CBSE Sample Papers for Class 11 Business Studies Set 7 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 11 Business Studies with Solutions Set 7 are designed as per the revised syllabus.

CBSE Sample Papers for Class 11 Business Studies Set 7 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.
Since the main objective of business is to earn profits, which of the following is not an appropriate method of earning profits? [1]
(A) Selling good quality products at reasonable prices
(B) Inflating the prices
(C) Selling low-quality products at low prices
(D) All methods are appropriate
Answer:
(B) Inflating the prices

Question 2.
B2B commerce i.e. business to business involves e-commerce transactions between business firms using Electronic Data Interchange (EDI) technology (True/False) [1]
Answer:
True

Question 3.
Which of the following is false regarding equity shares: [1]
(A) Funds raised through equity shares are known as ownership capital
(B) Equity shareholders do not get a fixed dividend
(C) Equity shareholders receive what is left after all other claims on the company’s income and assets have been settled
(D) Liability of equity shareholders is unlimited
Answer:
(D) Liability of equity shareholders is unlimited

Explanation: Equity share capital is a prerequisite to the creation of a company. Equity shareholders do not get a fixed dividend but are paid on the basis of earnings by the company. They are referred to as residual owners’ since they receive what is left after all other claims on the company’s income and assets have been settled. They enjoy the reward as well as bear the risk of ownership. Their liability, however, is limited to the extent of capital contributed by them in the company.

Question 4.
Debentures represent: [1]
(A) Fixed capital of the company
(B) Permanent capital of the company
(C) Fluctuating capital of the company
(D) Loan capital of the company
Answer:
(D) Loan capital of the company

Explanation: Debentures are an important instrument for raising long-term debt capital. A company can raise funds through the issue of debentures, which bear a fixed rate of interest. The debenture issued by a company is an acknowledgment that the company has borrowed a certain amount of money, which it promises to repay at a future date.

Question 5.
_______is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and Startups in the country. [1]
Answer:
Startup India

Question 6.
In the eyes, of_______the proprietorship and the owner are considered one and the same. [1]
Answer:
law

Question 7.
It involves an element of voluntary action on the part of business people for the benefit of society. Name the term that is being mentioned in the above lines. [1]
Answer:
CSR (Corporate Social Responsibility).

Question 8.
Goods are_______in nature and services are_______in nature. [1]
(A) Heterogeneous, Homogenous
(B) Homogenous,’ Heterogeneous
(C) Heterogeneous, Heterogeneous
(D) Homogeneous, Homogenous
Answer:
(B) Homogenous,’ Heterogeneous

Explanation: Goods are physical things and involve production thus, goods are homogenous in nature. Services are more like a process thus, services are heterogeneous in nature.

Question 9.
“It is a document that contains the rules regarding the internal management of a company.” What document is being explained in the above lines? [1]
Answer:
Articles of Association

Question 10.
Which of the following utilities are provided by the wholesalers: [1]
(A) Only time utility
(B) Only place utility
(C) Both time and place utility
(D) Neither time nor place utility
Answer:
(C) Both time and place utility

Explanation: Wholesalers provide various services to manufacturers as well as retailers and provide immense help in the distribution of goods and services. By making the products available at a place where these are needed and at a time when these are needed for consumption or use, they provide both the time and place utility.

Question 11.
_______business involves manufacturing and trade beyond the boundaries of one’s own country. [1]
Answer:
International

Question 12.
_______may be defined as conducting of activities industry, trade, and commerce through the computer network. [1]
Answer:
e-business

Question 13.
_______pollution occurs when the air contains harmful substances such as gases, fumes, dust, and odor in harmful amounts which causes damage to living organisms. [1]
Answer:
Air

Question 14.
Which shareholder gets a rate of dividend out of the net profits of the company before any dividend is declared for equity shareholders. [1]
Answer:
Preference shareholder

Question 15.
National Small Industries Corporation (NSIC) was established in which year? [1]
Answer:
1955

Question 16.
Automatic vending machine (AVM) is a machine operated by coins or tokens. (True/False) [1]
Answer:
True

Read the following passage and answer Q.No. 17-20 on the basis of the same.
Mr. Krishna Kumar is a businessman, dealing in confectionery items. His marketing strategy and quality control system have enabled him to create a niche market for his products. He has opened an account with PNB and every day he makes a number of transactions, both deposits and withdrawals to conduct his business smoothly. Sometimes he even withdraws more than the balance available in his account. But he doesn’t earn any interest on this account. Apart from this account, he has opened Recurring Deposit Account also in which he deposits 10,000 monthly. He believes that money should not be kept idle, rather it should be invested in productive channels as money begets money.

Question 17.
“He has opened an account with PNB and every day he makes a number of transactions, both deposits, and withdrawals.” Identify the bank account stated in the above line. [1]
(A) Savings Account
(B) Fixed Deposit Account
(C) Current Account
(D) Demat Account
Answer:
(C) Current Account

Explanation: Current deposit Accounts are opened by businessmen. The account holder can deposit and withdraw money whenever desired. As the deposit is repayable on demand, it is also known as a demand deposit.

Question 18.
The Current Account holders enjoy the facility of withdrawing more than the balance in their Account. Name the facility mentioned here. [1]
(A) Overdraft facility
(B) Cheque facility
(C) Demand draft facility
(D) None of these
Answer:
(A) Overdraft facility

Explanation: This facility is provided to the customer who maintains a current account with the bank. That customer takes permission from the bank to withdraw more money than deposited in his account. The extra amount withdrawn is called an overdraft. This facility is available to trustworthy customers for a small period.

Question 19.
Which of the following Bank Accounts is a non-interest-bearing bank account? [1]
(A) Savings Account
(B) R.D. Account
(C) Fixed Deposit Account
(D) Current Account
Answer:
(D) Current Account

Explanation: No interest is paid on current accounts. Rather charges are taken by the bank for services rendered by it.

Question 20.
Which account should be opened by Mr. Krishna Kumar, if he wants to enjoy the benefits of both Savings and Fixed Deposit Account? [1]
(A) Multiple Option Deposit Account
(B) Demat Account
(C) R.D. Account
(D) Current Account
Answer:
(A) Multiple Option Deposit Account

Explanation: It is a type of saving Bank A/c in which a deposit in excess of a particular limit gets automatically transferred into a fixed Deposit. On the other hand, in case adequate fund is not available in our saving Bank Account so, as to honor a cheque that we have issued the required amount gets automatically transferred from the fixed deposit to the saving bank account. Therefore, the account holder has twin benefits from this amount (i) he can earn more interest, and (ii) It lowers the risk of dishonoring a cheque.

Section- B (15 Marks)

Question 21.
Identify and explain an economic activity which is conducted by a person having special knowledge and special skills which is used to serve different sections of society. [3]
OR
How are economic activities different from non-economic activities?
Answer:
(i) Profession is an economic activity that requires special knowledge and skill to be applied by individuals for earning their living.
(ii) Those who offer specialized personal services are professionals.
(iii) These professionals have to follow the guidelines or codes of conduct laid down by professional bodies.

OR

Basic	Economic Activities	Non-Economic Activities
Meaning	Activity performed to earn livelihood.	That activity which is performed out of love, sympathy, sentiments, patriotism, etc.
Purpose	Undertaken to earn money and satisfy physiological needs.	Undertaken to satisfy psychological or emotional needs.
Types	Business, profession and employment.	Social responsibility, religious responsibility, personal satisfaction etc.

Question 22.
Write a short note on Health Insurance. [3]
Answer:
Under this insurance policy, medical expenses of illness and disability are covered by the Insurance. Depending upon the policy, the premium may be payable either in lump sum or in installments. Health insurance usually provides either direct payment or reimbursement for expenses associated with illness and injuries. It is a contract of indemnity as the insured can claim on the basis of medical expenses.

Question 23.
State the functions of insurance. [3]
Answer:
(1) Protection: Insurance provides protection against risk of loss due to an uncertain reason. It provides a sense of security in the minds of the businessmen. Therefore, they can concentrate more on important business decisions in order to increase profitability.
(2) Distribution of risk: Insurance is an arrangement pooling risk. Insurance spreads the risk over a large number of persons who contribute premium, which is used to compensate the person suffering loss.
(3) Specialisation: Insurance deals with making the losses of the concerned good. So, security is provided to the businessman as a result he can perform better by concentrating on the core issues of the business necessary for its growth, development and expansion.

Question 24.
Briefly explain the incentives provided by government for industries in backward and hilly areas. [3]
Answer:
Rural, Backward and Hilly areas (Incentives):
(1) Priority Financing: Under this scheme, commercial banks provide loans on priority basis to industries falling under priority sector. Commercial banks are required to meet financing needs of priority sector by reserving specified amount of loanable funds for this sector. Besides commercial banks, co-operative banks, regional rural banks, KVIC and State Financial Corporation advance loans to small business operating in rural, backward and hilly areas on priority basis.
(2) Lower Interest Rates and Easy Repayment of Loans: Loans provided to priority sector attract lower interest rates along with easy installments of loan repayment as compared to loans advanced to other sectors.
(3) Provision of Land and Industrial Sheds: Government provides land and industrial sheds for industrial purpose at concessional rates.

Question 25.
Write a short note on trade credit. [3]
Answer:
Trade credit is the credit extended by one trader to another for the purchase of goods and services. Purchase of supplies is affected without actual payment immediately. In the records of buyers (to whom credit is given) credit appears as ‘Accounts Payable’ or ‘Sundry Creditors’. Trade credit is given to those customers who have good financial standing and goodwill. The amount and time period of credit depends upon the degree of competition in the market, volume of purchases, past record of payment, financially position of seller and reputation of the purchasing firm.

Section – C (12 Marks)

Question 26.
Ishika is having a degree of hotel management and an experience of 5 years working with Hotel Oberoi. She has a keen desire to start a hotel of her own. Few days back she saw a hotel which was on sale. The hotel was on a highway and had good business potential but needed renovation. She fixed a meeting with the property owner and finalised the deal for ₹ 25 lakh, she sat down to prepare a business plan and realised that to start off her own business. She will need funds not only to finance the purchase but also to run the business.

She will need additional ₹ 10 lakh to renovate the hotel and ₹ 5 lakhs as bank balance to meet day today expenses. She checked her bank balance and could organise only 10 lakhs out of personal saving. She met the bank manager to find out how bank could help to arrange the required funds. Bank manager was ready to give her loan of ₹ 15 lakh against hotel ownership papers as security for ten years. Her two friends Shivani and Shreya readily agreed to provide the funds required but would like to be partner in the business. On the basis of information given above answer the following questions. [4]

(i) Name the type of capital required to meet day-to-day expenses.
(ii) What type of capital Ishika requires to buy the hotel?
(iii) State any four limitations of borrowing from bank.
(iv) If she gives ownership rights to her two friends in her business with limiting their liabilities to the extent of their investment made, which source of fund she has used here?
(v) What will be the nature of return on capital employed given to Shivani and Shreya who are also the owners of Ishika’s hotel?
Answer:
(i) Working capital
(ii) Fixed capital or long-term capital
(iii) Limitations of borrowings from banks are: High financial risk, charge on assets, fixed financial obligation to pay interest, and contractual constraints.
(iv) She has used equity shares to raise the funds. Giving ownership rights to her friends.
(v) Shivani and Shreya will get a ‘Dividend’ which is uncertain in nature (depending on the profits of the business) as a return on their capital employed.

Question 27.
Suggest a method in which government can promote infrastructural development in the country with the active participation of the private sector. Also, enumerate three features of such partnership.
OR
What is meant by departmental undertaking? State its two merits. [4]
Answer:
I would suggest for Public-Private Partnership.
The features of PPP are as follows:
(1) It is a contractual relationship between government and private sector organizations for implementing a project for public benefit.
(2) PPP is confined to a particular project for a specific area like its operation, maintenance or management.
(3) Selection of the private partner is done by the government through competitive bidding or competitive negotiations.

OR

Departmental undertakings are those public sector enterprises that are part of the government only having no separate entity and which function under the overall control of one of the ministries of central or state government For e.g., Railways, Defence, etc.
The merits are:
(1) Effective control of Parliament: These undertakings ensure effective control over their operations by the parliament. Annual reports of the undertakings are laid on the table of both houses of the parliament. Hence, Parliament can effectively ensure the efficiency of these undertakings.
(2) Public accountability: These undertakings are established for some specific work of the ministry. Sometimes government reviews the working of these undertakings through government audits. Hence, they provide a high degree of public accountability.

Question 28.
Raj wants to start a new business. He is well aware of the nature and causes of business risks but does not know anything about the methods of dealing with these risks. Tell him the methods of dealing with these risks. [4]
Answer:

• He should decide not to enter into too risky transactions.
• He should take preventive measures like insurance policies to transfer risk to insurance companies.
• He should create provisions for bad debts and make reserves out of profits.
• He can share risks with other enterprises e.g., by agreeing to share losses that are caused by falling prices.

Section – D (15 Marks)

Question 29.
“Earning of profit cannot be the objective of business any more than eating is the objective of living. A person cannot survive for a long-time and cannot lead a healthy life only by eating. A person has to perform other activities also such as social activities, religious, and patriotic activities. Similarly, a business with the sole objective of earning a profit cannot survive for a long-time to capture a big share in the market to create goodwill, to have durable profits; a businessman must have social and individual objectives of the business.”
(i) In the context of the above discussion, state any four social and individual objectives of the business.
(ii) State any two reasons other than those mentioned in the paragraph why profit is a requirement of the business. [5]
Answer:
(i) Social objectives:

• Supply of desired quality of products.
• Avoidance of unfair trade practices.
• Employment generation.
• Social service or community service.

Personal or individual objectives:

• Providing good working conditions.
• Payment of competitive and satisfactory wages and salaries.
• To provide various financial and non-financial incentives in order to motivate the workers.
• To provide opportunities for personal growth and development of employees.

(ii) Profit is required in the business for:

• Expansion and growth: When profit is large, a part of it can always be reinvested for expansion or diversification of production and other operations.
• An index of performance: Profits indicate whether a business is being managed efficiently or not. Higher profits indicate the efficiency of management and lower profits indicate the inefficiency of management. The success of a business can be judged by its ability to earn profit.

Question 30.
State the difference between departmental stores and multiple stores.
OR
Discuss any five types of small retailers. [5]
Answer:

Basis	Departmental Stores	Multiple Stores
Location	These are located at central place to attract customers.	These are located at number of places to attract customers.
Range of products	They provide wide range of products under one shed.	They provide specified range of their products only.
Services offered	They provide number of services to the customers like saloons, restaurant, to satisfy their customers.	They provide limited services only like exchange of defective goods, repairs etc.
Pricing	They do not have policy of fixed prices; even they have different discounts occasionally.	They have to follow single pricing policy set by head office.
Credit facilities	They may provide credit facility to their regular customers.	There is no chance of providing goods & services on credit.

OR

The different types of small retailers are as follows:
(1) General stores: These stores deal in a large variety of products required to satisfy the day-to-day requirements of the customers. They are found in a local market and residential areas. These stores remain open for long hours and provide convenience to the consumers buying goods of daily use such as stationery items, grocery items, toiletries, biscuits, etc. They also provide credit facilities to their regular customers.
(2) Specialty shops: These shops deal in specific line of products like shoes, toys, gifts, children’s garments, electronic goods, etc. Such shops are becoming very common, particularly in urban areas. In order to attract a large number of customers, these shops are centrally located.
(3) Street stall holders: These are small retailers generally found at places having heavy flow of population, such as street crossings, main roads, etc. They deal in low quality goods like toys, hosiery products, etc. They carry business operations at a very limited space.
(4) Second-hand goods shop: These retail shops deal in second-hand or used goods like automobiles, furniture, books, etc. They cater to the needs of people having limited means. The price of the goods sold by them is generally low. Sometimes, these shops deal in antique items or goods having historical value. In such a case, they charge high price from customers having special interest in such goods.
(5) Single line stores: These stores deal in a single product line such as watches, shoes, tyres, ready made garments, books, etc. These stores are centrally located and keep a wide variety of items of the same line.

Question 31.
What are the different documents related to payment in International business?
OR
When did WTO come into existence? Mention the functions performed by it giving new dimensions to world trade. [5]
Answer:
The different documents related to payment are as follows:
(1) Letter of credit: It is a guarantee letter issued by the importer’s bank stating that it will honor the export bills to the bank of the exporter up to a certain amount. It is the most appropriate and secure mode of payment.
(2) Bill of exchange: It is a written document whereby the person issuing it directs the other party to pay a specified amount to a certain person or the bearer of the instrument. In export and import transactions, the exporter draws the bill on the importer asking him to pay a specified amount to a certain person or the bearer of the instrument. The documents required by the importer for claiming the title of exported goods are passed on to him only when the importer accepts the bill.

OR

WTO came into existence with effect from 1st January 1995, as a successor of GATT having 159 members now to promote and to facilitate international trade among the member countries and to overcome various restrictions and discriminations.
GATT was the outcome of the Bretton woods conference for the same purpose which remained in force till December 1994. GATT governs trade in goods only but WTO as the successor of GATT is wider in scope governing trade not only in goods but also in services and intellectual property rights.
The major functions of WTO include:
(1) Promoting an environment that is encouraging its member countries to come forward to WTO in mitigating their grievances.
(2) Laying down a commonly accepted code of conduct with a view to reducing trade barriers including tariffs and eliminating discrimination in international trade relations.
(3) Acting as a dispute settlement body.
(4) Supervising the operations of the revised Agreements and Ministerial Declarations relating to goods services and TRIPS on a regular basis.

Section – E (18 Marks)

Question 32.
What advantages does the issue of debentures provide over the issue of equity shares?
OR
Discuss the factors affecting the choice of a suitable source of funds. [6]
Answer:
The following advantages are provided:
(1) The ownership of the Company is not divided by issuing debentures, while more equity share issue means more divisions of the ownership of the company.
(2) Debenture holders do not become the owner of the company means the owners of the company are free to take their own decisions,while equity shares increase the number of owners of the company.
(3) Debentures bear a fixed rate of interest means more profit is enjoyed only by a few owners while more issue of equity shares means distribution of profit in more owners.
(4) Tax deduction is applicable on the interest of debentures, while the dividend on equity shares is not a tax-deductible source.

OR

The following are the factors affecting the choice of source of funds:
(1) Cost: It refers to the cost incurred in obtaining the funds and the cost of using the funds. So, while deciding about the source of funds, both the costs should be taken into consideration.
(2) Flexibility and ease: Borrowings from banks and financial institutions involve many restrictions, detailed investigation and documentation. Therefore, the business firms may not prefer them in case other sources are easily available.
(3) Effect on creditworthiness: The creditworthiness of business is affected by the use of certain sources. For example The issue of secured debentures by a company may lead to the withdrawal of loans by unsecured creditors. It might become difficult for the company to raise further unsecured loans.
(4) Form of organization and legal status: The form of legal status of business firms also affects the choice of a source of finance. For example A sole proprietor or a partnership firm cannot obtain funds by issuance of equity shares as these can be issued only by Joint Stock Companies.
(5) Purpose and time period: The time period for which the funds are required also affects the selection of the source of funds. For example: if the funds are required for short period, sources such as trade credit, commercial papers, etc. can be used. For the long term, sources such as issues of shares, debentures, etc. are preferred. So, the purpose of the business should also be considered before choosing the source of finance.
(6) Tax benefits: Certain sources of funds like debentures and loans provide tax benefits. The interest payable on them is tax deductible. Hence, the organization seeking tax advantage prefers to raise funds through debentures or loans.

Question 33.
Differentiate between internal trade and external trade on the following basis :
(i) Meaning
(ii) Countries Involved
(iii) Risk
(iv) Currency
(v) Procedure
(vi) Mode of Payment
OR
Discuss the four points of ‘importance of International Business’ to firms. [6]
Answer:

Basis of difference	Internal trade	External trade
(i) Meaning	Internal trade refers to buying and selling of goods within the geographical limits of a country	External trade refers to buying and selling of goods beyond the geographical limits of a country
(ii) Countries Involved	Only one country is involved.	Minimum two countries are involved.
(iii) Risk	Less degree of risk is involved.	High degree of risk is involved.
(iv) Currency used	Payments are made and received in home currency only.	Payments are made and received in foreign currency only.
(v) Procedure involved	No long procedures or formalities to be completed before starting.	Long procedures and many formalities to be completed before starting.
(vi) Mode of Payment	Payments are made by cash or cheque.	Payments are made through bill of exchange or through banks.

OR

‘Importance of International Business’ to firms is as follows:
(1) Increased capacity utilization: Generally, the firms whose products have good demand in the domestic market, set up high production the capacities for their products by planning for overseas expansion too. With the help of orders from foreign customers, they can think of making use of their surplus production capacities and hence earn higher profits.
(2) Prospects for higher profits: As compared to domestic business, international business can be more profitable. Business firms can earn higher profits by selling their products in countries where prices are high, particularly when the domestic prices are not satisfactory.
(3) Prospects for growth: Business firms with saturated demand for their products in the domestic market improve their prospects of growth by entering into foreign markets. This is the prime reason which has prompted many of multinational companies from developed countries to tap the markets of developing countries.
(4) Way out to intense competition in the domestic market: The only way to achieve significant growth in intense competition in domestic market is through internationalization. Hence, the international business acts as a catalyst of growth for business firms facing tough competition in the domestic market.

Question 34.
Jack has outsourced the core activity i.e., manufacturing of its products to plants in other countries to get the advantage of lower cost due to the availability of cheap labor. But there. Child labor was common due to which he faced a lot of criticism for operating in low wages countries. Discuss any five social responsibilities that should be followed by the government and consumers. [6]
Answer:
Social responsibility towards Consumers:

1. Supply of the right quantity and quality of goods and services.
2. Reasonable prices.
3. Proper precaution against adulteration, poor quality, and lack of the desired service.
4. Right to information about the product and the company.

Social responsibility towards Government and Community:

1. Respect the laws of the country.
2. Pay taxes honestly.
3. Protect the natural environment.
4. Continuous interaction with various groups of people.