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

Q1. What do you understand by finance ? (TBQ) (1 mark)
Ans. Finance refers to funds or monetory resources needed by individuals, business houses and the government.

Q2. Give the significance of finance in an enterprise ? (TBQ) (2 marks)
Ans. The significance of finance in an enterprise is that it acts as a lubricant to the process of production. It assists in the formation of new businesses and allows businesses to take advantage of opportunities to grow and expand.

Q3. Name the most important pre-requisite to start an enterprise. (TBQ) (1 mark)
Ans. Finance.

Q4. State the most important factor for the survival of any business enterprise. (TBQ) (1 mark)
Ans. Financing.

Q5. State how sources can broadly be classified into categories. (TBQ) (2 marks)
Ans.
(i) Internal sources,
(ii) External sources.

Q6. What do you understand by internal sources of finance ? (TBQ) (1 mark)
Ans. It means owner’s own money, also known as “equity”.

Q7. How will you differentiate between Financial Market and Other Market ? Give one difference. (TBQ) (1 mark)
Ans. Financial Market provides working capital to industry, while Other Markets offer long-term capital for financing fixed assets.

Q8. What are the sources available to an entrepreneur to raise finance ? (2 marks)
Ans.
(i) Capital Markets,
(ii) Angel investors,
(iii) Venture capital,
(iv) Specialized financial institutions.

Q9. What is Capital Market ? (TBQ) (2 marks)
Ans. It is an organized mechanism meant for effective and smooth transfer of money capital or financial resources from the inventory to the entrepreneur.

Q10. Name the two players in the capital market. (TBQ) (2 marks)
Ans.
(i) Primary Market and
(ii) Secondary Market.

Q11. What is initial issue ? (2 marks)
Ans. When for the first time, entrepreneur for the purpose of obtaining capital funds decide to issue securities to the public, it is called as initial issues.

Q12. Identify the reward IPO investors seek as an appreciation of their investment. (1 mark)
Ans. Dividends.

Q13. Identify the method of raising additional finance from existing shareholders by offering securities to them on pro-rata basis. (TBQ) (1 mark)
Ans. Right issue.

Q14. What do you understand by pro-rata allotment of securities ? (2 marks)
Ans. Pro-rata allotment of securities means giving existing shareholders a right to a certain number of shares in proportion to the shares they are holding.

Q15. What is right issue ? (TBQ) (2 marks)
Ans. Right issue is a method of raising additional finance from existing shareholders by offering securities to them on pro-rata basis.

Q16. When the right issue are proposed to the existing shareholders and if they are not ready to subscribe what is the next step taken by an entrepreneur ? (TBQ) (2 marks)
Ans. Right issue are proposed to existing shareholders when entrepreneur wants to raise additional finance through them. In case they are not ready to subscribe, they can renounce the same in favour of another person.

Q17. Why right issue method of issuing securities is considered to be inexpensive ? (TBQ) (1 mark)
Ans. Because it does not require any brokers, agents, underwriters, prospectus, enlistment, etc.

Q18. What do you understand by private placement ? (TBQ) (1 mark)
Ans. It means direct sale by a company of its securities to a limited number of sophisticated investors.

Q19. What is meant by stock options or offering shares to the employees ? (TBQ) (1 mark)
Ans. It means offering shares to the employees of the company at low prices than the market price.

Q20. Name the method which enables employees to become shareholders and share the profits of the company. (TBQ) (1 mark)
Ans. Employee stock option plan.

Q21. What is a Secondary Market ? (TBQ) (2 marks)
Ans. Secondary Market, also known as old securities market or stock exchange deals with buying and selling of old securities, i.e., the market securities issued earlier are sold by existing investors in this market.

Q22. What is the need of Secondary Market ? (TBQ) (1 mark)
Ans. Secondary Market enhances the marketability of securities and thereby provides liquidity to investments.

Q23. What does I.P.O. stand for ? (1 mark)
Ans. Initial Public Offer.

Q24. What is secondary transaction ? (1 mark)
Ans. Any transection in shares or debentures subsequent to its primary offering is called “secondary transaction”.

Q25. Name the methods through which an entrepreneur can raise capital in primary market. (2 marks)
Ans.
(i) Public issue.
(ii) Right issue.
(iii) Private placement.
(iv) Offer to the employees.

Q26. What is minimum subscription as per SEBI guidelines ? (1 mark)
Ans. 90% of the issue amount from the public subscription including development and underwriters.

Q27. New issue market is also known as :
(i) Primary market,
(ii) Secondary market.
(1 mark)
Ans. (i) Primary Market.

Q28. For how many days is the subscription list for public issue be kept open ? (2 marks)
Ans. Subscription list for public issue is to be kept open for at-least three working days and for a total period of not exceeding ten working days.

Q29. Within how many days should form No. 2 for allotment of shares be filed ? (1 mark)
Ans. Within 30 days from the date of allotment.

Q30. The prospectus must be registered with ROC within :
(i) 30 days.
(ii) 3 months.
(iii) 10 weeks.
(iv) 120 days.
(1 mark)
Ans. (ii) 3 months.

Q31. What is the time period within which application money should be refunded to applicants in case of over-subscription ? (1 mark)
Ans. Within 10 weeks of the closure of subscription list.

Q32. Why SEPARATE BANK account opened in I.P.O. ? (1 mark)
Ans. For the purpose of collecting the proceeds of the issue.

Q33. Define money market. (1 mark)
Ans. The place where the demand for and the supply of short term funds is met is called money market.

Q34. What is meant by Financial Intermediation ? (1 mark)
Ans. The role of transforming financial resources from the surplus units to the deficit units is referred as “Financial Intermediation”.

Q35. “Production”, “Marketing” and “Financing”— deemed as the most important factors for any business’s survial. Among these name the most critical elements and why ? (1 mark)
Ans. Among these “financing” is the most critical element as nothing can be done without money.

Q36. Name the stock exchanges where most of the stock trading in India is done. (TBQ) (2 marks)
Ans.
(i) NSE (National Stock Exchange),
(ii) BSE (Bombay Stock Exchange).

Q37. What do you mean by stock exchange ? (TBQ) (2 marks)
Ans. Stock exchange means any body of individuals, whether incorporated or not, constructed for the purpose of assisting, regulating or controlling the business of buying and selling or dealing in securities.

Q38. What is SEBI ? (TBQ) (1 mark)
Ans. The Securities and Exchange Board of India (SEBI) is the regulator of the Securities Market in India.

Q39. State the three functions of SEBI rolled into one body. (2 marks)
Ans.
(i) Quasi-legislative,
(ii) Quasi-judicial,
(iii) Quasi-executive.

Q40. “Hunorously, they were once given the acronym FFF for Angel Investors.” What is FFF stands for. (TBQ) (1 mark)
Ans. Friends, Family and Fools.

Q41. What do you understand by Angel Investor ? (TBQ) (2 marks)
Ans. Angel investor or business angel or informal investor, is an affluent individual who provides capital for a business start-up and early stage companies having a high-risk, high-return matrix usually in exchange for convertible debt or ownership equity.

Q42. Define venture capital. (2 marks)
Ans. Venture capital is a type of private equity capital provided as seed funding to early stage, high-potential, high risk, growth up companies/entrepreneurs who lack the necessary experience and funds to give shape to their ideas.

Q43. Which are the two stages in which an entrepreneur can seek for venture capital finance ? (2 marks)
Ans. The two stages in which an entrepreneur can seek for venture capital finance are :
(i) Early stage financing.
(ii) Last stage financing/bridge/pre-public stage.

Q44. Name the three stages included in early stage financing. (2 marks)
Ans. Early stage financing includes :
(i) Seed capital.
(ii) Pre-start up and start up.
(iii) Second round financing.

Q45. Who are Angel Investors ? (2 marks)
Ans. Angel investors are wealthy investors who invest in entrepreneurial firms, usually during start up. They provide cash to young investors and take equity in return.

Q46. How can angels be classified ? (1 mark)
Ans. Angels can be classified into two groups :
(i) Affiliated.
(ii) Non-affiliated.

Q47. Who plays a vital role as a financial intermediatory ? (1 mark)
Ans. Capital markets.

Q48. Who are in need of the help of capital markets ? (2 marks)
Ans.

(i) Industry.
(ii) Finance.
(iii) Trade.
(iv) Government.

Q49. For what purpose is productive capital raised ? (1 mark)
Ans. Productive capital is raised for industrial purposes.

Q50. What is the other name of primary market ? (1 mark)
Ans. New Issue Market.

Q51. Name two methods of floatation of primary market. (1 mark)
Ans.
(i) Private Placement.
(ii) IPOs.

Q52. Name the most popular method of raising funds by companies in the primary market. (1 mark)
Ans. Offering shares through prospectus.

Q53. What is meant by “Capital Structure” ? (2 marks)
Ans. It is the composition or mix of different types of long-term capital whether owned or borrowed. It includes all the long-term funds consisting of share capital, debentures, bonds, loans and reserves.