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Question 11 Mark
Geeta Ram, an orange grower from Nagpur, wants to start a small juice producing factory using the oranges grown by him as well as by his fellow villagers. Name the financial institutions he should contact for obtaining loan for starting his factory.
Answer
National Bank for Agricultural and Rural Development (NABARD).
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Question 21 Mark
What is meant by 'collateral security'?
Answer
Collateral Security is the secondary security which is given along with the primary security by the borrower to the lender.
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Question 31 Mark
Rahul wants to start an amusement park near Vishakhapattanam. This will require an investment of Rs.50 lakhs. Name the financial institution which Rahul should approach for financing this venture.
Answer
Tourism Finance Corporation of India (TFCI).
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Question 41 Mark
Deepak Industries is a sugar manufacturing unit in U.P. Due to various reasons it started running into losses and was declared a sick unit by the State Confederation of Industries. It had assets and probability to revive if financial assistance could be made available.Name the financial organisation that can help Deepak Industries in this situation knowing well that it cannot furnish any collateral security against the loan sanctioned.
Answer
Industrial Investment Bank of India Ltd. (IIBI)
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Question 51 Mark
Name the specialized financial institution that was incorporated by a special Act of Parliament to provide medium and long term credit to eligible industrial enterprises in the corporate sector, particularly to those industries to which banking facilities are not available. Also state any one of its objectives, other than the one mentioned above.
Answer
Industrial Finance Corporation of India.
Objectives:
  1. The period of credit can be as long as 25 years and should not exceed that period.
  2. To grant credit to a single concern up to a maximum amount of rupees one crore. This limit can be exceeded with the permission of the government under certain circumstances.
  3. Guarantee loans and deferred payments.
  4. Underwrite and directly subscribe to shares and debentures issued by companies.
  5. Assist in setting up new projects as well as modernization of existing industrial concerns in medium and large scale sector.
  6. Assist project under co-operatives and in backward areas.
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Question 61 Mark
Internal sources are those sources of financing which are generated from within a business. Give any two examples of raising finance through this source.
Answer
Two examples of raising finance through this source are as follows:
  1. Equity shares
  2. Preference shares
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Question 71 Mark
In what forms, company can raise capital through primary market?
Answer
A company can raise capital through primary market from the following instruments:
  1. Public issue
  2. Rights issue
  3. Private placement
  4. Stock options
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Question 81 Mark
What do you understand by private placement?
Answer
Private placement means the direct sale by a company of its securities to a limited number of institutional investors like:
  1. Unit Trust of India.
  2. Army Group Insurance.
  3. State Level Financial Corporation.
  4. LIC, etc.
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Question 91 Mark
Why SFIs are referred to as development banks?
Answer
Specialised Financial Institutions (SFI) provide finance for investment in fixed assets, leading to the development of an enterprise. Therefore, they are referred to as 'development banks'.
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Question 101 Mark
Answer each of these questions in about fifteen words:
In what forms company can raise capital through primary market?
Answer
An entrepreneur can raise the required capital in the primary market by the following methods:
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Question 111 Mark
Answer each of these questions in about fifteen words:
What do you understand by private placement?
Answer
Private placement means the direct sale by a company of its securities to a limited number of sophisticated investors.
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Question 121 Mark
Which funds previously being administered by IDBI, are presently being administered by SIDBI?
Answer
The funds which are being presently administered by SIDBI are as follows:
  1. Small Industries Development Fund.
  2. Small Industries Development Assistance Fund.
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Question 131 Mark
Which among the two, viz angel investors and venture capital is a professionally managed pool of equity capital?
Answer
Venture capital is a professionally managed pool of equity capital.
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Question 141 Mark
Name the institution which owned an asset but allowed to be used by industrial concerns for a consideration called lease Rent.
Answer
ICICI.
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Question 161 Mark
How will you differentiate between financial market with other market? Give one difference.
Answer
Financial market facilitates in raising funds for the business. Market in general sense facilitates the interaction between buyers and sellers.
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Question 171 Mark
Answer each of these questions in about fifteen words:
State three functions of SEBI rolled into one body.
Answer
SEBI has three functions rolled into one body: quasi-legislative, quasi-judicial and quasi-executive.
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Question 181 Mark
Name the method which enables employees to become shareholders and share the profits of the company.
Answer
Employees Stock Option Scheme (ESOS).
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Question 191 Mark
Which financial institution was established to provide lending to new and existing small scale enterprises?
Answer
Small Industry Development Bank of India (SIDBI) was established to provide lending to new and existing small scale enterprises.
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Question 201 Mark
What is the time frame in which venture capitalists seek an exit from a business?
Answer
Venture capitalists look for an exit in the time frame of typically 3-7 years.
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Question 211 Mark
What is the need of secondary market?
Answer
Secondary market is needed because, it enhances the marketability of securities, thereby providing liquidity to the investors.
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Question 221 Mark
Name one of the financial institutions guaranteeing loans raised by industrial concerns which are repayable within a period not exceeding 25 years.
Answer
Industrial Finance Corporation of India (IFCI) .
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Question 231 Mark
Name one financial institution which extends seed capital/ loan assistance under the National Equity Fund, Mahila Udyan Nidhi and Mahila Vikas Nidhi.
Answer
Industrial Finance Corporation of India (IFCI).
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Question 241 Mark
Name the most important pre-requisite to start an enterprise.
Answer
Finance is the most important pre-requisite to start an enterprise.
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Question 251 Mark
State three functions of SEBI rolled into one body.
Answer
The three functions performed by SEBI are as follows:
  1. Quasi-Legislative
  2. Quasi-Executive
  3. Quasi-Judicial
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Question 261 Mark
Humorously, they were once given the acronym FFF for Angel Investors! What is FFF stands for?
Answer
Acronym FFF stands for Friends, family and Fools.
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Question 271 Mark
Name one financial institution which was set up by IDBI at the instance of the Government of India in April 1971 for rehabilitation of sick industrial companies.
Answer
Industrial Investment Bank of India Ltd. (IIBI): was set up by IDBI at the instance of the Government of India is in April 1971 for rehabilitation of sick industrial companies.
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Question 291 Mark
What is meant by seed capital?
Answer
Seed capital is provided to the entrepreneur for internal product development or to prove the feasibility of a project.
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Question 301 Mark
Answer each of these questions in about fifteen words:
State the most important factors for the survival of any business enterprise.
Answer
Financing, ‘production’, ‘marketing’ are deemed to be the most important factors for any business survival. Financing is considered to be the first because nothing can be done without money.
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Question 311 Mark
Answer each of these questions in about fifteen words:
What is meant by Stock options or offering shares to the employees?
Answer
A stock option is granted to specified employees of a company. ESOs carry the right, but not the obligation, to buy a certain amount of shares in the company at a predetermined price.
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Question 321 Mark
Explain the need and importance of Specialised Financial Institutions in India.
Answer
Following points bring forward the need and importance of Specialised Financial Institutions in India:
  1. Provision of sufficient long-term funds in the desired sectors.
  2. Facilitating new and small entrepreneurs in setting up industrial units.
  3. Development of small scale industry and projects in backward areas.
  4. Provision of technical and managerial advice to the entrepreneurs.
  5. Underwriting and directly subscribing for shares and debentures.
  6. Fulfilling capital requirements of industries with a long gestation period.
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Question 331 Mark
Identify the method of raising additional finance from existing shareholders by offering securities to them on pro-rata basis.
Answer
Rights issue.
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Question 341 Mark
Answer each of these questions in about fifteen words:
Name the most important pre-requisite to start an enterprise.
Answer
Finance is the most important prerequisite to start an enterprise.
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Question 351 Mark
Answer each of these questions in about fifteen words:
"Humorously, they were once given the acronym FFF for Angel Investors". What is FFF stands for.
Answer
Friends, Family and Fools.
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Question 361 Mark
What do you understand by pro-rata allotment of securities?
Answer
Pro-rata allotment or proportionate allotment means giving a certain number of shares to shareholders in proportion to the shares they are holding.
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Question 371 Mark
What do you mean by lease rent?
Answer
When assets are owned by ICICI but allowed to be used by industrial concerns for a consideration is called lease rent.
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Question 381 Mark
Name two National Stock Exchanges.
Answer
NSE (National Stock Exchange of India) and OTCEI (Over the Counter Exchange of India).
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Question 391 Mark
Answer each of these questions in about fifteen words:
What do you understand by finance?
Answer
‘Finance’ refers to funds or monetary resources needed by individuals, business houses and the government.
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Question 401 Mark
Though IDBI was set-up as a wholly owned subsidiary of RBI, but it was made autonomous corporation in 1976. Why?
Answer
Industrial Development Bank of India (IDBI) was set-up in July 1964, as a wholly owned subsidiary of the Reserve Bank of India. It was given independent status in 1976 and was made an autonomous corporation. The objective behind this move was to allow RBI to concentrate on its central banking functions and allow IDBI to fulfill its development functions.
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Question 411 Mark
What is SEBI?
Answer
The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India. It was established on 12th April, 1992, through the SEBI Act, 1992.
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Question 421 Mark
Answer each of these questions in about fifteen words:
Define capital market.
Answer
A capital market may be defined as an organized mechanism meant for effective and smooth transfer of money capital or financial resources from the investors to the entrepreneurs.
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Question 431 Mark
Name one of the financial institutions guaranteeing loans raised by Industrial concerns which are repayable within a period not exceeding 20 years.
Answer
State Financial Corporations (SFCs) guaranteeing loans raised by industrial concerns which are repayable within a period not exceeding 20 years.
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Question 441 Mark
Answer each of these questions in about fifteen words:
When was SIDBI established?
Answer
SIDBI was established in April 1990, as a wholly owned subsidiary of IDBI, under the Small Industries Development Bank of India Act, 1990.
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Question 451 Mark
For what purpose the productive capital is raised?
Answer
Productive capital is raised and made available for industrial purposes.
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Question 461 Mark
Angel investors generally invest in a business involving low-risk and high return is the above statement true?
Answer
No, the above statement is not true because angle investors generally invest in business having high risk and high return.
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Question 471 Mark
Name the stock exchanges where most of the stock trading in India is done.
Answer
Most of the stock trading in India is done on Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
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Question 481 Mark
When the right issue are proposed to the existing shareholders and if they are not ready to subscribe, what is the next step taken by an entrepreneur?
Answer
In case the existing shareholders are not willing to subscribe, then they can renounce their right in favour of another person.
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Question 491 Mark
Identify the reward IPO investors seek as an appreciation of their investment.
Answer
The only reward the IPO investors seek is an appreciation of their investment and possibly dividends.
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Question 501 Mark
What do you mean by capital market?
Answer
A capital market may be defined as an organized mechanism meant for effective and smooth transfer of money capital or financial resources from the investors to the entrepreneurs.
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1 Marks Question - Entrepreneurship STD 12 Commerce Questions - Vidyadip