1st PUC Business Studies Question Bank Chapter 9 Small Business

Karnataka 1st PUC Business Studies Question Bank Chapter 9 Small Business

One Mark Questions

Question 1.
In which year the MSMED Act was enacted?
Answer:
June 16, 2006, the MSMI-.D Act was enacted.

Question 2.
Expand NS1C.
Answer:
National Small Industries Corporation.

Question 3.
Expand SIDBI.
Answer:
Small Industries Development Bank of India.

Question 4.
Expand RWED.
Answer:
Rural and Women Entrepreneurship Development.

Question 5.
Expand WAS VIE.
Answer:
World Association Tor Small and Medium Enterprises.

Question 6.
Expand DICs.
Answer:
The District Industries Centers.

Question 7.
State the investment limit for micro-enterprises in manufacturing.
Answer:
Does not exceed twenty-five lakh rupees.

Question 8.
State the investment limit for micro-enterprises in services.
Answer:
Does not exceed ten lakh rupees.

Question 9.
State the investment limit for small enterprises in manufacturing.
Answer:
More than twenty-five lakh rupees but does not exceed five crore rupees.

Question 10.
State the investment limit for small enterprises in services.
Answer:
More than ten lakh rupees but does not exceed two crore rupees.

Question 11.
What is the investment limit for medium enterprises providing services?
Answer:
More than five crore rupees but does not exceed ten crore rupees.

Question 12.
What is the investment limit for medium enterprises engaged in manufacturing?
Answer:
More than two crore rupees but does not exceed five core rupees.

Question 13.
What is a tax holiday?
Answer:
A government incentive program that offers a tax reduction or elimination to businesses is called a tax holiday.

Multiple Choices One Mark Questions

Question 1.
Which one of the following is not the feature of cottage industries?
(a) Usage of simple equipment
(b) Small capital investment
(c) Usage of private resources by individuals
(d) Production of goods by using imported technology
Answer:
(d) Production of goods by using imported technology.

Question 2.
Which of the following industry groups does not come under the purview of the Small Seale Sector?
(a) Food products
(b) Rubber and plastic products
(c) Repair services
(d) Extraction of iron ore
Answer:
(d) Extraction of iron ore

Question 3.
A new scheme of ‘performance and credit rating’ of small businesses is implemented through
(a) NSIC
(b) NABARD
(C) RSBDC
(d) None of these
Answer:
(a) NSIC

Question 4.
In the manufacturing category, the investment range in Small scale business units is
(a) 25 lakhs to 10 crores
(b) 25 lakhs to I crore
(C) 25 Lakhs to 20 crores
(d) None of the these
Answer:
(a) 25 lakhs to 10 crores.

Question 5.
In the services category, the lnvestmént range in Small scale business units
(a) 10 Lakhs to 1 crore
(b) 10 lakhs to 5 crores
(c) 10 lakhs to 10 crores
(d) None of the these
Answer:
(a) 10 lakhs to 1 crore

Two Mark Questions

Question 1.
Give the meaning of village industry. (March – N 2018, March – N 2019. March – S 2018. March – N 2018)
Answer:
Village industry has been defined as any industry located in a rural area that produces any goods, renders any service with or without the use of power, and in which the fixed capital investment per head or artisan or worker does not exceed Rs. 50,000.

Question 2.
State any two features of cottage industries.
Answer:
(a) These are organized by individuals, with private resources.
(b) Normally use family labor and locally available talent.

Question 3.
State the twin objectives of performance and credit rating of small businesses through NSIC.
Answer:
(a) Sensitising the small industries about the need for credit rating.
(b) Encouraging the small business units to maintain a good financial track record.

Question 4.
State any two objectives for the establishment of the National Commission for Enterprises in the Unorganised Sector (NCEUS).
Answer:
(a) To recommend measures considered necessary for improving the productivity of small enterprises in the informal sector.
(b) Providing social security for the workers in the informal sector.

Question 5.
Name any two services provided by rural and women entrepreneurship development.
Answer:
(a) Creating a business environment that encourages initiatives of rural and women entrepreneurs.
(b) Providing training manuals for women entrepreneurs and training them.

Question 6.
Expand MSMED Act.
Answer:
The Micro, Small, and Medium Enterprises Development Act.

Question 7.
State any one type of manufactures enterprises as specified in the schedule to the industries (D & R) Act, 1951.
Answer:
Micro Enterprise is the one type of manufacturing enterprise.

Question 8.
State any one type of services as specified in the schedule to the industries (D & R) Act, 1951.
Answer:
Travel agency services.

Question 9.
Give the meaning of micro-enterprises related to manufacturing.
Answer:
Micro enterprises are those whose investment in plant and machinery does not exceed rupees one lakh.

Question 10.
Give the meaning of micro-enterprises related to services
Answer:
The enterprises engaged in providing or rendering services and are defined in terms of investment in equipment.

Question 11.
Expand KVIC.
Answer:
Khadi and Village Industries Commission.

Question 12.
Expand NABARD.
Answer:
National Bank for Agriculture and Rural Development.

Question 13.
Expand RSBDC.
Answer:
The Rural Small Business Development Centre.

Question 14.
State any two institutions set up by the government for the promotion of small and rural industries.
Answer:
(a) National Bank for Agriculture and Rural Development (NABARD).
(b) National Small Industries Corporation (NSIC).

Question 15.
Expand SFURTI.
Answer:
Scheme of Fund for Regeneration of Traditional Industries.

Question 16.
Expand WTO. (March – N 2018)
Answer:
World Trade Organisation.

Question 17.
Expand IRD.
Answer:
Indian Resource Development.

Question 18.
Expand PMRY.
Answer:
Prime Minister’s RozgarYojana.

Question 19.
When was National Small Industries Corporation established?
Answer:
In 1955 National Small Industries Corporation established.

Question 20.
Name any two services provided by rural and women entrepreneurship development.
Answer:
(a) Creating a business environment that encourages initiatives of rural and women entrepreneurs.
(b) Providing training manuals for women entrepreneurs and training them.

Question 21.
State any one type of manufacturing enterprise as specified in the schedule to the industries (D & R) Act, 1951.
Answer:
The type of manufacturing enterprises are per the D and R Act:
(a) Small enterprises
(b) Medium enterprises
(c) Micro-enterprises

Question 22.
What is a small enterprise related to manufacturing?
Answer:
A small-scale industrial undertaking is defined as one in which the investment in fixed assets of plant and machinery does not exceed rupees one crore.

Question 23.
Give the meaning of medium enterprise related to manufacturing.
Answer:
A medium-scale industrial undertaking is defined as one in which the investment in fixed assets of plant and machinery. More than five crore rupees but does not exceed ten crore rupees.

Four Mark Questions

Question 1.
State any eight major industry groups in the small-scale sector.
Answer:
Major Industry Groups in the Small Scale Sector are:
(a) Food Products.
(b) Chemical and Chemical Products,
(c) Basic Metal Industries.
(d) Electrical Machinery and Parts,
(e) Rubber and Plastic Products.
(f) Paper Products and Printing.
(g) Transport Equipment and Parts.
(h) Leather and Leather Products.
(i) Beverages, Tobacco, and Tobacco Products.
(j) Wool, Silk, Synthetic Fibre, and Textiles.
(k) Jute, Hemp, and Mesta Textiles.

Question 2.
Briefly explain the support to small and rural industries given by any four institutions.
Answer:
The contribution of small-scale industries is remarkable. Thus, the government has provided the following institutional support to solve the problem of finance and marketing in the small scale sector:
(a) National Bank for Agriculture and Rural Development (NABARD): NABARD was set up in 1982, to promote integrated rural development. Apart from agriculture, it supports small industries, cottage and village industries, and rural artisans. It provides credit and offers counseling and consultancy services and organizes training and development programs for rural entrepreneurs.

(b) The Rural Small Business Development Centre (RSBDC): It was set up by the world association for small and medium enterprises and sponsored by NABARD. It works for the benefit of socially and economically disadvantaged individuals and groups. It aims at providing management and technical support to current and prospective micro and small entrepreneurs in rural areas.

(c) National Small Industries Corporation (NSIC): This was set up in 1955 with a view to promote aid and foster the growth of small business units in the country.

Functions of NSIC include:

Supply of machines on easy hire-purchase terms.
Procure, supply, and distribute raw materials.
Export the products of small business units and develop export-worthiness.
Mentoring and advisory services.
Serve as technology business incubators.
Creating awareness on technological up-gradation.
Developing software technology parks and technology transfer centers.

(d) Small Industries Development Bank of India (SIDBI): SIDBI was set up as an apex bank to provide direct/indirect financial assistance under different schemes, to meet credit needs of small business organizations, and to coordinate the functions of other institutions in similar activities.

(e) The National Commission for Enterprises in the Unorganized Sector (NCEUS):
The NCEUS was constituted in September 2004, with the objectives of recommending measures considered necessary for improving the productivity of small enterprises in the informal sector and to enhance the competitiveness of the sector in the emerging global environment by developing linkages of the sector with other institutions in the areas of credit, raw materials, infrastructure, technology up-gradation, marketing, etc.

(f) Rural and Women Entrepreneurship Development (RWED): The Rural and Women Entrepreneurship Development program aims at promoting a conducive business environment and at building institutional and human capacities that will encourage and support the entrepreneurial initiatives of rural people and women by providing training and advisory services.

(g) Scheme of Fund for Regeneration of Traditional Industries (SFURTI): The Central Government set up this fund to make the traditional industries more productive and competitive and to facilitate their sustainable development. The main objectives of SFURTI are to develop clusters of traditional industries in various parts of the country; build innovative and traditional skills, improve technologies and encourage public-private partnerships, develop market intelligence, etc.

(h) The District Industries Centres (DICs): District Industries Centre is the institution at the district level which provides all the services and support facilities to the entrepreneurs for setting up small and village industries including identification of suitable schemes, preparation of feasibility reports, arranging for credit, machinery, and equipment, provision of raw materials and other extension services. This was launched on 1st May 1978.

Question 3.
Briefly explain the categories of enterprises as classified by MSMEI) Act, 2006.
Answer:
Small scale industry: A small-scale industrial undertaking is defined as one in which the in¬vestment in fixed assets of plant and machinery does not exceed rupees one crore.

Ancillary industry: The small-scale industry can enjoy the status of an ancillary small industry if it supplies not less than 50% of its production to another industry, referred to as the parent unit.

Export-oriented units: The small-scale industry can enjoy the status of an export-oriented unit if it exports more than 50% of its production.

Small scale industries owned and managed by women entrepreneurs: An enterprise pro¬moted by women entrepreneurs is a small scale industrial unit in which she/they individually or jointly have a share capital of not less than 51%.

Tiny industrial units: A tiny unit is defined as an industrial or business enterprise whose in¬vestment in plant and machinery is not more than Rs. 25 lakhs.

Small scale service and business enterprises: A small scale service and business enterprise are one whose investment in fixed assets of plant and machinery excluding land and building does not exceed Rs. 10 lakhs.

Microbusiness enterprises: Within the tiny and small business sector, micro-enterprises are those whose investment in plant and machinery does not exceed rupees one lakh.

Village industry: It has been defined as any industry located in a rural area that produces any goods, renders any service with or without the use of power, and in which the fixed capital investment per head or artisan or worker does not exceed Rs. 50,000.

Question 4.
Explain any four marketing support activities provided by MSMEs.
Answer:
(a) Development of display centers shows windows and hoarding, etc. for promoting products and services of MSMEs.
(b) Printing of literature, brochures, and product-specific catalogs and CDs, etc., and preparation of short films for disseminating information.
(c) Development of website/portal for facilitating the marketing of MSME products and services.
(d) Development and dissemination of advertising and publicity material about various programs/schemes for the MSME sector and events.
(e) Preparation and up gradation of MSME manufacturers/suppliers/ exporters directory.
(f) Documentation of the success stories of MSMEs.
(g) Conducting studies to explore and assess new markets/businesses and product ranges for both domestic and international markets.
(h) Hosting international delegation and networking events.
(i) Government, stores purchase program.

Question 5.
Briefly explain any four features of cottage Industries.
Answer:
The features of cottage industries are:
(a) Cottage industries are organized by individuals, with private resources.
(b) Cottage industries normally use family labor and locally available talent.
(c) The equipment used in cottage industries is simple.
(d) Capital investment in cottage industries is small.
(e) Cottage industries produce simple products, normally on their own premises.
(f) Cottage industries produce goods using indigenous technology.

Question 6.
Explain briefly any four points which highlight the role of small business in India.
Answer:
India is a developing country and in developing countries, the scope of small-scale industries is very wide. It is contributing to socio-economic development in the following ways:
(a) Contribution in GDP: Small industries in India account for 95% of the industrial units in the country. They contribute almost 40% of the gross industrial value added in the \ economy.

(b) Contribution in exports: 45% of the total exports from India come from small-scale industries. Gems and jewelry, handicrafts, sports goods, etc. are some items of exports from the small-scale sector.

(c) Employment generation: Small industries are the second largest employers of human resources, after agriculture, and generate more employment opportunities per unit of capital invested compared to large industries.

(d) Variety of production: Small industries produce a wide variety of products ranging from mass consumption goods, readymade garments, hosiery goods, stationery items, soaps and detergents, domestic utensils, leather, plastic and rubber goods, processed foods and vegetables, wood and steel furniture, etc. to the sophisticated items like electric and electronic goods, drugs and pharmaceuticals, agricultural tools and equipment, and several other engineering products.

(e) Regional balance: Small industries contribute significantly to the balanced development of the country as they produce simple products using simple technologies and depend on locally available resources both material and labor and can be set up anywhere in the country.

(f) Entrepreneurship development: Small industries provide opportunities for entrepreneurship development in the country. The latent skills and talents of people can be transformed into business ideas with little capital investment and almost nil formalities to start a small business.

(g) Low cost of production: Small industries have the advantage of the low cost of production as they use locally available resources which as less expensive. The establishment and running costs of small industries are lower because of low overhead expenses.

(h) Quick decision making: Due to the small size of the organization quick and timely decisions can be taken without consulting many people. New business opportunities can therefore be captured at the right time.

(i) Customized production: Small industries can design the product as per the tastes/ preferences/needs of individual customers. They can provide customized production of even non-traditional products such as computers and other such products. They can produce according to the needs of the customers as they use simple and flexible production techniques.

(j) Personal touch: Small industries have inherent strength of adaptability and a personal touch and therefore maintain good personal relations with both customers and employees. The government does not have to interfere in the functioning of a small-scale unit.

Question 7.
Explain briefly any four problems faced by small businesses.
Answer:
(a) Finance: The most serious problem faced by SSIs is the non-availability of adequate finance to carry out their operations. Small scale sector lacks the creditworthiness and collateral required to raise capital from the capital markets or financial institutions and hence they depend on local money lenders who charge high-interest rates.

(b) Raw materials: Another major problem of small businesses in the procurement of raw materials. If the required materials are not available, they have to compromise on the quality or have to pay a high price to get good quality materials. They purchase raw materials in small quantities due to a lack of storage capacity and hence their bargaining power is low.

(c) Managerial skills: Small business is generally promoted and operated by a single person, who may not possess all the managerial skills required to run the business. Many small business entrepreneurs possess sound technical knowledge but are less successful in marketing and may not find enough time to take care of all functional activities.

(d) Less productive labor: Small business firms cannot afford to pay high salaries to their employees, which affects employee willingness to work. Thus, productivity per employee is relatively low and employee turnover is generally high. Small business organizations are unable to attract talented people because of lower remuneration. Division of labor cannot be practiced in small-scale units, which results in a lack of specialization and concentration.

Question 8.
Briefly explain the common Incentives offered to attract small ¡ndùstries in rural areas by the government.
Answer:
Some of the common incentives provided by the Government for industries in backward and hilly areas are as follows:
(a) Land: Every state offers developed plots for setting up industries. The terms and conditions may vary. Some states don’t charge rent in the initial years, while some allow payment in installments.
(b) Power: It is supplied at a concessional rate of 50%, while some states exempt such units from payment in the initial years.
(c) Water: It is supplied on a no-profit, no-loss basis or with 50% concession or exemption from water charges for a period of 5 years. Sales Tax: In all union territories, industries are exempted from sales tax, while some states extend the exemption for 5 years period.
(d) Octroi: Most states have abolished octroi.
(e) Raw materials: Units located in backward areas get preferential treatment in the matter of allotments of scarce raw materials like cement, iron, and steel, etc.
(f) Finance: Subsidy of 10-15% is given for building capital assets. Loans are also offered at concessional rates.
(g) Industrial estates: Some states encourage the setting up of industrial estates in backward areas.
(h) Tax holiday: Exemption from paying taxes for 5 or 10 years is given to industries established in backward, hilly and tribal areas.

1st PUC Business Studies Small Business Textbook Questions and Answers

Short Answer Questions

Question 1.
State any two parameters used to measure the size of the business.
Answer:
Several parameters can be used to measure the size of business units. These include the number of persons employed in business, capital invested in the business, the volume of output or value of the output of the business, and power consumed for business activities.

Question 2.
What is the definition used by the Government of India for Small Scale Industries?
Answer:
The Government of India defines small-scale industries as their investment in plants and machinery. In India, the capital is scarce and labor is abundant this measure asks to keep in view the socio-economic environment.

Question 3.
How would you differentiate between an ancillary unit and a tiny unit?
Answer:

Ancillary Unit	Tiny Unit
(i) An ancillary unit is a unit that supplies not less than 50% of its production to the parent unit.	(i) A tiny unit is a business enterprise whose investment in plant and machinery is not more than Rs. 25 lakh.
(ii) Investment limit in such a unit is one crore.	(ii) Investment limit is Rs. 25 lakh in this type of unit.
(iii) Parent unit assists the ancillary unit by providing technical and financial help.	(iii) No such assistance is there.

Question 4.
State any four features of cottage industries.
Answer:
The features of cottage industries are:
(a) Cottage industries are organized by individuals, with private resources.
(b) Cottage industries normally use family labor and locally available talent.
(c) The equipment used in cottage industries is simple.
(d) Capital investment in cottage industries is small.
(e) Cottage industries produce simple products, normally on their own premises.
(f) Cottage industries produce goods using indigenous technology.

Long Answer Questions

Question 1.
How do small-scale industries contribute to the socio-economic development of India?
Answer:
India is a developing country and in developing countries, the scope of small-scale industries is very wide. It is contributing to socio-economic development in the following ways:
(a) Contribution in GDP: Small industries in India account for 95% of the industrial units in the country. They contribute almost 40% of the gross industrial value added to the economy.

Question 2.
Ans. The role of small business in rural India is explained in the following points:
(a) Non-farm employment: Traditionally, rural households in India were exclusively engaged in agriculture. But now rural households have varied and multiple sources of income and participate in a wide range of non-agricultural activities such as wage employment and self-employment in commerce, manufacturing, and services, along with the traditional rural activities of farming and agricultural labor. This can be largely attributed to the setting up of agro-based rural small industries.

(b) Employment for artisans: Cottage and rural industries play an important role in providing employment opportunities in the rural areas, especially for the traditional artisans and the weaker sections of society.

(c) Prevention of migration: Development of rural and village industries can also prevent migration of rural population to urban areas in search of employment.

(d) Poverty alleviation: Village and small industries are significant as producers of consumer goods and absorbers of surplus labor, thereby addressing the problems of poverty and unemployment. The promotion of small-scale industries and rural industrialization has been considered by the Government of India as a powerful instrument for realizing the twin objective; of accelerated industrial growth and creating additional productive employment potential in rural and backward areas.

(e) Socio-economic aspects: These industries contribute amply to other socio-economic aspects, such as reducing inequalities, dispersed development of other sectors of the economy.

Question 3.
Explain any four problems faced by small-scale industries. (March – N – 2018)
Answer:
(a) Finance: The most serious problem faced by SSIs is the non-availability of adequate finance to carry out their operations. Small scale sector lacks the creditworthiness and collateral required to raise capital from the capital markets or financial institutions and hence they depend on local money lenders who charge high-interest rates.

Question 4.
What measures has the government taken to solve the problem of finance and marketing in the small-scale sector?
Answer:
The contribution of small-scale industries is remarkable. Thus, the government has provided the following institutional support to solve the problem of finance and marketing in the small scale sector:
(a) National Bank for Agriculture and Rural Development (NABARD): NABARD was set up in 1982, to promote integrated rural development. Apart from agriculture, it supports small industries, cottage and village industries, and rural artisans. It provides credit and offers counseling and consultancy services and organizes training and development programs for rural entrepreneurs.

(c) National Small Industries Corporation (NSIC): This was set up in 1955 with a view to promote aid and foster the growth of small business units in the country.

Functions of NSIC include:

Supply of machines on easy hire-purchase terms.
Procure, supply, and distribute raw materials.
Export the products of small business units and develop export-worthiness.
Mentoring and advisory services.
Serve as technology business incubators.
Creating awareness on technological up-gradation.
Developing software technology parks and technology transfer centers.

Question 5.
What are the incentives provided by the government for industries in backward and hilly areas? or Explain the common nineteenth es offered to attract small industries in rural areas by the government. (March – S 2018, March – S 2019, March – N 2018)
Answer:
Some of the common incentives provided by the Government for industries in backward and hilly areas are as follows:
(a) Land: Every state offers developed plots for setting up industries. The terms and conditions may vary. Some states don’t charge rent in the initial years, while some allow payment in installments.
(b) Power: It is supplied at a concessional rate of 50%, while some states exempt such units from payment in the initial years.
(c) Water: It is supplied on a no-profit, no-loss basis or with 50% concession or exemption from water charges for a period of 5 years. Sales Tax: In all union territories, industries are exempted from sales tax, while some states extend the exemption for 5 years period.
(d) Octroi: Most states have abolished octroi.
(e) Raw materials: Units located in backward areas get preferential treatment in the matter of allotments of scarce raw materials like cement, iron, and steel, etc.
(f) Finance: Subsidy of 10-15% is given for building capital assets. Loans are also offered at concessional rates.
(g) Industrial estates: Some states encourage the setting up of industrial estates in backward areas.
(h) Tax holiday: Exemption from paying taxes for 5 or 10 years is given to industries established in backward, hilly and tribal areas.

1st PUC Business Studies Question Bank Chapter 9 Small Business

Karnataka 1st PUC Business Studies Question Bank Chapter 9 Small Business

1st PUC Business Studies Small Business Textbook Questions and Answers

1st PUC Business Studies Question Bank with Answers

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