FACULTY OF COMMERCE B.A./B.Com./B.Sc. I Semester (3YDC) Examination, May - 2022 Subject : COMMERCE Course Code No. & Name : BC110BO - Business Organization - I

 May - 2022

Business Organization - I Time : 3 Hours] [Max. Marks : 100 [Min. Marks : 40 

SECTION - A [Marks : 5 × 4 = 20] 

 a) Answer any five of the following questions.

 b) Each question carries 4 marks. 

1) Explain the economic objectives of business. 

Economic objectives of business refer to the objective of earning profit

    i. Profit earning 

Profit is the lifeblood of business,

 Profits must be earned to ensure the survival of business, its growth and expansion over time.

Profits help businessmen not only to earn their living but also to expand their business activities by reinvesting a part of the profits. 

In order to achieve this primary objective, certain other objectives are also necessary to be pursued by business, which are as follows: 

a) Creation of customers A business unit cannot survive unless there are customers to buy the products and services. Again a businessman can earn profits only when he/she provides quality goods and services at a reasonable price. For this it needs to attract more customers for its existing as well as new products. This is achieved with the help of various marketing activities.

 b) Regular innovations Innovation means changes, which bring about improvement in products, process of production and distribution of goods. 

 2) Define the term ‘Promotion’. List out its characteristics. 

 Promotion is a fundamental component of the marketing mix, which has 4 Ps: product, price, place, and promotion. It is also an essential element promotional plan or mix, which includes advertising, self and sales promotion, direct marketing publicity, trade shows, events, etc.,

Some methods of this procedure contain 

• an offer, 
• coupon discounts, 
• free sample distribution, 
• trial offer, 
• buy two items in the price of one,
•  contest, festival discounts, etc.

 The promotion of a product is important to help companies improve their sales because customers reaction towards discounts and offers are impulsive. In other words, promotion is a marketing tool that involves enlightening the customers about the goods and services offered by an organization. 

 3) What do you mean by sole proprietorship? State its advantages.

A Sole proprietorship is a business, owned, controlled and managed by a single individual. A Sole Proprietor reaps the financial rewards and is responsible for all risks and liabilities while conducting the business. It is suitable for individually managed occupations like salons or small retail shops.

Advantages –

• Swift decisions – A sole proprietor has complete responsibility in terms of making business decisions. It results in faster decision-making for the business as there is no need to consult multiple parties for every minor issue.
• Confidentiality – A sole proprietor can keep all business-related information to themselves as the business’s only decision-maker. The law does not bind them to make the accounts of a sole proprietorship public.
• Profit-sharing – A sole proprietor has complete ownership of profits arising from business operations. They are not obligated to share profits with anyone else.
• Fulfilment – Since a sole proprietor is responsible for both risks and rewards of their business, even a minor success can give a greater feeling of pride and satisfaction than other business forms.

 4) Explain various types of partnerships. 

There are several types of partnerships, including: 

General partnership (GP): A common type of partnership 

• Limited partnership (LP): A common type of partnership 
• Limited liability partnership (LLP): A common type of partnership 
• Limited liability limited partnership (LLLP): Not recognized in all states 
• Partnership at will: A partnership without a specific end date, where all partners can agree to dissolve the partnership when they want 
• Nominal partner: A partner who lends their name to a company but doesn't participate in its operations or make capital investments 
• Dormant partner: A partner who doesn't participate in the day-to-day operations of the company, but still shares in the profits and losses 

 5) Distinguish between Memorandum of Association and Articles of Association. 

Category	Memorandum of Association	Articles of Association
Purpose	Outlines the company's fundamental objectives and scope of activities.	Provides detailed rules and regulations for internal management and governance.
Scope	Covers broader aspects such as company name, registered office, objects, liability clause, and capital clause.	Focuses on specific internal regulations, including rights and powers of shareholders, appointment of directors, voting procedures, and dividend distribution.
Alteration	Changes require shareholder approval through a special resolution and formal filing with the company registrar.	Can be altered by passing an ordinary resolution in a general meeting of shareholders.
Binding Nature	Binds the company to the outside world, sets limits of company's authority, and acts as a source of information for external stakeholders.	Primarily governs the relationships and conduct of the company's directors, officers, and shareholders.
Relationship	Precedes the articles and holds superior importance. The articles must align with the provisions stated in the memorandum.	Subordinate to the memorandum, providing the framework for implementing the objectives and activities outlined in the memorandum.

. 6) Write a note on ‘Minimum Subscription’. 

Minimum subscription refers to the minimum amount which a company should raise at the time of issuing capital. The requirement for minimum subscription applies to all companies which raise funds from the public. The company may successfully procure the amount of minimum subscription.

7) Explain the advantages of preference equity. 

8) Write a note on: a) Warrants; and b) Deep Discount Bonds. 

Warrants normally allow the holder to buy the issuer's common stock, but they can also be used to buy the stock or bonds of another company (such as a subsidiary or even a third party). The exercise price or strike price is when a warrant holder can acquire the underlying securities.

A bond is considered a deep-discount bond if it is sold at a significantly lower price than par value, usually at 20% or more. A discount bond is contrasted with a bond sold at a premium.17 

 9) What is Sensex? State the objectives of Sensex. 

Sensex is the index of Bombay Stock Exchange (BSE) Ltd. The Sensex index baskets India’s top 30 financially strong companies from the major sectors from the 5000 stocks listed on the BSE. Moreover, it shows the movement of the Indian stock market to the world.

Objectives of Sensex

 

• The companies should be listed on India’s BSE (Bombay Stock Exchange) index.
• These constituents should either be a large or mega-cap company.
• The stocks of these companies should be relatively liquid.
• The core activities of these companies must generate revenue for them.
• The sector should be balanced in check with the Equity market of India.

 10) State various forms of commodity risks. 

Types of Commodity Risk

There are several types of commodity risks that businesses and investors can face. They include:

1. Price risk: Price risk is the risk of loss resulting from adverse price movements in a commodity. This risk arises when the price of a commodity changes in a direction that is unfavourable to a business or investor.
2. Supply risk: This is the risk of loss due to supply disruptions that affect the availability of a commodity. It can arise due to weather events, natural disasters, geopolitical tensions, or other factors.
3. Demand risk: This is due to changes in demand for a commodity. It can arise as a result of changes in consumer preferences, shifts in economic conditions, or changes in government policies.
4. Currency risk: This is the risk of loss due to changes in exchange rates between currencies. It can affect the cost of imports or exports of commodities.
5. Credit risk: This happens when a counterparty fails to fulfill its contractual obligations related to commodity transactions. It can arise due to counterparty default, insolvency, or other factors.

 SECTION - B [Marks : 5 × 12 = 60] Instructions to the candidates 

a) Answer all the questions using internal choice.

 b) Each question carries 12 marks. 

11) a) What is Commerce? Elaborate the stages involved in the development of commerce.

 Commerce is the exchange of goods and services between two or more parties, often for money or something of equal value 

the stages involved in the development of commerce.

The stages are: 1. Primitive Stage 2. Barter Stage 3. Start of Trading 4. Town Economy Stage 5. International Trade.

1. Primitive Stage:

In the olden days, the needs were very few and men produced only those things which they essentially needed and consumed. The man tilled the soil and produced what was necessarily required to keep him alive and to live in society.

The whole of the family was involved in fields and the ladies made clothes to wear. They built their own houses and there was no division of labour. The entire work was done by self. So, in primitive stage, commerce was not known and not needed too.

2. Barter Stage:

As the people built their own houses, they concentrated at one place and in this way, villages and where concentration was more towns sprang up. As men gained experience they started producing more than they needed for consumption and they wanted to dispose of the excess goods.

Since some needs also enlarged, it was not possible for man to produce all the things he needed. So the exchange or barter system started. That is exchange of goods for goods on reasonable terms.

Men began to produce only those goods in which they were specialised or which appeared to be advantageous to them and this created the position for exchange of goods. This resulted in division of labour.

3. Start of Trading:

The greatest drawback of a barter system is that you have to find a man who has the goods you need and is prepared to accept the goods you possess. This was a difficult job and as such the exchange of goods was few and far between.

This difficulty was, however, overcome to some extent by holding of mandis where the sellers and buyers assembled and got the exchange of goods. This too, was not of much help as mandis were held only for few days only in a month and at fixed places only. Though the trade came into existence but only to a very limited extent.

4. Town Economy Stage:

With the passage of time, some villages grew bigger and took the shape of towns and cities. This stage came to be known as town economy stage. At this stage, with the introduction of money economy in exchange of goods, men began to manufacture and produce for local markets. Towns took up the manufacturing of goods and villages devoted their energies for production of agriculture goods only.

So the villagers in exchange of agriculture goods exchanged manufactured goods. This resulted in the division of labour to a great extent. In towns, traders were divided into wholesalers and retailers. Trade came to be regulated by guides. Commerce, in its modern sense, came into existence in relation to domestic trade.

5. International Trade:

The final stage in the development of commerce was reached with the extension of international trade. Goods were not only produced for domestic use but also for selling to foreign countries. Materials were also procured from all the corners of universe. Such of the goods after having passed through the variety of processes of industry are conveyed to various countries to cover their demand by means of commerce. 

The most important commercial industries are the railways, motor transport. Sea ships and by means of air. Besides this there are various means of transport by road which carry goods from one place to another for sale to the consumers to meet their demand.

OR

 b) Define ‘Corporate Social Responsibility’. Discuss, in detail, its importance. ‘ 

Corporate social responsibility (CSR) is a self-regulating business model that helps a company be socially accountable to itself, its stakeholders, and the public. 

By practicing corporate social responsibility, also called corporate citizenship, companies are aware of how they impact aspects of society, including economic, social, and environmental. Engaging in CSR means a company operates in ways that enhance society and the environment instead of contributing negatively to them

Importance of Corporate Social Responsibility:

• Sustainability: CSR helps businesses to adopt sustainable practices that have a positive impact on the environment. This includes reducing carbon emissions, promoting energy efficiency, sustainable sourcing, and responsible supply chain management.
• Social Impact: CSR allows businesses to create a positive impact on society by engaging in philanthropic activities, supporting social causes, and giving back to the community. This includes community outreach programs, employee volunteerism, and charitable donations.
• Ethical Practices: CSR promotes ethical practices in business operations. It includes adhering to ethical standards, fair labor practices, responsible marketing, and avoiding unethical practices such as bribery and corruption.
• Stakeholder Engagement: CSR helps businesses to engage with their stakeholders, including customers, employees, suppliers, and communities. This creates a sense of trust and loyalty, which is beneficial for the business in the long run.
• Brand Reputation: CSR helps to enhance the brand reputation of the business. By being socially responsible, businesses can differentiate themselves from their competitors and build a positive brand image. This can result in increased customer loyalty and improved financial performance.

Effective Implementation of CSR:

• Set Sustainability Goals: Businesses should set sustainability goals that are measurable and achievable. This includes reducing carbon emissions, promoting energy efficiency, and implementing sustainable sourcing and supply chain practices.
• Engage Stakeholders: Businesses should engage with their stakeholders to understand their needs and expectations. This includes customers, employees, suppliers, and communities. By engaging with stakeholders, businesses can ensure that their CSR initiatives align with the needs of their stakeholders.

Corporate social responsibility (CSR) has become an increasingly important aspect of business in recent years. It refers to the responsibility of companies to contribute to sustainable development by balancing economic, social, and environmental concerns. In this article, we will explore the concept of CSR in detail, including its definition, importance, and examples of how companies are implementing CSR practices.

a) Define ‘Partnership’. Discuss its features.

 A partnership is an arrangement between two or more people to oversee business operations and share its profits and liabilities

its features

• Sharing of pro  its features. fits and losses.
• Mutual agency.
• Unlimited liability.
• Lawful business.
• Contractual relationship.

OR 

 

b) What do you mean by Cooperative Non-Credit Societies? Explain various types of non-credit societies. 

A "Cooperative Non-Credit Society" refers to a cooperative organization that primarily focuses on providing goods or services to its members, rather than offering financial credit like loans, essentially meaning it is not a "credit union" and does not engage in primary lending activities; instead, its core function revolves around collective benefits like purchasing power, shared resources, or service delivery within a specific sector like housing, consumer goods, or production.

Types of Non-Credit Cooperative Societies: 

Consumer Cooperatives:

• These societies buy goods in bulk at discounted prices and then sell them to members at affordable rates, often focusing on essential items like groceries or fuel. 
• Producer Cooperatives:
• Formed by producers like farmers or artisans to collectively market their products, allowing them greater bargaining power and control over pricing. 
• Housing Cooperatives:
• These societies pool resources to build or purchase housing units which are then made available to members at affordable rents. 
• Worker Cooperatives:
• Employees own and operate a business together, sharing profits and decision-making power. 
• Utility Cooperatives:
• These cooperatives provide essential services like electricity, water, or telecommunications to members in a specific area. 
• Healthcare Cooperatives:
• Cooperatives that focus on providing accessible healthcare services to members 
• Educational Cooperatives:
• Cooperative organizations that provide educational services like training programs or access to learning materials to their members

13) a) Discuss briefly the advantages and disadvantages of Joint Stock Companies.

  Advantages OF Joint Stock Company

A joint stock corporation divides its capital into shares sold to shareholders. It means there is no upper limit to the money to raise. Unlike a corporation, there are no limits on who can purchase shares in the firm.

#1 Limited Liability

Each shareholder has a portion of the company’s protection and accountability in a joint stock firm. 

#2 Scale Advantages

A joint stock company offers its owners economies of scale. One of the main benefits is that it may provide a steady flow of funding to businesses with high investment demands. 

#3 Benefits of Taxation

If a corporation is a joint stock company, no taxes are due on the stock shares until they sell them. T

#4 Higher Accountability

Since shareholders now possess a stake in the firm, they will demand reassurance that there is appropriate usage of their money once the company decides to move its headquarters or get out of particular businesses. 

Disadvantages of Joint Stock Company

A joint stock firm has numerous benefits but has certain drawbacks.

1 Difficult to Form

Joint Stock Companies are challenging to establish for several reasons. One explanation is that several people must consent to the company’s creation. Even one objection prevents the corporation’s creation. In addition, several legal issues also arise.

2 Lack of Secrecy

Because they must be open and honest with their shareholders, the firm must reveal information about its operations, finances, and other sensitive issues. 

3 Decision-making Delays

There is a greater likelihood of internal conflict inside a Joint Stock Company because there are many levels of authority within the organization.

4 More Government Laws and Restrictions

The government places many restrictions on joint stock companies. They must adhere to the same rules as other businesses. For example, there are limitations on permissible foreign investments.

5 Immoral or Unethical Management

The board of directors determines each member’s compensation, and some managers exploit their staff members to increase their income. Executives and stockholders have competing interests.

OR b) Explain the terms ‘Prospectus’ and ‘Statement-in-lieu of Prospectus’. Also state the contents of prospectus. 

Prospectus	Statement in Lieu of Prospectus
A detailed document that outlines all the relevant information and terms related to a securities offering, including but not limited to financial statements, management information, and other information about the issuer and the securities being offered.	A condensed version of a prospectus, which is used in certain situations where an exemption from the full prospectus requirement is granted.
Required for most public securities offerings, such as Initial Public Offerings (IPOs), and must be filed with the Securities and Exchange Commission (SEC) and delivered to investors before the securities are sold.	Not required for all securities offerings and may not be necessary for private placements or secondary offerings.
Must be reviewed and approved by the SEC before use.	May not be reviewed or approved by the SEC before use, as it is not a requirement for certain exemptions.
Available to the public and can be found on the SEC's EDGAR database.	Not necessarily available to the public and may only be distributed to a limited number of investors.
Typically a lengthy document that provides a comprehensive overview of the securities offering and the issuer.	Shorter document that may not include all of the information required in a full prospectus.
Should be read and understood by potential investors before they make a decision to invest in the securities being offered.	Should be read and understood by potential investors before they make a decision to invest in the securities being offered, but may not include all the information available in a prospectus.

 14) a) Examine the internal factors that determine the working capital requirements of a manufacturing firm.

Factors that Determine the Requirements of Working Capital

• Sales. For any business, the size of the sale matters. ...
• Length of the Operating Cycle. ...
• Inventory Management Policy. ...
• Size of Business. ...
• Credit Policy. ...
• Seasonality of Business. ...
• Nature of Production Technologies. ...
• Contingencies.

. OR b) Write a note on: i) Crowd Funding; 

Crowdfunding is a way of raising money to finance projects and businesses. It enables fundraisers to collect money from a large number of people via online platforms. Crowdfunding is most often used by startup companies or growing businesses as a way of accessing alternative funds.

ii) Peer to Peer Lending 

Peer-to-peer (P2P) lending makes it possible for individuals to obtain loans directly from other individuals, without going through a bank or other financial institution. The proliferation of websites that facilitate P2P lending in recent years has greatly increased its adoption as an alternative method of financing.

P2P lending is also known as "social lending" or “crowd lending." Major players in the field include such platforms as Funding Circle, Kiva, LendingClub, Prosper, and Upstart, among others.

15) a) Discuss the functions of stock exchanges. 

1. Role of an Economic Barometer:  Stock exchange serves as an economic barometer that is indicative of the state of the economy. It records all the major and minor changes in the share prices. It is rightly said to be the pulse of the economy, which reflects the state of the economy.
2. Valuation of Securities: Stock market helps in the valuation of securities based on the factors of supply and demand. The securities offered by companies that are profitable and growth-oriented tend to be valued higher. Valuation of securities helps creditors, investors and government in performing their respective functions.
3. Transactional Safety: Transactional safety is ensured as the securities that are traded in the stock exchange are listed, and the listing of securities is done after verifying the company’s position. All companies listed have to adhere to the rules and regulations as laid out by the governing body.
4. Contributor to Economic Growth: Stock exchange offers a platform for trading of securities of the various companies. This process of trading involves continuous disinvestment and reinvestment, which offers opportunities for capital formation and subsequently, growth of the economy.
5. Making the public aware of equity investment: Stock exchange helps in providing information about investing in equity markets and by rolling out new issues to encourage people to invest in securities. 
6. Offers scope for speculation: By permitting healthy speculation of the traded securities, the stock exchange ensures demand and supply of securities and liquidity.
7. Facilitates liquidity: The most important role of the stock exchange is in ensuring a ready platform for the sale and purchase of securities. This gives investors the confidence that the existing investments can be converted into cash, or in other words, stock exchange offers liquidity in terms of investment.
8. Better Capital Allocation: Profit-making companies will have their shares traded actively, and so such companies are able to raise fresh capital from the equity market. Stock market helps in better allocation of capital for the investors so that maximum profit can be earned.
9. Encourages investment and savings: Stock market serves as an important source of investment in various securities which offer greater returns. Investing in the stock market makes for a better investment option than gold and silver.

. OR b) Define ‘Commodity Derivative’. Describe the functions of commodity derivatives market. 

SECTION - C [Marks : 20 × 1 = 20] 

. b) Each question carries 1 mark. 

. I. Multiple Choice Questions. Choose the correct answer.

. 16) Industry engaged in re-production and multiplication of certain species of plants and animals with the object of sale is an example of _____.

 17) Which of the following is not a source of development of idea to promote a firm? 

 18) Which of the following doesn’t belong to Joint Hindu Family? 

 a) Partners b) Co-parceners c) Dayabhaga d) Mitakshara 

19) The supreme body for managing a Cooperative Society is _____ 

a) General Body b) Central Government c) Board of Directors d) Registrar of Cooperatives

 20) Which is not a feature of a Joint Stock Company? 

 a) Distinct Legal Entity b) One Person Company c) Limited Liability d) Perpetual Succession 

21) From the following, which is not a public document? 

 a) Minutes of the Meeting b) Prospectus c) Memorandum of Association d) Articles of Association. 

22) From the following, which doesn’t fit into the group? 

 a) Unsecured Debentures b) Convertible Debentures c) Redeemable Preference Shares d) Redeemable Debentures 

23) _____ is not a modern source of finance. _____ 

 a) Private Equity b) Forfaiting c) Angel Investors d) Euro Convertible Bonds 

 24) Of the following, which is not a precious metal? 

 a) Gold b) Copper c) Silver d) Platinum 

 25) One who expects quick profits in a short period with big risk?

a) Speculators b) Investors c) Manufacturing Company d) SEBI. 

 III. Fill in the blanks:

31) The obligation of any business to protect and serve public interest is known as ______CORPORATE SOCIAL RESPONSIBILITY 

     32) Society that pools the member’s land and other resources and arranges for joint cultivation is known as ______.  cooperative farming society   

33) The very purpose of entrenchment is ______ to stabilize law.

34) The gross working capital is also known as _______.current assets

35) ______ is a thing possessing a value and uniform in quality generally mined or cultivated or produced in large amount of quantity by variety of producers. commodities