Business Studies: Sole Proprietorship & Partnerships
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Questions and Answers

Which of the following is NOT a disadvantage of a sole proprietorship?

  • Unlimited Uncertainty
  • Easy to Set Up (correct)
  • Unlimited Liability
  • Limited Capital

    • A sole proprietor is personally liable for all the debts of the business.

    True (A)

    What is the main reason why a sole proprietorship might have limited expansion opportunities?

    Limited capital and managerial capabilities.

    A key feature of a partnership is that each partner is an implied ______ of the firm.

    <p>agent</p> Signup and view all the answers

    What is the minimum number of persons required for a partnership?

    <p>2 (A)</p> Signup and view all the answers

    A partnership agreement must always be in writing.

    <p>False (B)</p> Signup and view all the answers

    Match the following terms with their correct definitions:

    <p>Mutual Agency = Each partner is an implied agent of the firm. Lawful Business = The business must be legal and not violate any laws. Limited Liability = The partners are only liable for the amount of their investment. Unlimited Liability = The partners are personally liable for all debts of the business. Unlimited Uncertainty = The business's existence depends on the life of the partners.</p> Signup and view all the answers

    Explain the significance of the MALTS SUURJ acronym in relation to partnership features.

    <p>It represents the key features of a partnership, including Mutual Agency, Agreement, Lawful Business, Two or more persons, Specific legal entity, Unlimited Liability, Sharing of profits, and Joint liability.</p> Signup and view all the answers

    What is the upper limit of investment for small units in the service category?

    <p>2 crores (A)</p> Signup and view all the answers

    Micro units in the industry category can have an investment of up to 50 lakhs.

    <p>False (B)</p> Signup and view all the answers

    List one role of small-scale industry in India.

    <p>Mobilization of local resources</p> Signup and view all the answers

    Small industries contribute to _____ percent of exports of non-traditional items.

    <p>40</p> Signup and view all the answers

    Which of the following is NOT a role of small-scale industry?

    <p>Creation of large corporations (A)</p> Signup and view all the answers

    Match the following categories of MSME with their capital limits:

    <p>Micro Units = Up to 25 lakhs Small Units = From 25 lakhs to 5 crores Medium Units = From 5 crores to 10 crores Large Units = Above 10 crores</p> Signup and view all the answers

    Commerce deals only with the buying and selling of goods and not with services.

    <p>False (B)</p> Signup and view all the answers

    What is one advantage of small-scale industries in the context of entrepreneurship?

    <p>Less capital required</p> Signup and view all the answers

    Which of the following is NOT considered a merit of government companies?

    <p>Lack of accountability (C)</p> Signup and view all the answers

    Government companies are fully accountable to the parliament and general public.

    <p>False (B)</p> Signup and view all the answers

    What is the role of a promoter in the formation of a company?

    <p>To discover business opportunities and organize funds, property, and management.</p> Signup and view all the answers

    A government company is particularly useful to start an enterprise with a view to transfer to the ________ sector.

    <p>private</p> Signup and view all the answers

    Match the characteristics of global enterprises with their descriptions:

    <p>Large size = Control assets worth trillions of dollars Integrated structure = Coordination between different divisions Transfer of resources = Capital and knowledge from one country to another Geographical dispersion = Located in many countries</p> Signup and view all the answers

    Political interference in government companies primarily leads to which of the following issues?

    <p>Red tapism (B)</p> Signup and view all the answers

    The first step in the formation of a public company is incorporation.

    <p>False (B)</p> Signup and view all the answers

    What is one of the typical forms a global enterprise may take?

    <p>Franchises, branches, or joint ventures.</p> Signup and view all the answers

    What is the first stage in the promotion process?

    <p>Discovery (C)</p> Signup and view all the answers

    The detailed investigation focuses solely on the technical aspects of the business idea.

    <p>False (B)</p> Signup and view all the answers

    What document is prepared to persuade the public for financial support?

    <p>prospectus</p> Signup and view all the answers

    The promoter's role includes _____ various documents to get the company incorporated.

    <p>preparing</p> Signup and view all the answers

    Match the following stages of promotion to their descriptions:

    <p>Discovery = Finding a viable business opportunity Detailed investigation = Assessing feasibility and profitability Assembly = Organizing resources and materials Financing of proposition = Attracting investment through a prospectus</p> Signup and view all the answers

    Which of the following is not a role of a promoter?

    <p>Conducting regular audits (A)</p> Signup and view all the answers

    The assembly stage involves acquiring patent rights and purchasing machinery.

    <p>True (A)</p> Signup and view all the answers

    What is included in a project report or feasibility report?

    <p>market demand, availability of raw materials, competition, selling price, and profits</p> Signup and view all the answers

    What is a primary goal of cooperating with the state in policy decisions?

    <p>Solving national problems such as poverty (A)</p> Signup and view all the answers

    It is important to protect trade union rights in order to support workers' participation in management.

    <p>True (A)</p> Signup and view all the answers

    What are some negative impacts of industrialization on the environment?

    <p>Pollution of air, water, and noise.</p> Signup and view all the answers

    The _____ of trade unions is necessary for safeguarding workers' rights.

    <p>protection</p> Signup and view all the answers

    Match the following concepts in policy decisions with their descriptions:

    <p>Sense of belonging = Fair prices for goods Cooperation with state = Solving national problems Customer complaints = Handling issues related to service Cost reduction benefits = Lower prices for consumers</p> Signup and view all the answers

    What factor contributes to the rapid growth of environmental pollution?

    <p>Rapid industrialization and growing population (C)</p> Signup and view all the answers

    Assisting local bodies in providing amenities is unrelated to improving public welfare.

    <p>False (B)</p> Signup and view all the answers

    What is one approach to help weaker sections of society, such as scheduled tribes?

    <p>Benefits of cost reduction leading to lower prices.</p> Signup and view all the answers

    What is contained in a standard prospectus?

    <p>Nature and main objectives of the business (B)</p> Signup and view all the answers

    A Red-Herring Prospectus contains complete details on the price of securities.

    <p>False (B)</p> Signup and view all the answers

    What is a Statement in Lieu of Prospectus?

    <p>A document filed by a public company to raise capital without a prospectus.</p> Signup and view all the answers

    A public enterprise is controlled and managed by the ______.

    <p>Government</p> Signup and view all the answers

    Match the following types of prospectus with their correct definitions:

    <p>Shelf Prospectus = Issued for securities over a period without a new prospectus Red-Herring Prospectus = Does not contain complete price details Statement in Lieu of Prospectus = Filed when raising capital privately without public notice Prospectus = Detailed statement for raising capital via public offering</p> Signup and view all the answers

    Which of the following is NOT a characteristic of public enterprises?

    <p>Private profit maximization (B)</p> Signup and view all the answers

    For a public company to allot shares privately, it must publish a prospectus.

    <p>False (B)</p> Signup and view all the answers

    What percentage of shares must the government hold for a company to be considered a public enterprise?

    <p>More than 51%</p> Signup and view all the answers

    Study Notes

    Commerce Notes

    • Business activities are broadly divided into industry and commerce.
    • Industrial activities involve growing, extending, and manufacturing material goods.
    • Key characteristics of industries are wide scope, economic activity, economic development, production, and creation of utility.
    • Primary industries provide basic raw materials from natural sources.
      • Two types: Genetic industries breed certain plants and animals for profit; and Extractive industries extract materials from natural sources.
    • Secondary industries process or transform raw or semi-finished goods into finished products.
      • Includes Analytical (extraction of many goods from a single material), Synthetic (combining two or more materials), Processing (transforming materials to a final product form), and Assembly industries (combining components to create a final product)
    • Construction industries create basic infrastructure, such as buildings and bridges.
    • Industries contribute to economic development.
    • Classification of industries: MO BEEFS
      • Mobilization of local resources
      • Optimization of Capital
      • Balanced regional development
      • Egalitarian Society
      • Exchange Earnings
      • Feeder to larger industries
      • Social advantage

    Small Medium Macro Enterprises (SMEs)

    • Categorization by size according to the MSME Act 2006.
      • Micro Units: Industry- Up to 25 lacs; Service - Up to 10 lacs
      • Small Units: Industry - 25 lacs to 5 crores; Service - 10 lacs to 2 crores
      • Medium Units: Industry - 5 crores to 10 crores; Service - 2 crores to 5 crores
      • Large Units: Industry - above 10 crores; Service - above 5 crores

    Branches of Commerce

    • Trade is the process of procuring and purchasing goods and services with the object of selling them for profit.
    • Types of trade:
      • Home Trade (domestic/internal)- Buying/selling within a country;
        • A) Wholesale dealing in large quantities for resellers; B) Retail dealing in smaller quantities for final customers
      • Foreign Trade- buying/selling between countries -A) Export- selling goods to foreign buyers; B) Import- purchasing goods from foreign sellers; C) Entrepot-buying from one and selling to another country (re-export trade)
    • Aids to Trade: Include transportation, warehousing, and insurance to facilitate trade.

    Branches of Commerce

    • Commerce encompasses buying and selling and the related activities such as transportation, warehousing, banking, insurance, advertising and publicity. It removes hindrances of place, time, exchange, risk, and knowledge.

    Sole Traders

    • Definition: A business organization where one person invests all the capital, manages and has control of the business. They face unlimited liability if the business is dissolved.
    • Characteristics: Single ownership and control, no legal formalities, no legal separate entity, no sharing of profits, unlimited liability, small size, and ease of formation.
    • Objectives: Creating self-employment, utilizing funds, serving customers, leading an independent life, equitable distribution of wealth and a feeder to larger companies.
    • Merits: Personal touch, flexibility, economy, easy formation, easy dissolution, minimum government regulation.
    • Demerits: Limited capital, limited managerial capabilities, limited scope for expansion, unlimited liability, lack of continuity, and secrecy.

    Partnerships

    • Definition: A relationship between two or more persons who agree to share profits of a business carried on by all or any of them acting for all.
    • Features: Mutual agency, Agreement, Lawful business, Two or more persons, Sharing of profit, No legal separate entity.
    • Formation: Two or more persons agree to do business and share profits.
    • Partnership Deed: Contains rules on profit/loss sharing and responsibilities.
    • Types: General partnership and Limited liability partnership.
    • Advantages/Disadvantages: Easy formation, more capital than sole trader, specialization and expertise sharing, more flexibility, and quick decision making. Limited life and risk sharing, uncertainty of continuity, disagreement and conflict.

    Joint Stock Companies

    • Definition: An association of persons with a separate legal entity, perpetual succession, and common seal. Capital is divided into freely transferable shares.
    • Features: Separate Legal existence, Separate ownership and control, Statutory control and regulation, Perpetual succession, Limited liability, Transferability of shares
    • Distinct characterestics from partnerships
    • Benefits: Larger capital, limited liability, continuity, and ease of transfer.
    • Merits: Large capital, limited liability, continuity, wider ownership, easy transferability.
    • Demerits: More legal formalities, more rigid rules, lack of secrecy, and potential for conflicts.

    Types of Companies

    • Chartered companies are established under royal charters.
    • Statutory companies are incorporated under a special Act of the legislature.
    • Company based on ownership: Private companies need a minimum of 1 lac in paid up capital and limit the members, while Public companies have no limitation of members and need 5 lacs in paid up capital.
    • Companies based on liability: Limited by shares, Limited by guarantee, and Unlimited.

    Public Enterprises

    • Definition: Commercial and industrial undertakings owned, controlled, and managed by the government.
    • Characteristics: Service motive, state ownership/control, government financing, public accountability, and autonomous operation.
    • Merits: Secrecy, aid to public revenue, instrument for social change, direct government control, public accountability, and public interest.
    • Demerits: Lack of accountability, political interference, lack of motivation, and conflicts.

    Public Utility Companies

    • Types: Companies related to electricity, gas, water, and transport etc.
    • Characteristics: Supply of essential services, heavy fixed investment, inelastic demand, and non-transferable demand, monopoly position.

    Public-Private Partnerships (PPPs)

    • Definition: A partnership between a public sector and a private sector in financing, design, and developing infrastructure and facilities.
    • Features: Partnership, pooling of resources, high priority projects, revenue sharing, and attractive capital.
    • Benefits: Financial burden on the government is reduced, faster implementation, better quality services, cost reduction, and risk sharing.
    • Demerits: Government accountability and potential conflicts.

    Cooperative Organizations

    • Definition: A society with cooperative principles aimed at promoting the economic interests of its members.
    • Features: Separate legal entity, service motive, state control, one-man-one-vote, limited return, disposal of surplus, voluntary association, religious and political neutrality, and continuous existence.
    • Types: Consumer cooperatives, producer cooperatives, housing cooperatives, and credit cooperatives.
    • Merits: Democratic management, limited liability, low operating costs, internal financing, continuity and stability, cheaper and better supplies, and social utility.
    • Demerits: Limited capital, lack of motivation, lack of secrecy, inefficient management, disagreements among people, and difficulty in transfer of interest.

    Government Regulation of Business

    • Regulatory bodies control and oversee business activities to protect consumers, ensure fair practices, and maintain market stability.

    E-Business

    • Definition: Conducting business activities with the support of electronic media and communication.
    • Advantages: Global reach, wider market, ease of formations, reduced costs, swift transaction times, efficiency, increased convenience and new businesses.
    • Disadvantages: Security threats, technical dependence, high investment and low return, and limited customer dealings.

    Stock Exchanges

    • Definition: A marketplace for buying, selling, and trading securities (shares, bonds, etc.).
    • Functions: Price determination, protection of investors, ready market, capital formation, channel for investments, clearing house of information, facilitating the distribution of new securities, and economic barometer.
    • Services to the stock exchange such as wider market, high share prices, price stability, and dealing with security
    • Services to investors such as easy marketability, loan facility, ease in purchase sell, safe transaction, timely trading/investment advise and public confidence about the security investments etc

    Retailing

    • Definition: The activities involved in purchasing goods in bulk from wholesalers and selling in smaller quantities to consumers for personal or household use.
    • Types: Mobile trading, fixed shops, chain stores, and mail order business.

    Other types

    • Hyper markets
    • Consumer Cooperative stores
    • Franchising.
    • Wholesale trade

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    Commerce Notes PDF

    Description

    Test your knowledge on the concepts of sole proprietorship and partnerships in business studies. This quiz covers topics such as liabilities, expansion opportunities, and characteristics of partnerships. Prepare to match terms with definitions and understand the significance of small-scale industries in India.

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