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Samacheer Kalvi 11th Commerce Solutions Chapter 18 Business Ethics and Corporate Governance

Samacheer Kalvi 11th Commerce Business Ethics and Corporate Governance Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
Which of the following helps in maximising sale of goods to society?
(a) Business success
(b) laws and regulations
(c) Ethics
(d) Professional management
Answer:
(c) Ethics

Question 2.
Ethics is important for …………….
(a) Top management
(b) Middle level managers
(c) Non – managerial employees
(d) All of them
Answer:
(d) All of them

Question 3.
Which of the following does not ensure effective ethical practices in a business enterprise?
(a) Publication of a code
(b) Involvement of employees
(c) Establishment of compliance mechanisms
(d) none of them
Answer:
(a) Publication of a code

Question 4.
The role of top management is to guide the entire organisation towards …………….
(a) General behaviour
(b) Organisation behaviour
(c) Ethically upright behaviour
(d) Individual behaviour
Answer:
(c) Ethically upright behaviour

Question 5.
The ethical conduct of employees leading to standard practices results in …………….
(a) Good behaviour
(b) Bad behaviour
(c) Ethical behaviour
(d) Correct decision making
Answer:
(d) Correct decision making

II. Very Short Answer Questions

Question 1.
What is ethics?
Answer:
Business ethics are the business morality generally results from an individual’s own moral standards in the context of the political and cultural environment in which the organization is operating. Ethics and profits go together in the long run. It enhances the quality of life, standard of living and business.

Question 2.
What do you mean by code?
Answer:
The organization principles are defined in the written document called code.

Question 3.
State two ways by which ethics influences behaviour.
Answer:
Ethical behaviour is the act consistent with the moral standards or codes of conduct established by society.

Question 4.
What is the need for Corporate Governance?
Answer:
Corporate Governance is the system by which businesses are directed and controlled in the best interests of all stakeholders. Good corporate governance enables corporate success and economic development.

Question 5.
What are MNCs?
Answer:
A Multinational Corporation is an organization doing business in more than one country. It is defined as an enterprise operating in several countries but managed from one country.

III. Short Answer Questions

Question 1.
Define business ethics.
Answer:
Business ethìcs may be defined as “ A set of moral standards to be followed by owners, managers and business people”.In the words of Kilcullen and Kooistra (1999), Business Ethics is “ the degree of moral obligation that may be ascribed to corporations beyond simple obedience to the laws of the state”.

Question 2.
What do you mean by the concept of business ethics?
Answer:
Business exists to supply goods and services to the people from a social point of view but from an individual point of view, the primary objective of any business unit is to make a profit. The individual objective should not be in conflict with the societal objectives. These two objectives normally contradict each other, as one business enterprise may be good in an individual objectives and bad at social objectives and vice versa.

Question 3.
Why is ethics necessary in business?
Answer:
All business units have realized that ethics is vitally important for the existence and progress of the business as well as the society. It is very important as it improves the public image, earns public confidence, and leads to greater success. Ethics and profits go together in the long run. It enhances the quality of life, the standard of living, and business.

Question 4.
What are the benefits of Corporate Governance to Shareholders?
Answer:

1. Good corporate governance enables corporate success and economic development.
2. Ensures stable growth of organizations.
3. Aligns the interests of various stakeholders.
4. Improves investor’s confidence and enables raising of capital.
5. Reduces the cost of capital for companies.
6. Has a positive impact on the share price.

Question 5.
Illustrate with an example the working of an MNC.
Answer:
Any company is referred to as a Multinational company or corporation (MNC) when that company manages its operation or production or service delivery from more than a single country. It has its headquarters based in one country with several other operating branches in different other countries.

The country where the headquarter is located is called the home country whereas; the other countries with operational branches are called the host countries. Example McDonald’s an American food company has its head office in California, the United States has 69 million customers in over 100 countries.

IV. Long Answer Questions

Question 1.
Explain the different key elements of business ethics.
Answer:
Some of the basic elements of business ethics while running a business enterprise are:
Top Management Commitment:
The top management has a very important role to guide the entire organization towards ethical behaviour. The top-level personnel in any organisation should work openly and strongly committed towards ethical conduct and guide people working at middle and low level to follow ethical behaviour.

Publication of a “Code”:
Generally, organisations formulate their own ethical codes for the conduct of the enterprise; it should be followed by the employees of the organisation. The organisation principles are defined in the written document called code. The code of conduct covers various areas such as health and safety in the workplace, fair dealing in selling and marketing activities, ethical practices in the business, etc.

Establishment of Compliance Mechanism:
To make sure that actual decisions match with a firm’s ethical standards, suitable mechanisms should be established. Any organisation following ethical codes in training, recruitment, selection, etc., is sure to be profitable. The organisation must provide for an environment where the employees are to free to report about matters of unethical behaviour.

Involving Employees at All Levels:
It is the employees at different levels who implement ethics policies to make the ethical business a reality. Therefore, their involvement in ethics programmes becomes a must. For example a small group of employees can be formed tö discuss the important ethics policies of firms and examine the attitudes of employees towards these policies.

Measuring Results:
The organisations from time to time keep a check on the ethical practices followed. Although it is difficult to accurately measure the end results of ethics programs, the firms can certainly audit to monitor compliance with ethical standards. The top management team and other employees should then discuss the results for further course of action.

Question 2.
Describe the code of business ethics.
Answer:
Code of ethics documents the generally accepted principles of ethical conduct. They are statements of values and principles which define the purpose of an organisation. It gives a clear picture of the standards that employees should follow. It guides them in decision making. The code of business ethics can include the following:

1. To offer goods at fair prices.
2. To supply goods of good quality and not to deal in spurious and sub-standard products.
3. To listen to consumer’s complaints and to reduce them.
4. Not to raise the price of its products unjustifiably.
5. Not to resort to hoarding and lack marketing.
6. Not to resort to price-cutting with the sole aim of killing competition.
7. Not to issue advertisement containing false information or exaggerated claims.
8. To pay fair wages to its employees and not to exploit them.
9. To provide a congenial work atmosphere.
10. To design the production process in such a way as to reduce environmental pollution.
11. To keep proper books of accounts and records.
12. To pay taxes regularly.
13. To complain about various business losses and never to flout Government regulations.

Question 3.
Explain the significance of Corporate Governance from the point of Stakeholders.
Answer:

• Good corporate governance corporate success and development.
• Ensures stable growth of organizations.
• Aligns the interests of various stakeholders.
• Improves investors’ confidence and enables raising of capital.
• Reduces the cost of capital for companies and ensures the efficient allocation of resources. .
• Has a positive impact on the share price
• Provides incentives to managers to achieve organizational objectives.
• Eliminates waste, corruption, risks, and mismanagement.
• Improves the image of the company and creates a strong brand as an ethical business.
• The organization is managed to benefit the stakeholders.

Question 4.
Discuss the role of International Benchmarking on the working of Companies in India.
Answer:

• Asia: Independent Directors are a requirement for listed companies in all Asian economies, where most require at least 1/3rd of the Board to be independent.
• USA: The Council of Institutional Investors (CII), Corporate Governance Policies state that at least 2/3rd of the directors should be independent.
• Europe: European Commission urges member states to have a sufficient number of independent non-executive or supervisory directors on Board.
• G20 / OECD: The latest principles encourage the prominent role of independent Board members.
• Japan: In early 2014, the Japanese Prime Minister announced the goal of increasing the percentage of women in executive positions at Japanese companies to 30% by 2020.
• UK: UK businesses had voluntary targets first set in 2011 i.e. to have 25% women on FTSE 100 (The Financial Times Stock Exchange) Boards by 2015.
• Canada: At the Federal level, two bills are currently being tabled which will impose a 40% quota for female Board members of public companies and other regulated entities such as banks and insurance companies.
• Brazil: A bill pending in the Brazilian Senate would impose a 40% female quota on the Boards of state-owned enterprises by 2022.
• France: French parliament adopted a bill that requires public companies making at least 50 million Euros in turnover and employing more than 500 workers to have 40% female Board representation by 2017.

Question 5.
Describe the benefits of increasing the number of MNCs.
Answer:
The reasons for so many MNC’s in Indian are as follows:

1. India has a huge market
2. It is one of the fastest-growing economies in the world.
3. Favorable policies of the government towards FDI.
4.  Financial liberalization of the country after 1991.
5. The government encourages and makes continuous efforts to attract. foreign investment by relaxing policies.
6. The entry of MNC’s into India has proved quite beneficial for the growth and development of the Indian economy providing employment opportunities for the young generation.

Samacheer Kalvi 11th Commerce Business Ethics and Corporate Governance Additional Questions and Answers

I. Choose the Correct Answer:

Question 1.
Ethics governs the ……………..
(a) Behaviour
(b) Ethos
(c) Life
(d) Payoffs
Answer:
(a) Behaviour

Question 2.
The organisation principles are defined in the written document called ……………..
(a) Code
(b) Law
(c) Behaviour
(d) Ethical
Answer:
(a) Code

Question 3.
…………….. has its Headquarters based in one country with several other operating branches in different other countries.
(a) MNC
(b) GDP
(c) Company
(d) Business
Answer:
(a) MNC

Question 4.
There are …………….. primary types of bench making.
(a) Two
(b) Three
(c) Four
(d) Five
Answer:
(c) Four

Question 5.
…………….. bench making is a direct competitor-to-competitor comparison of a product, service process, or method.
(a) Internal
(b) Competitive
(c) Functional
(d) Generic
Answer:
(b) Competitive

Future Learning

Question a.
Money earning cannot be the sole objective of business or life.
Answer:
The primary objective is to make a profit. The individual objective should not be with societal objectives.

Question b.
The mind of students to accept that ethics and consideration for the environment, law, etc can lengthen the income-earning of an individual or business.
Answer:
All business units have realized that ethics is vitally important for the existence and progress of the business as well as the society. Ethics and profits go together in the long run. It enhances the quality of life, the standard of living, and business.

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Samacheer Kalvi 11th Commerce Solutions Chapter 20 International Finance

Samacheer Kalvi 11th Commerce International Finance Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
An instrument representing ownership interest in securities of a foreign issuer is called …………….
(a) an ownership certificate
(b) a depositary receipt
(c) an ownership receipt
(d) None of the above
Answer:
(b) a depositary receipt

Question 2.
Issuance of DRs is based on the increase of demand in the ……………
(a) International market
(b) Local market
(c) Existing shareholders
(d) All of the above
Answer:
(a) International market

Question 3.
ADRs are issued in …………….
(a) Canada
(b) China
(c) India
(d) The USA
Answer:
(d) The USA

Question 4.
Depositary receipts that are traded in an international market other than the United States are called …………….
(a) Global Depositary Receipts
(b) International Depositary Receipts
(c) Open Market Depositary Receipts
(d) Special Drawing Rights
Answer:
(a) Global Depositary Receipts

Question 5.
……………. bond is a special type of bond issued in the currency other than the home currency.
(a) Government Bonds
(b) Foreign Currency Convertible Bond
(c) Corporate Bonds
(d) Investment Bonds
Answer:
(b) Foreign Currency Convertible Bond

II. Very Short Answer Questions

Question 1.
Who are Foreign Institutional Investors?
Answer:
The Non-residents of an investment in the equity of a domestic company without the intention of acquiring management control are known as Foreign Institutional Investors.

Question 2.
What is a Depository Receipt?
Answer:
A depository receipt is a negotiable financial instrument issued by a bank to represent a foreign company’s equity shares or securities. They are issued to attract a greater amount of investment from other countries.

Question 3.
What is a GDR (Global Depository Receipt)?
Answer:
GDR is an instrument issued abroad by a company to raise funds in some foreign currencies and is listed and traded on a foreign stock exchange.

Question 4.
What is an American Depositary Receipt (ADR)?
Answer:
ADR is a dollar-denominated negotiable certificate representing a non-US company in the US market which allows US citizens to invest in overseas securities.

Question 5.
What is a Foreign Currency Convertible Bond?
Answer:
A foreign currency convertible bond is a special type of bond issued in a currency other than the home currency.

III. Short Answer Questions

Question 1.
Explain the importance of international finance.
Answer:

• It helps in calculating the exchange rates of various currencies.
• It helps to compare the inflation rates.
• It leads to economic status can be ascertained.
• International Financial Reporting facilitates the comparison of financial statements made by various countries.
• It helps in understanding the basics of international organisations and maintaining the balance among them.
• International finance organisations mediate and resolve financial disputes among member nations.

Question 2.
What are Foreign Currency Convertible Bonds?
Answer:
A foreign currency convertible bond is a special type of bond issued in a currency other than the home currency. In other words, companies issue foreign currency convertible bonds to raise money in foreign currency.

Question 3.
Explain any three disadvantages of FDI.
Answer:
Exploiting Natural Resources: The FDI Companies deplete natural resources like water, forest, mines, etc. As a result, such resources are not available for the usage of the common man in the host country.

Heavy Outflow of capital: Foreign companies are said to take away huge funds in the form of dividends, royalty fees, etc. This causes a huge outflow of capital from the host country.

Not Transferring Technology: Some foreign enterprises do not transfer the technology to developing countries. They mostly transfer second-hand technology to the host country. They keep the fundamental aspects of technology with the parent company. In such a case, the host country may not get the advantage of technology transfer and consequently economic development.

Question 4.
State any three features of ADR.
Answer:

1. ADRs are denominated only in US dollars.
2. They are issued only to investors who are American residents.
3. The depository bank should be located in US.

Question 5.
State any three features of GDR.
Answer:

1. It is a negotiable instrument and can be traded freely like any other security. GDRs are issued to investors
2. across the country. It is denominated in any acceptable freely convertible currency. GDR is denominated in
3. any foreign currency but the underlying shares would be denominated in the local currency of the issuer.

IV. Long Answer Questions

Question 1.
Describe the importance of international finance?
Answer:
International finance plays a pivotal role in international trade and in the sphere of exchange of goods and services among the nations. The following points highlight the importance of international finance. International finance helps in calculating the exchange rates of various currencies of nations and the relative worth of each and every nation in terms thereof.

• It helps in comparing the inflation rates and getting an idea about investing in international debt securities.
• It helps in ascertaining the economic status of the various countries and in judging the foreign market.
• International Financial Reporting System (IFRS) facilitates comparison of financial statements made by
• various countries.
• It’ helps in understanding the basics of international organisations and maintaining the balance among them.
• International finance organisations such as IMF, World Bank, etc. mediate and resolve financial disputes among member nations.

Question 2.
Distinguish between GDR and ADR.
Answer:

Question 3.
State any five features of FCCB.
Answer:

1. FCCB is issued by an Indian company in foreign currency.
2. These are listed and traded in the foreign stock exchange and similar to the debenture.
3. It is a convertible debt instrument. It carries an interest coupon. It is unsecured.
4. It gives its holders the right to convert for a fixed number of shares at a predetermined price.
5. It can be converted into equity or Repository receipt after a certain period.

Question 4.
Explain any five advantages of FDI.
Answer:

1. Achieving Higher Growth in National Income: Developing countries get much-needed capital through FDI to achieve a higher rate of growth in national income.
2. Help in Addressing BOP Crisis: FDI provides an inflow of foreign exchange resources into a country. This helps the country to solve the adverse balance of payment position.
3. Faster Economic Development FDI brings technology, management, and marketing skills along with it. These are crucial for achieving faster economic development in developing countries.
4. Generating Employment Opportunities FDI generates a lot of employment opportunities in developing countries, especially in high skill areas.
5. Encouraging Competition in Host Countries Entry of FDI into developing countries promotes healthy competition therein. This leads to enterprises in developing countries operating efficiently and effectively in the market. Consumers get a variety of products of good quality at a market-determined price which usually benefits the customers.

Samacheer Kalvi 11th Commerce International Finance Additional Questions and Answers

I. Choose the Correct Answer

Question 1.
…………….. is a section of financial economics that deals with the monetary interactions that occur between two or more countries.
(a) International finance
(b) Business finance
(c) DR
(d) GDR
Answer:
(a) International finance

Question 2.
From …………….., Foreign International Investors have been allowed to invest in all securities traded on the primary and secondary markets.
(a) 1992
(b) 1991
(c) 1995
(d) 1996
Answer:
(a) 1992

Question 3.
………………. is an instrument issued abroad by a company to raise funds in some foreign currencies and is listed and traded on a foreign stock exchange.
(a) GDR
(b) DR
(c) FDI
(d) FII
Answer:
(a) GDR

II. Very Short Answer Questions

Question 1.
Define Foreign Direct Investment (FDI).
Answer:
Foreign direct investment (FDI) is an investment made by a company or an individual in one country with business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company.

Question 2.
What are Commercial Banks?
Answer:
Most of the commercial banks extend foreign currency loans for promoting business opportunities. The loans and services of various types, provided by banks differ from country to country.

Question 3.
What is International capital markets?
Answer:
Modem organisations including multinational companies depend upon sizeable borrowings in rupees as well as in foreign currencies. Prominent financial instruments used for this purpose are Depository Receipts.

Students can Download Commerce Chapter 19 Sources of Business Finance Questions and Answers, Notes Pdf, Samacheer Kalvi 11th Commerce Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Samacheer Kalvi 11th Commerce Solutions Chapter 19 Sources of Business Finance

Samacheer Kalvi 11th Commerce Sources of Business Finance Textbook Exercise Questions and Answers

I. Choose the Correct Answer
Question 1.
What is defined as the provision of money at the time when it is required?
(a) Finance
(b) Bank
(c) Cash management
(d) None of these
Answer:
(a) Finance

Question 2.
Internal sources of capital are those that are ……………..
(a) a generated through outsiders such as suppliers
(b) generated through loans from commercial banks
(c) generated through issue of shares
(d) generated within the business
Answer:
(d) generated within the business

Question 3.
Debenture holders are entitled to a fixed rate of ……………..
(a) Dividend
(b) Profits
(c) Interest
(d) Ratios
Answer:
(c) Interest

Question 4.
Public deposits are the deposits which are raised directly from ……………..
(a) the public
(b) the directors
(c) the auditors
(d) the owners
Answer:
(a) the public

Question 5.
Equity shareholders are the …………….. of a company.
(a) Creditors
(b) Owners
(c) Debtors
(d) Employees
Answer:
(b) Owners

Question 6.
Funds required for purchasing current assets is an example for ……………..
(a) Fixed Capital Requirement
(b) Ploughing Back of Profits
(c) Working Capital Requirement
(d) Lease Financing
Answer:
(c) Working Capital Requirement

Question 7.
Which of the following holder is given voting right?
(a) Debentures
(b) Preference Shares
(c) Equity shares
(d) Bonds
Answer:
(c) Equity shares

Question 8.
It may be wise to finance fixed assets through ………………
(a) Creditors
(b) Long term debts
(c) Bank Overdraft
(d) Bills Discounting
Answer:
(b) Long term debts

II. Very Short Answer Questions

Question 1.
Write short notes on debentures.
Answer:
Debentures are an important instrument for raising long term debt capital. It is a medium to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest.

Question 2.
What do you mean by public deposits?
Answer:
Debentures are an important instrument for raising long term debt capital. A company can raise funds through the issue of debentures which bear a fixed rate of interest.

Question 3.
Name any two sources of funds classified under borrowed funds.
Answer:
Debentures and Loans from banks and financial institutions.

Question 4.
Name any two internal sources of business finance.
Answer:

1. Retained earnings
2. Collections form receivables

Question 5.
State any two factors that affect the choice of source of finance.
Answer:

1. The creditworthiness of the firms.
2. The time period for which the business finance is required determines the suitable source.

III. Short Answer Questions

Question 1.
Define Business finance.
Answer:
“Finance is that business activity which is concerned with the acquisition and conservation of capital fund in meeting the financial needs and overall objectives of business enterprises.” – B.O. Wheeler

Question 2.
What is pledge?
Answer:
A customer transfers the possession of an article with the creditor (banker) and receives loan. Till the repayment of loan, the article is under the custody of the borrower. If the debtor fails to refund the loan, creditor (banker) will auction the article pawned and adjust the outstanding loan from the sale proceeds. This is known as pledge.

Question 3.
List sources of raising long – term and short – term finance.
Answer:
Sources of Short Term Finance:

1. Loans and Advances
2. Bank Overdraft
3. Discounting Bills of Exchange
4. Trade Credit
5. Pledge
6. Hypothecation
7. Mortgage
8. Loans Against the Securities
9. Clean Loan
10. Commercial Paper (CP)
11. Hire Purchase Finance
12. Factoring

Sources of Long Term Finance:

1. Shares (i) Equity Shares (ii) Preference Shares
2. Debentures
3. Retained Earnings
4. Public Deposits
5. Long Term Loan from Commercial Banks
6. The Loans from Financial Institutions

Question 4.
For which purpose fixed capital is needed in business?
Answer:
Fixed capital is needed for the purchase of plant, machinery, furniture, fixtures, vehicles, and all other assets. It helps to lay down the basic infrastructure on which business is supposed to stand and flourish in a long run. It is also used to purchase intangible assets like patents, copyrights, goodwill, etc.

Question 5.
What do you mean by the working capital requirement of a business?
Answer:
Working capital requirements include the purchase of raw materials, payment of salary and. wages, incurring operating expenses like telephone bills, carriage inward and outward, electricity charges, premium, stationery, etc.

IV. Long Answer Questions

Question 1.
List out the various sources of financing.
Answer:
The various sources of business finance can be classified into three categories on the basis of

• period basis
• ownership basis
• source of generation basis.

On the basis of the period:

1. Short term finance
2. Medium-term finance
3. Long term finance

Sources of Short Term Finance:

1. Loans and Advances
2. Bank Overdraft
3. Discounting Bills of Exchange
4. Trade Credit
5. Pledge
6. Hypothecation
7. Mortgage
8. Loans Against the Securities
9. Clean Loan
10. Commercial Paper (CP)
11. Hire Purchase Finance
12. Factoring

Sources of Medium Term Finance:

1. Loans from Banks
2. Loan from Financial Institutions
3. Lease Financing

Sources of Long Term Finance:

1. Shares
   • Equity Shares
   • Preference Shares
2. Debentures
3. Retained Earnings
4. Public Deposits
5. Long Term Loan from Commercial Banks
6. The Loans from Financial Institutions

On the Basis of Ownership:

1. Owner’s Funds
2. Borrowed Funds

On the Basis of Generation of Funds:

1. Internal Sources
2. External Sources

Question 2.
What are the different types of short term finances given by commercial banks?
Answer:
Loans and Advances:
The loan is a direct advance made in a lump sum which is credited to a separate loan account in the name of the borrower. The borrower can withdraw the entire amount in cash immediately.

It can be repaid in one or more installments. But the interest on loans and advances is calculated on the whole of the amount borrowed right from the date of sanction. It may be secured or unsecured.

Bank Overdraft:
Bank overdraft refers to an arrangement whereby the bank allows the customers to overdraw the required amount from its current deposit account within a specified limit. Interest is charged only on the amount actually overdrawn.

Discounting Bills of Exchange:
When goods are sold on credit, the suppliers generally draw bills of exchange upon customers who are required to accept it. The duration of such bills of exchange may be ranging from 15 days to 180 days. Discounting bills of exchange refers to an act of selling a bill to obtain payment for it before its maturity.

Trade Credit:
Trade credit is the credit extended by one trader to another for the purpose of purchasing goods and services. Purchaser need not pay money immediately after the purchase. Trade credit is very simple and convenient method of raising short term finance. There is no formality involved in availing this facility. There is no need to give any security for trade credit. It is said to be more economical than bank loans.

Pledge:
A customer transfers the possession of an article with the creditor (banker) and receives a loan. Till the repayment of the loan, the article is under the custody of the borrower. If the debtor fails to refund the loan, the creditor (banker) will auction the article pawned and adjust the outstanding loan from the sale proceeds.

Question 3.
Write short notes on

1. Retained Earnings
2. Lease financing

Answer:
1. Retained Earnings:
Retained earnings refer to the process of retaining a part of net profit year after year and reinvesting them in the business. It is also termed as ploughing back of profit. An individual would like to save a portion of his/her income for meeting the contingencies and growth needs.

Similarly, a profit-making company would retain a portion of the net profit in order to finance its growth and expansion in near future. It is described to be the most convenient and economical method of finance.

2. Lease Financing:
Lease financing denotes procurement of assets through lease. For many small and medium enterprises, the acquisition of plant and equipment and other permanent assets will be difficult in the initial stages. In such a situation Leasing is helping them to a greater extent.

Leasing here refers to the owning of an asset by any individual or a corporate body which will be given for use to another needy business enterprise on a rental basis. The firm which owns the asset is called ‘Lessor’ and the business enterprise which hires the asset is called ‘Lessee’.

The contract is called ‘Lease’. The lessee pays a fixed rent on agreed basis to the lessor for the use of the asset. The terms and conditions like lease period, rent fixed, mode of payment and allocation of maintenance, are mentioned in the lease contract.

At the end of the lease period, the asset goes back to the lessor. Alternatively lessee can own the asset taken on lease by paying the balance of price of asset concerned to lessor. Hence lease finance is a popular method of medium term business finance.

Question 4.
Write short notes on

1. Owner’s funds
2. Borrowed funds

Answer:
1. Owner’s funds:
Owner’s funds mean funds which are provided by the owner of the enterprises who may be an individual or partners or shareholders of a company. The profits reinvested in the business (ploughing back of profit or retained earnings) come under the owner’s funds. These funds are not required to be refunded during the lifetime of a business enterprise. It provides the owner the right to control the management of the enterprise.

2. Borrowed funds :
The term ‘borrowed funds’ denotes the funds raised through loans or borrowings. For example debentures, loans from banks and financial institutions, public deposits, trade credit, lease financing, commercial papers, factoring, etc. represent borrowed funds.

• These borrowed sources of funds provide a specific period before which the fund is to be returned.
• The borrower is under a legal obligation to pay interest at the given rate at regular intervals to the lender.
• Generally borrowed funds are obtained on the security of certain assets like bonds, land, building, stock, vehicles, machinery, documents of title to the goods, and the like.

Question 5.
Explain any four personal investment avenues.
Answer:
1. Public Provident Fund (PPF):
It is the safest long-term investment option for investors in India. It is totally tax-free. PPF account can be opened in a bank or post office. The money deposited cannot be withdrawn before 15 years and an investor can earn compound interest from this account.

However, the investor can extend the time frame for the next five years if the investor does not opt to withdraw the amount matured for payment at the maturity date. PPF investor can take a loan against PPF account when he/she experiences financial difficulties.

2. Mutual Funds:
An individual investor who wants to invest in equities and bonds with a balance of risk and return generally can invest in mutual funds. Nowadays people invest in stock markets through a mutual fund. A systematic investment plan is one of the best investment options in India.

3. Direct Equity or Share Purchase:
An individual can opt for investment in shares. But he has to analyze the market price of various shares traded in the stock exchange, the reputation of the company, consistency in the payment of dividends, the nature of the project undertaken by the company, growth prospects of the industry in which a company is operating, before investing in shares. If the investment is made for a long time, it may yield a good return.

4. Real Estate Investment:
Real estate is one of the fastest-growing sectors in India. Buying, a flat or plot is supposed to be the best decision amongst the investment options. The value of the real asset may increase substantially depending upon the area of location and other support facilities available therein.

Samacheer Kalvi 11th Commerce Sources of Business Finance Additional Questions and Answers

I. Choose the Correct Answer:

Question 1.
Long term finance ………………
(a) more than 5 years
(b) above I year but below 5 years
(c) more than one year but below 3 years
(d) within one year
Answer:
(a) more than 5 years

Question 2.
The various sources of business finance can be classified into ………………
(a) three
(b) two
(c) four
(d) five
Answer:
(a) three

Question 3.
Business people hypothecate goods or equipment to get ……………… type of loan. It is a loan taken on the security of a movable assets.
(a) Hypothecation
(b) Pledge
(c) Trade credit
(d) Bank overdraft
Answer:
(a) Hypothecation

Question 4.
……………… is a type of loan taken from the bank by lodging with the bank title deeds of immovable assets like land and building.
(a) Hypothecation
(b) Mortgage
(c) Clean loan
(d) Factoring
Answer:
(b) Mortgage

Question 5.
Source of Medium Term Finance is ………………
(a) share
(b) debentures
(c) Bank overdraft
(d) lease finance
Answer:
(d) lease finance

Question 6.
Which one is the internal source?
(a) Retained earnings
(b) Shares
(c) Debentures
(d) Public deposits
Answer:
(a) Retained earnings

Question 7.
Which one are the owner’s funds?
(a) Debentures
(b) Loan from banks
(c) Equity shares
(d) Commercial papers
Answer:
(c) Equity shares

II. Very Short Answer Questions

Question 1.
What do you mean by Bonds?
Answer:
Bonds are one of the ideal investment options for those investors who would like to invest their hard-earned money safely. Bonds are issued both by government and public and private sector companies and financial institutions.

Question 2.
What are Mutual Funds?
Answer:
An individual investor who wants to invest in equities and bonds with a balance of risk and return generally can invest in mutual funds. Nowadays people invest in stock markets through a mutual fund.

Question 3.
What is Commercial Paper (CP)?
Answer:
Commercial paper (CP) is an unsecured money market instrument in the form of a promissory note. It was introduced in India in 1990 under Section 45 W of the Reserve Bank of India Act.

III. Short Answer Questions

Question 1.
Mention any three significance of business finance.
Answer:

1. A firm with adequate business finance can easily start any business venture.
2. Business finance helps the business organisation to purchase raw materials from the supplier easily to produce goods.
3. The business firm can meet financial liabilities like prompt payment of salary and wages, expenses, etc., in time with the help of sound financial support.

Question 2.
What is meant by preference shares?
Answer:
The fund raised by the issue of preference shares is called preference share capital. Preference shares are those shares which enjoy priority regarding payment of dividend at a fixed rate out of the net profits of the company. They will get their dividend every year before any dividend is paid to equity shareholders.

They will have a right to get their settlement before the claims of equity shareholders are settled at the time of liquidation of the company. However, they do not have voting rights.

Case Study

Gokul Steel Ltd is a large and creditworthy company that manufactures steel for the Indian market. It now wants to cater to the Asian market and decides to invest in new hi-tech machines. Since the investment is large, it requires long term finance. It decides to raise funds by issuing equity shares. The issue of equity shares involves huge floatation costs. To meet the expenses of floatation cost, the company decides to tap the money market.

1. Name and explain the money-market instrument the company can use for the above purpose.
2. What is the duration for which the company can get funds through the instrument?
3. State any other purpose for which this instrument can be used.

Answer:
The company can issue equity shares with premium. If the issue of the shares at a premium value, the share can be subsided easily because the company has already created a creditworthy less. So it can easily raise their capital and get more funds and solve the huge requirement of funds.

1. NSE (National Stock Exchange) – Gokul Steel Ltd.
   BSE (Business Stock Exchange) – Equity shares
2. Equity share capital for long term source of the company. One year, two years, or the life of the company.
3. In the future, the shares can be used to change the value of shares. In the future, this investment can be surrendered and get back the cash also with dividends.

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Samacheer Kalvi 11th Commerce Solutions Chapter 26 Export and Import Procedures

Samacheer Kalvi 11th Commerce Export and Import Procedures Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
EPC stands for ………………
(a) Export processing commission
(b) Export Promotion Council
(c) Export Carriage council
(d) Export Promotion Congress
Answer:
(b) Export Promotion Council

Question 2.
STC is an expansion for ………………
(a) State Training Centre
(c) State Trading Centre
(b) State Training Council
(d) State Trading Corporation
Answer:
(d) State Trading Corporation

Question 3.
An ……………… is a document prepared by the importer and sent to the exporter to buy the goods.
(a) Invoice
(b) Indent
(c) Enquiry
(d) Charter Party
Answer:
(b) Indent

Question 4.
The ……………… receipt is an acknowledgment of receipt of goods on the ship issued by the Captain.
(a) Shipping Bill
(b) Bill of Lading
(c) Mate’s Receipt
(d) Consular Invoice
Answer:
(b) Bill of Lading

Question 5.
The Exporters appoint the agent to fulfill the customs formalities.
(a) Clearing Agent
(b) Forwarding Agent
(c) Commission Agent
(d) Factor
Answer:
(b) Forwarding Agent

II. Very Short Answer Questions

Question 1.
What is meant by Indent?
Answer:
An indent is an order received from abroad for the export of goods. It contains information regarding the sale of goods. it is prepared in duplicate. One copy of the indent is sent to the exporters and the second one is retained by the importer and kept in his records.

Question 2.
Write any two export promotion institutions.
Answer:

1. Department of Commerce
2. Export Promotion Council (EPC)

Question 3.
Mention the types of Indent.
Answer:
A charter party is a formal agreement between the shipowner and the exporter under which the exporter hires an entire ship or a major part of the ship either for a particular voyage or for a specific time period when the shipping is heavy.

Question 4.
What is the Letter of credit?
Answer:
Mate’s Receipt is the document issued by the captain of the ship acknowledging the receipt of goods on board by him to the port of specified destination. This contains details like quantity of goods shipped, number of packages condition for packing, etc.

Where the Mate is satisfied with packing he/she issues a clean receipt. If he/ she is not satisfied with packing, he/she issues a foul receipt. The forwarding agent should seek to get a clean receipt. Otherwise, the insurance company will not bear liability for loss in case of foul receipt.

III. Short Answer Questions

Question 1.
What are the contents of Indents?
Answer:
Contents of an Indent:

1. Quantity of goods sent
2. Design of goods
3. Price
4. Nature of packing shipment
5. Mode of shipment
6. Period of delivery
7. Mode of payment

Question 2.
What is the meaning of a consular invoice?
Answer:
Where the customs duties are charged on the basis of value of goods at import’s port (ad – valorem basis), the customs officers are empowered to open the consignment to calculate duties. In order to avoid this problem exporter obtains consular invoice and sends it over to the importer.

Question 3.
What is meant by Charter Party?
Answer:
A charter party is a formal agreement between ship owner and the exporter under which exporter hires an entire ship or a major part of ship either for a particular voyage or for a specific time period when the shipping is heavy. The hiring of ship for specific voyage is called voyage charter while this hiring of entire ship for a specific time period is called time charter.

Question 4.
Write a short note on Mate’s receipt?
Answer:
Mate’s Receipt is the document issued by the captain of the ship acknowledging the receipt of goods on board by him to the port of specified destination. This contains details like quantity of goods shipped, number of packages condition for packing, etc.

Question 5.
What is Bill of Lading?
Answer:
Bill of Lading, refers to a document signed by ship owner or to his agent mentioning that goods, specified have been received and it would be delivered to the importer or his agent at the port of destination if good condition subject to terms and conditions mentioned therein.

IV. Long Answer Questions

Question 1.
What are the procedures relating to Export trade?
Answer:
An exporter has to fulfill the formalities given below to export the goods out of the country:
Receiving Trade Enquiry Exporter receives trade enquiry (written request) from the importer / his agent who intends to buy the product. In the first place, the importer requests the exporter to supply the information with regard to the products.

Receiving Indent and Sending Confirmation:
After the scrutiny of the quotation / proforma invoice, the buyer who intends to buy the goods sends an indent to the exporter. The latter may either receive the order directly from the importer or through an agent who acts as an intermediary between the exporter and the importer.

The agent receives a commission for this intermediating sendee. An indent actually points to an order received from abroad for export of goods, i.e. sale of goods. The indent contains the details in the box.

Arranging Letter of Credit:
Under this stage exporter intends to satisfy himself/herself about the trustworthiness of the importer. In this case the exporter is requested to arrange a letter of credit in his favour. Letter of Credit (LC) is an undertaking by its issuer (importer’s bank) that bills of exchange drawn by the foreign dealer on the importer will be honoured upon its presentation by exporter’s bank up to a specified amount.

In other words it simply represents a guarantee given by the importer bank to the foreign dealer (exporter) that the amount in the bill will be honoured upon its presentation by the exporter /his agent.

Obtaining Importer Exporter Code (IEC) and RBI code:
Number Exporter has to apply in Ayaab Niryatt Form 2A(ANF₂A) to the Regional Authority of the Director-General of Foreign Trade (DGFT) in the region where the registered office of the company is located. The exporter has to mention the number in all the shipping documents.

However, IEC number is not required where the goods are exported/imported for the personal use of importer and not for trade/ manufacture or agriculture purpose.

Obtaining Registration cum Membership Certificate (RCMC) from Export Promotion Council / Commodity Board:
An Exporter is required to obtain RCMC from Export Promotion Councils/ Commodity Board/Development Authority in order to avail himself/herself of export incentives, concessions, and other facilities offered by Government e g. cash compensatory support and benefit of the promotional scheme from Government.

Manufacturing / Procuring Goods and Packing items:
Exporters steps into manufacturing and procuring of goods required by the importer. Where the materials required for the manufacturing of goods are subject to excise duty. the exporter has to apply to Export Commissioner for exemption from excise duty if the goods are meant for export along with the invoice AR₄/AR₅ and other documents.

Export Inspection Certificate:
After the goods have been packed as per the specifications of importer, the exporter has to apply to the Export Inspection Agency (EIA) or other designated agency in this connection The agency sends an inspector to inspect the consignment meant for export. If the inspector is satisfied with the packing he/she issues certificate mentioning that. goods exported adhere to specification made by the exporter.

Insurance of Goods:
Exporter has to arrange for getting the goods insured to protect them against the various risks like deterioration, collision, immersion, fire, entry of seawater etc., as per the instructions of importer if any.

Certificate of Origin:
Import regulation of foreign countries may require that all these import consignments must accompany a certificate of origin. This certificate certifies that goods which are exported have been manufactured in a particular country. In India, the Chamber of Commerce, Trade Association, Export Promotion Council have been empowered to issue such certificates.

Consular Invoice:
Where the customs duties are charged on the basis of value of goods at import’s port(ad-valorem basis), the customs officers are empowered to open the consignment to calculate duties. This document is signed by the consul of importer’s country stationed in exporter’s country.

Engagement of Forwarding Agent
After Export Inspection certificate is obtained, the exporter has to obtain clearance from customs authorities. Generally exporters engage Clearing Forwarding Agent to fulfill various custom formalities. The latter do it for fees.

12. Dispatch of Goods to Port and Sending the Receipt to Agent The exporter will send the goods over to port town by rail or by truck and endorse the Railway Receipt (R/R) or Lorry Receipt(L/R) to forwarding agent’s favour with necessary instructions.13. Fulfilment of Customs Formalities by Forwarding Agent.

Customs Clearance
The exporter or his agent prepares three copies of shipping bill in printed form. The shipping bill contains the details like name and address of exporter, description of goods, value of goods, volume of goods, identification marks on the goods, port of destination and port of loading.

Preparation of Commercial Invoice and Submitting Documents to Bank
The exporter prepares a commercial invoice in respect of the goods shipped in triplicate according to the terms and conditions agreed between the exporter and the importer.

Then the exporter submits all related documents like commercial invoice, insurance policy, certificate of origin, consular invoice, etc., to his bank for onward transmission to the importer’s bank with the instruction that their documents should be delivered to the importer only when he accepts the bills enclosed
Securing Payment:
Bills of exchange of can are two types

1.  Document against payment (D/P)
2. Document against acceptance (D/A)

Question 2.
Distinguish between Bill of Lading and Charter Party.
Answer:

Basis	Bill of Lading	Charter Party
1. Meaning	This represents a document acknowledging receipt of goods on board for carrying them over to specified port of destination.	It refers to an agreement to hire a whole or major part of ship when the goods take exported is heavy.
2. Transferable	It Can be transferred to third party by endorsement and delivery.	It cannot be transferred to third party.
3. Loan	Loan can be raised against it.	Loan cannot be raised against it.
4. Crew	Master and crew remain the agent of ship owner.	Master and crew become the agent of exporter for a temporary period.
5. Lease	It is not a lease of ship.	It is a lease of ship.

Question 3.
What are the documents used in Export Trade?
Answer:
The following are the Documents used in Export Trade:
A. Documents related to Goods:

• Indent
• Certificate of Origin
• Certificate of Inspection

B. Documents related to shipment:

• Mate’s receipt
• Shipping bill
• Shipping Order
• Bill of Lading
• Marine Insurance Policy
• Consular Invoice
• Railway receipt/Lorry receipt

C. Documents related to Payment:

• Letter of Credit
• Commercial Invoice
• Bills of Exchange
• Bank Certificate Payment

Question 4.
Explain the various functions of Export Trading Houses.
Answer:
The functions of the export house are mentioned below:

1. Identifying a potential market for a product
2. Finding buyers and their agents and eliciting their response for export proposal.
3. Establishing product specifications in the light of market needs, standards and regulations in accordance with suppliers’ capabilities.
4. Determining appropriate mode of transportation and routing keeping in mind the cost, quality of service, and security.
5. Preparing the goods for delivery at destination.
6. Determining buyer’s creditworthiness.
7. Negotiating the transactions.
8. Arranging proper insurance coverage against maritime risks and currency fluctuations.
9. Financing the transactions and paying for goods and services received.
10. Preparing documents for international trade.
11. Settling claim.

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Tamilnadu Samacheer Kalvi 11th Economics Solutions Chapter 4 Cost and Revenue Analysis

Samacheer Kalvi 11th Economics Cost and Revenue Analysis Text Book Back Questions and Answers

Part – A

Multiple Choice Questions

Question 1.
Cost refers to _______
(a) price
(b) value
(c) fixed cost
(d) cost of production
Answer:
(d) cost of production

Question 2.
Cost functions are also known as …………………….. function.
(a) Production
(b) Investment
(c) Demand
(d) Consumption
Answer:
(a) Production

Question 3.
Money cost is also known as _______ cost.
(a) explicit
(b) implicit
(c) social
(d) real
Answer:
(a) explicit

Question 4.
Explicit cost plus implicit cost denote ………………… cost.
(a) Social
(b) Economic
(c) Money
(d) Fixed
Answer:
(b) Economic

Question 5.
Explicit costs are termed as
(a) out of pocket expenses
(b) social cost
(c) real cost
(d) sunk cost
Answer:
(a) out of pocket expenses

Question 6.
The costs of self – owned resources are termed as ……………………… cost.
(a) Real
(b) Explicit
(c) Money
(d) Implicit
Answer:
(d) Implicit

Question 7.
The cost that remains constant at all levels of output is _______ cost.
(a) fixed
(b) variable
(c) real
(d) social
Answer:
(a) fixed

Question 8.
Identify the formula for estimating average variable cost.
(a) TC/Q
(b) TVC/Q
(c) TFC/Q
(d) TAC/Q
Answer:
(b) TVC/Q

Question 9.
The cost incurred by producing one more unit of output is _______ cost.
(a) variable
(b) fixed
(c) marginal
(d) total
Answer:
(c) marginal

Question 10.
The cost that varies with the level of output is termed as …………………. cost.
(a) Money
(b) Variable cost
(c) Total cost
(d) Fixed cost
Answer:
(b) Variable cost

Question 11.
Wage is an example for _______ cost of the production.
(a) fixed
(b) variable
(c) marginal
(d) opportunity
Answer:
(b) variable

Question 12.
The cost per unit of output is denoted by …………………… cost.
(a) Average
(b) Marginal
(c) Variable
(d) Total
Answer:
(a) Average

Question 13.
Identify the formula of estimating average cost.
(a) AVC/Q
(b) TC/Q
(c) TVC/Q
(d) AFC/Q
Answer:
(b) TC/Q

Question 14.
Final total cost where TFC = 100 and TVC = 125.
(a) 125
(b) 175
(c) 225
(d) 325
Answer:
(c) 225

Question 15.
Long-run average cost curve is also called as _______ curve.
(a) demand
(b) planning
(c) production
(d) sales
Answer:
(b) planning

Question 16.
Revenue received from the sale of products is known as …………………….. revenue.
(a) Profit
(b) Total revenue
(c) Average
(d) Marginal
Answer:
(b) Total revenue

Question 17.
Revenue received from the sale of an additional unit is termed as _______ revenue.
(a) profit
(b) average
(c) marginal
(d) total
Answer:
(c) marginal

Question 18.
Marginal revenue is the addition made to the ……………………….
(a) Total sales
(b) Total revenue
(c) Total production
(d) Total cost
Answer:
(b) Total revenue

Question 19.
When price remains constant, AR will be _______ MR.
(a) equal to
(b) greater than
(c) less than
(d) not related to
Answer:
(a) equal to

Question 20.
A bookseller sold 40 books with a price of ₹10 each. The total revenue of the sellers is ₹ …………………….
(a) 100
(b) 200
(c) 300
(d) 400
Answer:
(d) 400

Part – B

Answer the following questions in one or two sentences

Question 21.
Define cost.
Answer:
Cost refers to the total expenses incurred in the production of a commodity. Cost analysis refers to the study of behaviour of cost in relation to one or more production criteria, namely size of output, the scale of production, prices of factors, and other economic variables.

Question 22.
Define cost function?
Answer:
The functional relationship between cost and output is expressed as ‘Cost Function’.
A Cost Function may be written as
C = f (Q)
Eg: TC = Q³ – 18Q² + 91Q + 12
Where, C = Cost, and Q = quantity of output. Cost functions are derived functions because they are derived from Production Functions.

Question 23.
What do you mean by fixed cost?
Answer:

1. Fixed Cost does not change with the change in the quality of output.
2. Fixed Cost is also called as “Supplementary Cost “or Overhead Cost”.
3. All payments for the fixed factors of production are known as Total Fixed Cost.

Question 24.
Define Revenue?
Answer:
The amount of money that a producer receives in exchange for the sale of goods is known as revenue. In short, revenue means sales revenue. It is the amount received by a firm from the sale of a given quantity of a commodity at the prevailing price in the market.

Question 25.
Explicit Cost – Define.
Answer:
Payment made to others for the purchase of factors of production is known as Explicit Costs. It refers to the actual expenditures of the firm to purchase or hire the inputs the firm needs.

Question 26.
Give the definition for ‘Real Cost’?
Answer:
Real Cost refers to the payment made to compensate for the efforts and sacrifices of all factor owners for their services in production. Real Cost includes the efforts and sacrifices of landlords in the use of land, capitalists to save and invest, and workers in foregoing leisure. Real costs are considered pains and sacrifices of labour as the real cost of production.

Question 27.
What is meant by Sunk cost?
Answer:
A cost incurred in the past and cannot be recovered in the future is called a Sunk Cost. This is historical but irrelevant for future business decisions. It is called sunk because, they are unalterable, unrecoverable and if once invested it should be treated as drowned or disappeared.

Part – C

Answer the following questions in One Paragraph

Question 28.
Distinguish between fixed cost and variable cost.
Answer:
Fixed Cost:

1. Does not change with the change in the quantity of output.
2. It is also called ‘Supplementary cost’ or ‘Overhead cost’.
3. (Eg.) Rent of the factory, Permanent worker’s salary.

Variable Cost:

1. These costs vary with the level of output
2. It is also called ‘Prime cost’, ‘Special cost’ or ‘Direct cost’.
3. (Eg.) Cost of raw materials, Temporary worker’s salary.

Question 29.
State the differences between money cost and real cost.
Answer:
Money Cost:

1. It is the total money expenses incurred by a firm in producing a commodity.
2. It includes the cost of raw materials, payments of wages and salaries, rent, interest, etc.,
3. It is also called prime cost or direct cost or nominal cost.

Real Cost:

1. It refers to the payment made to compensate for the efforts and sacrifices of all factor owners for their services in production.
2. It includes the efforts and sacrifices of factors of production.
3. Landlords’ effort is the use of land, capitalists to save and invest, and workers in foregoing leisure.

Question 30.
Distinguish between explicit cost and implicit cost.
Answer:
Explicit Cost:

1. Payment made to others for the purchase of factors of production.
2. It includes wages, payment for raw material, rent, interest, expenditure on transport, and advertisement.
3. It is also called accounting cost or out of pocket cost or money cost.

Implicit Cost:

1. Payment made to the use of resources that the firm already owns.
2. Cash payment is not made for the use of the producer’s own land, building, machinery, and other factors of production.
3. Implicit cost is also called imputed cost or book cost.

Question 31.
Define opportunity cost and provide an example?
Answer:
Opportunity cost is the cost of the next best alternative use. It is the value of the next best alternative foregone.
(Eg.) A farmer can cultivate both paddy and sugarcane in farmland. If he cultivates paddy, the opportunity cost of paddy output is the amount of sugarcane output given up. Opportunity cost is also called ‘Alternative cost’ or ‘Transfer cost’.

Question 32.
Stale the relationship between AC and MC.
Answer:
There is a unique relationship between the AC and MC curves.

1. When AC is falling, MC lies below AC.
2. When AC becomes constant, MC also becomes equal to it.
3. When AC starts increasing, MC lies above the AC.
4. MC curve always cuts AC at its minimum point from below.

Question 33.
Write a short note on Marginal Revenue?
Answer:
Marginal revenue (MR) is the addition to the total revenue by the sale of an additional unit of a commodity
MR = \(\frac { ∆TR }{ ∆Q } \)
MR-Marginal Revenue;  ∆TR – Change in total revenue, ∆Q – Change is the total quantity (OR) MR = TR_n – TR_n-1
TR_n – Total Revenue of n^th item.
TR_n-1 – Total Revenue of n-1^th item.
If TR = PQ, MR = dTR / dQ = P
Which is equal to AR.

Question 34.
Discuss the Long run cost curves with a suitable diagram.
Answer:
In the long run, all factors of production become variable. The existing size of the firm can be increased. There are neither fixed inputs nor fixed costs in the long run.

LAC = LTC/Q
LAC – Long-run average cost LTC – Long-run total cost
Q – denotes the quantity of output.
The LAC curve is derived from short-run average cost curves. It is the locus of points denoting the least cost curve of producing the corresponding output.
The LAC curve is called as ‘Planning curve’ or ‘Envelope curve’

Part – D
Answer the following questions in about a page

Question 35.
If total cost =10+Q³, find out AC, AVC, TFC, AFC when Q = 5.
Answer:
Formulas:
TC = TFC + TVC
AVC = \(\frac{TVC}{Q}\)
AFC = \(\frac{TFC}{Q}\)
AC = \(\frac{TC}{Q}\)

1. TC = 10 + Q³. The total cost has two components TFC and TVC.
2. TFC = is the total fixed cost that does not change with the level of output.
3. It is determined by putting the value of Q.
4. Given the total cost function TC = 10 + Q³

Q = units of output. Where Q = 5
Here TFC = 10 (TFC will not change when output changes)
TC = 10 + (5)³
TC = 10+125
TC = 135
∴ 135 = 10 + TVC
135 – 10 = TVC

TVC = 125
TVC = 125,
TC = 135
∴TFC = ?
TC = (TFC + TVC)
135 = x + 125
135 – 125 = 10

∴ TFC = 10
AFC = \(\frac{TFC}{Q}\)
TFC = 10, Q =5
AFC = \(\frac{10}{5}\) = 2

∴ AFC = 2
AVC = \(\frac{TVC}{Q}\)
TVC = 125,Q = 5
AVC = 125
∴ AVC = 25
AC = \(\frac{AC}{Q}\)
TC = 135,Q = 5
AC = \(\frac{135}{5}\) = 27
(or)
AC = AFC + AVC
AC = 2 + 25
AC = 27

Question 36.
Discuss the short-run cost curves with a suitable diagram.
Answer:
1. Total fixed cost: TFC
All payments for the fixed factors of production are known as total fixed costs. It does not change with output.

2. Total variable cost: TVC
All payments to the variable factors of production are called a total variable cost. As output increases, TVC also increases.

3. Total cost curves: TC
Total cost means the sum total of all payments made in the production. It is the total cost of production.
TC = TFC + TVC.

4. Average fixed cost: AFC
It refers to the fixed cost per unit of output.
AFC = \(\frac { TFC }{ Q } \)

5. Average variable cost: AVC
It refers to the total variable cost per unit of output.
AVC = \(\frac { TFC }{ Q } \)

6. Average cost:
It refers to the total cost per unit of output.
AC = \(\frac { TC }{ Q } \) (or) AC = AFC + AVC

1. ATC curve is also a ‘U’ shaped curve.
2. Initially, ATC declines, reaches a minimum, and rises beyond the optimum output.
3. The ‘U’ shape of the AC reflects the law of the variable proportions.

Marginal Cost:
Marginal cost is the addition made to the total cost by producer one extra unit of output

Question 37.
Bring out the relationship between AR and MR curves under various price conditions.
Answer:
If a firm is able to sell additional units at the same price then AR and MR will be constant. If the firm sells its additional units only by reducing the price then both AR and MR will fall and be different.

Constant AR and MR: (at a fixed price)
If the price remains constant, MR also remains constant and coincides with AR. Under perfect competition as the price is constant, AR is equal to MR and their shape will be straight line horizontal to X-axis.
TR – AR – MR – Constant price

Declining AR and MR: (at declining price)

When a firm sells large quantities at lower prices both AR and MR will fall. But the fall in MR will be steeper than the fall in the AR and MR lies below AR.

The MR curve divides the distance between the AR curve and Y-axis into two equal parts. The decline in AR need not be a straight line or linear. If the prices are declining with the increase in quantity sold, the AR can be non-linear may be concave or convex to the origin

AR, TR, MR declining price

Samacheer Kalvi 11th Economics Cost and Revenue Analysis Additional Questions and Answers

Part – A

Choose the best options

Question 1.
Real Costis ……………………
(a) Pain and sacrifice
(b) Subjective concept
(c) Efforts and foregoing leisure
(d) All the above
Answer:
(d) All the above

Question 2.
Average fixed cost is obtained by _______
(a) TC / Q
(b) TFC / Q
(c) TVC / Q
(d) None of the above
Answer:
(b) TFC / Q

Question 3.
The Marginal Cost curve is ……………………..
(a) V-shaped
(b) Upward
(c) Downward
(d) U – shaped
Answer:
(d) U – shaped

Question 4.
Total fixed cost + Total variable cost is?
(a) AC-MC
(b) TC-AC
(c) TC
(d) None
Answer:
(c) TC

Question 5.
What is the break-even point?
(a) No profit no loss point
(b) No profit
(c) No loss
(d) Profit – point
Answer:
(a) No profit no loss point

Question 6.
Break-Even point is _______
(a) Total cost and total revenue
(b) Average revenue and financial revenue
(c) No profit – no loss point
(d) All the above
Answer:
(c) No profit – no loss point

Question 7.
What is the other name for “Opportunity Cost”?
(a) Real Cost
(b) Money Cost
(c) Economic Cost
(d) Social Cost
Answer:
(a) Real Cost

Question 8.
Average variable cost is _______
(a) TFC / Q
(b) TVC / Q
(c) TC / Q
(d) None
Answer:
(b) TVC / Q

Question 9.
…………………….. revenue means the price of the product.
(a) Total
(b) Marginal
(c) Profit
(d) Average
Answer:
(d) Average

Question 10.
The cost function is the
(a) Relationship between total cost and output
(b) Relationship between revenue and cost
(c) Relationship between wages and interest d. None of the above
(d) None of the above
Answer:
(a) Relationship between total cost and output

Question 11.
Match the following

(a) 1 – (iv), 2 – (i), 3 – (iii), 4 – (ii)
(b) 1 – (iv), 2 – (i), 3 – (ii), 4 – (iii)
(c) 1 – (ii), 2 – (iii), 3 – (iv), 4 – (i)
(d) 1 – (iii), 2 – (iv), 3 – (i), 4 – (ii)
Answer:
(b) 1 – (iv), 2 – (i), 3 – (ii), 4 – (iii)

Match the following and choose the answer using the codes given below

Question 1.

(a) 1 2 3 4
(b) 3 4 1 2
(c) 2 3 4 1
(d) 4 3 1 2
Answer:
(b) 3 4 1 2

Question 2.

(a) 3 4 2 1
(b) 1 2 3 4
(c) 2 3 4 1
(d) 4 3 1 2
Answer:
(a) 3 4 2 1

Question 3.

(a) 2 3 4 1
(b) 3 4 2 1
(c) 1 2 3 4
(d) 4 3 2 1
Answer:
(d) 4 3 2 1

Question 4.

(a) 2 3 4 1
(b) 2 1 4 3
(c) 4 3 2 1
(d) 2 4 1 3
Answer:
(b) 2 1 4 3

Choose the correct statement

Question 5.
(a) In the long run, all the factors are fixed
(b) The LAC curve is called an envelope curve.
(c) LAC is equal to the long-run total cost
(d) LAC curve cannot be derived from short-run cost curves
Answer:
(b) The LAC curve is called an envelope curve.

Question 6.
(a) Revenue means the price of the product.
(b) Marginal revenue is equal to the price of the product.
(c) Revenue means sales revenue d. Average revenue is the total income of the firm.
(d) Average revenue is the total income of the firm
Answer:
(c) Revenue means sales revenue d. Average revenue is the total income of the firm.

Choose the incorrect pair

Question 7.

Answer:
(d) MR is infinity (iv) TR is decreasing

Question 8.

Answer:
(a) ATC  – (1) TC_n – TC_n-1

Analyze the reason for the following

Question 9.
Assertion (A) : If AR remains constant MR is also constant.
Reason (R) : MR is the addition made to the TR by the sale of an additional unit of a commodity.
(a) Both (A) and (R) are true, (R) is the correct explanation of (A)
(b) Both (A) and (R) are true, (R) is not the correct explanation of (A)
(c) Both (A) and (R) are false.
(d) (A) is true (R) is false.
Answer:
(b) Both (A) and (R) are true, (R) is not the correct explanation of (A)

Question 10.
Assertion (A) : Real cost refers to the payment made to compensate for the efforts and sacrifice of all factor owners.
Reason (R) : Adam Smith regarded pain and sacrifice of labour as the real cost of production.
(a) Both (A) and (R) are true, (R) is the correct explanation of (A)
(b) Both (A) and (R) are true, (R) is not the correct explanation of (A)
(c) Both (A) and (R) are false.
(d) (A) is false (R) is true.
Answer:
(a) Both (A) and (R) are true, (R) is the correct explanation of (A)

Choose the incorrect statement

Question 11.
(a) When AC is falling, MC lies below AC.
(b) When AC becomes constant, MC also equal to it.
(c) When AC starts increasing, MC lies above the AC.
(d) MC never cuts AC curve.
Answer:
(d) MC never cuts AC curve.

Question 12.
(a) MR is equal to zero and TR is decreasing
(b) AR and MR curve depends upon the elasticity of AR curve
(c) When price elasticity is greater than one, MR is positive
(d) When price elasticity is less than one, MR is negative
Answer:
(a) MR is equal to zero and TR is decreasing

Choose the odd one out

Question 13.
(a) Money cost
(b) Total variable
(c) Real cost
(d) prime cost
Answer:
(b) Total variable

Question 14.
(a) When P = 3, Q = 8 then TR = 24
(b) When P = Q = 1 then TR = 10
(c) When P = 4, Q = 6 then TR = 27
(d) When P = 5, Q = 7 then TR = 35
Answer:
(c) When P = 4, Q = 6 then TR = 27

Fill in the blanks with the suitable option given below

Question 15.
Economics profit is ______
(a) TR – TC
(b) TC – TR
(c) AC – MC
(d) None
Answer:
(a) TR – TC

Question 16.
Cost function is the ________
(a) Relationship between total cost and output
(b) Relationship between revenue and cost
(c) Relationship between wages and interest
(d) None of the above
Answer:
(a) Relationship between total cost and output

Question 17.
Break-even point is _________
(a) Total cost and total revenue
(b) Average revenue and financial revenue
(c) No profit – No loss point
(d) All the above
Answer:
(c) No profit – No loss point

Choose the best option

Question 18.
Average fixed cost is obtained by
(a) TC / Q
(b) TVC / Q
(c) AC / Q
(d) TFC / Q
Answer:
(d) TFC / Q

Question 19.
Long-run average cost curve can also be called as _____
(a) Planning curve
(b) Envelope curve
(c) Boat-shaped curve
(d) All the above
Answer:
(d) All the above

Question 20.
Total fixed cost + Total variable cost is _____
(a) AC – MC
(b) TC
(c) TC – AC
(d) None
Answer:
(b) TC

Part – B

Answer the following questions in one or two sentences

Question 1.
Give the definition for Economic Cost?
Answer:

1. Economic cost refers to all payments made to the resources owned and purchased or hired by the firm in order to ensure their regular supply to the process of production. It is the summation of explicit and implicit costs.
2. Economic Cost is relevant to calculate the normal profit and thereby the economic profit of a firm.

Question 2.
What is the economic cost?
The economic cost is the summation of explicit and implicit costs.

Question 3.
What is the Average Variable Cost?
Answer:
The average variable cost refers to the total variable cost per unit of output. It is obtained by dividing total variable cost (TVC) by the quantity of output [Q], AVC = TVC/Q, where AVC denotes Average variable cost, TVC denotes total variable cost and Q denotes the quantity of output.

Question 4.
What is a floating cost?
Answer:
Floating cost refers to all expenses that are directly associated with business activities but not with asset creation.

Question 5.
What are variable costs?
Answer:
The variable cost varies with the level of output. It is also called as prime cost, special cost or direct cost.

Question 6.
What is total revenue?
Answer:
Total revenue is the amount of income received by the firm from the sale of its products.

Question 7.
What is marginal revenue?
Answer:
Marginal revenue is the addition to the total revenue by the sale of an additional unit of a commodity.
MR = TR_n – TR_n-1

Part – C

Answer the following questions in One Paragraph

Question 1.
How can you calculate the average fixed cost?
Answer:
The average fixed cost is the fixed cost per unit of output. It is obtained by dividing the total fixed cost by the quantity of output.
AFC = \(\frac { TFC }{ Q } \)
(Eg.) If TFC is 100;
Q = 10 Find AFC
AFC = \(\frac { TFC }{ Q } \)
= \(\frac { 1000 }{ 10 } \)
AFC = 100.

Question 2.
Define the Prime Cost?
Answer:

1. All costs that vary with output, together with the cost of administration are known as Prime Cost.
2. Prime Cost = Variable Costs + Costs of Administration.

Question 3.
Write a note on average revenue.
Answer:
Average revenue is the revenue per unit of the commodity sold. It is calculated by dividing the total revenue (TR) by the number of units sold (Q).
AR = \(\frac { TR }{ Q } \)
If TR = PQ
AR = \(\frac { PQ }{ Q } \) = P
AR = P
AR – Average revenue, TR – Total revenue, Q – the quantity of unit sold.

Students can Download Commerce Chapter 17 Social Responsibility of Business and Business Ethics Questions and Answers, Notes Pdf, Samacheer Kalvi 11th Commerce Book Solutions Guide Pdf helps you to revise the complete Tamilnadu State Board New Syllabus and score more marks in your examinations.

Samacheer Kalvi 11th Commerce Solutions Chapter 17 Social Responsibility of Business and Business Ethics

Samacheer Kalvi 11th Commerce Social Responsibility of Business and Business Ethics Textbook Exercise Questions and Answers

I. Choose the Correct Answer

Question 1.
Which type of Responsibility gives the benefit to the Society out of its profits earned?
(a) legal
(b) Ethical
(c) Moral
(d) Economic
Answer:
(c) Moral

Question 2.
The Stakeholders of Socially Responsible business units are except ……………..
(a) Share holders
(b) Employees
(c) Government
(d) Company
Answer:
(d) Company

Question 3.
Assuming Social Responsibility of business helps the enterprise in
(a) Increase profit
(b) Decrease profit
(c) Sustainability
(d) Equilibrium
Answer:
(c) Sustainability

Question 4.
Socially Responsible business provides goods at ……………..
(a) High price
(b) Low price
(c) Reasonable price
(d) Moderate price
Answer:
(c) Reasonable price

Question 5.
Social Responsibility towards employees represents the following except ……………..
(a) Reasonable remuneration
(b) Proper facilities
(c) Social security
(d) Exploitation
Answer:
(d) Exploitation

II. Very Short Answer Questions

Question 1.
What do you mean by Social Responsibility?
Answer:
It is the idea that businesses should balance profit-making activities with activities which give benefits to society. The benefits which are earned through society are known as the Social Responsibility of business.

Question 2.
Give the meaning of Social Power.
Answer:
Businessmen have considerable social power. Their decisions and actions affect the lives and fortunes of society. Businessmen should assume social obligations commensurate with their social power.

Question 3.
What is a free enterprise?
Answer:
A business enterprise that accepts and discharges social obligations enjoys greater freedom. Social responsibilities are essential for avoiding governmental action against the business. The concerns which do not have the policy of following such rules are known as Free enterprises.

Question 4.
Who are called Stakeholders?
Answer:
A business organisation is a coalition of several interest groups are called stakeholders. Example – shareholders, customers, employees, suppliers, etc. Business should, therefore, work for the interest of all of them rather than for the benefit of shareholders /owners alone.

Question 5.
What is ethical Responsibility?
Answer:
The behaviour of the firm is expected by society but not codified in law. For example, respecting the religious sentiments and dignity of people while advertising for a product.

III. Short Answer Questions

Question 1.
Define the Concept of Social Responsibility?
Answer:
“Social Responsibility requires managers to consider whether their action is likely to promote the public good, to advance the basic beliefs of our society, to contribute to its stability, strength and harmony” – Peter F. Drucker.

Question 2.
Why you do think Social Responsibility of business is needed?
Answer:
Social Responsibility is needed for the following reasons:

• Self – Interest
• Law and order
• Creation of Society
• Moral Justification
• Social power
• Socio-cultural Norms
• The image in the society
• Professionalism
• Public awareness
• Trusteeship
• Free enterprise

Question 3.
What are the benefits derived by employees of a Socially Responsible business enterprise?
Answer:

1. Timely and regular payment of wages and salaries.
2. Proper working conditions and welfare amenities.
3. Opportunity for better career prospects.
4. Job security as well as social security like facilities of provident fund, group insurance, pension, retirement benefits, etc.

Question 4.
Enumerate the points relating to why business units are Socially Responsible?
Answer:
The following are the main points to be considered while turning the business units into socially responsible one.

• Protection of Stakeholders Interest
• Legitimacy
• Promotion of Society
• Competence
• Assessment of Social Impact
• Professional conduct
• Organized Social power
• Public opinion

Question 5.
List the kinds of Social Responsibility.
Answer:

1. Economic responsibility
2. Legal responsibility
3. Ethical responsibility
4. Discretionary responsibility

IV. Long Answer Questions

Question 1.
Explain in detail the concept and need for Social Responsibility?
Answer:

Concept of Social Responsibility:
The term social responsibility is defined in various ways. Every businessman earns prosperity from business and should give back the benefit of this prosperity to society. This is voluntary. This benefit is the moral responsibility of business. As this benefit is supposed to be passed on to society, it can be said to be social responsibility of business.

Need for Social Responsibility:
Business is expected to be responsible to society due to the following reasons:

Self-Interest:
A business unit can sustain in the market for a longer period only by assuming some social obligations. For example, provision of higher wages and good working conditions motivates workers to work hard and produce more. Labour turnover and absenteeism are reduced.

Creation of Society:
Business is a creation of society and uses the resources of society. Therefore, it should fulfil its obligations to society. In the long run a successful business can be built on the foundations of a happy community and a satisfied work force.

Social Power:
Businessmen have considerable social power. Their decisions and actions affect the lives and fortunes of the society. They collectively determine for the nation such important matters as level of employment, rate of economic progress and distribution of income among various groups. It is, therefore, the moral and right thing for business enterprises to assume social obligations.

Organized Social Power:
Large corporations have acquired tremendous social power through their multifarious operations. Social power may be misused in the absence of social responsibility. There should be an equilibrium between social power and social responsibility.

Image in the Society:
A business can improve its image in public by assuming social obligations. Good relations with workers, consumers, and suppliers help in the success of the business. Social obligations improve the confidence and faith of people in a business enterprise.

Public Awareness:
Nowadays consumers and. workers are well informed about their rights. Consumers expect better quality products at reasonable prices. Similarly, workers desire fairness. wages. and other benefits. They exercise pressure on the employer’s through-trade unions. There will be industrial unrest and conflict in society if the business does not fulfill its obligations.

Question 2.
Answer:
Illustrate with examples the arguments for Social Responsibility?
Answer:

1. Protection of Stakeholders Interest: A business organisation is a coalition of several interest groups or stakeholders. Example – shareholders, customers, employees, suppliers, etc.
2. Promotion of Society: Business is a subsystem of society. It draws support and sustenance from society in the form of inputs. Socially responsible behaviour is essential to sustain this relationship between business and society.
3. Assessment of Social Impact: During the course of its functioning, a business enterprise makes several decisions and actions. Its activities exercise a strong influence on the interests and values of society.
4. Organised Social Power: Large corporations have acquired tremendous social power through their multifarious operations. Social power may be misused in the absence of social, responsibility.
5. Legitimacy: It is in the enlightened self-interest of business to assume social responsibility.
6. Competence: Business organisations and their managers have proved their competence and leadership in solving economic problems.
7. Professional Conduct: Professional managers are required to display a keen social sensitivity and serve the society as a whole.
8. Public Opinion: Adoption of social responsibility as an objective will help to improve the public opinion of business.

Question 3.
Discuss the different groups that benefited from the Social Responsibility of business?
Answer:
The business generally interacts with owners, investors, employees, suppliers, customers, competitors, government, and society. They are called interest groups because, by each and every activity of the business, the interest of these groups is affected directly or indirectly.

The groups on which the business is interested in given below:
Responsibility towards Owners:
Owners are the persons who own the business. They contribute capital and bear the business risks. The primary responsibilities of a business towards its owners are to

• Run the business efficiently.
• Proper utilization of capital and other resources.
• Growth and appreciation of capital.
• A regular and fair return on capital invested.

Responsibility towards Investors:
Investors are those who provide finance by way of investment in debentures, bonds, deposits etc. Banks, financial institutions, and investing public are all included in this category.
The responsibilities of a business towards its investors are:

• Ensuring the safety of their investment.
• Regular payment of interest.
• Timely repayment of the principal amount.

Responsibility towards Employees:
Business needs employees or workers to work for it. These employees put their best effort for the benefit of the business. So it is the prime responsibility of every business to take care of the interest of their employees. If the employees are satisfied and efficient, then the only business can be successful. The responsibilities of business towards its employees include:

• Timely and regular payment of wages and salaries.
• Proper working conditions and welfare amenities.
• Opportunity for better career prospects.
• Job security as well as social security like facilities of provident fund, group insurance, pension, retirement benefits, etc.
• Better living conditions like housing, transport, canteen, creches, etc.
• Timely training and development.

Responsibility towards Suppliers:
Suppliers are businessmen who supply raw materials and other items required by manufacturers and traders. Certain suppliers, called distributors, supply finished products to the consumers. The responsibilities of business towards these suppliers are:

• Giving regular orders for the purchase of goods
• Dealing on fair terms and conditions.
• Availing reasonable credit period.
• Timely payment of dues.

Responsibility towards Customers:
No business can survive without the support -of customers. As a part of the responsibility of business towards them the business should provide the following facilities:

• Products and services must be able to take care of the needs of the customers.
• Products and services must be qualitative
• There must be regularity in the supply of goods and services

Question 4.
How do you classify Social Responsibility?
Answer:
1. Economic responsibility:
A business enterprise is basically an economic entity and, therefore, its primary social responsibility is economic i.e., produce goods and services that society wants and sell them at a profit.

2. Legal responsibility:
Every business has a responsibility to operate within the laws of the land. Since these laws are meant for the good of society, a law-abiding enterprise is a socially responsible enterprise as well.

3. Ethical responsibility:
This includes the behavior of the firm that is expected by society but not codified in law. For example, respecting the religious sentiments and dignity of people while advertising for a product. There is an element of voluntary action in performing this responsibility.

4. Discretionary responsibility:
This refers to the purely voluntary obligation that an enterprise assumes, for instance, providing charitable contributions to educational institutions or helping the affected people during floods or earthquakes.

It is the responsibility of the company management to safeguard the capital investment by avoiding speculative activity and undertaking only healthy business ventures which give good returns on investment.

Samacheer Kalvi 11th Commerce Social Responsibility of Business and Business Ethics Additional Questions and Answers

I. Choose the Correct Answer:

Question 1.
Management of business enterprises is being
(a) Professionalism
(b) Law and order
(c) Free enterprise
(d) Public awareness
Answer:
(a) Professionalism

Question 2.
How many kinds of Social Relationship of business?
(a) Two
(b) Three
(c) Four
(d) Five
Answer:
(c) Four

II. Very Short Answer Questions

Question 1.
What is Legal responsibility?
Answer:
Every business has a responsibility to operate within the laws of the land. Since these laws are meant for the good of society, a law-abiding enterprise is a socially responsible enterprise as well.

Question 2.
What is Public awareness?
Answer:
Now – a – days consumers and workers are well informed about their rights. Consumers expect better quality products at reasonable prices. Similarly, workers desire fair wages and other benefits.