SAMPLE QUESTION PAPER - 2

Business Studies (054)

Class XI (2024-25)

Time Allowed: 3 hours Maximum Marks: 80

General Instructions:
1. This question paper contains 34 questions.
2. Marks are indicated against each question.
3. Answers should be brief and to the point.
4. Answers to the questions carrying 3 marks may be from 50 to 75 words.
5. Answers to the questions carrying 4 marks may be about 150 words.
6. Answers to the questions carrying 6 marks may be about 200 words.
7. Attempt all parts of the questions together.
1. Business transaction taking place within the geographical boundaries of a nation is [1]
known as a domestic or national business. It is also referred to as internal business
or home trade. Manufacturing and trade beyond the boundaries of one’s own
country is known as international business.
Permitting another party in a foreign country to produce and sell goods under your
trademarks, patents, or copyrights in lieu of some fee is another way of entering
into international business. This is through ________.

a) sale of goodwill b) sale of copyrights

c) sale of trademark d) licensing and franchising

2. What do you mean by entrepreneurship? [1]

a) Pursuing employment b) Setting up of one's own

business

c) Practicing profession d) All of these

3. A prospectus is issued by: [1]

a) a joint enterprise b) a public enterprise

c) a private company d) a public company seeking

investment from the public
4. Which itinerant retailers are mostly found at places where huge floating population [1]
gathers?

a) Cheap jacks b) Market traders

c) Hawkers and paddlers d) Street traders

5. Which of the following are small industries? [1]

a) More labour intensive and less b) Less labour intensive and less
capital intensive. capital intensive.

c) More labour intensive and d) Less labour intensive and more

more capital intensive. capital intensive.

6. Expand VPN: [1]

a) Virtual Public Network b) Virtual Personal Network

c) Virtual Private Network d) Virtual Popular Network

7. A government company is any company in which the paid-up capital held by the [1]
government is not less than ________.

a) 51 percent b) 45 percent

c) 25 percent d) 49 percent

8. The government of India used which parameter to explain small industries? [1]

a) Power consumed for business b) Volume of output

activities

c) Number of persons employed d) Investment in plant and

in business machinery

9. Which of the following is false regarding equity shares? [1]

A. Funds raised through equity shares is 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.
 a) Only B is false b) Only D is false

c) Only A is false d) Only C is false

10. Assertion (A): The eldest member of a Hindu Undivided Family is called Karta. [1]
Reason (R): All other members, having equal ownership right over the ancestral
property are known as co-parceners.

a) Both A and R are true and R is b) Both A and R are true but R is
the correct explanation of A. not the correct explanation of
A.

c) A is true but R is false. d) A is false but R is true.

11. Which of the following utilities are provided by the wholesalers: [1]

a) Neither time nor place utility b) Only time utility

c) Only place utility d) Both time and place utility

12. ________ retail business acts as a universal supplier of a wide variety of products. [1]

a) Tele-shopping b) Multiple shop

c) Departmental store d) Mail-order business.

13. Which is the first stage in the formation of a company? [1]

a) Subscription of capital b) Promotion

c) Registration d) Incorporation

14. In which year National Small Industries Corporation(NSIC) was set up? [1]

a) 1953 b) 1954

c) 1956 d) 1955

15. ________ damages the quality of land making it unfit for agriculture or plantation. [1]

a) Noise Pollution b) Water Pollution

c) Air Pollution d) Land Pollution

16. Assertion (A): The principle of indemnity is not applicable to life insurance. [1]
Reason (R): Indemnity means the promise of the insurer to put back the insured in
the same position as before the mishap.

a) Both A and R are true and R is b) Both A and R are true but R is
the correct explanation of A. not the correct explanation of
A.

c) A is true but R is false. d) A is false but R is true.

17. Which of the following issues faced by small businesses is incorrect regarding the [1]
raw materials required by them for production?

a) Low bargaining power due to b) Required raw materials are not

the small quantity of purchases available easily
made by them

c) Large storage facilities to store d) Compromise on the quality as

the materials they have to pay high prices to
get good quality materials

18. Cattle breeding farms, poultry farms, and fish hatchery come under which industry? [1]

a) Genetic b) None of there

c) Manufacturing d) Extractive

19. Under Village and Small Industries Sector which of the following accounts for [1]
modern small industries.

a) Hand looms b) Power looms

c) Khadi d) Coir

20. Preliminary Contracts are: [1]

a) binding on the company b) binding on the guarantor

c) not binding on the company d) binding on the promoters

21. Write four points of importance of international business for a country. [3]

22. Differentiate the following activities into Economic and Non-economic: [3]
 i. A property dealer is purchasing a house for himself.
ii. A doctor is giving his son a medical treatment.
iii. A person is selling tea on a railway station.
iv. A property dealer is buying a house for someone on commission.

OR
Reema bought a new house recently and plans to shift in the near future. Therefore, she
is selling off her old kitchen appliances at OLX and has also made some profit in the
process.
In the context of the above case:
i. Will this transaction be constituted as a business activity? Why or why not?
ii. Mention the underlying characteristic of the business.

23. What purpose is served by wholesalers providing warehousing facilities? [3]

24. What are equity shares? Discuss its various features. [3]

OR
Who issues bonds? How are they different from debentures?

25. Point out the four features of a wholesaler. [4]

OR
Describe any four functions of retailers.

26. How would you classify business activities? [4]

OR
Karan is running a grocery shop in the nearby local market whereas his friend
Priyanshu works as a finance manager in a reputed IT company.
In the context of the above case:
i. Identify the different types of economic activities both the friends are engaged in.
ii. Distinguish between the two different types of economic activities as identified in
part (i) of the question (any two points).

27. E-business offers numerous benefits. Justify your answer by giving suitable [4]
reasons.

28. What are the different kinds of organizations that come under the public sector? [4]
29. What is business ethics? Mention the basic elements of business ethics. [4]

30. Clarify the meaning of the terms Entrepreneur, Entrepreneurship and [4]
Enterprise.

31. Jitesh had placed an order for import of medical equipment from the USA for his [6]
diagnostic center. He has now received an intimation about the arrival of the goods
in India. What are the various formalities that he will have to complete before
taking the delivery of goods?

OR
What is international business? How is it different from domestic business?

32. What is a Memorandum of Association? Briefly explain its clauses. [6]

OR
Distinguish between private companies and public companies.

33. Distinguish between Owner's Funds and Borrowed Fund. [6]

34. Gauri took an insurance policy for her home without disclosing that the home is [6]
being used to house the catering business. After a few months, a gas cylinder
explosion caused major damage to her property. Consequently, she filed a claim
against the insurance company for compensation of loss. On investigating the
matter, the insurance company discovered the commercial use of the home and
refused to pay any claims. Identify and explain the principle of insurance which has
been violated in the above case.
 Solution
SAMPLE QUESTION PAPER - 2
Business Studies (054)
Class XI (2024-25)
1.
(d) licensing and franchising
Explanation:
Permitting another party in a foreign country to produce and sell goods under your
trademarks, patents or copyrights in lieu of some fee is another way of entering into
international business is through licensing and franchising.
2.
(b) Setting up of one's own business
Explanation:
Entrepreneurship means setting up own business for profits.
3.
(d) a public company seeking investment from the public
Explanation:
A prospectus is a legal document issued by companies that are offering securities for sale.
4.
(d) Street traders
Explanation:
Street traders are the small retailers who are commonly found at places where huge
floating population gathers for eg., near bus stands or railway stations.
5. (a) More labour intensive and less capital intensive.
Explanation:
Small scale industries employed more labour and less capital .
6.
(c) Virtual Private Network
Explanation:
A VPN, or Virtual Private Network, is a type of network connection that allows users to
browse the web securely and anonymously.
7. (a) 51 percent
Explanation:
A government company means any company in which not less than 51 per cent of the
paid-up capital is held by the central government.
8.
(d) Investment in plant and machinery
 Explanation:
The parameter used to describe small industries is investment in plant and machinery.
9.
(b) Only D is false
Explanation:
The liability of equity shareholder is limited to the extent of capital contributed by them in
the company.
10.
(b) Both A and R are true but R is not the correct explanation of A.
Explanation:
Karta is the eldest member of the HUF who takes all the decisions. Other members, called
co-parceners have equal rights over the ancestral property.
11.
(d) Both time and place utility
Explanation:
Wholesalers provide both time and place utility
12.
(c) Departmental store
Explanation:
The departmental store is a retail business which acts as a universal supplier of a wide
variety of products.
13.
(b) Promotion
Explanation:
Promotion Stage is the first stage in the formation of a company.
14.
(d) 1955
Explanation:
National Small Industries Corporation Limited (NSIC) is a Mini Ratna PSU
established by the Government of India in 1955 It falls under Ministry of Micro, Small &
Medium Enterprises of India.NSIC has set up training cum incubation centre managed by
professional manpower.
15.
(d) Land Pollution
Explanation:
Land pollution is caused by the dumping of toxic wastages on land. It changes the
physical, chemical, and biological characteristics of the land and deteriorates the quality of
 land that make it unfit for cultivation.
16.
(b) Both A and R are true but R is not the correct explanation of A.
Explanation:
The principle of indemnity is not applicable to life insurance because the insurer can't
bring back the life of a person and there is no money equivalent to live. That's why he
can't bring the insured back into the position before the mishap.
17.
(c) Large storage facilities to store the materials
Explanation:
Large storage facilities to store the materials.Since due to a shortage of funds no bulk
quantity is purchased and no need to store.
18. (a) Genetic
Explanation:
Genetic industries are those industries that are engaged in re-production and
multiplication of species of plants and animals with the sole objective of sale and earning
profit.
19.
(b) Power looms
Explanation:
Power looms and small scale industries come under modern small industries.
20.
(c) not binding on the company
Explanation:
Preliminary contracts are contracts entered into by the promoters on behalf of the
company before its incorporation with third parties. Such contracts are legally not binding
upon the company even after it comes into existence.
21. importance of international business for a country are as follows:
i. 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.
ii. More efficient use of resources: As stated earlier, 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.
 iii. Improving growth prospects and employment potentials: Producing solely for the
purposes of domestic consumption severely restricts a country’s prospects for growth
and employment. Many countries, especially the developing ones, could not execute
their plans to produce on a larger scale, and thus create employment for people because
their domestic market was not large enough to absorb all that extra production.
iv. Increased standard of living: In the absence of international trade of goods and
services, it would not have been possible for the world 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.
22. i. Non-economic
ii. Non-economic
iii. Economic
iv. Economic
OR
i. No, this transaction cannot be constituted as a business activity. Reema has sold
materials on OLX only once and has earned profit out of it. But, it can not be termed as
business activity as the motive of selling is over and there are no intentions of Reema to
sell the same items again. Thus, the continuity of business is broken.
ii. The underlying characteristic of business is 'Dealings in goods and services on a regular
basis'.
23. Wholesalers purchase goods in bulk from manufacturers, store them and distribute them to
retailers in small quantities for further resale. This bulk purchase of goods enables
manufacturers to undertake production on a large scale without worrying about storage
facilities. By offering warehouses close to the centres of distribution, wholesalers provide
what is known as place utility. Wholesalers not only provide warehousing facilities such as
collection, storage and protection of goods but also facilitate marketing and distribution,
creating time utility.
24. Equity shares are the main source of finance of a firm. It gives the right to the holders to
claim dividend on the surplus profits of the company. The rate of dividend on the equity
capital is determined by the management of the company.
Features:
i. Equity shares are transferable in nature. They can be transferred from one person to
another with or without consideration.
ii. Equity shareholders are the actual owners of the company and they bear the highest
risk.
OR
 Bonds are issued as long-term financial instruments by the Central Government, State
Government, or any specialized financial institution.
These are some fine differences between debentures and bonds:
i. ​There is no to the minimum risk involved in bond investments but the risk factor is high
in debentures.
ii. At the time of liquidation, the bondholders are always given preference.
25. Four features of wholesale trade are as follows:
i. The wholesale deals in one or few items of goods.
ii. Wholesaler requires a large amount of capital to be invested in the business.
iii. Wholesaler buys goods from the manufacturer in large scale.
iv. Wholesaler sells the goods to retailers as per their requirement.
OR
The functions of retailers are as follows:
i. Financing: Retailers provide goods to consumers often on a credit basis to their regular
customers. This increases the level of consumption and hence the standard of living of
salaried class.
ii. Supplying market information: Since the retailer is in direct contact with the consumers,
he provides information regarding their tastes, preferences, and attitudes, etc. to the
wholesaler. This information helps them in making important marketing decisions.
iii. Convenience in buying: Retailers provide goods to consumers according to their
requirements through the door to door services or by telephone etc. Usually, they are
situated near residential areas and remain open for long hours.
iv. Risk bearing: A retailer has to bear the risk if the change in style and fashion occurs
when the goods are stored in large quantities in the warehouses.
v. After sales services: Retailers sometimes provide home delivery and after sales service
to costumers.
26. Business is the buying, selling and exchange of goods and services for profit motive.
Business activities can be classified into the following two broad categories:
i. Industry: It refers to economic activities in which raw materials are processed and
converted into useful products. During the process, value addition to the raw materials
takes place, and the final products have a higher value compared with the raw materials.
For instance, a piece of cloth has a higher value than the cotton from which it is
produced. Therefore, we can say that industries produce goods that are readily
consumable by the final consumers. Among the major activities that are performed by
industry are production, processing and manufacturing. Industries are classified into
 three categories:
a. Primary Industry - it includes activity connected with the production of wealth
directly from natural resources etc.
b. Secondary Industry - This industry is concerned with converting raw material into
finishing product.
c. Tertiary Industry - These industries are concerned with providing those services
which facilitate the flow of goods and services.
ii. Commerce: Unlike industry, commerce does not involve manufacturing or production.
It basically involves trading and its related activities. Commerce includes exchange of
goods and services. It primarily aims at the circulation of these goods and services so as
to keep them within the reach of the final consumers. The major commercial activities
are transportation, advertisement, packaging, warehousing, banking, communication,
etc. Hence, it can be said that commerce bridges the gap between the producers and the
consumers. Trade can be further classified into two-internal and external trade.
OR
i. The different types of economic activities both the friends are engaged in are: Karan is
doing Business whereas the occupation of Priyanshu is Employment.
ii. The difference between Business and Employment is given below:
S.
Basis Business Employment
No.
There is no minimum A person should be qualified in
qualification required for accordance with the nature of
1. Qualification
running a business employment that he/she wishes to
successfully. take up.
Profit earned is the reward for
2. Reward An employee is paid salary/wages.
a businessman.
27. There are actually innumerable advantages of e-Business, the most obvious one being the
ease of doing business. Some of the major advantages of e-business are as follows:
i. Easy to Set Up: It is easy to set up an electronic business. You can set up an online
business even by sitting at home if you have the required software, a device, and the
internet.
ii. Cheaper than Traditional Business: Electronic business is much cheaper than a
traditional business. The cost taken to set up an e-business is much higher than the cost
required to set up a traditional business. Also, the transaction cost is effectively less.
iii. Global reach: There are no geographical boundaries for e-business. Anyone can order
anything from anywhere at any time. This is one of the benefits of e-business.
 iv. Government Subsidies: Online businesses get benefits from the government as the
government is trying to promote digitalization.
v. Flexible Business Hours: Since the internet is always available. E-business breaks
down the time barriers that location-based businesses encounter. As long as someone
has an Internet connection, you may be able to reach and sell your product or service to
these visitors to your business website.
vi. E-business means freedom: Opening an e-business means freedom - freedom of
location, freedom to work and freedom to push your company where you want it to go.
28. Following are the different kinds of organizations that come under the public sector:
i. Departmental Undertaking: This is the oldest and traditional form of public enterprises.
It is managed by government officials as one of the government departments. It is under
the control of the concerned minister of the department, who is answerable to the
government through parliament.
ii. Statutory Corporation: Statutory Corporation is a corporate body with a separate legal
existence, set up under a special act of parliament or of the state legislature which
defines its power and functions.
iii. Government Company: According to the Indian Companies Act 1956, a government
company means any company in which not less than 51 per cent of the paid-up capital
is held by the government or by any state government or partly by the central
government and partly by one or more state governments. They are established purely
for business purposes.
29. Business ethics refers to a set of moral values or standards pr norms that govern the
activities of a businessman. Ethics defines what is right and what is wrong.
Elements of business ethics:
i. Identification: It means that businessmen should be competent enough to rank and
identify the ethical issues in order of importance.
ii. Evaluation: It means that businessmen must develop the rules and regulations in order
to evaluate the ethical issues of the business.
iii. Imagination: A businessman should be imaginative enough that he should think about
society before taking any decision about the business. He must be aware of the areas
towards which people are sensitive.
iv. Tolerance: Businessmen must have the quality to tolerate ethical disagreement.
v. Obligations: The business decision taking process should be evaluated so that it must
fulfill ethical obligations.
30. Entrepreneur: The owner of a business is known as an Entrepreneur or we can say that
the person who set-up a business. That person is the co-ordinator, organiser of resources
and gives shape to the business.
 Entrepreneurship: It is the dynamic process of interaction between the person and the
environment. It means starting up one's own business, concerned with strategic decisions
of resource allocation and involves huge risk to create value and earn a profit.
Enterprise: The output of the entrepreneurship process is known as the Enterprise. It is
something that attempted to be performed. It provides employment opportunities,
professional opportunities and business opportunities which helps in building up the
economy of a nation.
Thus, an entrepreneur refers to a person/individual who starts up a business. He is the one
who takes up the basic idea of setting up the business. In the process of setting up the
business, he undertakes risk coordinates production resources, and undertakes innovation.
This whole process of setting up a new business is called entrepreneurship. The final result
that is the business that is established after undertaking the process of entrepreneurship is
called an enterprise. In simple words, an entrepreneur is a person who undertakes the
process of entrepreneurship to set up an enterprise.
31. The importer or the C&F agent appointed on his behalf undertake the following steps for
getting the customs clearance and release of goods:
i. When the ship arrives at the port, the shipping company either issues a delivery order or
makes the endorsement for delivery on the back of the bill of lading in order to
authorize the importer to take the delivery of goods.
ii. In case the freight charges have not been paid by the exporter, the importer is expected
to clear these dues.
iii. The importer then submits two copies of a duly filled in 'application to import' form to
the 'Landing and Shipping Dues Office' for the payment of charges levied by the dock
authorities for services provided by them. After payment of dock charges, the importer
is given back one copy of the application as a receipt. This receipt is known as 'port
trust dues receipt'.
iv. After this, the importer fills in a 'bill of entry' form for assessment of customs import
duty. After the documents have been examined by the appraiser an examination order is
issued and the importer is expected to pay the import duty.
v. The bill of entry is then presented to the dock superintendent who in turn forwards the
goods to an examiner for physical examination. The examiner gives his report on the
bill of entry which is later on shown to the port authority.
vi. Finally, the importer or his C&F agent receives the release order after paying the
necessary charges to the port authority.
OR
International business refers to business activities that takes place across international
frontiers. International business involves not only trade in goods and services but also
 other operations such as production and marketing of goods and services in foreign
countries. International Business is also known, called or referred to as a Global Business
or an International Marketing.
Differences between International Business and Domestic Business are summarized
below:
Basis International Business Domestic Business
Nationality of
buyers and People of different nationalities People of one nationality
Sellers
Employees, suppliers, customers, Employees, suppliers, customers,
Nationality of shareholders, partners, shareholders, partners, middlemen,
other stakes- middlemen, etc. belong to etc. belong to the same nationality in
holders different nationalities in domestic business. Exceptions are
international business. possible.
International business is subject to
Political Domestic business is subject to the
the political system of many
Systems political system of one country.
nations.
Risk Degree of risk is higher The degree of risk is lower.
Mobility of
More within the geographical
factors of Less across countries.
boundaries of the country.
production
Consumer's
International markets are Domestic markets are more
taste and
heterogeneous homogeneous
preferences
Currency Use foreign currency. Use domestic currency.
Business International business is subject to Domestic business is subject to rules,
regulations and rules laws, policies, and taxation laws, policies, and taxation system,
policy system, etc. of multiple countries. etc. of a single country.
32. Memorandum of Association defines the objects for which the company is formed. This is
the main document of the company and is subordinate to the Companies Act.
Memorandum of Association defines the relationship of the company with outsiders.
Every company has to file a Memorandum of Association.
The various clauses of a memorandum of association are:
i. The name clause: This clause states the name of the company which has already been
approved by the Registrar of Companies.
ii. Registered office clause: This clause contains the details of the registered office of the
proposed company. However, thirty days of the grace period is given by the Registrar of
Companies in case the promoters have not been able to decide about the location of the
registered office at the time of filing of the documents for the registration.
iii. Object clause: This clause defines the purpose for which the company is formed.
Therefore, it is considered to be the most important clause as any activity of the
company beyond this clause is considered to be illegal.
iv. Liability clause: This clause restricts the liability of the members-only to the extent of
the amount unpaid on the shares owned by them.
v. Capital clause: The maximum amount of capital which the company will be authorised
to raise through the issue of shares is mentioned in this clause along with its face
values. The said company cannot issue share capital in excess of the amount mentioned
in this clause without making amendments in the Memorandum.
vi. Association clause: This clause contains the list of people who have agreed to become
signatories to the Memorandum of Association and also purchase qualification shares.
The Memorandum of Association must be signed by at least seven persons in case of a
public company and by two persons in case of a private company.
OR
Difference between a private company and public company:
Basis Private Company Public Company
Number of Minimum-2 Minimum- 7
(i)
members Maximum-200 Maximum- Unlimited
Number of
(ii) Minimum- 2 Minimum- 3
Directors
Can invite the public to
Invitation to the Cannot invite the public to
(iii) subscribe to its shares or
general public subscribe to its securities.
debentures.
(iv) Transfer of shares Restriction on Transfer No Restriction
No compulsion for holding It needs to hold a statutory
(v) Statutory meeting statutory meetings and filing of meeting and must file a
the statutory reports. statutory report.
After the issue of a certificate
Commencement of After the issue of a certificate
(Vi) of commencement of
Business of incorporation
business
 Does not invite the public for Invite public for subscription
(vii) Issue of prospectus
subscription by issuing a prospectus
33. Difference between Owner's Fund and Borrowed Fund:
S.No. Basis Owner capital Borrowed capital
Consist of the amount contributed by It includes funds available
1. Meaning owners and their profit reinvested in in the form of loans or
the business. credit.
It is not a permanent source
2. Permanent It remains permanently invested.
of investment.
The debts of the company
3. Risk It carries the risk of the business.
are secured.
No control rests with
Control rests with providers of
4. Control providers of borrowed
owners' capital.
funds.
It is backed by the security
5. Security Not secured by any assets.
of assets.
6. Reward The reward is dividends. Interest is paid as a reward.
Payment of interest gets
The reward is paid after payment of
7. Priority priority over payment of
interest on borrowed funds.
dividends.
Nature of The rate of dividends may fluctuate The rate of interest is fixed
8.
return year to year. on funds.
34. The principle of utmost good faith has been violated as Gauri didn't mention about the
commercial use of the home while taking the policy. The principle of utmost good faith is
described below:
i. An insurance contract is a contract of uberrimae fidei as it is based on utmost good faith
which should be displayed by both the parties involved therein, i.e., the insurer and the
insured.
ii. The insurer should make full and accurate disclosure of all material facts related to the
subject matter of the proposed insurance. The insurer should at the same time make all
the terms and conditions of the contract clear.
iii. The contract of insurance will be voidable at the discretion of the insurer if the insured
does not disclose any facts which are likely to affect the mind of a wise insurer in fixing
the amount of premium or the decision to accept the proposal of insurance.