Find the odd one. | Aster Classes


Chapter 5: Emerging Modes of Business

Select the correct option and rewrite the sentence.

1.For Online transactions____________ is required.

registration

trading

business

Solution: 

For online transactions, registration is required.

The term ‘e-business’ is derived from the term ___________ and e-commerce.

Cash

e-pay

e-mail

Solution: 

The term ‘e-business’ is derived from the term e-mail and e-commerce.

The transactions under ____________ are between consumers and consumers.

B2B

C2C

B2C

Solution: 

The transactions under C2C are between consumers and consumers.

The process of contracting a business function to someone else is called as ____________.

outsourcing

trading

e-business

Solution: 

The process of contracting a business function to someone else is called outsourcing.

In online shopping customers put the product in the ____________.

shopping mall

shopping cart

shopping bag

Solution: 

In online shopping, customers put the product in the shopping cart.

Match the pairs:

Group ‘A’Group ‘B’
A) E-business1) Consumer to consumer
B) B2C2) Exist everywhere
C) Outsourcing3) First step
D) Digital cash4) Business to Consumer
E) Registration5) Electronic business
 6) BPO
 7) RTO
 8) Efficient business
 9) exist only in cyberspace
 10) Last step

Solution: 

Group ‘A’Group ‘B’
A) E-business5) Electronic business
B) B2C4) Business to Consumer
C) Outsourcing6) BPO
D) Digital cash9) exist only in cyberspace
E) Registration3) First step

Give one word/term/phrase for the following sentence.

The stage where the goods bought are delivered to the customer.

Solution: 

The stage where the goods bought are delivered to the customer. – Delivery stage

The term derived from the terms of e-mail and e-commerce.

Solution: 

The term derived from the terms of e-mail and e-commerce. – e-business

The transaction which is done with the help of the internet.

Solution: 

The transaction which is done with the help of the internet.- online transactions

The first step in an online transaction.

Solution: 

The first step in an online transaction. – Registration

The process of contracting a business function to specialized agencies.

Solution: 

The process of contracting a business function to specialized agencies. – outsourcing

A subset of outsourcing.

Solution: 

A subset of outsourcing. – BPO

Sub-segment of BPO

Solution: 

A subset of outsourcing.- BPO

One of the value-added BPO service which involves legal work.

Solution: 

One of the value-added BPO service which involves legal work. – LPO

State with reasons whether the following statement true or false.

It is easy to set up e-business as compared to traditional business.

True 

False 

The term e-business is derived from the term e-mail and e-commerce.

True

False

 e-business allows you to work across the globe in any field.

True

False

LPO stands for legal product outsourcing.

True

False

KPO requires advanced analytical and technical skills.

True

False

Find the odd one.

BPO

RTO

LPO

KPO


B2B

B2C

A2Z

C2C


Debit card

Credit card

Aadhar card

ATM card

Complete the sentence.

E-business is an abbreviation for____________.

Solution: 

E-business is an abbreviation for electronic business.

The term e-business came into existence in the year __________.

Solution: 

The term e-business came into existence in the year 1997 .

E-business means using the ___________ to connect people and process.

Solution: 

E-business means using the Internet to connect people and process.

E-business is ___________ of e-commerce.

Solution: 

E-business is Superset of e-commerce.

E-commerce is ________ of e-business.

Solution: 

E-commerce is a Subset of e-business.

The process of contracting a business function to specialized agencies is known as _____________.

Solution: 

The process of contracting a business function to specialized agencies is known as Outsourcing.

Select the correct option and complete the table.

(Business to Business, First step, e-commerce, payment mechanism, e-business)

 Group AGroupB
A)Registration____________
B)Superset of e-commerce____________
C)____________Last step
D)Subset of E-business____________
E)____________B2B
Group AGroupB
A)RegistrationFirst step
B)Superset of e-commerceE-business
C)Payment mechanismLast step
D)Subset of E-businessE-commerce
E) Business to BusinessB2B

Answer in one sentence.

What is E-business?

Solution: 

E-business means using the internet to connect people and process. E-business establishes more closer and responsive relationship with partners, employees, and suppliers.

What is outsourcing?

Solution: 

Outsourcing is the process of contracting a business function or any specific business activity to specialized agencies mostly the non-core areas such as sanitation, security, household pantry, etc. are outsourced by the company. The company makes a formal agreement with the agency.

What is Online Transaction?

Solution: 

Online transaction is done with the help of the internet. It can’t take place without a proper internet connection. Online transactions occur when a process of buying and selling takes place through the internet.

What is a shopping cart?

Solution: 

The shopping cart gives a record of all the items selected by the buyer to be purchased, the number of units or quantity desired to be bought per item selected, and the price for each item.

What is digital cash?

Solution: 

Digital Cash is a form of electronic currency that exists only in cyberspace and has no real physical properties, but offers the ability to use real currency in an electronic format.

What is BPO?

Solution: 

Business process outsourcing or BPO is a business practice in which one organization hires another company to perform a task (process) that the hiring organization requires to operate its own business successfully.

What is KPO?

Solution: 

KPO is the sub-segment of BPO, in which the outsource service provider is hired not only for its capacity to perform a particular business process or function but also to provide expertise around it.

What is LPO?

Solution: 

LPO is a type of KPO that is specific to legal services, ranging from drafting legal documents, performing legal research to offering advice.

Correct the underlined word and rewrite the following sentence.

E-business is hard to start.

Solution: 

E-business is easy to start.

There are five stages of online transactions.

Solution: 

There are three stages of online transactions.

Registration is the Last step in online transactions.

Solution: 

Registration is the first step in online transactions.

Digital cash is a form of plastic currency.

Solution: 

Digital cash is a form of Electronic currency.

KPO includes less knowledge-based and specialized work.

Solution: 

KPO includes more knowledge-based and specialized work.

Arrange in proper order.

Purchase or sale / Delivery stage / Pre-purchase or sale.

Solution: 

Pre-purchase /sale ,Purchase/sale,Delivery stage

Placing orders, Cash on delivery, Registration

Solution: 

Registration, Placing an order, Cash on delivery

Explain the following term/concept.

E-business

Solution: 

The term ‘E-business’ i.e electronic business is derived from the terms of e-mail and e-commerce.

E-business or electronic business is the administration of conducting business via the internet.

This would include the buying and selling of goods or services, along with providing technical or customer support through the internet.

B2B

Solution: 

B2C transactions have business firms at one end and its customers on the other end.

The transactions under B2C are between business firms and consumers. Firms use their sites for a range of marketing activities.

B2C

Solution: 

B2C transactions have business firms at one end and its customers on the other end.

The transactions under B2C are between business firms and consumers. Firms use their sites for a range of marketing activities.

C2C

Solution: 

Consumer to consumer (C2C) involves the electronically facilitated transactions between consumers through some third party. Common consumers post an item for sale and other consumers bid to purchase it. The sites are only intermediaries, just to match the consumers.

Outsourcing

Solution: 

Outsourcing is the process of contracting some business functions to specialized agencies. The company benefits in two ways.

1. It reduces its own cost

2. It uses the expertise of the firm which specializes in a particular kind of service.

BPO

Solution: 

BPO is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider. BPO refers to the outsourcing of peripheral activities of the organization to an external organization to minimize cost and increase efficiency.

LPO

Solution: 

LPO is a type of KPO that is specific to legal services, ranging from drafting legal documents, performing legal research to offering advice. LPO refers to the practice of a law firm or corporation obtaining legal support services from an outside law firm or legal support services company. LPO is a high-end industry that has been growing rapidly in recent years.

KPO

Solution: 

KPO is the sub-segment of BPO, in which the outsource service provider is hired not only for its capacity to perform a particular business process or function but also to provide expertise around it.

KPO is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization. Which may be in the same country or in an off share location to save cost.

Study the following case/situation and express your opinion.

Abhay purchases some gift articles online from www.flipkart.com. At the same time, Sheetal purchased a gift from e-bay.com.

i. Which website is related to C2C?

ii. Which website is related to B2C?

iii. What first step does Abhay need to follow?

Solution: 

eBay.com website is related to Consumer to Consumer (C2C).

www.flipkart.com website is related to Business to Consumer (B2C).

Before online shopping. Abhay has to register with the www.flipkart.com by filling up a registration form. Registration is the first step in online transactions. Abhay needs to login a particular website to buy particular gift articles.

Satvik purchases a watch from Titan shop and his friend Shambhavi purchases a watch from online shopping sites.

i. Which shopping is from a traditional business?

ii. Which shopping is from e-business?

iii. Which business involved high risk?

Solution: 

The purchase of a watch by Satvik from Titan shop is an example of traditional business.

The purchase of a watch by Shambhavi from an online shopping site is an example of e-business.

e-business i.e. purchase of a watch from online shopping sites involves high risk as there is no direct contact between Shambhavi and the e-business owners.

Mr. Ved made his payment by cheque at the same time Mr. Shlok made his payment by fund transfer.

i. Whose payment is faster?

ii. Whose payment is related to traditional business?

iii. Whose payment is related to e-business?

Solution:

The payment made by Mr. Shlok by fund transfer is faster than the payment made by Mr. Ved through cheque.

The payment made by Mr. Ved by cheque is related to traditional business.

The payment made by Mr. Shlok by fund transfer is related to e-business.

Distinguish between.

Traditional business and E-business.

Traditional businessE-Business
1.Formation A traditional business takes a lengthy and complicated procedure to formE-Business is easy to form
2. Setting up cost It takes huge capital in order to setup.It takes a very nominal cost
3. Risk involved Less Risk involved as parties have personal interaction.High risk involved as there is no direct contact between the parties
4. Scope of business Traditional business is limited to a particular area so the scope is limited.E-business covers the entire world and so the scope is vast
5. Customer interaction Face to face interaction is possibleIn E-business, there is an absence of face to face interaction.
6. Physical inception Goods can be inspected physically before purchaseGoods cannot be inspected physically before purchase
7.Resources focus Traditional business resources focus on supply-sideE-business resources focus on demand-side
8.Delivery of goods In traditional business delivery of goods is instant.In E-business delivery of goods takes time
9.Usage It is ancient and still in usage where the digital network is not reachable.It is used to save valuable time and money
10.Accessibility It is available during the limited timeIt is available round the clock
11. Scope It is difficult to perform more business in this model.More business can be done easily without any hassles

E-business and E-commerce

E-businessE-commerce
1. Meaning: E-business is the conduct of business processes on the internet‘E-commerce involves commercial transactions done over the internet
2. What is it? E-business is a superset of E-commerceE-commerce is a subset of E-business
3. Features: E-business includes all kinds of resale and post-sale efforts.E-commerce just involves buying and selling of products and services
4. Concept: It is a broader concept that involves market surveying, supply chain, and logistic management and using data miningE-commerce is a narrower concept and restricted to buying and selling
5. Transaction: It is used in the context of B2B transactionsIt is more appropriate in the B2C context
6. Which network is using: E-business can involve the use of internet intranet or extranetE-commerce involves the mandatory use of internet

BPO and KPO

BPOKPO
1. Meaning: BPO refers to the outsourcing of nonprimary activities of the organization to an external organization to minimize cost and increase efficiencyKPO is another kind of outsourcing whereby, functions related to knowledge and information are outsourced to third-party service providers
2. Degree of complexity: BPO is less complexKPO is complex
3. Requirement: BPO requires process expertiseKPO requires knowledge expertise
4. Talent required in employees: BPO requires good communication skillsKPO requires professional qualified workers
5. Focus on: BPO focus on low-level processKPO focus on high-level process

Answer in brief

What is outsourcing? Illustrate with suitable examples.

Solution:

Outsourcing is the process of contracting a business function or any specific business activity to specialized agencies mostly the non-core areas such as sanitation, security, household pantry, etc. are outsourced by the company. The company makes a formal agreement with the agency.

Company benefits in two ways.

1. It reduces its own cost

2. It uses the expertise of the firm which specializes in a particular kind of service.

Examples of outsourcing:

The establishments such as shops, malls, housing societies, offices, etc. outsource facilities like canteen, sanitation, security, etc. In the same way arrangements for the wedding, anniversary, birthday celebration can also be outsourced.

What is BPO? Explain in detail?

Solution:

Business process outsourcing or BPO is a business practice in which one organization hires another company to perform a task ( process) that the hiring organization requires to operate its own business successfully.

Meaning:

BPO is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider. BPO refers to the outsourcing of peripheral activities of the organization to an external organization to minimize cost and increase efficiency.

BPO refers to the outsourcing of peripheral activities of the organization to an external organization to minimize cost and to increase efficiency. For example, customer care centers for various banks, service providers, etc.

What is KPO? Explain in detail.

Solution:

KPO is described as the functions related to knowledge and information outsourced to third-party service providers.

KPO is the sub-segment of BPO, in which the outsource service provider is hired not only for its capacity to perform a particular business process or function but also to provide expertise around it.

KPO is a form of outsourcing, in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization. Which may be in the same country or in an off share location to save cost.

KPO requires advanced analytical and technical skills as well as a high degree of specialist expertise. KPO allows both core and non-core activities.

What is LPO? Explain in detail.

Solution:

LPO is a type of KPO that is specific to legal services, ranging from drafting legal documents, Performing legal research to offering advice.

LPO refers to the practice of a law firm or corporation obtaining legal support services from an outside law firm or legal support services company. LPO is the industry in which in-house legal departments or organizations outsource legal work to such areas where it can be done at less cost.

For example, areas like the US or Europe outsourced legal work to India, where it can be performed at a significantly decreased cost. LPO is a high-end industry that has been growing rapidly in recent Years.

Legal outsourcing has gained tremendous ground in the past few years in India. It achieved Success by producing services such as document review, legal research, and writing, drafting of briefings, etc.

Justify the following statement.

It is easy to set up e-business as compared to traditional business.

Solution:

(1) e-business is run, managed, and carried out with the help of information technology, i.e. web (internet). However, traditional business is run, managed, and carried out in accordance with specific old custom or trading practices of long-lasting.

(2) In traditional business large, physical space is needed, to arrange and display a variety of goods. It needs a large amount of capital to have the infrastructure, staff, and other required facilities. e-business can be started, managed, and operated with the help of the internet from any place or even from one’s own home. Naturally, it requires very little capital. It is also easy to set up.

(3) In traditional business, time is required to travel, to convince, to negotiate, and to interact with the customers. In such a process a lot of time, energy, and money are wasted. While in e-business required information is provided and accepted with terms and conditions more instantly.

(4) e-business is also free from most of the problems faced by traditional businesses. Thus, it is easy to set up an e-business.

E-business allows users to work across the globe in any field.

Solution:

(1) e-business i.e. electronic business may be defined as the application of information and technologies to support all the activities of the business. It involves electronic buying and supply, chain management, process orders electronically, online payments via debit or credit cards, handling customer service, etc.

(2) In order to begin with e-business, a business owner must have an internet presence. He has to obtain an e-mail address for communicating the same to the customers and other business associates. This helps in speedy communication between business firms and customers.

Communication is easy as there is no face to face interaction.

(3) Once the owner of e-business has acquired an electronic means of contact, he may sell goods to the customers residing in any part of the world. There is no need for any wholesalers, retailers, etc. This reduces costs and increases profit. In e-business, goods can be purchased on the internet from any place across the globe, payments can be made with the help of debt, credit card, internet banking, and the goods are physically delivered at the doorstep of the buyer.

(4) Similarly, he can do trading in any field. e-business uses the internet to connect people and processes. The World Wide Web (WWW) offers a lot of exposure to e-business on a global platform. The international relationship is very strong in e-business. The Government also offers a lot of support to e-business. Thus, it allows one to work across the globe in any field he likes.

Online transactions are done with the help of the internet.

Solution:

(1) Online transactions take place when a process of buying and selling is completed through the internet. For online transactions, registration is required. The consumer needs to login to a particular website to buy a particular article or service. The customer’s email ID, name, address, and other details are saved and safe with the website for further contact.

(2) When a customer likes a product or service, he/she selects pickups and drops the items or things in the shopping cart. The shopping cart keeps a systematic and detailed record of what items have been picked up while browsing the online store.

(3) The buyer then proceeds to the payment option after selecting all the products. Payment can be made by accepting cash on delivery mode of payment, after receiving the physical delivery of goods. The customer may pay in cash or by debit or credit card. The buyer also sends a cheque to the seller and the seller sends the products after the realization of the cheque.

(4) If the payment is transferred by the buyer from his account to the seller’s account electronically, then after the payment is received by the seller, he sends the goods to the buyer. The credit card or debit card is also used by the cardholder for making payment of purchases. The amount gets immediately transferred to the vendor’s bank account. After the successful transfer of funds, goods are delivered by the vendor to the buyer. Thus, all aspects of online transactions are completed with the help of the internet.

Attempt the following.

What are the advantages and disadvantages of e-business?

Solution:

Advantages of e-commerce are as follows:

1) Ease of formation:

The formation of a traditional business is difficult, whereas to form e-business is relatively easy to start.

2) Lower Investment requirements:

The investment requirement is low as compared to traditional business as the store does not have physical existence and can be managed with less manpower so if the trade does not have much of the investment but have contact (network), he can do fabulous business.

3) Convenience:

The Internet offers the convenience of 24 X 7 X 365 days a year. Business is going on at any time and flexibility is available. Yes, e-business is truly a business that has been enabled and enhanced by electronics and offers the advantage of accessing anything, anywhere, any time.

4) Speed: 

This benefit becomes all the more attractive when it comes to information. Much of the buying or selling involves the exchange of information that the internet allows at the click of a mouse.

5) Global access:

The Internet is true without boundaries. On one hand, it allows the seller access to the global market. On the other hand, it offers the freedom to the buyer to choose products from almost any part of the world. No need for face to face interaction between buyer and seller.

6) The movement towards a paperless society:

The use of the internet has considerably reduced the dependence on paperwork. Thus, recording and referencing of information has become easy.

7) Government support:

The government provides a favorable environment for setting up of e-business. This support ensures maximum transparency.

8) Easy payment:

The payment in e-business is done by credit card, fund transfer, etc. and it is available round the clock..

The Disadvantages of e-business are a follows:

(1) Lack of personal Touch: 

E-business lacks a personal touch. One cannot touch or feel the products. So it is difficult for the consumers to check the quality of products.

(2) Delivery Time: 

The delivery of the products takes time. In a traditional business, you get the product as soon as you buy it. But that doesn’t happen in online business. This time lag often discourages customers e.g. Amazon now assures one-day delivery. This is an improvement but does not resolve the issue completely.

(3) Security issues: 

There are a lot of people who scam through online business. Also, it is easier for hackers to get your financial details. It has a few security and integrity issues. This also causes disturbance among potential customers.

(4) Government interference: 

Sometimes the Government monitoring can lead to interference in the business.

(5) High Risk: 

High Risk is involved as there is no direct contact between the parties. In the case of fraud, it becomes difficult to take legal action.

What are the types of e-business? Explain.

Solution:

The followings are the types of business:

1) Business to Business (B2B)

2) Business to Consumer (B2C)

3) Consumer to Business (C2B)

4) Consumer to Consumer (C2C)

5) Business to Administration (B2A)

6) Consumer to Administration (C2A)

1) Business to Business (B2B)

In this form, the buyer and seller are both business entities and do not involve individual consumers. Here, both the parties involved in e-commerce transactions are business firms and hence the name B2B i.e. business to business.

Transactions between business firms come under this category. Business firms interact with each other for a variety of services.

2) Business to Consumer (B2C):  

B2C transactions have business firms at one end and its customers on the other end.

The transactions under B2C are between business firms and consumers. Firms use their sites for a range of marketing activities. The cost of products and services is kept low through this method and the speed of transactions is also faster.

3) Consumer to Business (C2B)

In this electronic transaction, the consumer requests a specific service from the business. Consumer to Business is a growing arena where the consumer requests a specific service from the business. It enables buyers to quote their own prices for specific goods or services. A consumer posts his request with a set budget online and, companies review the customers’ requirements and bids out the project. For example, pest control services, taxi services, doorstep food delivery, etc.

4) Consumer to consumer (C2C)

It facilitates the online transaction of goods or services between two people. Consumer to consumer (C2 C) involves the electronically facilitated transactions between consumers through a third party. Common consumer posts an item for sale and other consumers bid to purchase it. The sites are only intermediaries, just to match the consumers.

5) Business to Administration (B2A)

This part of e-commerce encompasses all transactions conducted online between business and public administration. For example, registration of companies, payment of taxes, getting permits, etc.

6) Consumer to Administration (C2A)

The consumer to Administration model encompasses all electronic transactions conducted between individuals and public administration. For example, getting a passport, aadhaar card, licenses etc.

What are the advantages of outsourcing?

Solution:

Advantages of Outsourcing:

1) Overall cost advantages – 

It reduces the cost and also saves time and effort on training costs.

2) Stimulates entrepreneurship, employment, and exports-

Outsourcing stimulates entrepreneurship, employment, and exports in the country.

3) Low manpower Cost- 

The manpower cost is much lower than that of the host company.

4) Access to professional, expert, and high-Quality services- 

Mostly the tasks are given to people who are skilled in that particular field. This provides us with a better level of service and fewer chances of errors.

5) Emphasis on core process rather than the supporting ones- 

With its help companies can focus on their core areas which lead to better profits and increase the quality of their products.

6) Investment requirements are reduced –

The organization can save on investing in the latest technology, software, and infrastructure and let the outsourcing partner handle the entire infrastructure.

7) Increased efficiency and productivity –

There is increased efficiency and productivity in the non-core areas of an organization.

8) Knowledge sharing – 

Outsourcing enables the organization to share knowledge and best practices with each other, it helps develop both the companies and also boosts goodwill in the industry.

What are the disadvantages of outsourcing?

Solution:

Disadvantages of Outsourcing/Limitations of Outsourcing

1) Lack of customer focus- 

An outsourced vendor may be catering to the needs of multiple organizations at a time. In such a situation, he may lack complete focus on an individual organization.

As a result, the organization may suffer.

2) A threat to security and confidentiality – 

The confidential information of the organization may be leaked to the third party, so there are security issues.

3) Dissatisfactory services – 

Some of the common problem areas with outsourcing include stretched delivery time and substandard quality.

4) Ethical issues – 

The major ethical issue is taking away employment opportunities from one’s own country when the function is outsourced to a company from another country.

5) Other disadvantages –

i) Misunderstanding of the contracts.

ii) Lack of communication.

iii) Poor quality and delayed services.

Answer the following.

Explain the steps involved in online transactions.

Solution:

The online transaction moves through pre-purchase/sale, actual purchase/sale, and delivery stage. It involves the following steps.

1) Registration –

Before online shopping one has to register with the online vendor by filling up a registration form. Registration is the first step in online transactions. For online transactions, registration is required. The consumer needs to login a particular website to buy a particular article or service. The customer’s email ID, name, address, other details are saved and are safe with the website. For security reasons, the buyer’s ‘Account’ and his ‘Shopping Cart’ is an online record of what you have picked up while browsing the online store.

2) Placing an Order-

It is the second step in online transactions. When a customer likes a product or service he/she puts the product in the shopping cart. The shopping cart gives a record of all the items selected by the buyer to be purchased, the number of units or quantity desired to be bought per item selected, and the price for each item. The buyer then proceeds to the payment option after selecting all the products.

3) Payment –

It is the last step in an online transaction. The buyer has to select the payment option.

These payment systems are secured with very high-level encryption. Personal financial information is completely secure. The following are some ways in which we can make this payment.

a) Cash on Delivery-

In this type of payment, the buyer pays when he/she receives the product. The payment is made at the doorstep. The customer can pay in cash or by debit or credit card.

b) Cheque- 

In this type of payment, the buyer sends a cheque to the seller and the seller sends the product after the realization of the cheque.

c) Net Banking transfer- 

In this type of payment, the payment is transferred from the buyer’s account to the seller’s account electronically. After the payment is received by the seller, the seller dispatches the goods to the buyer. It is an electronic facility of transferring funds through the internet.

d) Credit or Debit card –

The buyer makes payment through debit or credit card and the amount gets deducted from customers’ accounts. A debit card or credit card popularly known as “Plastic Money”. They are mostly used for online payments.

e) Digital Cash – 

Digital Cash is a form of electronic currency that exists only in cyberspace and has no real physical properties, but offers the ability to use real currency in an electronic format.

What is outsourcing? Explain the advantages and disadvantages of outsourcing.

Solution:

Outsourcing is the process of contracting some business functions to specialized agencies. The company benefits in two ways.

1. It reduces its own cost

2. It uses the expertise of the firm which specializes in a particular kind of service.

 Advantages of Outsourcing:

1) Overall cost advantages-

It reduces the cost and also saves time and effort on training costs.

2) Stimulates entrepreneurship, employment, and exports-

Outsourcing stimulates entrepreneurship, employment, and exports in the country.

3) Low manpower Cost- 

The manpower cost is much lower than that of the host company.

4) Access to professional, expert, and high-Quality services-

Mostly the tasks are given to people who are skilled in that particular field. This provides us with a better level of service and fewer chances of errors.

5) Emphasis on core process rather than the supporting ones- 

With its help companies can focus on their core areas which lead to better profits and increase the quality of their products.

6) Investment requirements are reduced –

The organization can save on investing in the latest technology, software, and infrastructure and let the outsourcing partner handle the entire infrastructure.

7) Increased efficiency and productivity –

There is increased efficiency and productivity in the non-core areas of an organization.

8) Knowledge sharing – 

Outsourcing enables the organization to share knowledge and best practices with each other, it helps develop both the companies and also boosts goodwill in the industry.

Disadvantages of Outsourcing / Limitations of Outsourcing

1) Lack of customer focus- 

An outsourced vendor may be catering to the needs of multiple organizations at a time. In such a situation, he may lack complete focus on an individual organization.

As a result, the organization may suffer.

2) A threat to security and confidentiality – 

The confidential information of the organization may be leaked to the third party, so there are security issues.

3) Dissatisfactory services – 

Some of the common problem areas with outsourcing include stretched delivery time and substandard quality.

4) Ethical issues –

The major ethical issue is taking away employment opportunities from one’s own country when the function is outsourced to a company from another country.

5) Other disadvantages –

i) Misunderstanding of the contracts.

ii) Lack of communication.

iii) Poor quality and delayed services.

Chapter 4: Business Services

Select the correct option and rewrite the sentence.

1. Door to door service is provided by _________ transport.

railway

road

air

Solution: 

Door to door service is provided by road transport.

2. __________ creates time utility.

Warehouse 

Transport 

Government

Solution: 

Warehouse creates time utility.

3. _____________ warehouses provide facilities for perishable commodities.

Bonded

Cold storage

Government

Solution: 

Cold storage warehouses provide facilities for perishable commodities.

4. _____________  policy covers all types of risks of a vessel while it is anchored at the port for a particular period of time.

Port risk

Voyage

Floating

Solution: 

Port risk  policy covers all types of risks of a vessel while it is anchored at the port for a particular period of time.

5. Principle of ___________ is not applicable to life insurance.

insurable interest 

utmost good faith

indemnity

Solution: 

6. Principle of indemnity is not applicable to life insurance.

Match the pairs.

Group ‘A’Group ‘B’
A) Air Transport1) Time utility
B) Warehousing2) Intangible in nature
C) Money remittance3) Fast mode of transport
D) Pipeline Transport4) April, 2019
E) Business Service5) Western Union Money Transfer
 6) Fixed deposit account
 7) Petroleum and gas
 8) Tangible
 9) Place utility
 10) Savings account

Solution: 

Group ‘A’Group ‘B’
A) Air Transport3) Fast mode of transport
B) Warehousing1) Time utility
C) Money remittance5) Western Union Money Transfer
D) Pipeline Transport7) Petroleum and gas
E) Business Service2) Intangible in nature

Give one word/phrase/term for the following sentence.

1. These warehouses are owned, managed and controlled by central and state governments or public authorities.

Solution: 

These warehouses are owned, managed, and controlled by central and state governments or public authorities. – Government warehouse

An art of exchanging ideas, facts, information, etc . from one person or entity to another.

Solution: 

An art of exchanging ideas, facts, information, etc. from one person or entity to another. – Communication

A rail system in which the track consists of a single rail or a beam.

Solution: 

A rail system in which the track consists of a single rail or a beam. – Monorail

A transport system used to carry petroleum and gases.

Solution: 

A transport system used to carry petroleum and gases. – Pipeline transport

A ministry that looks after the development of surface transport throughout the country.

Solution: 

A ministry that looks after the development of surface transport throughout the country. – Ministry of Road Transport and Highways

State whether the following statement are true or false.

Business services are important for the growth of business.

True

False

Current Account is opened by salaried persons.

True

False

NEFT stands for National Electric Fund Transfer.

True

False

Air transport is the cheapest mode of transport.

True

False

The Internet is the global system of interconnected computer networks that use the Internet protocol suite to link devices worldwide.

True

False

Find the odd one.

1. Primary credit co-operative society

state co-operative bank

district co-operative bank

ex-change bank

2. NABARD

RBI

SIDBI

EXIM

3. Endowment policy

Whole life policy

Money back policy

Blanket policy

Complete the sentence.

1. The term bank comes from the French word _________

Solution: 

The term bank comes from the French word Banco 

2. _________ warehouses provide facilities for perishable commodities

Solution: 

Cold Storage warehouses provide facilities for perishable commodities

3. In ________ policy, several ships belonging to one owner are insured under the same policy.

Solution: 

In fleet policy, several ships belonging to one owner are insured under the same policy.

4. _______ banking refers to the use of banking services with the help of mobile phones.

Solution: 

Mobile banking refers to the use of banking services with the help of mobile phones.

Select the correct option and complete the following table.

(RTGS, SIDBI, apex financial institution in banking industry of country, recurring deposit, long term loans)

Group AGroup B
1 _________fund transfer on real time and gross basis
2. loans to meet long term capital requirements________
3 ____________Account operated by salaried and businessmen both.
4. Central bank_____________
5 _____________Principal financial institution for MSMEs

Solution: 

Group AGroup B
1 RTGSfund transfer on a real-time and gross basis
2. loans to meet long term capital requirementslong term loans
3 Recurring DepositAccount operated by salaried and businessmen both
4. Central bankapex financial institution in the banking industry of the country
5 SIDBIPrincipal financial institution for MSMEs

Answer in one sentence.

What is debit card?

Solution: 

Most of the banks nowadays offer debit cards as soon as the account is opened by the account holder. Through debit card payments, the amount gets deducted from the account holder’s account.

What is ‘subject matter’ in insurance?

Solution: 

Subject matter refers to the subject or entity i.e life, property, cargo or ship, etc. which is insured against which the policy is taken.

What is a government warehouse?

Solution: 

These warehouses are owned, managed, and controlled by central and state governments or public authorities. It is difficult for small farmers, businessmen, traders to own a warehouse, so these government warehouses assist them in storing their goods at a nominal charge.

What is air transport?

Solution: 

Air transport carries the goods and passengers through airways by using different aircrafts like passenger aircrafts, cargo aircraft, helicopters etc. This is the fastest mode of transport but it does not provide door to door service.

What is communication?

Solution: 

Communication is an art of exchanging ideas, facts, information, etc. from one person or entity to another. The process of passing any information from one person to another with the help of some medium is termed as communication.

Correct the underlined word and rewrite the following sentence.

1.Overdraft facility is available for savings bank account holders.

Solution: 

Overdraft facility is available for Current bank account holder.

2. Services are tangible in nature.

Solution: 

Services are Intangible in nature.

3. Insurance helps to maximize the risks in the business.

Solution: 

Insurance helps to minimize the risks in the business.

4.The foreign bank is the apex financial institution in the banking industry in the country.

Solution: 

The central bank is the apex financial institution in the banking industry in the country.

5. RTGS stands for Reasonable Time Gross Settlement.

Solution: 

RTGS stands for real Time Gross Settlement.

6. Arrange in proper order.

Claim, Accident, Taking the policy, Compensation

Solution: 

Taking the policy, Accident, Claim, Compensation

7. Email, Inland letter, Courier

Solution: 

Inland letter, Courier, E-mail

Explain the following term/concept.

Transport

Solution: 

Transportation is the movement of people, animals, and goods from one location to another location or it can be defined as a means of carrying goods and people from one place to another place.

Communication

Solution: 

Communication is an art of exchanging ideas, facts, information, etc. from one person or entity to another. The process of passing any information from one person to another with the help of some medium is termed as communication. Communication is a very simple process where the message is being transferred from a sender to the receiver. The receiver after receiving the message understands it in the desired form and then acts accordingly.

Banking

Solution: 

The term Bank comes from the French word ‘Banco’ which means a ‘bench’. In earlier days, money-lenders used to display coins of different currencies in big heaps or benches or tables for the purpose of lending or exchanging.

A bank is a financial institution which deals with deposits and advances and other related services. Bank provides various services related to money or financial requirements of consumers.

Insurance

Solution: 

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. Insurance is a contract between the insurer and the insured, whereby the insurer agrees to compensate the insured against loss. The insured has to pay a certain fixed sum of money on timely basis to the insurer.

Warehousing

Solution: 

Warehousing refers to the storage of goods and consists of all those activities which are connected with the storage and preservation of goods. It is a means of storing goods. Warehousing can be defined as a group of activities connected with the storing and preserving of stored goods from the time of production until the time of consumption.

Study the following case/situation and express your opinion.

Ms.Harshali has started a new business two years ago. Her customers are located in different parts of the country and hence they are directly depositing bill amounts in her business account. At the same time, she used to pay various payments from this account only.

i) Identify the Type of account maintained by Ms. Harshali.

ii) Suggest anyone modern way of money transfer to Ms.Harshali.

iii) What kind of facility does she get on her bank account?

Solution: 

The type of account maintained by Ms. Harshali is the current account.

NEFT stands for National Electronic Fund Transfer. Under this system, funds are transferred electronically from one branch to another branch or one bank to another bank in the country. The client has to give details of the NEFT code of branch and account number of a beneficiary to whom the money is to be transferred.

1. An overdraft facility is available for the current account.
2. For the current account, banks provide a statement of account every month.

Mr. Jagan is a salaried person. He wants to take policy for his two children which assures them protection as well as completes their financial needs once they become major by age.

i) Suggest him a policy which can satisfy the requirements of his children.

ii) Who are beneficiaries of policy?

iii) In the above case which principle is involved?

Solution: 

Mr. Jagan, a salaried person should take “Child Insurance Policy” to satisfy the financial requirements of his children.

In a child insurance policy, children of the insured person are the beneficiaries.

In the above case, the principle of insurable interest is involved.

Mr. Sharan is a successful manufacturer. He is having production units at various locations. He is having multiple production units, he has a large stock of raw material and finished goods. He is worried about safeguarding goods from any unwanted financial loss. He also requires transferring raw material and finished goods from one unit to another but does not have any facility for that. He also requires funds for expansion.

i) Name the service which will help him to safeguard goods from any damage?.

ii) Which service will help him to remove the difficulty of the place?

iii) From which service sector will he get financial support?

Solution: 

Warehousing is the service that helps Mr. Sharan to safeguard his goods from any damage.

Transport service will help Mr. Sharan to remove the difficulty of the place.

Mr. Sharan will get financial support from the Banking sector.

Mr. Amit is a businessman. He has his own factories in Pune and Nashik. He lives in Pune with his wife and 2 daughters aged 5 and 8 years.

i) Can Mr. Amit take a life insurance policy for his wife and 2 children?

ii) Can Mr. Amit take a marine insurance policy for his factories?

iii) Which type of insurance should Mr. Amit take for protecting his factories from loss due to fire?

Solution: 

Mr. Amit can take whole life policy or term insurance policy for his wife and child insurance policy or money back policy for his daughters.

Mr. Amit cannot take marine. insurance policy for his factories.

Mr. Amit can take Floating Fire Insurance Policy for protecting his factories at Pune and Nashik.

Distinguish between.

Duty Paid Warehouse and Bonded Warehouse

Solution: 

Duty paid Warehouses Bonded Warehouses
Meaning: If an importer faces any problem in the transportation of goods, after making payment of duty, then goods can be stored at a duty-paid warehouse.Bonded warehouses are licensed by the government to accept imported goods for storage until the payment of customs duty.
Control: All duty paid warehouses are public warehouses that are available to all importers.These warehouses work under the control of customs authorities.
Classification: Duty paid warehouses help the importer as proper care of goods is taken, processing of goods can be done like sorting, re-packing, etc.The goods are held in bond and cannot be withdrawn without paying the customs duty.
Location: These are located near the port & dock area.These are located near the dock area and if an importer is unable or unwilling to pay customs duty immediately then he can store the goods in a bonded warehouse.
Used : Such warehouses are more useful for the re-export of the goods.The importer can withdraw the goods in installments by paying the customs duty proportionately.

Central Bank and Commercial Bank

Solution: 

Central BankCommercial Bank
1. Function: The main function is to accept deposits from the public for lending to industry and othersThe main function of the central bank (RBI) is to regulate the money supply in the country.
2. Printing of Currency: The commercial banks cannot print currencyThe central bank can print currency notes.
3. Acceptance of Deposits: The commercial bank accepts deposits from the publicThe Central Bank does not accept deposits from the public.
4. Loans Commercial banks provide loans to industry and commerce.The Central bank provides loans to bankers and financial institutions
5. Ownership: It can be owned by private and/or by government agencies.It is owned and controlled by the government of India
6. Number of Banks: There are many commercial banks in India.There is only one Central Bank (RBI) in India.
7. Monetary policy The commercial banks do not frame any monetary policy The commercial bank does not keep a check on the central bankThe Central Bank frames the monetary and credit policy.

Road Transport and Air Transport

Solution: 

Road TransportAir Transport
1. Speed: Road transport has limited speed due to bad road conditions, accidents, etc.It is the fastest mode of transport.
2. Carrying capacity: It has limited carrying capacityIt has limited carrying capacity
3. Cost: It requires limited capital investment in terms of construction of roads, vehicles, and their maintenance.It uses airways which are natural and hence, there is no cost involved. However the huge cost of construction of aircraft involved. These costs are way high compared to other modes of transport.
4. Distance: Recommended for a short distance.Suitable for long-distance.
5. Charges: Transport charges are not fixed due to high due to increased fuel pricesThe transport charges is very high.
6. Door to door service: It provides door to door services.It does not provide door to door services.
7. Means of Transport: It uses animals, animal carts, motor-cycles, three, and four-wheelers.It uses aircraft, helicopters, jets, etc.
8. Suitability: It is suitable for transporting goods in relatively smaller quantities for a short distance.It is suitable for transporting lightweight perishable and valuable goods to any part of the world.
9. Safety: It provides limited safety to goods from the sun, rain, wind, etc.Goods are safe as they are specially packed.
10. Accidents: Chances of accidents are more due to poor road conditions and negligent driversChances of accidents are less because of maintenance and expert pilots.
11. Ownership: Ownership is in the hands of private parties as well as the government.It is owned by both the private sector as well as the public sector.

Life Insurance and Marine Insurance

Solution: 

Life InsuranceMarine Insurance
1. Meaning: A contract where by the insurance company undertakes to pay a certain sum of money either on death or maturity (whichever is earlier) for a consideration (premium)A contract whereby the insurance company undertakes to pay compensation to in insured in case of loss to him due to dangers (perils) of the sea.
2. Policy taken by: It can be taken by an individual for his own life or for his family members.It can be taken by exporters, importers, and shipping companies, etc.
3. Subject matter: In life insurance, the life of the insured is a subject matterIn Marine insurance, goods in the ship, cargo, and freight is the subject matter.
4. Insurable interest: It must exist at the time of contractIt must exist at the time of contract and also at the time of loss.
5. Tenure: The policy can be issued for any number of years, even until the death of the assured.It is generally for a short period and may range from one month to a year. Normally it does not exceed one year.
6. Compensation: It is paid either on death or maturity whichever is earlier.It is paid only if there is a loss causing event during the term of the policy.
7. Principle of Indemnity: It is not applicable as human life cannot be valued in terms of money for calculating the actual loss.It is applicable as the insurance company compensates for the financial loss and the insured is brought back to the same financial condition that he was before the event.
8. Number of policies: Insured can take any number of policies on the same life. Compensation is paid on all the policies.Generally, only one policy can be taken. However, double insurance is possible. However, compensation does not exceed the actual loss.
9. Beneficiary: The beneficiary can be insured (if he survives the selected term) or else the nominee or the legal heir on the death of the assured.The beneficiary is the insured person or company.
10. Surrender of policy: The policy can be surrendered before the expiry of the term subject to certain conditions.It cannot be surrendered.

Savings Account and Current Account

Solution: 

Savings AccountCurrent Account
1. Meaning: It is that account which is opened by individuals in order to save a part of their income.It is that account which is maintained by businessman and others who have regular bank transactions.
2. Withdrawals: Customers can withdraw either by cheques or by withdrawal slips.Customers can withdraw money by cheques.
3. Documentation: The bank gives a passbook, cheque book and pay-in-slip book to the customers.The bank gives a passbook, cheque book, statement of account, and pay-in-slip book to the customers.
4. Who takes it: It is suitable for fixed income groups, wages, or salary earners.It is suitable for traders, businessmen, firms, or institutions.
5. Restrictions: The customer has certain restrictions on withdrawals.There are no restrictions on the operation of a current account as long as there is balance in the account.
6. Interest rate: The interest rate is lowNormally interest is not given
7. Nature of Account: It is of continuous NatureIt is of continuous Nature
8. Facilities: No overdraft facility is given.Temporary overdraw facility is given

Life Insurance and Fire Insurance

Solution: 

Life InsuranceFire Insurance
1. Meaning: A contract whereby the insurance company undertakes to pay a certain sum of money either on death or maturity (whichever is earlier) for a consideration (premium)A contract in which the insurer promises to pay compensation to the insured if something happens to the subject matter due to fire or related events.
2. Policy took by: It can be taken by an individual for his own life or for his family members.It can be taken by an individual for their properties or by the businessman. For their goods, properties business liabilities.
3. Subject matter: In life insurance, the life of the insured is a subject matterIn Fire insurance, the goods and assets or property of the insured is the subject matter.
4. Insurable interest: It must exist at the time of contractIt must exist both at the time of contract and also at the time of loss.
5. Tenure: The policy can be issued for any number of years, even until the death of the assured.It is generally for a short period like one year.
6. Compensation: It is paid either on death or maturity whichever is earlier.It is paid only if there is a loss due to fire during the term of the policy
7. Principle of Indemnity: It is not applicable as human life cannot be valued in terms of money for calculating the actual loss.It is applicable as the insurance company compensates for the financial loss and the insured is brought back to the same financial condition that he was before the event.
8. Number of policies: Insured can take any number of policies on the same life. Compensation is paid on all the policies.Generally, only one policy can be taken but double insurance is possible. However, compensation does not exceed the actual loss.
9. Beneficiary: The beneficiary can be insured (if he survives the selected term) or else the nomine or the legal heir on the death of the assured.The beneficiary is the insured who has insured the property or goods
10. Surrender of policy: The policy can be surrendered before the expiry of the term subject to certain conditions.It cannot be surrendered.

Road Transport and Rail Transport

Solution: 

Road TransportRail Transport
1. Speed: Road transport has limited speed due to bad road conditions, accidents, etc.It has considerable speed since it runs on tracks which rarely gets disturbed
2. Carrying capacity: It has limited carrying capacityIt has a huge carrying capacity
3. Cost: It requires limited capital investment in terms of construction of roads, vehicles, and maintenance.The cost of construction of trains, railway tracks is high. Also, the maintenance of trains, tracks, and stations is high.
4. Distance: Recommended for a short distance.Recommended for both short and long-distance.
5. Charges: Transport charges are not fixed due to high due to increased fuel pricesTransport charges are relatively low and are fixed according to the distance.
6. Door to door service: It provides door to door services.It does not provide door to door services
7. Means of Transport: It uses animals, animal carts, motor-cycles, three, and four wheelers.It uses passenger trains and goods trains.
8. Suitability: It is suitable for transporting goods in relatively smaller quantities for a short distance.It is suitable for transporting heavy goods in large quantities over long distances.
9. Safety: It provides limited safety to goods from the sun, rain, wind, etc.Goods are kept in locked wagons which provide protection against sun, wind, rain, etc.
10. Accidents: Chances of accidents are more due to poor road conditions and negligent driversChances of accidents are less because of one-way track and good signal system.
11. Ownership: Ownership is in the hands of private parties as well as the government.Ownership is in the hands of the Government.

Rail Transport and Air Transport

Solution: 

Rail TransportAir Transport
1. Speed: It has considerable speed since it runs on tracks which rarely gets disturbedIt is the fastest mode of transport.
2. Carrying capacity: It has a huge carrying capacityIt has limited carrying capacity
3. Cost: The cost of construction of trains, railway tracks is high. Also, the maintenance of trains, tracks, and stations is high.It uses airways which are natural and hence, there is no cost involved. However the huge cost of construction of aircraft involved. These costs are way high compared to other modes of transport.
4. Distance: Recommended for both short and long-distance.Suitable for long-distance.
5. Charges: Transport charges are relatively low and are fixed according to the distance.The transport charges is very high.
6. Door to door service: It does not provide door to door servicesIt does not provide door to door services.
7. Means of Transport: It uses passenger trains and goods trains.It uses aircraft, helicopters, jets, etc.
8. Suitability: It is suitable for transporting heavy goods in large quantities over long distances.It is suitable for transporting lightweight perishable and valuable goods to any part of the world.
9. Safety: Goods are kept in locked wagons which provide protection against sun, wind, rain, etc.Goods are safe as they are specially packed.
10. Accidents: Chances of accidents are less because of one-way track and good signal system.Chances of accidents are less because of maintenance and expert pilots.
11. Ownership: Ownership is in the hands of the Government.It is owned by both the private sectors as well as public sector.

Current Account and Fixed Deposit Account.

Solution: 

Current AccountFixed Deposit Account
1. Meaning: It is that account which is maintained by businessman and others who have regular bank transactions.It is that account where a fixed sum of money is deposited for a fixed period.
2. Withdrawals: Customers can withdraw money by cheques.  Customers cannot withdraw during the specified period.
3. Documentation: The bank gives a passbook, cheque book, statement of account, and pay-in-slip book to the customers.  The bank gives a fixed deposit receipt to the customers.
4. Who takes it: It is suitable for traders, businessmen, firms, or institutions.  It is suitable for any person with temporarily idle cash.
5. Restrictions: There are no restrictions on the operation of a current account as long as there is balance in the account.  The amount becomes due on the expiry of the fixed period. If withdrawn earlier, then the rate of interest will be less than applicable.
6. Interest rate: Normally interest is not given  The interest rate is higher, longer the period, the higher will be the rate of interest.
7. Nature of Account: It is of continuous Nature  It is for a fixed period of time except when the fixed deposit receipt is renewed.
8. Facilities: A temporary overdraw facility is given  90% of the amount of fixed deposit can be given as loan.

Answer in brief.

1.State four types of deposits

Solution: 

1) Time Deposits:

Time deposits are called time deposits because they are repaid to the customers after the expiry of decided time.

2) Fixed Deposit:

A fixed deposit account is an account where a fixed amount is kept for a fixed period of time bearing a fixed interest rate. The rate of interest is more as compared to saving bank account and varies with the deposit period.

3. Recurring Deposit:

It is operated by salaried persons and businessmen having a regular income. A certain fixed sum of money is deposited into the account every month. Withdrawal of accumulated amount along with interest is paid after the maturity date.

4. Demand Deposits:

Demand deposits are those which are repaid to customers whenever they demand. That means money can be withdrawn as per the wish of the customer through withdrawal slips, Cheques, ATM cards, online transfer, etc.

2. State four modes of transport.

Modes of transport:

Generally, transportation is carried through various modes such as railways, roads, waterways, and the airway. Modes of transport are as follows:

1) Road Transport:

Roads are means that connect people and places on the surface of the land. It provides all-over connectivity in any terrain as compared to other modes of transport.

Various means of transport are used under road transport such as bullock carts, cycles, rickshaws, buses, cars, etc.

2) Rail Transport:

Transportation of goods and passengers on rail lines through trains is called as rail transport. It occupies an important place inland transport system of our country and is the most dependable mode of transport to carry goods and passengers over a long distances.

3. Air Transport:

Air transport carries goods and passengers through airways by using different aircraft like passenger aircraft, cargo aircraft, helicopters, etc. This is the fastest mode of transport but it does not provide door to door service. Air transport is also a suitable mode in case of an emergency like war, medical, natural calamities, rescue operations, etc. Air transport is classified as domestic transport and international transport.

4) Water Transport:

Water transport refers to the movement of goods and passengers on waterways by using various means like boats, steamers, launches, ships, etc. With the help of these means, goods and passengers are carried to different places, both within as well as outside the country. When the goods and passengers move inside the country, it is known as inland water transport. When the different means of transport are used to carry goods and passengers on the ocean or sea route, it is known as ocean or sea transport.

3. State four life insurance policies?

Solution: 

Types of life insurance policies:

1) Whole Life Policy:

Under this policy, the whole life of a person is insured. The insured cannot receive money from the insurance company until he is alive. The rate of premium is normally low. The money becomes payable on the death of the insured person to the nominee or the legal heir of the deceased policyholder.

2) Endowment Insurance Policy:

Insurance is taken for a specific period under this policy. The sum assured along with bonus is given on the death of the insured to dependents or on the expiry of the specific period, to the insured.

3) Term Insurance Policy:

The term insurance policy is taken for a specific period. Term insurance policy has the lowest premium among all insurance policies. Premium is fixed and does not change during the term of the policy. In case of untimely death, the dependents will receive the benefit amount specified in the term life insurance agreement.

4) Annuity Policy:

The insured has to pay the premium in a lump sum or in installments over a certain period of time. The insured will receive back a specific sum periodically from a specified date onwards, either for life or for a fixed number of years. It is like a pension payment scheme.

4. State any four features of business services?

Features of services:

Solution: 

1) Intangibility:

Service is not a physical product that can be touched or seen. A service can be experienced by the buyer or the receiver. Services lack material form, and therefore they are intangible.

2) Inseparability:

The unique characteristic of services is that the service and the service provider cannot be separated.

The presence of service providers is there at the time of delivering services to customers. In the case of service production and consumption take place at the same time.

3) Inconsistency:

Services are heterogeneous. There can be no perfect standardization of services. Even if the service provider remains the same, the quality of the service may differ from time to time. For example, the same restaurant can give a different experience to two different customers.

4) Perishability:

The production and consumption of services are inseparable because the storage of services is not possible. Being an intangible transaction there can never be an inventory of services. Unlike goods, they cannot be stored for future sale.

5. State money remittance services of the postal department?

Solution: 

Money Remittance Services:

a. Electronic Money Transfer (eMO):

A money order is an order issued by the Post Office for the payment of a sum of money to the person whose name is mentioned in the money order. It is sent through the agency of the Post.

Office. A ‘Payee’ is the person named in the money order as the person to whom the money is to be paid. The advantage of sending money to someone through a money order is that the money is delivered at the house or his place of stay.

b. Instant Money Order (IMO):

India Post presents Instant Money Order (IMO), the instant on-line money transfer service that is instant, convenient, reliable, and affordable. IMO is an instant web-based money transfer service through Post Offices (IMO Centre) in India between two resident individuals in Indian territory. One can transfer money from INR 1,000/- to INR 50,000/from designated IMO Post

Offices. It is simple to send and receive money.

c. International Money Transfer:

Money Transfer Service Scheme is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. Only inward personal remittances are permissible. Department of Posts, Government of India with the Western Union Financial Services, a state of the art International Money transfer Service is now available through the Post Offices in India, which enables instantaneous remittance of money from around 195 countries and territories to India.

Justify the following statement.

  1. Air transport is the fastest mode of transport?

Solution: 

(1) The mode of transport which is operated above the surface of the earth i.e. in the sky through airways is called air transport. For carrying passengers and goods, air transport uses different aircrafts such as passengers aircrafts, cargo aircraft, helicopters, etc.

(2) Among the means of transport available at present, air transport is the fastest and the quickest means of transport. It uses natural ways and no separate construction of routes is required. It is also due to use of modern and advanced technology and highly qualified and professional technician. Thick forests, high mountains, vast deserts and oceans cannot obstruct its speed and air routes.

(3) Air transport adopt shortest route to reach destination. It has faster speed without any disturbance of observing signal system speed. Air transport is useful to provide valuable services in hilly and mountainous areas, in situations like war and areas affected by natural calamities such as floods, cyclones, earthquakes, etc.

2. Communication is essential for the growth of the business

Solution: 

(1) Exchange of ideas, facts, information etc. from one person to another is called communication. It is a process of transfer of information from one place to another or from one person to another with the help of some medium. Means of communication comprise magazines, newspapers, post and telegraphs, radio and television, telephone, internet, e-mail, etc. Communication is essential for growth of business, which include industry, commerce, trade, etc.

(2) The difficulty of distance is effectively solved by various means of communication. Communication helps to transmit business information more quickly among the businessmen. Effective communication facilitates carrying required raw materials and other requirements from the place of their origin or market to the place of their production to facilitate large scale production. The communication also helps to carry finished products from the place of production to the places of consumption as well as market.

(3) Communication helps to make goods and services available wherever they are demanded. It helps to widen the market. Effective communications facilitates the development and growth of domestic and international market and bring prosperity to the country.

(4) Effective communication facilitates the reduction in the cost of production and distribution of goods at low prices which increase their demand and widen market. Increase in demand in turn leads to large scale production and supply. Thus, communication is essential for growth of business.

3. Principle of subrogation is applicable to all contracts of indemnity.

Solution: 

(1) The principle of subrogation is a colliery to the principle of indemnity. According to the principle of subrogation, after the insured is fully compensated for the total loss of the property or goods insured by him, all the rights in such property or goods pass on to the insurer.

(2) Insured person cannot claim any right in the property saved from the damage or loss, once he is fully compensated by the insurer. This is necessary because, if part of the goods or property saved from the fire, accident, damage, floods or cyclone, etc. could fetch any price, the same cannot be retained by the policyholder or insured. In that case he would realise more than the actual loss, which is against the principle of indemnity.

(3) As like the principle of indemnity, the principle of subrogation is applicable to all insurance policies except life insurance policies. In life insurance contracts, the question of indemnity and subrogation does not arise. The insurer cannot indemnify the insured because the loss due to death cannot be determined exactly in terms of money.

(4) In all insurance contracts, except life insurance contract, principle of indemnity and principle of subrogation is applicable. On indemnifying the insured, the insurer can sell the remains of the property damaged and reduce his loss. However, this principle is applicable only if the damaged property has any value after the happening of the event.

4. Warehousing is important.

Solution: 

(1) The term ‘warehousing is generally used to denote all those activities which are concerned with the storage of goods in a godown or warehouse. In modern days, these is a time gap between production of goods and their distribution. Warehousing is essential to hold the stock of goods till they have suitable demand.

(2) Agricultural goods such as rice, wheat, sugar, spices, etc. are produced seasonally but consumed throughout the year. It is necessary to store them in large quantity. Some goods may be required to be stored for conditioning, canning or processing, e.g, oil seeds, first, fruits, etc. Some perishable goods such as eggs, meat, butter, fruits, vegetables, medicines, etc. are preserved in cold storage so that their quality remains as it is.

(3) Warehousing plays an important role in price stabilisation. It helps to protect the goods from theft, deterioration, i.e. future risks. Warehouses nowadays provide facilities like packing, processing, grading, etc. Warehousing is necessary to facilitate dispersion of goods from production centre to different markets.

5. Cash can be withdrawn from ATM at any time.

Solution: 

(1) ATM is the abbreviation of Automated Teller Machine. It is popularly known as All Time Money or Any Time Money. ATM is an electronic cash dispensing machine. It is free standing self service terminal. There is no specific time limit for withdrawals of cash from ATM.

(2) ATM is one of important facilities provided by the bank to its savings account holder. To avail of this facility, bank installs ATM terminals at the places of public utility such as railway stations, shopping malls, airports, post offices, busy streets, etc.

(3) For withdrawal of cash from ATM, every accountholder is given specific code number. By operating this system, the account holder can withdraw the cash up to a specific limit or the quantum of amount available in the account whichever is less. ATM also provides other information like cash deposits, withdrawals, balance in the account, etc.

(4) Under this system, the account holder has cent per cent liquidity of banking funds. ATM avails twenty four hours of service. Hence, the accountholder can withdraw cash any time, i.e. even after banking hours, on holidays, Sundays or in the case of emergency by operating ATM. This facility is available in different parts of the country as well as outside the country.

Attempt the following.

  1. Explain the money remittance services of the post department?

Solution: 

Money Remittance Services:

a. Electronic Money Transfer (eMO):

A money order is an order issued by the Post Office for the payment of a sum of money to the person whose name is mentioned in the money order. It is sent through the agency of the Post.

Office. A ‘Payee’ is the person named in the money order as the person to whom the money is to be paid. The advantage of sending money to someone through a money order is that the money is delivered at the house or his place of stay.

b. Instant Money Order (IMO):

India Post presents Instant Money Order (IMO), the instant on-line money transfer service that is instant, convenient, reliable, and affordable. IMO is an instant web-based money transfer service through Post Offices (IMO Centre) in India between two resident individuals in Indian territory. One can transfer money from INR 1,000/- to INR 50,000/from designated IMO Post

Offices. It is simple to send and receive money.

c. International Money Transfer:

Money Transfer Service Scheme is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. Only inward personal remittances are permissible. Department of Posts, Government of India with the Western Union Financial Services, a state of the art International Money transfer Service is now available through the Post Offices in India, which enables instantaneous remittance of money from around 195 countries and territories to India.

2. Explain marine insurance policies?

Solution: 

It gives protection against the losses caused due to the dangers of the sea. It is a form of an insurance contract covering loss or damage to vessels or to cargo or passengers during marine transportation.

Types of marine insurance Policies:

1) Voyage Policy:

It is a policy in which the subject matter is insured for a specific voyage irrespective of time involved in it. In this case, risk begins only when the ship starts on a voyage.

2) Time Policy:

In this policy, the subject matter is insured for a definite period of time. A time policy cannot be for a period exceeding one year, but it may contain a continuation clause. The continuation clause means that if the voyage is not completed within the specified time, the risk shall be covered until the voyage is completed.

3) Mixed Policy:

This policy is the combination of voyage and time policy. It therefore covers the risk of both, particular voyage and for a specified period of time.

4) Valued Policy:

Under this policy, goods are insured for an agreed value between the insurer and insured at the time of taking policy. This facilitates easy settlements of claims in case of such items where it is difficult to assess the real market value.

5) Blanket Policy:

This policy is taken for the maximum limit of the required amount of protection and full amount of premium is paid in the beginning of the policy. This policy describes the nature of goods insured, specific route, ports and places of voyage. It covers multiple risks on one property or it covers many properties under the policy.

6) Port Risk Policy:

Port risk policy covers all types of risks of a vessel while it is anchored at the port for a particular period of time. This policy is applicable till the departure of the vessel from the port.

7) Composite Policy:

This type of policy is purchased from more than one insurers. The liability of each insurer is separate and distinct. This policy is taken when the amount of insurance is very high.

8) Single Vessel Policy:

This policy is suitable for small ship owner having only one ship or having one ship in different fleets. It covers the risk of one vessel of the insured.

9) Fleet Policy and Block Policy:

In fleet policy, several ships belonging to one owner are insured under the same policy. In block Policy, the cargo owner is protected against damage or loss of cargo in all modes of transport through which his/her cargo is carried i.e. covering all the risks of rail, road, and sea transport etc.

3. Explain types of warehouses?

Solution: 

1) Private Warehouses:

The private warehouses are owned and operated by big manufacturers and merchants to fulfill their own storage needs. Big business firms that need large storage capacity on a regular basis and who can afford the money, construct and maintain their private warehouses.

2) Public Warehouses:

A public warehouse is a specialized business establishment that provides storage facilities to the general public for a certain charge. It may be owned and operated by an individual or a cooperative society. It works under a license from the government in accordance with the prescribed rules and regulations. Public warehouses provide storage facilities to small manufacturers and traders at a low cost. These warehouses are well constructed and guarded round the clock to ensure safe custody of goods. Public warehouses are generally located near the junctions of railways, highways, and waterways.

3) Bonded Warehouses:

Bonded warehouses are licensed by the government to accept imported goods for storage until the payment of customs duty. These warehouses work under the control of customs authorities.

The warehouse keeper is required to give an undertaking or ‘Bond’ that it will not allow the goods to be removed without the consent of the customs authorities. The goods are held in bond and cannot be withdrawn without paying the customs duty.

4) Duty paid Warehouses:

If an importer faces any problem in the transportation of goods, after making payment of duty, then goods can be stored at a duty-paid warehouse. All duty paid warehouses are public warehouses that are available to all importers. Duty paid warehouses help the importer as proper care of goods is taken, processing of goods can be done like sorting, re-packing, etc.

5) Government Warehouses:

These warehouses are owned, managed, and controlled by central and state governments or public authorities. It is difficult for small farmers, businessmen, traders to own a warehouse, so these government warehouses assist them in storing their goods at a nominal charge.

6) Co-operative Warehouses:

These warehouses are owned, managed, and controlled by co-operative societies. They mainly provide warehousing facilities at the most economical rates. These types of warehouses are very useful for farmers and traders and the general public.

7) Cold storage Warehouses:

Cold storage warehouses provide facilities for perishable commodities like fruits, flowers, vegetables, dairy products, etc. In cold storage warehouses, goods are stored and refrigerated at very low temperatures so as to preserve them and use them in the future. International trade has become possible due to these warehouses.

4. Explain the utility function of banks?

Solution: 

Utility Functions:

A commercial bank performs utility functions for the benefits of its clients. It provides certain facilities or products to its clients as follow:

1) Issue of Drafts and Cheques:

A draft /cheque is an order to pay money from one branch of bank to another branch of the same bank or another bank. A bank issue drafts to its account holders as well as non-account holders whereas cheques are issued only to the account holders. Bank charges commission for issuing a bank draft.

2) Locker Facility:

This is a common utility function of any commercial bank. The bank provides locker facilities for the safe custody of valuables, documents, gold ornaments, etc.

3) Project Reports:

A bank may prepare project reports and feasibility studies on behalf of the clients. Project reports enable the business firm to obtain funds from the market and to obtain clearance from government authorities.

4) Gift Cheques:

Banks issue gift cheques and gold coins to account holders as well as to non-account holders.

The gift cheques/ coins can be used by the clients for the purpose of gifting on occasions like weddings, birthdays, etc.

5) Underwriting Services:

A commercial bank may underwrite the issue of securities issued by companies. If the shares are not fully subscribed, the underwriting bank agrees to take up the unsubscribed portion of the securities.

6) Gold related Services:

Nowadays many banks are providing gold services to their customers. Banks are commercially buying and selling gold or gold ornaments from customers on a large scale basis. Some bank also provides advisory services to its customers in terms of gold funds, gold ETF, etc.

5. Explain the modes of traditional communication?

Solution: 

The modes of traditional communications are as follows.

I) Postal Services:

The postal services in India come under the Department of Post and Telegraph which is part of the Ministry of Communication and Information and Technology.

Types of postal services:

1. Mail Services:

Mail services are further classified as follows:

a. Inland Letter: 

Inland letter card is used for transmission within India only. Inland letter ensures the confidentiality of the message.

b. Envelope: 

It enables sending confidential messages as well as enclosures like cheques, photos, resumes, etc.

c. Parcel: 

Parcels of a specified size and weight can be sent across the country as well as outside the country. Anything can be sent in a parcel except those items which are prohibited. Parcels can be insured.

d. Book-Post: 

Printed books, magazines, journals, etc. can be sent through a book post.

2. Specialized Postal Services:

Specialized Postal Services are further classified as follows:

a. Business Post:

Business Post provides complete mailing solutions right from mail preparation to mail delivery.

b. Logistics Post:

Logistics Post provides business customers a cost-effective and efficient solution, which manages the entire value chain from collection to storage to transmission to distribution across the country.

c. Bill Mail Service: 

Communications in the nature of financial statements, bills, monthly account bills, or any such other items of similar nature may be posted by a service provider to customers at least once in 90 days under this service.

3. Money Remittance Services:

Money Remittance Service is further classified as follows:

a. Electronic Money Transfer (eMO):

A money order is an order issued by the Post Office for the payment of a sum of money to the person whose name is mentioned in the money order. It is sent through the agency of the Post Office.

b. Instant Money Order (IMO): 

IMO is an instant web-based money transfer service through Post Offices (IMO Centre) in India between two resident individuals in Indian territory.

c. International Money Transfer:

Money Transfer Service Scheme is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India.

4. Retail Services:

Retail Services are further classified as follows:

a. Retail Post:

Under Retail Post, a range of services is offered including the collection of electricity bills, collection of taxes, collection of other bills and fees for the Government, etc.

b. e-Post: 

Through ePOST, customers can send their messages to any address in India with a combination of electronic transmission and physical delivery through a network of more than 1,55,000 Post Offices.

2. Explain the disadvantages of air transport?

Solution: 

Disadvantages:

1) It does not provide door to door service.

2) It gets heavily affected by adverse weather conditions.

3) It is comparatively slow-moving transport.

4) More investment cost is involved in terms of ports, ships, maintenance, etc.

5) It is subject to the perils of the sea.

Describe the role of transport?

Solution: 

Meaning: 

Transportation is the movement of people, animals, and goods from one location to another location or it can be defined as a means of carrying goods and people from one place to another place.

Modes of transport: 

Generally, transportation is carried through various modes such as railways, roads, waterways, and the airway. Modes of transport are as follows:

1) Road Transport:

Roads are means that connect people and places on the surface of the land. It provides all-over connectivity in any terrain as compared to other modes of transport.

Various means of transport are used under road transport such as bullock carts, cycles, rickshaws, buses, cars, etc.

2) Rail Transport:

Transportation of goods and passengers on rail lines through trains is called as rail transport. It occupies an important place inland transport system of our country and is the most dependable mode of transport to carry goods and passengers over long distances.

3. Air Transport:

Air transport carries goods and passengers through airways by using different aircraft like passenger aircraft, cargo aircraft, helicopters, etc. This is the fastest mode of transport but it does not provide door to door service. Air transport is also a suitable mode in case of an emergency like war, medical, natural calamities, rescue operations, etc. Air transport is classified as domestic transport and international transport.

4) Water Transport:

Water transport refers to the movement of goods and passengers on waterways by using various means like boats, steamers, launches, ships, etc. With the help of these means, goods and passengers are carried to different places, both within as well as outside the country. When the goods and passengers move inside the country, it is known as inland water transport. When the different means of transport are used to carry goods and passengers on the ocean or sea route, it is known as ocean or sea transport.

5) Monorail and Metro:

These are the types of rapid transit systems found in urban areas. These types of transport are energy efficient and less polluting too. A monorail is a railway in which the track consists of a single rail or a beam. The term is also used to describe the beam of the system, or the trains traveling on such a beam or track.

6) Ropeway:

Ropeway refers to a mode of transport that connects two places on the hills or across a valley or river. In ropeway transport, trolleys move on wheels connected to a rope and are used for carrying passengers or goods.

7) Pipeline Transport:

Pipeline transport sends goods through a pipe, most commonly liquid and gases. Short-distance systems exist for sewage, slurry, or water while long-distance networks are used for petroleum and natural gas.

What are the functions of warehouses?

Solution: 

A warehouse is defined as “an establishment for the storage or accumulation of goods.”

Warehousing refers to the storage of goods and consists of all those activities which are connected with the storage and preservation of goods. It is a means of storing goods.

Functions of Warehouses:

1) Storage:

This is the basic function of warehousing. Surplus commodities that are not needed immediately can be stored in warehouses. They can be supplied as and when needed by the customers.

2) Price Stabilization:

Warehouses play an important role in the process of price stabilization. It is achieved by the creation of time utility by warehousing. In warehouses, a usually large stock of goods is kept.

3) Risk bearing:

When the goods are stored in warehouses they are exposed to many risks in the form of theft, deterioration, fire, etc. Warehouses are constructed in such a way that they minimize these risks.

4) Financing:

Loans can be raised from the warehouse keeper or from financial institutions against the goods stored by the owner. Goods act as security for the warehouse keeper or for financial institutions. In this manner, warehousing acts as a source of finance for the businessmen for meeting business operations.

5) Grading and Packing:

Warehouses nowadays provide the facilities of packing, processing, and grading of goods. Goods can be packed in convenient sizes as per the instructions of the owner.

6) Transportation:

Warehouses can provide transportation facility to bulk depositors. It collects goods from the place of production and also sends goods to the place of delivery at the request of the owner.

7) Time and Place Utility:

Warehouses create time utility by preserving the goods until they are demanded. It also creates place utility by providing the goods at the place, where they are required.

8) Processing:

Certain commodities are not consumed in the form they are produced. Processing is required to make them consumable. e.g. Paddy is polished, fruits are ripened, etc. Sometimes warehouses undertake such activities on behalf of the owners.

Answer the following.

  1. What is insurance? Explain the principles of insurance?

Solution: 

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. Insurance is a contract between the insurer and the insured, whereby the insurer agrees to compensate the insured against loss. The insured has to pay a certain fixed sum of money on a timely basis to the insurer.

Principles of Insurance:

1. Principle of Utmost good faith:

In all types of insurance contracts, both parties must have the utmost good faith towards each other. The insurer and insured must disclose all material facts clearly, completely, and correctly. Failure to provide complete, correct, and clear information may lead to a non-settlement of the claim.

2. Principle of Insurable interest:

Insurable interest means some financial interest in the subject matter. The insured must have an insurable interest in the subject matter of insurance. Insurable interest is applicable to all insurance contracts.

3. Principle of Indemnity:

Indemnity means a guarantee or assurance to put the insured in the same financial position in which he was immediately prior to the happening of the uncertain event. Under this principle, the insurer agrees to compensate the insured for the actual loss suffered. The amount of actual compensation is limited to the amount assured or the loss, whichever is less. This principle is applicable to fire, marine, and general insurance. It is not applicable to life insurance as loss of life can never be measured in monetary terms.

4. Principle of Subrogation:

This principle is applicable to all contracts of indemnity. As per this principle, after the insured is compensated for the loss due to damage of the property insured, then the right of ownership of such property passes on to the insurer. This principle is applicable only when the damaged property has any value after the event causing the damage.

5. Principle of Contribution:

This principle is applicable to all contracts of indemnity where the insured has taken out more than one policy for the same risk or subject matter. Under this principle, the insured can claim the compensation only to the extent of actual loss either from one insurer or all the insurers.

6. Principle of Mitigation of loss:

Insured must always try to minimize the loss of the property, in case of uncertain events. The insured must take all possible measures and necessary steps to control and reduce losses.

Hence, it is the responsibility of the insured to protect the property and avoid loss.

7. Principle of Causa-Proxima:

The principle of causa Proxima means, when a loss is caused by more than one cause, then the proximate cause of a loss should be taken into consideration to decide the liability of the insurer. The property is insured against some causes and not against all causes, in such a case, the proximate cause of loss is to be found. If the proximate cause is the one which is insured against, the insurance company is bound to pay compensation and vice versa.

2. Define bank. Explain Different types of banks?

Solution: 

A bank is a financial institution which deals with deposits and advances and other related services. Bank provides various services related to money or financial requirements of consumers.

1) Central Bank :

The central bank is the apex financial institution in the banking industry in the country. Every country has its own central bank. In India, The Reserve Bank of India (RBI) is the central bank. The RBI was established in 1945 under the Reserve Bank of India Act, 1944. Some functions of RBI are as follows:

i) Frames monetary policy

ii) Issues currency notes

iii) Acts as a banker to the Government

iv) Acts as a banker’s bank to commercial and other banks in India.

2) Commercial Bank:

Commercial banks play an important role in the economic and social development of a country.

Commercial banks perform important functions such as:

Primary Functions i.e. accepting of deposits and lending of money and Secondary Functions i.e. agency functions and utility functions. In India, commercial banks are divided into three groups:

a) Public sector banks where the majority of the capital is held by the government such as Bank of India, State Bank of India etc.

b) Private sector banks are owned by a group of individuals such as AXIS bank, HDFC bank, etc.

c) Foreign banks are those banks that are established outside India but these banks have branches in India such as Citi Bank, HSBC, Standard Chartered, etc.

3) Co-operative Bank:

In India, co-operative banks are registered under Indian Co-operatives Societies Act and regulated under the Banking Regulation Act. Co-operative banks are popular in semi-urban and rural areas. The main aim of the co-operative banks is to provide credit to economically backward people, farmers, and small scale units. Generally, the co-operative bank works at three different levels:

a) Primary Credit Societies:

Primary Credit Co-operative society’s work at the village level. They collect deposits from members and the common public.

b) District Central Co-operative Bank:

These banks operate at the district level. They obtain deposits from the public at the district level and also get funds from the State Co-operative Bank for the purpose of lending.

c) State Co-operative Bank:

This bank operates at the state level. They provide funds to the central co-operative banks and primary credit societies as required.

4) Industrial Development Banks:

These are financial institutions that provide medium and long term funds to the business firms Examples of development bank are Industrial Finance Corporation of India (IFCI), State Finance Corporation (SFC), Maharashtra State Finance Corporation (MSFC), etc. Some functions of the development bank are as follows:

i) Provision of medium and long term funds to business units for the purpose of expansion and modernization.

ii) Underwriting of shares issued by public limited companies.

iii) Purchase of debentures and bonds.

5) Exchange Banks:

The exchange banks as well as large commercial banks facilitate foreign exchange transactions. Examples of exchange banks are Barclays Bank, Bank of Tokyo, etc. Some functions of the exchange bank are as follows:

i) Financing foreign trade transactions.

ii) Issue of letter of credit (LC)

iii) Discounting of bills of exchange.

iv) Remittances of dividends, interests, and profits, etc.

6) Regional Rural Bank:

Regional Rural Banks (RRBs) were established in 1975. These banks are sponsored by large public sector banks. The capital of RRB is contributed by Central Government 50%, State

Government 15% and Sponsored Banks 35%. RRBs mobilize deposits primarily from rural and semi-urban areas and provide loans and advances mostly to small and marginal farmers, agricultural laborers, and rural artisans.

7) Savings Bank:

The main objective of the savings banks is to encourage savings of the people, especially in rural areas. Examples of such banks include postal saving banks, commercial banks, and cooperatives banks.

8) Investment Bank:

These banks provide financial and advisory assistance to their customers. Their clients generally include business firms and government organizations. Investment banks facilitate mergers and acquisitions by undertaking research and providing advice on investment decisions. Generally, investment banks do not directly deal with the general public.

9) Specialized Banks:

These banks cater to the requirements and provide overall support for setting up a business in specific areas.

i) Export and Import Bank (EXIM): This bank provides financial assistance to exporters and importers.

ii) Small Industries Development Bank of India (SIDBI): This bank provides financing and development of the micro, small, and medium enterprise (MSME) sector.

iii) National Bank for Agriculture and Rural Development (NABARD): It is an apex institution for financing agricultural and rural sectors. NABARD provides both short term and long term credit through regional rural banks.

3. What is a warehouse? Explain its different functions.

Solution: 

A warehouse is defined as “an establishment for the storage or accumulation of goods.”

Warehousing refers to the storage of goods and consists of all those activities which are connected with the storage and preservation of goods. It is a means of storing goods.

Functions of Warehouses:

1) Storage:

This is the basic function of warehousing. Surplus commodities that are not needed immediately can be stored in warehouses. They can be supplied as and when needed by the customers.

2) Price Stabilization:

Warehouses play an important role in the process of price stabilization. It is achieved by the creation of time utility by warehousing. In warehouses, usually large stock of goods is kept.

3) Risk bearing:

When the goods are stored in warehouses they are exposed to many risks in the form of theft, deterioration, fire, etc. Warehouses are constructed in such a way that they minimize these risks.

4) Financing:

Loans can be raised from the warehouse keeper or from financial institutions against the goods stored by the owner. Goods act as security for the warehouse keeper or for financial institutions. In this manner, warehousing acts as a source of finance for the businessmen for meeting business operations.

5) Grading and Packing:

Warehouses nowadays provide the facilities of packing, processing, and grading of goods. Goods can be packed in convenient sizes as per the instructions of the owner.

6) Transportation:

Warehouses can provide transportation facility to bulk depositors. It collects goods from the place of production and also sends goods to the place of delivery at the request of the owner.

7) Time and Place Utility:

Warehouses create time utility by preserving the goods until they are demanded. It also creates place utility by providing the goods at the place, where they are required.

8) Processing:

Certain commodities are not consumed in the form they are produced. Processing is required to make them consumable. e.g. Paddy is polished, fruits are ripened, etc. Sometimes warehouses undertake such activities on behalf of the owners.

4. What are Services? Explain in detail different business services.

Solution: 

Services are intangible in nature; they are neither manufactured, transported nor stocked. Services cannot be stored for future use hence they are produced and consumed simultaneously. They are intangible in nature, heterogeneous, inseparable, inconsistent, perishable in nature, and require consumer participation.

Types of Business Services:

There are various types of services depending upon their nature and purpose. Some of the important services are as follows.

1. Banking: 

A bank is a financial institution which deals with deposits and advances and other related

services. Bank provides various services related to money or financial requirements of consumers.

2. Insurance: 

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. Insurance is a contract between the insurer and the insured, whereby the insurer agrees to compensate the insured against loss. The insured has to pay a certain fixed sum of money on a *timely basis to the insurer.

3. Transportation: 

Transportation is the movement of people, animals, and goods from one location to another location or it can be defined as a means of carrying goods and people from one place to another place. Generally, transportation is carried through various modes such as railways, roads, waterways, and the airway.

4. Warehousing: 

Warehousing refers to the storage of goods and consists of all those activities which are connected with the storage and preservation of goods. It is a means of storing goods. Warehousing can be defined as a group of activities connected with the storing and preserving of stored goods from the time of production until the time of consumption.

5. Communication: 

The process of passing any information from one person to another with the help of some medium is termed as communication. Communication is a very simple process where the message is being transferred from a sender to the receiver. The receiver after receiving the message understands it in the desired form and then acts accordingly.

5. What is communication? Explain in detail various types of communication.

Solution: 

The process of passing any information from one person to another with the help of some medium is termed as communication. Communication is a very simple process where a message is being transferred from a sender to the receiver. The receiver after receiving the message understands it in the desired form and then acts accordingly.

The types of communication

Following are various types of communication:

I) Postal Services

II) Modem means of communication

I) Postal Services:

The postal services in India come under the Department of Post and Telegraph which is part of the Ministry of Communication and Information and Technology.

Types of postal services:

1. Mail Services:

Mail services are further classified as follows:

a. Inland Letter: 

Inland letter card is used for transmission within India only. Inland letter ensures the confidentiality of the message.

b. Envelope: 

It enables sending confidential messages as well as enclosures like cheques, photos, resumes, etc.

c. Parcel: 

Parcels of a specified size and weight can be sent across the country as well as outside the country. Anything can be sent in a parcel except those items which are prohibited. Parcels can be insured.

d. Book-Post: 

Printed books, magazines, journals, etc. can be sent through book posts.

2. Specialized Postal Services:

Specialized Postal Services are further classified as follows:

a. Business Post:

Business Post provides complete mailing solutions right from mail preparation to mail delivery.

b. Logistics Post:

Logistics Post provides business customers a cost-effective and efficient solution, which manages the entire value chain from collection to storage to transmission to distribution across the country.

c. Bill Mail Service: 

Communications in the nature of financial statements, bills, monthly account bills, or any such other items of similar nature may be posted by a service provider to customers at least once in 90 days under this service.

3. Money Remittance Services:

Money Remittance Service is further classified as follows:

a. Electronic Money Transfer (eMO):

A money order is an order issued by the Post Office for the payment of a sum of money to the person whose name is mentioned in the money order. It is sent through the agency of the PostOffice.

b. Instant Money Order (IMO): 

IMO is an instant web-based money transfer service through Post Offices (IMO Centre) in India between two resident individuals in Indian territory.

c. International Money Transfer:

Money Transfer Service Scheme is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India.

4. Retail Services:

Retail Services are further classified as follows:

a. Retail Post:

Under Retail Post, a range of services is offered including the collection of electricity bills, collection of taxes, collection of other bills and fees for the Government, etc.

b. e-Post: 

Through ePOST, customers can send their messages to any address in India with a combination of electronic transmission and physical delivery through a network of more than 1,55,000 Post Offices.

II) Modern means of communication:

a. Courier Service:

An individual or a company responsible for the exchange of items between two or more parties is known as courier service. Courier services are usually employed by· a company and they charge a flat rate to the party using the courier service. Courier s·ervices are different from ordinary mail services by features such as speed, security, tracking, signature, and swift delivery times.

b. Internet: 

It is a network of networks that consists of private, public, academic, business, and government networks of local to global scope, linked by a broad array of electronic, wireless, and services, such as the inter-linked hypertext documents and applications of the World Wide Web (WWW), electronic mail and file sharing.

c. Email:

Electronic mail (email or e-mail) is a method of exchanging mail between people using electronic devices. Today’s email systems are based on a store-and-forward model.

7. What is road transport? Explain the advantages and disadvantages?

Solution: 

Roads are means that connect people and places on the surface of the land. It provides all-over connectivity in any terrain as compared to other modes of transport. India has a network of village roads, district roads, state highways, and national highways which form the economic backbone of the country. In India, the Ministry of Road Transport and Highways (MoRTH) looks after the development of surface transport throughout the country.

Advantages:

1) It is a cheap mode of transport compared to other modes of transport.

2) Perishable goods can be transported at a faster speed by road carriers over a short distance.

3) It is a flexible mode of transport as loading and unloading are possible at any destination.

4) It provides door to door service. Also, it functions as a feeder transport to other modes of transport.

5) It helps people to travel and carry goods from one place to another place where any other mode of transport is not available.

Disadvantages:

1) Due to limited carrying, capacity road transport is not economical for long-distance transportation.

2) Transportation of heavy and bulky goods through road transport involves high costs.

3) Road transport is affected by adverse weather conditions such as floods, rain, landslides, etc.

4) There is a possibility of road accidents which are common.

5) It causes pollution due to the emission of gases which affect the health of people.

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