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

Sample Papers for Class 11

Please refer to Class 11 Business Studies Sample Paper Term 2 With Solutions Set B 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 B

Case Based MCQs :

WS limited is a wholesaler situated in Bangalore, Karnataka. It is managed by two brothers- Venky & Kartik. It serves as an important link between manufacturers and retailers. It takes delivery of the goods and keeps them in large lots in its warehouse. In this process, it helps the manufacturer a lot. After that it supplies goods to the retailers. Interestingly, WS limited do not ask for the payment immediately. This enables the retailers to manage their business with relatively small working capital. These retailers are the last step in the value chain and create place utility. These retailers make the goods available to the final consumers who purchase them and use them for their consumption. To further increase their income, the brothers have decided to open up a new store. The store will be a large establish- ment offering a wide variety of products which are dealt by WS limited only. However, the store will have products of multiple brands and not just one particular brand.

Question. Which type of trade is highlighted in the paragraph?
(a) Internal trade
(b) International trade
(c) Both of these
(d) None of these



Question. Which service of retailer to manufacturer is highlighted in the line, “These retailers make the goods available to the final consumers who purchase them and use them for their consumption.”?
(a) Help in Distribution of Goods
(b) Personal Selling
(c) Enabling Large-scale Operations
(d) Collecting Market Information



Question. Which service of wholesaler to manufacturer is highlighted in the line, “It serves as an important link between manufacturers and retailers. It takes delivery of the goods and keeps them in large lots in its warehouse”?
(a) Facilitating Large Scale Production
(b) Bearing Risk
(c) Financial Assistance
(d) Help in the Marketing Function



Question. Which type of stores is highlighted in the line, “The store will be a large establishment offering a wide variety of products which are dealt by WS limited only. However, the store will have products of multiple brands and not just one particular brand”?
(a) Departmental stores
(b) Chain stores
(c) Both of these
(d) None of these



Question. Which service of wholesaler to retailer is highlighted in the line, “WS limited do not ask for the payment immediately. This enables the retailers to manage their business with relatively small working capital.”?
(a) Availability of Goods
(b) Marketing Support
(c) Grant of Credit
(d) Risk Sharing



Short Answer Type Questions :

Question. One of the disadvantages of chain stores is that majority of the multiple shops deal only in  limited range of products. For example, Reebok deals in sports-wear and foot wear. These stores do not sell products of other manufacturers. Therefore, customers visiting these stores have only selected items to choose from. There are more such disadvantages, explain any three of the same.
Answer : Disadvantages of chain stores are
(i) Lack of Initiative The employees working in these stores work on the instructions of the head office. Also, they do not stand to benefit in any way by the sales made by them. So, they do not take initiative on their own.
(ii) Lack of Personal Touch Due to operating on a large scale and lack of initiative on the part of employees, their dealings with customers lack personal touch.
(iii) Loss Due to Change in Demand If the demand for the goods sold by these stores change rapidly, then the management may have to sustain heavy losses, because of large stocks lying unsold at the central depot.

Question. Yash and Yashi were arguing whether international trade is actually necessary between the nations or is it just a fancy way to do business that gives no results. Help them in coming to a conclusion. 
Answer : Yash and Yashi can be brought to a conclusion that international trade is actually necessary between the nations because of the following reasons
(i) Uneven Distribution of Natural Resources All the countries cannot produce equally or cheaply becauses of uneven distribution of natural resources among them as well as differences in their productivity levels. Thus, contries exchange their surplus production with goods that they are in short supply in their country.
(ii) Factors of Production Availability Each country differ in terms of availability of various factors of production such as labour, capital and raw materials, needed for producing different goods and services.
(iii) Specialisation of Products Many countries specialise in the production of certain goods and services for which they have some advantages such as suitable climatic conditions, technical know how, high labour productivity, etc.
(iv) Benefits of Cost Cost of production differ in different countries due to different socio-economic, political and geographical conditions. Many of the countries are in a better position to produce some goods more economically than other countries. Thus, companies engage in international business so as to import available resources from other countries at lower prices and export goods on which they can fetch better prices.

Question. Departmental stores are large establishments offering a wide variety of products, classified into well-defined departments. In reference to the statement, state the features of departmental stores.
Answer : The following are the distinct features of departmental stores
(i) These stores are centrally located so that they can cater to large number of customers.
(ii) These 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.
(iii) These stores cater to that segment of customers for whom price is secondary.
(iv) The form of organisation for such stores is joint stock companies managed by Board of Directors.
(v) These stores purchase goods directly from the manufacturers and maintain their own warehouses where goods are stored. Thus, these stores combine the functions of retailing and
(vi) These stores have a centralised purchasing department, whereas sales are decentralised in different departments.

Question. Do you agree with the statement that “international business not only involve international movement of goods, but movement of few other things, too”? Also, explain how international trade helps firms in making way out to intense competition and improving the business vision?
Answer : Yes, I agree with the given statement. International business involves not only the international movement of goods and services, but also of capital, personnel, technology and intellectual property.
International trade helps the nations in the following ways
(i) Way Out to Intense Competition in Domestic Market Highly competitive domestic market drives many companies to go international in search of markets for their products.
(ii) Improved Business Vision Most enterprises have an urge to grow, to become more competitive, to diversify and derive the benefits of going global through international trade.

Question. Explain the concept of trade. Also, explain the classification of trade.
Answer : Trade refers to buying and selling of goods and services with the objective of earning profit. It bridges the gap between the producer and the consumer. The importance of trade in modern times has increased, as new products are being developed every day and are being made available for consumption throughout the world.
Trade can broadly be classified into two categories 
(i) Internal Trade Trade which takes place within a country is called internal trade.
(ii) External Trade Trade which takes place between two or more countries is called external trade.

Question. Jeetu is a retailer store owner dealing in stationery products. He has lot of experience in this particular industry now. He makes sure that all the products of different types and brands are available to customers. He is known for keeping a large variety of SKUs. He also educates the customers about the new product arrival and their uses. He even assists them in supplying them the refills of some of the products or even the repair of some medium to large items.
The above text talks about retailers’ services to customers. By quoting the lines, explain three such services.
Answer : Services of retailers to customers highlighted in the case are (any three)
(i) Regular Availability of Products The most important service of a retailer to consumers is to maintain regular availability of various products produced by different manufacturers.
Line “He makes sure that all the products of different types and brands are available to customers.”
(ii) New Products Information By arranging effective display of products, retailers provide important information about the arrival, special features, etc of products to the customers.
Line “He also educates the customers about the new product arrival and their uses.”
(iii) Wide Selection Retailers generally keep stock of a variety of products. This enables the consumers to make their choice.
Line “He is known for keeping a large variety of SKUs.”
(iv) After Sales Services Retailers provide important after-sales services in the form of home delivery, supply of spare parts etc.
Line “He even assists them in supplying them the refills of some of the products or even the repair of some medium to large items.”

Question. Explain the concept of international business. Also, define and explain the meaning of international trade as a part of international business.
Answer : International business can be defined as manufacturing and trading beyond the boundaries of one’s own country. It involves business activities that take place across the national frontiers. It involves not only the international movement of goods and services, but also of capital, personnel, technology and intellectual property like patents, trademarks,
copyright, etc. 
International trade is the component of International business. It comprises of buying and selling of goods and services beyond the geographical borders of the country. It is also referred to as ‘foreign trade’ or ‘external trade’. It can also be understood as exchange of goods and services between residents of different countries. It involves the use of foreign exchange to discharge trade obligations.

Question. What do you mean by international trade? Explain how international trade helps nations in earning foreign exchange and increase the standard of living?
Answer : International trade comprises of buying and selling of goods and services beyond the geographical borders of the country. It is also referred to as ‘foreign trade’ or ‘external trade’. It helps the nations in the following ways
i) Earning of Foreign Exchange International trade helps countries to earn foreign exchange. This helps a country to import those goods and services which it cannot produce efficiently.
ii) Increased Standard of Living International trade helps people of a country to have access to a large variety of goods and services. This helps them to improve their standard of living.

Long Answer Type Questions :

Question.Mention about the following problems of small scale industries in India.
(i) Quality
(ii) Capacity Utilisation
(iii) Technology
(iv) Sickness
(v) Global Competition
Answer : (i) Quality Many small business organisations do not adhere to desired standards of quality. Instead, they concentrate on cutting the cost and keeping the prices low. As they do not maintain quality, they are not able to compete in global markets. 
(ii) Capacity Utilisation Due to lack of marketing skills leading to lack of demand, many small business firms have to operate below full capacity due to which their operating costs tend to increase. This leads to sickness and closure of the business.
(iii) Technology Use of outdated technology is often stated as a serious problem of such enterprises. This results in low productivity and uneconomical production.
(iv) Sickness Prevalence of sickness in small industries has become a point of worry for both the policy-makers and the entrepreneurs. The causes of sickness are both internal and external.
(a) Internal problems include lack of skilled and trained labour, managerial and marketing skills.
(b) External problems include delayed payment, shortage of working capital, inadequate loans and lack of demand for their products.
(v) Global Competition In the present context of Liberalisation, Privatisation and Globalisation (LPG) policies being followed by several countries across the world. Small businesses feel threatened from the global entrepreneurs in the following areas
(a) Competitions from medium and large industries as well as multinational companies. 
(b) High quality standards, technological skills, financial credit worthiness, managerial and marketing capabilities of large industries.
(c) Due to strict requirements of quality certification like ISO 9000, small industries have limited access to markets of developed countries.

Question. Ishan is an inspirational boy who has always thought of solving the problems of this country. In his quest, he built a start-up which provided solutions for water pollution of the country. For a very long span of period, he worked on the model by using up his own savings. However, they soon reduced to almost nil making it difficult for him to continue. Fortunately, his model was highly appreciated by a leading CEO who decided to invest in the same from his own savings. Ishan started to refine his model and sell the same to some large authorities for mass implementation. To further expand, he decided to get funding from bank which involved the usual process of sharing the business plan and the valuation details. He still required some capital and therefore, reached to a professionally managed fund agencies who invest in companies that have huge potential in future.
Identify any four methods of start-up funding highlighted here by quoting the lines. Also, explain any two other methods available too.
Answer : The methods of start-ups funding highlighted in the passage are (any three)
(i) Bootstrapping Start-up Business It is known as self-funding. Entrepreneur can invest from their past saving or can get from family or friends. It is suitable only if the initial requirement is small. Line “For a very long span of period, he worked on the model by using up his own savings.” 
(ii) Bank Loan Funding from bank will involve the usual process of sharing the business plan and the valuation details, along with project report based on which the loan is sanctioned.
Line “To further expand, he decided to get funding from bank which involved the usual process of sharing the business plan and the valuation details.”
(iii) Angel Funding Angel investors take very early-stage business under their wing while venture capital or equity investors do not like to commit capital to tiny business. Line “Fortunately, his model was highly appreciated by a leading CEO who decided to invest in the same from his own savings.”
(iv) Venture Capital Venture capitals are professionally managed funds who invest in companies that have huge potential in future. They focus on sale rather than profit of ventures.
This type of funding is often obtained in exchange for an equity stake in business.
Line “….therefore, reached to a professionally managed funds who invest in companies that have huge potential in future.”
Other ways to funding (any two)
(i) Incubators They provide professional services that facilitates the development of new business by providing resources, support and advice. In India, more than 50% of the incubators are located in universities indicating role of universities in supporting new start-ups. e.g.
(a) Innovation and Entrepreneurship (SINE), IIT Mumbai
(b) Technology Business Incubator IIT Delhi
(ii) Accelerators Accelerators are organisations that offer a range of support service and funding opportunities for startups. They provide capital and investment in return for start-up equity. They target set action to boost the development and growth of a startups. e.g.
(a) Amity Innovation Incubator
(b) IAN Business Incubator, Kyron
(iii) Crowd Funding Crowd sourced funding is a means of raising money for a creative project (i.e, music, film book). It is a collection of funds from multiple investors through social networking sites for a specific project.

Question. Write five points elaborating the role of small-scale industries in India. 
Answer : Role of small scale industries in India can be understood with the help of following points (any five)
(i) Contribution in GDP Small industries in India account for 95% of the industrial units of the country. They contribute almost 40% of the gross industrial value added and 45% of the total exports (direct and indirect) from India.
(ii) Employment Generation In India, small industries are the second largest employers of human resources, after agriculture. They generate more employment opportunities per unit of capital invested as compared to large industries. Thus, they are considered good for countries like India, that have surplus labour and less capital.
(iii) 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. 
(iv) Balanced Regional Development As these industries produce products using simple technologies and depend on locally available resources in terms of both material and labour,
thus, they can be opened anywhere in the country, without any locational constraints and the benefits of industrialisation can be reaped by every region.
(v) Provide Business Opportunities They provide ample opportunity for entrepreneurship. The latent skills and talents of people can be channelled into business ideas, which can be
converted into reality with little or nil capital investment.
(vi) Low Cost of Production They also enjoy the advantage of low cost of production. This is because the establishment and running cost are minimal. Locally available resources are less expensive. Due to lower cost of production, they have competitive strength.

Question. What do you mean by public deposits? Mention its merits and demerits.
Answer : Public deposits refer to the deposits that are raised by business organisations directly from the public. Under it, a company directly raises loans from the public, in the form of deposits for a fixed period of time at a fixed rate of interest.
Merits of public deposits are
(i) The procedure of obtaining deposits is simple and does not contain restrictive conditions.
(ii) Cost of public deposits is generally lower than the cost of borrowings from banks and other institutions.
(iii) Public deposits do not usually create any charge on the assets of the company. 
Demerits of public deposits are
(i) New companies generally find it difficult to raise funds through public deposits.
(ii) It is an unreliable source of finance as the public may not respond when the company needs money.
(iii) Collection of public deposits may prove difficult, when the size of deposits required is large.

Question. Ravi is a learning enthusiast person who loves to explore new applications and software. Seeing the upsurge of working dashboards to present data in an attractive manner, he learnt Power BI to the depth. He soon became a master in this tool and started an online business of teaching Power BI courses to the students and professionals. His teaching style was liked by many and word of mouth spread like wildfire. He started earning good and generated good revenues. He then decided to launch similar courses on tableau, Excel & PowerPoint. However, he felt that rather than using a third-party site which cuts a huge commission on his revenue, he should collate all the courses and launch on his own website. The cost of creation of his dynamic website was ` 1,00,000 plus the cost of hosting which is ` 20,000. Rather than seeking help from anyone else, he decided to invest all his revenue in the same and launched his website.
Identify the source of finance highlighted in the passage and write its merits and demerits.
Answer : The source of finance highlighted here is retained earnings.
Merits of retained earnings are (any three)
(i) Retained earnings is a 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.
(iv) It enhances the capacity of business to absorb unexpected losses.
(v) It might lead to an increase in the market price of equity shares issued by the company.
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 ssociated with this source, leading to sub-optimal use of funds.

Question. Preference shares resemble debentures as they bear a fixed rate of return. Also, as the dividend is ayable only at the discretion of the directors and only out of profit after tax, to that extent, they resemble equity shares. In the light of the statement, explain the merits and demerits of preference shares.
Answer : Merits of preference shares are (any three)
(i) The dividends to be paid to the preference shareholders are fixed. This ensures the investors the security of fixed returns.
(ii) These shares are suitable for those investors who want fixed income with comparatively low risk.
(iii) It does not affect the control of equity shareholders. as these shares do not carry voting rights.
(iv) Payment of fixed dividends to preference shareholders enable a company to declare higher dividends for equity shareholders.
(v) The holders of these shares have a preferential right of repayment over equity shareholders, when the company liquidates.
(vi) Assets are not required to be mortgaged for raising preference share capital. Thus, the assets of the company are free from any charge and can be used to raise debt capital.
Demerits of preference shares are (any three)
(i) Preference shares are not suitable for those investors who are willing to take risk and are interested in higher returns.
(ii) These shares dilute the claim of equity shareholders over the assets of the company.
(iii) The company has to pay higher rates of dividends to the preference shareholders as compared to interest on debentures.
(iv) The dividend on these shares is to be paid only when the company earns profit. Thus, the returns are not assured and they are unable to attract the investors.
(v) The dividend paid on preference shares is not deductible from profits as expense. Thus, there is no tax savings, as in the case of interest on loans.

Question. Chetan Ltd is a public listed company in India listed on the stock exchanges in 2002. The company has maintained good Debt to Equity ratio till now. It has planned for expansion now and requires capital for the same. The company is considering the option which would help to maintain the ratio further and therefore, decides to raise funding through issue of shares. The company allotted shares in the following ways
(i) 20,00,000 shares were allotted to shareholders who were ready to take more risks from the company and to assume the voting rights.
(ii) 10,00,00 shares were allotted to shareholders who wanted to to receive dividend at a predetermined rate Identify the types of shares highlighted and write merits of case (i) and demerits of case (ii).
Answer : Case (i) 20,00,000 shares were allotted to shareholders who were ready to take more risks from the company and to assume the voting rights Shares highlighted in this case are equity shares. Merits of equity shares are (any three)
(i) Equity shares are suitable for those investors who are willing to assume risk for higher returns. 
(ii) Payment of dividend to the equity shareholders is not compulsory. Therefore, there is no burden on the company.
(iii) It is considered as a good source of long-term finance. A company is not required to pay back the equity capital during its lifetime. It is repaid only at the time of liquidation of company. Also, since it is paid last, even on liquidation, therefore it provides a cushion for creditors. Thus, it is a permanent source of capital.
(iv) Equity capital provides credit worthiness to the company and confidence to prospective loan providers.
Case (ii) 10,00,00 shares were allotted to shareholders who wanted to to receive dividend at a predetermined rate. Shares highlighted in this case are preference shares.
Demerits of Preference shares are (any three)
(i) Preference shares are not suitable for those investors who are willing to take risk and are interested in higher returns.
(ii) These shares dilute the claim of equity shareholders over the assets of the company. 
(iii) The company has to pay higher rates of dividends to the preference shareholders as compared to interest on debentures.
(iv) The dividend on these shares is to be paid only when the company earns profit. Thus, the returns are not assured and they are unable to attract the investors.

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

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