NIOS Class 12 Business Studies Chapter 5 Company Form of Business Organising

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NIOS Class 12 Business Studies Chapter 5 Company Form of Business Organising

Also, you can read the NIOS book online in these sections Solutions by Expert Teachers as per National Institute of Open Schooling (NIOS) Book guidelines. These solutions are part of NIOS All Subject Solutions. Here we have given NIOS Class 12 Business Studies Chapter 5 Company Form of Business Organising, NIOS Senior Secondary Course Business Studies for All Chapter, You can practice these here.

Company Form of Business Organising

Chapter: 5

Module – 1 Introduction to Business

INTEXT QUESTIONS 5.1 

1. If all the members of a joint stock company die in a road accident, then the company will be closed down. Do you agree with this statement? Give reasons in support of your answer.

Ans: No, since the company has perpetual existence. It can continue working with new members.  

2. Name the following with reference to a joint stock company. 

(a) The smallest unit into which the capital of company is divided.

Ans: Share. 

(b) The Act that governs the companies in India.

Ans: Companies Act 2013. 

(c) The sum total of the money contributed by the members of a joint stock company.

Ans: Share capital. 

(d) The official signature of a joint stock company.

Ans: Common seal.  

(e) The elected representatives of the members who manage the day to day affairs of the joint stock company.

Ans: Directors. 

(f) Members may come and go but the company can go on forever.

Ans: Perpetual succession.

INTEXT QUESTION 5.2 

1. Mr. Mohit has invested Rs.2 lakhs in shares of a public limited company. After one year he noticed that the company does not perform well, and the market value of its shares is going down. He thinks, if this situation continues, he will lose his Rs.2 lakhs and if required his house will be sold out to discharge his liabilities of the company. Is he thinking in the right direction? Give reasons in support of you answer. 

Ans: No. The liabilities of the shareholders are limited. Again, he has the option to transfer or sell the shares to avoid further loss. 

2. Below are given certain characteristics of Joint Stock Company. Identify which of the following characteristics is of public limited company and which one of private limited company: 

(a) There can be maximum of 200 members.

Ans: Private limited company.  

(b) It can be started with minimum of seven members.

Ans: Public limited company.  

(c) The shareholders cannot transfer their shares.

Ans: Private limited company. 

(d) It can invite the public to subscribe to its shares.

Ans: Public limited company. 

3. Below are given certain statement. Write ‘M’ at the end of the sentence, if it is the merit and ‘L’ if it is the limitation of a Joint Stock Company. 

(a) The liability of the members of Joint Stock Company is limited. 

Ans: M.

(b) The shares of the public limited company can be traded easily in the stock exchange.

Ans: M. 

(c) A number of legal formalities have to be complied with in the formation of a Joint Stock Company.

Ans: L. 

(d) The shareholders holding majority of shares take all decisions of the company.

Ans: L. 

(e) A company can spend a lot of money on research and development for improved process of production, designing and innovating new products.

Ans: M.

INTEXT QUESTIONS 5.3 

1. A Joint Stock Company is suitable where the volume of business is large, the area of operation is widespread and the risk involved is high. What are the other conditions under which a Joint Stock Company is more suitable? Write any two such conditions.

Ans: (a) Need for professional management.

(b) Huge financial requirement.

(c) More manpower requirement.  

2. There are a number of factors that determine the choice of a particular form of business organisation. Name the form of organisation i.e., either sole proprietorship or joint stock company which may be preferred keeping in mind the following factors: 

(a) It can raise huge capital and hire expert knowledge to manage a big business.

Ans: Joint stock company.  

(b) Maximum secrecy can be maintained.

Ans: Sole proprietorship. 

(c) The government control is very limited.

Ans: Sole proprietorship.

(d) Death or insolvency of a member does not affect its existence.

Ans: Joint stock company.  

(e) There is maximum flexibility in operations.

Ans: Sole proprietorship.  

INTEXT QUESTIONS 5.4 

1. State the general features of Multinational Corporation.

Ans: (a) International Operation. 

(b) Large size.

(c) Centralised control.  

2. Match the Column A with Column B: 

(a) Minimum number of members required to form: 

Column A	Column B
(i) Public Company	(i) 2
(ii) Private Company	(ii) 7
(iii) Partnership (Banking business)	(iii) 10

Ans:

Column A	Column B
(i) Public Company	(ii) 7
(ii) Private Company	(iii) 10
(iii) Partnership (Banking business)	(i) 2

3. Which of the following is not required for the commencement of a business? 

(a) Memorandum of Association. 

(b) Article of Association. 

(c) Certificate of Incorporation. 

(d) Commencement of Business Certificate. 

Ans: (d) Commencement of Business Certificate. 

4. Registration of companies is also called as: 

(a) Formation of company. 

(b) Establishment of company. 

(c) Incorporation of company.

(d) All of the above.

Ans: (c) Incorporation of company.  

5. The person who assume the task of promotion are called as: 

(a) Organiser. 

(b) Initiator. 

(c) Promoter. 

(d) Board of Director.

Ans: (c) Promoter.  

6. Which of the following documents must be duly stamped? 

(a) Prospectus. 

(b) Memorandum of Association. 

(c) Article of Association. 

(d) Memorandum and Articles of Association.

Ans: (d) Memorandum and Articles of Association. 

INTEXT QUESTIONS 5.5 

1. What is meant by public sector Enterprise? 

Ans: It refers to economic and social activities undertaken by public authorities. 

2. State whether the following statements are TRUE or FALSE and correct the statements if needed. 

(a) The objective of private sector enterprises is welfare of the customers. 

Ans: False-The objective of public sector enterprises is welfare of the customer.

(b) The public sector enterprises are managed by professional managers. 

Ans: False- The public sector enterprises are managed by the Government. 

(c) The private sector enterprises concentrate on area of public utility services.

Ans: False – The public sector enterprises concentrate on area of public utility service. 

(d) The private sector enterprises are owned and managed by private individuals.

Ans: True.  

(e) The public enterprises are totally funded by the public.

Ans: False – The public enterprises are financed from government funds and sometimes through pubic issues.

INTEXT QUESTIONS 5.6 

1. List any three services that are being taken care of by Departmental Undertakings. 

Ans: (a) Railways. 

(b) Postal Services. 

(c) Broadcasting.  

2. Identify the following and categorise them into Departmental Undertakings, Statutory Corporations and Government Companies. 

(a) Business Organisation established by the government and controlled by the Ministry concerned.

Ans: Departmental undertaking.  

(b) Organisations incorporated under a special Act of Parliament or state legislature. 

Ans: Statutory corporation. 

(c) It is managed by the government and is subject to budgetary accounting and audit control.

Ans: Government company.

(d) Organisation established by the government and registered under the companies Act.

Ans: Government company.  

3. Identify the Merits and Limitations of the departmental undertakings. Put their number in the boxes given below. 

(a) The organisation fulfils the social and economic objectives of the government.

Ans: Merits. 

(b) Lack of flexibility, hence cannot take quick decision.

Ans: Limitations. 

(c) The possibility of misuse of funds is limited.

Ans: Merits. 

(d) The organisation suffers due to inefficient and incompetent staff. 

Ans: Limitations.

(e) The organisation is responsible to the public through the parliament.

Ans: Merits. 

INTEXT QUESTIONS 5.7 

1. State the features of statutory corporation mentioning its:

(a) Incorporation.

(b) Management.

Ans: It is incorporated under a special Act of Parliament or State Legislature. 

2. Rectify the errors (if any) in the following sentences and write the correct sentence in the specified space. 

(a) Statutory Corporations are autonomous organisations.

Ans: No Change.  

(b) Statutory Corporations are registered under the Companies Act. 

Ans: Statutory corporations are incorporated under special Act of Parliament or state assemblies. 

(c) Statutory Corporations are motivated by profit.

Ans: Statutory Corporation are not motivated by profit.  

(d) The internal management of the Statutory Corporations is controlled by the Government.

Ans: The internal management of the statutory corporation is free from government control.   

(e) The capital of Statutory Corporation is provided by private industrialists. 

Ans: The capital of statutory corporation is provided by the government. 

INTEXT QUESTIONS 5.8 

1. The main objectives of establishing a government company are to ensure: 

(a) Managerial Autonomy. 

(b) ……………………………. 

(c) ………………………………. 

Ans: (b) Operational efficiency. 

(c) Competition to private sector.

2. Classify the following statements as merit (M) or limitation (L) of Government Companies and put the respective numbers in the boxes given below: 

(a) Its formation is simple and it is governed by Companies Act, 1956. 

Ans: Merits.

(b) It creates healthy competition in private sector.

Ans: Merits. 

(c) The Government Companies make delay in taking timely decisions.

Ans: Limitations. 

(d) A change in Government leads to change in rules, policies and procedures of the Government Company.

Ans: Limitations. 

(e) It has financial and administrative autonomy.

Ans: Merits.

INTEXT QUESTIONS 5.9 

1. Enumerate the major goals achieved through public sector enterprises. 

(a) _______________________________.

(b) _______________________________. 

(c) _______________________________. 

(d) _______________________________. 

(e) _______________________________.

Ans: (a) Public welfare. 

(b) Planned economic development of the country. 

(c) Regional balance. 

(d) Import substitution. 

(e) Checking concentration of economic power.

2. (a) Expand the following: 

(i) BHEL.

Ans: BHEL- Bharat Heavy Electricals Limited. 

(ii) BPCL.

Ans: BPCL- Bharat Petroleum Corporation Limited. 

(iii) GAIL.

Ans: GAIL- Gas Authority of India Limited. 

(iv) HPCL.

Ans: HPCL- Hindustan Petroleum Corporation Limited.  

(v) IOC.

Ans: IOCL- Indian Oil Corporation Limited.  

(vi) MTNL.

Ans: MTNL- Mahanagar Telephone Nigam Limited. 

(vii) NTPC.

Ans: NTPC- National Thermal Power Corporation.  

(viii) ONGC.

Ans: ONGC- Oil and Natural Gas Corporation Ltd. 

(ix) SAIL.

Ans: SAIL- Steel Authority of India Limited.

TERMINAL EXERCISE

Very Short Answer Type Questions: 

1. In a Joint Stock Company what is meant by the term ‘share’?

Ans: A joint stock company is an organisation which is owned jointly by all its shareholders. A joint-stock company is a business owned by its investors, with each investor owning a share of the company based on the amount that they’ve invested. 

2. State the meaning of the term ‘Company’ as per the Companies Act 2013. 

Ans: Section 2 (20) of the Companies Act 2013 defines a “Company” as a company incorporated under this Act or under any previous company law. This definition does not clearly point out the meaning of a company. 

3. What is meant by multinational corporation? 

Ans: A multinational corporation (also termed as multinational company is one which is registered as a company in one country but carries on business in a number of other countries by setting up factories, branches or subsidiary units. Such a company may produce goods or arrange services in one or more countries and sell these in the same or other countries.

4. State the difference between a public company and a private company as far as the commencement of business is concerned. 

Ans: As per section 2 (68),” Private company” means a company having a minimum paid-up share capital of one lakh rupees or such paid-up capital as may be prescribed, and which by its articles.

5. How do you identify a public company and a private company just by seeing their names? 

Ans: In Public Ltd company, after the name of the company only Ltd is used. For Example XYZ Ltd. In case of Pvt Ltd company, Pvt Ltd is used.

6. What is meant by Public Private Partnership? 

Ans: Public Private Partnership means partnership between public sector and private sector in financing, designing and developing infrastructural facilities. In a PPP, the private sector may contribute money, expertise and technical knowhow. Infrastructures like power, transport, education, healthcare, waste management etc. are maintained through PPPs.

7. Name a form of organisation that is formed by combined efforts of two or more independent firms?

Ans: Joint venture is a form of business, where two or more independent firms contribute capital and participate in business operations, these two organisations may be private or government organisations or a foreign company.

8. Define Public Sector Enterprise. 

Ans: The term PSU or PSU Companies represents the group of Companies in India owned by the union government of India, or one of the many state or territorial governments, or both. In a PSU Company, the majority of the shares (51% or more) are owned by Central or State Government.

9. What is meant by Public Corporation? 

Ans: The Statutory Corporation (or Public Corporation) refers to such organisations which are incorporated under the special Acts of the Parliament/State Legislative Assemblies. Its management pattern, its powers and functions, the area of activity, rules and regulations for its employees and its relationship with government departments, etc.

10. State the meaning of Departmental Undertaking.

Ans: Departmental Undertakings are that form of organisation which is run as a department of the government and each such department is headed by a minister who is responsible to the Parliament and lays down the general policy for such department. 

11. What is a Government Company?

Ans: Company in which not less than 51% of the paid-up share capital is held by the central government, or by any State government or government, or partly by central government and partly by one or more state governments and includes a company which is a subsidiary company of such a government.” These companies are registered under Companies Act, 2013 and follow all those rules and regulations as are applicable for any other registered company.

12. Name any two important goals to be achieved through public enterprises.

Ans: The two important goals to be achieved through public enterprises:

(i) Social welfare.

(ii) Economic development.

Short Answer Type Questions