CBSE Sample Papers for Class 12 Entrepreneurship Set 5 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Entrepreneurship with Solutions Set 5 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Entrepreneurship Set 5 with Solutions

Maximum Marks: 70
Time Allowed: 3 Hours

General Instructions:

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

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

Section – A (18 Marks)

Question 1.
Exploring opportunities in the environment is a process involving various steps. Arrange the steps in correct order. [1]
(i) Evaluating the ideas received from different sources to find a creative solution.
(ii) Identifying a product or service through innovation.
(iii) Opportunity spotting by analysing the needs and problems that exist in the environment.
(iv) Setting up a project and nurturing it to success.
(A) i-ii-iii-iv
(B) iii-i-ii-iv
(C) ii-iii-iv-i
(D) i-iv-iii-ii
Answer:
(B) iii-i-ii-iv

Explanation: The steps in exploring opportunities in the environment opportunity spotting by analysing the needs and problems that exist in the environment, evaluating the ideas received from different sources to find a creative solution, identifying a product or service through innovation and setting up a project and nurturing it to success. Sensing entrepreneurial opportunities is thus a process of converting an idea into an opportunity and then into an enterprise.

Question 2.
Vector Ltd., is in the Fast-Moving Consumer Goods industry. They introduced a new variety of biscuits in the market. It has high fiber content with different new flavours incorporating various multigrain. Identify which promotion strategy should be used by Vector Ltd. [1]
(A) Above-the-line
(B) Below-the-line
(C) Through-the-line
(D) None of these
Answer:
(A) Above-the-line

Explanation: Above-the-line promotions use mass media methods. This type of promotion focuses on advertising to a large audience. It includes conventional media like print, online, television and cinema advertising, etc. Above-the-line activities include advertisements in the press, the- line promotions.

Question 3.
How is ‘Unit of Sale’ determined in a restaurant providing dinner? [1]
(i) Unit of sale will be the number of dinners offered.
(ii) Unit of sale will be the average amount billed per dinner.
(iii) Unit of sale will be the amount of gross profit.
(iv) Unit of sale will be the amount of working capital.
(A) (i) only
(B) (ii), (iii)
(C) (iii), (iv)
(D) (iii) only
Answer:
(A) (i) only

Explanation: In the case of a restaurant, the unit of sale would be a Dinner. This is different from the person who pays the bill. A group my consist of 10 people or 5 or 2. At times it may even be one. In each case, the number of persons paying the bill would most likely be one. So, it is more accurate to go by the number of Dinners. The Dinner is the Unit of Sale and the average amount billed per Dinner would be the Unit Price.

Question 4.
Reliance Industries in its AGM of 2021 shows a PowerPoint presentation of performance of FY 2021 and future plans of including the chairman of Saudi Aramco as independent director in Reliance. It has a new project to invest in? 75 thousand crores to start green energy segment, which was explained by Mukesh Ambani himself through this presentation. What format of business plan did he use? [1]
(A) Elevator pitch.
(B) A pitch deck, with oral narrative
(C) A written presentation for external stakeholders
(D) An internal operational plan
Answer:
(B) A pitch deck, with oral narrative

Explanation: A hopeful, entertaining slide show and oral narrative that is meant to trigger discussion and interest potential investors in reading the written presentation, i.e. the executive summary and a few key graphs showing financial trends and key decision-making benchmark

Question 5.
Shruti, Neelabh and Shewtabh decided to start their own business of manufacturing steel utensils. They also finalised to set-up the manufacturing unit in Orissa as labour is available there at a very low rate. They also decided about the sources for the procurement of required funds and all the relevant external and internal factors affecting this venture. Identify the document which is required to be prepared by the entrepreneurs for the above decisions. [1]
(i) Financial plan
(ii) Production plan
(iii) Human resource plan
(iv) Organisational plan
(A) (ii) only
(B) (iii), (iv)
(C) (ii), (iv)
(D) (i) only
Answer:
(D) (i) only

Explanation: 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 and exact assessment of the revenue, cost, profits, cash flow dynamics, stock of inventory loans etc.

Question 6.
D’va handbags is a leather handbags manufacturing company. It decided to join its operations together with Nutrients Ltd., which is an energy drink company especially for sportsmen and women. After this merger, D’va would help the existing companies to extend their markets as both of these firms will share the goodwill. Identify the type of merger relationship they are in. [1]
(i) Product Extension Merger
(ii) Vertical Merger
(iii) Horizontal Merger
(iv) Market Extension Merger
(A) (i) only
(B) (iii), (iv)
(C) (ii), (iii)
(D) (ii) only
Answer:
(A) (i) only

Explanation: A 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 product extension merger allows the merging companies to group together their products and get access to a bigger set of consumers. This ensures that they earn higher profits.

Question 7.
A grocery store sold in a day, different quantity of different products at the prices indicated against them: [1]

Products	Price Per Unit (T)	Quantity Sold
Dal	40/kg	35 (kgs)
Chilli Powder	40/kg	10 (kgs)
Salt	5/packet	5 (packets)
Chips	15/packet	10 (packets)
Juice pack	5/packet	5 (packets)

The shopkeeper also found, based on the number of bills issued by him, that there were 50 customers. If customer is the unit sale and if the cost of each grocery item is 75% of its selling price, what will be the “gross margin” per unit of sale?
(A) ₹25
(B) ₹O
(C) ₹20
(D) ₹5
Answer:
(B) ₹O

Question 8.
Which of the following will help the entrepreneur to understand the market and produce goods or provide services in sync with the market? [1]
(A) Opportunity
(B) Trendspotting
(C) Brainstorming
(D) Both (B) and (C)
Answer:
(B) Trendspotting

Explanation: Trendspotting means identification of new trends. This will help the entrepreneur to understand the market and produce goods or provide services in sync with the market trends

Question 9.
Yellow televisions sell 24′ colour television at T5,000. The variable cost incurred in manufacturing these televisions are T2,000. Fixed expenses amount to T4,000. What will be the break-even quantity for the 24′ [1]
(A) 1.33 units
(B) 1.2 units
(C) 1 unit
(D) 1.5 units
Answer:
(A) 1.33 units

Question 10.
Assertion (A): The relation of partnership arises from contract and not from status. [1]
Reason (R): The business of partnership can be carried on by all the partners or any one of them acting for all.
(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 partnership is an association of two or more persons to carry on, as co-owners, a business and to share its profits and losses. Thus, two or more persons may form a partnership by making a written or oral agreement to carry a business jointly and share its proceeds. Thus, the relation of partnership arises from contract and not from status. Though oral agreement is even acceptable but in practice written agreement is much more advisable as disputes can be resolved better with it.

Question 11.
A capital market is a mechanism meant for transfer of money capital from which of the following? [1]
(A) Investors to the entrepreneurs.
(B) Shareholders to the entrepreneurs.
(C) Entrepreneurs to investors.
(D) Entrepreneurs to shareholders.
Answer:
(A) Investors to the entrepreneurs.

Explanation: A capital market may be defined as an organized mechanism meant for effective and smooth transfer of money capital or financial resources from the investors to the entrepreneurs. Here, productive capital is raised and made available for industrial purposes.

Question 12.
Assertion (A): An idea leads to a solution to resolve that problem. [1]
Reason (R): Competition often results in emergence of new and better 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).

Explanation: To sense an entrepreneurial opportunity, an entrepreneur employs his/her sharpened skills of observation, analysis and synthesis to identify an opening. Spotting an idea often triggers the process of sensing an opportunity. When a problem exists, an idea leads to a solution to resolve that problem, it emerges as a business opportunity. Competition often results in emergence of new and better ideas that result in new business opportunities.

Question 13.
Assertion (A): Net profit ratio is an indicator of the profitability of the business activity. [1]
Reason (R): Net profit ratio establishes the relationship between net profit before taxes and net sales turnover.
(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.

Read the following passage and answer the questions from 14 to question 18.
‘Cherry Candy’ was a partnership firm, owned by Raj and Rahul. Raj and Rahul were sharing profits in 1: 2 ratios. By 1980, they had set up a shop in Bangalore which sells savories and sweets. It was word of mouth that grew the business manifold over the next decade till Cheery candy came to stand for a sweet company that was synonymous with taste, hygiene and innovation.
‘Plum Sweets’ was another partnership firm owned by Shubham and Sunil. Shubham and Sunil were sharing profits in 2: 3 ratios. Both the firms were situated in a famous market of Bangalore and were doing competitive business. Sunil the partner of ‘Plum Sweets’ observed that many of their customers were from far off areas and if branches of ‘Plum Sweets’ are opened in other parts of the city; the firm may earn huge profits. Similar was the situation of ‘Cherry candy’.

One day the partners of both the firms met, in a marriage function at a common friend’s house. The partners of both the firms knew that the internal expansion of their respective firms will be costly. Hence, they decided about the merger of the two firms. For this purpose, they decided to meet again to finalise the conditions of the merger. Finally, on 1st March 1990, their respective firms were merged and a new firm ‘Cherry Plum Sweets’ was formed with all the four partners Raj, Rahul, Shubham and Sunil. Their new profit-sharing ratio was 1: 2: 2: 3. During the year ended 31st December 1990, the new firm opened six new branches in different parts of the city and earned a profit of 40% on sales.
Answer:
(B) Both Assertion (A) and Reason (R) are true but Reason (R) is not the correct explanation of Assertion (A).

Explanation: The main objective of a business is to earn maximum profit by using minimum resources. It establishes the relationship between net profit before taxes and net sales turnover. It is usually expressed as a percentage. It is an indicator of the profitability of the business activity. Higher the ratio the better it is. It measures the rate of return on sales. It enables to measure the overall efficiency of business.

Question 14.
Which of the following type of merger was adopted by the two firms? [1]
(A) Vertical
(B) Horizontal
(C) Conglomerate
(D) All of the above
Answer:
(B) Horizontal

Explanation: 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.

Question 15.
Which of the following will takes place between two companies that deal in the same products but in separate markets? [1]
(A) Market extension merger
(B) Vertical merger
(C) Both (A) and (B)
(D) None of these
Answer:
(A) Market extension merger

Explanation: A market extension merger takes place between two companies that deal in the same products but in separate markets. The main purpose of the market extension merger is to make sure that the merging companies can get access to a bigger market and that ensures a bigger client base.

Question 16.
Which of the following statement is correct with respect to mergers? [1]
(A) In any type of merger at least one entity loses its entity.
(B) A merger is a combination of two companies into one larger company.
(C) In merger, the acquiring company takes over the assets and liabilities of the merged company.
(D) All of the above
Answer:
(D) All of the above

Explanation: A merger is a combination of two companies into one larger company. In merger, the acquiring company takes over the assets and liabilities of the merged company. All the combining companies are dissolved and only the new entity continues to operate. When the two firms differ significantly by size, the term merger is used.

Merger commonly takes two forms. In the first form amalgamation, two entities combine together and form a new entity, extinguishing both the existing entities. In the second form absorption, one entity gets absorbed into another. The latter does not lose its entity. Thus, in any type of merger at least one entity loses its entity.

Question 17.
An automobile company joining with a parts supplier would be an example of which of the following merger? [1]
(A) Vertical
(B) Horizontal
(C) Conglomerate
(D) All of the above
Answer:
(A) Vertical

Explanation: A vertical merger joins two companies that may not compete with each other, but exist in the same supply chain. An automobile company joining with a parts supplier would be an example of a vertical merger. Such a deal would allow the automobile division to obtain better pricing on parts and have better control over the manufacturing process. The parts division, in turn, would be guaranteed a steady stream of business.

Question 18.
In a merger, the boards of directors of the two firms agree to combine and seek the approval of which of the following for the combination? [1]
(A) Stockholder
(B) Debenture holder
(C) Financial holder
(D) None of these
Answer:
(A) Stockholder

Explanation: Usually, mergers occur in a consensual setting, where executives from the target company help those from the purchaser in a due diligence process to ensure that the deal is beneficial to both the parties.

In a merger, the boards of directors of the two firms agree to combine and seek stockholder approval for the combination. In most cases, at least 50% of the shareholders of the target and the bidding firms have to agree to the merger. The target firm ceases to exist and becomes part of the acquiring firm.

Section – B (12 Marks)

Question 19.
State first four steps involved in incorporating a private or public company in India? [2]
OR
Why Partnership form of organisation has developed?
Answer:
The following steps are involved in incorporating a private or public company in India:
1. Name of the business entity.
2. Register for e-filing at MCA (Ministry of Corporate Affairs) portal.
3. Apply for Director Identification Number (DIN).
4. Obtain Digital Signature Certificate (DSC).

Partnership form of organisation has developed due to the inherent limitations of sole proprietorship i.e.
1. Limited capital
2. Limited managerial ability
3. Limited continuity
In this era of specialization, expansion and diversification, expecting one man to combat them all is not possible. Business acumen and wealth seldom meet in one person. This, desirable combination probably led to the emergence of Partnership form of business.

Question 20.
Vikrant was always interested in technology driven products. After finishing his engineering degree, he started working on a new walking stick which will help blind people. The stick will be Bluetooth and wi-fi enabled which will be connected through an app on the phone which will guide the blind persons about the objects in front of their walking path. He has started testing the walking stick and found that the stakeholders were satisfied and it had a great value to the customers. Identify and explain the stage of innovation process in which Vikrant is? [2]
Answer:
Innovation is the process of entrepreneurship which involves the translation of a useful idea into an application which has commercial value. It takes persistent effort to work out analytically the details of the enterprise or service, to develop marketing strategies, to organize finances and strategize operations. Vikrant is in Commercial application stage. The provision of value to customers, reward employees, and satisfy the stakeholders constitute the commercial application stage.

Question 21.
Read the following passage and identify and explain the form of business organisations mentioned in the passage. [2]
Rahul runs a grocery shop in the local market. He buys goods from the wholesale market and sells it to the customers as per their requirement. By doing so he earns some profit. He had started his business two years ago by investing t2 lakhs, which he had borrowed from his relatives. Today, he is running his business successfully, earning a good profit, and has been able to pay back the borrowed money. He has also employed two persons to help him in the shop.

A textile factory is going to be started in the nearby area where Rahul is carrying on his business. As a businessman, he is now in a delighted mood and wants to expand his business. He is thinking that once the textile factory is set up, he will get more customers; the sales will increase and he will earn more profit. But, for all these, he will have to expand his business, and for this he needs more money. The major problem is how to arrange the additional funds. He has the option of getting loans from the banks. But the fear of loss comes to his mind again and again. He does not want to take that risk. Another option is that he may join hands with some other person. By doing so, more resources can be raised, work can be shared, and business can be run in a better way. The risk of loss will also be shared.
Answer:
The form of business organisations mentioned in the passage are Sole proprietorship and Partnership. Sole proprietorship form of business is exclusively owned by a single person.”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. All investment is made by the proprietor. Though, if required he/she has access to loans and debts to procure funds for business. 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. 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.

A partnership is an association of two or more persons to carry on, as co-owners, a business and to share its profits and losses. Thus, two or more persons may form a partnership by making a written or oral agreement to carry a business jointly and share its proceeds. The objective of the business is to make profits and distribute the same amongst partners. Any association initiated to do charity work is not partnership. The relation of partnership arises from contract and not from status. Though oral agreement is even acceptable but in practice written agreement is much more advisable as disputes can be resolved better with it.

Question 22.
Various approaches may be used by a company to promote its products. One of them is the use of mass media methods by designing a promotion strategy that aims at establishing brand identity. Identify and this approach. [2]
OR
Since there are multiple advantages of growing a business through the franchise mode, certain disadvantages also exist that need to be carefully examined. Explain any two disadvantages of franchising to the franchisee.
Answer:
Above-the-line: Above-the-line promotions use mass media methods. This type of promotion focuses on advertising to a large audience. It includes conventional media like print, online, television and cinema advertising. Above-the-line activities include advertisements in the press. They also produce online banner advertisements, place advertisements on billboards and use their website to meet the needs of their consumers.

Making a message memorable to a large audience is not always easy. It is difficult to tailor a promotion to a specific group of consumers through above-the-line promotions. This is because it is viewed by a mass audience with different tastes and needs. Above- the-line promotion is also very expensive.

Disadvantages of franchising to the franchisee are as follows:
1. Right and the only way of doing things: Entering into a franchise contract limits the degree of freedom for the franchise. As such, one gets an over-guided and over-influenced degree of control exerted by the franchisor.
This results in losing the freedom to innovate to some extent.
2. Continuing cost implication: Over and above the original franchise fee and royalties, a percentage of revenue gets shared perpetually with the franchisor. The franchisor may also charge additional amounts towards sharing the cost for services provided such as advertising and training. As such, entering into franchise contracts with a well-known franchisor becomes a very expensive proposition because of a tendency on their part to exploit the franchisee.
3. Risk of franchisor getting bought: The franchisee faces serious problems and difficulties when the franchisor either fails or gets bought out by another company.
4. Inability to provide services: The disadvantages to the franchisee usually center around the inability of the franchisor to provide services advertising and location. When promises made in the franchise agreement are not kept, the franchisee may be left without any support in important areas.

Question 23.
Generating ideas is relatively an easy exercise, especially if it is done in groups. However, this process can also become a wild goose chase because all ideas need not necessarily become sound business opportunities. One has to assess it in terms of the potentiality of the opportunity. Comment on the first two steps involved in this type of investigation. [2]
Answer:
The first two steps involved in this type of investigation are discussed below:
1. Product identification: An idea should lead the entrepreneur to a definite product/service which he can sell. So, the first step is to obtain a concept of the product or service suggested by one idea. An entrepreneur should also see whether this product is already available in the market or not. If it is, then we should identify the reason for introducing the same product or service in the market.
2. Application and use: Ideas should be examined for their real-life use and application. If it already exists in the market, an entrepreneur has to find out its present use, then he may think of modifying it for better use.

Question 24.
Why finance is required in the business? State any four requirements. [2]
OR
What do you understand by Angel Investors.
Answer:
Finance is the elixir that assists in the formation of new businesses, and allows businesses to take advantage of opportunities to grow and expand. Right from the very beginning i.e. conceiving an idea finance is required to:

Promote or establish the business
Acquire fixed assets
Make market investigations
Develop product
Keep men and machines at work
Encourage management to make progress and create value.
Expand, diversify, improve and grow.
Be enough to meet unexpected/unplanned business expenses.

Section – C (15 Marks)

Question 25.
Vfone launched a smart mobile phone in the market recently after lot of research and development. This mobile phone had many new features which distinguished it from the existing mobile phones in the market. To recover the investment a high price was determined for the mobile phone even then the demand was very high. The quality conscious customers were ready to pay the high price as they understood the product’s value and its features. [3]
1. Identify and explain the pricing-strategy used by Vfone.
2. Explain one advantage and one disadvantage of this pricing strategy.
Answer:
1. Price strategy used by Vfone is skimming price. In case of skimming price, goods are sold at higher prices so that fewer sales are needed to break even. 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 their need for the product outweighing their need to economics, a greater understanding of the product’s value, or simply having a higher disposable income.
2. Advantages:

Price skimming helps the company in recovering the research and development costs which are associated with the development of a new product.
If the company caters to consumers who are quality conscious rather than price conscious, then this type of strategy can work in a great way for a company. (Any one)
Disadvantages:
This strategy can backfire if there are close competitors.
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.

Question 26.
Name and define the form of business organisation which is easy to form and close. Explain two more features of this form of business organisation. [3]
OR
How many choices are there to start a business by a businessman? Explain them.
Answer:
Sole proprietorship: The term ‘sole’ means single and ‘proprietorship’ means ‘ownership’. So, only one person is the owner of the business organisation. This means, that a form of business organisation in which a single individual owns and manages the business, takes the profits and bears the losses, is known as sole proprietorship form of business organisation.
Features of Sole proprietorship:
1. Single Ownership: The sole proprietorship form of business organisation has a single owner who himself/herself starts the business by bringing together all the resources.
2. No Separation of Ownership and Management: The owner himself/herself manages the business as per his/her own skill and intelligence. There is no separation of ownership and management as the case with company form of business organisation.
3. Less Legal Formalities: The formation and operation of a sole proprietorship form of business organisation does not involve any legal formalities. Thus, its formation is quite easy and simple.
4. No Separate Entity: The business unit does not have an entity separate from the owner. The businessman and the business enterprise are one and the same, and the businessman is responsible for everything that happens in his business unit.
5. No Sharing of Profit and Loss: The sole proprietor enjoys the profits alone. At the same time, the entire loss is also borne by him. No other person is there to share the profits and losses of the business. He alone bears the risks and reaps the profits.
6. Unlimited Liability: The liability of the sole proprietor is unlimited. In case of loss, if his business assets are not enough to pay the business liabilities, his personal property can also be utilised to pay off the liabilities of the business.
7. One-man Control: The controlling power of the sole proprietorship business always remains with the owner. He/she runs the business as per his/her own will.

A businessman has following choices to start a business:

1. Sole Proprietorship: The term ‘sole’ means single and ‘proprietorship’ means ‘ownership’. So, only one person is the owner of the business organisation. This means, that a form of business organisation in which a single individual owns and manages the business, takes the profits and bears the losses, is known as sole proprietorship form of business organisation.

2. Partnership: A partnership is an association of two or more persons to carry on, as co-owners, a business and to share its profits and losses. Two or more persons may form a partnership by making a written or oral agreement to carry a business jointly and share its proceeds.

3. Joint stock company: A joint stock company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership. It is an artificial person created by law, having a separate legal entity, with perpetual succession and a common seal.

Question 27.
Adas Ltd. and Galria Ltd. deals with men and women shoe manufacturing respectively in Mumbai and Gujarat. After sometime the market was slowly taken over by big shoe company. Both Adas Ltd. and Galria Ltd. understood the competition and decided to come together so as to increase their market share. This strategy helped them in cost saving through economies of scale as they could cover more areas now. It led to overall growth of both the companies. [3]
1. Identify the enterprise growth strategy adopted by the two.
2. Explain any two benefits that the companies have after this arrangement.
Answer:
1. A market extension merger takes place between the two companies that deal in the same products but in separate markets. The main purpose of the market extension merger is to make sure that the merging companies can get access to a bigger market and that ensures a bigger client base.

2. The benefits that the companies have after this arrangement are as follows:
Synergy: 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. By buying another company with unique technology, the buying company can maintain or develop a competitive edge.

Improved profitability: Companies explore the possibilities of a merger when they anticipate that it will improve their profitability.

Acquiring a competency: Companies opt for mergers and acquisitions to acquire a competency or capability that they do not have and which the other firm has.

Entry into new markets: Mergers are often looked upon as a tool for hassle-free entry into new markets. Through mergers one can enter the market with greater ease and avoid too much competition.

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: By merging with a loss-making entity, a company with high tax liability can set off the accumulated losses of the target against its profits, gaining tax benefits.

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, examine the blue print of an operational plan for an entrepreneur. [3]
Answer:
Where the production plan aims at “plan your work”, their operations plan ensures “work your plan”. It is actually a blueprint prepared right in advance of actual operations:

Ensuing orderly flow of materials in the manufacturing process from the beginning (raw state) to the end (the finished products)
Facilitating continuous production, lesser work-in-progress and minimization of wastage.
Coordinating the work of engineering, purchasing, production, selling and inventory management.
Describing the flow of goods/services from production point to the consumers.
Introducing a proper system of quality control
Undertaking the best and most economic production policies and methods.

Question 29.
What are the assumptions made for calculation of break-even point for sales mix? [3]
OR
What does total cost include?
Answer:

The proportion of sales mix must be pre determined.
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
Total cost includes variable costs and fixed costs. Variable costs vary directly with the level of output. It includes the expenditure on raw materials, transportation, etc. Fixed costs are not dependent on the level of output. These are period costs. They include interest, rent, salary of permanent workers,etc.

Section – D (25 Marks)

Question 30.
An entrepreneur has a number of alternative channels available to him for distributing his products. These channels vary in the number and types of middlemen involved. Explain the different types of channels of distribution. [5]
OR
Explain the main tools of public relations.
Answer:
Channels of distribution are broadly divided into four types:
1. Producer-customer (Direct channel-zero level): This is the simplest and shortest channel in which no middlemen is 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.

2. Producer-retailer-customer (Indirect-one level): This channel of distribution involves only one middleman called ‘retailer1. Under it, the producer sells his/ her product to big retailers (or retailers who buy goods in large quantities) who in turn sell to the ultimate consumers. This channel relieves the manufacturer from burden of selling the goods himself and at the same time gives him control over the process of distribution. This is often suited for distribution of consumer durables and products of high value.

3. Producer-wholesaler-retailer-customer (Two levels): This is 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.

4. Producer-agent-wholesaler-retailer-customer (Three levels): This is the longest channel of distribution in which three middlemen are involved. This is used when the producer wants to be fully relieved of the problem of distribution and thus hands over his/ her entire output to the selling agents. The agents distribute the product among a few wholesalers. Each wholesaler distributes the product among a number of retailers who finally sell it to the ultimate consumers. This channel is suitable for wider distribution of various industrial products.

1. News: Sometimes companies get involved in such kind of activities or make such policies so that they get some positive coverage in news. For example, a company’s name may be covered in news for reservation of jobs for women or for introducing new technology.

2. Speeches: The speeches given by the leaders of corporate sectors influence various members of public specially banks, shareholders, etc. Public relations department creates occasion when the speeches are delivered by the leader of company.

3. Events: Events refer to organising press conferences, multimedia presentation, stage shows, etc.

4. Written materials: Sometimes written materials such as Balance sheet, Annual Reports, Special documents, etc. are circulated to various parties to improve and maintain public image of the company.

5. Public service activities: Big business houses often associate themselves with various social service projects such as women welfare programmes, charity shows, planting trees on road side, etc.

Question 31.
Venture capitalists are typically very selective in deciding what to invest in and as a rule of thumb. Analyse and
justify the statement. [5]
Answer:
Venture capitalists are typically very selective in deciding what to invest in and as a rule of thumb as:
1. They may invest in one in four hundred opportunities presented to it,
2. They look 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. They look for an “exit” in the time frame of typically 3-7 years.
4. They are inclined towards ventures with exceptionally high growth potential.
Thus, entrepreneurs are expected to carry out detailed due diligence prior to seeking venture capital as a source of financing. As venture capitalists’ investments are illiquid, requiring extended time frame to harvest, an entrepreneur should carefully evaluate and analyse, the stage which he/she would require venture capitalist to assist in.

Question 32.
What is problem identification? How does problem identification help the entrepreneur? [5]
OR
What is PESTEL model? Explain it.
Answer:
Problem identification is a fundamental way of identifying the problem at hand so that we can comprehend the objective that we are trying to achieve or the issue we are trying to address. The process of problem identification should help in clearly stating the problem. It should also help identify the target group of people facing this problem.
Problem identification helps the entrepreneur to:

Bring out new products in the market.
Understand the problems and needs of the market.
Be creative.
Increase employment generation.
Increase national income of the country.

For example, in our everyday lives, we face a number of problems for which we wish sometimes for instant solutions. If we look carefully, there is an array of instant food products flooding the market on a daily basis. Some of them are very successful, the reason being that,the younger generation is highly career-oriented and does not have time to cook. New websites came into operation which were results of problems faced by the entrepreneur himself.

PESTEL model explains the macro factors affecting the environment.
These are as follows:

Political: The political environment includes taxation policy, government stability and foreign trade regulations.
Economic: The economic environment
includes interest rates, inflation, business cycles, unemployment, disposable income, energy, availability and cost.
Social: The social/cultural environment includes population demographics, social mobility, income distribution, lifestyle changes, attitude towards work and leisure, levels of education and consumerism.
Technological: It is influenced by government spending on research, new discoveries and developments, government and industries focus on technological efforts speed of technological transfer and rate of obsolescence.
Ecological: It considers the ways in which the organization can produce its goods or services with minimum environmental damage.
Legal: It covers areas such as taxation, employment, law, monopoly, legislation and environmental protection laws.

Question 33.
Raj Singh has started a restaurant on a National highway in the name of ‘Desi Dhaba’ by spending ?25,00,000. [5]
He invested T10,00,000 of his own and took a loan of LI5,00,000 from Dena Bank @ 6% per annum. His monthly sales revenue is ?17,00,000 and cost of goods sold is T9,00,000. He pays monthly salary of T3,00,000 to his employees. The tax rate is 25%. You are required to calculate:
1. Return on investment and
2. Return on Equity for Raj Singh.
Answer:
Option A (on annual basis)
Formula for calculating return on investment

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Calculation:

Equity	10,00,000
Debt	15,00,000
Capital invested	25,00,000

Sales revenue (17,00,000 x 12)	2,04,00,000
Less: Cost of goods sold (9,00,000 x 12)	2,04,00,000
Gross Profit	96,00,000	96,00,000
Less: Fixed expenses (3,00,000 x 12)	36,00,000
Loan (15,00,000 x 6/100) = (90,000 x 1/12)	90,000
	36,90,000	36,90,000
Net profit before tax		59,10,000
Less: Tax 25%		14,77,500
Net profit after tax		44,32,500

Total Capital Invested
ROI = Net profit after tax/Total capital Invested x 100 = 44,32,500/25,00,000 x 100 = 177.3%
OR
ROI = Net Profit before Interest Tax/Total Capital Invested x 100
= 59,10,000 + 90,000/25,00,000 x 100 = 60,00,000/25,00,000 x 100 = 240%
Option B (on monthly basis)

Equity	10,00,000
Debt	15,00,000
Capital invested	25,00,000

Sales revenue	17,00,000
Less: Cost of goods sold	9,00,000
Gross Profit	8,00,000	8,00,000
Less: Fixed Expenses Salaries	3,00,000
Loan (15,00,000 x 6/100) = (90,000 x 1/12)	7,500
	3,07,500	3,07,500
Net profit before tax		4,92,500
Less: Tax 25%		1,23,125
Net profit after tax		3,69,375

ROI = Net Profit after tax/Capital employed x 100 = 3,69,375/25,00,000 x 100 = 14.77% (5)
OR
ROI = Net profit before interest and tax/Capital employed x 100
= 4,92,500 + 7,500/25,00,000 x 100 = 5,00,000/25,00,000 x 100 = 20%
Return On Equity
Formula = Earnings after tax/Equity x 100 = 44,32,500/10,00,000 x 100 = 443.25%

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 he could no longer run the unit so Karan decided to take over the factory. 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. [5]
Answer:
Karan has to formulate manpower planning keeping in mind the following:
1. 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 more semi-skilled employees keeping in mind that they will be manufacturing electronic circuits. He will also need a manager to supervise the production work.

2. How many people are required?
This question deals with the quantity of personnel the enterprise needs. Presently the factory has just two employees, so Karan 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.

3. 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.