Class 11 Business Studies Sample Paper Term 2 with Solutions Set A

Please refer to Class 11 Business Studies Sample Paper Term 2 With Solutions Set A provided below. The Sample Papers for Class 11 Business Studies have been prepared based on the latest pattern issued by CBSE. Students should practice these guess papers for class 11 Business Studies to gain more practice and get better marks in examinations. The Term 2 Sample Papers for Business Studies Standard 11 will help you to understand the type of questions which can be asked in upcoming examinations.

Term 2 Sample Paper for Class 11 Business Studies With Solutions Set A

Case Based MCQs :

PT and Sons is a shop in Chennai, Tamil Nadu. It purchases relatively small quantity of goods from  different wholesalers and sell them to ultimate consumers. PT and Sons remain in direct and constant  touch with the buyers, so they give important market information about the tastes, preferences and  attitudes of customers to the wholesalers. It is also famous for keeping stock of a variety of products.  This enables the consumers to make their choice. Over the time, its sales increased and it has got lot of capital. So, the owners decided to invest this capital and start trading the products in International  markets as well. They believe that they will procure goods in which they have a comparative advantage , similarly manufacturers will produce goods in which they have comparative advantage and wasteful duplication of resources will be prevented. PT and Sons is known to have supreme quality of products which are not available in International markets. Through this international trade, countries will get access to a large variety of goods of PT and Sons.

Question. Which service of retailers to consumers is highlighted in the line, “It is also famous for keeping stock of a variety of products. This enables the consumers to make their choice.”?
(a) Wide Selection
(b) New Products Information
(c) Regular Availability of Products
(d) After Sale Services

Question. In which type of internal trade, PT and Sons is involved in?
(a) Wholesale Trade
(b) Retail Trade
(c) Both of these
(d) None of these

Question. Which advantage of international trade to nation is highlighted in the line, “Through this international trade, countries will get access to a large variety of goods of PT and Sons.”?
(a) Earning of Foreign Exchange
(b) Better Utilisation of Resources
(c) Improving Growth Prospects and Employment Potential
(d) Increased Standard of Living

Question. Which service of retailers to wholesalers is highlighted in the line, “PT and Sons remain in direct and constant touch with the buyers, so they give important market information about the tastes, preferences and attitudes of customers to the wholesalers.”?
(a) Collecting Market Information
(b) Help in Distribution of Goods
(c) Help in Promotion
(d) Enabling Large-scale Operations

Question. Which advantage of international trade to nation is highlighted in the line, “They believe that they will procure goods in which they have a comparative advantage, similarly manufacturers will produce goods in which they have comparative advantage and wasteful duplication of resources will be prevented.”?
(a) Earning of Foreign Exchange
(b) Better Utilisation of Resources
(c) Improving Growth Prospects and Employment Potential
(d) Increased Standard of Living

Short Answer Type Questions :

Question. What is the meaning of trade credit? Also, explain the factors on which trade credit depends upon.
Answer : Trade credit facilitates the purchase of supplies and raw material without immediate payment. Such credit appears in the accounts of the buyer of goods as sundry creditors or accounts payable. It is commonly used by business organisation as a source of short-term financing. The amount and period of trade credit depends on the following factors
(i) Goodwill or reputation of the purchasing firm.
(ii) The amount of purchases made.
(iii) Past record of the buyer and his financial position. Also, the terms to trade credit may vary from industry to industry and person to person.

Question. How do Small Scale industries help in supply of various goods and involve low cost of production?
Answer : Small scale industries justify the mentioned qualities as follows
(i) Supply Variety of Products Small industries in our country supply enormous variety of products which include goods of mass consumption such as readymade garments, hosiery goods, stationery items, soaps and detergents, domestic utensils, etc. Sophisticated goods such as electrical goods, engineering goods, drugs, etc are also manufactured by these industries.
(ii) Low Cost of Production They also enjoy the advantage of low cost of production. This is because the establishment and running costs are minimal. Locally

Question. Intellectual property rights are the intellectuals emerged from the human mind and the legal right on these human intellects. In the light of the statement, explain the importance of Intellectual rights in detail.
Answer : Importance of Intellectual Property Rights is
(i) Exclusive right on the use of IP is the biggest motivation behind creation of intellectual property.
(ii) Customers get improved goods and services due to IPR.
(iii) Entrepreneurs are enabled to earn more revenue due to IPR.
(iv) It is cost saving mechanism for society through effectively utilisation of resources.

Question. Mention any three points of difference between American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).
Answer : The following differences are observed between the two stated instruments
(i) American Depository Receipts (ADR) can be bought and sold only in America, whereas Global Depository Receipts (GDR) can be bought and sold in many international markets.
(ii) Issue of ADRs require strict disclosure requirements, whereas issue of GDRs do not require strict disclosure requirements.
(iii) ADRs are more liquid, whereas GDRs are less liquid.

Question. Retained earnings means that part of trading profits which are not distributed in the form of dividends, but retained by directors for future expansion of the company. In the light of statement, write any three merits and three demerits of retained earnings.
Answer : Merits of Retained Earnings are
(i) Retained earnings are permanent source of funds for an organisation.
(ii) Retained earnings do not involve any explicit cost in the form of interest, dividend or floatation cost.
(iii) This source offers a greater degree of operational freedom and flexibility.
Demerits of Retained Earnings are
(i) Excessive ploughing back may cause dissatisfaction amongst the shareholders, as they would get lower dividends.
(ii) As the profits of business are fluctuating, it is an uncertain source of fund.
(iii) Firms do not recognise the opportunity cost associated with this source, leading to sub-optimal use of funds.

Question. Glenn started his firm manufacturing textiles in a small city in Gujarat. It was a small firm which manufactured gloves and socks. Majority of the work was done by hands. As the demand for his goods increased, he decided to purchase small machines. However, he found that he was short of capital. He pondered and approached an organisation which helped him to get supplies of imported machines on hire-purchase schemes. Identify the institutional support highlighted here and state its other functions.
Answer : The institutional support highlighted here is National Small Industries Corporation (NSIC). The functions are
(i) It launches various schemes and extends support to help small scale entrepreneurs.
(ii) It exports the product of small units and help to establish their credit worthiness.
(iii) It helps in upgradation of technology.
(iv) It provides mentoring and advisory services.
(v) It serves as technology business incubator.
(vi) It develops software technology parks and technology transfer centres.

Question. For a developing economy like India, there is a desperate need of entrepreneurship development. Why?
Answer : Need of entrepreneurship development arises due to the following reasons
(i) More Utilisation of Natural Resources It enables the economy to utilise and explore the abundant of natural resources.
(ii) Economic Growth and Development It provides the base of industrialisation in economy which is the main cause of economic growth and economic development
(iii) Capital Formation It encourages the establishment of new industries in economy which increase the capital formation rate in country.
(iv) Development of Backward and Tribal Areas It leads to scattering of economic activities in all areas of the country.

Question. The financial needs of the business can be categorised into fixed capital requirements and working capital requirements. Write the meaning and two features of both fixed capital requirements and working capital requirements.
Answer : The amount which is required to purchase fixed assets is known as fixed capital requirements of the enterprise.
Features of fixed capital requirements are(any two)
(i) Fixed capital requirements are more for a manufacturing firm as compared to a trading firm.
(ii) Fixed capital requirements are more for a business operating on a large scale.
(iii) Fixed capital requirements should be financed through long-term sources of finance.
The amount required to meet these needs is known as the working capital requirements of the business. Features of working capital requirements are (any two)
(i) The shorter the operating cycle, the lesser will be the amount of working capital required and vice-versa.
(ii) Working capital requirements are generally met through short-term sources of finance.
(iii) Working capital

Long Answer Type Questions :

Question. AMCD stores try to maximise customer satisfaction by providing additional facilities such as restaurants, travel and information bureau, free wi-fi zone, kids zone, rest rooms, etc. Identify the type of store and explain its advantages.
Answer : The type of store mentioned is departmental stores. Its advantages are
(i) Attract Large Number of Customers As these stores are centrally located, therefore they attract a large number of customers.
(ii) Convenience in Buying These stores offer a large variety of goods under one roof. Therefore, it is convenient for customers to purchase goods from these stores.
(iii) Attractive Services These stores provide extra services to the customers, such as, home delivery of goods, accepting orders through telephone and online, provision of rest rooms, restaurants, etc.
(iv) Economy of Large-scale Operations These stores are organised and managed on a large scale. Therefore, they are able to enjoy economies of large scale operations and increase their profits.
(v) Promotion of Sales The departmental stores are in a position to spend considerable amount of money on advertising and other promotional activities which help in boosting the sales.

Question. OPQR stores have got many stores in the country. The price of the goods is fixed and sales are made on cash basis. Daily sales are deposited in a local bank account and details to this regard are sent to the head office. Identify the type of stores and explain its advantages.
Answer : The type of store mentioned is Chain stores. Its advantages are (any five)
(i) Economies of Scale These stores also operate on a high scale and procure the goods centrally. Therefore, they are also able to enjoy economies of scale.
(ii) Elimination of Middlemen Through these stores, the manufacturers sells goods directly to the consumers, thus eliminating unnecessary middlemen in the sale and purchase of goods.
(iii) No Bad Debts All the sales in these stores are made in cash. Therefore, there is no question of bad debts.
(iv) Transfer of Goods In case of lack of demand, goods from one store can be transferred to another store.
(v) Diffusion of Risk The risk is spread over a number of shops. Loss from one shop can be recovered from the profit of another shop.
(vi) Low Cost Because of centralised purchasing, elimination of middlemen and centralised promotion of sales, chain stores have low operational costs.

Question. Differentiate between domestic business and international business on any five basis.
Answer :

Question. What do you understand by the term international business. State any three of its advantages to the firm.
Answer : Manufacturing and trading beyond the boundaries of one’s own country is known as international business. It can be defined as those business activities that take place across the national frontiers.
Its advantages to firms are (any three)
(i) Many business and industrial enterprises have unused capacity, that can be efficiently utilised for further production. Thus, surplus production can be used to generate extra profits from foreign trade.
(ii) Highly competitive domestic market drives many companies to go international in search of markets for their products.
(iii) When prices in the domestic market are low, firms can earn more profits by selling their products in those countries in which prices are high.
(iv) When the domestic demand for a firm’s product or services start getting saturated in the domestic market, then firms can considerably improve prospects of their growth by venturing out in the international market.

Question. Commercial banks such as State Bank of India (SBI), Canara Bank, etc, advance money to the business firms for different purposes and different time periods. What are the merits and demerits of such finance?
Answer : Merits of commercial institutions are
(i) Banks provide timely assistance to business by providing funds as and when needed.
(ii) Secrecy of business can be maintained as the information supplied to the bank by the borrowers is kept confidential.
(iii) Formalities such as issue of prospectus and underwriting are not required for raising loans from a bank. This, therefore, is an easier source of funds.
Demerits of commercial institutions are
(i) Funds are generally available for short periods and its extension or renewal is uncertain and difficult.
(ii) Banks make detailed investigation of the company’s affairs, financial structure, etc. This makes the procedure of obtaining funds slightly difficult.
(iii) In some cases, difficult terms and conditions are imposed by banks for the grant of loan.

Question. The government has established a number of financial institutions all over the country to provide finance to business organisations. These institutions are established by the Central as well as State Governments. What are the merits and demerits of such finance?
Answer : Merits of financial institutions are
(i) Financial institutions provide long-term finance that is not provided by the commercial banks.
(ii) These institutes not only provide funds but also extend technical and managerial support to business firms.
(iii) Only a promising and sound business is able to get a loan from these institutions. So, if a firm gets a loan from these institutes, then this will also help in raising the goodwill of the borrowing company in the capital market.
Demerits of financial institutions are
(i) Too many formalities are required by these institutes to grant a loan.
(ii) Restrictions are imposed by these institutes on companies such as restrictions on the payment of dividends or restrictions on the autonomy of management.
(iii) Generally, the financial institutions have their nominees in the Board of Directors of the borrowed company. This restricts their powers and the borrowed companies feel helpless in certain cases.

Question. Beauty House is a wholesaler in Meerut district of Uttar Pradesh dealing in Beauty products. It purchases products from multiple manufacturers and make them available to retailers. Since, the orders are of big-ticket size, at times, it allows the retailers to take goods on pay later basis. It even takes some advertising and promotional events to increase the secondary and tertiary sale in the market. It also inform the retailers about various new products, schemes and qualities of these products. The given text talks about multiple services offered by wholesalers to retailers. Highlighting the lines, identify and explain any three those services.
Answer : Following services are highlighted in the case (any three)
(i) Availability of Goods The wholesalers make the products of various manufacturers readily available to the retailers. Because of this, the retailers are able to offer a variety of goods to their customers. Line “ It purchases products from multiple manufacturers and make them available to retailers.”
(ii) Marketing Support The wholesalers perform various marketing functions such as advertisement and other sales promotional activities to induce customers to purchase the goods. This increases the demand of the products which results in increased profits for the retailer. Line “It even takes some advertising and promotional events to increase the secondary and tertiary sale in themarket.”
(iii) Grant of Credit The wholesalers generally extend credit facilities to retailers. This enables them to manage their business with relatively small amount of working capital.
Line “Since, the orders are of big-ticket size, at times, it allows the retailers to take goods on pay later basis”
(iv) Specialised Knowledge The wholesalers specialise in one line production. They inform the retailers about the new products, their uses, quality, prices, etc. Line “They also inform the retailers about various new products, schemes and qualities of these products.”

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