Scales of Business – CS Foundation Business Environment Notes

Scales of Business – CS Foundation Business Environment Notes

Introduction:
1. Scale of business refers to size of the business.

2. “Enterprise means an industrial undertaking or a business concern or any other establishment by whatever name called, engaged in the manufacturing or production of goods, in any manner, pertaining to any industry specified in the 1st schedule to the Industries (Development and Regulation) Act, 1951 or engaged in providing or rendering of any service or services.”

3. Enterprises can be classified into following forms on basis of size of Industry, choice of the business activity; etc.

Micro Enterprises :

  • It is an enterprise engaged in the manufacturing or production of goods pertaining to any industries specified in the 1st schedule to the Industries (Development and Regulation) Act, 1951 where the investment in plant and machinery does not exceed 25 lakh rupees.
  • In case of enterprises engaged in providing or rendering of services, it is micro where investment in equipment does not exceeds 10 lakh rupees.
  • It is the most frequent form of business in developing countries.
  • It requires small amount of capital for its formation.
  • It is simple to operate.
  • It makes use of local product and skills.
  • It helps in creating jobs as it is labour intensive.
  • It uses micro loans or micro credit for its finance.
  • Owners of micro enterprises are known as entrepreneurs.
  • It is a catalyst for comprehensive community development.

It provides following advantages to the country’s economy :

  • Creates Jobs
  • Enhances income
  • Strengthens the purchasing power
  • Lower cost
  • Adds business convenience
  • Show most promise for sustainable development.

Small Scale Enterprises/Small Scale Industries (SSI)

  • Initially they were classified into those using power with less than 50 employees and those not using power with the employee strength being more than 50 but less than 100.
  • Plays a vital role in generating employment and increasing commercial activities.
  • These are organised on small scale, producing goods with the help of small machines, hired labour and power.
  • It is an enterprise engaged in the manufacture or production of goods pertaining to any industry specified in the 1st schedule to the Industries (Development and Regulation) Act, 1951, where the investment in plant and machinery is more than 25 lakh rupees but does not exceed 5 crore rupees.
  • In case of the enterprises engaged in providing or rendering of services. It is a small enterprise, where the investment in equipment is more than 10 lakh rupees but does not exceed 2 crore rupees.

They are of two types:

  • Traditional Small Industries
  • Modern Small Industries

Capital source investment on plant and machinery to differentiate from small scale and large scale or medium scale.

Traditional Small Industries:

  1. Highly labour intensive
  2. Cannot provide full time employment to workers
  3. Provides part-time employment to agricultural labour and artisans
  4. Example – Khadi, handloom, handicrafts, village industries etc.
  5. In 1979-80, it provided 56% of total employment and 74% of output.
  6. Handicrafts possess highest labour productivity. It also makes a significant contribution towards foreign exchange earning.

Modern Small Industries:

  1. It makes use of highly sophisticated machinery and equipment.
  2. Example – industries producing rubber products, chemical products, – hardware, electrical items etc.
  3. In 1979 – 80, it provided only 33% of total employment.

It plays following role in Indian economy:
(i) Production: It helps in growth of country’s economy. It contributes almost 40% of the gross industrial value added in the economy.

(ii) Employment generation: After agriculture, it creates the largest employment opportunities for the Indian people.

(iii) Export: It plays a major role in Indian exports. It contributes 45%- 50% to Indian exports. Directly it accounts for nearly 35% of total exports and indirectly around 15%.

(iv) Opportunity: It provides enormous opportunities due to following reasons :

  • Less capital intensive
  • Government support and promotion
  • Manpower training
  • Export promotion
  • Machinery procurement
  • Raw Material procurement
  • Growth in demand in the domestic market
  • Funding & Financing and subsidies
  • Reservation for exclusive manufacturers by S.S.I
  • Tooling & testing support

(v) Increasing export potential for domestic products: It has played a major role in increasing the export potential of various Indian products.

(vi) Welfare: It improves the welfare position of people in following ways:

  • It can be started by people of lower income group
  • Increases the people’s income level and standard of living
  • Reduces poverty
  • Promotes equal income distribution
  • Large proportion of income generated by these enterprises is distributed among workers

Large Scale Enterprises:

  • It means those industries which require huge infrastructure, manpower and have influx of capital assets.
  • It refers to industries with a fixed asset of more than 10 crore or 100 million rupees.
  • Due to the IT Boom IT companies are also included in large scale industry.
  • It uses both indigenous and imported technologies.
  • They cater both the local and foreign markets.
  • Example : iron and steel industry, textile industry, telecom industry, natural gas, mining, IT company etc.

Public Enterprises:

  • it refers to business organisation owned, managed and controlled by local, central or state government. Whole or most of the investment is made by government itself.
  • “Public enterprises are autonomous or semi autonomous corporations and companies established, owned and controlled by the state and engaged in industrial and commercial undertakings.”
  • It is not only managed by government it’s also controlled by them.
  • It is also known as Public Sector Enterprises.
  • Example : HMT – Hindustan Machine Tools GAIL – Gas Authority of India, etc.

These were required due to following reasons :

  • Private sector do not take interests in areas where –
  • gestation period is long
  • heavy investment is required
  • profit margin is low
  • Private sector prefer to set up their business in areas having certain natural advantages, thus leading to regional imbalances.

They possess the following characteristics:

  • Government control: They are owned, controlled, managed and financed by State or Central government.
  • Useful to various sectors: It serves people of ail sections of the community.
  • Autonomous or semi – autonomous organisation: They may either be under the direct control of government or established under any statute or act.
  • Providing service: It provides the people with essential commodities at most reasonable prices.
  • Monopoly enterprises: It does not involve private participation, thus enjoy monopoly in its operations.
  • Public accountability: They are liable to general public for their activities.
  • Direct channel for use of foreign money.
  • Agent for implementing government plans.
  • Financial independence.

Following forms are prevalent in India for public enterprises:
(i) Departmental Undertaking: These are directly managed by different government departments. It is established for providing essential public utility services.
Example : Posts and Telegraph, Railways etc.

(ii) Government Company: These are companies registered as joint stock under Indian Companies Act, 2013. It refers to company in which 51% or companies under more of paid -up capital is held by Central or State Government.
Example : Hindustan Machine Tools Ltd (HMT), Bharat Electronics Ltd. etc.

(iii) Statutory/Public Corporation: These organisations are established under special act passed by Parliament or State Legislature.
Example : Life Insurance Corporation of India (LIC), Union Trust of India (UTI).etc.
a. In 1947, there were 3 departmental enterprises :

  • Railways
  • Post and telegraphs
  • Defense production

b. Foundation of strong public enterprises in Indian economy was laid by our first Prime Minister Jawahar Lai Nehru. Other renowned personalities associated with this are :

  • Josip Broz Tito
  • Abdel Gamal Nasser

c. Presently number fo PSU’s have increased to 300 enterprises with a total investment of about 130 billion euros.

d. PSU’s account for nearly 20% of India’s gross national product (GNP). PSE’s contribute nearly 4% of total national savings.

e. Presently, PSE’s employs 1.9 million persons as compared to private sector which employs about 0.9 million persons only.

f. It provides a low rate of return on capital invested.

g. Government’s industrial policy was announced on 24th July, 1991. Following central PSEs were identified by Government as ‘Navratnas’ in July, 1997 :

  • BHEL – Bharat Heavy Electronics Limited
  • BPCL – Bharat Petroleum Corporation Limited
  • GAIL – Gas Authority of India Limited
  • SAIL – Steel Authority of India Limited
  • MTNL – Mahanagar Telecom Nigam Limited
  • ONGC – Oil and Natural Gas Corporation .
  • HPCL – Hindustan Petroleum Corporation Limited
  • IOC – Indian Oil Corporation
  • NTPC – National Thermal Power Corporation

h. In October, 1997 some other PSE’s were included in Navratnas, thus giving them as ‘Miniratnas’

i. BIFR : Board for Industrial and Financial Reconstruction is set up by government for the revival of sick and loss making enterprise.

j. In 2010, the government established the higher Maharatna category, which raises a company’s investment ceiling from ₹ 1,000 crore to ₹ 5,000 crore. The Maharatna firms can now decided on investments of up to 15 per cent of their net worth in a project while the Navaratna companies could invest up to ₹ 1,000 crore without explicit government approval. Two categories of “Miniratnas” afford less extensive financial autonomy.

Guidelines for awarding ratna status are as follow:

Maharatna Navaratna Miniratna Category-1 Miniratna Category-ll
Eligibility

 

 Three years with an average annual net profit of over ₹ 5,000 crore,
or
Average annual Net worth of ₹ 15,000 crore for 3 years. or Average annual Turnover of ₹ 25,000 crore for 3 years ₹ 1,000 crore ₹ 5,000 crore,
or
free to decide on investments up to 5% of their net worth in a project		 A score of 60 (out of 100), based on six parameters which include net profit, net worth, total manpower cost, total cost of production, cost of services, PBDIT (Profit Before Depreciation, Interest and Taxes), capital employed, etc., and A company must first be a Miniratna and have 4 independent directors on its board before it can be made a Navaratna. Have made profits continuously for the last three years or earned a net profit of ₹ 30 crore or more in one of the three years. Have made profits continuously for the last three years and should have a positive net worth.
Benefits for investment ₹ 1,000 crore ₹ 5,000 crore, or free to decide on investments up to 5% of their net worth in a project up to ₹ 1,000 crore or 15% of their net worth on a single project or 30% of their net worth in the whole year (not exceeding ₹ 1,000 crore). up to ₹ 500 crore or equal to their net worth, whichever is lower. up to ₹ 300 crore or up to 50% of their net worth, whichever is lower.

As on October, 2019 there are 10 Maharatnas, 14 Navaratas and Miniratnas in category 1 category 2

Note : From 1st December 2016 by an official notification, Government of India dissolved it and all proceeding to be referred to the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) as per provisions of insolvency and Bankruptcy Code.

Performance of Industry : 12th five year plan (2012-17) following schemes are:

  • National Automotive Testing and R&D Infrastructure Project (NATRIP).
  • Restructuring of PSEs under DHL
  • Jagdishpur; UP Paper Mill Project of Hindustan Paper Corporation Lmt. (H.P.C.)
  • Scheme for enhancement of competitiveness in Capital Goods Industry.
  • Schemes for North Eastern Region (HPC; NPPC; CCI & AXCL).

Multinational Corporation (MNC’s/Multinational Enterprise (MNE)

  • It refers to a corporation/enterprise which manages its production / delivers services in more than one country.
  • “MNC is a corporation that has its management headquarters in one country called home countries, and operates in several other countries, called host countries.”
  • These are large sized enterprises.
  • There world wide activities are centrally controlled by its parent company.
  • Example: MC Donalds, Honda, Toyota etc.
  • U.S.A. among the biggest MNCs country.

MNC’s can functions in three ways:

  • Headquarters is located in one nation while production facilities are located in one or more countries.
  • Parent company is situated in one nation while other operating subsidiaries in other countries
  • Headquarters is located in one country which looks after the wide conglomeration which stretch to several countries.

Reasons for growth of MNC’s can be as follows

  • Avoid trade barriers.
  • Low labour costs.
  • Reduce transport and distribution costs.
  • Securing supplies of raw material.

Following are the reasons why company extend into different country:

  • Reduce the transportation/distribution cost
  • Avoid custom duty/licensing
  • Meet different rules and regulation
  • Cost advantage- for example law labour cost
  • Secures supplies of raw material in market
  • Economic growth and Employment

Economy of any country receives following advantages from MNC:

  • Provides employment to people of host countries, thereby enabling economic growth.
    Generates new ideas and new technology which helps in improving the production quality, thereby improving the quality of human capital.
  • Provides the host country with availability of high quality goods and services at reasonable prices.
  • It contributes large amount to the government treasury of host country in form of huge taxes.
  • It invests in the infrastructure of host countries.

Advantages of MNC’s:

To Host Countries To Home Countries
  1. Raising the Investment Rate
  2. Accelerates Economic Growth
  3. Increases Exports and Reduces Imports
  4. Efficient Resource Utilisation.
  5. Support to enterprises of host countries
  6. Facilitates transfer of technology.
  7. Provides services of skilled professionals
  8. Benefits of Research & Development
  9. Increasing competition thus finishing monopolies
  1. Increased foreign exchange inflow
  2. International co-operation
  3. Promotion of Bilateral Trade Relations
  4. Optimum Resource Utilisatior

Disadvantages of MNC’s:

  • Provides costly, outdated and obsolete technologies
  • Charges heavy fees for their services.
  • Reckless utilisation of resources, leading to extinction of non – renewable resources.
  • Creates monopolies by acquiring control over markets of host countries.
  • Adverse effects on life style/culture of people.
  • They may avoid taxes by the way of transfer pricing.
  • Profit maximization being their main objective, harms the national interest of host country.
  • Interference in the economic and political systems of economy.
  • Causes brain drain in the developing countries
  • Develop monopolies which effect local market.

Multiple Choice Questions

Question 1.
Micro enterprises are the enterprises providing services, and where the investment in equipment exceeds 10 lakh rupees.
(a) True
(b) False
(c) Partly true
(d) Partly false
Answer:
(b) False

Question 2.
Scale of business involves determination of:
(a) Capital Requirement
(b) Business size
(c) Business production
(d) All of the above
Answer:
(d) All of the above

Question 3.
Micro enterprises are:
(a) Labor intensive
(b) Capital intensive
(c) Machine intensive
(d) Both (b) and (C)
Answer:
(a) Labor intensive

Question 4.
Traditional small industries provide:
(a) Full time employment
(b) Part time employment
(c) No employment
(d) All of the above
Answer:
(b) Part time employment

Question 5.
Handloom is an example of:
(a) Small scale enterprise
(b) Modern small scale enterprise
(c) Micro enterprise
(d) Traditional small scale enterprise
Answer:
(d) Traditional small scale enterprise

Question 6.
The agreement entered into by two countries in order to facilitate trade and removing restrictions is called _______.
(a) Liberal agreement
(b) Mutual agreement
(c) Co-operative agreement
(d) Bateral agreement
Answer:
(d) Bateral agreement

Question 7.
For the goods having artistic features _______ enterprise is preferred.
(a) Large scale
(b) Small stale
(c) Micro
(d) Very large scale
Answer:
(b) Small stale

Question 8.
Large scale business provides _______ economies.
(a) Internal
(b) External
(c) Both internal and external
(d) None of the above
Answer:
(c) Both internal and external

Question 9.
“Public corporations are autonomous or semi- autonomous corporations and companies established, owned and controlled by the state and engaged in industrial and commercial undertaking.”
This definition is given by:
(a) N.N. Malaya
(b) A.H. Hansom
(c) O.L. Rehan
(d) LV. Starke
Answer:
(a) N.N. Malaya

Question 10.
Public accountability and Government control are features of which type of enterprise:
(a) Micro
(b) MNC
(c) Large scale
(d) None of these
Answer:
(d) None of these

Question 11.
Which of the following is not a type of public sector enterprise?
(a) Departmental undertaking
(b) Statutory corporation
(c) Subsidiary of public enterprise
(d) Government company
Answer:
(c) Subsidiary of public enterprise

Question 12.
The advantages of MNC’s to the Home country include.
(a) Inflow of foreign exchange
(b) Promoting bilateral trade relations
(c) Both (a) and (b)
(d) Neither (a) nor (b)
Answer:
(c) Both (a) and (b)

Question 13.
Foundation of public enterprises in India was laid down by:
(a) Indira Gandhi
(b) Jawaha, Lai Nehru
(c) Dr. Rajendra Prasad
(d) S. Radha Krishnan
Answer:
(b) Jawaha, Lai Nehru

Question 14.
PSLI’s account for _______ of India’s GNP.
(a) 10%
(b) 20%
(c) 30%
(d) 40%
Answer:
(b) 20%

Question 15.
Government’s Industrial Policy was announced on _______.
(a) 24th July, 1990
(b) 24th July, 1997
(c) 24th July, 1991
(d) None of these
Answer:
(c) 24th July, 1991

Question 16.
Which of the following is not a ‘Navratna’?
(a) GAIL
(b) NTPC
(c) LIC
(d) BHEL
Answer:
(c) LIC

Question 17.
BIFR Means:
(a) Board for Indian financial Reserves
(b) Board for Industrial and Financial Resources
(c) Board for Industrial and Financial Reconstruction
(d) Board for International Fund Reserves
Answer:
(c) Board for Industrial and Financial Reconstruction

Question 18.
Following is/are the main characteristics of MNC’s :
(a) Large size
(b) World wide activities centrally controlled by parent Company.
(c) Both (a) and (b)
(d) None of the above
Answer:
(c) Both (a) and (b)

Question 19.
Which of the following is not a reason for MNC’s growth :
(a) Avoid trade barriers
(b) Increased labour cost
(c) Reduced transport cost
(d) None of the above
Answer:
(b) Increased labour cost

Question 20.
Advantages of MNC’s include:
(a) Employment Generation
(b) Economic Growth
(c) Efficient Resource Utilisation
(d) All of the above
Answer:
(d) All of the above

Question 21.
Basis for classification of Industries are _______.
(a) Size of Industry
(b) Nature of Business
(c) Choice of Business
(d) Both (a) & (b).
Answer:
(d) Both (a) & (b).

Question 22.
Population engaged in Micro enterprises produces non-monetary wealth for ________.
(a) Advertising
(b) Serving society
(c) Self consumption
(d) Sale.
Answer:
(c) Self consumption

Question 23.
Source of finance for Micro sector are-
(a) Micro loan
(b) Financial institution
(c) Formal source
(d) Informal source.
Answer:
(a) Micro loan

Question 24.
Capital requirement for Micro Enterprise should be (Service Producing) ________.
(a) Equipment not exceeding 10 lakh.
(b) Equipment not exceeding 12 lakh.
(c) Equipment not exceeding 25 lakh.
(d) Equipment not exceeding 01 lakh.
Answer:
(a) Equipment not exceeding 10 lakh.

Question 25.
Micro enterprise are intensive therefore create _______.
(a) Capital, profit
(b) Labour, job
(c) Technological, capital
(d) Capital, job.
Answer:
(b) Labour, job

Question 26.
Initially, Small scale Industry were classified on basis of ________.
(a) Number of employees
(b) Amount of capital
(c) Profit generating ability
(d) Power of production.
Answer:
(a) Number of employees

Question 27.
Small Scale Industries are classified into ________.
(a) Traditional, Modern
(b) Traditional, Ancient
(c) Modern, Ancient
(d) None of above:
Answer:
(a) Traditional, Modern

Question 28.
S.S.I contributes ________ of the gross industrial value added in the Indian economy.
(a) 80%
(b) 20%
(c) 90%
(d) 40%.
Answer:
(d) 40%.

Question 29.
Which of these is not an opportunity for SSI ________.
(a) Less Capital Requirement
(b) Finance & Subsidies
(c) Export Promotion
(d) State Control.
Answer:
(d) State Control.

Question 30.
Increasing export potential for Indian products enabled our country to achieve _______.
(a) Fashion Technology
(b) Information Technology
(c) Design Technology
(d) All the above.
Answer:
(d) All the above.

Question 31.
Which of the following is not the role of SSI in Indian Economy
(a) Employment Generation
(b) Export Barrier
(c) Tooling & Testing Support
(d) Improved Welfare Position.
Answer:
(c) Tooling & Testing Support

Question 32.
Large Scale Industry comprises of ________.
(a) Sophisticated Products
(b) Engineering Product
(c) Iron & Steel Industry
(d) All of the above.
Answer:
(c) Iron & Steel Industry

Question 33.
The public sector enterprises are owned by ________.
(a) Government
(b) Individual
(c) Society
(d) Public.
Answer:
(a) Government

Question 34.
Most of the investment done in PSE are by ________.
(a) Individual
(b) Private Body
(c) Government
(d) Non-Profit-organisation.
Answer:
(c) Government

Question 35.
The enterprises which are under monopoly of state enterprises are ________.
(a) Railway
(b) Post & telegraph
(c) Energy Production
(d) All of above.
Answer:
(d) All of above.

Question 36.
Characteristic of public enterprise to be responsible for nation denotes ________.
(a) Public Accountability
(b) Government Accountability
(c) Owner Accountability
(d) Ethics Accountability.
Answer:
(a) Public Accountability

Question 37.
Arranging day to day finance is the characteristic of ________.
(a) Private enterprise
(b) Public enterprise
(c) MNC
(d) Small scale industries.
Answer:
(b) Public enterprise

Question 38.
Statutory corporation is not created by Act of Government ________.
(a) False
(b) Partly True
(c) True
(d) Both
Answer:
(a) False

Question 39.
Government company refer to the company in which 51 % of ________ is held by the Government?
(a) Control
(b) Paid up capital
(c) Called up capital
(d) Unpaid capital
Answer:
(b) Paid up capital

Question 40.
Departmental enterprises comprises of ________.
(a) Railway, Telegraph, Defence
(b) Telecom, Railway, Defence
(c) Transport, Railway, Defence
(d) Network, Transport, Railway.
Answer:
(a) Railway, Telegraph, Defence

Question 41.
Person responsible for the collection of taxes on behalf of the Government are ________.
(a) Cashier
(b) Exchequer
(c) Manager
(d) Controller.
Answer:
(b) Exchequer

Question 42.
Which of them is a Navrafna’s of Government?
(a) IOD
(b) LOC
(c) IOC
(d) BOC
Answer:
(c) IOC

Question 43.
Which of them is not among the Navratna’s?
(a) HMT&LIC
(b) BHEL&GAIL
(c) MTNL&BPCC
(d) SAIL & ONGC.
Answer:
(a) HMT&LIC

Question 44.
LDC, stand for ________.
(a) Local development country .
(b) Less developments company
(c) Lack of developed company
(d) Less developed country.
Answer:
(d) Less developed country.

Question 45.
Which of them is not a merit of MNCs ________.
(a) Optimum utilization of resources
(b) Charge heavy fees
(c) Break monopolies
(d) Transfer of technologies.
Answer:
(b) Charge heavy fees

Question 46.
MNCs have their head quarters in more than ________ country/countries
(a) 1
(b) 2
(c) 4
(d) 6
Answer:
(a) 1

Question 47.
An enterprise engaged in production is a micro enterprise if the investment in Plant & Machinery does not exceed _______.
(a) 25 lakhs
(b) 1 Crore
(c) 50 lakhs
(d) None of the above
Answer:
(a) 25 lakhs

Question 48.
In India, a large scale enterprise refers to an enterprise in which investment in fixed assets is more than _______.
(a) 100 million
(b) 500 million
(c) 250 million
(d) 1000 million
Answer:
(a) 100 million

Question 49.
How many PSU’s are currently operating in India?
(a) 247
(b) 300
(c) 259
(d) 350
Answer:
(b) 300

Question 50.
How many companies in India are included in Miniratnas?
(a) 73
(b) 60
(c) 100
(d) 110
Answer:
(a) 73

Question 51.
Which of the following is not an advantage of MNC’s ________.
(a) It helps in generating tax revenues for the host
(b) It helps in generating employment opportunities
(c) Providing high quality goods
(d) Helps in development of backward areas
Answer:
(d) Helps in development of backward areas

Question 52.
BHEL, HPCL, NTPC, ONGC, SAIL are the examples of ________.
(a) Navratnas
(b) Miniratnas
(c) Swarnratnas
(d) Kohinoors
Answer:
(a) Navratnas

Question 53.
The contribution of PSU’s in the total national savings is ________.
(a) 4%
(b) 6%
(c) 1%
(d) 5%
Answer:
(a) 4%

Question 54.
The number of people currently employed in PSU’s in India are around _______.
(a) 1.9 million
(b) 3 million
(c) 4.8 million
(d) 5 million
Answer:
(a) 1.9 million

Question 55.
Which of the following statements is not true in respect of PSU’s?
(a) It has played a significant role in the Indian Economy
(b) The rate of return is high
(c) The total saving rate in PSU’s is nearly 35%
(d) The overall performance of most of the PSU’s is not satisfactory
Answer:
(b) The rate of return is high

Question 56.
Which of the following statement is true?
(a) The traditional small scale industries are labour intensive
(b) Modern small scale industries use highly sophisticated machinery and equipments
(c) Neither (a) nor (b)
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)

Question 57.
A corporate body created by Parliament or state legislature by a special Act defining its powers i.e. functions etc. is called ________.
(a) Departmental undertaking
(b) Government company
(c) Statutory corporation
(d) Public company
Answer:
(c) Statutory corporation

Question 58.
An organisation established for providing essential services like railway, postal services, broadcasting etc. is called _______.
(a) Statutory Corporation
(b) Departmental undertaking
(c) Public Company
(d) Government company
Answer:
(b) Departmental undertaking

Question 59.
A government company refers to a company in which _______ is held by the central or state government
(a) 51 % of authorised capital
(b) 51% of Subscribed capital
(c) 51% of nominal capital
(d) 51 % of the paid up capital
Answer:
(d) 51 % of the paid up capital

Question 60.
Life Insurance Corporation, State Trading Corporation etc. are the examples of ________.
(a) Statutory corporation
(b) Government company
(c) Departmental undertaking
(d) Public company
Answer:
(a) Statutory corporation

Question 61.
ONGC, BHEL, Hindustan Machine Tools Limited etc are the examples of ________.
(a) Statutory corporation
(b) Government company
(c) Departmental undertaking
(d) None of the above
Answer:
(b) Government company

Question 62.
The country in which the headquarters of MNC are located is called ________.
(a) Host country
(b) Home country
(c) Principle country
(d) None of the above
Answer:
(b) Home country

Question 63.
The foreign country in which the MNC operates its business is called as ________.
(a) Host Country
(b) Home Country
(c) Foreign country
(d) None of the above
Answer:
(a) Host Country

Question 64.
Bringing credits savings and other essential services to the poor is called ________.
(a) Poor Finance
(b) Micro Credit
(c) Micro Finance
(d) Both (b) & (c)
Answer:
(d) Both (b) & (c)

Question 65.
Which one of the following is true about micro enterprises?
(a) Labour intensive
(b) Capital intensive
(c) Technology intensive
(d) None of the above
Answer:
(a) Micro enterprises refers to enterprises where the investment in plant and machinery does not exceed 25 lakh rupees. These enterprises require small amount of capital for its formation. Moreover, it helps in creating jobs as it is labour-intensive.

Question 66.
Which one of the following is a key in the firm’s growth phase?
(a) Increase in scale
(b) Increase in profit
(c) Increase in capital
(d) All of the above
Answer:
(d) Increase in firms scale, capital and profit all will result in firms growth. Increase in scale refers to the increase in production. Increase in capital also means firms factors of production. Moreover, increase in firm’s profits will result an increase in firms overall growth.

Question 67.
In which year was the new economic policy ushered that gave a new direction to Indian economy?
(a) 1993
(b) 1989
(c) 1991
(d) 1985
Answer:
(c) To improve the performance of the public enterprise, Government of India has taken several measures. On 24th July, 1991 the Government of India announced its industrial policy to improve the j performance and portfolio of public sector enterprises.

Question 68.
Which of the following is not true about the purpose of a business?
(a) Earning profit
(b) Supply of goods and services
(c) Creating job opportunities
(d) Performing sovereign functions
Answer:
(d) Business is an organisation in which organised production and exchange of goods and services are undertaken with a view to earn profits. It can also be referred as process of organising all the steps that are required to be undertaken for establishment of relationship between men, material and machinery in order to carry on business efficiently.

Thus, business is carried on for the purpose of:

  • Earning profit
  • Supplying goods and services
  • Creating job opportunities

Question 69.
The definition of Micro, Small and Medium Enterprises (MSMEs) in India is based on:
(a) Total sales of the unit
(b) Investment in machines and equipments
(c) Market coverage
(d) Export turnover
Answer:
(b) The definition of Micro, Small and medium enterprise in India is based on investment in machines and equipments. Under Micro Enterprise Investment in Plant and machinery does not exceed 25 Lakh rupees while Investment in equipment does not exceed 10 Lakh rupees. In small enterprises investment in P&M is more than 25 Lakh while Investment in equipment does not exceeds 2 crore.

Question 70.
The abbreviation ‘BIFR’ with reference to sick companies in India means:
(a) Board for Indian Financial Reserves
(b) Board for Industrial and Financial Resources
(c) Board for Industrial and Financial Reconstruction
(d) Board for International Fund Reserves
Answer:
(c) The government has taken every step to revive and restructure the public sector enterprises to improve their performance, productivity and profitability for sick companies in India, the enterprises are referred to Board for Industrial and Financial Reconstruction to prepare appropriate revival or rehabilitation package.

Note : From 1st December 2016 by an official notification, Government of India dissolved it and all proceeding to be referred to the National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) as per provisions of insolvency and Bankruptcy Code.

Question 71.
Which one of the following is a push factor influencing the internationalisation of a company?
(a) Difficulty in finding skilled staff in the home country
(b) The need to be close to key resources
(c) Low-cost labour in other countries
(d) Financial incentives from governments in emerging markets.
Answer:
The following are some reasons to expand into different countries:

  • Reduce transport and distribution cost.
  • Avoid trade barriers.
  • Meet different rules and regulations.
  • Secure supplies of raw material or market.
  • Cost advantage-e.g. low labour cost.

Thus low labour cost in other countries is one of the push factor influencing the inter nationalisation of a company.

Question 72.
Foundation of public enterprises in India was laid down by:
(a) Indira Gandhi
(b) Jawaharlal Nehru
(c) Dr. Rajendra Prasad
(d) Dr. S. Radhakrishnan
Answer:
(b) The foundation of the strong public enterprises, particularly the goods producing section in the Indian economy was firmly laid by our Prime Minister Jawahar Lai Nehru who was also inspired and supported by the Josip Aiigned movement.

Question 73.
Transfer pricing litigations are generally related to _______.
(a) Domestic Companies
(b) Multinational Companies
(c) Public Enterprises
(d) Statutory Authority.
Answer:
(b) Multinational Companies have various disadvantages associated with it one of which is – Transfer pricing enables MNC’s to avoid taxes by manipulating prices in the case of intra-company transactions. Thus, Transfer pricing litigations are generally related to Multinational Companies.

Question 74.
Coca-Cola is an example of:
(a) MNC
(b) Indian Company
(c) Foreign Company
(d) None of these
Answer:
(a) Coca Cola is an example of MNC. MNC refers to a corporation / enterprise which manages its production / delivers services in more than one country.

Question 75.
________ is responsible for revival of Public Sector Enterprises.
(a) NTPC
(b) NCLT
(c) BRPSE
(d) MNC
Answer:
(c) BRPSE : Boards for reconstruction of Public Sector Enterprises. Established in December, 2004 as advisory body to advise the Government on the strategies, measures and schemes related to strengthening, modernizing, reviving and restructuring of public sector enterprises.

Question 76.
Microsoft is a:
(a) Indian Government Company
(b) Multinational Company
(c) Statutory Corporation
(d) Public Limited Company
Answer:
(b) Multinational Corporation is a corporation that manages production or delivers services in more than one country. Microsoft is also a Multinational Company.

Question 77.
Advantages of multinationals to home countries are _______.
(a) Ensure optimum utilisation of resources
(b) Promote bilateral trade relations
(c) Promote global Co-operations
(d) All of the above
Answer:
(d) Advantages of Multinational to home countries are:

  • Facilitate Inflow of Foreign Exchange
  • Promote Global Co-operations
  • Ensure Optimum Utilization of Resources
  • Promote Bilateral Trade Relations

Question 78.
For the goods having artistic features size of enterprise is preferred.
(a) Small scale
(b) Large scale
(c) Corporation
(d) Very large
Answer:
(a) Traditional as small scale industries includes goods having artistic features like Khadi handloom, village industries handicrafts, sericulture, coin etc.

Question 79.
Which is not a criterion for defining small business?
(a) Usually employs fewer people
(b) Is Geographically localised
(c) Is considered smaller in relation to competitors
(d) Financed by a large number of investors.
Answer:
(d) An Industrial unit can be categorised as a small scale unit if it fulfills the capital investment limit fixed by the Government of India for small scale sector. The investment in plant & machinery is more than 25 lakhs but does not exceeds 5 crores and the number or investors ar-e limited.

Question 80.
Push factors for locating a business includes:
(a) Availability of skilled labour
(b) Rising competition in an area
(c) Government support
(d) Technological advancement
Answer:
(a) Push factors for locating a business includes availability of skilled labour, availability of raw materials etc.

Question 81.
The size and structure of business depends on many factors which (are):
(a) Arbitrary and random
(b) In the control of enterprises
(c) Range from internal to external factors which are beyond the control of enterprises
(d) Beyond the control of enterprises
Answer:
(c) The size and the structure of business depends on many factors which range from internal to external factors which are beyond the control of the enterprises.

Question 82.
Which of the government agency look after the industrial sick unit?
(a) BRPSE
(b) BIFR
(c) IDBI
(d) All are applicable
Answer:
(b) BIFR looks after Industrial sick units. The government has taken every step to revive and restructure the public sector enterprises to improve their performance, productivity and profitability for sick companies in India. The enterprises are referred, to Board for Industrial and financial reconstruction (BIFR) to prepare revival or rehabilitation package.

Note : From 1st December 2016 by an official notification, Government of India dissolved it and all proceeding to be referred to the National Company Law Tribunal (NCLT) and National, Company Law Appellate Tribunal (NCLAT) as per provisions of insolvency and Bankruptcy Code.

Question 83.
MNCs have their head quarters in more than countries/country.
(a) 6
(b) 2
(c) 4
(d) None of these
Answer:
(d) Multi National Corporation (MNC) or Multi National Enterprise (MNE) is a corporation enterprise which has its headquarters in one country and manages production or delivers services in more than one country.

Question 84.
What is the full form of SSI?
(a) Small scale industries
(b) Small scale enterprises
(c) Large scale enterprises
(d) Public enterprises
Answer:
(a) Full form of SSI is Small Scale Industries.

Question 85.
A public sector enterprise is suitable for:
(a) Fierce competitive projects
(b) High capital intensive projects
(c) Low capital intensive projects
(d) Low technology intensive projects
Answer:
(b) Public sector enterprise is suitable for high capital intensive projects as it denotes “state ownership and operation of industrial, agricultural, financial and commercial undertakings”. It is thus liable to the general public for their performances. It helps to reduce regional imbalances altogether.

Question 86.
Handicraft industry is a:
(a) Heavy capital intensive industry
(b) Medium/small scale industry
(c) Technical industry
(d) Macro industry.
Answer:
(b) Handicraft industry is a medium/small scale industry which are organised on a small scale and produce goods with the help of small machines, hired labour and power. Traditionally these industries are highly labour-intensive.

Question 87.
A Multinational Corporation (MNC) operates in:
(a) More than 1 country
(b) More than 5 countries
(c) More than 10 countries
(d) More than 2 countries.
Answer:
(a) A multinational corporation or multinational enterprise is a corporation that manages its production or delivers its services in more than one country.

Question 88.
A Multinational Corporation (MNC) operates in:
(a) More than 2 countries
(b) More than 10 countries
(c) More than one country
(d) More than 5 countries
Answer:
(c) Multinational Corporation refers to a corporation which manages its production/delivers services in more than one country. It has its management quarters in one country called home country and operates in several countries called host countries.

Question 89.
A(n) ________ is a group of firms producing a similar product or service, such as soft drinks, electronic games or computers.
(a) Cluster
(b) Division
(c) Sector
(d) Industry
Answer:
(d) In modern economies, there are dozens of industry classifications, which are typically grouped into larger categories called sectors, with individual companies being classified into an industry based on their largest sources of revenue. Thus, an industry is the group of firms producing a similar products and services.

Question 90.
Modern small-scale units are:
(a) Labour intensive
(b) Material intensive
(c) Technology intensive
(d) Capital intensive
Answer:
(c) Small scale enterprises are organized on the small scale, producing goods with the help of small machines, hired labour and power but in the modern small scale units, it makes the use of highly ‘ sophisticated machinery and equipment.
Example: Industries producing rubber products, chemical products etc.

Question 91.
The process under which profits go back to the head quarters of the MNC, rather than staying in the host country is called:
(a) Remittance of profits
(b) Transferring of profits
(c) Sending of profits
(d) Repatriation of profits
Answer:
(d) The word Repatriation means return of money back to ones’ own country. The process of sending profits back is called Repatriation of profit.

Question 92.
The definition of Micro-Small and Medium Enterprises (MSMEs) in India is based on:
(a) Total sales of the unit
(b) Investment in machines and equipments
(c) Market coverage
(d) Export turnover
Answer:
(b) Definition of Micro-small and medium enterprises based on ‘Investment in plant and machinery and its equipment’ in India.

In Micro enterprises, investment does not exceed 25 lakh rupees. In case of small enterprises, investment is more than 25 lakh rupees but not exceed five crore rupees. In medium enterprises, investment is more than 5 crores rupees but not more than 10 crore rupees.

Question 93.
Which of the following is a Push Factor influencing the internationalisation of a company?
(a) Difficulty in finding skilled staff in the home country
(b) The need to be close to key resources
(c) Low cost Labour in other countries
(d) Financial incentives from governments in emerging markets.
Answer:
(c) Factors influencing the internationalisation of a company:

  • Reduce transportation costs and distribution costs
  • Avoid trade barriers
  • Meet different rules and regulations
  • Secure supplies of raw materials / markets
  • Cost advantages – i.e Law Labour costs
  • Economic growth and employment
  • Advantages of MNCs Hence, Option (C) is Correct.

Question 94.
Foundation of public enterprises in India was laid down by:
(a) Indra Gandhi
(b) Jawaharlal Nehru
(c) Dr. Rajendra Prasad
(d) Dr. S. Radhakrishnan.
Answer:
(b) The foundation of public enterprises particularly the goods producing sectors in Indian economy was firm laid down by our first prime minister Jawahar Lai Nehru who was also inspired and supported by Josip Broz Tito and Abdul Qamal Nasser.

Question 95.
Which one of the following is true about Investment Cost per Job?
(a) Investment costs per Job are high in large and medium industries.
(b) Investment costs per job are high in small industries.
(c) Investment costs per job are high in micro enterprises.
(d) Investment costs per job are higher in micro enterprises than small scale enterprises.
Answer:
(a) Investment Costs per job are low in Micro enterprises but high in large and medium enterprises.

Question 96.
Full form of MNC _______.
(a) Mega Nurturing Corporates
(b) Mega National Corporations
(c) Multinational Corporations
(d) None of these
Answer:
(c) MNC: Multinational Corporations.

Question 97.
NCLT given a delay period for filing _______.
(a) of 10 days
(b) of 100 days
(c) of 900 days
(d) of 90 days
Answer:
(d) NCLT given a delay period for filing of 90 days

Question 98.
BRPSE stands for:
(a) Board of Reconstruct Private Sector Enterprises
(b) Board for Reconstruction Public Sector Enterprises
(c) Board for Remuneration Partition and Serve Enterprises
(d) None of these
Answer:
(b) BRPSE: Board for Reconstruction Public Sector Enterprises.

Question 99.
Transfer pricing litigations are generally related to:
(a) Domestic Companies
(b) Multinational Companies
(c) Public Enterprises
(d) Statutory Authority
Answer:
(b) Multinational companies have various disadvantages associated with it, one of which is that transfer pricing enables it to avoid taxes by manipulating prices in case of intra-company transactions. Thus, transfer pricing litigations are generally related to multinational companies.

Question 100.
Trade between Home country to foreign country?
(a) Multinational country
(b) International
(c) Bilateral country
(d) None
Answer:
(a) Multinational corporations (MNCs) are key agents transforming the international political and economic landscape. Because they are highly visible organisations with great power and mobility, they inspire both awe and fear.

Question 101.
The capital market intermediaries act as a link between?
(a) Investors and issuers
(b) Investors and regulators
(c) Regulators and issuers
(d) Regulators, investors, issuers
Answer:
(d) In the context of capital market, capital market intermediaries are an important constituents of overall governance framework. Being an important link between regulators, investors and issuers, therefore expected to ensure that their internal control are so efficient that ensure effective investor service at all times.

Question 102.
Maharatna involves _______.
(a) NTPC
(b) ONGC
(c) SAIL
(d) All of the above
Answer:
(d) Maharatna involves 7 companies are:

  • NTPC
  • ONGS
  • SAIL
  • BHEL
  • IOCL
  • CIL
  • GAIL

Question 103.
Which of the following are included in traditional small industries.
(a) Khadi and Handloom
(b) Sericulture
(c) Both ‘A’ and ‘B’
(d) None
Answer:
(c) Traditional small industries involved Khadi and Handloom and sericulture as they are more labour intensive.

CS Foundation Business Environment and Law Notes