Short Type Questions - Business Arithmetic, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download

Q1. Name any three central level financing institutions and explain how they support entrepreneurs. (CBSE 2009, A.I.) (3 marks)
Ans.
(i) Industrial Finance Corporation of India (IFCI) : The first development bank was established as a statutory corporation on Ist July, 1948. Its specific objectives are granting loans and advances to Industrial Enterprises those are repayable within 25 years.
(ii) Industrial Development Bank of India (IDBI) : IDBI was established in July 1964. Before 16th February 1976, it was a wholly owned subsidiary of Reserve Bank of India. Since than it has been delinked from RBI and made an autonomous corporation.
(iii) Industrial Credit and Investment Corporation of India (ICICI) : ICICI was established as a Joint Stock Company in January 1955. Its major shareholders are Unit Trust of India, Life Insurance Corporation of India and General Insurance Corporation and its subsidiaries.

Q2. You propose to set up an automated plant to process and export potato chips. The estimated financial outlay is ` 12 crores (not including the cost of land and building) and the working capital estimates are ` 30 lakhs per month. Explain what sources of financing you would resort to and the reason for opting for that source. (CBSE 2009 A.I.) (4 marks)
Ans. For this purpose we can get loan from SFC’s (State Financial Corporations). This Corporation Act, 1951 was brought into force to enable all the State Government except (J&K) to set up SFC’s as regioned development banks. At present there are 18 states in which SFC’s have been set up. SFC’s provide financial assistance to small and medium enterprises. Presently, following assistances are provided to small scale and medium scale enterprise or units :
(i) Providing long term finance to industrial enterprises having sole proprietary, or statutory company.
(ii) Providing financing assistance to small and medium enterprises engage d in service sector.
(iii) Providing working capital loans and meeting various short-term needs of their clients.

Q3. State any four functions of IDBI. (CBSE 2008 A.I.) (4 marks)
Ans. Functions of Industrial Development Bank of India (IDBI) are :
(i) To grant loans to any industrial concern.
(ii) To act as trustee for the holders of debentures or other securities.
(iii) To gaurantee deferred payment due from any industrial concern.
(iv) To fill the gaps in the industrial structure of the country by planning promoting and developing industries.
(v) To provide an administrative and technical assistance for the promotion and expansion of industry. (Any four)

Q4. Explain the functions of IRBI. [CBSE 2014] (4 marks)
Ans. It performs the following functions :
(i) Taking over and controlling the management of sick industrial unit.
(ii) Providing leasing facility to sick units.
(iii) Selling sick units to running enterprises.
(iv) Providing loans and advances to assist and promoting industrial development.
(v) Subscribing and underwriting of shares and debentures.

Q5. Enumerate any four functions of IFCI. (4 marks)
Ans. Following are the functions of IFCI :
(i) Undertaking various promotional activities financed out of funds received from the government;
(ii) Giving loans and advances to industrial enterprise repayable within 25 years;
(iii) Guaranteeing the loans raised;
(iv) Underwriting the issue of shares, debentures and bonds by individual enterprise; subscribing directly to the shares issued by industrial enterprises.

Q6. Explain in brief the main objectives of IDBI. (4 marks)
Ans. The main objectives of IDBI are as follows :
(i) To serve as an apex financial institution for term finance for industry.
(ii) To coordinate the working of the institutions engaged in financing, promoting, etc.
(iii) To strengthen the industrial structure of the country by planning, promoting, etc.
(iv) To provid assistance for the promotion and expansion on industry.
(v) To carry out market research and surveys. (Any four)

Q7. Explain the role of SFC’s in financing the industrial enterprises. (4 marks)
Ans.
(i) It provides long term finance to small and medium industrial enterprises.
(ii) It subscribes equity and debentures of various industrial enterprises.
(iii) It gives assistance to enterprises.
(iv) It provides short term loans.

Q8. Explain the role of SIDC’s in the state industrial development. (TBQ) (4 marks)
Ans. SIDC’s play a vital role in the industrial development of the state. For this purpose, they perform following functions :
(i) State Industrial Development Corporations coordinate with entrepreneurs for setting up joint ventures.
(ii) SIDC undertakes, feasibility studies, market surveys, etc. for encouraging enterprises in the state.
(iii) It helps in subscribing shares, debentures of the industries of the state.
(iv) It facilitates loans to the enterprises.

Q9. Explain the need and importance of SFIs in India ? (TBQ) (4 marks)
Ans.
(i) Provision of sufficient long-term funds in the desired sectors in accordance with planned priorities to the industrial units and entrepreneurs.
(ii) New and small entrepreneurs in setting up industry.
(iii) Development of (a) small scale industry and (b) projects in backward areas.
(iv) Provision of technical and managerial advice to the entrepreneurs, facilitating thus, in identification, evaluation and execution of new investment enterprises.
(v) Underwriting of and direct subscription to the issue of shares and debentures in the Capital Market of the upcoming ventures.
(vi) Establishment of enterprises which require extra-ordinarily large amount of finance for their projects with a long-gestation period. (Any four)

Q10. Write the full form of and when it was established :
(i) SIDC,
(ii) TFCI,
(iii) SFCs,
(iv) NABARD,
(v) IFCI,
(vi) IDBI,
(vii) ICICI,
(viii) SIDBI (TBQ)
(4 marks)
Ans.
(i) SIDC : State Industrial Development Corporation.
(ii) TFCI : Tourism Finance Corporation Limited. It was established in 1987.
(iii) SFCs : State Financial Corporation. It was formed in 1951.
(iv) NABARD : National Bank for Agricultural and Rural Development. It was formed in 15th December, 1981.
(v) IFCI : Industrial Finance Corporation of India. It was formed on 1st July, 1948.
(vi) IDBI : Industrial Development Bank of India. It was formed in July, 1964.
(vii) ICICI : Industrial Credit and Investment Corporation of India. It was established in 1955.
(viii) SIDBI : Small Industries Development Bank of India. It was established in April, 1990.

Q11. Which sections of the industry face greater difficulties in procuring long-term finance ? (4 marks)
Ans. Certain sections of the industry face greater difficulties than others in procuring long-term finance. These include :
(i) Small and medium sized concerns.
(ii) New concerns set up by new entrepreneurial group.
(iii) Specific industries, which require funds for modernization.
(iv) Enterprises involved in innovation and new technological developments.
(v) Enterprises requiring extra-ordinary large amounts of finance with a long gestation period.
(vi) Ventures in backward regions.

Q12. Write a short note on SIDBI. (4 marks)
Ans. Small Industries Development Bank of India (SIDBI) was established in April 1990, as a wholly owned subsidiary of IDBI, under Small Industries Development Bank of India Act, 1990. SIDBI is the principal financial institution for promotion, financing and development of small-scale industries in India.
The objectives of SIBI are :
(i) Initate steps for technological upgradation and/or modernization of existing units.
(ii) Expand channels for marketing of SSI sector products in India and abroad.
(iii) Promote employment-ordinary industries.

Q13. What are the objectives behind the establishment of ICICI ? (3 marks)
Ans. ICICI has been established to achieve the following objectives :
(i) To assist in the formation, expansion and modernization of industrial units in the private sector.
(ii) To stimulate and promote the participation of private capital (both Indian and foreign) in such industrial units.
(iii) To furnish technical and managerial aid so as to increase production and expand employment opportunities.

Q14. Write a short note on NABARD. (4 marks)
Ans. National Bank for Agriculture and Rural Development (NABARD) Bill was passed in the parliament on 15th December, 1981 which started functioning on 1st July, 1982.
NABARD was established according to the preamble of the Act for providing credit for the promotion of :
(i) Agriculture.
(ii) Small-scale industries.
(iii) Cottage and village industries.
(iv) Handicrafts and other rural crafts.
(v) Other economic activities in rural areas with a view to promoting IRDP and securing prosperity of rural areas.

Q15. What are the objectives of SFCs ? (4 marks)
Ans. The objectives of State Financial Corporations are as under :
(i) Provide financial assistance to small and medium industrial concerns.
(ii) Provide long and medium-term loan, repayment ordinarily within a period not exceeding 20 years.
(iii) Grant financial assistance to any single industrial concern under corporate or co -operative sector with an aggregate upper limit of Rupees Sixty Lakhs. In any other case (partnership, sole proprietorship or Joint Hindu Family) the upper limit is Rupees Thirty Lakhs.
(iv) Provide financial assistance generally to those industrial concerns whose paid up share capital and free reserves do not exceed ` 3 crores.
(v) To lay special emphasis on the development of backward areas and small scale industries.

Q16. What are the limitations of financial institutions ? (3 marks)
Ans.
(i) Too many formalities have to be fulfilled for taking loans from financial institutions.
(ii) They may put certain restrictions such as restriction on dividend payment, etc.
(iii) Sometimes, financial institutions appoint their nominees as Board of Directors to restrict the powers of a company.