Business Studies 6 Marks Question

a. A banker's cheque is the most convenient and inexpensive medium of exchange and function of banks for the withdrawal of deposits. There are two types of cheques, mainly (a) bearer cheques, which are encashable immediately at bank counters and (b) crossed cheques which are to be deposited only in the payee's account.
b. A bank draft is a cheque provided on nominal commission charges to a customer of a bank or acquired from a bank for remittance purposes, that is drawn by the bank, and drawn on another bank or payable through or at a bank. Unlike a cheque, a draft is a pre-paid negotiable instrument, wherein the drawee bank acts as a guarantor to make payment in full when the instrument is presented.
c. Real-Time Gross Settlement are specialist funds transfer systems where the transfer of money or securities takes place from one bank to another on a 'real-time' and on a 'gross' basis. It does not require any physical exchange of money. Settlement in 'real- time' means a payment transaction is not subjected to any waiting period, with transactions being settled as soon as they are processed. 'Gross settlement' means the transaction is settled on a one-to-one basis without bundling or netting with any other transaction. 'Settlement' means that once processed, payments are final and irrevocable. RTGS systems are typically used for high-value transactions that require and receive immediate clearing.

a. The four merits of raising funds through equity shares are as follows:
i. The issue of equity shares does not create any fixed burden on the company as the payment of the dividend is not compulsory.
ii. Generally equity capital is to be repaid only at the time of liquidation of a company after settling the other claims. Therefore, it serves as a source of permanent capital for the company.
iii. Equity capital helps to build up creditworthiness of the company as it is the ow ner's fund. Thus, it becomes easier for the company to raise loans.
iv. Equity share capital constitutes the part of ow ner's fund. Hence, there is no need to provide any security of assets while raising it.
b. Ding Dong Ltd. can raise funds through international capital markets through global depository receipts (GDRs).
A global depository receipt (GDR) is a certificate issued by a depository bank, which purchases shares of foreign companies and deposits it on the account. In the Indian context, a GDR is an instrument issued abroad by an Indian company to raise funds in either U.S. dollars or euros. GDRs represent ownership of an underlying number of shares of a foreign company. Normally, one GDR is equal to ten underlying shares, but any ratio can be used. The market price of global depository receipts are based on the values of related shares, but they are traded and settled independently of the underlying share. GDRs are often listed in the Frankfurt Stock Exchange, Luxembourg Stock Exchange, and the London Stock Exchange.

a. The cooperative society is a voluntary association of persons, who join together with the motive of the welfare of the members.
b. Amul was promoted in the form of cooperative by a group of farmers who decided to bring an end to the exploitation of marginal milk producers by traders or agents of the only existing dairy, thereby gaining access to markets and maximizing returns for their efforts. The four merits of a cooperative society form of organization are described below:
i. Equality in Voting Status: Regardless of the amount of capital invested by a member, the principle of 'one man one vote' governs the cooperative society.
ii. Limited Liability: The liability of the members of the cooperative society is limited to the extent of capital invested by them. The personal assets of the members cannot be used to settle the claims of the business against outsiders.
iii. Stable Existence: The existence of a cooperative society is not affected by the death, insolvency or insanity of its members. Thus, it is a stable form of business organization
iv. Economy in Operations: The operations of a cooperative society are economical in nature. This is due to multiple factors like the members may work on an honorary basis, elimination of middlemen, etc.

Sole proprietorship refers to a form of business organisation which is owned, managed and controlled by an individual who is the recipient of all profits and bearer of all risks. This single individual has to supply capital owned or borrowed to the business. This form of organisation is also known as 'Sole Trader', 'Individual Proprietorship' or 'Individual Entrepreneurship'.
Benefits of Sole Proprietorship:
i. Ease of formation and dissolution: The sole proprietorship is the simplest form of business ownership. No legal formalities required for starting such firm.
ii. Quick decision making: A sole proprietor enjoys a considerable degree of freedom in making business decisions.
iii. Confidentiality of information: Sole decision-making authority enables the proprietor to keep all the information related to business operations confidential and maintain secrecy. A sole trader is also not bound by law to publish the firm's accounts.
iv. Direct Incentive: A sole proprietor enjoys all the profits of the business as there is no one else to share earnings of the business.
v. Sense of accomplishment: Sole proprietorship provides personal satisfaction to people who want to be self-employed. As the proprietor is himself responsible for the success of the business, it not only provides him satisfaction but also creates a sense of accomplishment and confidence.
Limitations of Sole Proprietorship:
i. Limited resources: Resources of a sole proprietor are limited to his/her personal savings and borrowings from others. He doesn't have enough security to acquire big loan.
ii. Limited life of a business concern: In the eyes of law, the proprietor and the owner are considered one and the same. Death, insolvency or illness of a proprietor affects the business and can lead to its closure. In most cases, the business collapses when the owner dies.
iii. Unlimited liability: A major disadvantage of the sole proprietorship is that the owner has unlimited liability. If the business fails, the creditors can recover their dues not only from the business assets but also from the personal assets of the proprietor.
iv. Limited managerial liability: The owner has to assume the responsibility of varied managerial tasks, such as purchasing, selling, financing etc. It is rare to find an individual who excels in all these areas.

Selling and sending goods and services from the home country to a foreign country is known as exporting while buying goods and services and bringing them into the home country from a foreign country is known as importing. The import and export of goods can be done either directly or indirectly. When the firm itself approaches the overseas buyers or sellers and performs all the formalities related to import and export of goods, it is referred to as direct importing or exporting. When the firm's participation in the import and export operations is minimum and most of the formalities are carried out by some middlemen, it is referred to as indirect exporting or importing. In this case, firms don't directly deal with overseas customers.
Advantages:
i. The easy way: It is the simplest way of gaining entry into international markets and does not involve any complex activity.
ii. Less investment: It does not require much of investment in foreign countries.
iii. Low risk: It does not carry much of the risks and requires less time.
Limitations:
i. Since the goods move from one country to another country, it involves, additional packaging, transportation, and insurance cost is incurred in transferring the goods which increases the cost of the product.
ii. Less knowledge of the foreign market. Basically, the export firms produce goods in the home country and send their goods to foreign countries. Hence, export firms do not have much contact with the foreign market.
iii. No longer feasible when import restrictions exist in a foreign country.

a. The two benefits available to the business firms engaged in leather export are as follows:
i. Prospects for higher profits for the business firms as they get an opportunity to sell their products in countries where prices are high.
ii. Increased capacity utilization may help the business firms to take advantage of economies of scale, which leads to a reduction in the production cost and increases per-unit profit margin.
b. The two ways in which different countries engaged in international trade of leather goods stand to gain are as follows:
i. Improving growth prospects and employment potentials as the scope of production activities increase.
ii. Increased standard of living as it provides access to the products with better technology from other countries.