CBSE NCERT Class XI (11th) | Business Studies

Chapter 4 - Business Services

Multiple choice questions : Solutions of Questions on Page Number : 108
Q1 :  
DTH services are provided by ____________________.
(a) Transport companies
(b) Banks
(c) Cellular companies
(d) None of the above

Answer :
Direct-to-home (DTH) services are provided by cellular companies to transmit media-related services to their customers. They use satellites for transmitting information to enable their customers to watch multiple television channels of their choice by installing a small dish antenna and a set-top box.
Hence, the correct answer is option (c).

Short answerslong answersmultiple choice questions : Solutions of Questions on Page Number : 109
Q1 :  
Define services and goods?

Answer :
Services are intangible activities that require personal interaction between the consumer (purchaser of the service) and the service provider (seller of the service) at the time of delivery. The services need not involve any production or sale of goods. Generally, services are classified into the following two categories.
(a) Business services: These include banking, insurance and warehousing services.
(b) Professional services: These include legal services, medical advice and tax consultancy.
In contrast to services, the term 'goods' refers to physical and tangible objects whose ownership gets transferred to the buyers as soon as he or she purchases these objects. Examples of goods are televisions, radios and shoes.
Q2 :  
What are services? Explain their distinct characteristics?

Answer :
Services are intangible economic activities that require personal interaction between the consumer and the service provider at the time of delivery of the services. Services need not involve any kind of production or sale of goods and are mainly provided in order to satisfy individuals' wants. Services are generally classified into business services (including banking, insurance and warehousing) and professional services (including legal services, medical advice and tax consultancy).
Features of services are as follows:
(i) Intangible: Services are intangible as they cannot be seen or touched. One can only experience them. This implies that the quality of services cannot be checked before their use. Thus, it becomes imperative for service providers to offer services to the satisfaction of the individuals concerned.
(ii) Inseparable: Services have to be produced and used simultaneously. Unlike goods, which are produced today for sale later, services have to be used at the same time as they are made available.
(iii) Inconsistent: No standards can be set for services; they have to be provided each time according to the demand and expectations of the service users. As each service user has different tastes and preferences, the type and quality of services provided differ according to the user.
(iv) Involvement: The involvement of the service user and the service provider is a prerequisite at the time of delivery of the services. For instance, in a school, the teacher and the students are actively involved in the exchange of the service of imparting knowledge.
(v) Inventory: Services cannot be stored for sale at a future date. They need to be provided as and when the service users ask for them. This is because if services are not consumed immediately then they lose its value.
Q3 :  
The benefits of public warehousing include __________.
(a) Control
(b) Flexibility
(c) Dealer relationship
(d) None of the above

Answer :
Public warehouses provide a high degree of flexibility to its agents in the following aspects.
• Storage of goods: Goods can be stored as per the convenience and preferred locations of the agents.
• Negligible fixed costs: The agents need to incur only negligible fixed costs to store their goods.
• Safety: Safety is ensured, and the risk of loss by theft is minimal.
• Other benefits: Other benefits include facilities such as packaging and labelling.
Hence, the correct answer is option (b).
Q4 :  
What is e-banking? What are the advantages of e-banking?

Answer :
e-banking refers to the use of the electronic medium for conducting various banking operations such as transferring money, checking accounts and applying for loans. These services are provided by commercial banks to make it easy for their accountholders to conduct banking transactions online from anywhere and at any time.
The following are a few advantages of e-banking.
(i) 24 x 7 availability: e-banking is available round the clock and throughout the year. A customer can access his or her own bank account and conduct banking transactions online at any time. This provides greater flexibility and a high degree of comfort to bank customers as they need not to visit their banks in person.
(ii) Easy access: Transactions can be made as and when required on mobile phones and through computers.
(iii) Reduced load on banks: e-banking reduces the workload on banks as a significant portion of functions can be carried out electronically.
Q5 :  
Explain the functions of commercial banks with an example of each.

Answer :
The following functions are performed by commercial banks:
(i) Collection of deposits: Banks accept various types of deposits from the public such as savings account deposit, current account deposit and fixed account deposit, and pay interest on them. They are indebted to repay the depositor the amount deposited by him or her.
(ii) Lending of funds: Banks grant loans and advances on the basis of the total deposits available with them. These advances can be in the form of overdrafts, discounted trade bills, cash or consumer credits, etc. The interest charged on these loans is a major source of profits for banks.
(iii) Extension of cheque facility: Cheques drawn on other banks are also collected by banks, and thus they act as a clearing house. Cheques are mainly of two types—bearer cheques (encashable immediately at bank counters) and crossed cheques (only deposited in the payees' accounts).
(iv) Remittance of funds: Banks help in transferring the funds of customers from one place to another. These transfers can be done in the form of bank drafts and pay orders at nominal commission charges.
(v) Provision of allied services: In addition to other functions, banks also provide services such as locker facility, underwriting services and bill payments. They also perform functions such as buying and selling of shares and debentures on behalf of their customers.
Q6 :  
Which of the following is not a function of insurance?
(a) Risk sharing
(b) Assist in capital formation
(c) Lending of funds
(d) None of these

Answer :
Insurance is a contractual policy through which an individual gets financial protection by spreading the risks or losses that may be caused by the occurrence of unpredictable events. It gives individuals an assurance that a certain sum of money will be given to them in case of any damage to the insured goods. In return for this assurance, the insured makes a regular payment (monthly, quarterly or yearly) to the insurer, which is termed premium. Thus, insurance helps in pooling financial resources and assists in capital formation.
Insurance does not involve lending of funds; lending is a function of commercial banks. Insurance is also not risk sharing, as the risk associated with the occurrence of unpredictable events is not shared, but rather spread out.
Hence, the correct answer is option (b).
Q7 :  
Write a note on various telecom services available for enhancing business?

Answer :
The following are the various types of telecom services that enable a business to carry out its operations efficiently.
(i) Cellular mobile service: It include voice and non-voice transmission services and data transmission services.
(ii) Radio paging service: It is a one-way communication service by which information is transmitted in the form of a tone or numeric or alphanumeric message.
(iii) Fixed-line service: Under this kind, fiber optic cables are laid across the country for transmitting information including both voice and non-voice messages.
(iv) Cable service: This service is used to transmit media-related information to a defined area of operation for which a licence has been acquired. In this type of telecom service, the flow of information is one way.
(v) VSAT service: The abbreviation 'VSAT' stands for 'very small aperture terminal'—it is a satellite-based communication service through which information can be transmitted to far-flung and remote areas. Therefore, it provides a wider reach and high degree of flexibility to businesses.
(vi) DTH service: The abbreviation 'DTH' stands for direct-to-home—DTH service is a type of telecom service provided by DTH companies. The companies transmit TV channels to customers through satellites. The customers can watch multiple channels by installing a small dish antenna and a set-top box connected to their television set.
Q8 :  
Write a detailed note on various facilities offered by Indian Postal Department.

Answer :
The Indian Postal Department provides the following types of facilities.
Financial facilities: Post offices provide a variety of savings facilities to the public. Some of these schemes are mentioned below:
(i) Public Provident Fund (PPF)
(ii) Kisan Vikas Patra
(iii) National Saving Certificate (NSC)
(iv) Recurring Deposit Scheme
(v) Fixed Deposit Scheme
(vi) Money order facility
Mail facilities: Mail facilities primarily include the following three kinds of services:
(i)Parcel facilities: They facilitate the movement of an article from one place to another.
(ii) Registration facilities: They provide security to the article being transmitted.
(iii) Insurance facilities: They cover the risks involved in transmission by post.
Some of the mail facilities provided by the banks are as follows:
(i) Post cards: It is the cheapest form of postal service.
(ii) Letter: It ensures the secrecy of the information conveyed, and is placed in an envelope.
(iii) Registered post: Registered post ensures that the mail registered is delivered to the addressee or returned to the sender if it is not delivered.
Allied facilities: Post offices also provide a variety of allied services to customers.
(i) Passport service: Post offices accept passport applications on behalf of the Ministry of External Affairs.
(ii) Media Post: These include aerograms and letters through which the corporate companies can advertise their brands.
(iii) Direct Post: These include brochures, questionnaires, pamphlets and CDs/floppies through which addressed as well as unaddressed advertisement can be delivered.
(iv) Speed Post: It involves fast and speedy transfer of articles to the addressees within a specified period.
Q9 :  
Which of the following is not applicable in life insurance contract?
(a) Conditional contract
(b) Unilateral contract
(c) Indemnity contract
(d) None of the above

Answer :
In a life insurance contract, the insurer pays a fixed sum of money to the insured or the insured's beneficiaries either at the time of his or her death or on the maturity of the contract, whichever comes earlier. This implies that an indemnity contract is not applicable in the case of life insurance. This is because, in an indemnity contract, the insured is paid only the actual amount of the loss and not an assured sum. However, in the case of a life insurance contract, the insured or his beneficiaries are paid an assured sum of money in the event of death of the insured or on the maturity of the contract.
Hence, the correct answer is option (c).
Q10 :  
Explain briefly the principles of insurance with suitable examples?

Answer :
The following are the principles of insurance on which insurance contracts are based.
(i) Utmost good faith: Both the insurer and the insured should have faith in each other and in the contract signed by them.
Example: Rahul, if he is a heart patient, should inform his insurance company about his health issues while buying a life insurance policy.
(ii) Insurable interest: It implies that the insured must have some interest vested in the object which is being insured by him.
Example: A businessperson has an insurable interest in his or her land, house and other properties.
(iii) Indemnity: According to the principle of indemnity, the purpose of an insurance contract is to bring back the insured to the same financial position as he or she was before the loss occurred to him or her (because of a mishap).
Example: If an individual suffers a loss of Rs. 1 lakh in a fire accident, then the insurance company will accept a claim up to Rs. 1 lakh and not more.
(iv) Proximate cause: The proximate cause principle states that the reason for a loss or damage to the insured object should be related to the subject matter of the contract.
Example: If an individual suffers a loss in a fire accident, then this should already be a part of the contract in order for this person to claim the insurance amount.
(v) Subrogation: Once the compensation is paid, the right of ownership of the damaged property passes on to the insurer, so that the insured cannot sell the damaged property to make profits.
Example: If a person receives Rs. 1 lakh for his or her damaged stock, then the ownership of the stock will be transferred to the insurance company and the person will hold no control over the stock.
(vi) Contribution: If an individual buys more than one insurance policy for the same object, then the insurers will contribute in order to compensate insured for the actual amount of loss.
Example: If a person A insures his or her house for Rs. 2 lakh with insurer B and for Rs. 1 lakh with another insurer, say, C, then, in case of a loss of Rs .90,000, insurer B and insurer C will together pay A Rs. 90,000 and not more.
(vii) Mitigation: The insured should take care of the insured object in the same way as he or she would have in the absence of the insurance.
Example: If a person has insured his house against fire, then, in case of fire, he or she should take all possible measures to minimise the damage to the property exactly in the manner he or she would have done in absence of the insurance.
Q11 :  
Describe various types of insurance and examine the nature of risks protected by each type of insurance.

Answer :
Insurance can be classified into the following three types:
(i) Life Insurance
(ii) Fire Insurance
(iii) Marine Insurance
Life Insurance
Life insurance is a contract between the insurer and the insured in which the insurer agrees to pay a certain pre-specified amount to the insured on the occurrence of death of the assured or on maturity of the insurance contract, whichever comes earlier. That is, in case the insured dies before the maturity of the contract, his or her family is given the assured amount. However, if the insured survives till the maturity of the contract, then he or she is given the specified sum of money. In return for this assurance, the insured pays a fixed amount as premium to the insurer. The need for a life insurance policy arises because of the uncertainties of life.
Thus, life insurance policies protect us from the following two types of risks:
(a) Risk of dying too early
(b) Risk of dying too late
Fire Insurance
Insurance contracts that protect the insured against the loss or damage caused by fire during a given period are called fire insurance contracts. Under a fire insurance contract, the insurer agrees to compensate the insured for the loss or damage to the insured property caused by fire, against a payment of a fixed premium. The maximum compensation which the insurer is liable to pay is pre-specified in the contact, along with the conditions under which the contract is enforceable.
Marine Insurance
A marine insurance contract protects the owner of a ship or cargo against complete or partial loss or damage caused to the ship or cargo at sea. It provides protection against the perils of the sea such as collision of the ship with a rock, attack on the ship by enemies and pirates, and damage caused by fire. The insured pays a certain amount as premium to the insurer.
Q12 :  
CWC stands for________________.
(a) Central Water Commission
(b) Central Warehousing Commission
(c) Central Warehousing Corporation
(d) Central Water Corporation

Answer :
The abbreviation 'CWC' stands for the Central Warehousing Corporation. It is a government organisation that manages and operates the warehouses owned by the government.
Hence, the correct answer is option (c).
Q13 :  
Explain warehousing and its functions?

Answer :
Warehousing involves storing goods in a scientific and organised manner to maintain their value and quality. Warehouses not only provide storage services but also logistical services by providing the right place for the right quantity at the right time and at the right cost.
The following are some of the functions performed by warehouses.
(i) Storage: Warehouses facilitate the storage of goods and raw materials that are not required immediately for sale or for manufacturing, and protect them from spoilage or damage.
(ii) Value-added services: They perform value-added services, such as grading the quality of products, packaging and labelling, for producers.
(iii) Financing: The owner of the goods or raw materials stored in a warehouse can use the warehouse receipt as a security for borrowing money from banks or other financial institutions.
Q14 :  
Explain in detail the warehousing services.

Answer :
Warehousing involves storing goods in a scientific and organised manner to maintain their value and quality for a longer period of time. The place where goods are stored is known as a warehouse. Warehouses not only provide storage services but also logistical services by providing the right place for the right quantity at the right time at the right cost.
The following are some of the functions performed by warehouses:
(i) Consolidation: The foremost function of a warehouse is to pool the goods or raw materials from different plants and dispatch them at the same time to different customers in one shipment. This reduces the time and cost of shipment.
(ii) Bulk breaking: Warehouses often receive goods or materials in bulk from production plants. These bulk quantities are then divided into smaller quantities, which are later delivered to different customers according to their requirement.
(iii) Stockpiling: It is the most important function performed by a warehouse as it facilitates the storage of goods and raw material that are not required for immediate sale or manufacturing. It also ensures that the goods are protected from any spoilage or damage caused by sun, rain, pests, theft, fire, etc.
( iv) Price stabilisation: In situations of varying demand and supply of goods, warehouses help in stabilising the prices of goods. That is, in the case of excess supply, warehouses store the excess quantity. This prevents the prices from falling and helps in price stabilisation. Similarly, in times of scarcity, goods can be released from warehouses to control a rise in prices.
(v) Value-added services: Warehouses perform value-added services for producers such as grading the quality of goods, packaging and labelling, in case stored packages are opened by buyers for inspection.

(vi) Financing: The owner of the goods or raw materials stored in a warehouse can use the warehouse receipt as security for borrowing money from banks or other financial institutions.

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