Question 1

Liability of Karta in HUF business is generally:

Accepted Answer

Karta’s liability is unlimited for business debts.

Question 2

Technological environment refers to:

Accepted Answer

Technology changes products, processes and competitiveness.

Question 3

The main motive of co-operative society is:

Accepted Answer

Service motive and member welfare are central.

Question 4

A limitation of SWOT analysis is:

Accepted Answer

SWOT depends on judgement and quality of information.

Question 5

Support institutions for small business mainly provide:

Accepted Answer

Support bodies assist through training, finance facilitation, infrastructure and guidance.

Question 6

LLP is best described as:

Accepted Answer

LLP combines limited liability with partnership-style flexibility through LLP agreement.

Question 7

Commerce mainly creates:

Accepted Answer

Commerce facilitates distribution and exchange, creating time and place utility.

Question 8

A major disadvantage of company form is:

Accepted Answer

Companies require registration, filings, audits and statutory disclosures.

Question 9

Industry creates:

Accepted Answer

Industry is concerned with production/processing and creates form utility.

Question 10

A key principle of corporate governance is:

Accepted Answer

Transparency requires timely and accurate disclosure.

Question 11

The principle of democratic control in co-operatives means:

Accepted Answer

Co-operatives follow one member one vote irrespective of shares.

Question 12

MOA has higher authority than AOA because:

Accepted Answer

AOA is subordinate to MOA and must be consistent with MOA and Companies Act.

Question 13

An entrepreneur is a person who:

Accepted Answer

Entrepreneur identifies opportunity, organises resources and bears risk to run enterprise.

Question 14

A promoter is a person who:

Accepted Answer

Promoter undertakes formation and preliminary steps for incorporation.

Question 15

Partnership deed is:

Accepted Answer

Partnership deed records terms and conditions of partnership.

Question 16

Triple Bottom Line focuses on:

Accepted Answer

TBL balances social, environmental and economic performance.

Question 17

Promotion of a company refers to:

Accepted Answer

Promotion includes idea, feasibility and steps to form and register a company.

Question 18

Liability of coparceners in HUF is:

Accepted Answer

Coparceners have limited liability, usually up to their share in family property.

Question 19

Profit motive in business is mainly important for:

Accepted Answer

Profit provides a reward for risk and supports survival, expansion and innovation.

Question 20

In a partnership firm, business is carried on under:

Accepted Answer

Partnership is governed by partnership agreement/deed.

Question 21

Define co-operative society.

Accepted Answer

A co-operative society is a voluntary association of persons formed to promote the common economic interests of its members through mutual help and democratic control.

Question 22

What is partnership deed?

Accepted Answer

Partnership deed is a written agreement stating the terms and conditions of partnership among partners.

Question 23

What is mutual agency?

Accepted Answer

Mutual agency means each partner is an agent and principal—any partner can act on behalf of the firm and bind the other partners.

Question 24

Expand SWOT.

Accepted Answer

SWOT stands for Strengths, Weaknesses, Opportunities and Threats.

Question 25

Define business environment.

Accepted Answer

Business environment refers to all internal and external factors that influence the decisions, operations and performance of a business.

Question 26

What is Articles of Association (AOA)?

Accepted Answer

AOA is a document containing internal rules and regulations for management and administration of the company.

Question 27

State any one role of small business in India.

Accepted Answer

Small businesses generate large-scale employment with relatively low capital investment in India.

Question 28

Define entrepreneurship.

Accepted Answer

Entrepreneurship is the process of starting and managing a new enterprise by converting an idea into a business through innovation, organisation of resources and risk-taking.

Question 29

What is Certificate of Incorporation?

Accepted Answer

Certificate of Incorporation is a certificate issued by the Registrar of Companies confirming that the company is registered and legally formed as a separate entity.

Question 30

State any one economic objective of business.

Accepted Answer

Earning profit is an economic objective of business; it is necessary for survival and growth.

Question 31

Differentiate between micro and macro environment.

Accepted Answer

**Micro environment** includes factors that directly affect a firm’s operations such as customers, suppliers, competitors, intermediaries and publics. **Macro environment** includes broad forces that indirectly affect the firm such as economic conditions, political/legal policies, social trends, technology and environmental factors. Micro is firm-specific; macro affects all businesses.

Question 32

Explain the objectives of business.

Accepted Answer

Business objectives include **economic objectives** such as earning profit, survival, growth/expansion and improving efficiency through innovation. It also has **social objectives** like supplying quality goods at fair prices, generating employment and fair wages, employee welfare and safe working conditions, customer protection and honest dealings, and protection of environment through sustainable practices. Both sets of objectives are important for long-term success.

Question 33

Explain functions of an entrepreneur.

Accepted Answer

An entrepreneur performs functions such as **identifying business opportunities**, preparing plans and feasibility studies, and **organising resources** like finance, manpower, technology and materials. He bears **risk**, introduces **innovation** in product/process/market, coordinates activities and takes important decisions. He also monitors and controls performance to achieve goals.

Question 34

Write a short note on LLP as a form of business organisation.

Accepted Answer

LLP is a hybrid form combining partnership flexibility with limited liability. It has **separate legal entity** and partners’ liability is **limited**, protecting personal assets in most cases. Internal management is governed by an **LLP agreement**, making it more flexible than a company. LLP is suitable for professional and service businesses where limited liability and flexible management are both required.

Question 35

State important clauses of MOA.

Accepted Answer

Important clauses of MOA include **Name clause**, **Registered office (situation) clause**, **Object clause** (main and ancillary objects), **Liability clause**, **Capital clause** and **Association/Subscription clause**. These clauses define the identity, location, scope, liability and capital structure of the company.

Question 36

Explain the factors affecting the choice of form of business organisation in detail.

Accepted Answer

The choice of a suitable form of business organisation is an important decision because it affects ownership, liability, capital, control and future growth. The major factors are:

1. **Nature of business and size of operations:** Small trading and service activities may suit proprietorship or partnership, while large manufacturing and complex operations may require company/LLP.
2. **Capital requirement:** Low capital needs favour proprietorship/partnership; large capital requirements favour company (issue of shares/debentures) or LLP.
3. **Risk and liability:** High-risk businesses prefer limited liability forms (company/LLP) to protect owners’ personal assets.
4. **Control and management:** If the owner wants full control and quick decisions, proprietorship is suitable. For shared control with combined skills, partnership/LLP is suitable. In a company, ownership and management are separated and control is through Board of Directors.
5. **Continuity and stability:** Proprietorship and partnership may be affected by death/insolvency; company and LLP provide better continuity (perpetual succession).
6. **Legal formalities and cost:** Proprietorship has minimum formalities, partnership has low formalities, while company requires registration, disclosures and higher compliance cost.
7. **Secrecy and flexibility:** Proprietorship provides maximum secrecy and flexibility; company has more disclosure and is comparatively less flexible.
8. **Transferability and growth needs:** Company shares are transferable and it is better suited for large-scale growth.

Thus, the form should be selected after balancing capital needs, risk, control, continuity and compliance requirements.

Question 37

Explain objectives of business. Classify them into economic and social objectives with suitable points.

Accepted Answer

Business objectives are the results which a business aims to achieve through its activities. These objectives guide decision-making and performance.

**(A) Economic objectives:**
1. **Earning profit:** Profit is necessary for survival, risk-bearing and expansion.
2. **Survival:** Maintaining continuity in competitive and changing conditions.
3. **Growth and expansion:** Increasing sales, market share, capacity, diversification and entering new markets.
4. **Efficiency and innovation:** Improving productivity, reducing cost, improving quality and adopting new technology for better performance.

**(B) Social objectives:**
1. **Supply of quality goods/services at fair prices:** Ensuring consumer satisfaction and protection.
2. **Employment generation and fair wages:** Providing job opportunities and fair compensation.
3. **Employee welfare:** Safe working conditions, training, welfare and healthy industrial relations.
4. **Environmental protection:** Pollution control and sustainable use of resources.
5. **Community development (CSR):** Contribution to education, health, sanitation and social welfare.

A modern business cannot focus only on profit; balancing economic and social objectives leads to goodwill, stability and long-term success.

Question 38

Define entrepreneur and entrepreneurship. Explain functions of an entrepreneur and its importance in economic development.

Accepted Answer

An entrepreneur is a person who identifies business opportunities, organises resources, bears risk and starts and manages an enterprise. Entrepreneurship is the process of converting an idea into a business through innovation, planning, organisation of resources and risk-taking.

**Functions of an entrepreneur:** An entrepreneur identifies opportunities and generates business ideas. He conducts feasibility studies and prepares plans. He arranges and organises resources such as finance, manpower, materials and technology. He bears risks and uncertainty and takes key decisions. He introduces innovation in product, process, market or methods and coordinates and leads employees. He also controls operations and monitors performance to achieve objectives.

**Importance in economic development:** Entrepreneurship is crucial for development because it creates **employment** and promotes self-employment. Entrepreneurs introduce **innovation**, improve productivity and create new products and services. They increase **industrial output**, generate income and contribute to GDP and tax revenue. Entrepreneurship promotes balanced regional development by setting up units in different areas and supports exports and competitiveness. Therefore, entrepreneurs act as a driving force for growth and modernization of the economy.

Question 39

Explain SWOT and PESTLE analysis. How do these tools help in strategic planning?

Accepted Answer

**SWOT analysis** is a tool used to identify internal **Strengths** and **Weaknesses** and external **Opportunities** and **Threats**. Strengths may include strong brand, skilled workforce or good technology; weaknesses may include poor finance or outdated processes. Opportunities may include new markets or favourable policies; threats may include competition or recession. SWOT matrix helps develop strategies: SO, ST, WO and WT.

**PESTLE analysis** examines the macro environment through **Political, Economic, Social, Technological, Legal and Environmental** factors. It helps understand government policies, economic conditions like inflation, social trends like changing preferences, technological innovations, legal compliance requirements and environmental sustainability issues.

**Role in strategic planning:** These tools help management understand the organisation’s position and external conditions. SWOT helps match internal capabilities with external opportunities and manage weaknesses and threats. PESTLE provides early warning of external changes and helps in forecasting and risk assessment. Together they support better strategy formulation, resource allocation and timely corrective actions for long-term growth and survival.

Question 40

Explain partnership deed and write the important clauses of a partnership deed. Why is it necessary?

Accepted Answer

A partnership deed is a written agreement that contains the terms and conditions on which a partnership business is carried on. Although partnership can be formed orally, a written deed is highly advisable.

**Important clauses of partnership deed:**
1. Name of the firm and nature/place of business
2. Names and addresses of partners
3. Capital contribution of each partner
4. Profit and loss sharing ratio
5. Drawings and interest on drawings
6. Interest on capital and interest on partners’ loans/advances
7. Salary, commission or remuneration to partners
8. Duties, powers and responsibilities of partners; division of work
9. Accounting system, books of accounts, audit (if any) and closing of accounts
10. Bank operation and authority to sign cheques
11. Rules for admission, retirement, expulsion and death of partners
12. Valuation and treatment of goodwill
13. Settlement of disputes and arbitration clause
14. Duration of partnership and method of dissolution

**Necessity/importance:** The deed provides clarity and prevents misunderstandings by defining rights and duties. It serves as evidence in case of disputes, ensures smooth functioning of the firm and helps in fair settlement of accounts at retirement or dissolution.

Business Organization — Question Paper

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