II. Very Short Answer Questions
Question 1. Who is called Sole Trader?
Answer: Proprietorship is a form of business organization in
which an individual introduces his own capital, uses his own skill and
intelligence in the management of its affairs and is solely responsible for the
results of its operations.
Question 2. What are the non - corporate enterprises?
Answer:
1. Sole trading concern
2. Partnership firm
3. Joint Hindu family business.
Question 3. What are the corporate enterprises?
Answer:
1. Government — Public Undertakings, Public Utilities.
2. Private —Joint stock companies
3. Co — operative society
Question 4. For which of the following types of business do
you think a sole proprietorship form of organization would be more suitable,
and why?
1. Grocery store
2. Medical store
3. Craft center
4. Legal consultancy
5. Internet cafe
Answer: Sole proprietorship will be most suitable in case of
a Grocery store as in this case,
initial business setting-up costs are not very high, the legal requirements are
minimum and the scale of operations is small. Besides, direct personal contact
is needed with the customers in the case of a grocery store and hence, sole
proprietorship where there is a single person who owns and manages the business
may be more suitable as he would be able to know his customers well and thus
serve them better.
III. Short Answer Questions
Question 1. How is it possible to maintain secrecy in sole
proprietorship?
Answer: In sole proprietorship as the trader is the sole
owner of the business, the secrecy can be maintained easily.
Question 2. What is unlimited liability?
Answer: The liability of the proprietor for the debts of the
business is unlimited. The creditors have the right to recover their dues even
from the personal property of the proprietor in case the business assets are
not sufficient to pay their debts.
Question 3. Write any three characteristics of sole
proprietorship.
Answer:
1. Ownership by one
man: This is owned by single person. The sole trader contributes the
required capital. He is not only the owner of the business but also manages the
entire affairs.
2. Freedom of work
and Quick Decisions: Since.an individual is himself as an owner, he need
not consult anybody else. Hence he can take quick decisions.
3. Unlimited Liability: When his business assets are not
sufficient to pay off the business debts he has to pay from his personal property.
Question 4. Give some examples of sole trading business.
Answer: Beauty parlor, barbershop, general store and sweet
shop run by a single owner.
Question 5. Define Sole trading business.
Answer: "Sole proprietorship is that form of business
organization which is owned and controlled by a single individual. He receives
all the profits and risks of his property in the success or failure of the
enterprise" — Wheeler.
IV. Long Answer Questions
Question 1. Explain the characteristics of sole trading
business.
Answer:
Answer:
1. Ownership by one
man: This is owned by single person. The sole trader contributes the required
capital. He is not only the owner of the business but also manages the entire
affairs.
2. Freedom of work
and Quick Decisions: Since an individual is himself as a owner, he need not
consult anybody else. Hence he can take quick decisions.
3. Unlimited
Liability: When his business assets are not sufficient to pay off the
business debts he has to pay from his personal property.
4. Enjoying Entire
Profit: He strives tirelessly for the improvement and expansion of his
business and enjoys all the benefits of his hard work.
5. Absence of
Government Regulation: A sole proprietor concern is free from Government
regulations. No legal formalities are to be observed in its formation,
management or in its closure.
6. No Separate
Entity: The sole trading concern comes to an end with death, disability,
insanity and insolvency of the individual.
7. Maintenance of
Secrecy: Since he/she manages all the affairs of the business, the secrecy
can be maintained easily.
Question 2. What are the advantages of sole trading
business?
Answer:
1. Easy Formation:
No legal formalities are required to initiate a sole trading concern. Any
person capable of entering into a contract can start it, provided he has the
necessary resources for it.
2. Incentive to Work
hard: There is a direct relationship between effort and reward. The fact
that the entire profit can be taken by himself without sharing with anybody
else induces him to work ceaselessly.
3. Small Capital:
Small capital is an important as well as specific advantage of sole
proprietorship. Sole proprietor can start business with small capital.
4. Credit Standing:
Since his private properties are held liable for satisfying business debts, he
can get more financial assistance from others.
5. Personal Contact
with the Customers:
Since sole proprietor knows each and every customer
individually he can supply goods according to their taste and preferences. Thus
he can cultivate personal relationship with the customers.
6. Flexibility:
The sole trader can easily adjust himself to the changing requirements of his
business.
Question 3. What are the disadvantages of sole trading
business?
Answer:
1. Limited Capital:
Since the capital is contributed by one individual only, business operations
have necessarily to be on a limited scale.
2. Limited Managerial
Skill: Single person's intelligence and experience may not help him beyond
a certain stage. Since he has to focus on each and every activity, his
managerial ability is bound to be limited.
3. Unlimited
Liability: The creditors have the right to recover their dues even from the
personal property of the proprietor in case the business assets are not
sufficient to pay their debts.
4. Lack of Specialization: Since the business unit is small and the financial
resources are limited, experts in different fields cannot be employed to secure
maximum advantages.
5. Hasty Decisions:
Sole proprietor is more likely to take hasty decision as he need not consult
anybody else.