Students must start practicing the questions from CBSE Sample Papers for Class 12 Entrepreneurship with Solutions Set 9 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Entrepreneurship Set 9 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.
Ecobrick is a company manufacturing bricks using recycled plastics. They have collection centres in various strategic locations all over the city and citizens are encouraged to sell their plastic products in these centres. This will save the environment in the long run. Also, it will promote ideology of ‘Swachh Bharat’. It will generate good revenue for the company as it sources its raw materials from the general public from whom the used plastic products are a scrap. Identify macro environment factors affecting the environment in the above case. [1]
(i) Ecological
(ii) Economic
(iii) Political
(iv) Social
(A) (i), (ii)
(B) (ii) only
(C) (ii), (iv)
(D) (iii), (iv)
Answer:
(A) (i), (ii)

Explanation: Economic factors considers the economic environment includes interest rates, inflation, business cycles, unemployment, disposable, income, energy, availability and cost. Ecological factors consider the ways in which the organisation can produce its goods or services with minimum environmental damage.

Question 2.
Ritu has completed her B.Tech. in textile designing. She wants to start a ready-made garments manufacturing unit. She wants to manufacture trendy garments for children below the age of one year. She approached a popular trend potter to help her with the same. The trend spotter demanded ₹2,00,000 from Ritu to help her. Looking at the high fee demanded, she decided to do the trends potting by herself. She decided to identify the trend by talking to the parents of the newly born. The method that Ritu adopted to spot the trend is: [1]
(A) Watch trends
(B) Think trends
(C) Talk trend
(D) Read trend
Answer:
(C) Talk trend

Explanation: Talking to people is an equally important trend-spotting tactic. Entrepreneurs get involved in specific industry’s trade association and attending events both online and offline. They also take advantage of social networking tools like social network websites and forums.

They use social media or online surveys to get input on what customers are thinking, buying, craving and doing. They also use social network websites and forums to identify key influencers and trendsetters in their target markets. In addition, they pay attention to ratings and review sites — not just what customers are saying about the business, but what they are saying about the competitor’s business.

CBSE Sample Papers for Class 12 Entrepreneurship Set 9 with Solutions

Question 3.
Rajeev has just completed his B.Tech. and wants to start his own business. He knew that the demand of electricity in India was increasing day-by-day, whereas its generation was not sufficient. Rajeev shared his views with some of his friends and they all decided to start the business of electricity generation. They experimented various methods and ultimately succeeded in electricity generation through garbage. They all were very happy as India is also facing the problem of garbage disposal. Which source of Idea-field had been generated by Rajeev and his friends? [1]
(A) Natural resources
(B) Existing product or services
(C) Demand driven
(D) None of these
Answer:
(C) Demand driven

Explanation: It is an organized effort to gather information about target markets or customers. Ideas can be generated based on existing demand in the market. It is a very important component of business strategy.

Question 4.
After doing her M.Comfrom ‘Himachal Pradesh University of Shimla’, Komal went back to her village in Kinnaur district of Himachal Pradesh. She wanted to contribute for the development of women of her village, so she formed an organisation, the membership of which was open for all the women villagers on a voluntary basis by paying ₹500 only which would be treated as their capital. Komal knew that the land of her village was suitable for the farming of medicinal plants.

So, she motivated the members of her organisation for growing medicinal plants in their fields under the guidance and help of the local agricultural department. It was also decided that the organisation will purchase the produce of each member and sell the same to drug manufacturing companies at a very good price which was not possible for the members individually. The main objective of the organisation is to render services to its members rather than to earn profit.

A computer training centre for young boys and girls of the village was started under the guidance of Komal from the surplus of the profits. The process that helped Komal in developing an idea into an opportunity is: [1]
(A) Scanning the environment
(B) Sensing entrepreneurial opportunities
(C) Trend spotting
(D) None of these
Answer:
(B) Sensing entrepreneurial opportunities

Explanation: Sensing entrepreneurial opportunities is a process of converting an idea into an opportunity and then into an enterprise. To sense an entrepreneurial opportunity, an entrepreneur employs his/her sharpened skills of observation, analysis and synthesis to identify an opening. The most important factors involved in the process are ability to perceive and preserve basic ideas which could be used commercially, ability to harness different sources of information and vision and creativity.

Question 5.
Assertion (A): A properly planned follow-up procedure is helpful in dispatching errors and defects in the work.
Reason (R): Inspection is the art of comparing materials, product or performance with established standards. [1]
(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:
(D) Assertion (A) is false but Reason (R) is true.

Explanation: A properly planned follow-up procedure is helpful in dispatching errors and defects in the work because follow-up or expediting function relates to evaluation and appraisal of work performed. Follow-up element helps the entrepreneurs in developing ways to review the present situation with regard to materials, work-in-progress and finished goods, evolving ways to expedite the performance of those departments which lag behind, removing obstacles in the way of production by suggesting remedial measures.

Question 6.
Assertion (A): A company has an independent status.
Reason (R): A company cannot sign the documents. [1]
(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 company has an independent status, different from its members. This implies that a company cannot be held liable for the actions of its members and vice-versa. Company has a distinct entity separate from its members. Being an artificial person, company cannot sign the documents. Hence, it uses a common seal on which its name is engraved. Putting the common seal on papers, is equivalent to that of signatures of a human being, making them binding on the company.

Question 7.
“Deepika wanted to pitch in to reduce the financial crisis prevailing in her house and thought of working as a cook. She started working in three different households, one Punjabi, One Gujrati and one South Indian family. She soon realized that all the three households had different cuisine. It was indeed a challenge for her to learn the techniques of the cuisine. All the families greatly appreciated the time frame within which she had mastered the local cuisine.

After working for them for a year, she decides to open a small eating joint of her own along with two of her friends by the name ApnaBhoj’. They decided to share profits equally and that each of them will be liable for acts performed by the other two. Soon the eatery became a hot spot because of the fusion platter which was being offered.” Identify the kind of business organization which was set up by Deepika and her friends. [1]
(i) Sole proprietorship
(ii) Partnership
(iii) Company
(iv) None of these
(A) (i) only
(B) (ii) only
(C) (ii), (iii)
(D) (iii), (iv)
Answer:
(B) (ii) only
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.

Question 8.
Reeta and Neeru have recently completed MBA from a renowned Management college and they want to open a management consultancy firm. They decided to prepare a business plan and discussed regarding the authority-responsibility of each member, management team, salary to be given, etc. The type of business plan discussed above is: [1]
(A) Production plan
(B) Operational plan
(C) Marketing plan
(D) Human resource plan
Answer:
(B) Operational plan

Explanation: Operational plan is a system whereby there is achieved a smooth and coordinated flow of work within the factory so that, by planning and control of all the productive operations in all the stages of manufacture, the final product is completed in accordance with the plans.

CBSE Sample Papers for Class 12 Entrepreneurship Set 9 with Solutions

Question 9.
Jalaji an entrepreneur started a new website ‘Fashionate Shirts’ to sell readymade shirts. In the first year he sold 1200 shirts at the rate of 500 each. His cost of placing an order and receiving the shirts is 1,000 per order. If the Economic order Quantity is 200 shirts. What will be the inventory holding cost per year? [1]
(A) ₹100
(B) ₹80
(C) ₹40
(D) ₹60
Answer:
(D) ₹60

Explanation:

\(\mathrm{EOQ}=\frac{\sqrt{2 p d}}{C}\)

D = Annual demand; P = Ordering cost; C = Holding cost

Or \(200=\sqrt{\frac{2 \times 1,200 \times 100}{C}}\)

Or \((200)^2=\frac{2 \times 12,00,000}{C}\)

Or \(\mathrm{C}=\frac{24,00,000}{40,000} \text { or } ₹ 60 /-\)

Question 10.
‘The Shop’ a ready made garments retail shop sold 5,000 shirts at ₹200 per shirt during the year ended 31st March, 2014. Cost of placing an order and receiving goods is ₹1,000 per order. Inventory holding cost is ₹250 per year. What will be the ‘Economic Ordering Quantity’ of ‘The Shop’? [1]
(A) 100 units
(B) 150 units
(C) 200 units
(D) 300 units
Answer:
(C) 200 units

Explanation: Economic ordering quantity formula
\(\begin{aligned}
&=\sqrt{\frac{2 P D}{C}} \\
&=\sqrt{\frac{2 \times 1,000 \times 5,000}{250}} \\
&=\sqrt{40,000}
\end{aligned}\)
=200 units

Question 11.
Assertion (A): Capital Markets play a very vital role of a financial intermediary.
Reason (R): The capital market satisfies the tastes of savers and the needs of investors through its various financial instruments. [1]
(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 role of transferring financial resources from the surplus units to the deficit units is what is referred to as “Financial Intermediation”. Capital Markets play a very vital role of a financial intermediately. 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.
The duration between buying the raw material and receiving the cash from the customer is known as the: [1]
(A) Operating Cycle
(B) Cash Conversion Cycle
(C) Both (A) and (B)
(D) None of these
Answer:
(C) Both (A) and (B)

Explanation: The duration between buying the raw material and receiving cash from the customer is known as the Operating Cycle. It is also referred to as the Cash Conversion Cycle. 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.

Question 13.
Which of the following is an important source of equity for startup companies? [1]
(i) Trade credit
(ii) Venture capital
(iii) Stock exchange
(iv) Secondary market
(A) (iii) only
(B) (iii), (iv)
(C) (ii) only
(D) (ii), (iv)
Answer:
(C) (ii) only

Explanation: Venture capital is a type of private equity capital provided as seed funding to early-stage, high potential, high risk, growth up companies/entrepreneurs who lack the necessary experience and funds to give shape to their ideas. Venture capital is an equity-based investment in a growth-oriented small to medium business to enable the investors to accomplish objectives, in return for minority shareholding in the business or the irrevocable right to acquire.

Read the following passage and answer the question from 14 to question 18.

Gopal, a small shopkeeper in Bikaner, Rajasthan used to sell the famous ‘Bhujia-Sev’. It was a quick-selling product for locals and foreign tourists. His second generation expanded the business and got ‘Gopal Ki Bhujia’ registered with concerned authorities. Gradually the brand offered a wide range of products to its customers like namkeen, sweets, bakery items, etc. However, ‘Bhujia-Sev’ remained the most popular product of the brand creating maximum revenue.

‘Gopal Ki Bhujia’ offered its products at competitive prices even while offering customer services like gift packaging and free home delivery to become a household name. ‘Gopal Ki Bhujia’ initially decided to charge a price to cover the cost of producing a product plus a reasonable profit. Now it has virtually become a synonym for bhujia-sev in the market, so much so, that people ask for ‘Gopal Ki Bhujia’ instead of bhujia-sev.

‘Gopal Ki Bhujia’ has developed a strong distribution network in India and abroad by setting up retail outlets and reaching out to the customers through internet selling. Promotion of the brand had always been low profile, till the increase in competition pushed it to hire the services of a professional advertising agency, Vigyapanpvt. ltd. for promoting the product.

On the advice of Vigyapanpvt. ltd., ‘Gopal Ki Bhujia’ has also worked upon managing public opinion by developing relations with the masses through sponsoring cultural and sporting events, maintenance of public parks, etc

Question 14.
‘His second generation expanded the business and got ‘Gopal Ki Bhujia’ registered with concerned authorities.’ With reference to the given text ‘Goapl ki Bhujia’ is a ______ giving it a legal protection against its use by anyone else. [1]
(A) Brand value
(B) Trademark
(C) Trait mark
(D) Brand mark
Answer:
(B) Trademark

Explanation: A brand or part of a brand that is given legal protection is called trademark. The protection is given against its use by other firms. Thus, the firm, which got its brand registered, gets the exclusive right for its use. In that case, no other firm can use such name or mark in the country.

Question 15.
Gopal Ki Bhujia’ has developed a strong distribution network in India and abroad by setting up retail outlets and reaching out to the customer through internet selling. Identify the element of marketing mix being discussed above. [1]
(A) Product
(B) Price
(C) Place
(D) Promotion
Answer:
(C) Place

Explanation: 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.

CBSE Sample Papers for Class 12 Entrepreneurship Set 9 with Solutions

Question 16.
On the advice of Vigyapan pvt. ltd., ‘Gopal Ki Bhujia’ has also worked up on managing public opinion by developing relations with the masses through sponsoring cultural and sporting events, maintenance of public parks, etc. Identify the promotion techniques mentioned in the lines above. [1]
(A) Advertising
(B) Personal Selling
(C) Sales Promotion
(D) Public Relations
Answer:
(D) Public Relations

Explanation: Public relations is the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organisation (or individual) and its (or their) public.

Question 17.
Gradually the brand offered a wide range of products to its customers like namkeen, sweets, bakery items, etc. Identify the element of marketing mix being discussed above. [1]
(A) Product
(B) Price
(C) Place
(D) Promotion
Answer:
(A) Product

Explanation: Product refers to the item actually being sold. A product is anything that can be offered to a market for attention, acquisition, or consumption. It includes physical objects, services, personalities, places, organisations and ideas. The character of the product may be seen differently by the buyer and the seller.

Question 18.
‘Gopal Ki Bhujia’ initially decided to charge a price to cover the cost of producing a product plus a reasonable profit. Identify the pricing strategy adopted by ‘Gopal Ki Bhujia’. [1]
(A) Cost-plus pricing
(B) Penetration pricing
(C) Creaming pricing
(D) None of these
Answer:
(A) Cost-plus pricing

Explanation: In cost-plus pricing 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.

Section – B (12 Marks)

Question 19.
To provide a rational basis for developing goals and strategies for business growth an entrepreneur must do environmental scanning. What are the different sources to collect information for environmental scanning?
OR
Explain how ‘Trading Related Ideas’ act as ‘Idea Fields’ for generation of ideas? [2]
Answer:
Following sources can be used:
Records of companies. Government publications and publications by financial institutions. Verbal information from customers, wholesalers, retailers, etc.

OR

Trading-Related Ideas: Trading refers to buying and selling of goods and services for profit. Today, scope of trade has enlarged to local trade, import & export, e-commerce etc. So, an entrepreneur must have a clear idea of the kind of trading he is willing to enter into. Afterwards, this idea further gives him a way to lot more ideas about the place, size and nature of his trading business.

Question 20.
Read the following magazine article and explain any two things which should be written by start-up companies in their manpower planning component of business plan.

Covid-19 disrupted well-laid-out strategic workforce plans for many organizations. Many business models are imploding, causing some companies to shrink their workforce. Meanwhile, healthcare and consumer technology companies are continuing the trajectory of their strong growth, while industries like food logistics and online fitness are seeing a growth explosion.

This is leading to an imbalance in demand and supply of skills in the labour force, posing interesting choices for organizations as they assess their talent pools and pipelines. Talent pools and internal pipeline requirements have changed in 2020. As organizations explore how to build, buy, borrow or shrink talent in reaction to Covid-19, they need to conduct scenario modelling.

Even one meeting to talk about potential scenarios can help figure out how future needs may have changed and prepare them to iterate as the environment changes. Companies should pin down the focus of their organization’s strategic workforce plan and ensure it aligns with the long-term business strategy, instead of reacting with measures that may yield short-term results.

The remarkable work-from-home experiment that was forced upon the global workforce earlier in 2020 silenced critics who believed that working from home was not possible in most cases; it instead boosted productivity. As the virus stubbornly refuses to go away, people are making choices on where to live and moving away from expensive cities because they can do so without making career sacrifices.

The talent pool has, therefore, truly become a much bigger, global one, opening up opportunities for people. Also, as companies are trying to make a more visible shift in their overall diversity, equity and inclusion (DEI) approach, sourcing more diverse talent pools from other geographies that were previously out of reach is likely to make a difference to the numbers. [2]
Answer:
Manpower planning helps in assessing:

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. Thus, as the most basic thing, the entrepreneur must clearly state: what kind/type of person is required to be hired for getting his work done.

As each person would have a different position, duties and responsibilities, it becomes imperative for the entrepreneur to clearly workout a wide range of personnel ranging from managers, supervisors, administrators, engineers, technical, skilled and unskilled class. Nature of business activity helps entrepreneur to a large extent in deciding the type of manpower required.

How many people are required: They should also estimate the number of personnel required keeping in mind the total work and survival in the present situation and planning for future growth.

How to procure personnel: As the next step in manpower planning, entrepreneur clearly mentions the strategies, methods, policies, rules and regulations pertaining to personnel’s recruitment, selection and training. Procurement of “right person, at right job, at right time” is the objective of human resource plan.

Question 21.
How will you show that Market Mix is dependent on the type of product?
OR
Explain External Expansion. How a firm goes for external expansion? [2]
Answer:
Market Mix is a set of activities, contribution of each is essential. It can be explained using following example: A toilet soap manufacturer can offer improved quality product at a lower price. He can keep such a low price that it can be termed as penetrating pricing. In the competitive market, he would be able to increase its sale by selecting adequate channel of distribution to reach maximum consumers.

Promotion on T. V. and Newspapers for timely information will be beneficial in raising his sales. He will have to keep shorter distribution channel for ensuring easy and quick reach of the product to the customers.

OR

External Expansion means expansion beyond the boundaries of a company. It includes:
Combination of two or more firms for expansion. Combining to maximise profit and shape the policies in the best way. Combining with competitive firms to reduce competition and increase profit, etc.

CBSE Sample Papers for Class 12 Entrepreneurship Set 9 with Solutions

Question 22.
Explain briefly the features of venture capital.
OR
Primary market is also known as new issue market. Justify the statement. [2]
Answer:
The main features of venture capital are as follows:
Investment are made in those enterprises which are new and use new technology to produce new products, having an expectation of higher profits. Generally, the investments are in equity instruments. The venture capital investment is highly illiquid. Investors return is taxed as capital gain rather than as ordinary income.

The venture capital investor cannot interfere in day-to-day management of the enterprise but to protect and enhance the investment, he keeps close contact with the entrepreneur or promoter. In India, venture capital funds are governed by the Securities and Exchange Board of India (SEBI) guidelines.

OR

When an entrepreneur decides to issue securities like shares, debentures to the public for the first time for the purpose of obtaining capital funds, such issues of securities are referred as “new money issues”. Therefore, primary markets are also known as “new issue market”.

Question 23.
Unicon Ltd. and Nahata Communications provide cable TV network in adjacent areas of Delhi. After sometime the market was slowly taken over by big cable companies. Both Unicon Ltd. and Nahata communications understood the competition and decided to come together so as to increase their markets share. This strategy helped them in cost saving through economies of scale as they could cover more areas now. It led to the overall growth of both the companies.
(i) Identify the enterprise growth strategy adopted by the two.
(ii) Explain any one benefits that the companies have after this arrangement. [2]
Answer:
(i) Market extension merger
(ii) Benefits:
Synergy: Synergy is the most essential components of mergers. In mergers, synergy between the participating firms determines the increase in value of the combined entity. In other words, it 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. To upgrade technology, a company need not always acquire technology. 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 competence: Companies also opt for Merger and Acquisition to acquire a competency or capability that they do not have and which the other firm does.

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.

Access to funds: Often a company finds it difficult to access funds from the capital market. This weakness deprives the company of funds to pursue its growth objectives effectively. In such cases, a company may decide to merge with another company that is viewed as 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.

Question 24.
Sarabjeet Singh was living in a small village near Nainital. He had a car that could run on solar energy. The car would not be generally charged due to non-availability of sunlight. The petrol was too costly and he could not afford petrol-run Car. He thought of an idea and identified a chemical which when mixed with an oil would work like petrol. The cost of this chemical mixture was very low. He tested this idea, verified it and found it valuable.
Identify and explain the concept discussed in the above para. [2]
Answer:
The concept discussed is creativity. Creativity is important to entrepreneurs because it is the first stage in the process of innovation, providing the stimulus for opportunity discovery and new venture creation. As new entrants, entrepreneurs often justify themselves upon the same dimensions as creativity: novelty, usefulness, and appropriateness.

Arguably, one of the first tasks demanded of an entrepreneur is to manifest creative ability through the conceiving of new product-market opportunities and unique value propositions. From these initial acts of creativity, entrepreneurs must build effective organizations that can repeatedly bring ideas to commercially valuable forms in order to survive and grow.

Section – C (15 Marks)

Question 25.
Explain how ‘Demand’ and ‘Project Innovation and Changes’ help an entrepreneur in assessing the market.
OR
Explain the factors that help an entrepreneur to identify a product. [3]
Answer:
Market assessment begins with finding out the target market. Different elements which help an entrepreneur in assessing the market are:
(i) Demand Analysis
(ii) Project Innovation & Changes

Demand Analysis: It refers to finding out the willingness and ability of the persons to buy products or services. Demand analysis is conducted to find out the answer to the following questions:
Who are the customers — individuals or companies? What is the economic status of the customer? What is the purpose of buying the product? What is the expenditure pattern of the customer? What utility customer expects from the products? etc.

Project Innovation and Changes: Another important element of market assessment is to find out the products used by competitors and other players in the market. They must find out the products used by competitors and its merits and demerits. This analysis helps an entrepreneur in preparing a product with changes and innovation according to the want of customers.

OR

The factors that help an entrepreneur to identify a product are:

Application and use: Ideas should be examined for their real-life use and application. If it already exists in the market, we will have to find out its present use, then we may think of modifying it for better use.

Level of operation: This is a crucial test for product/service identification. Depending on the use of the product/service the entrepreneur will produce it in a cottage industry or a small scale-industry or a large-scale industry.

Cost: What is the per unit cost of the product at particular level of operation? Whether this cost is comparable with that of other competitive products? These are some of the questions that have to be answered. This will ultimately decide the sale price.

Competition: Any product or service will face market competition at some stage. So, market competition should be assessed through a study of the trends in demand and supply.

Technical complexity: What type of technology is required to produce the product? Whether training and application of such technology will be locally available or will it have to be supported from other places? What would be the position of supply of plant and machinery for such a technology? These are important issues that have to be resolved.

Annual turnover and profit margin: Ideas should also have to be examined on the basis of expected annual turnover. This will also indicate the market share of the product or service.

Question 26.
How does branding help in effective Marketing?
OR
Given the same product and the same market, is it necessary to adopt different types of Marketing Mix by an entrepreneur. State the factors determining Marketing Mix. [3]
Answer:
Branding is useful in the following ways:

  1. Identification: A product and its enterprise get its identification by its brand name. This reduces the advertising cost.
  2. Differentiation: Brand name helps in differentiating one product with the another. Any particular brand can be easily differentiated from its competitors.
  3. Better Understanding: Brands develop better understanding of customers with the product. This increases loyalty and consequently reduces Marketing efforts.

OR

Different entrepreneur adopt different types of Market Mix for their products because of following:

Target Group: Market Mix is different for different income groups. Higher price is kept for the products meant for rich people. Also, the demands of the customers vary from place to place which ultimately depend on their paying capacity.

Promotional Method: Various types of promotional methods have varying effect in the same locality. Therefore, the selection of the method is guided by the locality.

Distribution: Mode of distribution is different for different areas. If it is city area, then road and air transport is preferable. If supply chain is longer, then it could be a mixture of air, water and land transport. Easily reachable mode is preferred and selected.

Question 27.
What do you mean by cash converting cycle? What does it indicate? [3]
Answer:
Adequate working capital is required for the smooth running of any business. It is required by a business for meeting day-to-day business expenses to complete business cycle or the operating cycle. The working capital of a business keeps on circulating or changing since the money circulates in various forms of assets in a continued manner. In a business concern operating cycle begins with outflow of cash towards the:

Purchase of raw material. Payment of labour, power, fuel and other expenses. Converting the raw materials into work-in-progress and converting them into finished goods. Sale of finished goods for cash or credit. If on credit then conversion of accounts receivable into cash. This operating cycle indicates that funds once tied up in the form of raw material are later converted into the form of finished goods.

In a manufacturing concern there is a time gap between the first step of purchasing of raw-materials to last step of selling goods and realising cash. This time duration is called operating cycle. It is also called the “changing” or “circulating capital” because money circulates in various forms of assets in a continued manner.

CBSE Sample Papers for Class 12 Entrepreneurship Set 9 with Solutions

Question 28.
ABC Company, manufacturing shoes, has taken over XYZ Company which also manufactures shoes at a small scale what do you think will be the reason for this kind of takeover? [3]
Answer:
ABC Company may have decided to expand in terms of its production and wanted to raise its sales and turnover. ABC Company may have decided to expand its area of sales and so may be desirous to take over the marketing area of XYZ Company. ABC Company may have wanted to use the research and development of the XYZ company for raising its output and sales.

Question 29.
Rajeshwari an entrepreneur, wants to start an industry for groundnut oil in Kathiawar (Gujrat), where less employment opportunities are available. She wants to fix a very low and reasonable price for this as compared to her competitor. She investigated that other oil factories are either making soya oil or sunflower oil which is not in much demand by the consumers of this area as they cannot afford to buy these oils. For this she prepares a comprehensive business plan that encompasses the entire range of activities being planned in the business.
Identify the plan and explain why this is needed by an entrepreneur. [3]
Answer:
Business Plan: A business plan provides clarity in all the areas. It explains clearly what the entrepreneur is doing, why he is doing and how he will do it. Such a plan helps the entrepreneur to select right technology and resources. The business plan is valuable to the entrepreneur, potential investors, venture capitalists, banks, financial institutions, new personnel’s suppliers, customers, advisors and others who are trying to familiarize themselves with the venture, its goals, and objectives. The business plan:

(a) Helps in determining the viability of the venture in a designated market.

(b) Helps in providing guidance to the entrepreneur in organizing his/her planning activities as such:
Identifying the resources required. Enabling obtaining of licenses if required etc. Working out with legal requirements as desired by the government. Helps in satisfying the concerns, queries, and issues of each group of people interested in the venture. Provides room for self-assessment and self evaluation, requiring entrepreneur to think through various scenarios and plan ways to avoid obstacles.

Though not desirable, at times, business plan helps to realize the obstacles which cannot be avoided or overcome, suggesting to terminate the venture while still on paper without investing further time and money. As the investors/lenders focus on the four Cs of credit: character, cash flow, collateral and equity contribution, it is the business plan which reflects the entrepreneur’s credit history, the ability to meet debt and interest payments, and the amount of personal equity invested thus serving as an important tool in funds procurement.

Section – D (25 Marks)

Question 30.
Sheila has a degree in robotics and she loves to design products. She started her career in ‘Robotech’ which uses high end technology in all their products. Her job profile included travelling a lot also. Whenever she travelled, she noticed that disabled people have difficulty in manufacturing their wheelchairs from one place to another because in some places ramp is not provided and there is no way they can walk up the stairs.

She came up with an idea of a wheelchair which can be used on stairs easily. She decided to quit her job and start her own company. She realized that her idea was the first stage in the process of innovation.
Identify the concept and explain the steps in its process. [5]
Answer:
Creativity:
The creative process: The process of creativity involves five steps: 1. Idea germination, 2. Preparation, 3. Incubation, 4. Illumination and, 5. Verification.

Idea germination: This is the seeding stage of a new idea. It is the stage where the entrepreneur recognizes 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.

Preparation: On the basis of the idea, interest and curiosity the need is adjudged by the entrepreneur and he starts looking of 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 the form of an idea. The entrepreneurs foresee the future of the product.

Incubation: This is the subconscious assimilation of information. This is the transition period. The entrepreneur starts thinking about the idea and implementation in his/her subconscious mind.

Verification: 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.

Innovation:It is the process of entrepreneurship which involves the translation of a useful idea into an application which has commercial value. It takes persistent efforts to analytically work out the details of the enterprise or service, to develop marketing strategies to organize finances and strategies operations.

Question 31.
What is pentration pricing method? Explain the advantages and disadvantages of this method of pricing.
OR
Promotion is the method to spread the word about the product or service to customers, stakeholders and the broader public. In the light of this statement, explain the various approaches a company can use to promote its products. [5]
Answer:
Penetration pricing: Penetration pricing is a pricing strategy where the price of a product is initially set at a price lower than the eventual market price to attract new customers. Penetration pricing is most commonly associated with a marketing objective of increasing market share or sales volume, rather than to make profit in the short term. The price will be raised later once this market share is gained.

The advantages of penetration pricing to the firm are:
It can result in fast diffusion and adoption. This can achieve high market rates quickly. This can take the competitors by surprise, not giving them time to react. It can create goodwill among the early adopter’s segment. This can create more trade by word of mouth. It creates cost control and cost reduction pressures from the start, leading to greater efficiency.

It discourages the entry of competitors. Low prices act as a barrier to entry. It can create high stock turnover throughout the distribution channel. This can create critically important enthusiasm and support in the channel.

Disadvantages or penetrating price method:
It establishes long–term price expectations for the product and image preconceptions for the brand and company. This makes it difficult to eventually raise prices. Another potential disadvantage is that the low profit margins may not be sustainable long enough for the strategy to be effective.

OR

There are various approaches a company can use to promote its products viz.,

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.

Below-the-line: Below-the-line methods are very specific, memorable activities focused on targeted groups of consumers. They are under the control of the organisation. The purpose of these activities has been to develop the brand by creating awareness and building a brand profile, which include sponsorship, sales promotions, public relations, personal selling and direct marketing.

Through-the-line: “Through-the-line” refers to an advertising strategy involving both above and below-the-line communications in which one form of advertising points the target to another form of advertising thereby crossing the “line”.

Question 32.
Karan has started a restaurant on a National Highway in the name of ‘Apna Dhaba’ by spending ₹20,00,000. He invested ₹8,00,000 of this own and took a loan of ₹12,00,000 from SBI @ 6% per annum. His monthly sales revenue is ₹12,00,000 and cost of goods sold is ₹7,00,000. He pays monthly salary of ₹2,00,000 to his employees.
The tax rate is 25%.Y are required to calculate:
(i) Return on Investment and
(ii) Return on Equity for Karan. [5]
Answer:
Option A (On annual basis)
Formula for calculating Return on Investment
\(=\frac{\text { Net profit after tax }}{\text { Total Capital invested }} \times 100\)

OR

Net-Profit-before interest and tax × 100
Total capital invested

Equity 8,00,000
Debt 12,00,000
Capital invested 20,00,000 20,00,000
Sales revenue (12,00,000 × 12) 1,44,00,000
Less: Cost of goods sold (7,00,000 × 12) 84,00,000
Gross Profit 60,00,000 60,00,000
Less: Fixed expenses (2,00,000 × 12) 24,00,000
Loan (12,00,000 × 6/100) 72,000
24,72,000 24,72,000
Net profit before tax 35,28,000
Less: Tax 25% 8,82,000
Net profit after tax 24,46,000 24,46,000

ROI = Net profit after tax/Total Capital Invested × 100
= 26,46,000/20,00,000 × 100
= 132.3%

OR

ROI = Net Profit before Interest and Tax/Total Capital Invest
= 35,28,000 + 72,000/20,00,000 × 100
= 180%

Option B (on monthly basis)
Calculation

Equity 8,00,000
Debt 12,00,000
Capital invested 20,00,000 20,00,000
Sales revenue 12,00,000
Less: Cost of goods sold 7,00,000
Gross Profit 5,00,000 5,00,000
Less: Fixed expenses salaries 2,00,000
Loan (12,00,000 × 6/100) = (72,000 × 1/12) 6,000 2,06,000
Net profit before tax 2,94,000
Less: Tax 25% 73,500
Net profit after tax 2,20,500

ROI = Net profit after tax/Capital employed × 100
= 2,20,500/20,00,000 × 100
= 11.025%

OR

ROI = Net profit before interest and tax/Capital invested × 100
= 2,94,000 + 6,000/20,00,000 × 100
= 3,00,000/20,00,000 × 100
= 15%
Return on Equity Formula
= Net profit after tax/Equity × 100
= 26,46,000/8,00,000 × 100
= 330.75%

CBSE Sample Papers for Class 12 Entrepreneurship Set 9 with Solutions

Question 33.
Bhushan and Vinay were pursuing Electrical Engineering from a prestigious engineering college. During their third year they developed a solar LED bulb which can be used indoors. The bulb had a small panel which had to be charged at a stretch for 10 hours in the sun and it would last for 200 hours of usage. The idea was risky as there was a possibility that the market might not accept such a product, but if they do so, then, there would be a revolution in the power industry as it would lead to saving of power in every household.

The prototype was made but to manufacture and distribute the same, they required around 5 crores. Both Bhushan and Vinay approached some affluent individuals who were ready to invest in their business in exchange for a convertible debt. Identify and explain the type of investors and state any two features of the same. [5]
Answer:
Angel Investor: Business angel or informal investor or an angel investor, is an affluent individual who provides capital for a business start-up and early stage companies having a high risk, high-return matrix usually in exchange for convertible debt or ownership equity. The job of an angel investor is invaluable. They fill the gap in start-up or early stage financing between “friends and family”, by providing seed funding and formal venture capital.

Features:

Most angel investors are current or retired executives, business owners or high-net-worth individuals who have the knowledge, expertise, and funds that help start-ups match up to industry standards. As angel investors bear extremely high risk and are usually subject to dilution from future investment rounds. They expect a very high return on investment.

Apart from investing funds, most angels provide proactive advice, guidance, industry connections and mentoring start-ups in its early days. Their objective is to create great companies by providing value creation, and simultaneously helping investors realize a high return on investments. They have a sharp inclination to keep abreast of current developments in a particular business arena, mentoring another generation of entrepreneurs by making use of their experience.

Question 34.
Trend spotting helps the entrepreneur to understand the market and produce goods or provide services in synchronisation with the market trends. Explain the ways by which entrepreneurs can spot trends.
OR
Enlist the activities included in the operational plan. [5]
Answer:
Ways by which entrepreneurs can spot trends are as follows:

Read Trends: Entrepreneurs regularly read the leading publications and visit websites affecting their business. At first, they scan information from a wide variety of sources – from international news on down to niche bloggers focused on specific aspects of their industry. Obviously, there’s a tsunami of information available.

They use tech–tools like RSS feeds, e-mail newsletters or websites and forums to keep on top out of all and get the information they want. They understand quickly which sources are valuable and which should be avoided.

Talk Trends: Talking to people is an equally important trend-spotting tactic. They get involved in specific industry’s trade association and attending events both online and offline. They also take advantage of social networking tools like social network websites and forums.

They even start or join groups on the networks and see what people are buzzing about and about the latest trends.

Watch Trends: Entrepreneurs go out in the marketplace to see what customers want. There’s no substitute for getting out in the marketplace. They make it a point to regularly go where their target customers hang out. The entrepreneur spends some time simply watching and observing. What are people eating, doing, wearing, using?

What stores or restaurants draw crowds and which sit empty? Trade shows are a great place to get trend ideas, too even if they are not looking to buy product, they attend many shows simply to see what’s hot.

Think Trends: Entrepreneurs absorb and think about what they have read, heard and observed. They start making connections and observations which lead to business-boosting insight. As an entrepreneur begins gathering all these information regularly, they will start to develop a “trend-spotter mind.” As they absorb and mull about what they’ve read, heard and observed, they’ll start to make connections and observations that will lead to business-boosting insights.

OR

Operational plan includes:

  • Flow of Material: It ensure orderly flow of material in the manufacturing process from the beginning to the end.
  • Continuity: Facilitating continuous production, less work-in-process and minimization of wastage.
  • Coordination: Co-ordinating the work of various department of the organization.
  • Flow of Goods: Describing the flow of goods/services from production level to the ultimate consumers.
  • System: Introducing a proper system of quality control.
  • Economic Production Policy: Undertaking the best and most economical production policies and methods.