]

CHAPTER 7
SOURCES OF BUSINESS FINANCE
Source of Business Finance
On the basis
of ownership
Owner’s Funds Borrowed Funds
1. Equity share 1. Debenture

2. Preference share 2. Bonds
3. Retained earning 3. Loans from banks
and financial
4. GDR
institution
5. ADR
4. Public deposits
6. IDR
5. Trade credit
6. Inter corporate
deposits
On the basis of period
Long Term Medium Term Short Term
1. Equity share 1. Debenture 1. Commercial Banks

a. Overdraft
2. Preference share 2. Preference share
b. Cash credit
3. Debenture 3. Public deposit c. Short-term loan
d. Discounting of
4. Retained earning 4. Commercial banks
BR
5. Specialised
2. Trade credit
Financial Institution
i.e. 3. Inter-corporate
IDBI, UTI, LIC, deposits
SIDC, ICICI

CONCEPT OF BUSINESS FINANCE
The term finance means money or fund. The requirements of
funds by business to carry out its various activities is called business
finance.
Finance is needed at every stage in the life of a business.
A business can not function unless adequate funds are made available
to it.
NEED OF BUSINESS FINANCE

1. Fixed Capital Requirement :- In order to start a business funds.
are needed m to purchase fixed assets like land and building,
plant and machinery.
2. Working Capital Requirement :- A business needs funds for its
day to day operation. This is known as working Capital
requirements. Working capital is required for purchase of raw
materials, to pay salaries, wages, rent and taxes.
3. Diversification :- A company needs more funds to diversify its
operation to become a multi-product company e.g. ITC.
4. Technology up gradation :- Finance is needed to adopt
modern technology for example uses of computers in business.
5. Growth and expansion :- Higher growth of a business
enterprise requires higher investment in fixed assets. So finance
is needed for growth and expansion.
State two factors that affect the 'Fixed capital' requirements of

a company.
CLASSIFICATION OF SOURCE OF FUNDS

Source of Funds
Classification
On the basis of On the basis of On the basis of

Period Ownership Source of generation
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.
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 PREFERENCE SHARES :-

1. Investment is safe :- Preference shareholders investment is
safe. They have preferential right to claim dividend and
capital.
2. No Charge on assets :- The company does not need to
mortgage its assets for issue of preference shares.
3. Control :- It does not affect the control of equity share
holders because they have no voting right.

4. Fixed dividend :- They get fixed dividend. So, they are
useful for those investor who want fixed rate of return.
LIMITATIONS /DEMERITS:-
1. Costly sources of funds :- Rate of preference dividend is
greater than rate of interest on debenture, for a company it is
costly source of funds than Debentures.
2. No tax saving :- Preference dividend is not deductible from
profit for income tax. Therefore there is no tax saving.
3. Not suitable for risk takers :- Preference shares are not suitable
for those who are willing to take risk for higher return.
Difference Between Equity Shares And Preference Shares
Base Equity Shares Preference Shares
1. Dividend After preference shares Priority over enquiry share
2. Voting Right dividend is paid full voting rights No voting right
3. Risk Risk bearing securities Less Risk
4. Rate of Return Fluctuates with profit Fixed Rate of Dividend
5. Control Control on the management No control on the management
Q. Madhu Ltd. is a company manufacturing garments for children. It has

been consistently earning good profits for many years. This year too, it
has been able to generate enough profits. There is availability of
enough cash in the company. It believes in quality of product, equal
employment opportunities & good remuneration. It has many share-
holders who prefer to receive a fixed & regular income. Mohan is one of
such shareholders.
i) Which type of shares Mohan holds.
ii) Identify two values followed by the company.
Debentures :- Debentures are the important debt sources of

finance for raising long term finance. Debenture holders get fixed rate of
interest on Debentures interest is paid after every six months or one
year. They are like Creditors of a company.

Type of Debentures:-
1. Secured Debentures
2. Unsecured Debentures
3. Convertible Debentures.
4. Non Convertible Debentures
5. Redeemable Debentures.
6. Registered Debentures.
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. Tax benefit is available only in case of payment of interest of
debentures and not on payment of dividends of shares ? Why ?
Q. State one reason why a company earning high profits may choose
debentures over equity shares to raise funds.
Retained Earning :- A portion of company's net profit after tax and

dividend, Which is not distributed but are retained for reinvestment
purpose, is called retained earning. This is also called sources of self-
financing.
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.

DEMERITS
1. Uncertain Source :- It is uncertain source of fund because it is
available only when profits are high.
2. Dissatisfaction among shareholder :- Retained profits cause
dissatisfaction among the shareholder because they get low
dividend.
Q1. Abhimanyu Ltd. is manufacturing cotton shirts for men. It is
planning to expand its business by opening one more unit in
another city. It has consistently earning good profits so these are
sufficient reserving. State the most appropriate source of finance
for the company. Also explain 2 merits & 2 demerits of such
source of finance.
Q2. Name the part of owner's fund which is contributed by profits

but not distributed among partners.
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.

2. Limited fund :- The quantum of public deposit is limited because
of legal restrictions 25% of share capital and free reserves.
3. Not Suitable for New Company :- New company generally find
difficulty to raise funds through public deposits.
Q1. In India, What is the maximum maturity periods of public

deposits?
Q2. 'Raising funds through public deposits frequently by a company
lowers its image in the public. How ?
Q3. In case of a company raising funds in a particular form, it is
required to follow the provision set by RBI (Reserve Bank of
India). Name the form of Fund.
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.

COMMERCIAL BANKS:-
Commercial Banks give loan and advances to business in the
form of cash credit, overdraft loans and discounting of Bill. Rate of
interest on loan is fixed.
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.

INTERNATIONAL SOURCE OF BUSINESS FINANCE
1. Commercial Bank :- Commercial Bank provide foreign
currency loan for business all-over the world. Standard
chartered Bank is an important organisation for foreign currency
loan to the Indian industry.
2. International Agencies and Development Bank :- A number of
international agencies and development Bank e.g. IFC, ADB,
provide long term loan.
3. INTERNATIONAL CAPITAL MARKET

1. GDR :- When the local currency shares of a company are
delivered to the depository bank, which issues depository receipt
against shares, these receipt denominated in US dollar are caller
GDRs.
Feature of GDR:-
1. GDR can be listed and traded on a stock exchange of any
foreign count-% other than America.
2. It is negotiable instrument.
3. A holder of GDR can convert it into the shares.
4. Holder of GDR gets dividends.
5. Holder of GDR does not have voting rights.
6. Many Indian companies such as Reliance, Wipro and ICIC1
have GDR.
2. ADR The depository receipt issued by a company in USA are
known ADRs (American Depository Receipts)
Feature of ADR :-
1. It can be issued only to American Citizens.
2. It can be listed and traded is American stock exchange.
3. Indian companies such as Infosys, Reliance issued ADR
DIFFERENCE BETWEEN ADR & GDR
Basis ADR GDR
1. Listing Only in American Stock Exchange Anywhere in the World
2. Liquidity More liquid Less liquid.
3. Share Holder Only American Citizens All over the World Citizens.

III. Foreign Currency Convertable Bonds (FCCBs):- The FCCB s
are issued in a foreign currency and carry a fixed interest rate.
These are listed and traded in foreign stock exchange and
similar to the debenture.
Indian Depository Receipts (IDRS)

IDRs are like GDR or ADR except that the issuer is a foreign
company raising funds from Indian Market. IDRS are rupee dominated.
They can be listed on any Indian stock Exchange.
Issue Procedure of IDRS
Issuing Overseas Indian

Co.
Foreign
" Custodian
Bank (OCB)
" Depository
(ID)
" Indian
Investors
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

Advantages of IDR
1 It provides an additional investment opportunity to Indian
Investors for overseas investment.
2. It satisfies the capital need of foreign companies.
3. It provides listing facility to foreign companies to list on Indian
Equity Market.
4. It reduces the risk of Indian Investors who want to take their
money abroad.
"The Govt. of India has made provision for issuing a particular

type of financial instrument on the pattern of American Depository
Receipt." Name the financial instrument indicated in above
statement. Give its two features.
Inter-Corporate Deposits (ICD)

Inter-Corporate Deposits are unsecured short term deposits
made by one company with another company. These deposits are
essentially brokered deposited, which led the involvement of brokers.
The rate of interest on their deposits is higher than that of banks and
other markets. The biggest advantage of ICDS is that the transaction is
free from legal hassles
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.

3. These are unsecured deposits.
4. These transactions are generally completed through brokers.
5. These deposits have no organized market.
6. These deposits have no legal formalities.
7. These are risky deposits from the point of view of lenders.
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.

1. Who is the owner of the company?
(a) Equity share holder
(b) Preference share holder
(c) Debenture holder
(d) Director

2. ICD’s are issued by —
(a) Bank (b) RBI
(c) company to another (d) SIDBI
3. ADR’s are issued by
(a) USA (b) Canada
(c) India (d) Japan
4. Which of the following is fixed capital?
(a) Equity share (b) Debenture
(c) Public deposit (d) Retained earning
5. Which of these is included in Owner’s Fund
(a) Debenture (b) Loan from SBI
(c) Equity share (d) Trade credit
6. Trade credit is example of —
(a) Long-term finance
(b) Medium-term finance
(c) Short-term finance
7. ADR is issued by a company which is listed in —
(a) India (b) America
(c) France (d) Any other company
8. Overdraft facility is provided by —
(a) RBI (b) Commercial banks
(c) Stock company (d) Statutory corporation
9. Which share have preferential right in the payment of annual
dividend?
(a) Equity share (b) Preference share
(c) Right share (d) All of the above
10. Which is internal source of Business Finance?
(a) Loans from commercial banks
(b) Debenture
(c) Retained earning
(d) Equity shares

Answer the following in one or two words
1. The securities which are issued in foreign country are called
_________.
2. In which country are IDR issued?
3. Name the source of business finance in which company directly
accept deposit from public.
4. What is the main purpose of issuing ADR?
5. Name any two institutions which provide short-term business
finance.
6. Who has the right of voting in Annua General Meeting of
company?
1 Mark Questions
1. What type of share capital is also called "Risk Capital" ?
2. Name the return given to debenture holders for using their
funds?
3. Name the one unique feature of "Retained Earnings" which is not
available in any another source of finance ?
4. What is the similarity between ADR and Public Deposits ?
5. Which term is concerned with the acquisition and conservation of
capital funds in meeting the financial needs of a business
enterprise ?
6. Name the organization which have been set up by the central as
well as State governments to provide medium term and long
term loans to business sector.
7. Write any one similarity between Equity share capital and
Preference share capital.
8. Write the names of 2 Indian companies that have issued
G.D.R.s.
9. Preference Share Capital is not suitable for which type of
investors ?—
10. Name the debt instrument on which investors get income tax
relief in specific cases.

3-4 MARKS QUESTIONS
11. Define Share and write any two advantages of it.
12. Write any two differences between share and debentures.
13. Mite any three limitations of equity share capital.
14. Write any three advantages of Retained Earnings.
5-6 MARKS QUESTIONS

15. Write main advantages and disadvantages of Public Deposits
16. What is the difference between ADR and GDR
17. Comment on the following sources of International finance
i) I.D.R. (ii) I.C.D.
18. "Ojas Auto Ltd. " is a very well known auto company in the
industry having more of equity share capital than long term debt
in its capital structure. It is willing to expand and establish new
unit in the backward region and want to train the tribal women in
skill Development to empower them. It has a huge amount of
cash reserve of Rs. 1000 crores.
(a) what is the status of capital structure of the above company.
(b) According to you, which source of finance should be used
by the company in establishing new units ? Give any two
reasons in support of your answer.
[Hints - Sound Capital Structure, Retained Earnings - Optimum
Utilization of resources and no dilution of control, Balanced
Regional Development]
19. "Avika Ltd." company, an It giant company registered in India
want to top the huge amount of resources for its growth and
expansion from U.S.A. for long term needs. It also needs money
for a period of less then 3 years to meet its medium cum short
term needs. The company is following the practice of educating
and giving employment to under privileged youth. 50% of its
office electricity is generated through solar power.

(a) Which two sources of finance should be used by the
company to meet its requirement. write any two
characteristics of each source.
[Hints - ADR and Public Deposits, Employment Generation,
Concern for environment]
High Order Thinking Questions (hot)

1. Mohit Ltd. wants to expand its production capacity by
modernizing its plant and machinery. This will cost Rs. 4 crores
approximately. The company does not have enough reserves to
support expansion plans. Suggest any two sources of finance for
the company.
2. As a source of finance, is retained earing a better option than
other source? Give one reason to support your answer.
3. Due to festive season , crescent Ltd. decided to expand the
business activities by increasing stock of an estimated cost of
Rs. 30 lakh. As the finance manager of the company, advise the
directors about the 3 sources of finance for this purpose.
4. Rohan has Rs. 1 lakh for investment. Suggest types of securities
he should opt. for.
5. Now-a-days, more and more companies are issuing debentures
for raising long term debt capital. Give 4 reason why is it
becoming popular.
6. You are finance manager of 'Satya Ltd.'. You have suggested the
directors to opt. for long term loan from a financial institution to
raise finance needed for company's expansion. Explain reason
to support your answer.
7. Mr. Arun has retired from his Govt. Job. He wants a part of his
savings to invest in some company. He want a fixed and regular
income without any risks.
i) Name the type of shares in which he should invest.
ii) State 2 merits & 2-demerits of the type of shares suggested
above.
8. These type of shares enjoy preferred rights in dividends. Identify
the type of shares. Also explain 2-merits & 2 demerits.

9. These type of shares do not enjoy any preferred rights but they
are real masters of the company. Identify the type of shares. Also
explain 2 merits & 2 demerits of the same.
10. 'Rudra Limited' is a successful company dealing in shoe making.
Though it has enough reserved yet the directors of the company
opted for debentures as a source of finance. Is the decision
wise? In your opinion which source the company should opt. for.
Give reasons to support your answer.
11. Mr. Manav Sharma is the finance manager of 'Setu Limited'
company needs Rs. 50 crores. To arrange the capital needed Mr.
Sharma has two option. Issue of equality shares or debentures.
After consideration of all facts, he decided in favour of issuing
debentures. He presented his decision before the CEO who
asked why he had opted for debentures Mr. Sharma replied that
debentures are fixed charge funds and do not participate in
profits of the company.
State more facts that Mr. Sharma must have presented before
the CEO about the debentures and equity shares.
12. "Mahindre and Manhindra' was the first company in India to
issue convert able debentures in 1990. Now many more
companies have the approval to issue convert able debentures
to raise long term debt capital. State & explain the reason of
issuing such debentures.
13. Zen Ltd. planning to organize a country wide 'Sale of its products
during festival season. The co. has to build stock of its
inventories to be able to meet the increased demand.
a) Name the type of capital co. must have to meet production
demands. (Working capital)
b) Advise the sources that the co. may consider to raise
required funds. (Trade Cr. , Cash Cr. (O/D).
14. Aryan is running a Travel Agency. The nature of business does
not require too many fixed assets. However, he is planning to
open another office in Dubai and to meet the financial needs he
has applied for a long term loan from a bank. Do you think he will
be able to get long term loan from bank ? Give reason.
15. Tania received 1,00,000 from her parents as a gift. She is
planning to invest entire amount but wants her money to be safe
and secure. Advise her about various options where she can
invest her money.

16. The Director of Asia Ltd. are planning to improve its productivity
by replacing their plant and machinery by installing new plant
and machinery with latest technology at a cost of $5 crores. They
can raise funds through issue of shares but is not confident of
raising all the money from shares. Suggest the ways of raising
finance for the company.
17. Tara Ltd. decided to raise funds through issue of equity shares as
the board of Directors know that a company has to pay dividend
to equity shareholders only when it earns profits. Board of
Directors decided that they record losses for the first 3 years so
that they don't have to pay any dividend to the shareholders.
(a) Are the Boards of Directors right in thinking ?
18. Mr. Pardeep owns a business of toys. At present he sells his
product in North and West India, but now planning to sell his
products in South India also. For this he applied to the bank for
enhancement of his overdraft limit from 50 Lakhs to 75 Lakhs.
Bank manager suggested him to take 'Term Loan" of $25 Lakh
instead of increasing overdraft limit. Do you think he should
consider Term Loan instead of overdraft limit ? Give reasons.
19. A foreign company wants to collect money from the capital
market of India. The financial manager of the company. Mr.
Trump wants to issue such a financial instrument, as instead of
being in dollars, shall be denominated in rupees, as it can be
listed in any Indian stock Exchange thereafter.
a) Identify the Financial Instrument indicated in above situation.
b) Explain the procedure of issuing this Financial instrument.

– Merchandise export & import – Earn foreign exchange
– Export & import of services – More efficient use of resources
– Licensing & franchising – Improves growth prospectus
– Foreign investment – Increased standard of living
Brain Map
ope
e
rat
r
rad
i o
lT
m
a
n
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
n
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
A product which is sold A product which is brought

to a buyer in the global from a supplier in the global
market is called an export market is called an import

BASIS DOMESTIC BUSINESS
1. Nationality Both buyers & sellers belong to Buyers & sellers belong to different
of buyers & same country. countries.
sellers
2. Mobility of Buyers & sellers belong to different

sectors of countries. There are restrictions on
production free mobility of factors of production
across countries.
3. Mode of Payment is done through telegraphic

payment transfer, LOC, Bills of exchange
4. Mode of Good are shipped out of geographical

transport boundaries of country this only air or
sea can be used
5. Cost of Quite low cost

transportation
6. Govt. Enterprise can start their business

Registration once the business is established. No
need of special license to sell
7. Customer Domestic markets are relative more

heterogenei homogeneous in nature.
-ty across
market
8. Currency Currency of home country is used.

Used
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.

Export Process
Receipt of Enquiry and sending quotations
Receipt of order or indent
Accessing importer's credit worthiness
Obtaining export licence
Obtaining pre-shipment Finance
Production or Procurement of Goods
Pre-shipment Clearance
Obtaining Certificate of Origin
Reserving shipping space
Package and forwarding
Insurance of Goods
Customs Clearance
Obtain Mate's Receipt
Payment of Freight
Preparation of Invoice
Securing Payment

MAJOR DOCUMENTS USED IN EXPORT TRANSACTIONS
A. Documents B. Documents C. Documents

Related to Goods Related to Shipment Related to Payment

Import Process
Trade enquiry
Procurement of import licence
Obtaining foreign exchange
Placing order or indent
Obtaining Letter of Credit
Arranging of finance
Receipt of shipment advice
Retirement of import documents
Arrival of goods
Custom clearance & release of goods

(1 marks)

Business Study
Practice Paper (Unsolved) M.M. = 80
Class 11 M.T. = 3 hrs.
Q. 1 State the meaning of Hindi (1)

Q. 2 Nipun is shareholder in Krishna Ltd. holding 500 shares of
` 50 each on which he has already paid ` 44 per share. What
will be his liability in the event of Krishna Ltd. failure to pay
debt? (1)
Q. 3 Which type of function of banks is 'Accepting deposit'? (1)
(a) Primary function (b) Secondary function
(c) Social function (d) None of the above
Q. 4 What do you mean by social responsibility of business? (1)
Q. 5 Differentiate between Equity share and Preference share on
the basis of rate of divided. (1)
Q. 6 State the meaning of Angel investment (1)
Q. 7 Neha, an exporter, entered into a contract for rent of the
whole ship to export goods with shipping company. Name the
contract entered by Neha. (1)
Q. 8 Differentiate between shares and debentures on the basis of
return. (1)
Q. 9 Jasvinder Singh has a shop of ladies suits in Chandni Chowk,
Delhi. He directly take the stock from the manufacturer, Rati
Ram and sells to multiple ladies like Vimla who sell them
further to the ultimate customers based on his work Jasvinder
is a retailer. True/False. (1)
Q. 10. Mention the name of the store in which there are a number
of departments in the same building selling different types of
commodities. (1)
Q. 11. BATA is which type of trader? (1)
(a) Chain store (b) Departmental store
(c) Super market (d) None of the above
Q. 12. What do you mean by crowd funding? (1)

Q. 13. Rainbow Ltd. (USA) acquires another company, Milk Food
Ltd. of India by investing 100% in its equity. What will Milk
Food Ltd. be called? (1)
Q. 14. Maruti Suzuki is which form of mode of entry in International
business? (1)
(a) Contract manufacturing (b) Licensing
(c) Franchising (d) Joint venture
Q. 15. "Monika, a cashier in a private bank pilferaged cash which led
to huge losses for the company."
Which type of business risk is being referred above? (1)
Q. 16. Keshav gets his car insured for ` 12,00,000 with insurer A and for
` 16,00,000 with insurer B. In an accident, the car was damaged.
He claimed for a compensation of ` 2,80,000 (total loss) from
both the companies. Can he do that?
Name the relevant principle of insurance applicable in above
case. (1)
Q. 17. You go to a Bank for opening a saving account. The manager
gives you a better option than saving account. In this account,
the excess amount exceeding a certain limit, gets automatically
transferred into the fixed deposit. The interest earned is more
than saving account. This account serves the purpose of both the
saving account and fixed deposit. Name the type of bank account
opened and discussed. (1)
Q. 18. Hira jewellers does retail business of jewellery at very large
scale. The firm has to pay a lot of attention to advertisement.
The owners of the firm are aware that if they spend more time on
advertisement, some other important activities are left pending.
One of the partners suggested that ' if the job of advertisement is
handed over to some Advertising Company, they will be relieved
of this important activity. By doing so, they will get benefit of
specialisation and their expenditure on this activity will be less
also. The firm implemented this and got positive results. Identify
the emerging mode of business discussed here. (1)
Q. 19. A local shoes maker company used the logo and name of an
established brand (Reebok) on its shoes and was able to sell
them at a high price. Is his act ethical? Give reason in support
of your answer? (1)

Q. 20. Which of these is not an economic activity? (1)
(a) Clerical work in a bank (b) Teaching in Govt. school
(c) Cooking by a housewife (d) Car production
Q. 21. "Business should operate on the basis of those principles
which are considered desirable by the society". Explain. (3)
Q. 22. "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." State
any three risks associated with e-business. (3)
Q. 23. "Both departmental store and multiple shops are large scale retail
establishment yet they are different." Explain. (3)
Q. 24. Explain any three features of Public Private Partnership
OR
Explain any three features of Joint Stock Venture (3)
Q. 25. Yogita is a chartered accountant. She runs her firm from Laxmi
Nagar, Delhi. After running her firm for four years, she feels that
she should get her business registered in a way that she can
reduce herself from the fear of unlimited liability. But at the same
time she does not want anyone else to be part of decision-making
in her business. (3)
(i) Name the form of business organisation to be form by
Yogita.
(ii) State any two features of the form of business organisation
identified in part (i) above
Q. 26. "Incentives have been provided by the Government for
industries in backward and hilly areas." Describe any four
such incentives. (4)
OR
What steps have been taken by the government for the
promotion of small industrial units? Explain.
Q. 27. Harish has recently done a cookery course after completing
his graduation. He decides to open his own food outlet. After
analysing various options, he decides to cook and sell South
Indian food. he has a capital of ` 4,00,000 and will take a loan
of ` 7,00,000.

Based on the above para, identify, quoting the lines, two
factors that Harish has considered for starting the business.
Also explain other three factors that need to be considered.(4)
Q. 28. "It is necessary for the business firms to take suitable steps for
the safety of environment."
Do you agree with the above staement? Give reason in
support of your answer and describe the need of environment
conservation. (4)
Q. 29. Explain GDRS & ADRS as a source of International finance (5)
OR
This source of finance is regulated by the Reserve Bank of
India and can not exceed 25% of share capital and reserves.
(i) Identify the source of finance on the basis of above information
(ii) Describe any two merits and two demerits of it.
Q. 30.
It is a public sector enterprises in which Govt. of India held 65%
of paid up share capital and it is registered as per Company Act,
2013. It deals in manufacturing of fertilizer. (5)
(i) Which type of public sector enterprise is discussed above?
(ii) Write any two characteristics of such organisation.
(iii) Write any two limitations of such organisation.
Q. 31. Sanjay LTd. wants to export TVs to Singapore. Explain any
five documents which will be used in this procedure by Sanjay
Ltd. (5)
Q. 32.
Kavya Private Ltd. was established in the year 2012 by
seven friends. As business of the company has increased, its
management is now planning to convert it into another form of
business to raise fund from the public. (6)
(i) Name the form of business Kaya Ltd. is planning to adopt.
(ii) Give any four differences between old and new form of
business.
OR
Identify the documents described below and differentiate
between them on any four basis:
(i) No company can be registered without it.
(ii) It defines the duties rights and powers of the officers and
board of directors.

Q. 33. State the meaning of the Intellectual property rights and
Enterpreneurship. Also explain the relation between them. (6)
Q. 34. What do you mean by World Trade Organisation? Describe the
role of WTO in removing the barriers of international trade. (6)
OR
"International business plays an important role to face the
challenge of unequal distribution of natural resources." Do
you agree with the above statement. Give reason in support of
your answer.

Answer Key
1. Hundi was an instrument of exchange which was used in
Indian Sub-continent in ancient time.
2. 500×6 = ` 3000
3. Primary function
4. It relates to voluntary efforts made on the part of businessman
to contribute to social well being.
5. Rate of diffident on equity shares – not fixed
Rate of diffident on preference shares – fixed
6. It is investment made by rich people with surplus cash and
having interest in development of startup.
7. Charter party
8. Return on shares – diffident
Return on debentures – interest
9. False
10. Departmental store
11. Chain store
12. Under this fund, money is collected from a large number of
people through the medium of internet by giving detailed
information of startup.
13. 100% wholly occupied subsidiary
14. Joint venture
15. Human causes
16. No, principle of contribution
17. Multi-option Deposit Account
18. Business Process Outsourcing
19. This is unethical as the business being done is illegal
20. Cooking by a house wife
21. Business should operate on the basis of moral values/
standards/principles called business ethics. Ethics defines
what is right and what is wrong. Follow of business ethics is
necessary for the protection of interest of all stakeholders.

22. Risk associated with e-business:
1. Transaction risk
2. Fraudulent practice
3. Storage and transmission risk
(Or any other correct risk with explanation)
23. Differentiate between department store and multiple shops as
follows:

Departmental Store Multiple Store

1. It is located at a central place It is located in popular
localities
2. It provides different types of It provides unique/single
products product
3. It provides all facilities such It does not provide such kind
as restaurant, rest rooms, of facilities
etc.
(Or any other correct differences)
24. Features of PPP:
1. Facilities partnership between public sector and private
sector
2. Pertaining high priority project
3. Useful in public welfare projects like Delhi Metro Railway
Corporation.
4. Sharing revenue
5. Suitable for big project
(any three with explanation)
OR
Any three features of joint venture.
25. One person company (1+2=3)
(any two features)
26.
(i) Establishment of National Small Industries Corporation
(NSIC)
(ii) Establishment of District Industries Centre
(iii) Other Govt. incentives to Hilly Backward and Rural Areas
(With explanation)

OR
1. Tax Holidays
2. Power, Land, Water, etc. at Concessional Rates
3. Abolition of Octoroi
4. Protective measures
5. Marketing Assistance
6. Finance
(any four with explanation)
27. 1. Nature of work
Line quoted – He decide to open his own foot outlet
2. Capital contribution
Line quoted – He has a capital of ` 4,00,000 and will take a
loan of ` 7,00,000
Other factors :
3. Location
4. Scale of business/risk
5. Degree of control
6. Management ability
(or any other correct factors)
28. Yes, I am agree with the above statement because industries
inject harmful substances into the environment during
production.
Need for environment protection:
1. To ensure healthy life
2. To ensure safety
3. Economic losses reduction
4. Improved public image
(any three with explanation)
29. Global Depository Receipts: When the local currency shares of
a company are delivered to the depository bank, which issues
depository receipt against shares, these receipts denominated
in US toll or are called GDRs. It can be listed and traded on a
stock exchange of any foreign country other than America. It
is a negotiable instrument and can be converted into shares.
American Depository Receipts – The depository receipts
issued by a company in the USA are known as American

Depository Receipts. ADRs are bought and sold in American
markets, like regular stocks. It is similar to GDR except that it
can be issued only to American citizens and can be listed and
traded on a stock exchange of USA.
OR
Public Deposits
Merits:
a. No charge on assets
b. Tax saving
c. Simple procedure
d. Control not diluted
(any two with explanation)
Demerits:
a. For short-term finance
b. Limited fund
c. Not suitable for new company
(any two with explanation)
30. Government company
Features
a. Govt. has minimum 51% of paid-up capital
b. It is managed by board of directors selected by government
and other shareholder
(or any other features)
Limitations
a. If suffers from interferences & politicians
b. It evaded constitutional responsibility which a company
financed by the governments should have, as it is not directly
answerable to parliaments.
31. (i) Certificate of origin
(ii) Shipping bill
(iii) Mates receipt
(iv) Bill of Landing
(v) Letter of credit
(or any other appropriate documents)

32.
Basis Private company Public company
1. Name It has to write It has to write only

private limited after limited after its name
its name
2. Number of As per company Act Minimum – 7

members 2013 Maximum – No limit
Minimum – 2
Maximum – 200
3. No. of Minimum – 2 Minimum – 3
directros
4. Invitation to Private Company Public compnay
public can't invite public for can invite public for
issuing shares and issuing its share and
debentures debentures
(Or any other correct differences)

OR
(i) Memorandum of Association
(ii) Article of Association
Difference between them as follows:
Basis Memorandum of Article of Association
Association
1. It defines the objectives It defines the rules for
of the company attaining the objected
mentioned in MoA
2. Position Very important/ Subsidiary document
necessary document
33. Intellectual property rights – It refers to the creativity of a
person. It is the legally recognised excessive rights given to
the creator of their creation like invention, art work, musical,
literary, symbols, names, designs, image, discoveries, etc.
Entrepreneurship – It is set of all activities performed by an
entrepreneur to translate to business ideas into desired
monetary results.
IPR is an asset for innovative entrepreneurship in the following

way:
1. Innovative potential got market value
2. Upcoming entrepreneur can make their name and place in
the market with IPR.
3. IPR give the entrepreneur property right of intangible asset.
(or any other correct relations)
34. Yes, I agree with the above statement.
Manufacturing and trading beyond the geographical
boundaries of a country is known as international business.
Unequal distribution of natural resources and differences in
the productivity level of the countries make them incapable of
producing every good of their requirement. So international
business plays an important role to face the challenges of
unequal distribution of natural resources in the form of import
and export of goods and services. It helps the nation and firms
in many ways.
(or other correct explanation)
OR
World Trade Organisation came into existence on Ist Jan.
1995 with the objective of solving problems between countries
and providing a forum for multilateral trade negotiations.
Role of WTO:
1. To act as a dispute settlement body by setting trade related
disputes among nations.
2. To ensure that all the rules and regulations prescribed
in the Act are duly followed by the member countries for
setting of their disputes.
3. Laying down a commonly accepted code of conduct for
international trade aiming at reducing tariff and non-tariff
barriers in international trade.
4. To consult other agencies to bring better understanding
cooperation in global economic policy making.
5. Providing technical assistance and guidance related
to management of foreign trade and fiscal policy to its
member nations

Business Study
Practice Paper (Unsolved) M.M. = 80
Class 11 M.T. = 3 hrs.
Q 1. Ramajun has posted his savings of ` 15 lakh and bought

machinery for making hand bags from it. Under what category
of small scale enterprise will you classify his business (1)
(a) Manufacturing small enterprise
(b) Manufacturing micro enterprise
(c) Service micro enterprise
(d) Manufacturing medium enterprise
Q. 2. The scheme of 'Performance and Credit Rating' of small
business is being implemented by which government
institute? (1)
(a) NSIC (b) DIC
(c) Both of them (d) None of them
Q. 3. Which is the term used in trade documents to say that mistakes
and things that have been forgotten should be taken into
account? (1)
Q. 4. Laxmi puts her stall of clips, hair bands every Saturday in
the nearby Saturday market. What type of itnerant retailer is
she? (1)
(a) Peddler (b) Cheap Jack
(c) Street trader (d) Market trader
Q. 5. Pizza Hut has used which mode of entry in our country? (1)
(a) Joint venture (b) Licensing
(c) Franchising (d) Contract manufacturing
Q. 6. Formation of consumer's forum and pressure groups is an
example of — (1)
(a) B2B Commerce (b) B2C Commerce
(c) C2C Commerce (d) C2B Commerce
Q. 7. Arihant Shipping Ltd. has given Global Logic Pvt. Ltd. an
acceptance to carry their stock of readymade garments to
Japan. What is this document called? (1)
(a) Shipping bill (b) Bill of lading
(c) Mate's receipt (d) Marine Insurance Policy

Q. 8. Vidhi usually comes late at night. She is worried to carry cash
as she has to purchase household things on the way. So,
suggest how she can avoid carrying cash. (1)
Q. 9. A person gets his house (worth ` 12,00, 000) insured from
three insurance companies, A: ` 2,00,000; B: ` 4,00,000; C:
`6,00,000. At the time of incurrence of loss, the compensation
will be paid by insurance companies in the ratio of 1:2:3. This
is the case of which principle of insurance? (1)
Q. 10. Carbon monoxide emitted by automobiles directly contributes
to (1)
(a) Water Pollution (b) Noise Pollution
(c) Land Pollution (d) All of these
Q. 11. The owners of Gupta & Gupta Pvt. Ltd. are taking special
interest in getting plants planted around their factory. Also,
they dump the waste water of their factory only after passing
through the 'Effluent Treatement Plant'. Identify the social
responsibility fullfilled by the company. (1)
Q. 12. e-Business includes (1)
(a) e-Commerce (b) Production
(c) Product development (d) All of the above
Q. 13. Which of the following is not included in 'Auxiliary to Trade' (1)
(a) Animal husbandry (b) Insurance
(c) Transport (d) Warehousing
Q. 14. Capital is required in — (1)
(a) Profession (b) Employment
(c) Business (d) Non-economic Activity
Q. 15. ICD's are issued by (1)
(a) Bank (b) RBI
(c) One company to another (d) SIDBI
Q. 16. Which of the following is fixed capital? (1)
(a) Equity share (b) Debenture
(c) Public deposit (d) Retained earning
Q. 17. LIC is an example of — (1)
(a) Departmental Activity (b) Statutory Corporation
(c) Government Company (d) Private Company

Q. 18. Which of the following is related to a specific Ministry? (1)
(a) Indian Railways (b) FCI
(c) Coal India (d) BHEL
Q. 19. What is the minimum number of members in a public
company? (1)
Q. 20. What is Sole Proprietorship? (1)
Q. 21. Write any three importance of IPR for an entrepreneur. (3)
Q. 22. Explain three features of a company (3)
OR
What is partnership deed? What are included in partnership
deed?
Q. 23.
Rahul had taken insurance of ` 3 lac for his car (worth ` 2 lac)
from an insurance company. After 2 month, his car caught fire
and got damaged severely. His car was taken by insurance
company and insurance amount was paid to the Rahul. (3)
(i) How much amount was given by the insurance company
to Rahul?
(ii) According to which principle of insurance did the insurance
company take his damaged car?
Q. 24. The Chief Manager of Surya Ltd., Mr. Mohan takes huge interest
in fulfilling his social responsibilities towards its employees.
Explain how the company is must be fulfilling its commitment
regarding the fulfillment of it's social responsibility. Give any
three points. (3)
Q. 25. Explain (3)
(i) ADR (ii) IDR
Q. 26. William, who is currently running an online service in name
– 'Cab available on rent-labor felt that there was a new
opportunity of providing on-line restaurant food to people of
Delhi. He analyzed the idea in terms of technical, financial
and economic feasibility. Once he found all the aspects to
be satisfactory, he decided to start a company named –
'Lubercats'. He got the name registered with the registrar of
companies and prepared the necessary documents. (3)
(i) Identify and explain the step in formation of a company
highlighted in above case.

(ii) Enumerate the next three steps to be followed after the
completion of the step identified in part (i) above.
Q. 27. Explain (4)
(i) B2B Commerce (ii) B2C Commerce
OR
(i) BPO (ii) KPO
Q. 28. Explain the role of NSIC in enhancing the role of small scale
enterprises (4)
Q. 29. Ms. Meena is a lecturer in a college. She get ` 72,000
p.m. as remuneration. Mr. Kunal 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, teaches
slum children after her office hours. She doesn't charge
anything from them. This gives her psychological and
mental satisfaction. (5)
(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?
Q. 30. Urvashi is a village girl who comes to Delhi to visit her
relatives. She goes to a big store with her cousins. The
store is centrally located. She is astonished by the variety of
goods being sold there. The store has restrooms, restaurant
inside it. Her cousins tell her that this store is being operated
by a company. (5)
(a) Identify the type of store Urvashi visited.
(b) Quoting lines from the above para, explain the four features
of the store
Q. 31. Explain any five problems faced in International Trade. (5)
OR
Explain the role of WTO in International Business.
Q. 32. What do you mean by Multinational Companies? (6)
OR
What do you mean by Joint Venture? Explain any five
benefits of it.

Q. 33. Explain the following terms — (6)
(i) Retained earning (ii) Public deposit
(iii) Trade credits (iv) ICD's
(v) Preference shares (vi) GDR
OR
Differentiate between Share and Debenture on the basis of
following —
(i) Meaning (ii) Nature/status
(iii) Voting right (iv) Return
(v) Management (vi) Convertibility
Q. 33. Shubham Ltd. is a leading manufacturer of toys. His production
capacity is higher than the demand of his toys in domestic
market. So he is planning to export his toys to China. He has
approached you to explain the export procedure. Give him
step by step details of the procedure. (6)

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DIRECTORATE OF EDUCATION

Govt. of NCT, Delhi

Under the Guidance of

Mr. Sandeep Kumar

Mr. Binay Bhushan

Dr. Saroj Bala Sain

Published at Delhi Bureau of Text Books , 25/2 Institutional Area, Pankha

NOT FOR SALE

PUBLISHED BY : DELHI BUREAU OF TEXTBOOKS

S.No. Subject Subject Expert Designation School

1. Business Kumkum Kumar Vice-Principal GGSSS, A Block,

viii XI – Business Studies

Units Periods Marks

Part A: Foundation of Business

Unit 1: Evolution and Fundamentals of Business

Content • After going through this unit, the

Unit 2: Forms of Businesss organizations

Unit 3: Public, Private and Multinational Company

xii XI – Business Studies

Postal SErvice - Mail, Registered Post, • Understand the utility of different

xiii XI – Business Studies

Entrepreneurship Development • Understand the concept of

Small scale enterprise and defined by • Understand the meaning of small

Government schemes and agencies for • Appreciate the various Government

xiv XI – Business Studies

Unit 10: International Trade

Objective Short Short Long Long

Present and defend

Total 20×1=20 5×3=15 3×4=12 3×5=15 3×6=18 80(34)

There will be internal choice in questions of 3 marks (1 choice), 4 marks (1 choice),

xvi XI – Business Studies

Profession Business Employment

Primary Secondary Tertiary Trade Auxiliary

Genetic Extractive 1. Transport 1. Transport

Manufacturing Constructive Internal External

Spread of trade and Commerce

After Barter Diverse Metal began Documents

Trading Transport Rise of Indigenous

Hundi: It was an instrument of exchange which was used in Indian

Hundi as practised by Indian Merchant Communities

Firman-jog Darshani Hundi made payable to order.

Dekhan-har Darshani Payable to the presenter or

Firman-jog Muddati Hundi made payable to order

Jokhmi Muddati Drawn against dispatched

Indigenous banking system

1991 AD: Economic 1973 AD: 1952 AD: 3.8% of the

Basic Meaning Economics Non-Economic

Meaning T h o s e a c t i v i t i e s w h o s e Those activities whose aim is

Main objective is to achieve

Comparison of Business Profession and Employment

S.N. Basis of Destruction Business Profession Employment

5. Reward/Return Profits Professional Fee Salary or wage

6. Risk It involves high risk No risk in it

7. Code of conduct No code of conduct Professional code of The terms and

Transfer possible with Not Possible Not Possible

Objectives of Business :- The objectives of business means the

Economic Objectives Social Objectives

Quality goods &

Market Standing Avoidance of antisocial &

Classification of Business Activities

Primary Secondary Tertiary or Trade Aids/Auxilliaries

1. Primary Industry - The primary industry includes those