CBSE Sample Papers for Class 12 Entrepreneurship Set 4 with Solutions

Students must start practicing the questions from CBSE Sample Papers for Class 12 Entrepreneurship with Solutions Set 4 are designed as per the revised syllabus.

CBSE Sample Papers for Class 12 Entrepreneurship Set 3 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.
Given below are the factors necessary for developing a successful idea. Identify the correct combinations from the given options: [1](A) Skills and Knowledge
(B) Trends and demand
(C) Skills, Knowledge and competencies
(D) Trends, demand and change
Option (C) is correct.
Explanation: Skills and knowledge are essential for identifying opportunities and understanding the market. Competencies encompass the abilities and expertise required to effectively execute the idea and turn it into a successful venture.

Question 2.
‘Polymer Ltd.’ decided to diversify into manufacturing pipes and plastic household products apart from their water tanks business. Their finance and marketing department decided to adopt any of the two pricing strategies – adding a certain percentage of profit to the cost of production selling at a lesser amount so as to capture a huge market. They put forward their funding strategy to the CEO. The suggested pricing strategies are: [1](i) Cost-plus pricing
(ii) Skimming pricing
(iii) Penetration pricing
(iv) Competitive pricing
(A) (i) and (ii)
(B) (ii) and (iii)
(C) (iii) and (iv)
(D) (i) and (iii)
Option (D) is correct.
Explanation: Cost-plus pricing: This strategy involves adding a certain percentage of profit to the cost of production to determine the selling price. Penetration pricing: This strategy involves setting a lower price for the products to penetrate the market and gain a significant market share.

Question 3.
Harshdeep is the stockkeeper of Neha Textiles Ltd. The company is into converting cotton yarn into fabric and then further computerised printing on the same to add value to the fabric. He wants to know the ideal quantity of yarn to be ordered so that the production process does not stop. How can he know the correct time to place an order? [1](A) By calculating Break-even point
(B) By calculating Re-order point
(C) By calculating Economic order quantity
(D) By calculating lead time
Option (B) is correct.
Explanation: Re-order point is the inventory level at which a new order should be placed to replenish stock in order to avoid stockouts and ensure uninterrupted production. It takes into consideration the lead time, which is the time taken from placing the order to receiving the delivery.

Question 4.
Vinit innovated a new pen which can read any text when placed on top of a page or newspaper which definitely helps blind and old people who are unable to read. He wishes to legally protect his product. He can get a: [1](A) Patent
(B) Copyright
(C) Trademark
(D) Geographical Indication
Option (A) is correct.
Explanation: Patents are granted for inventions that are new, useful, and non-obvious. Vinits pen qualifies as an invention since it introduces a new and innovative feature that solves a problem faced by blind and old people who are unable to read. The pen’s ability to read text when placed on top of a page or newspaper sets it apart from existing pens and makes it eligible for patent protection.

Question 5.
(i) Each partner is liable for acts performed by other partners.
(ii) Each partner can bind other partners and the firm by his acts done in the ordinary course of business. Which feature of the partnership is highlighted by these two statements? [1](a) Implied authority
(b) Utmost good faith
(c) Mutual Agency
(d) Agreement
(A) (1) and (ii) only
(B) (iii) and (iv) only.
(C) (ii) only
(D) (iii) only
Option (D) is correct.
Explanation: “Each partner is liable for acts performed by other partners” highlights the concept of mutual agency, as it signifies that partners are mutually responsible for the actions and obligations of their fellow partners. “Each partner can bind other partners and the firm by his acts done in the ordinary course of business” further emphasizes mutual agency, as it indicates that the actions and decisions of one partner can legally bind the partnership and its other partners.

Question 6.
In the year 2012, the social media application “Chowpal” acquired “Socialite” at a purchase value of $1 billion. Both the entities operated in the social media industry and offered similar products as part of their photo-sharing services. However, Chowpal intended to further bolster its market position in the social media space, and the acquisition of Socialite exactly fitted in its scheme of the plan. The merger eventually helped Chowpal in increasing its market share, eliminating competition, and gaining access to a wider audience. Identify the type of merger: [1](A) Vertical merger
(B) Horizontal merger
(C) Market extension merger
(D) Product extension merger
Option (B) is correct.
Explanation: A horizontal merger refers to a merger or acquisition between two companies that operate in the same industry and offer similar products or services. In this case, Chowpal, a social media application, acquired Socialite, another social media company that offered similar photo-sharing services. Both entities were operating in the social media industry, and their products overlapped.

Question 7.
Given below are information obtained from the balance sheet of PQR Ltd. What will be the gross working capital for PQR Ltd. for the year ending 31st March, 2022? [1]Assets: (in Rupees)
(i) Cash- 60,000
(ii) Stock- 50,000
(iii) Trade Debtors- 65,000
(iv) Short-term investment- 15,000
Liabilities: (in Rupees)
(i) Short term loans- 25,000
(ii) Trade creditors- 5,000
(iii) Outstanding expenses- 10,000
(A) 40,000
(B) 1,90,000
(C) 1,50,000
(D) 2,30,000
Option (B) is correct.
Explanation: Gross Working Capital = Cash + Stock + Trade Debtors + Short-term Investment
Gross Working Capital = ₹ 60,000 + ₹ 50,000 + ₹ 65,000 + ₹ 15,000
Gross Working Capital = ₹ 1,90,000

Question 8.
‘Umbrella branding’ is? [1](A) Entrepreneur opts to use a common or successful family name for their several products.
(B) Entrepreneurs choose to utilise their corporate name or logo together with some brand names of individual products.
(C) Entrepreneur uses alpha-numeric names to signify physical characteristics of the product.
(D) Entrepreneur chooses distinct names for each of his offerings.
Option (A) is correct.
Explanation: Umbrella branding refers to using a common or successful family name for several products. For example: AMUL uses umbrella branding where it sells several products like milk, ghee, butter, ice-cream, chocolates etc. under the same brand name.

Question 9.
ABC Ltd. decided to raise funds by issuing shares. The finance department felt that the company should offer the shares to existing shareholders on a pro-rata basis. Out of the following, identify the method of raising the funds being suggested by the finance department: [1](A) Public Issue
(B) Rights Issue
(C) Private Placement
(D) Offer to Employees
Option (B) is correct.
Explanation: A rights issue is a way for a company to raise additional capital by offering existing shareholders the opportunity to buy additional shares at a discounted price.

Question 10.
Assertion (A): Customers are part of the microenvironment.
Reason (R): Microenvironment does not operate in isolation and is one of the levels of business environment. [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.
Option (B) is correct.
Customers are part of the microenvironment as microenvironment relates to the immediate periphery of an organization and directly influences the organization on a regular basis.

Question 11.
Ashwin was working as Director Finance in Ambur Metal Works. Managing Director of the company Kailash asked Ashwin to draft a proforma investment decision plan enlisting the funds which should be invested in different assets so that the company can get the highest possible returns. From the following identify the reason(s) that would help Ambur Metal Works: [1](i) It will help the company to understand the total amount of funds required.
(ii) It will also help the company to assess the situation as to whether they have excess or inadequate funds.
(iii) It helps the company to understand the various sources of funds.
(iv) It helps the company to reflect the position of the business at the end of every year.
(A) (i) only
(B) (i) and (ii) only
(C) (i) and (iii) only
(D) (i), (ii), and (iii) only
Option (B) is correct.
Explanation: An investment decision plan will be very useful in analysing the total amount of funds required. It will help the firm to determine whether they are over-capitalized or under-capitalized.

Question 12.
Assertion (A): Logos are a critical aspect of business marketing.
Reason (R): As the company’s major graphical representation, a logo anchors company’s brand. Lii
(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.
Option (A) is correct.
Explanation: A logo is an identifying symbol for a product or business. It is a distinctive design, mark or sign. It is a graphic mark or sign.

Question 13.
Assertion (A): Capital market promotes capital formation directly.
Reason (R): Only buying of securities takes place in the primary market. [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.
Option (B) is corred.
Explanation: Primary Capital Market assists in capital formation by raising funds. In the primary market the flow of funds is from savers to investors, that directly promotes capital formation.

Question 14.
Nelson started an AC repair shop in his area after doing a diploma course. What idea field is it? [1](A) Market driven
(B) Trading related
(C) Service related
(D) Creative efforts
Option (C) is correct.
Explanation: Service sector is the most growing field these days all over the world, thanks to emerging knowledge societies and advancements in Information and Technology. So, new opportunities can be identified by understanding the linkages to different business activities.

Question 15.
Priya joined a Publication Company that publishes a monthly magazine “Lifestyle”. It covers articles related to fitness, clothing, gadgets, cooking etc., Priya had joined the clothing division of the magazine. Her divisional head explained her nature of work of the division. She also informed Priya that in addition to visits to local mall, she would have to attend ‘Power lunches’ on the first Monday of every month. Out of the following identify the way of spotting trend, the divisional head is talking about: [1](A) Talk trends
(B) Read trends
(C) Watch trends
(D) Think trends
Option (C) is correct.
Explanation: Watching trends refers to the act of observing and staying informed about the latest developments, changes, and popular patterns in a particular field or industry. In the context of Priya’s work in the clothing division of the magazine, it means that she needs to actively keep an eye on fashion trends. By attending “Power lunches” on the first Monday of every month, Priya will have the opportunity to observe and stay updated on the latest fashion trends and developments in the industry.

Question 16.
Sudha started her small-scale business of making Pickles along with few of her neighbours using their free time at home. They named their venture ‘Home Sweet Home’. They were able to supply to the entire district. One of the members suggested that they should expand and start selling to other states. When she discussed the same to her husband, he suggested that they have to properly look into the environment analysing the competitors. He suggested Sudha to [1](A) Formulate policies
(B) Tap useful resources
(C) Environment scanning
(D) Image building
Option (C) is correct.
Explanation: Environment scanning is conducted to find out the influence of different factors and persons on the concerned business.

Question 17.
Victor Industries has been one of the leading companies in mobile phone industry in India. The company decided ta launch a new model All which will have in built latest software to encourage hands-free use and enhance the customer experience through 3D photos. They are also looking into ideas to use eco-friendly recyclable materials for the body of the phone which will cause less environmental damage. Identify the two factors of PESTEL model from the above case study. [1](A) Economic, Social
(B) Ecological, Technological
(C) Legal, Economic
(D) Social, Political
(B) Ecological, Technological

Question 18.
A prospective entrepreneur has to find an opportunity which would be suitable for him? her in terms of customers to be served and profits expected. An opportunity may be derived from spotting and analysing the …………. (i) and …………………….. (ii) that exist in the environment. [1](A) (i) needs (ii) market conditions
(B) (i) market conditions (ii) needs
(C) (i) needs (ii) problems
(D) (i) market conditions (ii) problems
Option (A) is correct.
Explanation: An opportunity may be derived from spotting and analysing the need and market conditions that exist in the environment.


Question 19.
List the two things that an entrepreneur has to ensure before selecting an opportunity. [2]OR
List any two elements of a business opportunity. [2]Answer:
(i) There is a good market for the product he is going to produce.
(ii) The rate of return on the investment is attractive to be accepted by him.
(i) Assured market scope.
(ii) An attractive and acceptable rate of return on investment.

Question 20.
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 multigrains. Create a tagline for the product and state which promotion strategy should be used by Vector Ltd. [2]Answer:
Health One and for all Promotion strategy used: Above the line as it focuses on advertising to a large audience through print,
television, etc.

Question 21.
Quick Rasoi is a fast food chain selling Indian items like Kathi Roll, Sarnosa, Idli, Dhoklas, etc. Now, they want to sell Kulfi in their outlets. Kulfi has been an item on their menu earlier also but was withdrawn because of its higher price as compared to the price of established brands. Therefore, this time they decided to initially price the Kulfi at cost. It was done with the objective of increasing market share. Management of Quick Rasoi is of the view that once their Kulfi is established in the market they will increase the price to a level that will help them in earning reasonable profit on their product. Identify and explain the pricing strategies adopted by Quick Rasoi earlier and at present. [2]Answer:
Price Skimming: It is the method where the initial price is set high to attract brand-conscious customers and to recover the research and development cost quickly.

Penetrating price: It is a method where the prices are kept low or at par with the competitors in order to gain the market share. Once it is achieved the prices are gradually increased to match up with the market.

Question 22.
Why are copyrights and patents important for an entrepreneur? [2]OR
Differentiate between the two types of sales strategy. [2]Answer:
Copyright: It gives the creator of original work exclusive rights to it, usually for a limited time. It applies to a wide range of creative, intellectual or artistic forms or work. For example, musical composition, literary work such as poems, plays, etc.

Patents: It grants an inventor the right to exclude others from making, using, selling, offering to sell, and importing an invention for a limited period of time, in exchange for the public disclosure of the invention.
The two strategies are:
Direct sales strategy: The salespeople talk about each feature of the competitor’s product and compare it to theirs. Indirect sales strategy: In this, the approach is by demonstrating features and benefits not available with the competitor’s products or services without ever mentioning them by name.

Question 23.
To be successful an entrepreneur needs to work on various areas. One such area is generation of ideas which is very crucial for the ultimate success of the firm. In order to streamline the generation of the ideas the entrepreneurs will have to use various convenient frames of reference. Comment on any two such frames. [2]Answer:
Idea Fields:
(i) Natural Resources:
This idea field involves exploring opportunities related to the utilization, conservation, or sustainable management of natural resources. Entrepreneurs can identify ways to extract, process, or utilize natural resources more efficiently, develop eco-friendly alternatives, or create products and services that leverage renewable resources.

(ii) Existing Product or Services:
This idea field revolves around improving or enhancing existing products or services. Entrepreneurs can identify gaps or pain points in the market and come up with innovative ideas to address them. This could involve adding new features, improving functionality, enhancing user experience, or finding ways to make existing products/services more cost-effective.

(iii) Market-Driven or Demand-Dnven Ideas:
This idea field focuses on understanding market trends, customer demands, and consumer behaviour. Entrepreneurs can identify emerging needs or untapped markets and develop ideas that cater to those demands. By studying market data, conducting surveys, and analysing consumer preferences, entrepreneurs can generate ideas that have a higher chance of success in the market.

(iv) Trading-Related Ideas:
This idea field involves exploring opportunities in the trading sector, such as identifying new markets, products, or supply chains. Entrepreneurs can consider import/export opportunities, cross-border trade, or new trading platforms. They can also explore innovative ways to connect buyers and sellers, streamline logistics, or optimise the trading process.

(v) Service-Related Ideas:
This idea field focuses on identifying gaps in service industries and developing new service offerings. Entrepreneurs can look for areas where customers are underserved or dissatisfied with existing service providers. By developing innovative service models, improving service quality, or leveraging technology to enhance service delivery, entrepreneurs can generate ideas that disrupt traditional service industries.

(vi) Creative Efforts:
This idea field involves leveraging creativity, art, and design to develop unique and innovative ideas. Entrepreneurs can explore areas such as fashion, entertainment, advertising, architecture, or media where creative efforts play a crucial role. They can
generate ideas that push boundaries, challenge norms, and capture the attention of consumers through aesthetics, storytelling, or experiential elements.

Question 24.
Iqbal runs an electrical shop in Lucknow. The most sold product in his shop is ceiling fans. The annual demand for fans is 32,000. The annual holding cost per unit is ₹ 192. The cost incurred in placing an order is 3,000. Calculate the Economic Ordering Quantity of ceiling fans. [2]OR
The following figures are extracted from the balance sheet of Swadesha Ltd.
Net profit after tax: ₹ 2,00,000
Net profit before tax: ₹ 2,80,000
Total Investment(Owned + Borrowed): ₹ 4,00,000
Own funds: ₹ 1,00,000
Calculate Return on Equity for Swadesha Ltd. [2]Answer:
Economic Ordering Quantity = \(\sqrt{\frac{2 D P}{C}}\)
Where; 2 is constant
D = Annual demand
P = Cost of placing the order
C = Inventory holding cost/carrying cost
Thus as: Annual demand (D) = 32,000
Order cost (P) = ₹ 3,000
Annual carrying cost of I unit (C) = ₹ 192
EOQ = \(\sqrt{\frac{2 * 3,000 * 32,000}{192}} \)
= \(\sqrt{\frac{1,9,20,00,000}{192}} \)
= \(\sqrt{10,00,000} \)
= 1,000 Units
Return on Equity = \(\frac{\text { Net profit after tax }}{\text { Equity }} \times 100\)
= \(\frac{2,00,000}{1,00,000} \times 100\) = 200%


Question 25.
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 the Marketing Mix. [3]Answer:
Different entrepreneurs adopt different types of Market Mix for their products because of the following:
(i) 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 depends on their paying capacity.

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

(iii) Distribution:
The Mode of distribution is different for different areas. If it is a 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 26.
Explain the various factors involved in sensing opportunities? [3]OR
An organisation will have to look into three situations while framing the production plan. Explain these three situations. [3]Answer:
The most important factors involved in the process are:
(i) Ability to perceive and preserve basic ideas:
Spotting of 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 and an idea leads to a solution to resolve that problem, it emerges as a business opportunity.
  • Change: A change in sod al, legal, technological aspects, etc. leads to new opportunities to start a business.
  • Inventions: Invention of 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: It includes 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 helps in the evolution of basic ideas. Bring 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 help them to move forward, overcoming all the obstacles.

They constantly:

  • overcome the adversity
  • are able to exercise control over the business
  • are capable of making significant difference.

The three situations involved in production plan 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 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 clear mention of what entrepreneur intends to do himself and what he plans to get it done from outside is required.

(iii) Complete Manufacturing:
If the manufacturing is to be carried out in whole by the entrepreneur, he/she will need to describe:

  • 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.

Question 27.
Kavita started a boutique named ‘Stylo Queens’. She replaced old sewing machines with the new one’s during the pandemic to manufacture masks and PPE kits. Gradually her boutique became popular and seeing the swelled-up demand for her products she further installed extra machines to cater to the growing demand of the increasing customers. From the profits earned, she decided to further expand the business by starting a new business of cushion covers and bed sheets. [3](i) Identify the type of expansion mentioned above.
(ii) What is the net result of such an expansion?
(iii) Explain the expansion discussed above.
(i) The type of expansion mentioned is internal expansion.
(ii) The net result of internal expansion is the increase in business activities and broadening the present capital structure.
(iii) Internal expansion: It is a slow and time-consuming process which is a result of a gradual increase in the activities of the enterprise.

Question 28.
“All business planned for sales volumes and revenues, resource quantities, costs and expenses, etc.” Identify the concept involved in the above planning and state any two benefits of this concept. [3]OR
“Writing a good business plan can’t guarantee success but it can go a long way towards reducing the odds of failure.” In the light of above statement state the objectives of a good business plan. [3]Answer:
The break-even point is the level of sales or revenue at which total costs equal total revenues, resulting in neither profit nor loss. It represents the point where a business covers all its costs and starts generating profits.

Two benefits of break-even point analysis are:
(i) Financial Decision Making:
Break-even analysis helps businesses make informed decisions about pricing, production levels, and cost control. By understanding the break-even point, a business can determine the minimum level of sales required to cover costs. This information is valuable in setting sales targets, determining pricing strategies, and assessing the feasibility of new projects or investments.

(ii) Risk Assessment and Planning: Break-even point analysis enables businesses to assess their financial risk and plan accordingly. By knowing the break-even point, a business can evaluate its vulnerability to changes in costs, sales volumes,
or market conditions. It helps identify the level of sales or revenue needed to avoid losses and achieve profitability.
A good business plan has the following objectives:
(i) Clarity and Direction: A business plan aims to provide a clear sense of direction for the business by defining its mission, vision, goals, and strategies. This helps align efforts and guide decision-making processes.

(ii) Funding and Support A well-developed business plan is crucial for attracting funding and support from investors, lenders, or stakeholders. It demonstrates the business’s potential for success and enhances credibility, increasing the likelihood of securing financing or partnerships.

(iii) Viability and Feasibility Assessment:
The objective of a business plan is to assess the viability and feasibility of the business idea. It involves analyzing the market, competition, and potential risks to determine the business’s chances of success and its sustainable competitive advantage.

Question 29.
State any six drawbacks of “Public Issue”. [3]Answer:
While there are benefits to going public, it also means additional obligations and reporting requirements such as:

  • Increasing accountability to public shareholders.
  • Need to maintain dividend and profit growth trends.
  • Becoming more vulnerable to an unwelcome takeover.
  • Need to observe and adhere strictly to the rules and regulations by governing bodies.
  • Increasing costs in complying with higher level of reporting requirements.
  • Relinquishing some control of the company following the public offering.
  • Suffering a loss of privacy as a result of media interest.

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