Previous Year Short & Long Questions With Answers: Small Business | Business Studies (BST) Class 11 - Commerce PDF Download

Short Answer Type Questions

Q1: Give any two characteristics of entrepreneurship development.
Ans: Every entrepreneur must possess the following skills to run a successful business.

• Time management skills.
• Ability to take risks
• Envision your goal and believe in a leap of faith .
• Strong communication and listening skills.
• Open to seek help when they need it

Q2: State any three major problems faced by MSMEs?
Ans: The  three major problems faced by the MSME are as follows:

• Managerial skills: Single-person or family-run businesses that lack management, technical, and entrepreneurial abilities. The lack of knowledge also makes things more challenging. Due to a shortage of financial means, they cannot operate the businesses independently or employ others.
• Finance: These businesses have little financial resources, which makes daily operations challenging. Due to these businesses’ weak credit standing, obtaining bank finance is also difficult. 
• Raw materials: These businesses are forced to modify and make compromises by using low-quality or expensive raw materials since some are not readily available. Both circumstances exacerbate the issues with such businesses.

Q3: State some primary characteristics of small businesses.
Ans: Any small business must have two of the following characteristics:

• Management is autonomous. Managers sometimes double as owners.
• An individual or small group of people provide the capital and own the ownership.
• The operational territory of a business is primarily local, and generally, owners and employees belong to the same residential community. Markets do not have to be local.
• In terms of industrial scale, the company is minor compared to the top players in its sector. The upper bracket’s dimensions are very variable, so something that would look big in one area would be little in another.

Q4: What is MSME?
Ans: The Indian government approved the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, which provides the following definition of micro, small and medium enterprises:

• Micro-enterprises are those with capital investment and annual revenue of less than Rs. 1 crore and Rs. 5 crores, respectively.
• Small businesses are defined as having capital investment of under Rs. 10 crore and annual revenue of under Rs. 50 crores.
• Businesses classified as medium enterprises have a capital investment of less than Rs. 50 crore and annual revenue of less than Rs. 250 crores.

Q5: Discuss the role and significance of small businesses in India’s economic growth.
Ans: The small-scale sector is crucial to the Indian economy since it fosters entrepreneurship and aids in generating foreign cash.
The following points will highlight the significance of small businesses.

• Small businesses are the ones that drive innovation and productivity even if they don’t have their research and development departments.
• Individual preferences, style, and individualised service: Small-scale businesses are adaptable to changes in client preferences and trends and may modify their manufacturing processes appropriately.
• National identification markers: They are locally owned and managed. They can support India’s social structure and cultural heritage. They are seen as significant markers of national identity.

Q6: State the meaning of entrepreneurship.
Ans: These are people or a group of people who take advantage of a commercial opportunity by introducing a fresh product or method to the market or by significantly improving an already existing product, service, or industrial technique.

Q7: What types of assistance does the government provide to small businesses?
Ans: The following ways in which the government supports the anal industries:

• Help from institutions for loan facilities.  
• Offering prepared areas for the building of sheds.
• Offering trade resources.
• Provision of equipment under terms of hire-purchase.
• Support for both domestic and international marketing.
• Financial and technical support for technological advancement.
• Special rewards for establishing businesses in underdeveloped regions.

Q8: What are the different parameters used to measure the size of MSME?
Ans: There are several ways to measure the size of business units. These variables include, among others, the number of employees at the company, the sum invested in it, and the turnover rate. The Government of India bases its definition of an MSME on revenue and investment in equipment and facilities.

Q9: ‘Creativity and Innovation is the key to MSME’. Justify the statement.
Ans: The following arguments support that statement:

• Infrastructure assistance is necessary for companies to develop innovative ideas that benefit MSMEs and the overall industrial sector to modernise technology.
• Initiatives from the Ministry of MSME are intended to promote and aid in adopting cutting-edge manufacturing technologies and knowledge based innovative MSMEs or enterprises and foster and nurture people’s latent creativity.
• Technology Centres are a crucial component of business development and play a significant part in it.
• The programme’s primary objectives are to foster and promote people’s latent creativity and adopt cutting-edge manufacturing techniques and innovative, knowledge based MSMEs.
• The strategy to support the company’s success and growth will include expert assistance, business and technology mentoring, networking with other businesses, seed funding, and financial aid.
• Technology-based companies are frequently seen as high-risk, high-growth firms, and to increase their chances of success, they need an enabling environment. We may thus state that “Creativity and Innovation is the key to MSME.”

Q10: Differentiate between cottage industries and small businesses.
Ans: The distinction between a cottage industry and a small business is based on the fact that the former employs primarily manual labour.
There are primarily two distinctions between small-scale and cottage industries:

• While cottage industries are typically connected to agriculture and offer auxiliary employment in rural regions, small-scale businesses are typically found in metropolitan centres as independent companies.
• While cottage industries entail activities mostly carried out by hand and are supported primarily by family members, small-scale companies create items using partially or entirely mechanical equipment while using less manpower. 

Q11: State the meaning of village and Khadi industries.
Ans: Village industries are the ones that are based in rural regions and invest in fixed assets following national policy.
Khadi Industries are those businesses that manufacture handlooms using cotton, wool, silk yarn, or a combination of any 2 or all of these yarns.
Therefore, industries classified as Khadi and Village are those headquartered in rural regions and have a fixed capital investment per artisan or weaver of fewer than 100,000 rupees. The Fixed Capital Investment may be changed whenever the Indian government deems it proper.

Q12: MSME and entrepreneurship are connected. Do you agree? Give two reasons.
Ans: Yes, there is a relationship between MSME and entrepreneurship.
Reason: MSMEs provide banks with financing support. By building specialised training facilities, they promote the expansion of entrepreneurship and the upgrading of skills. MSMEs are renowned for offering sincere support in breaking into both local and foreign markets.

Q13: What services does National Small Industries Corporation NSIC primarily offer?
Ans: The following are the primary services offered by National Small Industries Corporation (NSIC):

• To import equipment into business at simple, affordable conditions.
• To purchase, provide, and distribute imported raw materials and equipment.
• To help small businesses in exporting their goods.
• To oversee and carry out the advising service.

Long Answer Type Questions

Q1: “Innovation is integral to MSME”. Discuss giving reasons for your answer.
Ans: Innovation is a driving force in any economy. Due to its rapid development and use, technology has become a crucial element affecting almost all industries, including agriculture, manufacturing, and services. Innovations and technical advancements greatly influence the extent to which businesses and initiatives contribute to the country’s economic growth and worldwide expansion.
The current state of the world requires constant innovation from businesses, including introducing new technology to raise quality standards and creating proper infrastructure support. There have been attempts to construct appropriate laboratories, technology centres, and incubation units to assist all businesses in improving their tools and machines.

• Infrastructure assistance is necessary for companies to develop innovative ideas that benefit MSMEs and the overall industrial sector to modernise technology.
• It is also necessary for business incubators to help entrepreneurs with commercialisation to hasten the process of turning such technologies from basic ideas into successful enterprises that generate jobs.
• Initiatives from the Ministry of MSME are intended to promote and aid in adopting cutting-edge manufacturing technologies and knowledge-based innovative MSMEs or enterprises and foster and nurture people’s latent creativity.
• 18 Technology Centres (TCs) have been created by the Ministry of MSMEs around the nation. In earlier days, these were called tool rooms (10 of them) and technology development centres (8).
• The Ministry has introduced 15 new Technology Centres (TCs), with construction already underway in several sites around the nation, to increase the reach of the TCs.
• The Technology Centres play a crucial part in supporting MSME projects in the nation by giving youngsters of all skill levels, from school dropouts to graduates and engineers, access to contemporary technology, technical advising support, and skilled labour.

In conclusion, inventions take place when individuals think outside the box. To be a successful invention, it must be simple, basic, and focused on only one task. Any technology or invention must be understandable to the average person for it to be helpful. A brilliant mind is driven to succeed by all these original ideas and the desire to make them happen.
These enterprises and innovators are supported by the Ministry of MSME, which encourages them to follow their lofty goals of creating something useful and novel.

Q2: Describe the role of small businesses in rural India.
Ans: The following are a few essential requirements that small enterprises in rural India carry out.

• Opportunities for Employment: Cottage and rural industries are significant employers, especially those in rural regions. Particularly underprivileged members of rural areas will benefit from this.
• To end poverty, small businesses embrace labour-intensive manufacturing methods that let them use extra or surplus rural labour. Small-scale businesses alleviate hidden unemployment in the agriculture sector and give rural inhabitants a source of income. They thereby aid in reducing rural poverty.
• Equitable income distribution: Since small-scale enterprises utilise labour-intensive manufacturing processes, they have low capital needs, encouraging entrepreneurs to start them. Small businesses thus increase throughout the nation, much-creating work for residents in rural areas. As a result, wealth and income are redistributed in rural regions, providing a fairer income distribution.
• Acceleration of growth: small businesses have been seen as a significant source of employment and economic growth for many years.

Q3: What measures has the government taken to solve the problem of finance and marketing in the small-scale sector?
Ans: These are some of the measures a government has made to encourage small businesses:

• NABARD, National Bank for Agriculture and Rural Development, was established to encourage rural development. This organisation specialises in giving small businesses, cottage industries, and rural businesses access to simple, affordable loans.
• The Small Enterprises Development Bank of India, or SIDBI, was established to aid in supplying small size industries with financial support.
• The World Association for Medium and Small Enterprises, often known as WASME, is a global non-governmental organisation that aids in addressing the issues facing small and medium-sized businesses. It has established a committee for rural industrialisation to create a model for the expansion and development of rural industries.
• To encourage, support, and facilitate the growth of small businesses across the nation, the government established NSIC, or National Small Industries Corporation, in 1955.
• NCES, also known as The National Commission for Enterprises in the Unorganised Sector, was established in September 2004 to enhance small businesses’ ability to compete globally. It focuses on finding solutions to issues small businesses in the unorganised sector confront.

Q4: List the main business sectors that are found in the small-scale industries.
Ans: The following are the  important industry sector is included in the small-scale industries:

• Food items.
• Producing and printing paper.
• Chemical products and chemicals.
• Fundamental Metal Industries
• Electrical equipment and components.
• Plastic and Rubber Products.
• Equipment and Components goods electrical.
• Clothing and hosiery are made of wool.
• Metal-free lie Natural Resources.
• Transport tools and components.
• Leather and leather-related goods.
• Industries of Various Manufacturing.
• Drinks, tobacco, and tobacco-related items.
• Service Repairs.
• Cloth made of cotton.
• Wool. Textiles, synthetic fibres, and silk.
• Textiles are made of jute, hemp, and metastatic.
• Various Services.

Q5: Discuss the problems faced by small-scale industries.
Ans: Some of the challenges  that small enterprises in rural India faces  are given below: :

• Finance: Most small enterprises begin with little capital. Many small sector units are not creditworthy enough to obtain market financing. They thus rely heavily on local financial resources and are regularly taken advantage of by money lenders. Typically, these companies don’t have enough operational capital due to late payments or because their money is being held in unsold inventory.
• Raw material: For small businesses, obtaining raw materials is another major challenge. Because the necessary resources are not easily accessible, they are forced to either sacrifice quality or pay a higher price for superior products. They have minimal negotiating leverage because they don’t make any purchases. Additionally, because they lack the storage room for the goods, they cannot afford to take the risk of making large purchases.
• Management skills: small businesses are usually promoted and controlled by sole proprietors who might not have all the managerial skills necessary to run the firm. Despite having superior technical knowledge, many small business entrepreneurs find it challenging to market their goods. Additionally, they might not have enough time to finish all required activities. At the same time, they lack the resources to employ capable management.
• Labour: Staff motivation to work hard and produce more is hindered since small firms cannot afford to pay their employees more. As a result, staff turnover and per-employee productivity are low.
• Capacity utilisation: Due to a lack of marketing expertise or demand, many small firms are obliged to operate below capacity, which raises their operational expenses. This eventually results in disease and the demise of the company.
• Technology: Small businesses have a serious problem using outmoded technology, leading to low output and productivity.
• Quality: These businesses struggle to maintain consistent quality because of outdated production techniques.
• Global competition: They must contend with competition from big businesses and industries.

Q6: State the role of MSME in the development of a country.
Ans: The growth of the nation’s industrial economy depends heavily on MSMEs. Due to the industry’s agility and vitality, which have helped it survive the present economic crisis and recession, it has demonstrated extraordinary inventiveness and flexibility. The following is the role of MSME:

• Opportunities for Employment: Small businesses offer the most employment after the agricultural industry.
• Optimum utilisation of resources: The best possible use of resources is made possible by small businesses using simple technologies and locally accessible resources.
• Encourage locals: Locals are given opportunities and encouraged to start their businesses, and their abilities in handicraft and other artistic endeavours are the best use.
• Rapid decisions: Due to the modest size of the organisation, it enables rapid and prompt choices.
• Rural Development: Regional development is made feasible by offering employment opportunities and motivating residents to use their abilities.
• Balanced development: Because they rely on locally accessible resources, basic technology, and labour class individuals, these business units may be established everywhere, in any country and region. This helps the nation flourish in a balanced way.
• Eliminate poverty: To end poverty, these businesses embrace labour-intensive manufacturing methods that let them use extra or surplus rural labour. Small-scale businesses alleviate hidden unemployment in the agriculture sector and give rural inhabitants a source of income. They thereby aid in reducing rural poverty.