HS1BS Unit 1: Nature and Purpose of Business
### **1. Introduction to Business**
**Q1.** What is the primary focus of business activities in modern societies?
(a) Providing charity
(b) Earning money by meeting people’s demands for goods and services
(c) Establishing political parties
(d) Promoting religious institutions
**Answer:** (b) Earning money by meeting people’s demands for goods and services
**Q2.** Which of the following institutions has a major influence on our daily lives?
(a) Schools
(b) Hospitals
(c) Religious bodies
(d) Business
**Answer:** (d) Business
### **2. Concept of Business**
**Q3.** The term ‘business’ is derived from which word?
(a) Trade
(b) Commerce
(c) Busy
(d) Profit
**Answer:** (c) Busy
**Q4.** What is considered an economic activity in business?
(a) Working out of love and affection
(b) Engaging in charity work
(c) Performing activities regularly with a view to earning profit
(d) Working as a volunteer
**Answer:** (c) Performing activities regularly with a view to earning profit
### **3. Characteristics of Business**
**Q5.** Which of the following is not considered a business activity?
(a) A teacher teaching in a school
(b) A doctor operating in his clinic
(c) A housewife cooking food for her family
(d) A manager working in an office
**Answer:** (c) A housewife cooking food for her family
**Q6.** Which characteristic of business refers to the uncertainty in the amount of money earned?
(a) Profit earning
(b) Production or procurement
(c) Sale or exchange of goods
(d) Uncertainty of return
**Answer:** (d) Uncertainty of return
**Q7.** Which of the following is an essential characteristic of business?
(a) Sale or exchange of goods and services
(b) Emotional satisfaction
(c) Irregular transactions
(d) Profit sharing with society
**Answer:** (a) Sale or exchange of goods and services
### **4. Comparison of Business, Profession, and Employment**
**Q8.** Which of the following is a profession, not a business?
(a) Running a restaurant
(b) Operating a factory
(c) Practicing law
(d) Opening a retail shop
**Answer:** (c) Practicing law
**Q9.** Employment is characterized by which of the following?
(a) Selling goods for profit
(b) Performing services for others in exchange for remuneration
(c) Being self-employed
(d) Engaging in professional services
**Answer:** (b) Performing services for others in exchange for remuneration
**Q10.** In which of the following does the individual work for others and receive a salary in return?
(a) Business
(b) Profession
(c) Employment
(d) None of the above
**Answer:** (c) Employment
### **5. Functions of Business**
**Q11.** Which function in business is concerned with mobilizing and utilizing funds?
(a) Production
(b) Marketing
(c) Financing
(d) Human resource management
**Answer:** (c) Financing
**Q12.** The process of converting raw materials into finished products falls under which business function?
(a) Financing
(b) Production
(c) Marketing
(d) Human resource management
**Answer:** (b) Production
**Q13.** Which function involves ensuring the availability of skilled workers to perform tasks?
(a) Marketing
(b) Financing
(c) Human resource management
(d) Production
**Answer:** (c) Human resource management
### 14. What is the primary purpose behind most business activities?
- (a) Helping society
- (b) Earning profit by meeting people’s demands
- (c) Promoting education
- (d) Supporting the government
- **Answer:** (b) Earning profit by meeting people’s demands
### 15. Which of the following is considered an economic activity?
- (a) A housewife cooking food for her family
- (b) A boy helping an old man cross the road
- (c) A doctor operating in his clinic
- (d) A teacher teaching her child at home
- **Answer:** (c) A doctor operating in his clinic
### 16. Which of the following is NOT a characteristic of business activities?
- (a) Economic activity
- (b) Uncertainty of return
- (c) Sentimental value
- (d) Profit earning
- **Answer:** (c) Sentimental value
### 17. The transformation of raw materials into finished goods occurs in which type of industry?
- (a) Primary industry
- (b) Tertiary industry
- (c) Extractive industry
- (d) Secondary industry
- **Answer:** (d) Secondary industry
### 18. Which of the following is NOT a type of primary industry?
- (a) Farming
- (b) Mining
- (c) Manufacturing
- (d) Fishing
- **Answer:** (c) Manufacturing
### 19. A business that assembles different component parts to make a new product is classified under which industry?
- (a) Analytical industry
- (b) Synthetical industry
- (c) Assembling industry
- (d) Processing industry
- **Answer:** (c) Assembling industry
### 20. Transport and banking are part of which category of business activity?
- (a) Industry
- (b) Commerce
- (c) Extractive industry
- (d) Retail trade
- **Answer:** (b) Commerce
### 21. The removal of time hindrances in business is facilitated by which of the following?
- (a) Warehousing
- (b) Advertising
- (c) Transport
- (d) Communication
- **Answer:** (a) Warehousing
### 22. What is the main objective of trade?
- (a) Promotion of goods
- (b) Financing industries
- (c) Buying and selling of goods
- (d) Advertisement of services
- **Answer:** (c) Buying and selling of goods
### 23. Which of the following is an example of external trade?
- (a) Selling goods within the same city
- (b) Exporting goods to another country
- (c) Wholesale trading within a country
- (d) Retail trading in the domestic market
- **Answer:** (b) Exporting goods to another country
### 24. Activities like transport, banking, insurance, and advertising are known as:
- (a) Primary activities
- (b) Tertiary activities
- (c) Auxiliaries to trade
- (d) Manufacturing activities
- **Answer:** (c) Auxiliaries to trade
### 25. What is the role of advertising in commerce?
- (a) Providing financial aid to traders
- (b) Storing goods for future sales
- (c) Informing consumers about available products
- (d) Transporting goods from one place to another
- **Answer:** (c) Informing consumers about available products
### 26. Which type of risk does insurance help to manage in business?
- (a) Market competition
- (b) Fire, theft, accidents
- (c) Capital funding
- (d) Employee training
- **Answer:** (b) Fire, theft, accidents
### 27. Innovation in business refers to:
- (a) The regular exchange of goods and services
- (b) Introduction of new ideas or methods in products or services
- (c) Removal of trade hindrances
- (d) Expansion of manufacturing units
- **Answer:** (b) Introduction of new ideas or methods in products or services
### 28. Which of the following is NOT an auxiliary to trade?
- (a) Insurance
- (b) Warehousing
- (c) Manufacturing
- (d) Transport
- **Answer:** (c) Manufacturing
### 29. What does the term "business risks" refer to?
a) Possibility of earning profits
b) Possibility of inadequate profits or losses due to uncertainties
c) Increase in customer demand
d) Reduction in production costs
**Answer:** b) Possibility of inadequate profits or losses due to uncertainties
### 30. Which of the following is NOT a cause of speculative risk?
a) Fluctuations in demand and supply
b) Fire hazards
c) Changes in prices
d) Changes in customer preferences
**Answer:** b) Fire hazards
### 31. Which of the following is an example of pure risk?
a) Changes in fashion trends
b) Rise in interest rates
c) Theft
d) Changes in government policies
**Answer:** c) Theft
### 32. Which statement best describes the relationship between risk and profit?
a) Profit is independent of risk
b) No risk leads to greater profits
c) Greater risk increases the chance of higher profit
d) Lower risk guarantees higher profit
**Answer:** c) Greater risk increases the chance of higher profit
### 33. Which of the following is a human cause of business risks?
a) Earthquake
b) Strikes
c) Riots
d) Tax increase
**Answer:** b) Strikes
### 34. What is the main factor that determines the amount of risk in a business?
a) Number of employees
b) Type and size of the business
c) Location of the business
d) Amount of taxes
**Answer:** b) Type and size of the business
### 35. What is an example of a natural cause of business risks?
a) Theft
b) Change in consumer tastes
c) Earthquake
d) Fluctuation in market prices
**Answer:** c) Earthquake
### 36. Which of the following is NOT a method of dealing with business risks?
a) Taking preventive measures
b) Avoiding insurance
c) Sharing risks with other enterprises
d) Making provisions for bad debts
**Answer:** b) Avoiding insurance
### 37. What is the first factor to consider when starting a business?
a) Financing the business
b) Selecting the line of business
c) Choosing the location
d) Deciding the plant layout
**Answer:** b) Selecting the line of business
### 38. Which of the following factors influences the choice of business ownership form?
a) Tax liability
b) Competency of employees
c) Capital requirements and legal formalities
d) Plant layout
**Answer:** c) Capital requirements and legal formalities
### 39. What is the significance of tax planning in a business?
a) It ensures profit maximization
b) It helps in deciding the location of the business
c) It influences various business decisions
d) It affects the hiring of the workforce
**Answer:** c) It influences various business decisions
### 40. Which of the following is necessary for launching an enterprise?
a) Ignoring tax laws
b) Mobilizing resources and fulfilling legal formalities
c) Avoiding market analysis
d) Delaying production plans
**Answer:** b) Mobilizing resources and fulfilling legal formalities
### 41. What does the degree of risk in business depend upon?
a) Type of goods sold and the number of employees
b) Size of the business and market competition
c) Type of goods/services and size of business
d) Total sales and advertising budget
**Answer:** c) Type of goods/services and size of business
### 42. Why is competent and committed workforce essential for a business?
a) To handle taxation issues
b) To convert physical and financial resources into outputs
c) To reduce the cost of production
d) To ensure low-risk business operations
**Answer:** b) To convert physical and financial resources into outputs
### 43. What must an entrepreneur consider when choosing the location for a new business?
a) Competitor's locations
b) Availability of raw materials, labor, and power supply
c) Interest rates on loans
d) Number of employees required
**Answer:** b) Availability of raw materials, labor, and power supply
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