STEP UP ONLINE CLASSES

RAJ NAGAR EXTENSION

BUSINESS STUDIES MID TERM

Class 11 - Business Studies
Time Allowed: 3 hours Maximum Marks: 80

General Instructions:

10 minutes for making pdf

send in a neatly written pdf; no images.

underline key words, make figures/web charts wherever necessary.

Section A
1. Which of the following is not a characteristic of business? [1]

a) Creation of utilities b) Entrepreneurship

c) Regularity of dealing d) Non economic activities

2. Which of the following can be considered as an economic activity? [1]

a) Business b) Profession

c) All of these d) Employment

3. The term business is derived from the word ________. [1]

a) busy b) buy and selling

c) proprietorship d) financial markets

4. The business assets of a firm amounts to ₹ 22,000 but the liabilities stand at ₹ 47,000. What course of action can [1]
the creditors take if it is a sole proprietorship firm?

a) Creditors can settle their account only to the b) Creditors can settle their account only to the
extent of the owner's personal assets extent of business assets available i.e. ₹
available 22,000

c) Besides using business assets of ₹ 22,000, d) None of these

creditors can use the personal property of
the owner to the extent of ₹ 25,000
5. Which is the first stage in the formation of a company? [1]

a) Subscription of capital b) Promotion

c) None of these d) Incorporation

6. The eldest member of the Joint Hindu Family shall become Karta. Which of the following is true about the [1]
Karta?

a) Both male or female can become the Karta b) Only a female can become the Karta

c) Only a male can become the Karta d) All of these

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 7. What are the main reasons behind the slow growth in the Size of Sole Proprietorship firms? [1]

a) Unlimited liability b) Limited resources

c) All of these d) Limited managerial ability

8. As per the ________ partnership business can be carried on by all the partners or any one of the partners can act [1]
for all.

a) compulsory registration of partnership b) unlimited liability

c) limited liability d) mutual agency

9. Which of the following is an economic cause of business risks? [1]

a) Price b) Competition

c) Demand for goods d) All of these

10. Match the following: [2]

(a) A business owned, managed and controlled by a single individual is known as (i) Partnership

(b) Business is carried out by the members of a HUF (ii) Cooperative Society

(c) Association of two or more persons who agree to jointly pursue a business (iii) Hindu undivided
activity family

(d) This organisation is a voluntary association of persons who join together for
(iv) Sole proprietorship
mutual help

11. Which of the following statements is false? [1]

A. Long-term funds fulfil the financial requirements for a period exceeding 5 years.
B. Medium-term sources provide funds for a period of more than one year but less than five years.
C. Medium-term sources provide funds for a period of more than one year but less than three years.
D. Short-term funds are required for a period not exceeding one year.

a) Only C is false b) Only D is false

c) Only B is false d) Only A is false

12. 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

13. Raising money through retained earnings involves which of the following explicit costs: [1]

a) Flotation cost b) Dividend

c) Interest d) No explicit cost is incurred

14. Match the following: [2]

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 (a) Retained earning are also known as (i) Expense of the company

(b) Interest paid on public deposits is deducted from the total income of the
(ii) Ploughing back of profit
company

(iii) Reduction in Tax

(c) They are always redeemed or paid back on the expiry of fixed period of time
liability

(d) When it is paid to debentureholders it is considered as (iv) Debentures

Section B
15. Identify and explain the objectives of the business in the following statements: [3]
i. Mrs. Suman, the owner of Start Coaching Institute teaches the poor children for free.
ii. HP comes out with the latest Calling Tablet.
iii. Employer contributing to NPS (New Pension Scheme) to his employee.
16. How does a cooperative society exemplify democracy and secularism? Explain. [3]
17. Define preference shares. State the merits of raising funds through the issue of preference shares. [3]
OR
To meet the problem of short-term capital inadequacy, Tizen Ltd. borrowed Rs. 5 crores from Sky Ltd., which had
surplus funds. Although Sky Ltd. charged higher interest rates as compared to bank borrowings, still Tizen Ltd.
preferred this source as no security had to be given to raise funds.
Identify the source of finance is discussed in the given case. Also, state its three merits.
18. Pluto Electricals Ltd. has been successfully manufacturing electrical accessories for the past ten years. As the [3]
profit margin is good, the company has been managing all the financial requirements of the business through the
profits reinvested in the business. Identify the source of finance being mentioned in the given case and state its
four merits.
19. Mrs Reeta Bajaj, the lecturer in Business Studies asked three students of her class-XI each one to express one of [3]
his views on the selection of the form of business organization. First of all, it was Kanika's turn. She said that
she would select such a form of business organization in which her domestic property cannot be used to pay
debts during adverse circumstances. After this, Rahul got the opportunity of what he had to say. Rahul said that
he would establish such a business organization for which trained and expert manpower should be easily
available. Last of all, Anvi, expressing her views said that she would like such a business organization as can be
set up without many formalities. In this way, all three of them expressed their respective views on the choice of
business organization. What particular point is indicated by the three students through their respective choice of
the business organization in the above paragraph?
20. Ram is a marginal farmer whatever he produces, he uses for his family consumption and does not generate any [5]
market surplus to buy the seeds and fertilizers he has taken a loan from Agriculture credit society. Because of
heavy rainfall and storms, his crop is totally destroyed. He suffered a huge loss and to repay the loan he has
started working on a Zamindar's farm.
i. In reference to the above paragraph identify the economic activity Ram is engaged in?
ii. Name the cause of risk Ram suffered.
iii. Can Ram be called as a businessman? Give your views in support of the answer.
21. Arun, Bimesh, and Czar are partners in a partnership firm manufacturing air conditioners. Their firm is not [5]
registered. Recently, in order to increase the profits of the firm, Bimesh decided to use substandard raw materials

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 without the knowledge of Arun and Czar. As a result, many accidents were reported by the consumers and a case
has been filed against the firm.
a. Is this a wrong act of Bimesh binding on Arun and Czar too? State the related feature of the partnership form
of business organization.
b. Can Arun and Czar file a case against Bimesh? Why or why not? Give a suitable reason in support of your
answer.
c. List any two values being ignored by Bimesh.
22. Gunjan Cinemas is a popular film entertainment company in Delhi. Keeping in view the growing culture of [5]
multiplex its owners have decided to make some changes in the interiors like creating a lounge area, installing
more effective sound systems, etc. The company wants to raise the required funds for a period of more than one
year but less than five years.
In the context of the above case answer the following questions:
a. Identify and explain the type of funds that Gunjan Cinema seeks to raise on the basis of the time period.
b. Explain any one appropriate source of the type of funds as identified in part (a) of the question.
Also, state its any two merits.
OR
State the different ways in which an entrepreneur can deal with risk.
23. Kiran is a sole proprietor. Over the past decade, her business has grown from operating a neighbourhood corner [6]
shop selling accessories such as artificial jewellery, bags, hair clips and nail art to a retail chain with three
branches in the city. Although she looks after the varied functions in all the branches, she is wondering whether
she should form a company to better manage the business. She also has plans to open branches countrywide.
a. Explain two benefits of remaining a sole proprietor.
b. Explain two benefits of converting to a joint-stock company.
c. What role will her decision to go nationwide play in her choice of the form of the organisation?
d. What legal formalities will she have to undergo to operate business as a company?
24. State the merits and demerits of public deposits and retained earnings as methods of business finance. [6]
25. Discuss the factors affecting the choice of source of funds. [6]
Section C
26. Read the text carefully and answer the questions: [4]
Elpis Ltd. took a loan of ₹ 50 lakh from a bank for its growth and expansion plans. The company was unable to
repay the loan amount because of heavy losses incurred in the business on a continuous basis. The management
of the company asked its shareholders to contribute towards repayment of the loan.
But the shareholders refused as they had already paid the full amount due on their shares. The bank filed a case
against Elpis Ltd. in the court. The court held that the shareholders of the company were not liable to repay the
loan as they had not unpaid amount on shares.
(i) Is the court's decision justified? Give reason in support of your answer. (Identify the correct option)

a) Yes, because the shareholders of a b) Yes, because the shareholders of a

company have unlimited liability. company are only liable to the extent of
the amount unpaid on the shares held by
them.

c) No, because a company is a legal entity d) No, because the shareholders’ personal

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 distinct from its shareholders, directors assets may be used to settle the debts of
and promoters. the company.
(ii) Which characteristic of the company form of organisation protected the shareholders?

a) Artificial person b) Separate legal entity

c) Perpetual succession d) Limited liability

(iii) The board of directors of a Joint stock company is elected by:

a) Employees b) General public

c) Government bodies d) Shareholders

(iv) Maximum number of members in Elpis Ltd. must be:

a) 10 b) 200

c) 50 d) Unlimited
27. Read the text carefully and answer the questions: [4]
All the four children of Mr. Govind Singh are doctors. Ankit is a skin specialist, Vinod is a heart specialist,
Mansi is a child specialist and Shakshi is a physician. Dr. Ankit joined a multi-speciality private hospital. Dr.
Vinod established his own nursing home. Dr. Mansi works in a government hospital and also treats the poor
people free of cost in a charitable dispensary. Dr. Shakshi opened a medical store wherein she sells genuine
medicines, getting the minimum profit margin.
(i) The children of Mr. Govind Singh are engaged in:

a) None of these b) Both economic and non-economic

activities

c) Non-economic activities d) Economic activities only

(ii) ________ is engaged in employment.
a. Dr. Ankit
b. Dr. Mansi
c. Dr. Vinod
d. Dr. Shakshi

a) (a) and (c) b) (c) and (d)

c) (a) and (b) d) (b) and (c)

(iii) The reward a businessman gets for bearing the risks is called ________.

a) Bonus b) Profit

c) Commission d) Remuneration
(iv) Which of the following is a non-economic activity?
A. A factory owner producing school bags for sale in the market.
B. Person begging at a busy traffic intersection.
C. Services of a domestic help doing household chores at an employer's house.
D. Services of a housewife doing household chores at home.

a) Both (B) & (D) b) Option (B)

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 c) Option (D) d) All of these
28. Read the text carefully and answer the questions: [4]
Manohar Das is the only owner of a T-shirt manufacturing factory. He enjoyed a considerable degree of freedom
and took prompt decisions on all matters. But, now he was having a shortage of funds and therefore took a loan
of ₹15 lakhs from a finance company for the expansion of his business. In the beginning, his business was
running well but later on, he started incurring losses, and due to continuous losses he was not able to repay the
loan.
After receiving many reminders from the finance company, Manohar decided to close the business as he had the
complete authority to do so. He sold all his machines and other assets and realized ₹10 lakh. he requested the
finance company to settle his accounts at ₹10 Lakh. But the finance company refused, and on his failure to pay
the total debt, it filed a case against him in court. Manohar gave an argument in the court that he had sold all his
business assets, and the loan was taken by him for business, not for his personal use. So the finance company
must settle the account at ₹10 lakh. The court did not agree with the argument of Manohar Das and gave the
decision in favour of the finance company. He was ordered to pay the full amount of loan by selling off his
personal assets.
(i) Identify the form of business carried on by Manohar Das.

a) Partnership b) Sole Proprietorship

c) Cooperative Society d) Private Company

(ii) State the feature of the form of business identified in the given para which is considered by the court while
giving the judgement.

a) All of these b) Sole risk-bearing

c) Continuity d) No separate entity

(iii) State one advantage of the business form highlighted in the first para of the case study.

a) Direct Incentive b) Ease of formation and closure

c) Quick Decision Making d) Confidentiality

(iv) State one advantage of the form of business carried on by Manohar that has been highlighted in the second
para.

a) Quick Decision Making b) Direct Incentive

c) Confidentiality d) Ease of formation and closure

29. Read the text carefully and answer the questions: [4]
The economic development of any country depends on the growth of the business sector. The well developed
financial system helps the business to achieve growth by making funds available to them. For which, the
government has established financial institutions all over the country to provide finance to businesses. Banks
have immense monetary assets and subsequently are dominant players in all sectors of financial markets like
credit, cash, securities, foreign exchange and derivatives. Commercial banks have a critical part in the general
financial position of the economy as they give assets to various purposes and additionally for various durations.
A rate of premium is charged by banks for the loan.
(i) A company needs to increase its stock of raw materials and finished goods, which will require funds of ₹
40 lakh. Identify the option available with the company to finance this amount.

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 a) Loan from commercial banks b) Inter corporate deposits

c) Loan from financial institutions d) Commercial paper

(ii) Loan from commercial banks are ________ finance.

a) Long term b) Short term or medium term

c) Medium term d) Short term

(iii) Which among the following is not an example of loan from a financial institution?

a) LIC b) IFCI

c) IDBI d) ICD
(iv) Which among the following is not an advantage of loan from financial institution?

a) Funds are available during periods of b) Large funds for longer durations are
depression available

c) Financial institutions put restrictions on d) Repayment of loan can be made in easy

autonomy of management installments

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