(b) has no restriction on transfer securities; and

(c) is not prohibited from inviting the public to subscribe to its securities.
However, a private company which is a subsidiary of a public company is also
treated as a public company.
Privileges of a private limited company as against a public limited
company:
1. A private company can be formed by only two members whereas seven
people are needed to form a public company.
2. There is no need to issue a prospectus as public is not invited to subscribe
to the shares of a private company.
3. Allotment of shares can be done without receiving the minimum
subscription. A private limited company can start business as soon as it
receives the certificate of incorporation.
4. A private company needs to have only two directors as against the minimum
of three directors in the case of a public company. However, the maximum
number of directors for both types of companies is fifteen.
5. A private company is not required to keep an index of members while the
same is necessary in the case of a public company.
One Person Company
One Person Company is a company with only one person as a member. That
one person will be the shareholder of the company. It avails all the benefits of
a private limited company such as separate legal entity, protecting personal
assets from business liability and perpetual succession.
Formation of a Company: Formation of a company is a complex activity
involving completion of legal formalities and procedures. These formalities can
be divided into three distinct stages, which are:
(i) Promotion; (ii) Incorporation and (iii) Subscription of capital.
1. Promotion of a Company: Promotion is the first stage in the formation of
a company. It involves conceiving a business idea and taking an initiative to
form a company so that practical shape can be given to exploiting the available
business opportunity.
Any person or a group of persons or even a company may have discovered an
opportunity. If such a person or a group of persons or a company proceeds to
form a company, then, they are said to be the promoters of the company.
Steps in Promotion:

➢ Identification of Business Opportunity: The first and foremost function

of a promoter is to identify a business idea e.g. production of new product or
service.

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➢ Feasibility Studies: After identifying a business opportunity the promoters
undertake detailed studies of technical, Financial, Economic feasibility of a
business.

➢ Name Approval: After selecting the name of company the promotors submit
an application to the Registrar of companies for its approval.

➢ Fixing up signatories to the Memorandum of Association: Promotors

have to decide about the director who will be signing the memorandum of
Association.

➢ Appointment of professional: Promoters appoint merchant bankers,

auditors etc.

➢ Preparation of necessary documents: The promoters prepare certain legal

documents such as memorandum of Association, Articles of Association
which have to be submitted to the Registrar of the companies.
2.Incorporation
➢ Application for incorporation: Promoters make an application for the
incorporation of the company to the Registrar of companies.

➢ Filing of necessary documents: Promoters files the following documents:

(i) Memorandum of Association.
(ii) Articles of Association.
(iii) Statement of Authorized Capital
(iv) Consent of proposed director.
(v) Agreement with proposed managing director.
(vi) Statutory declaration.

➢ Payment of fees: Along with filing of above documents, registration fee has
to be deposited which depends on amount of the authorized capital.

➢ Registration: The Registrar verifies all the document submitted. If he is

satisfied then he enters the name of the company in his Register.

➢ Certificate of Incorporation: After entering the name of the company in

the register. The Registrar issues a Certificate of Incorporation. This is called
the birth certificate of the company.
3 Capital Subscription: A public company can raise funds from the
public by issuing shares and Debentures. For this it has to issue
prospectus and undergo various other formalities:
Steps in capital subscription:
1. SEBI Approval: SEBI regulates the capital market of India. A public
company is required to take approval from SEBI.
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2. Filing of Prospectus: Prospectus means any documents which invites
offers from the public to purchase share and Debenture of the company.
3. Appointment of bankers, brokers, underwriters: Banker of the company
receive the application money. Brokers encourage the public to apply for the
shares, underwriters are the person who undertake to buy the shares if these
are not subscribed by the public. They receive a commission for underwriting.
4. Minimum subscription: According to the SEBI guide lines minimum
subscription is 90% of the issue amount. If minimum subscription is not
received then the allotment cannot be made and the application money must
be returned to the applicants within 30 days.
5. Application to Stock Exchange: It is necessary for a public company to
list their shares in the stock exchange therefore the promoters apply in stock
exchange to list company shares.
6. Allotment of Shares: Allotment of shares means acceptance of share
applied. Allotment letters are issued to the shareholders. The name and
address of the shareholders submitted to the Registrar.
4. COMMENCEMENT OF BUSINESS: To commence business a public
company has to obtain a certificate of commencement of Business. For this
the following documents have to be filled with the registrar of companies.
1. A declaration that 90% of the issued amount has been subscribed.
2. A declaration that all directors have paid in cash in respect of allotment of
shares made to them.
3. A statutory declaration that the above requirements have been completed
and must be signed by the director of company.
IMPORTANT DOCUMENTS IN THE FORMATION OF A COMPANY
1. Memorandum of Association: It is the most important document as it
defines the objectives of the company. No company can legally undertake
activities that are not contained in its Memorandum of Association.
Contents of Memorandum of Association:
(i) The name clause: This clause contains the name of the company with
which the company will be known.
(ii) Registered office clause: This clause contains the name of the state, in
which the registered office of the company is proposed to be situated.
(iii) Objects clause: It defines the purpose for which the company is formed.
(iv) Liability clause: This clause limits the liability of the members to the
amount unpaid on the shares owned by them.
(v) Capital clause: This clause specifies the maximum capital which the
company will be authorised to raise through the issue of shares.

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2. Articles of Association: Articles of Association are the rules regarding
internal management of a company. These rules are subsidiary to the
Memorandum of Association.
Contents of the Articles:
1. The amount of share capital and different classes of shares.
2. Rights of each class of shareholders.
3. Procedure for making allotment of shares.
4. Procedure for issuing share certificates.
5. Procedure for forfeiture and reissue of forfeited shares.
6. Rules regarding casting of votes and proxy voting
7. Procedure for selection and removal of directors
8. Dividend declaration and payment related rules
9. Procedure for capital readjustment
10. Procedure regarding winding up of the company.

3 . Prospectus: Prospectus means any document which invites deposits from

the public to purchase share or debentures of a company.

Choice of form of Business Organisation

(i) Cost and ease in setting up the organisation: From the point of view of
initial cost, sole proprietorship is the preferred form as it involves least
expenditure. Company form of organisation, on the other hand, is more
complex and involves greater costs.
(ii) Liability: In case of sole proprietorship and partnership firms, the liability
of the owners/partners is unlimited. In joint Hindu family business, only the
karta has unlimited liability. In cooperative societies and companies, however,
liability is limited.
(iii) Continuity: The continuity of sole proprietorship and partnership firms
is affected by death, insolvency or insanity of the owners. However, such
factors do not affect the continuity of business in the case of Joint Hindu
family business, cooperative societies and companies.
(iv) Management ability: A sole proprietor may find it difficult to have
expertise in all functional areas of management. If the organisation’s
operations are complex in nature and require professionalised management,
company form of organisation is a better alternative.
(v) Capital considerations: If the scale of operations is large, company form
may be suitable whereas for medium and small sized business one can opt
for partnership or sole proprietorship.
(vi) Degree of control: If direct control over operations and absolute decision-
making power is required, proprietorship may be preferred. But if the owners
do not mind sharing control and decision making, partnership or company
form of organisation can be adopted.
(vi) Nature of business: If direct personal contact is needed with the
customers, sole proprietorship may be more suitable. For large manufacturing
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units, however, when direct personal contact with the customer is not
required, the company form of organisation may be adopted. Similarly, in
cases where services of a professional nature are required, partnership form
is much more suitable.
MCQ QUESTIONS
1. The certificate of …………is called as the birth certificate of the
company.
A. Prospectus
B. Certificate of Incorporation
C. Certificate of commencement
D. Memorandum of Association
2. Assertion: A public company inviting funds from the general public
must make adequate disclosure of all relevant information and must
not conceal any material information from the potential investors.
Reason: Prior approval from SEBI is necessary for protecting the
interest of the investors.
(A) Both A and R are true. R is the correct explanation of A.
(B) Both A and R are true, but R is not the correct explanation of A.
(C) A is correct, but R is incorrect.
(D) A is incorrect, but R is correct.
3. Identify the stage which involves conceiving a business idea and taking
an initiative to form a company so that practical shape can be given to
exploiting the available business opportunity.
(A) Company (B) Promotion (C) Partnership (D) None of these
4. It is a popular form of business organisation and is the most suitable
form for small businesses, especially in their initial years of operation.
(A) Company (B) JHF (C) Partnership (D) Sole proprietorship
5. The Memorandum of Association must be signed by at least …. Persons
in case of a public company and by ….. persons in case of a private
company.
A. 1 and 2
B. 2 and 5
C. 2 and 7
D. 7 and 2
6. Assertion: Promoters have to decide about the members who will be
signing the Memorandum of Association of the proposed company.
Reason: The people signing memorandum are also the first Directors
of the Company.
(A) Both A and R are true. R is the correct explanation of A.
(B) Both A and R are true, but R is not the correct explanation of A.
(C) A is correct, but R is incorrect.
(D) A is incorrect, but R is correct.
7. Joint Hindu Family Business is controlled by the head of the family who
is the eldest member and is called…...
A. Karanavar
B. Co-parcener

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 C. Kartha
D. Superior
8. A ………… partner is one whose association with the firm is unknown
to the general public. Other than this distinct feature, in all other
aspects he is like the rest of the partners. He contributes to the capital
of the firm, takes part in the management, shares its profits and losses,
and has unlimited liability towards the creditors.
(A) Secret (B) Active (C) Zero (D) None of these
9. Assertion: Articles of Association are the rules regarding internal
management of a company.
Reason: The rules are not subsidiary to the Memorandum of
Association.
(A) Both A and R are true. R is the correct explanation of A.
(B) Both A and R are true, but R is not the correct explanation of A.
(C) A is correct, but R is incorrect.
(D) A is incorrect, but R is correct.

10. As per Rule 10 of The Companies (miscellaneous) Rules 2014, at

Present the maximum number of partners can be …
(A) 2 (B) 200 (C) 50 (D) 100

ANSWERS
1. (B) Incorporation
2. (A) Both A and R are true. R is the correct explanation of A.
3. (B) Promotion
4. (D) Sole proprietorship
5. ( D)Seven, two
6. (A) Both A and R are true. R is the correct explanation of A.
7. (c)Karta
8. (A) Secret
9. (C) A is correct, but R is incorrect.
10. (C) 50
Short Answer questions (3/4 Marks)
1. Read the following text and answer questions(A-D) on the basis of the
same.
Sarah's friends lived in a small town of 1,000 people. They were
struggling to make ends meet. They didn't own a home and were paying
heavy rents, leaving them with minimal funds for other essentials.
Sarah was concerned about their well-being and she wanted to help
them. She listened to their challenges and offering emotional support.
Her aim was to solve the housing problems of that locality by
constructing houses and giving the option of paying in instalments.
Sarah and her friends established an organisation to help people with
limited income to construct houses at reasonable costs. f lats or
provide plots to members on which the members themselves can
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 construct the houses as per their choice.
A. Name the form of organisation established by Sarah and her friends
to solve their housing crisis?
(A) Sole proprietorship
(B) Partnership
(C) Cooperative society
(D) Company
B. Under which Act, these organisations are governed?
(A) Indian Partnership Act, 1932
(B) Cooperative Societies Act, 1912
(C) The Companies Act, 2013
(D) Hindu Succession Act, 1956
C. What is the minimum number of persons required to form such
organisation?
(A) 2 (B) 5 (C) 20 (D) 10
D. Who can become the members of the above identified organisation?
(A) Person of Sound mind (B) Has a common interest (C) Any person
who is above 18 years (D) All of the Above
Answer:
1.(C) Cooperative society
2. (B) Cooperative Societies Act, 1912
3. (D) 10
4. (D) All of the Above
2. It can be described as an artificial person having a separate legal
entity, perpetual succession and a common seal. Identify the type of
business organisation. Explain its merits.
Ans: Joint stock company
Merits
i. Limited liability: The shareholders are liable to the extent of
the amount unpaid on the shares held by them.
ii. Transfer of interest: The shares of a public limited company
can be easily sold in the market and converted into cash in
case the need arises. This avoids blockage of investment.
iii. Perpetual existence: Existence of a company is not affected
by the death, retirement, resignation, insolvency or insanity
of its members as it has a separate entity from its members.
iv. Scope for expansion: Capital can be attracted from the
public as well as through loans from banks and financial
institutions. Thus there is greater scope for expansion.
v. Professional management: A company can afford to pay
higher salaries to specialists and professionals. It can,
therefore, employ people who are experts in their area of
specialisations.
3. Partnership firm’s registration is optional, but still why do partnership
firms willingly go through this legal formality and get themselves
registered? Explain.

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 Ans: The consequences of non-registration of a firm
a) A partner of an unregistered firm cannot file a suit against the
firm or other partners,
b) The firm cannot file a suit against third parties, and
c) The firm cannot file a case against the partners.
4. Explain the choice of form of business organisation on the basis of:
i) Liability ii) Continuity iii) Management ability iv) Capital
consideration.
i) Liability: In case of sole proprietorship and partnership firms, the
liability of the owners/partners is unlimited. In joint Hindu family business,
only the karta has unlimited liability. In cooperative societies and companies,
however, liability is limited.
(ii) Continuity: The continuity of sole proprietorship and partnership firms is
affected by death, insolvency or insanity of the owners. However, such factors
do not affect the continuity of business in the case of Joint Hindu family
business, cooperative societies and companies.
(iii) Management ability: A sole proprietor may find it difficult to have
expertise in all functional areas of management. If the organisation’s
operations are complex in nature and require professionalised management,
company form of organisation is a better alternative.
(iv) Capital considerations: If the scale of operations is large, company form
may be suitable whereas for medium and small sized business one can opt
for partnership or sole proprietorship.
5. It is a voluntary association of persons, who join together with the
motive of welfare of the members. They are driven by the need to
protect their economic interests in the face of possible exploitation at
the hands of middlemen obsessed with the desire to earn greater
profits. Name the type of business organisation. Explain its types.Ans:
Co-operative society.
(i) Consumer’s cooperative societies: The consumer cooperative societies
are formed to protect the interests of consumers; The society aims at
eliminating middlemen to achieve economy in operations. It purchases goods
in bulk directly from the wholesalers and sells goods to the members.
(ii) Producer’s cooperative societies: These societies are set up to protect
the interest of small producers. The members comprise of producers desirous
of procuring inputs for production of goods to meet the demands of
consumers. It supplies raw materials, equipment and other inputs to the
members and also buys their output for sale.
(iii) Marketing cooperative societies: Such societies members consist of
producers who wish to obtain reasonable prices for their output. The society
aims to eliminate middlemen and improve competitive position of its members
by securing a favourable market for the products.

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(iv) Farmer’s cooperative societies: These societies are established to
protect the interests of farmers by providing better inputs at a reasonable cost.
The aim is to gain the benefits of large-scale farming and increase the
productivity.
Long answer questions (6 marks)
1.This form of business is particularly common in areas of personalised
services such as beauty parlours, hair salons and small- scale activities like
running a stationery shop in a locality. Identify the form of business
organisation. Explain its advantages.
Ans: Sole proprietorship
Merits
(i) Quick decision making: A sole proprietor enjoys considerable degree of
freedom in making business decisions. Further the decision- making is
prompt because there is no need to consult others.
(ii) Confidentiality of information: Sole decision -making authority enables
the proprietor to keep all the information related to business operations
confidential and maintain secrecy.
(iii) Direct incentive: A sole proprietor directly gets the benefits of his efforts
as he is the sole recipient of all the profit.
(iv) Sense of accomplishment: The knowledge that one is responsible for the
success of the business not only contributes to self-satisfaction but also a
sense of accomplishment and confidence in one’s abilities.
(v) Ease of formation and closure: Sole proprietorship is the least regulated
form of business, it is easy to start and close the business as per the wish of
the owner.
2. It is a specific form of business organisation found only in India which is
one of the oldest types of business organisation in the country. Write a short
note about this form of business.
Ans: Joint Hindu Family Business
This is a specific form of business organisation found only in India. It refers
to a form of organisation wherein the business is owned and carried on by the
members of the Hindu Undivided Family (HUF). It is governed by the Hindu
Law. The basis of membership in the business is birth in a particular family
and three successive generations can be members in the business. The
business is controlled by the head of the family who is the eldest member and
is called karta.
(i) Formation: There should be at least two members in the family and
ancestral property to be inherited by them to start a sole proprietorship.
(v) Minor Members: The basis of membership in the business is birth in a
particular family Hence, minors can also be members of the business.
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 (ii) Liability: The liability of all members except the karta is limited to their
share of co-parcenery property of the business, But Karta has unlimited
liability.
(iii) Control: The control of the family business lies with the karta. His
decisions are binding on the other members.
(iv) Continuity: The business continues even after the death of the karta as
the next eldest member takes up the position of karta, leaving the business
stable.
(v) Minor Members: Minors can become the members of the business.
3. Compare different types of partners like active partner, dormant partner,
secret partner and partner by estoppel on the basis of capital contribution,
liability, participation in management and profit share.
(i) Active partner: An active partner is one who contributes capital,
participates in the management, shares its profits and losses and has
unlimited liability.
(ii) Sleeping or dormant partner: Partners who do not take part in the day
to day activities of the business are called sleeping partners.
(iii) Secret partner: A secret partner is one whose association with the firm
is unknown to the general public. He contributes to the capital of the firm,
takes part in the management, shares its profits and losses, and has
unlimited liability.
(iv) Partner by estoppel: A person is considered a partner by estoppel if,
through his own initiative, conduct or behaviour, he gives an impression to
others that he is a partner of the firm. Such partners are held liable for the
debts of the firm.
4. Briefly explain the various documents required to be submitted to get the
company registered.
1. Memorandum of Association: It is the most important document as it
defines the objectives of the company. No company can legally undertake
activities that are not contained in its Memorandum of Association.
2. Articles of Association: Articles of Association are the rules regarding
internal management of a company. These rules are subsidiary to the
Memorandum of Association.
3. Prospectus: Invitation to public for subscription of shares.
5. As compared to the sole proprietorship and partnership forms of
organisation, this form of organisation has large financial resources. Further,
capital can be attracted from the public as well as through loans from banks
and financial institutions. Identify the form of business organisation and
explain its demerits.
Ans: Joint stock company.
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Limitations
(i) Complexity in formation: As compared to sole proprietorship and
partnership form of organisations, formation of a company is more complex.
(ii) Lack of secrecy: The Companies Act requires each public company to
provide from time-to-time a lot of information to the office of the registrar of
companies. Such information is available to the general public also. It is,
therefore, difficult to maintain complete secrecy.
(iii) Impersonal work environment: Separation of ownership and
management leads to situations in which there is lack of effort as well as
personal involvement on the part of the officers of a company.
(iv) Numerous regulations: The functioning of a company is subject to many
legal provisions and compulsions. This reduces the freedom of operations of
a company and takes away a lot of time, effort and money.
(v) Delay in decision making: Companies are democratically managed
through the Board of Directors which is followed by the top management,
middle management and lower level management. Communication as well as
approval of various proposals may cause delays not only in taking decisions
but also in acting upon them.
CHAPTER-3
Public, Private and Global Enterprises

Indian Economy

Private Sector Public Sector

Difference between Private Sector and Public Sector

Private Sector Public Sector

• It includes the business • It includes the enterprises and
enterprises owned, managed organisations owned and managed by
and controlled by individuals government (central or state or both)
or group of individuals. either fully or partly.
• Enterprises work with the • These are popularly known as Public
main objective of earning Sector Undertakings /Enterprises
profit. (PSUs/PSEs).
• There is more freedom of • Enterprises work with the main motive
operation. of providing social welfare.
• These are directly accountable • There is less freedom of operation.
to general public. • These are accountable to general public
• Forms of Private Sector as well as to parliament.
Enterprises are: • Forms of Public Sector Enterprises:
o Sole Proprietorship o Departmental Undertakings
o Partnership o Statutory Corporations
o Joint Stock Company (Public Corporations)
o Government Company
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 (Public Company,
Private Company and
OPC)
o Joint Hindu Family
Business (Hindu
Undivided Family)
o Cooperative Society

Public Sector Enterprises:

1. Departmental Undertakings: These are established as departments of
ministry and financed, managed and controlled by either central government
or state government. Indian Railways, All India Radio, State Public
Transportation (KSRTC, UPSRTC, RSRTC, etc.) are some examples of these.

Departmental Undertakings:
Features Merits Limitations
1. No Separate Entity 1. Parliament has 1. Lack of Flexibility
2. Financed by Effective Control 2. Leads to Delay
Government 2. High Degree of 3. Avoids Risky
3. Accounting & Audit Public Ventures
Control as per Accountability 4. Over Political
Government Rules 3. Source of Revenue Interference
4. Employees are for Government 5. Promotes Red
Government Servants 4. Suitable for Tapism
5. Accountable to the National Security 6. Insensitive to
concerned Ministry Consumer Needs

2. Statutory Corporations: These are established by passing special Act in

the Parliament. The Act defines its power, functions, rules, regulations of
governing employees and its relationship with government. RBI, UTI, ONGC,
LIC are some examples of these.

Statutory Corporations:

Features Merits Limitations

1. Set up under Act of 1. Internal 1. Autonomy for
Parliament Autonomy name’s sake
2. Separate Legal Entity 2. Quick decisions 2. Major Political
3. Employees are not 3. Effective Interference
Government Servants Parliamentary 3. Hub of Corruption
4. Not Subject to Audit & control 4. Appointment of
Accounting like 4. Efficient Advisors by
Government Management Government
Department 5. No Interference by
5. Independently Government in
Financed Finance
6. Wholly owned by
Government

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3. Government Company: A government company is a company which is
registered under the Companies Act, 2013 and in which not less than 51% of
the paid-up capital is held by central government or state government or
jointly by both. BHEL, SAIL, NMDC, etc. are some examples of it.

Government Company:

Features Merits Limitations

1. Registered under 1. Easy to 1. Interference of
the Companies Act, Form Ministers and
2013 2. Separate Government
2. Separate Legal Legal Entity Officials
Entity 3. Enjoys 2. Not Directly
3. Management by Autonomy Answerable to
Provisions of the 4. Able to Parliament
Companies Act Control 3. Government is
4. Employees are Market the Sole
appointed as per Shareholder
MOA of Companies 4. Provisions of the
5. Auditor is appointed Companies Act
by Government do not have
6. Permitted to raise much Relevance
funds from Capital
Market

Multi-national Company/Global Enterprise:

• Global enterprises are huge industrial organisations which extend their
industrial and marketing operations through a network of their
branches in several countries but these have their headquarters in one
country in which these are incorporated.
• Walmart, IBM, Microsoft, Toyota Motors, Coca cola, Wipro, Infosys,
Apple Inc. are some examples of MNCs.

Features of MNCs:

1. Centralized control:
• MNCs have headquarters in their home countries from where they
exercise control over all branches and subsidiaries.
• It provides only broad policy framework to them and there is no
interference in their day-to-day operations.
2. International Operations:
• An MNC has production, marketing and other facilities in several
countries.
3. Foreign Collaborations:
• Usually, they enter into agreements relating to sale of technology,
production of goods, use of brand name etc. with local firms in the host
country.
4. Huge Capital Resources:
• MNCs possess huge capital resources and they are able to raise lot of
funds from various sources.

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5. Advanced technology: These organisations possess advanced and
superior
technology which enables them to provide world class products &
services.
6. Product Innovations:
• MNCs have highly sophisticated research and development
departments.
• These are engaged in developing new products and superior design of
existing products.
7. Marketing Strategies:
• MNCs use aggressive marketing strategies.
• Their brands are well known and spend huge amounts on advertising
and sale promotion.

Joint Venture:
• When two or more businesses agree to join together for a common
purpose and mutual benefit, it gives rise to a joint venture.
• These two or more organisations may be private, government-owned or
a foreign company.
• In a broader sense, a joint venture is the pooling of resources and
expertise by two or more businesses, to achieve a particular goal.

Benefits of Joint Venture:

(a) Increased resources and capacity:
Joining hands with another or teaming up adds to existing resources and
capacity enabling the joint venture company to grow and expand more quickly
and efficiently.
(b) Access to new markets & distribution networks:
When a business enters into a joint venture with a partner from another
country, it opens up a vast growing market.
(c) Access to technology:
Technology is a major factor for most businesses to enter into joint ventures.
Advanced techniques of production leading to superior quality products save
a lot of time, energy & investment as they do not have to develop their own
technology.

(d) Innovation:
The markets are increasingly becoming more demanding in terms of new and
innovative products. Joint ventures allow business to come up with something
new and creative for the same market.
(e) Low cost of production:
When international corporations invest in India, they benefit immensely due
to the lower cost of production. They are able to get quality products for their
global requirements. India is becoming an important global source and
extremely competitive in many products.
(f) Established brand name:
When two businesses enter into a joint venture, one of the parties’ benefits
from the other’s goodwill which has already been established in the market.
If the joint venture is in India and with an Indian company, the Indian
company does not have to spend time or money in developing a brand name
for the product or even a distribution system.
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Public Private Partnership (PPP):
• PPP is defined as a relationship between public and private entities in
the context of infrastructure and other services.
• The public partners in PPP are Government entities, i.e., ministries,
government departments, municipalities or state-owned enterprises.
• The private partners can be local or foreign and include businesses or
investors with technical or financial expertise relevant to the project.
• Under the PPP model, public sector plays an important role and ensures
that the social obligations are fulfilled and sector reforms and public
investment are successfully met.
• The private sector’s role in the partnership is to make use of its expertise
in operations, managing tasks and innovation to run the business
efficiently.
• 135 Km expressway by Kundli Manesar Expressway Ltd., Delhi Metro
Railway Corporation, and Automated Testing Stations are some
examples of PPP projects.
Features of PPP Model:
• Contract with the private party to design and build public facility.
• Facility is financed and owned by the public sector.
• Key driver is the transfer of design and construction risk.
Multiple Choice Questions (MCQs)/One Mark Questions
Q.1 Match the following:
A B

i) Financed through budget allocation 1. Statutory Corporations

ii) Formed by special Act 2. MNCs

iii) Incorporated under Companies Act. 3 Departmental Undertakings

iv) Centralised control over the 4. Government Company

operations

(a) i)-3, ii)-1, iii)-4, iv)-2 (b) i)-4, ii)-2, iii)-3, iv)-1
(c) i)-1, ii)-2, iii)-3, iv)-4 (d) i)-3, ii)-1, iii)-2, iv)-4

Q.2 Government decided to sell the shares in Telecom department to private

sector. This is an example of _______
(a) Disinvestment (b) Memorandum of Undertaking
(c) Reconstruction (d) Rehabilitation

Q.3 LIC is an example of a................

(a) Multinational Company (b) Departmental Undertaking
(c) Statutory Corporation (d) None of these

Q.4 Public Sector Enterprises (PSEs / PSUs) are owned and managed by
______
(a) HUF (b) Government
(c) Private Sector (d) Foreign Companies

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Q.5 Which among the following is a departmental undertaking?
(a) Air India (b) LIC (c) SBI (d) Indian Railways

Q.6 Pick out the departmental undertaking from the following:

(a) Shipping Corporation of India (b) RBI
(c) Indian Railways (d) LIC

Q.7 Identify the business which is brought in to existence by a Special Act of

Parliament or State Legislature.
(a) Departmental Organisation (b) Public Corporation
(c) Government Company (d) Private Company

Q.8 What is the minimum portion that the Government should hold in the
paid-up capital of a Government Company?
(a) 49% (b) 51% (c) 50% (d) 25%

Instructions: Q.9 to Q.12 are based on Assertion and Reason. In each

question, on the basis of (A) and (R) given in the question, choose the correct
choice from the options given below:
(a) Both (A) and (R) are wrong
(b) Only (A) is right and (R) is wrong
(c) Both (A) and (R) are right and (R) is the correct explanation of (A)
(d) Both (A) and (R) are right but (R) is not the correct explanation of (A)

Q.9 Assertion (A): When a national security is concerned, departmental

undertakings form of public sector enterprises is most suitable.
Reason (R): Departmental undertaking is under the direct control and supervision
of the concerned ministry.

Q.10 Assertion (A): The government generally does not interfere in their financial
matters, including their income and receipts.
Reason (R): The funds of these organisations do not come from the central budget.
Q.11 Assertion (A): Partnership is a relation between two or more persons who
agree to
carry on a business to share profits.
Reason (R): Joint ventures and partnership are same.

Q.12 Assertion (A): MNCs have centralised control.

Reason (R): They only aim at maximising profits irrespective to spreading
their branches all over.
Instructions: Q.13 to Q.16 are based on two statements, in each question,
choose
the correct option from the following:
(a) Both Statements are wrong
(b) Statement I is right and Statement II is wrong
(c) Statement I is wrong and Statement II is right
(d) Both Statements are right

Q.13 Statement I: A statutory corporation is established under the Companies

Act, 2013
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and is registered and governed by the provisions of the Act.
Statement II: A government company may be formed as a private limited company
or a
public limited company.

Q.14 Statement I: The shares of a government company are purchased in the

name
of the President of India.
Statement II: The government is the major shareholder and exercises control over
the management of government companies.

Q.15 Statement I: Qualitative research requires huge investment which only

global
enterprises can afford.
Statement II: Global enterprises possess a more reliable and upto-date market
information system. Their advertising and sales techniques are normally very
effective.
Q.16 Statement I: A public private partnership ensures higher quality and timely
provision of public services.
Statement II: Huge industrial organization which extend their industrial
operations
through a network of their branches in several countries are known as global
enterprises.
Read the following and answer Q.17 to Q.20 on the basis of the same:
Indian Railways is a part of Railway Ministry. It is organised, financed and
controlled by
Railway Ministry. The finances are allocated from government treasury and
whatever
revenue it earns is deposited to government treasury only. It is treated as a part of
government and even the appointment recruitment and selection of employees is
done in the same way as that of civil servant.
Gas Authority of India Ltd. (GAIL) is carrying on various projects of energy and
power.
Majority of its shares are held by the government of India. It was registered under
the
previous Companies Act. It enjoys all the characteristics of a company. The board
of
directors are appointed by the government. The Board and shareholders are
responsible
for the efficient working of the company. The company prepares its annual report
and
submit to the appropriate authorities.
Q.17 Name the type of public sector enterprise Indian Railways is:
(a) Government Company (b) Departmental Undertaking
(c) Statutory Corporation (d) Public Company

Q.18 How does Indian Railways get its finance?

(a) Independently financed (b) From government treasury
(c) From Reserve Bank of India (d) From the public

Q.19 Name the type of public sector enterprise GAIL is:

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 (a) Government Company (b) Departmental Undertaking
(c) Statutory Corporation (d) Public Company

Q.20 In whose name does the public sector enterprise identified in Q.19 buy
shares?
(a) The Central Bank (b) The Governor of India
(c) The President of India (d) The Prime Minister of India
Answer Key

1 (a) 2 (a) 3 (c) 4 (b) 5 (d) 6 (c) 7 (b) 8 (b) 9 (c) 10 (c)
11 (b) 12 (b) 13 (c) 14 (d) 15 (d) 16 (d) 17 (b) 18 (b) 19 (a) 20 (b)

Very Short Answer Type Questions ( 3 Marks Questions)

Q.1 The Government of India planned to begin a Road Project. The

Government needed management specialists and financial help to complete
it. The Government contacted the private sector to fulfill this requirement.
Now, this project will be completed jointly by both the public sector and
private sector.
(a) Identify the form of enterprise.
(b) Give any two features of such enterprise.
Ans. (a) Public Private Partnership
(b) Features:
1. Contract with the private party to design and build public facility.
2. Facility is financed and owned by the public sector.
Q.2 Differentiate between private sector and public sector enterprises.
Ans. Difference between Private Sector and Public Sector
Private Sector Public Sector
• It includes the business • It includes the enterprises and
enterprises owned, organisations owned and managed by
managed and controlled government (central or state or both)
by individuals or group of either fully or partly.
individuals. • These are popularly known as Public
• Forms of Private Sector Sector Undertakings /Enterprises
Enterprises are: (PSUs/PSEs).
o Sole Proprietorship • Forms of Public Sector Enterprises:
o Partnership o Departmental Undertakings
o Joint Stock o Statutory Corporations
Company (Public Corporations)
(Public Company,Private o Government Company
Company & OPC)
o Joint Hindu Family
Business
o Cooperative Society

Q.3 “Departmental Undertakings are a curse for public enterprise.” Do you

agree? Give reasons to support your answer.
Ans. Yes.

Reasons:
1. Lack of Flexibility
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 2. Leads to Delay
3. Avoids Risky Ventures
4. Over Political Interference

Q.4 “multi-national corporations are giants both in terms of assets and

operations.” Explain this statement.
Ans.
1. Huge Capital Resources:
MNCs possess huge capital resources and they are able to raise lot of funds
from various sources.
2. International Operations:
An MNC has production, marketing and other facilities in several countries.
3. Foreign Collaborations:
Usually, they enter into agreements relating to sale of technology, production
of goods, use of brand name etc. with local firms in the host country.

Q.5 Why is the government company form of organisation preferred to other

types in the public sector?
Ans. Merits of Government Company:
1. Easy to Form
2. Separate Legal Entity
3. Enjoys Autonomy

Short Answer Type Questions/Four Marks Questions

Q.1 To overcome the difficulties faced by public in public transport system,

the government of India started the METRO project in which the government
involved private sector participation to get the benefits of efficiency of private
sector. The project was great success as lakhs of people are enjoying the metro
service to move from one place to other.
(a) Identify the form of enterprise.
(b) Give any three features of such enterprise.

Ans. (a) Public Private Partnership

(b) Features:
1. Contract with the private party to design and build public facility.
2. Facility is financed and owned by the public sector.
3. Key driver is the transfer of design and construction risk.

Q.2 Distinguish between Departmental Undertakings and Statutory

Corporation on the basis of:
(i) Incorporation (ii) Legal Status
(iii) Autonomy (iv) Suitability

Ans. Departmental Undertakings Vs Statutory Corporation

Basis Departmental Statutory Corporation

Undertakings

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 These are not incorporated These are incorporated under
Incorporation under any act but special act passed in
established by the ministry parliament
as department of
government
Legal Status No separate legal entity It has separate legal entity
Autonomy No autonomy Sufficient autonomy
Suitability Where national security is Industrial and commercial
concerned undertaking of national
priority

Q.3 Name the enterprise which is the result of partnership between two
companies. Why do two companies unite together to work as one enterprise?
Give at least three reasons.

Ans. Joint Venture.

Reasons:
1. Increased Resources and Capacity:
Joining hands with another or teaming up adds to existing resources and
capacity enabling the joint venture company to grow and expand more quickly
and efficiently
2. Access to New Markets and Distribution Networks:
When a business enters into a joint venture with a partner from another
country, it opens up a vast growing market.
3. Access to Technology:
Technology is a major factor for most businesses to enter into joint ventures.
Advanced techniques of production leading to superior quality products save
a lot of time, energy & investment as they do not have to develop their own
technology.
Q.4 Name the organisation which is established by passing a Special Act of
Parliament or State Legislature. Give any three characteristics of such
enterprise.
Ans. Statutory Corporation
Characteristics:
1. Set up under Act of Parliament
2. Separate Legal Entity
3. Employees are not Government Servants

Q.5 You must have consumed soft drinks like Coca cola and Pepsi. Identify
these companies and discuss three features of such companies.

Ans. Global Enterprises/Multi-national Corporations

Features:
1. Advanced technology:
These organisations possess advanced and superior technology which enables
them to provide world class products & services.
2. Product Innovations:
MNCs have highly sophisticated research and development departments.
These are engaged in developing new products and superior design of existing
products.

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3. Marketing Strategies:
MNCs use aggressive marketing strategies. Their brands are well known and
spend huge amounts on advertising and sale promotion

Long Answer Type Questions/Six Marks Questions

Q.1 The Tata Group, founded by Jamshedji N. Tata in 1868, as a private

trading firm. Presently doing business in different segments like steel,
automobiles, energy, home care products, etc. The group is managed by
professional managers appointed by the Board of Directors. The business
group enjoy global leadership and its main motive is to earn profit and
generate wealth. The group is not accountable to the public.
(i) The given case is referring to the working of a private sector enterprise.
Name the other sector which is also working in our mixed economy.
(ii) In the instant case, the group is not accountable to the public. State to
whom the group is accountable?
(iii) What is the main aim of public sector enterprises?
(iv) In whose hand the management of public enterprises are entrusted?
(v) Does public enterprises have freedom of operations?
(vi) Are public enterprises accountable to the public?
Ans.
(i) Public Sector
(ii) Owners/Investors
(iii) To render services to the public at large.
(iv) The management and control lies in the hands of the Board of Directors
having more of government representatives.
(v) Due to government interference, freedom of operation is less.
(vi) Yes, these enterprises are accountable to the public through Parliament.

Q.2 Explain the characteristics of global enterprises.

Ans. Characteristics of Global Enterprises:
1. Centralized control:
• MNCs have headquarters in their home countries from where they
exercise control over all branches and subsidiaries.
• It provides only broad policy framework to them and there is no
interference in their day to day operations.
2. International Operations:
• An MNC has production, marketing and other facilities in several
countries.
3. Foreign Collaborations:
• Usually they enter into agreements relating to sale of technology,
production of goods, use of brand name etc. with local firms in the host
country.
4. Huge Capital Resources:
• MNCs possess huge capital resources and they are able to raise lot of
funds from various sources.
5. Advanced technology:
• These organisations possess advanced and superior technology which
enables them to provide world class products & services.
6. Product Innovations:

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 • MNCs have highly sophisticated research and development
departments.
These are engaged in developing new products and superior design of existing
products.

Q.3 Discuss the benefits of Joint Venture.

Ans. Benefits of Joint Venture:
(a) Increased resources and capacity:
Joining hands with another or teaming up adds to existing resources and
capacity enabling the joint venture company to grow and expand more quickly
and efficiently.
(b) Access to new markets & distribution networks:
When a business enters into a joint venture with a partner from another
country, it opens up a vast growing market.
(c) Access to technology:
Technology is a major factor for most businesses to enter into joint ventures.
Advanced techniques of production leading to superior quality products save
a lot of time, energy & investment as they do not have to develop their own
technology.
(d) Innovation:
The markets are increasingly becoming more demanding in terms of new and
innovative products. Joint ventures allow business to come up with something
new and creative for the same market.
(e) Low cost of production: When international corporations invest in India,
they benefit immensely due to the lower cost of production.

(f) Established brand name:

When two businesses enter into a joint venture, one of the parties benefits
from the other’s goodwill which has already been established in the market.

Q.4 What do you understand by public sector enterprise? Describe the various
forms of public sector enterprises.
Ans. Public Sector Enterprise:
It includes the enterprises and organisations owned and managed by
government (central or state or both) either fully or partly. These are popularly
known as Public Sector Undertakings /Enterprises (PSUs/PSEs).
Forms of Public Sector Enterprises:
• Departmental Undertakings
• Statutory Corporations (Public Corporations)
• Government Company
1. Departmental Undertakings: These are established as departments of
ministry and financed, managed and controlled by either central government
or state government. Indian Railways, All India Radio, State Public
Transportation (KSRTC, UPSRTC, RSRTC, etc.) are some examples of these.
2. Statutory Corporations: These are established by passing special act in
the parliament. The act defines its power, functions, rules, regulations of
governing employees and its relationship with government. RBI, UTI, ONGC,
LIC are some examples of these.

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 3. Government Company: A government company is a company which is
registered under the Companies Act, 2013 and in which not less than 51% of
the paid-up capital is held by central government or state government or
jointly by both. BHEL, SAIL, NMDC, etc. are some examples of it.

Q.5 What are public corporations? Narrate their features, merits and
limitations.
Ans. Public Corporations: These are also known as statutory corporations.
These are established by passing special act in the parliament. The act defines
its power, functions, rules, regulations of governing employees and its
relationship with government. RBI, UTI, ONGC, LIC are some examples of
these.
Statutory Corporations:
Features Merits Limitations
1. Set up under Act of 1. Internal Autonomy 1. Autonomy for
Parliament 2. Quick decisions name’s sake
2. Separate Legal Entity 3. Effective 2. Major Political
3. Employees are not Parliamentary control Interference
Government Servants 4. Efficient Management 3. Hub of
4. Not Subject to Audit & 5. No Interference by Corruption
Accounting like Government in 4. Appointment
Government Dept Finance of Advisors by
5. Independently Government
Financed
6. Wholly owned by
Government

CHAPTER 4 BUSINESS SERVICES

BUSINESS SERVICES
Meaning : Business services are those services which are used by business
enterprises for the conduct of their activities. For example, banking,
insurance, transportation, warehousing and communication services.
Types of Business Services
1. Baking
2. Insurance
3. Transportation
4. Warehousing
5. Communication

Banking:
A banking company in India is the one which transacts the business of
banking which means accepting, for the purpose of lending and
investment of deposits of money from the public, repayable on demand
or otherwise and withdrawable by cheques or otherwise.

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 Types of Bank Accounts
1. Savings Deposit Account: This type of bank account encourages the
small savings of individuals. The deposits in this account are made by
persons who wish to save a little out of their incomes. Interest is paid
at nominal rate.
2. Current Deposit Account: these deposit accounts are most suitable
for business organization. In this account, a depositor can deposit
money any number of time and can withdraw it as and when requires
it. No interest is paid on these accounts.
3. Recurring Deposit Account: in this type of account a depositor
deposits a fixed amount of money on monthly basis for a fixed period.
Rate of interest on RD account is generally higher than that of Savings
account.
4. Fixed Deposit Account: money is deposited in fixed deposit account
for a fixed period. Fixed accounts are time deposits with higher rate of
interest as compared to the savings accounts. The amount of deposit is
repayable by the bank after the expiry of the fixed term.
5. Multiple Option Deposit Account: It is a combination of savings
account and Fixed Deposit Account which provide specific options to
the depositors. It is a type of Savings Deposit Account in which amount
of deposit in excess of a particular limit gets automatically transferred
to Fixed Deposit Account

Banking Services
1. Bank Draft: It is also known as Demand Draft. It is an instrument
which is used for the transfer of funds.
2. Bank Overdraft: The bank allows a customer to overdraw his
current account balance up to an agreed limit. The customer has to
pay interest on the amount overdrawn by him.
3. Cash Credits: It is a short- term cash loan to a company. The
borrower is sanctioned a credit limit up to which it may draw
amounts from the bank. This credit limit is determined by the bank’s
estimation of the borrower’s credit worthiness.
E– Banking:
In simple terms, Internet banking means any user with a PC or
mobile and a browser can get connected to the banks website to

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 perform any of the virtual banking functions and avail of any of the
bank’s services.
The range of services offered by e-banking are: Automated Teller
Machines (ATM), Point of Sales (PoS), Electronic Data Interchange
(EDI), Credit Cards, Electronic or Digital cash and Electronic bank
transfer (EFT).
Types of Digital Payments
1) Electronic Funds Transfer (EFT): EFT are electronic transfer of
money from one bank account to another either within a single
financial institution or across multiple institutions.
2) Credit or Debit Cards (Plastic Cards): The customer can make
digital payments for online transactions through credit or debit
cards.
3) Digital Cash: Digital cash (or e-cash) is a system of purchasing cash
credits, storing the credits in computer or digital wallet, and then
spending them while making electronic purchases over the internet
or in person.
4) Aadhaar Enabled Payment System (AEPs): It can be used for
payment transactions. This service can only be availed if Aadhaar
number is registered with the bank.
5) Mobile Wallets: A mobile wallet stores credit card or debit card
information on a mobile device like phone, a tablet, or smartwatch.
Mobile wallets are a convenient way to buy things online or in stores
that are set up to take payments through mobile wallet.
6) Point of Sale (POS): Point of sale (POS) is where a customer makes
the payment for goods purchased in a store. POS can be found at
restaurants, hospitals, gas stations, hotels, etc., to allow a space for
customers to pay their bills.
7) Unified Payments Interface (UPI): It is a way to move money from
one bank account to another using a single window. We can send or
receive money or scan a quick response (QR) code to pay a person, a
merchant, or a service provider to shop, pay bills, or authorize
payments.
8) Bharat Interface for Money (BHIM): It is a UPI enabled initiative to
facilitate safe, easy and instant digital payments through your
mobile phone.
9) Micro ATM: Micro ATMs are like modified point of sales terminals
which can connect to banking network via GPRS to perform banking
transactions. This machine contains card swipe facility.
10) Prepaid Cards: A prepaid card is a card with money loaded on it,
which can be used to pay for things at many stores and online.

INSURANCE: It is a contract or agreement under which one party agrees in

return for a consideration (called premium) to pay an agreed amount of money
to another party to make good a loss, damage or injury to something of value.
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 Under the contract of insurance, the person whose risk is insured is called
insured and the firm which insures the risk of loss is known as insurer.

PRINCIPLES OF INSURANCE

(i) Utmost good faith: A contract of insurance is a contract of uberrimae

fidei i.e., a contract found on utmost good faith. Both the insurer and
the insured should display good faith towards each other in regard to
the contract. It is the duty of the insured to voluntarily make full,
accurate disclosure of all facts, material to the risk being proposed and
the insurer to make clear all the terms and conditions in the insurance
contract.
(ii) Insurable Interest: The insured must have an insurable interest in
the subject matter of insurance. Insurable interest of the insured in
the subject matter of the insurance must exist at the time of happening
of the event.
(iii) Indemnity: All insurance contracts of fire or marine insurance are
contracts of indemnity. According to it, the insurer undertakes to
compensate the insured for the loss caused to him/her due to damage
or destruction of property insured. The principle of indemnity is not
applicable to life insurance.
(iv) Proximate Cause: According to this principle, an insurance policy is
designed to provide compensation only for such losses as are caused by the
perils which are stated in the policy. In case of loss arising out of any mishap,
the most proximate cause of the mishap should be taken into consideration.
(v) Subrogation: It refers to the right of the insurer to stand in the place of the
insured, after settlement of a claim. After the insured is compensated for
the loss or damage to the property insured by him/her the right of
ownership of such property passes on to the insurer. This is because the
insured should not be allowed to make any profit, by selling the damaged
property or in the case of lost property being recovered.
(vi) Contribution: According to this principle, in case of double insurance,
the insurers are to share the losses in proportion to the amount assured by
each of them. In case there is a loss, when there is more than one policy on

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 the same property, the insured will have no right to recover more than the
full amount of his actual loss.

Types of Insurance: Life, Fire, Marine and Health

1. Life Insurance: Life insurance may be defined as a contract in which the

insurer in consideration of a certain premium, (either in a lump sum or
by other periodical payments,) agrees to pay to the assured, or to the
person for whose benefit the policy is taken, the assured sum of money,
on the happening of a specified event contingent on the human life or at
the expiry of certain period.

2. Fire Insurance: Fire insurance is a contract whereby the insurer, in

consideration of the premium paid, undertakes to make good any loss or
damage caused by fire during a specified period up to the amount specified
in the policy. Normally, the fire insurance policy is for a period of one year
after which it is to be renewed from time to time.

3. Marine insurance: A marine insurance contract is an agreement whereby

the insurer undertakes to indemnify the insured in the manner and to the
extent thereby agreed against marine losses. Marine insurance provides
protection against loss by marine perils or perils of the sea.

4. Health Insurance: A health insurance is a contract between an insurer

and an individual or group in which the insurer agrees to provide specified
health insurance at an agreed-upon the premium, payable either in a
lump sum or installments.

POSTAL SERVICE

1. Mail Services: Mail services consist of parcel facilities that is

transmission of articles from one place to another; registration facility
to provide security of the transmitted articles and insurance facility to
provide insurance cover for all risks in the course of transmission by
post.
2. Registered Post: It is a service provides a higher level of security and
tracking for packages as it is assigned a unique tracking number that
helps to monitor its progress from the time it is dispatched until it is
delivered.
3. Parcel: It is a service of post office for sending books, garments etc.
across the country as well as outside the country.
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 4. Speed Post: It has over 1000 destinations in India and links with 97
major countries across the globe.
5. Courier Services: It is provided by private post offices for sending and
receiving letters, documents parcels, etc.

TELECOM SERVICES

(i) Cellular mobile services: These are all types of mobile telecom
services including voice and non-voice messages, data services
(ii) Fixed line services: These are all types of fixed services including
voice and non-voice messages and data services to establish linkages
for long distance traffic.
(iii) Cable services: These are linkages and switched services within a
licensed area of operation to operate media services, which are
essentially one way entertainment related services. The two-way
communication including voice, data and information services
through cable network.
(iv) VSAT services: VSAT (Very Small Aperture Terminal) is a satellite-
based communications service. It offers businesses and government
agencies a highly flexible and reliable communication solution in
both urban and rural areas.
(v) DTH services: DTH (Direct to Home) is again a satellite-based
media services provided by cellular companies.

MULTIPLE CHOICE QUESTIONS

1. -------------------is a type of Savings Deposits Account in which amount of

deposit in excess of a particular limit gets automatically transferred to Fixed
Deposit Account. And, in case sufficient funds are not available in Saving
Deposits Account to honour a cheque issued, the required amount gets
automatically transferred from Fixed Deposit Account to the Savings Deposits
Account

(a) Recurring Deposit (RD) Account (b) Multiple Option Deposit Account
(c) Current Deposit Account (d) None of these
2. Which of the following is not included in the range of services offered by
e-banking?

(a) Automated Teller Machines (ATM) (b) Bank Overdraft

(c) Digital cash d) Mobile wallet
3. AlI types of deposits in banks carry interest except----------------

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 (a) Savings Account deposits b) Current Deposit Account

(c)Fixed Deposits d) Recurring Deposits

4. Read the following statements carefully – Assertion (A) and Reason (R) and
choose the correct alternative:

Assertion (A): Banking, insurance, transportation, warehousing and

communication services are examples of Business Services

Reason (R): These services are used by business enterprises for the
conduct of their activities.

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A).

(b) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the
correct explanation of Assertion (A).

(c) Assertion (A) is true, but Reason (R) is false

(d) Assertion (A) is false, but Reason (R) is true

5. Which of the following is not an example of ‘Business Service’?

a) Transportation b) Warehousing c) Banking d) Recreational services

6. “Loss” is not measurable in this type of insurance. Name the type of such
insurance.

a) Life insurance. b) Fire insurance) Marine insurance. d) Accident

insurance.

7. DTH services are provided by

a) Transport companies. b) Banks c) Cellular companies d) None of the

above

8. Mrs. Kavitha is working as an accountant in ABC Ltd. She wants to deposit

₹4,000 every month in a bank in order to meet her son’s future education
expenses. Suggest the best deposit a/c she should open in a bank.

a) Savings Bank a/c b) Fixed Deposit a/c c) Recurring Deposit a/c

d) Multi- Option Deposit a/c

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9. The insurance is not only a protection but is a sort of investment because
a certain sum is returnable to the insured at the time of death or at the expiry
of a certain period. Choose the correct option for it.

a) Fire Insurance b) Marine Insurance c) Medical Insurance d) Life Insurance

10. There are two statements marked as Assertion (A) and Reason (R).

Read the statements and choose the appropriate option from the options given
below:
Assertion (A) There is always an element of risk in life and business.
Reason (R) Insurance is a tool which is used to minimise the impact of such
risks.
(a) Both the Assertion (A) and Reason (R) are true and Reason (R) is the correct
explanation of Assertion (A)
(b) Both the Assertion (A) and Reason (R) are true, but Reason (R) is not the
correct explanation of Assertion (A)
(c) Assertion (A) is true, but Reason (R) is false
(d) Assertion (A) is false, but Reason (R) is true

11. Identifying the emerging mode of business service shown in the picture
below:

a) Communication b) e-Banking
c) Warehousing d) Insurance

12. Roshan, the owner of GB Fertilizers

opened a current account in State Bank of India. One day he needed money
more than the balance in the account. He was worried about how to arrange
the money. He needed the amount for 1 month. One of his friends told him
that the customer having current account in the bank can get the permission
to withdraw money more than the balance in the account after making an
agreement with the bank.
Identify the facility provided by the bank referred to in the above case.
a) Cash credit b)Bankers’ cheque c)Bank draft d)Bank overdraft

13. Assertion (A): According to the principle of Subrogation, the insured

should not be allowed to make any profit by selling damaged property or in
case of lost property being recovered.
Reason (R): Principle of Subrogation is corollary to the principle of Indemnity
and damaged goods will belong to the insurance company, once the
ZIET, MYSORE