CBSE Sample Papers for Class 11 Business Studies Set 1 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 11 Business Studies with Solutions Set 1 are designed as per the revised syllabus.

CBSE Sample Papers for Class 11 Business Studies Set 1 with Solutions

Time Allowed: 3 Hours
Maximum Marks: 80

General Instructions:

This Question paper contains five Sections- A, B, C, D & E.

Section- A contains Questions 1 to 20 carrying 1 mark each.
Section- B contains Questions 21 to 25 carrying 3 marks each. Answers to these Questions may be in about 50 to 75 words.
Section- C contains Questions 26 to 28 carrying 4 marks each. Answers to these Questions may be in about 120 words.
Section- D contains Questions 29 to 31 carrying 5 marks each. Answers to these Questions may be in about 150 words.
Section- E contains Questions 32 to 34 carrying 6 marks each. Answers to these Questions may be in about 200 words

Section – A (20 Marks)

Question 1.
Among which of the following occupations, people work for others and get remuneration in return? [1]
(A) Business
(B) Employment
(C) Profession
(D) None of these
Answer:
(B) Employment

Explanation: Employment is an occupation where a person (called employee) has to work for other (called employer). There are certain terms and conditions of work like hours of work (how many hours a day), duration of work (how many days or hours in a week or month etc.), leave facility, salary/ wages, place of work etc.

Question 2.
Among the following given activities, which one is not an economic activity? [1]
(A) Social welfare
(B) Trading in goods and services
(C) Transportation services
(D) Manufacturing of goods for sale
Answer:
(A) Social welfare

Explanation: Economic activities are those by which we can earn our livelihood, whereas, non-economic activities are performed out of love, sympathy, sentiment, patriotism, etc.

Question 3.
Sole proprietors have __________ liability. [1]
Answer:
Unlimited

Question 4.
The Head of the joint Hindu family business is called:
(A) Proprietor
(B) Director
(C) Karta
(D) Manager
Answer:
(C) Karta

Question 5.
Business finance refers to the requirements of funds by business to carry out its various activities. Hence, finance is called the life_________of any business. [1]
(A) Blood
(B) Brain
(C) Heart
(D) None of these
Answer:
(A) Blood

Question 6.
What is the maximum amount that can be invested in equipment by a Medium enterprise engaged in rendering services? [1]
(A) X 2 crore
(B) X 3 crore
(C) X 4 crore
(D) X 5 crore
Answer:
(D) X 5 crore

Explanation: An enterprise, engaged in providing or rendering of services is said to be:
(a) a micro enterprise, where the investment in equipment does not exceed? 10 lakhs
(b) a small enterprise, where the investment in equipment is more than? 10 lakhs but does not exceed? 2 crores
(c) a medium enterprise, where the investment in equipment is more than ? 2 crores but does not exceed? 5 crores.

Question 7.
Which is the e-business application that involves the online buying and selling of shares and other financial instruments? [1]
(A) e-Delivery
(B) e-Promotion
(C) e-Bidding
(D) e-Trading
Answer:
(D) e-Trading

Question 8.
Which of the following is incorrect regarding social responsibility? [1]
(A) It involves an element of voluntary action on the part of business.
(B) It involves the question of what is morally right or wrong in relation to the firm’s responsibilities.
(C) It involves the obligation to take decisions and perform actions which are desirable in terms of the objectives and values of our society.
(D) All the statements are correct.
Answer:
(D) All the statements are correct.

Explanation: Social responsibility of business refers to its obligation to take those decisions and perform those actions which are desirable in terms of the objectives and values of our society. The assumption of social responsibilities by business enterprises implies that they respect the aspirations of society and would try their best to contribute to the achievement of these aspirations along with their profit interests.

Question 9.
What does GST stand for? [1]
Answer:
Goods and Services Tax.

Read the following text and answer Q.No. 10-13 on the basis of the same:
Rachit a student of XI standard was asked by his Business Studies teacher to write an article on ‘Role of Public Sector Enterprises in Indian economy’, where both private sector and public sector exists. While writing the article he learned about various types of PSUs through which government achieves its objective of establishing socialistic pattern of society. There are various Public Sector Enterprises, formed by the government in strategic areas like Defence, Railways, etc.

Under the direct control of ministries and on the other hand for various public utility services it created PSE to work as an autonomous body by passing a Special Act in the Parliament. To run on commercial lines and to compete with companies in private sector, the PSEs like ONGC, BHEL, etc. are successfully working with the ownership shared with private sector but the private sector can have maximum 49% of ownership only. As per the needs of economy and industrial policies, the government has to change its policies for PSEs.

Question 10.
__________ in Indian economy where both private sector and public sector exists”. Identify the nature of Indian economy. [1]
(A) Capitalistic Economy
(B) Socialistic Economy
(C) Mixed Economy
(D) Developed Economy
Answer:
(C) Mixed Economy

Explanation: Mixed economy refers to an economic system combining private and state enterprise.

Question 11.
‘Public Sector Enterprises formed by the government in strategic areas like Defence, Railways, etc. under the direct control of ministry’. Name the type of PSEs stated here. [1]
(A) Departmental Undertaking
(B) Statutory Corporation
(C) Government Company
(D) Public Company
Answer:
(A) Departmental Undertaking

Explanation: A departmental undertaking is organized, managed, and financed by the government. It is controlled by a specific department of government. A minister heads each such department.

Question 12.
’PSE to work as an autonomous body by passing a Special Act in the Parliament’. Which of the following PSE is an example of such Public sector undertakings? [1]
(A) Hindustan Aircraft
(B) Unit Trust of India
(C) Hindustan Machine Tools
(D) Maruti Udhyog Ltd
Answer:
(B) Unit Trust of India

Question 13.
What is the minimum percentage of the paid-up capital that must be held by the government in Government Companies? [1]
(A) 51%
(B) 49%
(C) 75%
(D) 100%
Answer:
(A) 51%

Question 14.
IEC stands for which of the following? [1]
(A) Import Export Clause
(B) Import Export Code
(C) Import Export Convention
(D) Import Export Constitution
Answer:
(B) Import Export Code

Question 15.
Which of the following is a source for raising borrowed funds? [1]
(A) Equity Shares
(B) Preference Shares
(C) Loans from financial institutions
(D) Retained Earnings
Answer:
(C) Loans from financial institutions

Question 16.
An entrepreneur is a___________. [1]
(A) Job-seeker
(B) Job-provider
(C) Job-hunter
(D) Job-applicant
Answer:
(B) Job-provider

Question 17.
Which of the following are fixed shop retailers? [1]
(A) Market traders
(B) Pavement vendors
(C) Cheap jacks
(D) Speciality shops
Answer:
(D) Speciality shops

Explanation: Instead of selling a variety of products of different types, these retail stores specialise in the sale of a specific line of products. For example, shops selling children’s garments, men’s wear, ladies shoes, toys and gifts, school uniforms, college books or consumer electronic goods, etc. These are some of the commonly found stores of this type in the marketplace.

Question 18.
Which pollutant has created a hole in the ozone layer resulting in the dangerous warming of the earth? [1]
Answer:
Air pollution (Chlorofluorocarbon).

Question 19.
e-commerce offers many benefits to the consumers. Which of the following is not a benefit resulting from e-commerce? [1]
(A) Flexibility
(B) More options and choices
(C) Quick and Timely delivery
(D) Narrow outreach
Answer:
(D) Narrow outreach

Question 20.
In terms of tangibility, goods are tangible and services are intangible. (True/False) [1]
Answer:
True

Explanation: Services are those separately identifiable, essentially intangible activities that provide satisfaction of wants, and are not necessarily linked to the sale of a product or another service. A good is a physical product capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer.

Section- B (15 Marks)

Question 21.
Explain any three economic objectives of the business. [3]
OR
Irace the evolution of Banking System in Indian history.
Answer:
Three economic objectives of business are:
(1) Earning Profit: The main objective of every business activity is to earn money in the form of profit and any activity which results in earning
of money and creation of wealth is considered as an economic activity.
(2) Survival: The business must cover the costs.
(3) Growth: The main objective of business is also to grow in terms of product, capital, etc.,

(1) Banking in India dates back to Vedic Age. The Vedas and Manusmriti consist the term usury meaning practice of making unethical monetary loan that unfairly riches the lender.
(2) The mention of loan deeds as mapatra or mapanna or malekhaya in Kautilya’s Arthshastra indicates the existence of unorganised banking system in India at that age.
(3) Adhesha used during Mauryan period is the forefather of present day Bill of Exchange.

Question 22.
India has emerged as a low cost back office, manufacturing and research base, thanks to its skilled but relatively cheap manpower. Thus, in recent times, India has become an attractive destination for MNCs. But it is said that multinational corporations are of great advantage but they are not free from ill effects. Explain any three ill effects of multinational corporations. [3]
Answer:
Limitations or ice-effects of multinational corporations are as follows:
(1) Disregard of national objectives: Sometimes, the multinational companies disregard the national objectives. As a result, planning don by the government falls in vain.
(2) Depletion of national resources: Multinational companies are set up with profit motive only. They exploit the natural resources in unbalanced manner. So, it is harmful for the economies.
(3) Threat of obsolete technology: Sometimes in the ‘technology transfer’ process, obsolete technology is transferred as a result of which the diseconomies of scale prevail.
(4) Unhealthy competition: Multinational companies enjoy economies of scale and the cost of production is less as compared to other companies. It provides a threat to the domestic industry.
(5) Threat to national sovereignty and integrity: Multinationals are a severe threat to national sovereignty and integrity of the nation. History has instances to prove this like East India Company ruled India for many decades.
(6) Oligopolist power: It means when power is concentrated in the hands of a few companies, only takeovers are often exercised by multinationals.

Question 23.
Naresh took a fire insurance policy from NICL of? 50 Lakh for his factory at the annual premium of? 75,000. In order to avoid premium more than his amount, he did not disclose that highly explosive chemicals are being manufactured in his factory. Due to fire, his factory was damaged. The insurance company, NICL refused to make the payment for claim as it came to know about the highly explosive chemicals. Is Naresh entitled to claim? Explain the principle of insurance violated by Naresh. [3]
Answer:
No, Naresh is not entitled to receive the claim because he has violated the principle of ‘Utmost Good Faith’. Good faith or disclosure of all material facts: An insurance contract is a contract of good faith. Both parties to the contract are bound to likely affect the acceptance of the proposal by the insurance company. It is known as a contract uberrimae fidei, i.e. contract requiring absolute good faith and the disclosure of all material facts.

Question 24.
Mention three special features of Inter-corporate deposits. [3]
Answer:
The main features of inter-corporate deposits are as follows:
(1) Period of deposit: Minimum period for which ICD is deposited is 90 days and maximum period is 180 days. However, after the expiry of this period, the deposit may be renewed if both the parties agree.
(2) Amount of deposit: Minimum deposit amount which can be raised is 1 lakh and there is no limit on the maximum amount.
(3) Interest rate: Interest rate varies from 12% to 17% per annum.

Question 25.
Discuss any three institutional sources from which a large industrial enterprise can raise capital for financing modernisation and expansion. [3]
Answer:
Sources are as follows:
(1) Industrial Finance Corporation of India: It was established in July 1948. IFCI has contributed a lot to the development of management the education in the country. The main function is to provide finance to private sector units.
(2) State Financial Corporations: It was established in the year 1951 by SFC Act. It provides short term loans to the business units.
(3) Industrial Credit and Investment Corporation of India (ICICI): It was formed in the year 1955 as a private limited company. It provides long term finance to private sector units.
(4) Unit Trust of India: It was established by government of India in 1964 under the Unit Trust of India Act 1963. Its main objective is to mobilise the community’s savings into the productive ventures. Other important financial institutions are LIC, IDBI, SIDBI, SIDC etc.

Section – C (12 Marks)

Question 26.
Explain any two merits and two demerits of raising funds through preference shares. [4]
OR
State the limitations of equity shares.
Answer:
Merits:
(i) Preference share capital cannot be redeemed during the life span of the company. Hence, these are the sources of permanent capital.
(ii) The cost of issuing preference shares is economical.

Demerits:
(i) The dividend paid to the preference shareholders is not a deductible expense while computing the tax liability of the company.
(ii) Investors willing to take risk and earn higher profit do not prefer preference shares.

Limitations of Equity Shares:
(i) The voting power and earnings of existing equity shareholders is affected by issue of additional equity shares.
(ii) Raising funds through issue of equity shares involves a lot of formalities and a lengthy procedure.
(iii) Since the dividend payable to equity shareholders keeps on fluctuating, investors who want steady income do not prefer them.
(iv) The cost of raising funds through equity shares is generally more as compared to other sources

Question 27.
In order to promote infrastructural development in the country with active participation of private sector, which type of business partnership would you suggest to the government? Also enumerate three features of such partnership. [4]
Answer:
I would suggest for Public-Private Partnership.
The features of PPP are as follows:
(i) It is a contractual relationship between government and private sector organisation for implementing a project for public benefit.
(ii) PPP is confined to a particular project for a specific area like its operation or maintenance or management.
(iii) Selection of the private partner is done by the government through competitive bidding or competitive negotiations.

Question 28.
Identify and explain the features of sole proprietorship shown in following statement sentences : [4]
(i) He can carry out his plans without any interference from others.
(ii) He receives all the business profits which become a direct reward for his risk bearing
Answer:
(i) The feature indicated here is ‘Control’. The right to run the business and make all the decisions lies absolutely with the sole proprietor. He needs not to take consent of anyone else while taking decisions. He solely controls his business.
(ii) The feature shown in the sentence is ‘Sole risk bearer and the profit recipient1 As the sole proprietor is the only owner of the business, therefore the risk of failure of business or profit earned by successfully running the business are enjoyed by him all alone.

Section – D (15 Marks)

Question 29.
Mr. Bhuvan is a Chartered Accountant in a Multinational Company. He gets? 85,000 per month as his salary. On weekends, Mr. Bhuvan goes to nearby village and teaches some slum children, he does not charge anything from them, he does it out of sympathy and concern for poor children. This gives him mental and psychological satisfaction. [5]
(i) Working as CA in MNC refers to which type of human activity? Give meaning also.
(ii) Teaching students in slum is which type of human activity? Explain.
Answer:
(i) Employment It refers to the occupation in which people work for others and get remuneration (wages/ salaries) in return.
(ii) Non-economic Non-economic activities are those activities which are undertaken to satisfy social, religious cultural and sentimental requirements.

Question 30.
Define departmental stores and state any four disadvantages of departmental stores. [5]
OR
Define multiple shops and state any four disadvantages of multiple shops.
Answer:
A Departmental store is a large establishment, which sells a wide variety of products and aims to satisfy all needs of the customers under one roof.
Advantages of Departmental Stores:
(1) Lack of personal attention: Large size of the store makes it difficult to provide adequate personal attention to the customers.
(2) High possibility of loss: Due to large-scale operations, the possibility of losses are high in these stores. For example, in case of change in fashion, the store has to sell the out-of-fashion goods in clearance sale at heavy discounts.
(3) High operating cost: Because of the various services offered by the store to its customers, the operating cost is high. High operating cost increases the price of the goods and hence these stores are not attractive for lower income groups.
(4) Inconvenient location: Since these stores are centrally located, it is not convenient for the purchase of goods required immediately.

Multiple shops are networks of retail shops, which are owned by the single business enterprise. The limitations of multiple shops are as follows:
(1) Limited selection of goods: These stores sell range of goods produced in their organisations only. Thus, they offer limited choice of goods.
(2) Lack of personal touch: Sometimes, differences and lack of personal touch arise in the employees due to lack of incentives.
(3) Problems of change in demand: The management has to bear heavy losses when the demand for their goods changes rapidly. This is because a large amount of stock remains unsold at the central office.
(4) Lack of initiative: The branch managers are required to follow the instructions received from the head office. Thus, they become habitual of seeking the guidance of head office in all matters. This kills their initiative to make use of their creative skills. The chances of dead stock in these stores are reduced.

Question 31.
Identify the type of retail selling in which business is carried through post. Enlist any four demerits of such retail business. [5]
OR
What is meant by itinerant traders? Explain the various types of itinerant traders.
Answer:
The retail outlets which sell their products through mail are referred to as mail order houses. This type of trading involves no personal contact between the customer and the seller. The trader contacts the customer through advertisement in newspapers or magazines, circulars, catalogues and price list is sent to them by post. The advertisement gives the complete description regarding price, delivery terms, terms of payments, features, etc. of the product.
Limitations:
(1) Lack of personal contact: Sometimes, the lack of personal contact between the buyers and the sellers results in misunderstanding and mistrust between the two.
(2) No after-sales service: Both buyers and sellers are located very far away from each other and there is no personal contact between the two. Hence, it is very difficult to provide after-sales services to the buyers.
(3) No credit facility: This system fails to provide credit facility to the customers. So, the customers with scarce means are not interested in this system.
(4) Delayed delivery: The receipt and execution of order through mail takes a lot of time. So, there is a delay in the delivery of the products.

Retailers who do not have any fixed place to carry out their business activities are known as itinerant traders. They have to move from one place to another along with their goods in search of consumers. Various types of itinerant traders are as follows:
(1) Peddlars and hawkers: These are the oldest form of retailers. They deal in non-standardised and low value goods like fruits, vegetables, icecreams, toys, fabrics, etc., which they carry on bicycle, hand cart, cycle rickshaw or on their head. They are small traders who move from one place to another to sell their products.

(2) Market traders: They are also small traders who sell their goods at different places on fixed days. For example, every Saturday or every Sunday in ‘Saturday market’ and ‘Sunday market’, etc. These traders deal in a single line of goods such as toys, ready made garments, fabrics, etc. They deal in low price, low quality goods. Hence, they cater to the needs of the lower income group.

(3) Street traders: They are also known as pavement traders. These retailers can be seen in areas having high population like bus stands, railway stations, etc. They deal in common use products, like newspapers, magazines, toys, stationary items, etc. They do not change their place of business frequently.

(4) Cheap jacks: They are small retailers who deal in consumer items. They have shops in business localities on a temporary basis. They change their business place from one locality to another on the basis of potentiality of the area.

Section – E (18 Marks)

Question 32.
Write a short note on e-business. [6]
OR
Indian Oil Corporation has taken initiative in providing clean drinking water, running child and maternity health centres, construction of school buildings, libraries and providing financial help to deserving students from poor and needy family through scholarship.
(i) Why do you think IOC needs to take such initiatives?
(ii) Identify two values upheld by IOC by discharging such activities.
Answer:
E-business, also known as electronic business, is the conduct of business on the internet. Its scope is not only confined to”buying and selling of products but also servicing customers and collaborating with business partners. In simple words, it can be defined as the administration of conducting business via internet. The activities of a business are as follows:
(1) Business to Business commerce.
(2) Consumer to Consumer commerce.
(3) Business to Consumer commerce.
(4) Intra-business commerce.

Indian Oil Corporation has taken initiative in providing clean drinking water, running child and maternity health centres, construction of school buildings, libraries and providing financial help to deserving students from poor and needy family through scholarship as it is fulfilling its social responsibilities like:
(1) To play a fair role in civic affairs.
(2) To provide and promote general amenities and help in creating better living conditions in general.
(3) To preserve and promote social and culture values.
(4) To undertake socially desirable projects relevant for the community as a whole.
(5) To take steps for developing backward areas. Two values upheld by IOC by discharging such activities:

Maintenance of society.
Holding business responsible for social problems.

Question 33.
What are the incentives provided by the government for small scale business? [6]
OR
Explain any six problems being faced by small business in India.
Answer:
The incentives provided by the government are as follows:
Land: Developed plots are offered by every state for establishing industries.
Power: Some states supply power at a concessional rate of 50%, while some give it free of cost during the initial years.
Water: Water is either supplied at 50% concession or is totally free for a period of 5 years.
Finance: Small business units are offered loans at a very low rate of interest i.e. 10 to 15% subsidy is given for building capital assets.
Raw material: Units located in backward areas get preferential treatment in the matter of allotment of scarce raw materials like cement, iron, steel, etc.
Octroi: Governments of states exempt industries from paying Octroi, which is in backward, hilly and tribal areas. Many states have abolished Octroi.

The following are the main problems faced by small businesses:

Finance: Non-availability of adequate funds in order to carry out business operations is one of the major problems of small businesses. Due to lack of credit worthiness, many of these units fail to raise funds from the capital market. Banks also hesitate to lend money to these units because many of these units fail to provide adequate collateral security or guarantees.

Raw materials: Obtaining good quality raw material is another important problem faced by these industries. They have to either compromise on the quality or have to pay a high price to get good quality materials. Bargaining power is relatively low because of the small quantity of purchases made by them.

Managerial skills: A small business is established and managed by a single individual. Hence, he/ she may not possess all the managerial skills needed to run the business. Due to shortage of funds, they cannot afford to employ professional managers.

Labour: Due to shortage of funds, these enterprises are not in a position to afford high salaries to the employees. As a result, the productivity per employee is low and the rate of labour turnover is high. Therefore, attracting talented and skilled employees is a major problem faced by these units.

Marketing: In many small scale units, marketing is a weak area. Direct marketing is not feasible for these units since they lack the necessary infrastructure. Hence, they have to depend on middlemen who sometimes exploit them by paying low prices and delaying the payments.

Sickness: Many of these units are becoming sick because of various internal and external problems. Lack of talented and skilled labour, and managerial and marketing skills are the various internal problems while delayed payments, inadequate loans, lack of demand for their products, etc. are various external problems faced by these units.

Question 34.
Sidhu wants to import machinery from Germany for manufacturing of automatic and high quality toys. Explain the initial six steps that he needs to take in order to perform import machinery. [6]
Answer:
The initial six steps that he needs to take in order to import machinery are:

(1) Obtaining I.E.C. No: Before starting the import procedure, he has to obtain an I.E.C. (ImportExport Code) number. This number is used in filling the formalities of import procedure. To get this number, he has to apply to the regional Import-Export Licensing Authority in the prescribed form.

(2) Obtaining Registration-Cum-Membership Certificate (RCMC): He will get various benefits in the form of subsidies and exemption in excise duty, tax, etc. To get these benefits, they have to show RCMC. After getting the I.E.C. number, he will apply for RCMC. The RCMC is issued by:
(a) Import Promotion Council.
(b) Federation of Indian Import Organisation.
(c) Import Development Authority, etc. Along with the application, he has to submit a bank certificate and IEC number. If the authority is satisfied, then they will issue RCMC.

(3) Opening a letter of credit: Letter of credit is issued by his bank in favour of the exporter. In this letter, the bank undertakes guarantee for making payment on his behalf. He will approach his bank and instructs the bank to issue a letter of credit in favour of the exporter. He will instruct the bank about the documents to be collected from the exporter before making the payment.

(4) Arrival of goods: Goods are shipped by the exporter as per his specifications. When goods reach the importer’s country, the captain of the ship informs the dock officer and instructs him to receive the goods and record the details about the goods on the document called Import General Manifest. This document gives all the details of imported goods.

(5) Informing importer: After the arrival of goods, the dock authorities inform the importer about the arrival of goods. The importer prepares a document called bill of entry, which contains details about the imported goods and submits this document to the customs officer to get custom clearance.

(6) Customs clearance: The customs officer i examines the bill of entry carefully and assesses the custom duty to be paid by the importer and after assessing the duty amount, the bill of entry is given to the appraiser officer who verifies the details given in the bill. If the appraiser officer is satisfied with the information given in bill of entry, then he returns the bill to the importer for making payment of custom duty.