NCERT MOST IMPORTANT QUESTIONS CLASS – 11 | Business Studies IMPORTANT QUESTIONS | CHAPTER –4 Business Services | EDUGROWN |

NCERT Most important question:

Question 1.
Explain the need and benefits of services.
Answer:
The need for Service Sector: Modern trade is the symbol of modem civilization. It has crossed every barrier and reached even the distant and remote parts of the world. It has touched every man. The economic welfare of mankind has been made possible by trade. The physical distribution of goods requires series of interrelated activities, which help in the flow of goods from the producer to the final consumer.

Serv ice sector ensures the smooth supply of goods and services. The service sector consists of a series of interrelated activities concerned with producers to consumers. Service facilities help ensure the supply of the right quantity of the right products to the right place at file right time.

Benefits of Services:
1. Quick and economical services to customers: Efficient service to customers is the only way to have an edge over the competitors. Customer satisfaction can be gained by providing quick, economical, and efficient services to consumers.

2. Minimisation of cost: The distribution costs are part of the price of goods. The costs of transportation, insurance, warehousing, and financing increase the price of the commodities. The efficient and cheap supply of these services minimizes the cost, which is beneficial to consumers.

3. Additional sales volume: The service sector through its efficient transportation, communication, warehousing, and advertising facilities helps increase demand and supply of sales. These services provide knowledge about the commodity and also help in their distribution. Services improve the faith and loyalty of customers.

4. Stabilisation of prices: Transportation helps in the transfer of goods from areas of abundant supply to the areas of scarcity, so the price remains almost the same everywhere. Warehousing adjusts the supply according to demand to avoid violent fluctuations in prices.

5. Removal of time and place barrier- There is a time gap between the production and consumption of the commodities. The warehousing services keep the commodity in their safe custody for the period between production or purchases and sale. This service protects goods from damage and destruction. Modem transport facilities have enabled the movement of commodities from one place to other places.

Question 2.
What are the various types of financial services? Explain in brief.
Answer:
Types of Financial Services: In addition to the traditional financial services of Banking and Insurance the following new financial services have emerged.
1. Merchant Banking: Services of intermediary regarding the issue, management, underwriting corporate restructuring are referred to as merchant banking. They provide growth of the capital market and help in developing an investment climate in the country.

2. Loan Syndication: The approach of borrowers to several banks willing to syndicate a loan, specify ing the amount, and the tenure of the loan is termed as loan syndication.

3. Venture Capital: Subscribing the equity shares of borrowers in return for part of ownership.

4. Factoring: The practice of selling accounts receivable to other companies or agencies for raising funds is termed factoring.

5. Leasing: The legal agreement by which the user of an asset may make payment of lease rent to the owner of the asset in return of use. At the end of the agreement, the lessee takes possession of the assets.

6. Mutual Funds: A company that pools funds from individuals to invest in shares or debentures and in short-term securities.

Question 3.
What are the various types of life insurance policies undertaken by the policyholders?
Answer:
Types of Life Insurance Policies: The life insurance corporation has got different policies suiting to the needs of different persons. These policies are as Under:

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1. Whole life policy: This policy reins throughout the whole life of the assured. The sum assured becomes payable to the beneficiary only after the death of the insured. The amount of premium is comparatively lesser in this policy. The period of the policy is indefinite. Its payment is made to the dependents of the insured only.

2. Endowment policy: This policy is for a fixed amount and specified period. If the policyholder survives for the period of the policy he is paid the specified amount of the policy with a bonus. An endowment policy provides both protection as well as savings for old age.

3. Joint life policy: This life policy is taken by two or more persons jointly. These persons may be partners of the firm, employees of an organization, members of the family, etc. According to the terms of the policy, the premium is paid jointly. On the death of anyone member of the group, the entire amount of the policy or the amount as per agreement is paid.

4. Annuity life policy. In this policy, the amount of the policy is paid before the maturity of the policy after one year or the year or the expiry of the fixed period. The entire amount of the policy is paid on the death of the policyholder or after the expiry of the period of the policy, whichever is earlier.

Question 4.
Differentiate Life Insurance and Fire Insurance.
Answer:
Difference between Life Insurance and Fire Insurance:

Points of difference	Life Insurance	Fire Insurance
I. Element of safety/investment	It has got both thethe element of safety and investment.	It has got an element of safety only.
2. Surrender value	The assured can surrender the policy before its maturity.	The insured cannot surrender the policy.
3. Contract of indemnity	It is not a contract of indemnity.	It is a contract of indemnity.
4. Number of years	The life insurance policy is taken for many years.	Fire insurance policy is taken for one year. It has to be renewed after one year if it has to be continued.
5. Insurable interest	It must be present at the time of the contract	It must be present both at the time taking policy and at the time of loss.

Question 5.
Explain the term Double Insurance and Re-Insurance and differentiate the two.
Answer:
Double Insurance: Any person is free to take more than one insurance policy for the same property or goods. But he cannot recover more than the amount of loss actually suffered because a contract of insurance is a contract of indemnity.

Reinsurance: When an insurer risks that are beyond his control, he may get the whole or a part of his risk reinsured with other insurers. This is known as reinsurance.

Points of difference	Double Insurance	Reinsurance
1. Meaning	Ensuring the same risk with two or more companies is Double Insurance.	It is a contract of sub-insurance between the insurer and the reinsurer.
2. FilingClaim	A claim can be filed with all insurers but restricted to an actual loss in case of fire and marine policies.	The insured will claim compensation from the original insurer, who will claim compensation from reinsurers.
3. Contribution	The contribution will be made by each insurer in proportion to the sum insured.	Reinsurers are not directly required to contribute to losses.

Question 6.
What is the role or advantages of insurance in business?
Answer:
Role/Advantages Of Insurance In The Business: The future is always uncertain. Uncertainties in the business make plans futile and investments valueless. In order to minimize risk different types of insurance policies are taken. Insurance policies are advantageous in the following respects:

Role/Advantages of Insurance in the Business:

1.	Protection
2.	Indemnity
3.	Diffusion of Risk
4.	Social utility
5.	Industrial Development

1. Protection: Insurance provides protection against the risk of loss. Incaseoflife insurance the loss of an individual cannot be compensated but the receipt of the insured amount from Life Insurance Corporation helps him in standing. Insurance enables the businessman to carry on business with confidence and peace of mind.

2. Indemnity: The loss caused by fire and other mishappenings is compensated by the insurance company. Insurance, as such is the protection against losses and businessman feels secured and free from anxiety.

3. Diffusion of Risk: The burden of loss is distributed among a large number of persons through insurance. The impact of loss on one industry is not unduly heavy, that can be transferred by the insurance company to others.

4. Social utility: Insurance provides safety to the common man. It is a means of social security. It also generates employment opportunities.

5. Industrial Development: The insurance companies collect a huge amount as a premium. These funds are invested in industrial ventures and cause industrial development.

Question 7.
What do you understand by the term Merchant Bankers? Mention in brief the services provided by Merchant Bankers.
Answer:
Merchant Bankers: Merchant bankers or lead managers undertake the management of new capital issues of companies. A merchant banker helps the company intending to raise fresh capital in drafting the prospectus (or statement in lieu of prospectus), the arrangement of underwriters, selection of brokers, publicity, the appointment of the registrar to the issue, etc. In India, several banks have specialized divisions or subsidiaries for offering merchant banking services.

Merchant bankers provide a wide variety of financial services to the corporate sector. They look into various legal and procedural aspects involved in the issue of securities and the raising of loans. They also provide consultancy in matters of investment, capital restructuring, valuation, merger, acquisition, etc.

Question 8.
Define Reserve Bank of India and its important functions:
Answer:
Reserve Bank of India: It was incorporated on April l, 1935 as a shareholders’ bank. The majority of shares were held by the central government. After independence, the Reserve Bank of India was nationalized on April l, 1949. Reserve bank of India performs the following important functions:

Functions Of Reserve Bank Of India:
A. Primary functions:

1. Issuingcurrencynotes(except one rupee note, which is issued by the ministry of finance)
2. Bank of the government
3. Working as the banker of banks
4. Controlling bank rate or rate of interest
5. Controlling exchange rate.

B. Subsidiary functions:

1. Dealing in foreign exchange
2. Discounting bills of different banks
3. Dealing in government securities
4. Accepting deposits without interest
5. Managing clearing houses
6. Managing agricultural credit
7. Extending short-term loans to banks and financial institutions
8. Regulating developmental, industrial, and commercial activities in India.

Question 9.
Explain the term E-banking and the services of E-banking in today’s economic world.
Answer:
E-Banking (Electronic Banking): Many banks have introduced electronic banking services for their customers. Like IDBI Bank, UTI Bank, Global Trust Bank, Citibank, State Bank of India, etc. They make use of computers and satellites for the transfer of funds and communication. E-banking includes the following services:

1. EFT (Electronic Fund Transfer System): It is a cost-saving scheme for the convenience of customers. Under the schemes accompany may transfer wages and salaries from its bank account to the personal accounts of its employees. Similarly, a company can distribute dividends to its shareholders electronically. This is a very safe method of transfer of money as compared to banker’s draft, traveler’s cheque, etc.

2. ATMs (Automated Teller Machines): Many banks have installed ATMs in big cities. An ATM renders a teller’s job 24 hours a day. It is a self-service terminal that renders the facility of withdrawal and deposit of money to the bank customers. Each customer is given a separate plastic card to avail of the services at the ATM.

The customer has to insert the plastic card into the terminal and enter his identification code. The machine would then respond to the customer’s instruction of giving cash, taking a deposit, and handling other banking transactions.

3. Credit Card: The card issued to selected customers to enable them to make payment of credit bills of the credit limit. It is also called plastic money as it allows the credit cardholder to withdraw money without making any deposit into the bank. It allows an overdraft facility to the customer up to a specified limit. The cardholder can use the card for making payments for goods and services to the suppliers having Internet service is provided in India by many companies like VSNL, Bharti Telecom, and MTNL known as Internet Providers.

Any individual or organization can open an account with any Internet Service Provider who will give an account number for a monthly or yearly charge. Then the user may have access to the internet and the e-mail through it.

4. Debit Card: This is the card issued to the holder of a bank account against the balance amount in the account to facilitate and simplify the payment, withdrawal, and transfer of money any time, anywhere through the computer is known as a debit card.

Question 10.
Banking is the lifeblood of the economy. Mention the role or importance of Banking in the economy.
Answer:
Role/Importance Of Banking In National Economy:
As capital is the lifeblood of trade, commerce, and industry, so banking, in the same way, is the lifeblood of the economy. The importance of banking can be justified on the following grounds:

The modem economy is helpless without banking services. Banking as the lifeblood of the economy has assumed the following significance.
1. Credit creation: Banks accept deposits, retain a nominal percentage of the deposit as a cash reserve, and the best major part is lent to trade, industry and commerce at a higher rate of interest. It is known as credit creation.

2. Mobilisation of savings: Banking accept surplus savings and return together with interest, whenever required. It inculcates the habit of savings among people. It is responsible for capital formation.

3. Safe custody of valuables: The banks provide locker services and keep our valuables like ornaments, notes, documents, etc. safe, we can take them from banks whenever required.

4. Promotion of foreign trade: Finance is the lifeblood of all trading activities, even foreign trade. Banks are the source of funds, help in the payment and transfer of money, provide foreign exchange, issue letter of credit, and provide assistance to foreign trade in many ways.

5. Social and national welfare: Surplus funds of the people are accepted as deposits by banks and lent to trade, commerce, and industry for productive purposes. It promotes the welfare of the people.

Question 11.
Define the term internet and its various benefits and uses in the modern world.
Answer:
Internet is a worldwide or global network of computers, connected through telephone lines and other high-speed links. It is a facility of communicating and sharing information with mi 11 ions of people all over the World Internet Service is provided in India by many companies like VSNL, Bharti Telecom, and MTNL, known as internet service providers.

Any individual or organization can open an account with any internet service provider who will give an account number for a monthly or yearly charge. Then the user may have access to the internet and the e-mail through its information in a variety of forms.

Benefits/Uses of the Internet: Nowadays the internet is being used in every place and every sphere of life, whether it is a share market, shopping complex, companies, organization, departments, or Government understandings. There are a lot of buyers and sellers who use the internet as their buying and selling market. A newspaper or magazine can be read out through it. Seminars, conference, workshop, meeting, the conversation is also possible on the internet.

Thus, the benefits/uses of the internet can be classified as follows:
1. Sharing information: The first and foremost use of the internet is to share information. Company employees and many other people can share research and business data among colleagues and like-minded individuals

2. Communication- Internet facility is also used for communication Through the internet individuals can make communicate directly in various “chat-sessions” and E-mail facilities. With the help of modern technology people can talk face-to-face with the help of a Digital Camera which is possible only with the internet.

3. Marketing of products: Various Multinational Companies (MNC’s), departmental stores, shopping complexes, manufacturers, organizations, etc. used the internet for selling their products. Buyers also used interest to buy different kinds of goods from different corners of the world.

4. Entertainment: The Internet is a good source of entertainment. It offers a lot of entertainment programs as you can play any game by downloading it on your computers. You can come to know the latest Hollywood and Bollywood information about your favorite stars and films. You can hear songs and see films on the internet.

5. Making of queries: The Internet provides the facility to make queries regarding various places, products, films, books, personalities, institutions, etc. That’s why. a high and suitable institute, college, or school with its features and co-curricular activities can be approached.

6. Feedback and suggestions: Through the internet, many institutions and governments can take feedback and suggestions about their decisions and orders (e.g. Daily voting regarding decisions in Hindustan Times and Aaj Ki Baat).

7. Other uses: The Internet facility is also used to find out vacancies and provide opportunities. It can also be used for matrimonial and many more things.

Question 12.
Discuss the various characteristics of an Ideal warehouse.
Answer:
Characteristics Of An Ideal Warehouse: Efficient storage facilities are essential for the smooth flow of trade and commerce.

The essential features of good storage facilities are as follows:
1. Economy: An ideal warehouse must not be very expensive. The benefits provided by it should be much greater than the cost involved in its establishment and maintenance. Its hire charges should be reasonably low.

2. Safety: A good warehouse must provide adequate protection to the goods stored in it. It should be properly constructed to safeguard the goods from heat, moisture, rats, fire, theft, etc.

3. Proximity: The warehouse should be easy Iy accessible. It should be centrally located so that goods can be loaded, unloaded, and transported quickly at the minimum possible cost. It should provide easy or convenient entry and exit of goods.

4. Security: A good warehouse should facilitate pledging or hypothecation of the goods kept therein. It should provide for the supervision and control of the pledged goods. It should be capable of being insured at low rates of premium.

5. Control-There must be proper arrangements for the inspection, measurement, identification, etc. of goods. Proper care should be taken of the stored goods. There should be trained and experienced staff to manage the warehouse.

Question 13.
Differentiate between Private Warehouses and Public Warehouses.
Answer:
Difference between Private Warehouses and Public Warehouses:

Points of Difference	Private Warehouse	Public Warehouse
1. Capital	Large investment in equipment. trained personnel and other facilities.	There is no need for capital investment in public warehouses.
2. Risk	More risk of obsolescence due to change in demand and technology.	Minimum risk is involved investment in public warehouses.
3. Tax benefit	Advantages of depreciation allowance white calculating taxable income.	No property advantage due to free-port State real estate is taxless.
4. Operating cost	Operating costs are lower. if sufficient volume is stored.	Higher due to inclusion of profit factor. selling and advertising costs.
5. Economies of scale.	Depends on company volume.	Possible due to serving a large number of customers.
6. Storage and handling Cost	Only estimated costs of storage and handling are made.	Storage and handling costs depend on decision making.

Question 14.
What are Bonded Warehouse and its significance in business?
Answer:
Bonded warehouses are those licensed by the government to accept imported goods for storage before the payment of customs duty by the importers of such goods. Such warehouses work under the supervision and control of customs authorities. Bonded warehouses are located near ports. The goods stored in a bonded warehouse cannot be withdrawn without payment of necessary duty charges. These warehouses are very useful in foreign trade.

Significance Or Objectives Of Bonded Warehouse:
1. Facility in the payment of customs duty: The importer after depositing goods with the bonded warehouse gets sufficient time to arrange funds for the customs duties. There is also an opportunity to pay customs in parts and get the required quantity of goods cleared from the bonded warehouse.

2. Possibility of sales even without clearance of goods: Warehouse receipt is a negotiable instrument, so goods can be sold by endorsing warehouse receipt to the purchaser, who will have to pay customs duty for clearing goods.

3. Exemption from customs duty in case of the report: If goods are imported for exporting abroad, the importer can get it cleared from the bonded warehouse without the payment of customs duty’.

4. Encouragement to foreign trade: Bonded warehouse facilitates foreign trade by its location at the ports and deferred payment of custom duty.

5. Borrowing facility: Warehouse receipt issued by bonded warehouses can be deposited with the bank as security for obtaining loans.

Question 15.
Differentiate between service and goods.
Answer:
Difference between service and goods:

Points of Difference	Services	Goods
1.Nature	An activity or Process	A Physical Product
2. Type	Heterogeneous	Homogenous
3. Tangibility	Intangible	Tangible
4. Ownership	Not transferable	Transferable
5. Inventory	Cannot be kept as stock	Can be kept as stock
6. Involvement	Participation of customers at the time of service delivery	Transferable at the time of delivery not possible
7. Inseparability	Simultaneous production and consumption	Separation of production and consumption
8. Production	Services are performed not produced	Goods are produced

Question 16.
Write a short note on types of services?
Answer:
Services can be classified into:

1. Business Services
2. Personal Services
3. Social Services

1. Business Services: Business services are those services which are used by business to conduct its day to day work. Like Warehousing, Transport, Banking, Insurance, Communication, etc. There are gaps of distance, time, knowledge, and risk between the production and consumption of goods. Business services bridges these gaps. The need for services arises because production is concentrated whereas customers are scattered widely.

2. Personal Services: Those services which are experienced differently by different customers are called personal services. These services are not consistent in nature. They will differ depending upon the service provider. They will also depend upon the customer’s preferences and demands, for example, tourism, restaurants, etc.

3. Social Services: Social services are those services that are performed for the benefit of society. They provide voluntarily in pursuit of certain goals. These goals may improve the standard of living of the weaker sections of the society or may educate them or provide health care and hygienic conditions in slum areas. For example health care and education services provided by certain NGOs and government agencies.

Question 17.
Explain the various types of Banks?
Answer:
Banks can be classified into the following:

1. Commercial Banks
2. Cooperative Banks
3. Specialized Banks
4. Central Banks

1. Commercial Banks: These banks perform all kinds of banking business. They accept deposits from the public and provide short term loans and advances to customers. They act as financial intermediaries or dealers in debt. Commercial banks are regular banks.

In India, there are three types of commercial banks:

1. Public Sector Commercial Banks
2. Private sector commercial banks
3. Foreign Banks

2. Cooperative Banks: These banks are formed and set up the principles of cooperations. They are registered under Cooperative Societies Act. They provide credit and other facilities to their members. The members may be farmers, small scale traders, etc. They accept deposits from the members and grant loans to them at low rates of interest.

3. Specialised Banks: Specialised banks are foreign exchange banks, industrial banks, development banks, export-import banks catering to specific needs of these unique activities. They provide financial aid to industries, heavy turnkey projects, and foreign trade.

4. Central Bank: Central bank is the apex institution that supervises and controls the entire banking system of the country. Every country has a central bank. The Reserve Bank of India is the central bank of our country. A central bank does not deal directly with the public and its aim is not to earn profits. It also acts as a government banker. It controls and coordinates the currency and credit policies of any country. It maintains the exchange rate. It is the custodian of foreign currency reserves of the country.

Question 18.
What do you understand by insurance? How is it facilitates business?
Answer:
Insurance is a means of spreading risks. It involves the pooling of risks. A group of people who are subject to an insurable risk contributes regularly and the fund so created is utilized to compensate those unfortunate few members of the group who actually suffer a loss due to some unexpected density:

In other words, Insurance is a social device for pooling arid dividing risks among a large number of persons.

Importance of Insurance: Insurance plays a very important role in business. It provides the following advantages of businessman:
1. Protection against risks: It provides protection against risks of loss. By providing security against heavy risks and losses, insurance stimulates the expansion of trade and industry.

2. Division of labor- It facilitates the division of labor. A businessman can concentrate fully on his own business because his risks are taken over by an insurance company that is a specialist in risk-bearing.

3. Ability to face competition- It helps in improving the efficiency of business because an insured businessman feels more safe and active. Insurance contributes to the survival and continuity of business.

4. Better utilization of capital: In absence of insurance facilities businessmen will have to maintain large reserves to face risks due to loss. Insurance avoids the need for such reserves and the fund so released can be invested to generate additional wealth.

5. Facility for loan: Insurance companies provide loans and underwriting facilities to businessmen and also invest in industrial securities. After insuring his goods, the creditworthiness of the businessman increases.