Students must start practicing the questions from CBSE Sample Papers for Class 12 Entrepreneurship with Solutions Set 2 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Maximum Marks: 70
Time Allowed: 3 Hours

General Instructions:

The question paper contains 4 sections – A, B, C, and D.

  1. Section A contains Multiple choice questions.
  2. Section B-2 marks
  3. Section C-3 marks
  4. Section D-5 marks

Section – A (18 Marks)

Question 1.
All basic ideas have to undergo a vigorous combination of process to identify viable opportunities. Identify the correct combinations from the given options. [1]
(A) Examination and synthesis
(B) Examination and evaluation
(C) Examination, evaluation and analysis
(D) Examination, evaluation, analysis and synthesis
Answer:
(D) Examination, evaluation, analysis and synthesis

Explanation: All basic ideas have to undergo a vigorous process of examination, evaluation, analysis and synthesis to identify viable opportunities. A strategic positioning is required to convert an idea into an opportunity. This simply means that knowledge, skills, competendes and creative thinking needed to develop an idea are backed by factors critical for market success. When knowledge, skills, competendes and creativity are strategically applied or market orientation, a viable venture is born.

Question 2. ‘Texus Ltd’ deals in making skin care products. The company decided to launch a new product. They also decided to charge a price to cover the cost of producing a product plus a reasonable profit. [1]
The suggested pricing strategies are:
(i) Cost-plus pricing
(ii) Skimming pricing
(iii) Penetration pricing
(iv) Competitive pricing
(A) (i) only
(B) (ii), (iii)
(C) (i), (iv)
(D) (iv) only
Answer:
(A) (i) only

Explanation: The most common technique is costplus pricing, where the manufacturer charges a price to cover the cost of producing a product plus a reasonable profit. The cost-plus method is simple, but it does not encourage the efficient use of resources. Cost-plus pricing is typically based on a manufacturing estimate. Biggest advantage of this is that company knows exactly the amount of expenditure that has incurred on making a produd and therefore they can add profit margin accordingly which helps in achieving the desired revenue for a firm.

Question 3.
Which amongst the following would help an entrepreneur to determine the Gross profit? [1]
(i) Selling price per unit
(ii) Cost price per unit
(iii) Revenue
(iv) Working capita
(A) (i), (iii)
(B) (ii), (iii). (iv)
(C) (i), (ii)
(D) (iii), (iv)
Answer:
(C) (i), (ii)

Explanation: Gross profit is the profit a business makes after subtracting all the costs that are related to manufacturing and selling its products or services. It is calculated as: Gross Profit = Selling price per unit-cost price per unit.

Question 4.
Raman started a gym named as ‘Strong Body’. He installed large number of machines and equipment of different types and appointed qualified trainers to help the customers in the use of machines. Initially he kept a low fee per hour so that boys and girls belonging to the poor families may also avail the facilities of the gym. Very soon his gym became popular and he started operating in three shifts. For this, he appointed additional trainers. He also installed extra machines so that more customers could been rolled. In one year, he started earning good profit. He took a nearby building on rent and started a ‘Recreation and Health Club’ for the senior citizens of the locality on very nominal charges. He also encouraged young boys and girls to participate in the cleanliness drive started by Prime Minister. They agreed and started giving one hour daily for cleanliness of the nearby areas before opening of the ‘strong body’ gym and ‘Recreation Club’. Out of the following, identify the type of business expansion that took place under the entrepreneurship of Raman. [1]
(A) Internal expansion
(B) External expansion
(C) Merger
(D) None of these
Answer:
(A) Internal expansion

Explanation: Internal expansion results from the gradual increase in the activities of the concern. The concern may expand its present production capadty by adding more machines or by replaang old machines with the new machines with higher productive capadty. The internal expansion can also be undertaken by taking up the production of more units or by entering new fields on the production and marketing sides. Internal expansion may be financed by the issue of more share capital, generating funds from old profits or by issuing long-term securities. The net result of internal expansion is the increase in business activities and broadening the present capital structure.

Question 5.
Vinita, Bhavana, Rani and Nandini are all good friends in the age group of 15-17 years of age. All of them decided together to start a business venture of making soaps at home using natural ingredients. They decided to name their venture as ‘O&HM’ meaning Organic and Home Made. They spoke about their venture to their parents and asked them if their business could be registered so that it will be easy to divide the profits. Vinita suggested that they should register it as a Partnership firm. Can they form a partnership firm? [1]
(A) No, they cannot form a partnership firm since all of them are minors.
(B) Yes, they can form a partnership firm.
(C) No, since minimum number of people required to form a partnership is.
(D) None of the above.
Answer:
(A) No, they cannot form a partnership firm since all of them are minors.

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Explanation: Section 30 of the Indian Partnership Act 1932 contains legal provisions about a minor in a partnership. Indian Contract Act 1857 dearly states that no person less than the age of 18, i.e. a minor can be a party to a contract. Minors cannot form a partnership firm as they are incompetent to enter into contract but can be admitted to the benefits of a running firm. The minor is not entitled to take part in conducting of the business as he has not representative capadty to bind the firm. The minor cannot bring any suit against the partners for an account or payment of his share of the property or profits of the firm.

Question 6.
Rohan a budding musician created a lot of musical notes for his upcoming video. He was extremely thrilled to listen to his compositions. He presented his compositions to his friend Victor. The release of musical video of Rohan was getting delayed for a few months due to shortage of cash. Meanwhile Victor used most of the musical compositions of Rohan in his video. Rohan was extremely upset to know that his friend had cheated him and used all his work. Identify which of the following intellectual property rights Rohan could have done to save his work.[1]
(A) Copyrights
(B) Trademark
(C) Patents
(D) Industrial
Answer:
(A) Copyrights

Explanation: Intellectual property (IP) rights are the legally recognized exdusive rights to creations of the mind. Under this law, owners are granted certain exdusive rights to a variety of intangible assets. Common types of intellectual property rights indude copyrights, trademark, patents, industrial design rights and trade secrets.Copyright gives the creator of original work exclusive rights to it, usually for a limited time. It means apply to a wide range of creative, intellectual or artistic forms or work. For example, musical composition, literary work such as poems, plays etc.

Question 7.
Given below are information obtained from the financial accountant of ABC ltd. What will be the ‘Return on Equity’? [1]
Capital: ₹8,00,000
10% Loan: ₹4,00,000
Net profit before interest ₹1,40,000.
(A) 13%
(B) 13.5
(C) 15%
(D) 12.5%
Answer:
(D) 12.5%

Explaination:

\(\begin{aligned}
\text { Return on Equity } &=\frac{\text { Net Profit after Tax }}{\text { Equity }} \times 100 \\
\text { Interest } &=4,00,000 \times \frac{10}{100}=₹ 40,000 \\
\text { Profit after Interest } &=1,40,000-40,000=1,00,000 \\
\mathrm{ROE} &=\frac{1,00,000}{6,00,000} \times 100=12.5 \%
\end{aligned}\)

Question 8.
The entrepreneurs have an option to brand their product individually, as it signifies:[1]
(A) Separate brand name
(B) Group brand name
(C) Family brand name
(D) None of these
Answer:
(A) Separate brand name

Explanation: Entrepreneur can follow different polities in choosing brand name keeping in mind the range of products offered by him/her. The new product is given a name so that it can get public attention. Thus, as, the whole meaning and direction of a company can be explained through its brand management strategy, an entrepreneur should be very careful in dedding/in choosing its brand strategy. In individual brand name an entrepreneur can choose distinct names for each of his offering, i.e. every product is promoted on the basis of a separate brand name.

Question 9.
B spends ₹2,00,000 to open a shop and earns a net profit of ₹40,000 in one year. What will be B’s annual return
on investment? [1]
(A) 40%
(B) 25%
(C) 10%
(D) 20%
Answer:
(D) 20%
Explaination:
\(\begin{aligned}
\mathrm{ROI} &=\frac{\mathrm{EBI}}{\text { Total Investment }} \times 100 \\
&=\frac{\mathrm{₹} 40,000}{\mathrm{₹} 2,00,000} \times 100 \\
&=20 \%
\end{aligned}\)

Question 10.
Assertion(A): Business ideas come from a careful analysis of market trends and consumer needs [1]
Reason(R): By following different ways for generating ideas an entrepreneur collects a number of ideas.
(A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true but Reason (R) is false.
(D) Assertion (A) is false but Reason (R) is true.
Answer:
(B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Explanation: The process of creating, developing, and communicating ideas which are abstract, concrete, or visual. It includes the process of constructing through the idea, innovating the concept, developing the process, and bringing the concept to reality. Business ideas are all around us. Some business ideas come from a careful analysis of market trends and consumer needs; others come from serendipity. By following different ways for generating ideas an entrepreneur collects a number of ideas. The process of generation of ideas can be streamlined by developing an awareness for different idea fields. This will help the entrepreneur in enlarging the scope of thinking, at the same time structuring the ideas according to convenient frames of reference.

Question 11.
Which of the following is to facilitate transfer of resources from the savers to the entrepreneurs seeking funds for setting new enterprises?[1]
(A) Primary market
(B) Capital market
(C) Angel Investor
(D) None of these
Answer:
(A) Primary market

Explanation: Primary market is basically to facilitate transfer of resources from the savers to the entrepreneurs seeking funds for setting new enterprises and expanding. The entrepreneurs highly bank on this type of “issue” to generate funds. When for the first time, entrepreneur for the purpose of obtaining capital funds decides to issue securities to the public, its first sale is in the primary market. Such issues of securities” are even referred as “new money issues”.

Question 12.
Assertion (A): A franchise agreement is the official document [1]
Reason (R): Franchising opportunities have often evolved from changes in the environment as well as important social trends.
(A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true but Reason (R) is false.
(D) Assertion (A) is false but Reason (R) is true.
Answer:
(B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).

Explanation: A franchise agreement is the legal document that binds the franchisor and franchisee together. This document explains what the franchisor expects from the franchisee in running the business. The agreement is designed to assure that all of the franchisees within an organization are treated equitably. The expectations must be uniform throughout the system. Franchising allows entrepreneurs to be in business for themselves, but not by themselves. Franchising opportunities have often evolved from changes in the environment as well as important social trends.

Question 13.
Assertion (A): Different products will have different operating cycles. [1]
Reasoning (R): Longer the operating cycle, working capital quantum is more.
(A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A)
(C) Assertion (A) is true but Reason (R) is false.
(D) Assertion (A) is false but Reason (R) is true.
Answer:
(B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A)

Explanation: The cash conversion cycle (CCC or Operating Cycle) is the length of time between a firm’s purchase of inventory and the receipt of cash from accounts receivable. It is the time required for a business to turn purchases into cash receipts from customers. CCC represents the number of days a firm’s cash remains tied up within the operations of the business. Different products will have different
operating cycles. If the conversion takes longer then the cycle will be longer. For trading, where there is no manufacturing (or conversion), the operating cycle will be shorter. Longer the operating cycle, working capital quantum is more; shorter the cycle, is need.

Read the following passage and answer the questions from14 to question 18. m

Sahil, a fitness freak NRI, had done his masters in nutritional sciences from U.K., during his vacations, he was disappointed to see that no Gymnasium in Delhi had a workout module to suit his requirement. Looking at the statistics of many health issues, he has a great concern for fitness. Anyhow, Fitness Fine Gymnasium of his friend offered him freedom to exercise the way be wanted. In short time, Sahil became popular amongst the other members because of his knowledge, experience, competency,tactics and tips on exercising. He now explored deeply his curiosity of starting a Gymnasium in Greater Kailash 2, having a fusion of both diet and exercise under one roof. He conducted a market research and subconsciously as simulated a whole data bank of information pertaining to life style, interests, etc. of people in and around the area. He approached his father for financial help of ?25 lacs as he had ?20 lacs only. The ground floor of his flat was to be converted into a Gymnasium. He started networking and negotiating with the manufacturers who could provide him with customized machines of his choice/’One of the first tasks demanded of an entrepreneur is to manifest creative ability through the conceiving of new product-market propositions”.

Question 14.
Which of the following factors involved in sensing opportunities by Sahil? [1]
(A) Creativity
(B) Ability to perceive
(C) Ability to harness
(D) None of these
Answer:
(A) Creativity

Explanation: Creativity in innovating a solution and vision. The entrepreneur should be able to creatively identify an idea to generate a valuable solution to a problem. Once the solution is identified their vision to convert the solution into business opportunity helps them to move forward, overcoming all the obstacles. They constantly overcome adversity, exercise control over the business and make a significant difference.

Question 15.
Which of the following step in the creative process is mentioned in the below lines “Looking at the statistics concern for fitness”? [1]
(A) Idea Germination
(B) Preparation
(C) Incubation
(D) Illumination
Answer:
(A) Idea Germination

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Explanation: “Looking at the statistics…concern for fitness,” acted as the seeding stage for his idea to launch hi-tech gymnasium. It is this stage where the entrepreneur recognizes the existence of an opportunity. Being himself fitness conscious he explored an opportunity according to his intent. Idea germination It is the stage where the entrepreneur recognises that an opportunity exists. The idea germination takes place according to interest,curiosity of the entrepreneur according to which opportunity is explored and exploited to its best potential. Creative idea germinates besides the interest, the need of a specific problem or area of study.

Question 16.
Identify the step in the creative process in which on the basis of the idea, interest and curiosity the need is adjudged by the entrepreneur?[1]
(A) Idea Germination
(B) Preparation
(C) Incubation
(D) Illumination
Answer:
(B) Preparation

Explanation: On the basis of the idea, interest and curiosity the need is adjudged by the entrepreneur and he starts looking for the answer to implement the idea. If the idea is to launch a new product or service then market research is conducted. That happens because the seed of curiosity has taken form of an idea, the entrepreneurs foresee the future of the product. Sahil conducted a market research in and around the target market to foresee the future of his idea.

Question 17.
Which of the following step in the creative process is mentioned in the below lines “He started networking and negotiating with the manufacturers who could provide him with customized machines of his choice”? [1]
(A) Idea Germination
(B) Preparation
(C)Incubation
(D) Illumination
Answer:
(D) Illumination

Explanation: In this period of illumination the idea re-surfaces in realistic way and entrepreneur comes out with viable plan to give practical shape by collecting raw-material, arranging funds, policy¬ making for the implementation ofidea. Sahil is now trying to give his idea a practical shape through aviable plan by collecting raw materials, arranging funds, negotiating so as to implement his idea.

Question 18.
Which of the following is the most difficult phase in the creativity process? [1]
(A) Idea Germination
(B) Preparation
(C) Incubation
(D) Verification
Answer:
(D) Verification.

Explanation: Verificationis also called the validation or testing stage. This is where the idea is verified to prove that it has value. This is the most difficult phase of creativity as obstacles begin to appear. This is the developing stage in which knowledge is developed into application.

Section – B (12 Marks)

Question 19.
Explain any two characteristics of sole proprietorship form of business organization. [2]
OR
What are the consequences for non-registration of a partnership firm? Give any two.
Answer:
Following are the characteristics of sole proprietorship form of business organization:
1. Individual ownership: This business is exclusively owned by a single person.
2. Individual management and control: “What is to be done, how it is to be done, and when it is to be done – all affairs are managed and controlled by the sole proprietor. Though, competent people can also be employed for efficient management.
3. Individual financing: All investment is made by the proprietor. Though, if required he/she has access to loans and debts to procure funds for business.
4. No separate legal entity: Legally, the proprietor and proprietorship are one and the same business and owner exists together, thus with owner’s death, business too dies.
5. Unlimited liability: The proprietor is liable/ responsible for all losses arising from business. In case the business assets are insufficient to pay off liabilities, his/her personal property can be called upon to pay his business debts.
6. Sole beneficiary: The sole proprietor alone is entitled to all the profits and losses of business. So, he/she puts his/her heart and soul to increase his/her profits.
7. Easy formation and closure: Sole proprietorship are subjected to minimum legal formalities and regulations both at the time of commencing and/or closing.
8. Limited area of operation: This form of business generally has a limited area of operation due to limited finance availability and limited managerial abilities.

OR

Consequences for non-registration of a partnership firm are as follows:
1. A partner cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act.
2. A right arising from a contract cannot be enforced in any Court by or on behalf of the firm against any third party.
3. Further, the firm or any of its partners cannot claim a set off (i.e. mutual adjustment of debts owned by the disputant parties to one another) or other proceedings in a dispute with a third party.

Question 20.
‘Winber Motors Ltd.’ was a car dealer. It took over a car manufacturing plant ‘Speedcart & Co., and started a new business in the name of ‘Unique cart Ltd.’ to synergise and capture a major share of the market and to maximize their profits. Like their competitors, they decided to sell their cars through company appointed dealers (retailers) in various parts of the country. This type of distribution network will enable the company to retain control over the distribution process. [2]
1. Identify and explain the type of expansion.
2.Also, explain the form of the type of expansion identified in (i) above.
Answer:
1. External Expansion: External expansion refers to business combination where two or more concerns combine and expand their business activities. In the process of combination, two or more units engage in similar business or related process or stages. Sometimes stages of the same business join with a view to carry on their activities or shape, their polices on common basis some other or in coordination for mutual benefit or maximum profits. The combination may be among competing units or units engaged in different processes. After combination, the constituted firm pursues some common objectives or goals.

2. Acquisition: It could be acquisition of control, leading to takeover of a company. It could be acquisition of tangible assets, intangible assets, rights and other kinds of obligations. They could also be independent transactions and may not lead to any kind of takeovers or mergers.

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Question 21.
Read the following passage and identify and explain any two elements in the PESTEL model which is present in this passage. [2]

‘Dhanwantri Ayurveda Ltd. (DAL)’ are the manufacturers of soaps, detergents, dental care products, cosmetics, grocery products and even medicines based on Ayurveda. It has grown since its inception. The reasons for the growth and popularity of DAL can be attributed to the fact that it started its operations at a time when the Government in the country is moving towards making the country self-reliant. DAL is following government initiatives like ‘Make in India’ campaign. Government is promoting Ayurveda through the “Ayush Ministry” that promotes Yoga,Ayurveda and other traditional and complementary medicines.

This gives DAL a huge boost as it itself claims to be an Ayuredic company. DAL’s input cost increases or decreases based on the taxation policies of the government. Implementation of Goods and Services Tax (GST) has benefited DALas the genre of DAL is not taxable. With inflation rate increasing continuously, people are looking for cheaper and effective substitutes which are provided by the extensive range of products provided by DAL. The people of India are becoming more health conscious and want to consume organic products. The company focuses only on retailing in India through its own retail chain stores and also through online mode through its E-commerce website Ayur Pro. The detergent products of the company are non-polluting. The packing material used for the products is also biodegradable. DAL has a separate department to prosecute and get penalized those who misrepresent its brand and its name.
Answer:
On the basis of PESTEL model:

Political: DAL’s input cost increases or decreases based on the taxation policies of the government. Implementation of Goods and Service Tax (GST) has benefited DAL as the genre of DAL is not taxable

Economic: With inflation rate increasing continuously, people are looking for cheaper and effective substitutes which are provided by the extensive range of products provided by DAL.

Social: The people of India are becoming more health conscious and want to consume organic products.

Technological: Through online mode through its E-commerce website Ayur Pro.

Ecological: Detergent products of the company are non-polluting. The packing material used for the products is also bio degradable.

Legal: DAL has a separate department to prosecute and get penalized those who misrepresent its brand and its name.

Question 22.
“Entrepreneurs use this strategy to employ only for a limited duration to recover most of the investment made to build the product. They also used this method to have some setbacks as it could leave the product at a high price against the competition/’Comment on pricing strategy method used by an entrepreneur here and explain any two of its disadvantages. [2]
OR
What is Synergy? In what forms it can take place?
Answer:
The pricing method used by an entrepreneur is skimming. Selling a product at a high price, sacrificing high sales to gain a high profit is therefore “skimming” the market. Skimming is usually employed to reimburse the cost of investment of the original research into the product commonly used in electronic markets when a new range, such as smart phones, are firstly dispatched into the market at a high price.

This strategy is often used to target “early adopters” of a product or service. Early adopters generally have a relatively lower price- sensitivity. This can be attributed to the imeed for the product outweighing their need to economics, a greater understanding of the product’s value, or simply having a higher disposable income.

Disadvantages of skimming price:
This strategy can backfire if there are close competitors and they also introduce same products at lower price then consumers will think that the company always sells the products at higher prices which will result in consumers abandoning other products of the company also. Price skimming is not a viable option when there are strict legal and government regulations regarding consumer rights. If the company has history of price skimming then consumers will never buy a product when it is newly launched, they would rather wait for a few months and buy the product at lower price.

OR

Synergy is the most essential component of mergers. In mergers, synergy between the participating firms determines the increase in value of the combined entity. Synergy is the difference between the value of the combined firm and the value of the sum of participants in a merger. It occurs in the form of revenue enhancement and cost savings. For example, if firms A and B merge and the value of the combined entity—V(AB)—is expected to be greater than (VA+VB), the sum of the independent values of A and B, the combined entity is said to be benefitting through synergy.
It can take place in the following forms:

Operating synergy: It refers to cost savings that come through economies of scale or increased sales and profits.

Financial Synergy: This is the direct result of financial factors such as lower taxes, higher debt capacity or better use of idle cash. When a firm with accumulated losses or unabsorbed depreciation merges with a profitable firm and the combined firm can set off such losses against its profits, a financial synergy, known as tax shield, occurs.

Question 23.
Aditi started her boutique business near an industrial area and she was not getting clients as she had expected, before starting the boutique? Suggest the various factors that she has to look into before venturinginto business. [2]
Answer:
She has ignored the following factors:
Whether there is a good market for the product that she is going to produce. The rate of return on the investment is attractive or not.
Following factors, she must look into before venturing into business.

Assured market scope. An attractive and acceptable rate of return on investment. Practicability of the idea. Competence of the entrepreneur to encash it. Potential of future growth.

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Question 24.
When an entrepreneur decides to go public and become a public company, he/she tends to be in advantageous positions and get many benefits out of it. Explain the benefits. [2]
OR
Angel investor and venture capital are two sources of raising finance for an entrepreneur. Explain the concept of both the sources stating one distinguishing feature of each.
Answer:
Advantages to an entrepreneur ongoing public are as follows:
Access to capital: The primary advantage to an entrepreneur by going public is access to capital. This capital is not to be repaid and does not involve any charge on interest. The only reward the IPO investors seek is an appreciation of their investment and possibly dividends.
Mergers and acquisitions: Public stock of a company can be used for businesses to grow through acquisitions.

Higher valuations: Public companies are typically valued more than private companies.

Benchmark trading price: The trading price of a public company’s stock serves as a benchmark of the offer price of other securities.

Capital formation: Raising capital later is typically easier because of the extra liquidity for the investors.

Incentives: Stock options and stock incentives can be very helpful in attracting employees.

Reduced business requirements: While an underwritten initial public offering requires significant earnings, the lack of earnings does not keep a private company from going public.

Less dilution: There is less dilution of ownership control compared to an IPO.

Liquidity: A public company provides liquid-ity for management, minority shareholders and investors.

Prestige: Added prestige and visibility with customers, suppliers, as well as the financial community.

OR

1. Angel investor: It an affluent individual who provides capital for a business start-ups and early stage companies using a high-risk, high return matrix usually in exchange for convertible debt or ownership equity.
2. Venture capital: It a type of a private equity capital provided as seed funding to early stage, high potential, high risk, growth up companies/entrepreneurs.
3. Distinguishing feature: Angel investors participate in the management of the business but venture capitalists do not take part in the management of the business.

Section – C (15 Marks) 

Question 25.
Rohan after completing MBA from IIM Kolkata has joined a multinational company in the capacity of Marketing Manager. The company deals in diversified range of products. It deals with electronic items (like LED bulbs, blenders etc.) engineering goods, along with heavy machinery to be used in chemical industries. He has to decide the channels of distribution best suited for the company’s product. Therefore, Rohan decided to use wholesalers and retailers for electronic goods and engineering goods and direct selling for heavy machinery. [3]
1. Identify and explain the element of marketing mix discussed above.
2. Specify the component of identified marketing mix element stated above.
3. Name and explain the types of the identified components used by Rohan.
Answer:
The element of marketing mix discussed above is Place Mix. A channel of distribution or trade channel is defined as the path or route along which goods move from producers or manufacturers to ultimate consumers or industrial users. In other words, it is a distribution network through which the producer puts his products in the market and passes it to the actual users.

This channel consists of: producers, consumers or users and the various middlemen like wholesalers, selling agents and retailers (dealers) who intervene between the producers and consumers. Therefore, the channel serves to bridge the gap between the point of production and the point of consumption thereby creating time, place and possession utilities. In Place mix, the channels of distribution are stated here. Rohan has used indirect or two-level channel for electronic and engineering goods whereas direct or zero level channel for heavy machinery. Two levels are the most common and traditional channel of distribution.

Under it, two middlemen i.e. wholesalers and retailers are involved. Here, the producer sells his product to wholesalers, who in turn sell it to retailers. And, retailers finally sell the product to the ultimate consumers. This channel is suitable for the producers who have limited finance, narrow product line and need expert services and promotional support of wholesalers. This is mostly used for the products with widely scattered market. Zero level channel is the simplest and shortest channel in which no middlemen are involved and producers directly sell their products to the consumers. It is fast and economical channel of distribution.

Under it, the producer or entrepreneur performs all the marketing activities himself and has full control over distribution. A producer may sell directly to consumers through door-to-door sales persons, direct mail or through his own retail stores. Big firms adopt this channel to cut distribution costs and to sell industrial products of high value. Small producers and producers of perishable commodities also sell directly to local consumers.

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Question 26.
An organisation will have to look into three situations while framing the production plan. Explain these three situations. [3]
OR
What are the key areas, for a sound financial plan to work?
Answer:
The three situations involved in production plan are:
1. No manufacturing involved: If the new venture does not include any manufacturing function, say it’s a trading firm or a service provider, then this section will stand eliminated from the plan.
2. Partial manufacturing: If some or all the manufacturing process is to be subcontracted or outsourced, then the production plan should describe: (a) Name and location of subcontractor(s) (b) Reasons for their selection (c) Cost and time involved (d) Any contracts that have been completed, etc. In such cases, a clear mention of what entrepreneur intends to do himself and what he plans to get it done from outside is required.
3. Complete Manufacturing: If the manufacturing is to be carried out in whole by the entrepreneur, he/she will need to describe: (a) the physical plant layout, (b) the machinery and equipment required to perform the manufacturing operations, (c) raw materials and suppliers names, addresses, terms and conditions, (d) cost of manufacturing (e) any future capital equipment required, etc.

OR

Finance is one of the most important pre-requisites to establish an enterprise. Availability of finance required by the entrepreneur facilitates him to bring together man, material, machines and methods to produce goods/services. As timely availability of funds in right volume is key to entrepreneurial success, the entrepreneur should develop a sound financial plan discussing:

  • Financial requirements
  • Sources of raising funds
  • Exact assessment of the revenue, cost, profits, cash flow dynamics, stock of inventory, loans, etc.

Question 27.
largest chocolate manufacturer ‘Cadibo in India merged with well-known Potato chips manufacturer ‘Best- Chips’. To impart a distinct identity to the merged company they decided to re-design their ‘Logo’ for their new brand name ‘Cadibo = Best – Chips. [3]
1. Identify and explain the ‘type of merger’ discussed above.
2. State one more type of merger in addition to the one identified in part (i).
Answer:

1. Product extension merger: Takes place between two business organizations that deal in products that are related to each other and operate in the same market. The objective of this merger is to group together their products and to have access to a bigger set of consumers, to earn higher profits.

2. Horizontal merger: A merger occurring between companies in the same industry. Horizontal merger is a business consolidation that occurs between firms which operate in the same space, often as competitors offering the same goods or service. Horizontal mergers are common in industries with fewer firms, as competition tends to be higher and the synergies and potential gains in market share are much greater for merging firms in such an industry.

Example: A merger between Coca-Cola and the Pepsi beverage division, for example,would be horizontal in nature. The goal of a horizontal merger is to create a new, larger organization with more market share. If the merging companies’ business operations are very similar, there may be opportunities to join certain operations, such as manufacturing and reduce costs. [VA + VA = 3]

Question 28.
Where the production plan aims at “plan your work”, there operations plan ensures “work your plan”. In the light of the given statement, briefly explain the objectives of an operation plan. [3]
Answer:
The objectives of an operational plan are as follows:
1. Plan for production/operation in advance.
2. Establishing the exact route of each individual item, part of assembly.
3. Setting, starting and finishing dates for each important assignment/work.
4. Regulating the orderly movement of goods through the entire manufacturing cycle i.e., right from procurement of all materials to the shipping of the finished goods.

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Question 29.
What are the assumptions made for calculation of break-even point for sales mix? [3]
OR
Raghav is a very creative person and has always been working on innovating products and services that can make living healthy and hygienic. He developed a design of an air conditioner with an inbuilt air purifier as well. Since he did not get any financial support from any bank, he approached Nirvana Vent (VC), a venture capitalist firm. Though VC liked the idea but it refused to help Raghav at the seeding stage and asked him to come again if needed during second round financing. Why was seed capital not given by VC when it was ready to fund the second-round financing?
Answer:

  • The proportion of sales mix must be predetermined.
  • The sales mix must not change within the relevant time period.
  • All costs can be categorized as variable or fixed.
  • Sales price per unit, variable cost per unit and total fixed cost are constant.
  • All units produced are sold.

OR

Venture capitalists are typically very selective in deciding what to invest in and as a rule of thumb:
1. They may invest in one in four hundred opportunities presented to it,
2. Looks for the extremely rare, yet sought after qualities, such as:

  • Innovative technology
  • Potential for rapid growth
  • A well-developed business models
  • An impressive management teams

3. Looks for an “exit” in the time frame of typically 3-7 years.
4. Is inclined towards ventures with exceptionally high growth potential. The VC do not fund for seed capital as its result and return both are not sure.

Section – D (25 Marks)

Question 30.
Mergers and Acquisitions are inspired by a desire to diversify or achieve higher growth rate. What are the other reasons for merger and acquisitions? [5]
OR
What is a brand name? Explain different types of brand names.
Answer:
Reasons for merger and acquisitions are as follows:
Synergy: Synergy is the most essential component of mergers. In mergers, synergy between the participating firms determines the increase in value of the combined entity. Synergy refers to the difference between the value of the combined firm and the value of the sum of the participants. Synergy accrues in the form of revenue enhancement and cost savings.

Acquiring new technology: To remain competitive, companies need to constantly upgrade their technology and business applications. Toupgrade technology, a company needs not always acquire technology By buying another company with unique technology, the buying company can maintain or develop a competitive edge.

A good example is a merger of alogistics company such as a land transport entity with anair-line cargo company. Another example is a merger between Blackberry and Treo which can incorporate cellphone capability and e¬mail connectivity in one device; palm pilots and tablet laptops can provide benefits to both the entities.

Improved profitability: Companies explore the possibilities of a merger when they anticipate that it will improve their profitability. The results of the International Business Owners Survey, 2004, carried out by Grant Thompson, conducted across 26 countries in Europe, Africa, Asia-Pacific,and the US, showed that 34% of business use M&A to maintain or improve profitability. For example, European Media Group Bertelsmann, Pearson, and others have driven their growth by expanding into the US though M&As.

Acquiring a competency: Companies also opt for M&A to acquire a competency or capability that they do not have and which the other firm does. For example, the ICICI  ITC alliance made the retailer network and depositor base available to the merging entity. Similarly, IBM merged with Daksh for acquiring competencies that the latter possessed.

Entry into new markets: Mergers are often looked upon as a tool for hassle-free entry into new markets. Under normal conditions, a company can enter a new market, but may have to face stiff competition from the existing companies and may have to battle out for a share in the existing market. However, if the merger route is adopted, one can enter the market with greater case and avoid too much competition. For example, the merger of Orange, Hutch, and Vodafone took place to achieve this objective.

Access to funds: Often companies find it difficult to access funds from capital market. In such a case company may decide to merge with another company which is fund-rich.

Tax benefits: Mergers are also adopted to reduce tax liabilities. By merging with a loss-making entity, a company with a high tax liability can set off the accumulated losses of the target against its profits gaining tax benefits. For example, Ashok Leyland Information Technology (ALIT) was acquired by Hinduja Finance, a group company, so that it could set off the accumulated losses in ALITs books against its profits.

OR

A brand name is “that part of a brand which can be vocalized i.e. can be spoken. It is like naming a newborn child. Mercedes, Woodland, Asian Paints, Pepsi, Maggie, Uncle Chips etc. are few examples of the brand names.
Different types of brand names are as under:
1. Individual brand name: Here entrepreneur can choose distinct names for each of his offering, i.e., every product is promoted on the basis of a separate brand name.
2. Family brand name: Entrepreneur can opt to use a common or successful family name for several products. Either the entrepreneur’s name or the company’s name may be used for all the products. It is even referred as umbrella branding.
3. Corporate names: Entrepreneur may choose to utilise their corporate name or logo together with some brand names of individual products for example, Godrej, Tata, etc.
4. In many industrial products, an alpha-numeric name often signifies its physical characteristics, thus creating a distinctive identify of the product. Entrepreneur has anoption available to brand his/her products alpha-numerically too. For example, SX4, Liv52, ANX Grindlay, ilO, i20, etc.

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Question 31.
“An entrepreneur can raise the required capital in the Primary Market.” Explain the various methods of raising the funds in the Primary Market by an entrepreneur. [5]
Answer:
1. Public issue: Public issue is the most popular method of raising capital these days by the entrepreneurs. This involves raising of funds directly from the public through the issue of prospectus. Anenterprise organizing itself as a public limited company can raise the required funds commonly by preparing a prospectus. When an entrepreneur a offers shares to the public for subscription he/she is required to comply with all the restrictions and formalities pertaining to the initial issues, prospectus drafting and launch.

2. Rights Issue: Rights issue is a method of raising additional finance from existing shareholders by offering securities to them on pro-rata basis i.e. giving them a right to a certain number of shares in proportion to the shares they are holding. Normally, through a circular, rights issues are proposed to the existing shareholders and in case they are not willing to subscribe, they can renounce the same in favour of another person. This method of issuing securities is considered to be inexpensive as it does not require any brokers, agents, underwriters, prospectus or enlistment, etc.

3. Private Placement: Private placement means the direct sale by a company of its securities to a limited number of sophisticated investors. Entrepreneurs, herein, raise funds by selling the issues mainly to the institutional investors like Unit Trust of India, Life Insurance Corporation of India, General Insurance Corporation of India, Army Group Insurance, State Level Financial Corporations, etc. Entrepreneurs both from public limited and private limited sector, bank heavily upon raising funds through the issue of varied financial instruments under this segment as at times they do not wish to disclose information to the open market.

4. Offer to Employees: In stock option plan or offer to employees, company offer its shares to its employees at a rate lower than market price. This method enables employees to become shareholders and share the profits of the company. Stock options or offering shares to the employees has gained much popularity in many countries of the world. This method leads to higher efficiency, low labour turnover, better industrial locations, low floatation cost and wider/higher generation of funds.

Question 32.
Sensitivity to environmental factors is crucial for an entrepreneur. With an appropriate example explain the relevance of the statement. [5]
OR
What key elements is covered under project description when the entrepreneur hopes to accomplish with the business? Explain in brief.
Answer:
Sensitivity to environmental factors is crucial for an entrepreneur. If a company is able to adapt to its environment, it would succeed in the long run. For example, Sony is failing to understand the changing trends in mobile phones and therefore losing its market share. The benefits of understanding the relevant environment of business are:

Identification of opportunities to get firstmover advantage: By keeping in touch with the changes in the external environment, an enterprise can identify opportunities and find strategies to capitalise on the opportunities at the earliest. For example, Volvo, the Swedish brand has 74% share in the luxury bus segment as it had entered India earlier.

Formulation of strategies and policies: It helps in identifying threats and opportunities in the market. These can serve as the basis off or mulation of strategies to counter threats and capitalise on opportunities in the market. For example, to understand new trends in the market.

Tapping useful resources: If the company has a thorough knowledge of the external environment, it can tap raw materials,technology and even financial resources from the market at economical prices at the right time. For example, resources or raw materials which can be obtained from different countries.

Better performance: Proper understanding of the various elements of the external environment is necessary to take timely action to deal with threats and avail opportunities for the purpose of improvement in the performance of the firm. For example, new entry of competitor with advanced technological product.

Sensitisation of entrepreneurs to cope with rapid changes: A keen watch on the trends in environment would help to sensitise the entrepreneur to the changing technology,competition, government policies and changing needs of the customers. For example, hanging trends in clothing.

Image building: If a company is sensitive to the external environment, it will come out with new products and services to meet the requirements of the customers. This would build the image or reputation of the firm in the eyes of the general public. For example, call-radio taxis with additional features like GPS systems, online booking etc.

OR

What the entrepreneur hopes to accomplish with that business, along with a clear description about the following key elements is covered under project description?
Site: Location of enterprise, owned or leasehold land, industrial area, no objection certificate from the Municipal Authorities if required, needs to be determined.
Physical infrastructure: Availability of the following items of infrastructure should be mentioned in the business plan.

1. Raw material: Whether indigenous or imported, sources of supply etc.
2. Labour: Type of labour required, provision for their training, number of man power required etc.
3. Utilities: These include: power, fuel, water, gas, electricity, etc. Business plan needs to clearly state type of utilities required, load sanctioned, sources and quality of water used quantum of coal, coke, oil etc. required and the suppliers of the same.
4. Pollution control: The sewage system, and the sewage treatment plant, water harvesting system, arrangement for dumping and disposing of the other types of waste or emission all need to be discussed in the plan.
5. Transport and communication system: Requirements for transportation and communication facilities, modes and means opted for; bottlenecks etc. are duly covered in by the business plan.
6. Machinery and equipment’s: A complete list of items of machinery and equipment’s required indicating their size, capacity; type, cost and sources of their supply should be disclosed.
7. Production process: A mention of the process involved in production, the installed licensed
capacity of the plant, the technology to be used, whether available locally or imported, shifts involved, needs to be present in the business plan.

Question 33.
Paramveer Singh runs an online business for gym equipment’s. The annual demand for the Waist Flexers sold [5]
by him is 16,000 units. The annual holding cost of Waist Flexers per unit is ?48 and the cost of placing an order is ?1,500. Calculate the economic order quantity of Waist Flexers.
Answer:
Formula:

\(=\sqrt{\frac{2 \times \text { annual usase } \times \text { ordering cost per unit }}{\text { Carrying cost per unit }}}\)

Thus as: annual demand T16000
order cost = ?1,500
annual carrying cost of 1 unit = ?48

\(\begin{aligned}
&\text { EOQ }=\sqrt{\frac{2 \times 16,000 \times 1,500}{48}} \\
&=\sqrt{10,00,000}
\end{aligned}\)

CBSE Sample Papers for Class 12 Entrepreneurship Set 2 with Solutions

Question 34.
Karan finished his graduation from Polytechnic college in the year 2018. He had specialised in repairing of electronic goods. After few months of his graduation, he met his uncle who has a small factory manufacturing electronic circuits used in Television. His uncle informed Karan that hecould no longer run the unit so Karan decided to take over the factory. [5]

His uncle had two workers. Karan was able to get a huge order of supplying 10,000 units of electronic circuits every month from a popular TV manufacturing company in India. He knew that to meet the orders timely he has to employ more people. In order to do so he decided to formulate Manpower planning. Describe the factors that Karan has to keep in mind while formulating manpower plan.
Answer:
Karan has to formulate manpower planning keeping in mind the following:
What kind of people are required? To carry on its work, each organisation needs personnel with the necessary qualifications, skills,knowledge, experience and aptitude for work.

Since it is a factory, Karan will need moresemi-skilled employees keeping in mind that they will be manufacturing electronic circuits. He will also need a manager to supervise the production work. How many people are required? This question deals with the quantity of personnel the enterprise needs. Presently, the factory has just two employees, soKaran will need at least ten workers to achieve the production target every month.

This number of employees will be taken into account keeping in mind the absenteeism and turnover. How to procure personnel? As the next step in manpower planning, entrepreneur clearly mentions the strategies, methods, policies,rules and regulations pertaining to employees. He can approach his own polytechnic college and recruit fresh graduates. He has to properly train the employees so that there is less error in production and the target is completed on time.