CBSE Class 9 Elements of Business Test Paper 1

Multiple Choice Questions (MCQ) (1 mark each)

Choose the correct option:

1. All business activities which are connected with raising, producing and processing of goods and services are known as _________.
(a) Trade
(b) Industry
(c) Commerce
(d) Auxiliaries to trade

2. All those activities which facilitate transfer of goods and services from one place to another or from one person to another is known as __________.
(a) Trade
(b) Industry
(c) Commerce
(d) None of the above

3. Buying and selling of goods and services on regular basis is known as ______.
(a) Trade
(b) Industry
(c) Commerce
(d) Auxiliaries to trade

4. Which of the following activities is considered a business activity?
(a) Raju, a furniture dealer sold his own Maruti car to Hari.
(b) Raj, a garments dealer purchased a suit for himself.
(c) A tailor stitching clothes for her children.
(d) A fruit seller selling fruits in the local market

5. Which of the following is not a limitation of proprietorship?
(a) Unlimited capital
(b) Unlimited liability
(c) Limited size
(d) Lack of continuity

(6) Which of the following is not an advantage of sole proprietorship?
(a) Quick decision
(b) Better control
(c) Better decision
(d) Flexibility in operation

7. Which of the following is not a feature of partnership?
(a) Two or more members
(b) Sharing of profit
(c) Limited liability
(d) Agreement among the partners

8. Which of the following is an advantage of a joint stock company?
(a) Easy to form
(b) Limited liability
(c) Better control
(d) Quick decision

9. The form of business which has a legal existence separate from its members is known as ______.
(a) Sole proprietorship
(b) Partnership
(c) Joint stock company
(d) None of the above

10. Which of the following is not a feature of sole proprietorship?
(a) Sharing of profit and loss
(b) Single ownership
(c) Unlimited liability
(d) One-man control

11. Tarun and Hari are friends and want to start a business together. None of them wants that their personal property should be used to pay off any loss in the business. Which type of business organisation will they choose?
(a) Partnership
(b) Joint stock company
(c) Sole proprietorship
(d) None of the above

12. Girish, a sole trader has enough capital but limited expertise. He wants to expand and grow his business and does not want to lose his control. Which of the following measures would suit him the most?
(a) Admit a partner
(b) Convert his business into a company
(c) Hire a computer professional
(d) Ask his father to join his business and help him

13. Which of the following characteristics does not belong to a wholesaler?
(a) Requires more capital
(b) Sale of goods for resale
(c) deals only in limited goods
(d) Sells goods in small quantities

14. Which of the following features belongs to a retailer?
(a) Direct contact with customers
(b) Sells goods in large quantities
(c) Sells different varieties of a particular product
(d) Employs number of agents for distribution of goods

15. Which of the following is not a function of a retailer?
(a) Buying and assembling of goods
(b) Providing personal services to customers
(c) Providing financial support to producers
(d) Providing credit facilities to regular customers

16. Which of the following is a function of the wholesaler?
(a) Buying finished goods from the producers and keeping them in warehouses till they are sold.
(b) Buying finished goods and assembling of different varieties of goods from different manufacturers
(c) Providing expert advice regarding quality features and usefulness of the items to customers
(d) Display different types of goods to attract the attention of customers.

Solutions to Multiple Choice type Questions

1. (c) Commerce
2. (a) Trade
3. (a) Trade
4. (d) A fruit seller selling fruits in the local market
5. (c) Limited size
6. (b) Better control
7. (c) Limited liability
8. (b) Limited liability
9. c) Joint stock company
10. (a) Sharing of profit and loss
11. (b) Joint stock company
12. (c) Hire a computer professional
13. (d) Sells goods in small quantities
14. (a) Direct contact with customers
15. (c) Providing financial support to producers
16. (a) Buying finished goods from the producers and keeping them in warehouses till they are sold.

Questions for three marks each:

17. Classify industry into three categories with brief explanation of each.
Answer:

Industries may be classified into three categories namely:

(i) Primary Industries: These include activities concerned with the extraction and production of natural resources and reproduction and development of living organisms, plants, etc. Primary Industries can be further subdivided into:

(a) Extractive Industries like mining
(b) Genetic Industries like breeding firms and hatcheries

(ii) Secondary Industries: These industries process raw-materials into final products and can be further subdivided into:

(a) manufacturing industry
(b) construction industry

(iii) Tertiary Industries: These are service industries catering to primary and secondary industries. Service facilities offered by banking, insurance, transport and warehousing come under this category.

18. What is meant by Business? State any two characteristics of Business.
Answer:

Business means an occupation in which people regularly engage in activities related to production and purchase of goods and services for sale, transfer or exchange with a view to earning profits. Two characteristics of business are:

(i) It is an economic activity which aims at earning profit.

(ii) It involves risk and uncertainty of income.

19. Sole proprietorship is the best form of Business Organisation at small scale. Justify the statement by giving any three reasons.
Answer:

Sole proprietorship is the best form of business organisation for small businesses, because of the following factors:

(i) Ease of formation and closure: Starting a proprietorship business does not require elaborate procedure or adherence to complicated legal procedures. This saves the small-scale entrepreneur a lot of time and money.

(ii) Flexibility in operations: The sole proprietor is the only risk bearer and profit earner and is not accountable to anyone. Thus, he can act more freely and with clear perception.

(iii) Control: Being sole owner and director of the business he can exercise better control over the business by leveraging his options quickly and effectively.

20. Give the meaning of ‘Partnership Deed’. State the contents of ‘Partnership Deed’.
Answer:

A ‘Partnership Deed’ is a formal written document detailing nature of the business, sharing of profit/loss etc which is signed by all the partners to become binding on them. A Partnership deed may contain the following points:
(a) Number and type of partners – active, sleeping, nominal etc.
(b) Capital contribution by each partner
(c) Duties and powers of each partner
(d) Share in profits/losses
(e) Liability of partners

21. State three limitations of partnership
Answer:

Three limitations of partnership are:

(a) Unlimited liability: Partners are jointly or individually liable to repay debts even from their personal resources if the situation demands. The liability of the partners cannot be restricted to business liabilities.

(b) Possibility of conflict: In a partnership firm decision making is a very sensitive are where partners often come up with different suggestions. This results in inevitable conflict.

(c) Problem of resource mobilisation: Since partnership firms have restriction on the number of partners they can admit, organising large funds is a problem. This limits the size of business.

22. Explain ‘No separate legal existence’ and ‘Unlimited Liability’ as features of partnership.
Answer:

‘No separate legal existence’ – A partnership firm has no legal existence which is distinctly different from the partners. This means that the firm and the partners are inseparable and considered as one entity. The firm and the partners collectively designate the firm.

‘Unlimited Liability’- The partners of a firm have unlimited liability. Personal assets may be used for repaying debts in case the business assets are insufficient to meet the liabilities. Also, the partners are jointly and individually liable for payment of debts. Jointly, the debts are shared in proportion to the share of profits. Moreover, individual partners can also be charged with debt recovery proceedings.

23. Difference between ‘Partnership’ and Sole Proprietorship on the basis of
(i) Formation (ii) No. of members (iii) Governing Act
Answer:

The distinction between a sole proprietorship and a partnership firm can be listed as follows:

Formation	Sole proprietorship	Partnership
Formation	A sole proprietorship business can be easily started by obtaining a trade license.	A partnership firm comes into existence through a written legal agreement wherein the terms and conditions governing the partnership are laid down.
No. of members	Sole proprietorship concern is owned by a single person	A partnership firm is formed among two or more persons, the maximum number being 50.
Governing Act	There is no specific Act governing sole proprietorship firms.	A partnership firm is governed by the Indian Partnership Act,1932.

24. What is meant by Channels of Distribution? List the two types of channels of distribution.
Answer:

Channels of Distribution means the route taken by goods as they are transferred from producer to consumer.

The Distribution Channel is divided two parts:

(i) Direct channel:

Producer —> Consumer

The goods move directly from the producer to the consumer. For example, paddy being transferred from the farmer to rice mills.

(ii) Indirect Channel:

Producer —> Wholesaler —-> Retailer

Goods move from the producer through wholesaler to retailer. For example, soap moving from the factory (producer) to the wholesaler who then distributes them to retailers

25. Explain fixed shop retailing as a type of retail trade.
Answer:

By Fixed shop retailing we mean localised small shops which sell on retail basis to customers. They are called fixed shops because they permanently operate from one place and become household names in the locality. They are located in market places, commercial areas or residential areas. These fixed shops offer commodities of different brands and know the customers and their preferences quite well.

26. What is meant by e-retailing?
Answer:

E-retailing is currently a very effective and convenient way of retailing multi-brand products. E-retailers do not have to put up expensive showrooms, the entire operation is web-based. Business units develop web-sites where prospective customers can find thousands of goods from daily necessities to super luxury items. They can choose, see user reviews and place their orders by making online payment. The goods are shipped to them in a few days’ time.

27. Explain the three advantages of Multiple shops to buyers and sellers.
Answer:

Three advantages of multiple shops are:

(a) Economies of scale: As there is central procurement, the multiple shop organisation enjoys economies of scale and can offer goods at lower prices to buyers.
(b) Elimination of middlemen: By selling directly to customers, the multiple shops can eliminate the need of middlemen and price their products attractively.
(c) Diffusion of risks: The losses incurred by one shop may be covered by profits in other shops reducing the total risk of the organisation.

Questions for 4 marks each

28. Differentiate between ‘Departmental Stores’ and Multiple Shops on the following basis
(i) Location (ii) Decoration (iii) Varieties of goods (iv) Credit facility
Answer:

The difference between departmental stores and multiple shops can be listed as follows:

Location	Departmental Stores	Multiple Shops
Location	Departmental stores are located in prominent commercial centres in standalone building attracting large number of customers	Multiple shops are area -specific and located in respectable localities or shopping malls
Decoration	Departmental stores are elegantly decorated with product-specific counters	Multiple shops are styled in identical fashion to boost the brand image
Convenience in buying	Departmental stores offer huge variety of items from durables to daily necessities under one roof	Multiple shops offer lifestyle items under same brand name directly to consumers with promotional offers
Credit facility	Some departmental stores offer credit facilities	Multiple shops do business on cash basis

29. What is meant by ‘Wholesaler”? Why wholesalers are needed in the channels of distribution?
Answer:

A wholesaler is the primary link in the supply chain of products offered by manufacturers. They purchase goods in bulk, arrange warehousing facility to stock them and then distribute the same among various retailers. Since, they buy the commodities in large quantities they are offered discounted prices. This discount or commission is the profit of the wholesalers. After lifting the stock, it is distributed in the retail channel and sale proceeds are collected.
Wholesalers are vital links in the supply chain because of the following factors:

1. Wholesalers have the capacity to lift large amount of stock from producers and push them in the retail network. Without them retailers would not be able to buy items in small quantities because big companies do not sell directly to retailers.
2. Helping Cash flow:
As has been said, the wholesaler invests funds and sends regular payments to get guaranteed supply from producers. This help maintain a steady cash flow and uninterrupted production.
3. Market specialists:
The wholesaler, sitting in a strategic position in the distribution channel, can access market intelligence from retailers and pass on vital inputs to manufacturers who can adjust their production accordingly.

30. Harish displays different types of goods in systematic and attractive manner in his shop. What type of middleman is he? State three other features of this type of middleman in the channels of distribution.
Answer:

Harish displays different types of goods in a systematic and attractive manner in his shop. Since he is dealing in different types of products he must be running a proprietorship retail outlet. He has to arrange the items systematically so as to be able cater to his customers quickly.

The three features of a retail outlet are:

(a). A retail shop is a single point outlet for multiple brands and products.
(b) They are localised in different areas of cities and towns and are known as neighbourhood shops
having good rapport with customers.
(c) Retail shops sell their goods mostly on cash basis.

CBSE Class 9 Elements of Business Test Paper 1 – Completed