Previous Year: Short Questions with Answers - Sources of Business Finance | Business Studies (BST) Class 11 - Commerce PDF Download

Q. 1. What is the need of entrepreneurship development?
Ans. Entrepreneurship development aims at individuals who want to start or possibly expand a business.
(i) Entrepreneurship development programmes motivate people to establish new business which in turn creates employment opportunities.
(ii) It helps in formation of capital.
(iii) Entrepreneurship development programmes aids in formulation of projects.
(iv) It helps in distributing economic activities in all the areas of the country thus resulting in balanced regional growth.
(v) It also helps the entrepreneur to use local resources.
(vi) Entrepreneurship development programmes help in creating employment opportunities which in turn leads to improvement in standard of living.

Q. 2. Define Entrepreneurship Development. State the stages of entrepreneurship development program.
Ans. Entrepreneurship development program is the process of improving the skills and knowledge of entrepreneurs through various training and programs. An Entrepreneurial Development Programme consists of three broad stages:
(i) Pre-training Stage.
(ii) Training or Development stage.
(iii) Post-training or Follow-up stage.

Q. 3. What is Start up India Scheme?
Ans. Start up India is a flagship initiative of the Government of India, intended to build a strong eco-system for nurturing innovation and Start ups in the country that will drive sustainable economic growth and generate large scale employment opportunities. The Government through this initiative aims to empower Start ups to grow through innovation and design.

Q. 4. State and explain any six features of cottage industries.
Ans. The features of cottage industries are as follows:
(i) Simple equipment: Simple equipments are used in the production of goods.
(ii) Indigenous technology: Indigenous technology is used for producing goods.
(iii) Individuals: The industries are organised by individuals having private resources.
(iv) Investment: Small amount of capital is invested in the production.
(v) Simple products: Production of simple products in their own premises.
(vi) Family labour: Cottage industries use family labour and locally available talent.

Q. 5. Explain the classification of small scale industries according to the MSMED Act, 2006.
Ans. As per the MSMED Act, 2006, small enterprises are classified into manufacturing and service enterprises based on their investment in plant and machinery or equipment (excluding land and buildings) as indicated below:
(i) Micro enterprise: Investment limit is upto `25 lakhs in case of a manufacturing unit and it is `10 lakhs in case of a service unit.
(ii) Small enterprise: For manufacturing units, more than`25 lakhs and upto `5 crores. For service unit more than `10 lakhs and upto `2 crores.
(iii) Medium enterprise: In case of manufacturing unit more than `5 crores and upto `10 crores and in case of service unit more than `2 crores and upto `5 crores.

Q. 6 ‘Protection of small-scale industries (SSI) by the Government is essential for equality of opportunity’. Comment.
Ans. The given statement is correct. Small-scale industries occupy a very important place in the industrial structure of the country. However, they cannot compete with the big industrial firms. They can flourish only when they are protected from the large firms. The government has reserved production of a number of products for the small scale industry. Moreover, small-scale industries were also given concessions, so steps taken by the Government for their growth are justified.

Q. 7. Explain the role of small business in rural India.
OR
“Small industries are small in size but play a big role in development of rural areas”. Explain the role of small inquiries in rural areas.
Ans. The role of small business in rural India is as follows:
(i) Employment opportunities: Cottage and rural industries create a lot of employment opportunities in the rural areas especially for the traditional artisans and the weaker sections of society.
(ii) Prevents migration: Establishment of these industries in the rural areas prevent migration of rural population to urban areas in search of employment.
(iii) Reduces inequalities: Cottage and rural industries help in reducing inequalities in income, disperse development of industries and establish link with other sectors of the economy.

Q. 8. Explain any three problems faced by small scale business in India.
Ans. The problems faced by small scale business are as follows:
(i) Quality: The weakest point of small scale units is maintaining the quality. These business firms have neither adequate resources to invest in quality research nor the expertise to upgrade technology for improving the quality of their products.
(ii) Technology: The technology used by these firms is usually outdated. As a result, the production is uneconomical and low.
(iii) Capacity utilisation: Many small business firms have to operate below full capacity due to lack of marketing skills or lack of demand. This increases their operating cost and may result in even closure of the business.

Q. 9. Do you think small business units can survive in a competitive market? Explain any three factors which make way for the scope of small business enterprises.
Ans. Yes, small business units can survive in a competitive market. Factors which make way for the scope of small business enterprises are as follows:
(i) Limited resources: Individuals with entrepre- neurial spirit but with limited economic means and resources always have an option of starting a small business.
(ii) Flexibility: Small firms are usually owner- operated and this allows them to expand or reduce the scale of operation, try new products, new ideas without requiring lengthy approval procedures.
(iii) Personal touch: Small enterprises are more likely to succeed in areas requiring personal touch in handling customers.

Q. 10. Why is there scope for SSI in developing countries like India?
Ans. Developing countries face the problem of massive unemployment, shortage of finance, unutilized idle resources, regional disparities, lack of industrialisation, dependence on agriculture for livelihood etc. SSIs prefer techniques of production which require less capital and more labour, uses simple technology, can be widely spread without locational constraints, depends on locally available resources, can broaden the industrial base thus addressing the major problems of developing countries. Thus, SSI have immense scope in developing countries.

Q. 11. Write a short note on SIDBI.
Ans. Small Industries Development Bank of India has been set up as an apex bank. The main functions of SIDBI bank are as follows:

(i) To provide both direct and indirect financial assistance to small business units in order to meet their requirements.
(ii) To coordinate the functions of other institutions engaged in similar activities.
(iii) SIDBI has formulated CGFT (Credit Guarantee Fund Trust) to provide guaranteed loan upto `10 lakhs.

Q. 12. Write a short note on National Small Industries Corporation (NSIC).
Ans. National Small Industries Corporation (NSIC) was established in the year 1955 in order to promote, aid and foster the growth of small business units in the country. The functions of NSIC are as follows:
(i) To create awareness about technological up gradation.
(ii) To develop technology transfer centres and software technology parks.
(iii) To export the products of small business units in order to develop export worthiness.
(iv) To obtain, supply and distribute indigenous and imported raw materials.
(v) To provide mentoring and advisory services.
(vi) To serve as technology business incubators.
NSIC has also introduced a new scheme of performance and credit rating for small businesses in order to encourage them to maintain good financial track record and to sensitise them about the need for credit rating.

Q. 13. Explain any two special schemes for developing industries in rural, backward and hilly areas.
Ans. Two special schemes for developing industries in rural, backward and hilly areas are as follows:
(i) Priority financing: Under this scheme, Commercial banks, co-operative banks, regional rural banks, KVIC and state financial corporations advance loans to small businesses operating in the above said areas.
(ii) Provision of land and industrial sheds: For establishing industries in rural, backward and hilly areas, the government provides land and industrial sheds for industrial purpose at concessional rates.

Q. 14. Name the organisation which registers local small scale industries and maintains their records. Explain any its of three roles.
Ans. The name of the organisation is District Industries Centre. The roles played by DIC are as follows:
(i) Preparing industrial profile of the district with respect to information about small scale industrial units working in the district in different forms: small, tiny, medium, large and cooperative sectors.
(ii) Assessing local raw materials, manpower availability.
(iii) Assessing availability of various infrastructural facilities and preparing techno-economic feasibility reports on various products which may be produced locally.

Q. 15. ‘Non availability of finance to buy input and plant and machinery deprives many new entrepreneurs from availing opportunities. 
(i) Identify the government Institution established to cater to this need of entrepreneurs, 
(ii) Mention any three functions of this institution.
Ans. (i) This Institution is NSIC.
(ii) Three functions of NSIC are as follows:
(a) It supplies imported machines and raw material to SSI on hire purchase scheme.
(b) Provides help in up gradation of technology.
(c) It exports the product of small units.

Q. 16. Enlist any three functions performed by NCEUS.
Ans. (i) Provision of micro finance and related services to informal sectors.
(ii) Providing social security for the workers in informal sector.
(iii) Creates growth poles for the informal sector in the form of clusters in order to get external economic aid.

Q. 17. What are the different parameters used to measure the size of business?
Ans. The various parameters used to measure the size of business are :
(i) Number of persons employed in the business
(ii) Capital invested in the business
(iii) Volume or value of output of business
(iv) Power consumed for business activities

Q. 18. What is the definition used by Government of India for Small Scale Industries?
Ans. The definition used by the Government of India to describe small industries is based on the investment in plant and machinery .The capital limit of a small scale manufacturing unit is more than `25 lakhs and up to `5 crores and in case of a service unit more than `10 lakh, and upto `2 crores.