CBSE Sample Papers for Class 11 Business Studies Set 3 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 11 Business Studies with Solutions Set 3 are designed as per the revised syllabus.

CBSE Sample Papers for Class 11 Business Studies Set 3 with Solutions

Time Allowed: 3 Hours
Maximum Marks: 80

General Instructions:

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

1. Section – A contains Questions 1 to 20 carrying 1 mark each.
2. Section – B contains Questions 21 to 25 carrying 3 marks each. Answers to these Questions may be in about 50 to 75 words.
3. Section – C contains Questions 26 to 28 carrying 4 marks each. Answers to these Questions may be in about 120 words.
4. Section – D contains Questions 29 to 31 carrying 5 marks each. Answers to these Questions may be in about 150 words.
5. 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.
Manufacturing industries create which utility? [1]
(A) Form
(B) Place
(C) Time
(D) Possession
Answer:
(A) Form

Explanation: Manufacturing industry creates form utility by changing the form of materials into finished goods.

Question 2.
Global enterprises have certain disadvantages. Which of the following is incorrect in the light of this statement? [1]
(A) Gives rise to the growth of monopolies.
(B) Always concentrate on selling items desirable for developing countries.
(C) Leads to concentration of power in few hands.
(D) Concentrates more on selling consumer goods and luxury items.
Answer:
(B) Always concentrate on selling items desirable for developing countries.

Question 3.
Which of the following does not indicate the nature of services? [1]
(A) Involvement
(B) Inseparability
(C) Indifference
(D) Intangibility
Answer:
(C) Indifference

Explanation: Services are heterogeneous. They are very diverse and varied.

Question 4.
NGO providing free education to slum dwellers. Which type of service is being provided by NGO? [1]
Answer:
Social Service

Question 5.
People working for others and getting paid in the form of salaries is an example of economic activity. (True/False) [1]
Answer:
True

Explanation: Employment is an economic activity in which people work for others and get paid in the form of salaries.

Question 6.
It involves discovering of new ideas and taking an initiative to form a company. What stage to form a company is being explained in the above lines? [1]
Answer:
Promotion

Explanation: Promotion is the first stage in the formation of a company. Promotion involves conceiving a business idea and taking an initiative to form a company so that practical shape can be given by exploiting the available business opportunity.

Question 7.
Debentures are a source of raising _______ finance. [1]
(A) Long-term
(B) Medium-term
(C) Short-term
(D) None of the above
Answer:
(A) Long-term

Explanation: Debentures are an important instrument for raising long-term debt capital. A company can raise funds through issue of debentures, which bear a fixed rate of interest.

Question 8.
Which of the following is true about Global Enterprises? [1]
(A) They use passive marketing strategies to increase their sales.
(B) They do not engage in highly sophisticated research and development.
(C) They are generally small in size.
(D) They have an impact on the international economy as well as local economy.
Answer:
(D) They have an impact on the international economy as well as local economy.

Question 9.
A lot of small businesses in India are largely sick units. Which of the following is an internal cause leading to sickness and closure of such units? [1]
(A) Delayed payment
(B) Shortage of working capital
(C) Lack of skilled and trained labour
(D) Lack of demand for their products
Answer:
(C) Lack of skilled and trained labour

Question 10.
Which of the following is incorrect regarding the features of a Chain Stores or Multiple Shops? [1]
(A) Networks of retail shops
(B) Run by the same organisation
(C) Have different merchandising strategies, with different products and displays
(D) Established in populous localities spread over different parts of the country
Answer:
(C) Have different merchandising strategies, with different products and displays

Explanation: Chain stores or multiple shops are networks of retail shops that are owned and operated by manufacturers or intermediaries. Under this type of arrangement, a number of shops with similar appearance are established in localities, spread over different parts of the country. These different shops normally deal in standardised and branded consumer products, which have rapid sales turnover. These shops are run by the same organisation and have identical merchandising strategies, with identical products and displays.

Read the following and answer Q.11- 14 on the basis of the same.

Mr. Mehra is working at the post of General Manager in AU Small Finance Rajasthan. He is transferred to Hyderabad. So he sold his old sofa, and bed through OLX. In Hyderabad, he bought a new sofa and small bed of his choice according to the space of the room placing online order to Godrej Furniture. On receiving the delivery of the items, he found colour defect in the sofa so he filed an online complaint with customer care cell of Godrej Furniture. The head of customer grievances cell forwarded this complaint mail to the Marketing manager and Production manager for further action. In enquiry, it was found that M/s Touchwood Furniture Dealers, distributor of Godrej Furniture in Hyderabad made the ‘default on delivery’ while taking online order from Godrej Furniture for making delivery to its online customers.

Question 11.
‘So he sold his old sofa, and bed through OLX.’ Identify in the type of business model involved in the transaction mentioned here. [1]
(A) Business to Customer
(B) Business to Business
(C) Customer to Customer
(D) Customer to Business
Answer:
(C) Customer to Customer

Explanation: Consumer-to-consumer, or C2C, is the business model that facilitates commerce between private individuals.

Question 12.
_______ he found colour defect in the sofa so he filed an online complaint with customer care cell of Godrej furniture.” Identify the type of e-business model involved in transaction mentioned here. [1]
(A) Business to Customer
(B) Business to Business
(C) Customer to Customer
(D) Customer to Business
Answer:
(D) Customer to Business

Explanation: Consumer-to-business (C2B) is a business model in which consumers (individuals) create value and businesses consume that value.

Question 13.
“The head of customer grievances cell forwarded this complaint mail to the Marketing manager and Production manager for further action.” Identify the scope of e-business mentioned in this case. [1]
(A) Customer to Customer
(B) Business to Business
(C) Intra B
(D) Customer to Business
Answer:
(C) Intra B

Explanation: Intra b-commerce refers to the business which takes place between the people of the same firm.

Question 14.
“M/s Touchwood Furniture Dealers, distributor of Godrej Furniture in Hyderabad made the ‘default on delivery’ while taking online order from Godrej furniture for making delivery to its online customers.” Identify the limitation of e-business stated here. [1]
(A) Lack of personal touch
(B) Time-consuming
(C) Risk arising due to anonymity and no traceability of parties
(D) Fraudulent trading
Answer:
(C) Risk arising due to anonymity and no traceability of parties

Question 15.
Identify the source of finance which does not cost anything to the company? [1]
(A) Retained earning
(B) Preference shares
(C) Debentures
(D) None of the above
Answer:
(A) Retained earning

Explanation: Part of earnings or profit that is not distributed to the shareholders as dividends is known as retained earnings.

Question 16.
Which of the following fixed shop small retailers sell rare objects of historical value and antique items at heavy prices to people who have special interest in such antique goods : [1]
(A) Second-hand goods shop
(B) Speciality shops
(C) General stores
(D) Street stallholders
Answer:
(A) Second-hand goods shop

Explanation: These shops deal in second-hand or used goods, like books, clothes, automobiles, furniture and other household goods. Generally persons with modest means purchase goods from such shops. The goods are sold at lower prices. Such shops may also stock rare objects of historical value and antique items which are sold at rather heavy prices to people who have special interest in such antique goods.

Question 17.
FDI (Foreign Direct Investment) denotes which type of foreign investment? [1]
(A) Only portfolio investment
(B) Only direct investment
(C) Both direct and portfolio investment
(D) None of these
Answer:
(B) Only direct investment

Question 18.
These shareholders do not get the right to participate in the annual meeting of the company but get the preferential right for the payment of dividend. Name the type of shareholders that are being mentioned in the above lines. [1]
Answer:
Preference shareholders

Question 19.
Which of the following indicates entrepreneurship? [1]
(A) Setting up one’s own business
(B) Pursuing employment
(C) Practicing profession
(D) All of these
Answer:
(A) Setting up one’s own business

Explanation: Entrepreneurship is the process of setting up one’s own business as distinct from pursuing any other economic activity, be it employment or practising some profession. The person who set-up ‘his business is called an entrepreneur.

Question 20.
DGFT stands for which of the following? [1]
(A) Director General for Foreign Transaction
(B) Director General for Foreign Trade
(C) Director General for Foreign Treaty
(D) None of these
Answer:
(D) None of these

Explanation: The correct full form is Directorate General of Foreign Trade.

Section – B (15 Marks)

Question 21.
Mr. Rajesh is head of the family. He is taking care of the family business. He has the absolute power of taking business decisions and his decisions are binding on the other members. Once he took a wrong decision of buying new equipment which soon got-obsolete and the business suffered the heavy loss.
(i) Identify the form of business organisation and explain its two limitations.
(ii) What are the options available to coparceners to avoid this situation?
OR
Identify the merits or limitations of sole proprietorship hidden in the quoted lines:
(i) “The sole proprietor can easily change the size of the business.”
(ii) “All the profits of the business belong to the sole proprietor.”
(iii) “Inability of the owner to manage all the activities of business himself. [3]
Answer:
(i) Joint Hindu Family business
Limitations of JHF are:
(a) Dominance of Karta: The Karta individually manages the business and takes all the decision and coparceners can’t go against his decision.
(b) Unlimited Liability: If the business fails, the creditors, can recover their dues not only from the business assets but also from the personal assets of karta.
(ii) If the coparceners are not satisfied with the performance of Karta, with the mutual consent of members business can be terminated.

OR

Merits of Sole Proprietorship:
(i) Ease of formation and dissolution: The sole proprietorship is the simplest form of business ownership. There is hardly any formality involved in setting up this type of organisation. This ownership organisation is not governed by any special Act.

(ii) Sole claim on profits: The sole trader is the only person to whom the profits belong. This always acts as a stimulant to personal incentive.

(iii) Limitations of Sole Proprietorship: Limited managerial skills: She/He must rely upon his/her own skills and judgment in managing the business. Few proprietors have all of the management skills required for financing, marketing purchasing, supervising personnel, and related functions. Not only does this limit the size of the business, but it also contributes to the relatively high rate of failure among sole proprietorships.

Question 22.
Services are those separately identifiable, essentially intangible activities that provide satisfaction to the consumers. In context to business, how can you define services? [3]
Answer:
In the context of business, services are separately identifiable as services differ from marketer to marketer and experience of each customers also differs. Services are essentially intangible activities that provide satisfaction as these are the actions or deeds of the marketer to create value desired by Customers Services may be defined as all those economic activities that are intangible and imply an interaction between the service provider and the consumer to create satisfaction. Business services include banking, insurance, transportation, warehousing, communication, etc.

Question 23.
Explain any two auxiliaries to trade. [3]
Answer:
Following are the important auxiliaries to trade:

Transportation and communication: Production of goods generally takes place in particular location, But these goods are demanded for consumption in different parts of the country. This hindrance of place can be removed by transportation—road, rail or coastal shipping, etc. In the same way, the hindrance of information is removed by communication. Communication helps in exchange of information between producers, consumers and traders.

Banking and finance: Banks and financial institution provide credit facility to provide finance for smooth flow of business activities. Other facilities like collection and deposit of cheques, issue of bank draft, discounting of bills of exchange, etc. are also provided by banking institutions.

Insurance: Risk is inherent in business. The insurance sector provides protection from some of the risks faced by business. These risks mainly include theft, burglary, fire, accident, etc.

Warehousing: Goods are not consumed immediately when these are produced. Usually there is a time gap between production and consumption of goods as special arrangement has to be made to store the goods to prevent the loss to goods and to keep them fresh. Warehousing helps the businessman to overcome the problem of storage by creating time utility.

Question 24.
Mohan and Seema are husband and wife. Seema has taken a life insurance policy. She died accidentally but Mohan is making regular payment of premium. Will be get the amount policy in the end? Why? [3]
Answer:
The husband will get compensation from the insurance company, because in the case of a life insurance policy, the insurable interest must be present at the time of taking policy. If the husband is making regular payment of premium, then he will get the compensation for the death of his wife.

Question 25.
Explain any three merits of trade credit. [3]
Answer:
The merits of trade credit are as follows:

Simplicity: The operation of trade credit method is very simple. It requires just an understanding of the seller of items required by a buyer who wants to avail trade credit.

No charge on assets: Trade credit facility is available without creating any charge on the assets of the company. Thus, it increases creditworthiness.

No extra financial burden: Trade credit is available without any interest. Interest is charged only in the case of delay in payment of trade credit.

Section- C (12 Marks)

Question 26.
Despite of limitations of size and resources, many people continue to prefer sole proprietorship over other forms of organisation. Why? [4]
Answer:
Despite of limitations of size and resources, many people continue to prefer role proprietorship over other forms of organisation because of the following advantages of this form of organisation:

Quick decision making: A sole proprietor enjoys considerable degree of freedom in making business decisions.

Confidential and secrecy: Sole decision making authority enables the proprietor to keep all the information related to business operations confidential and maintain secrecy. A sole trader is also not bound by law to publish the firm’s accounts.

Direct incentive: A sole proprietor directly reaps the benefits of his/her efforts as he/she is the sole recipient of all the profits.

Sense of accomplishment: There is a personal satisfaction involved in working for oneself. The knowledge that one is responsible for the success of the business not only contributes to self-satisfaction but also instils a sense of accomplishment and confidence in one’s abilities.

Question 27.
Ishu and Neeti two fashion designers from Delhi decided to sell their designer outfits to rich market segment by providing them facility of customizing the outfits as per their needs. So they made a website ‘myfashion.com’ as they don’t want to spend too much finance on operating retail outlet in a costly market. Sooner they started getting good response not only from Delhi but also from other cities like Mumbai, Jaipur, etc.
(i) Name and state the form of business highlighted above by quoting the lines.
(ii) Highlight any two advantages of the above form of business.
OR
Aarav Ltd., an enterprise, is registered in USA and has its business operation of production, marketing, etc. in many countries. Its headquarter is located in USA which exercises control over its branches and subsidiaries in various countries. The company employs trained and professional managers. To face international competition it uses sophisticated technology that leads to greater productivity and better quality.
(i) Identify the type of enterprise.
(ii) Explain three features of the enterprise identified above in by quoting lines from the above case. [4]
Answer:
(i) The form of business highlighted above is ‘e-business’ Lines – “They made a website myfashion.com costly market”.

(ii) Advantages of e-business:
(a) Ease of formation and lower investment requirements: Unlike a host of procedural requirements for setting up an industry, e-business is relatively easy to start. The benefits of internet technology accrue to big or small business alike. In fact, internet is responsible for the popularity of the phrase ‘networked individuals and firms are more efficient than networthed individuals’.
(b) Convenience: Internet offers the convenience of 24 hours, 7 days a week, 365 days a year business that allows shopping well after midnight.

OR

(i) The type of enterprise is Global enterprise/MNCs.
(ii) The four features of Global enterprises with lines quoted are:
(a) Line – ‘It’s business operation of production, marketing, etc. in many countries.’
Feature —> International operation – An MNC operates in more than one country. It has its branch factories, offices in several counties. It operates through a network of branches and subsidiaries in host country.

(b) Line – Its headquarter is located in USA which exercises control over its branches and subsidiaries in various countries.
Feature —> Centralised control – The branches of MNCs spread in different countries are controlled and managed from the headquarters located in their home country. All the branches operate within the broad policy framework of the parent company. There is no interference in day-to-day operations.

(c) Line – ‘The company employs trained and professional managers.’
Feature —> Professional Management —> An MNC employs professional experts, trained, specialised human resources and keep updating their knowledge and skills by imparting training from time to time to handle the advancements in technology.

(d) Line – ‘To face —— better quality’
Feature —> Advanced Technologies —> These enterprises posses technological superiorities in their methods of production so that they can conform to international standards and quality specifications with their innovative techniques of production that help them to come out of a place in global markets.

Question 28.
Explain the role of small business in India with emphasis on rural India. [4]
Answer:
The role of small business in rural India are as follows.

Employment opportunities: Cottage and Rural Industries create a lot of employment opportunities in the rural areas especially for the traditional artisans and the weaker sections of the society.

Prevents migration: Establishment of these Industries in the rural areas prevent migration of rural population to urban areas in search of employment.

Reduces Inequalities: Cottage and rural industries help in reducing inequalities in Income, disparity in development of industries and establish link with other sectors of the economy.

Mobilisation of Local Resources: Small businesses facilitate mobilisation and utilization of local resources which might remain undesired or under-employed. Small industries provide ample opportunities for entrepreneurship development specifically in rural areas.

Section – D (15 Marks)

Question 29.
Mr. Kumar is one of the promoters of Rock Industrial Ltd. The company has been incorporated, and now, steps are being taken to invite subscription to its shares from the public. Mr. Kumar insisted that they provide true and fair information in the document that they prepare for the purpose.
(i) At which stage of formation of a public company are the above steps taken?
(ii) Name the document that will be prepared by the company.
(iii) Also, state any two functions performed by Mr. Kumar.
(iv) Also, explain the position of promoters in relation to a company. [5]
Answer:
(i) At capital subscription stage.
(ii) The document to be prepared by Mr. Kumar is ‘Prospectus’.
(iii) Two functions performed by Mr. Kumar are:
(a) Preparation of necessary documents which have to be submitted under the law, to the Registrar of the companies for getting the company Registered.
(b) Fixing up signatories to MOA and appointment of profession such as mercantile bankers, auditors, etc. to assist the promoter in preparation of required documents as per the law.
(iv) Position of promoters: Promoters undertake various activities to get a company registered and get it to the position of commencement of business But, they are neither the agents nor the trustee of the company. They enjoy a fiduciary position with the company which they must not misuse.

Question 30.
Differentiate between Departmental stores and Chain stores on any five basis. [5]
OR
What are the services offered by retailers to consumers?
Answer:

S.No	Basic	Departmental store	Chain-store/multiple stores
(i)	Location	A departmental store is located at central place where a large number of customers can be attracted to it.	Multiple store/chain stores are located at a number of places for approaching a large number of customer.
(ii)	Range of product	These stores carry a variety of products of different types to satisfy all the needs of customers under one roof.	The multiple store aims to satisfy the requirements of customers relating to a specified range of their products only.
(iii)	Service offered	Departmental stores lay great emphasis to their customers like alternation of garments/restrooms, restaurants etc.	Multiple shops provide very limited services confined to guarantee and repairs it the sold goods turnout to be defective.
(iv)	Pricing	The departmental stores do not have uniform pricing policy for all the departments; rather they have to change it occasionally	The multiple chain shops sell goods at fixed and maintain uniform pricing policy for all the shops.
(v)	Class of customer	These stores cater to the needs of relatively high income group of customers who care more for the services provided instead of the prices of goods.	These chain stores cater to different types of customers including lower income groups who are interested in buying quality goods at reasonable price.
(vi)	Credit facilities	Departmental stores may provide credit facilities to some of their regular customers.	Multiple shops make all sales strictly cash basis. No credit facilities allowed to the customers.

OR

Services to Consumers:
Ready or quick supply: The most important service of a retailer to consumers is to maintain regular availability of various products so that the buyers can buy the products whenever they need.

Wide variety: Retailers generally keep a stock of variety of products and from different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.

Guiding customers: By arranging the effective display of products and through their personal selling efforts, retailers should provide the information of products to the customers.

Demonstration and after-sale services: It can be done in the form of home delivery, supply of spare parts and attending to customers.

Home delivery: It is an important part of after sale services and for a buyer, decision for repeat purchase of the products.

Question 31.
Raj has recently completed his MBA in international business from IIM-A. He is now planning to start his own international business. His father advised him to take into consideration the limitation of international business, before investing huge money. Suggest any five limitations of international business to Raj.
OR
Explain the meaning of the following documents used in connection with import transactions. [5]
(i) Trade enquiry
(ii) Import license
(iii) Shipment advice
(iv) Import general manifest
(v) Bill of entry
Answer:
The main problems in international business are as follows:

Distance barrier: International business is carried across the borders of the country. When the markets are far moved by distance, the transportation cost becomes high and the delivery time tends to become longer. As a result, there is an increase in cost of product.

Differences in language: An international businessman often encounters the problems arising out of differences in language. Even when the same language is used in different countries, the same words or terms may have different meanings.

Cultural differences: Cultural differences constitute one of the most important problems in international business. Many domestic markets, are not free from cultural diversities.

Political and legal differences: Political and legal differences also act as a major hurdle in international business. The complexity generally increases as more countries are included in the company’s portfolio.

Difference in currency: The currency varies from nation to nation. This may cause problems of exchange rate fluctuations and currency convertibility. The monetary system and regulations may also vary from nation to nation.

Economic differences: The economic environment may change from country to country which is a major hurdle in international business.

OR

(i) Trade enquiry: It is a written request made by an importing firm to the overseas supplier for providing information regarding the price and various terms and conditions for exporting goods.

(ii) Import license: In India, certain goods can be imported freely, while for others, it is compulsory to obtain an import license. Importers can refer the Export-Import Policy to know whether license is needed or not. In case license is mandatory for the given goods, then the importer must obtain license from the licensing authority.

(iii) Shipment advice: It is a document sent by the exporter to the importer in order to inform the importer that the shipment of goods has been made. Shipment advice provides details about
invoice number, bill of lading, name of the vessel, the port of export, etc.

(iv) Import general manifest: It is a document which provides complete details regarding the imported goods. The unloading of the cargo takes place on the basis of this document.

(v) Bill of entry: It is an application form supplied by the customs office to the importer. At the time of receiving the goods, the importer has to fill in three copies of this form and submit the same to the customs office. It contains information such as name of ship, number of packages, marks on the packages, name and address of the exporter, etc.

Section – E (18 Marks)

Question 32.
John has outsourced the manufacture of its products to plants in other countries and faced a lot of criticism for operating in low wages countries where child labour is common. Discuss any five social responsibilities each, that should be followed towards employees and society. [6]
Answer:
The responsibilities of a business towards employees are as follows:
(i) To provide them fair wages and full employment.
(ii) They should be provided good working conditions.
(iii) They should be provided suitable opportunities of advancement.

The responsibilities of business towards the society are as follows:
(i) Maximum utilisation of natural resources.
(ii) To provide maximum employment opportunities.
(iii) To preserve social and cultural values.

Question 33.
Rajesh is the CEO of GALA trading company. In a board meeting it has been decided to modernize the plant and machinery of the entire company for better production. The estimated cost for the new setup is ? 5 crore. State the merits and demerits of issuing equity shares for this purpose.
OR
Surya company, an LED lights manufacturing company has good growth prospects. The owners of the company are planning to expand their business. For this, the company needs additional funds. The finance manager reports that the company is not in a position to bear extra burden of paying any fixed financial charges like interest or dividend. They do not want to bear any flotation costs even. Also, the equity shareholders insist not to issue further shares as there is risk of dilution of control.
(i) Suggest the source of finance most suitable for the company.
(ii) Enumerate any three merits and two demerits of the source of finance identified in part. [6]
Answer:
Three merits and three demerits of issuing equity shares:

Merits:
(i) Permanent capital: Equity shareholders provide the permanent funds of the company as there is no fixed commitment to return the money or pay a fixed rate of dividend.
(ii) No charge on assets: For issue of equity shares; a company is not required to mortgage its assets. This increases credit worthiness of the company.
(iii) No financial risk: Payment of dividend to the equity shareholders is not compulsory. Therefore, there is no financial burden on the company.

Demerits:
(i) Risk of fluctuating Return: Investors who want steady income, may not prefer equity shares as equity shares get fluctuating returns.
(ii) Legal formalities: More formalities and procedural delays are involved while raising funds through issue of equity shares.
(iii) Cost involved: The cost of equity shares is generally more as compared to the cost of raising funds through other sources.

OR

(i) The most suitable source of finance is ‘Retained Earnings’.
(ii) Merits of Retained Earnings:
(a) Most dependable source: Retained earnings is a permanent and dependable source of funds to an organization as it is an internal source.
(b) Economic source: It does not involve any explicit cost in the form of interest, dividend or flotation cost.
(c) No dilution of control: As the funds are generated internally so there is a greater degree of operational freedom and flexibility.
Demerits of Retained Earnings:
(a) Overcapitalization: Large amount of retained earnings results in issue of bonus shares to equity shareholders. Frequent capitalization of reserves may result in over capitalization.
(b) Dissatisfaction among shareholders: Excessive ploughing back may cause dissatisfaction among equity shareholders, as they do not receive higher rate of dividend.

Question 34.
(i) Name the organization set up on 1 January, 1995 replacing the GATT.
(ii) Where is its headquarter?
(iii) Explain its benefits.
OR
Explain the benefits of international trade to countries and firms. [6]
Answer:
(i) World Trade Organisation (WTO).
(ii) Its headquarter is situated at Geneva, Switzerland.
(iii) Major benefits of WTO are:
(a) WTO helps to promote international peace and facilitates international business/trade to flow smoothly and truly.
(b) Makes Rules regarding to make international trade and relations very smooth and predictable.
(c) It settles disputes between member nations with mutual consultation.
(d) Helps in economic growth of developing countries by giving them preferential treatment in trade-related matters.
(e) Free Trade helps in providing quality products and improving the living standard of people by increasing the income.

OR

Benefits of International Trade to Firm:

Prospects for higher profits: As compared to domestic business, international business can be more profitable. Business firm can earn higher profits by selling their products in countries where prices are high, particularly when the domestic prices are not satisfactory.

Prospects for growth: Business firms with saturated demand for their products in the domestic market can improve their prospects of growth by entering into foreign markets. This is the prime reason which has prompted many of the multinational companies from the developed countries to tap market of developing countries.

Way out to intense competition in domestic market: The only way to significant growth in intense competition in domestic market is internationalization. Hence, international business acts as a catalyst of growth for business firms facing a tough competition in the domestic market.

Benefits of International Trade to a Country:

Earning of foreign exchange: International business helps a country to earn foreign exchange, which it can later use for meeting its imports of capital goods, technology, petroleum products and fertilisers, pharmaceutical products and a host of other consumer products which otherwise might not be available domestically.

More efficient use of resources: International business operates on a simple principle, Produce what your country can produce more efficiently and trade the surplus production so generated, with other countries to procure what they can produce more efficiently. If such an enhanced pool of goods & services is distributed equally amongst nations, it benefits all the trading nations.

Increased standard of living: In the absence of International trade of goods and services, it would not have been possible for the community to consume goods and services produced in other countries that the people in these countries are able to consume and enjoy a higher standard of living.