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Class 11 - Business Studies

Nature and Purpose of Business Test 01

Question No. 1 to 5 are based on the given text. Read the text carefully and answer the questions:

Sameer, a young man, wants to provide employment to the local people of his village. He decided to do the wholesale
business of mobile phones made by the latest technique. But so many questions began to crop up in his mind: how will
the goods be brought from distant places, how will the finance be arranged, and how will the information on his modern
business be conveyed to the people? He consulted a business expert, Mr. Ram who gave him information on the
auxiliaries to trade, which could solve his problem. Sameer understood what the expert told him. He employed 60
workers and started his business.

1. Which economic activity is Sameer going to do?

a. Employment
b. Business
c. Profession
d. Trade
2. On which part of business was the information given to Sameer by the business expert?
a. Auxiliaries to Trade/Services
b. Commerce
c. Business
d. Trade
3. But so many questions began to crop up in his mind: how will the goods be brought from distant places. Which
auxiliary to trade can solve Sameer's problem?
a. Warehousing
b. Transportation
c. Communication
d. Banking
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4. But so many questions began to crop up in his mind: how will the finance be arranged? Which auxiliary to trade can
solve Sameer's problem?
a. Transportation
b. Banking
c. All of these
d. Advertising
5. But so many questions began to crop up in his mind: how will the information on his modern business be conveyed to
the people? Which auxiliary to trade can solve Sameer's problem?
a. Communication
b. Advertising
c. Banking
d. Warehousing
6. Business involves various types of risks. To protect a business against these risks ________ is required.
a. insurance
b. banking

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c. advertising
d. transport
7. Transport, banking, insurance, warehousing, communication, packaging, and advertising are included under which
industry?
a. Secondary
b. Primary
c. Tertiary
d. None of these
8. Activities which are meant for assisting trade are known as ________.
a. auxiliaries to trade
b. banking and finance
c. profession
d. advertising
9. Usually, goods are not sold or consumed immediately after production. They are held in stock to make them available as
and when required. For this purpose ________ is important.
a. banking
b. warehousing
c. finance
d. advertising
10. Assertion (A): Extractive industries are the industries that extract or draw products from natural sources.

Reason (R): Farming, mining, lumbering, hunting, and fishing operations are examples of Extractive Industries.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
11. Assertion (A): The processing industry involves successive stages for manufacturing finished products.

Reason (R): Sugar and Paper Industries are examples of the Processing industries.
a. Both A and R are true and R is the correct explanation of A.
b. Both A and R are true but R is not the correct explanation of A.
c. A is true but R is false.
d. A is false but R is true.
12. State True or False:
a. India is the world's sixth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP).
a. True
b. False
b. Mining comes in the category of genetic industry.
a. True
b. False
13. Fill in the blanks:
a. Activities that help in the smooth flow of trade are called ________.
b. ________ is an unconditional order in writing made by a person named in the order.
14. Which type of business risk involves both the possibility of gain as well as the possibility of loss?
15. Mining of iron ore is an example of which industry?
16. Distinguish between Business and Profession on the following basis:
i. Risk
ii. Mode of Establishment

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iii. Qualification
iv. Nature of work
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17. Multi-Industries Private Ltd. is a big company in Private Sector. It produces several agricultural products like sugarcane,
cotton, etc. This company uses all its own agricultural products like the Raw Material instead of selling them in the
market. The sugar cane is used to produce sugar and similarly, the cotton is to make cloth. The company has established
its sugar and the cloth mill at a place where the people were very much worried due to unemployment. In this way, the
company provided employment to about 500 local people. Besides, the company paid special attention to greenery all
around its factories. The company's business is growing fast.
To which sub-type of industries are related the different products described in the above paragraph?
18. Harshit runs a well known departmental store in Delhi. He procures different kinds of products from all over the country
through railways, roadways, and airways. He also owns a godown to hold the stocks. He has also taken an insurance
policy worth Rs.10 crores for his business. Moreover, he has taken a loan of Rs. 2,00,000 from ICICI Bank in order to
meet short term financial needs of his business. He has placed information about his store on the hoardings, billboards,
etc. in order to popularize them.

In the context of the above case answer the following:

i. What are auxiliaries to trade?
ii. Identify the different auxiliaries to trade that are being used by Harshit in his business by quoting lines from the
paragraph.
19. Discuss the various types of Hundis practiced by ancient Indian merchant communities.
20. What are the social objectives of business?

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Class 11 - Business Studies

Nature and Purpose of Business Test 01

Solution

1. (d) Trade

Explanation: Sameer is going to do Trade.

2. (a) Auxiliaries to Trade/Services

Explanation: The business expert gave information about Auxiliaries to Trade/Services to Sameer.

3. (b) Transportation

Explanation: Transportation can solve Sameer's problem to bring the goods from distant places.
4. (b) Banking

Explanation: Banking can solve Sameer's problem of arranging finance.

5. (b) Advertising

Explanation: Advertising can solve Sameer's problem of conveying the information on his modern business.

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6. (a) insurance

Explanation: Insurance is a means of protection from financial loss. It is a form of risk management primarily used to
hedge against the risk of a contingent, uncertain loss.
7. (c) Tertiary

Explanation: The tertiary industry provides support to other industry, creating complementarity to primary and
secondary industries. 
8. (a) auxiliaries to trade

Explanation: Auxiliaries to trade or aids to trade also provide the necessary support to trade. Such as transport,
warehousing, banking and finance, and insurance.
9. (b) warehousing

Explanation: A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers,
importers, exporters, wholesalers, transport businesses, customs, etc. They are usually large plain buildings in industrial
areas of cities, towns, and villages.
10. (b) Both A and R are true but R is not the correct explanation of A.

Explanation: Extractive Industries like fishing, hunting, etc. are the industries that extract products from natural
resources and supply some basic raw materials.
11. (b) Both A and R are true but R is not the correct explanation of A.

Explanation: The processing industry like the sugar and paper industry is the one that involves various successive
stages for manufacturing finished goods.
12. State True or False:
a. (a) True

Explanation: True
b. (b) False

Explanation: False
13. Fill in the blanks:
a. Auxiliaries
b. Hundi
14. Speculative Risk involves both the possibility of gain as well as the possibility of loss.

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15. Primary industry.

16. Basis Business Profession

Business involves greater amount of

Risk In profession, the degree of risk is not high.
risk.
To start a business entrepreneur's
Mode of Profession can be commenced after acquiring membership and
decision plus legal formalities, if
Establishment certificate of practice from the respective professional body
required.

There is no need of minimum or

Qualification specific qualification for doing a a For a profession, prescribed qualification is indispensable.
business.

Nature of It involves providing goods and/or In profession, a professional renders specialised personal
work services to the public. service, expert opinion to his clients.
17. Extractive Industry: Sugarcane and cotton

Processing Industry: Sugar and Cloth

18. i. Auxiliaries to Trade - It implies activities required to facilitate the purchase and sale of goods i.e. are meant for
assisting trade.
ii. The different auxiliaries to trade that are being used by Harshit in his business are:
a. Transport as he procures different kinds of products from all over the country through railways, roadways, and
airways.
b. Warehousing as he owns a godown to hold the stocks.
c. Insurance as he has taken an insurance policy worth Rs. 10 crores for his business.
d. Banking and Finance as he has taken a loan of Rs. 2,00,000 from ICICI Bank in order to meet short term
financial needs of his business.
e. Advertising as he has placed information about his store on the hoardings, billboards, etc. in order to popularize
them.
19. Types of Hundis:
i. Darshani- Darshani is a hundi which is payable at sight. It is like a demand bill. Moreover, it is negotiable. The party
can sell them at par, premium, and discount. The holder has to present the darshani for payment within a reasonable
time of its receipt. If the drawer faces any loss due to delay in presentation, the holder shall be responsible for it.
ii. Miadi - Also called as muddati, miadi is something which is payable after a certain time period like a ‘time bill’.
Banks generally provide loans for the security of such hundis.
iii. Shahjog - This is a hundi made payable only to a Shah (a respectable person of financial worth and substance in the
market). It is freely transferrable. But it is not payable to bearer. In general, it is similar to a crossed cheque.
iv. Namjog - Under this hundi, the amount is payable to the party whose name is on it. Such an instrument is similar to a
bill of exchange payable on order.
v. Dhanijog - ‘Dhani’ in local terms means owner. It is generally like a bearer cheque as the holder of it becomes a
holder in due course if he takes it for value.
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material for CBSE, NCERT, JEE (main), NEET-UG and NDA exams. Teachers can use Examin8 App to create similar
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20. The objective of the business should not always be economic. There is no doubt that economic objective is very
important for existence and development of a business, but economic objectives can be achieved only when a business
has social standing.

In other words, the objective of business should be to earn profit through social service. According to Henry Ford,
Service first and profit next should be the motive of every businessman. According to F. E. L. Bresh, "Business has no

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meaning unless it serves and satisfies a customer at a profit."

The social objectives of a business may be summarized as follows:

i. Produce quality goods: The objective of the business is not only to provide goods to the society but also to provide
goods and services of high quality. A businessman can earn a good profit by selling adulterated goods but he cannot
carry on his business for a long time like this.
ii. To charge fair prices: The social objective of the business is not only to provide quality goods to society but also at
reasonable prices. Undue profits earned by increasing the prices of the goods will not last long and will hamper the
reputation of the business in the society.
iii. To provide employment: The social objective of the business is also to provide employment to the society. With the
development of business, the need for employees arises. Thus, the business needs the services of good employees.
So, the business should provide opportunities for meaningful work.
iv. To provide regular and fair returns to investors: It is also a social objective of business to provide regular and fair
returns to investors. Investors invest money and bear risk. So, investors must be suitably rewarded.
v. To promote the progress of society: Business is a part of society. The society provides a regular market for goods and
services of the business apart from factors of production. The progress of the business is linked with the progress of
society. 

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