CBSE Sample Papers for Class 12 Entrepreneurship Set 1 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Entrepreneurship with Solutions Set 1 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Entrepreneurship Set 1 with Solutions

Time : 3 Hours
Maximum Marks: 70

General Instructions

  • This question paper contains 34 questions.
  • The question paper contains 4 sections – A, B, C, and D.
  • Part A contains multiple-choice questions.
  • Part B -2 marks; Answers to these questions may be from 30-40 words.
  • Part C -3 marks; Answers to these questions may be from 50-75 words.
  • Part D -5 marks; Answers to these questions may be from 120-150.
  • Internal choice is given in the paper, there is no overall choice.


Question 1.
Environmental analysis is required by every firm to determine the opportunities and threats in an organisation. What is required to process and analyse the obtained data? (1)
(A) Quantitative analysis
(B) Qualitative analysis
(C) PESTEL analysis
(D) Both Quantitative and Qualitative analysis
(D) is correct
Explanation: An environmental analysis, also called an environmental scan, is a strategic tool used to identify and assess all external and internal elements in a business environment. It examines organizational and industry factors that can
positively or negatively affect the business. By anticipating short-term and long-term impacts, the organization can readily respond to them when they appear. Both quantitative as well as qualitative analysis is required lo process and analyse the so obtained data.

Question 2.
‘Shiny Teeth’ have been in the field of manufacturing tooth pastes since 2010. They decided to foray into the field of other specialised products in oral hygiene. Initially they decided to promote their specialised products to a large audience in the same manner as how they have been promoting their toothpastes. Within a few months they realised that their promotion technique is not working. The marketing team analysed and came to the conclusion that the specialised products should be promoted to a specific target audience. This idea worked very well and the promotion was a success. Identify all the promotion strategies used by them? (1)
(i) Above the line
(ii) Below the line
(iii) Through the line
(A) (i) only
(B) (ii) only
(C) (i) and (ii)
(D) (i), (ii), (iii)
(C) is correct.
Explanation: Initially they used above the line promotion strategy which is a less focused marketing technique that reaches a larger/wider target audience. After changing their promotion technique, they reached to below the line technique in which a specific audìence is targeted and the promotional techniques are created for a group of specific audience.

Question 3.
Mr. Dhambani is the CFO of Cherico Industries. He has to present the analysis of the financial health of the company during the last financial year, 2022-2023. He is making a presentation for the Annual Board Meet. To clearly explain the position he needs to work on: (1)
(i) Financial Plan
(ii) Economic order quantity
(iii) Return on Investment
(iv) Break-Even Analysis
(v) Return on Equity
(A) (j) and (ii)
(B) (ii) and (iii)
(C) (iii) and (v)
(D) (iv) and (v)
(C) is correct.
Explanation: As per the given case, Mr. Dhambani is presenting the financial health ol the company during the last year and for this, he will need to present the status of return on equity and the return on investment in order to show the financial strength
and financial health of the company as these two are the perfect indicators of the financial strength of a company.

CBSE Sample Papers for Class 12 Entrepreneurship Set 1 with Solutions

Question 4.
Aarna Industries started manufacturing ice-creams under the brand name ‘Tasty’. The company decided to use 3D animation techniques which will be projected on buildings. They chose several high raise buildings all over major metropolitan cities and started their advertising campaign. What form of media is the company using? (1)
(A) Television
(B) Point of sale
(C) Ambient
(D) Cinema
(C) is correct.
Explanation: Ambient marketing is a way of promoting products or services using unusual locations or items and their elements to your advantage as a communication channel. It involves creative advertising messaging, interacting with the target audience, and should affect consumers on an emotional level.

Question 5.
Identify the various factors which will help the entrepreneur as well as the potential investor from the organisational plan. (1)
(i) Long-term effectiveness of the enterprise
(ii) Profitability
(iii) Specifying the types of skills needed and the roles that must be filled by the members
(iv) the attitudes, behaviours, dress, communication styles, etc., thus chalking out informal organisation
(A) (i) and (ii) only
(B) (i), (iii), and (iv) only
(C) (i), (ii), (iii) and (iv)
(D) (i), (ii), (iii)
(C) (i), (ii), (iii) and (iv)

Question 6.
This promotional technique is deliberately planned and sustained effort to establish and maintain mutual understanding between an organisation and public. This industry grew 12% to touch 1600 crore in FY19, according to the fourth ‘State of the Industry Survey 2019’ report by the Public Relations Consultants Association of India (PRCAI). While media relations continue to be the largest service, non-media relations services now contribute 53 percent of the industry’s revenue. Identify the technique. (1)
(A) Advertising
(B) Sales Promotion
(C) PrsonaI Selling
(D) Public Relations
(D) is correct.
Explanation: Public relations is a strategic communication process that builds mutually beneficial relationships between organizations and their publics. Generally, public relations specialists manage an organization’s public image and reputation. They help that organization communicate with their public and work on developing a positive relationship between the two.

Question 7.
What will be the Net Working Capital of Sukhom Ltd. from the given data? (1)

Cash ₹ 2,00,000
Account Receivables ₹ ‘1,50,000
Account Payables ₹ 65,000
Inventory ₹ 3,00,000
Short-term borrowings ₹ 1,00,000
Outstanding Salaries ₹ 50,000

(A) ₹ 6, 50,000
(B) ₹ 2,15,000
(C) ₹ 8,65,000
(D) ₹ 4,35,000
D) is correct.
Explanation: Net working capital = Current assets – current liabilities
Current assets = 2,00,000 (cash) + 1,50,000 (B/R) + 3,00,000 (inventory) = 6,50,000
Current Liabilities = 65,000 (B/F) + 1,00,000 (Short term borrowing) + 50,000 (o/s salaries) = 2,15,000
Net working capital = 6,50,000 – 2,15,000 = ₹ 4,35,000

Question 8.
Ratnanjali Ayurveda introduced a new range of products on the basis of the tri doshas. The marketing department is brainstorming on the branding of the new range where the customers can identify the new range easily and at the same time it creates awareness about the type of products this range has. The name AyurPrakriti’, was adopted by the company and it would be used for all the products under this range. Which type of branding is adopted by Ratnanjali Ayurveda? (1)
(A) Individual branding
(B) Corporate branding
(C) Umbrella branding
(D) Alphanumeric branding
(C) is correct.
Explanation: Umbrella branding is a technique under which two or more related but distinct products are sold under a common brand name. This technique is used by the companies having the positive brand equity. As per the given case, the company ¡s selling its products under a single brand name. hence, it is using umbrella branding.

CBSE Sample Papers for Class 12 Entrepreneurship Set 1 with Solutions

Question 9.
Identify the place where transaction happens in shares or debentures subsequent to its primary offering. (1)
(A) Primary market
(B) Secondary market
(C) Capital market
(D) Securities and Exchange Board of India
(B) is correct.
Explanation: The capital market is classified into two types: primary market and secondary market. The first time or initially the securities are bought and sold in primary market and once the securities have been issued, they are traded in secondary market.

Question 10.
Assertion (A): The basic test of a successful entrepreneur is the identification of business opportunity in the environment.
Reason (R): In order to be successful an entrepreneur needs to initiate steps to produce and sell goods and services to make the best use of that opportunity. (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.
(A) is correct.
Explanation: The most important ability of an entrepreneurship is to identify the business opportunities in order to best utilization of the available resources in order to expand and make the business more successful.

Question 11.
Which among the following is NOT a method of raising the required capital in the primary market? (1)
(A) Xma Ltd. raised additional finance from existing shareholders by offering securities to them in proportion to the shares they are holding.
(B) Prabhat Luminous Ltd. raised funds by selling its shares mainly to the General Insurance Corporation of India and Army Group Insurance.
(C) To increase the efficiency of the employees and reduce the labour turnover, the management of CVK Ltd. made employees the shareholders and enabled them to share the profits of the company.
(D) Sujata Al ltd. raised funds from Mr. Bansal, an affluent individual in exchange for ownership equity.
(D) is correct.
Explanation: Primary Market is a market in which first-time issued securities are traded through the stock market.

Question 12.
Assertion (A): Advertising is a paid form of communication. (1)
Reason (R): Successful advertising makes the products or services positively known by that section of the public most likely to purchase them.
(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.
(B) is correct
Explanation: Advertitng is a means of communication with the users of a product or service. Advertisements are messages paid for by those who send them and are intended to inform or influence people who receive them. It is a paid form of communication. The main aim of advertising is to create a positive image of a product or service in the mind of the mass of the people to enhance them to purchase it.

Question 13.
Assertion (A): The Angel Investors were given the acronym FFF — i.e. FRIENDS, FAMILY, AND FOOLS. (1)
Reason (R): Angel investors are high net-worth individuals who have the knowledge, expertise, and funds that help start-ups without due diligence.
(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.
(C) is correct.
An angel investor is a person or company that provides capital for start-up businesses in exchange for ownership equity or convertible debt. They may provide a one-time investment or an ongoing capital injection to help the business move through
the difficult early stages.

Question 14.
The United Nations has declared 2023 as the International Year of Millets. Many start-up firms were influenced with this news and have started to create their own version using millets. One such company was ‘Young You’; they created a new variety of product using millets which was targetted at the young generation. Which of the following stages of enterprise process has the company followed in the above case? (1)
(A) Opportunity spotting by analysing the needs and problems that exist in the environment.
(B) Evaluating the ideas received from different sources to find a creative solution.
(C) Identifying a product or service through innovation.
(D) Setting up a project and nurturing it to success.
(C) is correct.
Explanation: The company ‘Young You is identifying a product through innovation after getting a positive idea from the side of the United Nations Organisation by declaring the year 2013 as the international year of millets. In this way, the company started to work on innovating a new product made up of millets.

CBSE Sample Papers for Class 12 Entrepreneurship Set 1 with Solutions

Question 15.
Farheen, also known online as Fairu, has become a well-known figure on social media. This social media phenom has a staggering 28M Instagram followers, and they support her wholeheartedly. Millions of social media users enjoy her videos and photographs because she understands how to connect with the viewers. Fairu frequently uploads photos and videos to her Instagram account to keep her followers entertained. The fact that this social media celebrity will soon appear in India’s most popular reality show marks a significant turning point in her career. Raja an entrepreneur has been following Farheen to spot the latest trend. Which of the following trends is it? (1)
(A) Read Trend
(B) Talk trend
(C) Watch trend
(D) Think trend
(A) is correct.
Explanation: In read trend, an entrepreneur regularly reads the leading publications and also focuses on the various websites and other publications like social blogs, magazines, newspaper,s etc. In this case, Farhaan is keeping a sharp eye on the various social networking websites. So, he is following the read trend.

Question 16.
As a chemistry enthusiast, Athavan was always very innovative and wanted to try Out new things. He had an idea of making a new stain remover which will help in removing stains very fast from dothes. He did a market research to find out the various stain removers available in the market to foresee the future of the product in the market. Which of the following steps of the creative process is he following? (1)
(A) Idea germination
(B) Preparation
(C) Incubation
(D) Illumination
(B) is correct.
Explanation: Is conducting market research to understand the various stain removers already available in the market. This step involves gathering information and analyzing the existing products and their market potential. By doing so, Athavan is preparing himself with the necessary knowledge and insights to evaluate the feasibility and future prospects of his idea for a new stain remover.

Question 17.
The finance minister of India announced in the 2023 budget that the Government has allocated 16,459 crore to the IT ministry, 40% higher than last year to improve various facilities. Which of the following PESTEL factors does the above news article indicate? (1)
(A) Political
(B) Economic
(C) Legal
(D) Ecological
(A) is correct.
Explanation: The political factor in the PESTEL analysis refers to the laws and regulations set by the governments like tax policy, environment regulations, tariffs, political stability etc.

Question 18.
Carpet weaving has been a major industry in Kashmir. Bareen wanted that this cottage industry to be known worldwide and that it gets its due importance. She along with her friends and help from the government decided to market and sell the same. She organised the required raw material and human resources for carpet weaving. Identify the element of innovation process that Bareen is performing (1)
(A) Analytical planning
(B) Organising resources
(C) Implementation
(D) Commercial Application.
(B) is correct
Expianaf ion: Bareen is gathering and organizing the required raw materials and human resources for carpet weaving. By ensuring that the necessary resources are available and properly allocated, she is setting the foundation for the successful implementation and marketing of the cottage industry.


Question 19.
State any two objectives of problem identification (2)
Enlist any two ways in which creative ideas can be generated. (2)

  • It should clearly state the problem.
  • Identify the target group facing the problem.
  • Find the market acceptability of the solution to the problem.

There are basically five ways in which creative ideas can be generated:

  1. Develop a new product or service.
  2. Improve an existing product or service.
  3. Find a new process or resource for manufacturing a product.
  4. Find new markets for existing products or services.
  5. Find a new use of an existing product or service.

CBSE Sample Papers for Class 12 Entrepreneurship Set 1 with Solutions

Question 20.
Jal Prakash Ltd. was running into losses for the past few years. The company appointed a consultant to look into the reasons for the loss. The consultant after analysing everything framed a sales strategy which helped the sales force spend time targeting the correct customer at the right time. This helped the company to revive their profits within a few months. Explain the types involved in this strategy. (2)
(i) Direct Sales Strategy: Where sales people attack the competition head on when talking to the customer. They talk about each feature of the competition’s product and compare it to theirs. The term “negative selling” refers to the direct sales approach.

(ii) Indirect Sales Strategy: They apply more subtle techniques by demonstrating features and benefits not available with the
competition’s products or services without ever mentioning them by name. This more sophisticated, positive sales strategy requires research and analysis of the competition.

Question 21.
Pooja after finishing her catering course wanted to start her pastry shop in her home town – Jaipur. She knew that there were a lot of national and international tourists who visit the place whom she considered as her target customers. She also planned to have a centralised kitchen to make the pastries and then use vans to transport to various shops all around Jaipur. For the same, she also decided to rent a warehouse near to her centralised kitchen. From the above case study, identify and explain the factors which Pooja has paid attention whilst doing market assessment. (2)
(i) Demand: The demand assessment will be based on the size of market being targeted, i.e., local markets, market at state level or national international market. It will also involve a study of the target groups of consumers, their preferences, tastes and other related variables.

(ii) Cost and price of product: It is important to determine the cost of the product and its comparison with available products in the market. Cost variables of competitors in terms of transportation delays, wastage, storage, etc. have to be studied to spot cost advantage. This will influence the delivery mechanism of the identified product or service.

Question 22.
How is franchising a better option for external expansion in case of start-ups? (2)
How is the channel of distribution influenced by the type of buyer? (2)

  • Franchising changed the working of the startups because already the product carriers a name in the market already which is the most difficult part of business to establish.
  • Startups take up training to understand the product and franchisors make franchises fully conversant with the product/services that they have to offer.
  • The start-ups can grow fast without having to increase labour, operating costs, and blocking running expenses because normally buyers straight walk up to them.

Buyers can be of two types: General Buyers and Industrial Buyers
if more buyers of the particular product belong to general category then there will be more middlemen. The reason is that the product has to reach the ultimate customer who can be anywhere in the country and to reach them, numerous middlemen e required. In case of industrial buyers, there will be fewer middlemen. The reason is the industry is the ultimate consumer and to reach them there is no need to have many intermediaries in between.

Question 23.
An entrepreneur perceives opportunities, synthesizes the available information and analysis emerging patterns so that it can be shared and supported by all customers, partners, employees, and suppliers. Comment on any two factors involved. (2)
Factors involved in sensing opportunities
(i) Ability to perceive and preserve basic ideas Spotting an idea often triggers the process of sensing an opportunity. The following are the various sources which lead to the emergence of basic ideas.

  • Problems: When a problem exists, an idea leads to a solution to resolve that problem, it emerges as a business opportunity.
  • Change: A change in social, legal, technological aspects etc. leads to new opportunities to start a business.
  • Inventions: New products or services leads to new business opportunities.
  • Competition: Competition often results in emergence of new and better ideas that result in new business opportunities.
  • Innovation: Creating new things of value as well as new and creative processes that add value to the existing products or services. For example, computers to tablets.

(ii) Ability to harness different sources of information Various sources like magazines, journals, books, seminars, trade shows, family members, customers, friends, etc. help in getting information that results in evolution of basic ideas. Bringing together various sources of information and knowledge, and analyze It to the best possible extent. The analysis helps in the identification of the right opportunity to start a new business.

(iii) Vision and creativity
Creativity in innovating a solution and vision. The entrepreneur should be able to creatively identify an idea to generate a valuable solution to a problem. Once the solution is identified their vision to convert the solution into business opportunity helps them to move forward, overcoming all the obstacles.

They constantly

  • overcome adversity
  • exercise control over the business
  • make a significant difference.

Question 24.
Given below is the data from the cost sheet of ‘Shiv Dhaba’. Calculate the unit price per customer from the information provided. (2)

Week Number of people taking meals Average amount billed (in ₹)
Week 1 120 150
Week 2 60 205
Week 3 70 146
Week 4 80 221
Week 5 90 240

The quantity of jeans sold by a shop is 1,200 per month @ of ₹ 1100/-. The cost of placing an order and receiving goods is ₹ 1500/- per order. The inventory holding cost is ₹ 30/- per annum. What is the economic order quantity for the shopkeeper? (2)

Week Number of people taking meals Average amount billed Amount billed
Week 1 120 150 18,000
Week 2 60 205 12,300
Week 3 70 146 10,220
Week 4 80 221 17,680
Week 5 90 240 21,600
Total 420 79,800

Unit Price per customer
= \(\frac{\text { Total Billed Amount }}{\text { Number of Customers }} \)
= \(\frac{79,800}{420} \)
= ₹ 190/customer

Q = \(\sqrt{2PD/C}\)
P = ₹ 1,500
D = 1,200 x 12 = 14,400
C = ₹ 30
Q = \(\sqrt{2 \times 1,500 \times 14,400 / 30}\)
= \(\sqrt{14,40,000}\)
= 1,200 jeans

CBSE Sample Papers for Class 12 Entrepreneurship Set 1 with Solutions


Question 25.
This concept is an identifying symbol for any product or business. It can be any distinctive design, mark, sign which stands associated with the enterprise. Enlist any three purpose of this concept. (3)
Purpose of logo:
Logos are a critical aspect of business marketing. As the company’s major graphical representation, a logo anchors company’s brand.

  • Corporate Logos are intended to the identity” of an enterprise because of displaying graphically enterprise’s uniqueness.
  • Through a set color combination, fonts, images, impressions and/or pattern, logos provide essential information about a company that allows customers to relate with the enterprise’s core brand.
  • Enterprises normally resort to logos’ as a short path for advertising and other marketing materials.
  • Logos act as the key visual component of an enterprise’s overall brand identify.

Question 26.
What are the three most likely situations which arise before any firm while preparing the production plan? (3)
Enlist any three points of importance in framing the business plan. (3)
The three situations are:
(i) No manufacturing involved: If the new venture does not include any manufacturing function, say it’s a trading firm or a service provider, then this section will stand eliminated from the plan.
(ii) Partial manufacturing: If some or all the manufacturing process is to be subcontracted or outsourced, then the production plan should describe:

  • Name and location of subcontractor(s)
  • Reasons for their selection
  • Cost and time involved
  • Any contracts that have been completed etc.

In such cases, a dear mention of what entrepreneur intends to do himself and what he plans to get it corner from outside is required.

(iii) Complete Manufacturing: if the manufacturing is to be carried out in whole by the entrepreneurs he/she will need to decr1be:

  • the physical plant layout,
  • the machinery and equipment required to perform the manufacturing operations,
  • raw materials and suppliers names, addresses, terms and conditions,
  • cost of manufacturing,
  • any future capital equipment required, etc.

The business plan:
(i) helps in determining the viability of the venture in a designated market.
(ii) helps in providing guidance to the entrepreneur in organizing Wher 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.

(iii) helps in satisfying the concerns, queries, and issues of each group of people interested in the venture.
(iv) provides room for seLf-assessment and self-evaluation, requiring entrepreneurs to think through various scenarios and plan ways to avoid obstades.
(v) 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.
(vi) as the investors4enders focus on the four C’s of credit: character, cash flow, collateral, and equity contribution (Any three points)

Question 27.
Mittal Industries is into manufacturing of television sets. The company decided to introduce a new range of smart television sets which can use any mobile phone as remote control. The finance department along with the R&D department brainstormed to arrive at an optimal price for the television sets. They decided that the price be fixed based on a manufacturing estimate. Enlist the advantages of fixing price in this manner. (3)
Advantages of cost-plus pricing
(i) Biggest advantage of this is that company knows exactly the amount of expenditure that has incurred on making a product and therefore they can add profit margin accordingly which helps in achieving the desired revenue for a firm.

(ii) It is the simplest method to decide the price for a product because one has just to add up all the cost and then add profit which you want to earn which will give the price for a product.

(iii) Since the company is using its own data for deciding cost which makes it easier for a company to evaluate the reasons for
escalations in expenses and therefore it can take corrective action immediately.

Question 28.
The production plan aims at “plan your work”, whereas operations plan ensures “work your plan”. In the light of the given statement, examine the relevance of a operational plan for an entrepreneur. (3)
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 the production point to the consumers
  • Introducing a proper system of quality control
  • Undertaking the best and most economic production policies and methods.

CBSE Sample Papers for Class 12 Entrepreneurship Set 1 with Solutions

Question 29.
‘Finance is the elixir for any business’. Justify the given statement. (3)
In its vital role as a financial intermediary, capital markets satisfies the tastes of the savers and the need of the investors. Evaluate the given statement. (3)
(i) Finance assists ¡n the formation of new businesses and allows businesses to take advantage of opportunities to grow and expand.
(ii) A business needs funds to:

  • Promote or establish the business
  • Acquire fixed assets
  • Make market investigations
  • Develop products
  • Keep men and machines at work
  • Encourage management to make progress and create value.
  • Expand, diversify, improve, and grow.

(iii) The entrance of finance in an enterprise is Like a lubricant to the process of production. Finance is the elixir for any business as nothing happens without money.

  • Mobilize the financial resources on a nationwide scale.
  • Secure the required foreign capital and know-how to promote economic growth at a faster rate.
  • Ensure the most effective allocation of the mobilized financial resources by directing the same either to such projects which are capable of the highest yield or to the underdeveloped priority areas where there is an urgent need to promote balanced and diversified industrialization. The capital market satisfies the tastes of savers and the needs of investors through its various financial instruments and institutions.


Question 30.
What is the most essential component of mergers? Distinguish between the two forms of this component. How does this factor play a key role in deciding whether any organization should go for a merger? (5)
Differentiate between ‘merger’ and ‘acquisition’ as forms of external expansion. Explain the ways in which one business can acquire another. (5)
Synergy is the most essential component 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.

(i) Operating synergy: This refers to the cost savings that come through economies of scale or increased sales and profits. It leads to the overall growth of the firm.

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

  • A merger is a combination of two companies into one larger company.
  • All the combining companies ‘are dissolved and only the new entity continues to operate.


  • An acquisition is taking control of a company, leading to its take ovet It could be an acquisition of tangible assets, intangible assets, rights and other kinds of obligations.
  • Acquisitions are often made as part of a company’s growth strategy whereby it is more beneficial to take over an existing firm’s operations and niche compared to expanding on its own.

There are four types of acquisitions:

  • Friendly acquisition: Both the companies approve of the acquisition under friendly terms. There is no forceful acquisition and the entire process is cordial.
  • Reverse acquisition: A private company takes over a public company.
  • Backflip acquisition: A very rare case of acquisition in which the purchasing company becomes a subsidiary of the purchased company.
  • Hostile acquisition: Here, as the name suggests, the entire process is done by force. The smaller company is either driven to such a condition that it has no option but to say yes to the acquisition to save its skin or the bigger company just buys off all its share, thereby establishing majority and hence initiating the acquisition.

Question 31.
The role of a venture capitalist in an organization is dependent on the stage at which an organization is being funded by the venture capitalist. Evaluate.(5)
Seed capital finance:
It refers to the capital required by an entrepreneur for conducting research at the pre-commercialisation stage. During this stage, the entrepreneur has to convince the investor (VC) why his ideal product is worthwhile. The investor will investigate the technical and economical feasibility of the idea. In some cases, there is some sort of prototype of the ideal product that is not fully developed or tested. As the risk element at this stage is very high, the investor (VC) may deny assisting if he does not see any potential in the idea.

Start-up finance:
If the ideal product/process is qualified for Further investigation and/or investment, the process will go to the start-up stage. A business plan is presented by the entrepreneur to the VC firm. A management team is being formed to run the venture. li the
company has a board of directors, a person from the VC firms will take seats on the board of directors.

Second-round financing:
At this stage, we presume that the idea has been transformed into a product and is being produced and sold. The entrepreneur, at this stage, needs assistance from the Venture Capitalist for expansion, modernization, and diversification so that economies
of scale and stability could be attained. At this time, larger funds than the other early-stage financing are required, entrepreneur should be extra careful because only if they and their management team can prove their capability of standing against the competition, only then is the VC firm interested in financing.

Question 32.
Explain in detail the following sources of Idea Fields:
A. Natural resources
B. Existing products or services
C. Market-driven ideas
D. Trading related ideas
E. Service-related ideas (5)
Explain the first five steps involved in idea and opportunity assessment. (5)
Natural resources: Ideas can be generated based on natural resources. A product or service may be desired from forest resources, agriculture, horticulture, mineral, animal husbandry, wind, sun, and human resources. Existing products or services: A great business idea combines skills with imagination and market demand. A business opportunity or idea often comes from everyday problems that someone solves.

Successful businesses find a need and fill it by providing a service or product. Entrepreneurs who look at ways to make an existing product or service better can be as successful as those who create or invent products.

Market driven ideas: Market research is any organized effort to gather information about target markets or customers. It is a very important component of business strategy. It is a key factor to maintain competitiveness over competitors. The research helps in creating new products in the market as per the needs of the customer.

Trading-related ideas: With increasing consumerism, the scope and nature of trade has enlarged; local trade, import, and export, and e-commerce are all making trading a very wide area of enterprise. With the opening of the market to International Companies, large size departmental stores, chain shops, and umbrella markets have become omnipresent; competition has become intense and to survive in the market, new entrants will have to acquire skills, competencies, and knowledge required to launch, manage and expand business opportunities.

Service-related ideas:
Entrepreneurial opportunities are not only restricted to the manufacturer, Service sector is the most growing field these days, the world over, because of the emerging knowledge in societies and advancements in Information and Technology. So, new opportunities can be identified by understanding the linkages to different business activities.
(i) 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. We 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.

(ii) 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.

(iii) 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.

(iv) Cost
What is the per unit cost of the product at a 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.

(v) 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.

CBSE Sample Papers for Class 12 Entrepreneurship Set 1 with Solutions

Question 33.
Fast Rite Ltd. manufactures a variety of stationery but its most popular product is its pen. Three varieties of pens to suit the needs of its users. The details of the pens are given in the table below.

Variety Classic Gel Pen Executive Ball Pen Four-in-one Ball Pen
Selling Price per unit (in rupees) 15 21 36
Variable cost per unit (in Rupees) 9 14 19
Sales Mix 20% 20% 60%

The total fixed cost is ₹ 2,56,000.
Calculate the following from the information given above.
(i) Total weighted average contribution margin
(ii) l3reakeven Quantity for each variety
(iii) Break even (in Rupees) for Four-in-one Ball Pen. (5)

Variety Classic Gel Pen Executive Ball Pen Four-In one Ball Pen
(A) Selling Price per unit 15 21 36
(B) Variable cost per unit 9 14 19
(C) Contribution A-B (in Rupees) 6 7 17
(D) Sales Mix 20% 20% 60%
Weighted Contribution (C x D) 6 7 17
1.2 1.4 10.2

(i) Total weighted average contribution margin (1.2+1.4+10.2) = ₹ 12.8

(ii) Break even Quantity for each variety
BEP = Total Fixed CoI/I’ota1 Weighted Contribution = 2,56,00/12.8 = 20,000 units
BEP for Individual
Classic Gel ren 20,000 x 20% = 4,000 units
Executive Ball Pen 20,000 x 20% = 4,000 units
Four-in-one Ball Pen 20,000 x 60% = 12,000 units

(iii) Break even (in Rupees) for a Four-in-one Ball Pen Break-even quantity x selling price/ball pen 2,000 x ₹ 36 = ₹ 72,000

Question 34.
Karthik is in the business of manufacturing laptop components since 2010. They have been supplying their parts to all major manufacturers. His son Harsh took over the factory in 2022. He had done his Masters in Business Administration and wanted to expand the operations of the company. He planned to start manufacturing laptops to be sold in the Indian market. He discussed the idea with his financial team. They estimated the cost of the project to be around ₹ 65 crores. They decided to take the required hinds from potential investors. The financial team of the company decided to make a plan which will explain to the potential investor the ways and means of how the entrepreneur plans to meet all financial obligations. Explain any five components of this plan. (5)
Financial Plan
Components of Financial Plan:
(i) Proforma Investment Decisions:
This part of financial plan relates to how the enterprise’s funds are invested in different assets so that the enterprise is able to earn the highest possible returns on investment.

(ii) An estimate of various components of capital nature.
Proforma Financing Decisions:
This section summarizes all the projected sources of funds available to the venture to raise finance from. Typically, sources of hinds are:

  • Owners i.e. Owner’s funds
  • Outsiders i.e. Borrowed funds

(iii) Proforma Income Statement
The proforma income statement is the projected net profit calculated from projected revenue minus projected costs and expenses. It summarizes all the profit data during the first year of operations of the new enterprises. In preparing the proforma income statement, ‘sales by month’ must be calculated first, making use of forecasting techniques as the basis.

(iv) Proforma Cash Flow
Profit and cash flow are not the same, when from sales we subtract expenses, the result is profit and when from cash receipts we subtract cash payments, the resultant figure is the cash flow. Proforma cash flow reflects the projected cash available with the enterprise as a result of subtracting projected cash disbursements from projected cash accumulations. Cash flows only when actual payments are received or made. Mere sales which might be on credit, will not generate cash.

(v) Break-even point
Every firm wants to maximise its profits. The Break-even point is that level of volume of production at which firm neither makes a profit nor a loss. Here, the total revenue is equal to the total cost of a firm, at the given level of capacity.

(vi) Economic and Social Variables
In view of the social responsibility of business, the abatement costs, i.e. the cost of controlling the environmental damage should also be stated in the plan. It’s always advisable to mention in the business plan, the socioeconomic benefits expected to acquire from the proposed investment.

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