Class 12 Enterpreneurship Official Sample Question Paper (2017-18) | Entrepreneurship Class 12 - Commerce PDF Download

 Page 1


EP/SAMPLE PAPER/17-18 Page 1 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2017-18 
 
Time Allowed: 3 hours             Maximum Marks: 70 
 
S.no. Questions/ Expected Value Points Marks 
1. Differentiate between capital budget and cash budget.  1 
Ans. Capital budget is used to determine whether an organisation’s long term investment 
plans are worth pursuing, whereas cash budget determines when income will be 
sufficient to cover expenses and when the company will need to seek outside 
financing. 
 
2. Gupta ltd., are the manufacturers of sports motorcycles. They want to manufacture 
low cost scooters using latest technology. For financing the project they have 
estimated a capital requirement of Rs. 50 lakhs. The company wants to finance the 
project by borrowing from a financial institution. Name any two financial institutions 
they can approach for the same. 
1 
Ans. Industrial Development Bank of India; Small Industries Development Bank of India; 
Industrial Finance Corporation of India; Industrial Credit and Investment Corporation 
of India (Any two)   
 
3. Naveen owns a 10 room building near Indira Gandhi International Airport. He wants 
to start a guest house there because he knows that many visitors require low cost 
accommodation near the airport. State two things that he has to ensure before opting 
for this opportunity.  
1 
Ans. ? To ensure that there is a good market for the service 
? The rate of return on the investment is attractive  
 
4. Give the meaning of a ‘Joint Hindu Family Business’. 1 
Ans. It is a business which is owned, managed and controlled by the male members of a 
Joint Hindu Family. 
 
5. What is a trade mark? 1 
Ans. It is a recognizable sign, design or expression which distinguished products or 
services of a particular trade from the similar products or services of other traders. 
 
6. List any four advantages of Employees Stock Option Plan. 2 
Ans. Higher Efficiency; Low labour turnover; Better industrial locations; Low flotation 
cost; Wider higher generation of funds (Any four) 
 
7. 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 spotter to help her with the 
same. The trend spotter demanded Rs. 2,00,000 from Ritu to help her. Looking at the 
high fee demanded, she decided to do the trendspotting by herself. She decided to 
identify the trend by talking to the parents of the newly born.  
Explain the method that Ritu adopted to spot the trend. 
2 
Ans. Talk Trends: talking to people is equally important trend spotting activity which helps 
the entrepreneur to get inputs on the needs of the customer. This can be done both 
online and offline.  
 
8. The first step in the creative process is ‘Idea germination’. Explain the next step that 
follows.  
2 
Ans. Preparation: on the basis of the idea generated the entrepreneur starts looking for the  
Page 2


EP/SAMPLE PAPER/17-18 Page 1 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2017-18 
 
Time Allowed: 3 hours             Maximum Marks: 70 
 
S.no. Questions/ Expected Value Points Marks 
1. Differentiate between capital budget and cash budget.  1 
Ans. Capital budget is used to determine whether an organisation’s long term investment 
plans are worth pursuing, whereas cash budget determines when income will be 
sufficient to cover expenses and when the company will need to seek outside 
financing. 
 
2. Gupta ltd., are the manufacturers of sports motorcycles. They want to manufacture 
low cost scooters using latest technology. For financing the project they have 
estimated a capital requirement of Rs. 50 lakhs. The company wants to finance the 
project by borrowing from a financial institution. Name any two financial institutions 
they can approach for the same. 
1 
Ans. Industrial Development Bank of India; Small Industries Development Bank of India; 
Industrial Finance Corporation of India; Industrial Credit and Investment Corporation 
of India (Any two)   
 
3. Naveen owns a 10 room building near Indira Gandhi International Airport. He wants 
to start a guest house there because he knows that many visitors require low cost 
accommodation near the airport. State two things that he has to ensure before opting 
for this opportunity.  
1 
Ans. ? To ensure that there is a good market for the service 
? The rate of return on the investment is attractive  
 
4. Give the meaning of a ‘Joint Hindu Family Business’. 1 
Ans. It is a business which is owned, managed and controlled by the male members of a 
Joint Hindu Family. 
 
5. What is a trade mark? 1 
Ans. It is a recognizable sign, design or expression which distinguished products or 
services of a particular trade from the similar products or services of other traders. 
 
6. List any four advantages of Employees Stock Option Plan. 2 
Ans. Higher Efficiency; Low labour turnover; Better industrial locations; Low flotation 
cost; Wider higher generation of funds (Any four) 
 
7. 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 spotter to help her with the 
same. The trend spotter demanded Rs. 2,00,000 from Ritu to help her. Looking at the 
high fee demanded, she decided to do the trendspotting by herself. She decided to 
identify the trend by talking to the parents of the newly born.  
Explain the method that Ritu adopted to spot the trend. 
2 
Ans. Talk Trends: talking to people is equally important trend spotting activity which helps 
the entrepreneur to get inputs on the needs of the customer. This can be done both 
online and offline.  
 
8. The first step in the creative process is ‘Idea germination’. Explain the next step that 
follows.  
2 
Ans. Preparation: on the basis of the idea generated the entrepreneur starts looking for the  
EP/SAMPLE PAPER/17-18 Page 2 
 
answers to implement the idea. If the idea is to launch a new product or service then 
market research is conducted.  
9. Mohan and Radha want to start a shop to sell Rajasthani Sweets. They did not know 
how to enter into the agreement. Therefore, they approached a Chartered Accountant 
who advised them to prepare a document which may stipulate the terms and 
consolidation of the agreement.  
Name the document about which the chartered accountant advised Mohan and Radha.  
Also state any four important items they should include in the agreement besides the 
name, nature and place of business. 
2 
Ans. Partnership Deed;  
 
Contents of the deed: 
1. Amount of capital to be contributed by each partner. 
2. Profit sharing ratio between the partners. 
3. Loans and advances from the partners and the rate of interest thereon. 
4. Drawings allowed to the partners and the rate of interest thereon. 
5. Amount of salary and commission, if any, payable to the partners. 
6. Duties, powers and obligations of partners. 
7. Maintenance of accounts and arrangement for their audit. 
8. Mode of valuation of goodwill in the event of admission, retirement and death of a 
partner. 
9. Settlement of accounts in the case of dissolution of the firm. 
10. Arbitration of case of disputes among the partners. 
11. Arrangements in case a partner becomes insolvent. (Any four) 
 
10. Quick Rasoi is a fast food chain selling Indian items like Kathi Roll, Samosa, Idli, 
Dhoklas Etc., Now, they want to sell Kulfi in their outlets. Kulfi has been an item in 
their menu earlier also but was withdrawn because of 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 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 
Ans. 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. 
 
11. In 2015 Jaya Ltd, started a toy manufacturing unit using robot technology. The toys 
manufactured by the company became popular amongst children. But since the cost of 
the toys was high, the company could not earn good profit. The business is of high 
risk along with higher expected returns. The company wants to increase production so 
that they can reduce cost per unit. For this the company wants additional investment 
of Rs. 50 lakhs. The company approached Ashok who has just retired from Indian 
Space Research Organisation and who is an influential person.  
Ashok agreed to give the loan to the company provided that his loan is converted into 
equity shares after two years. The company agreed to Ashok’s proposal. 
3 
Page 3


EP/SAMPLE PAPER/17-18 Page 1 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2017-18 
 
Time Allowed: 3 hours             Maximum Marks: 70 
 
S.no. Questions/ Expected Value Points Marks 
1. Differentiate between capital budget and cash budget.  1 
Ans. Capital budget is used to determine whether an organisation’s long term investment 
plans are worth pursuing, whereas cash budget determines when income will be 
sufficient to cover expenses and when the company will need to seek outside 
financing. 
 
2. Gupta ltd., are the manufacturers of sports motorcycles. They want to manufacture 
low cost scooters using latest technology. For financing the project they have 
estimated a capital requirement of Rs. 50 lakhs. The company wants to finance the 
project by borrowing from a financial institution. Name any two financial institutions 
they can approach for the same. 
1 
Ans. Industrial Development Bank of India; Small Industries Development Bank of India; 
Industrial Finance Corporation of India; Industrial Credit and Investment Corporation 
of India (Any two)   
 
3. Naveen owns a 10 room building near Indira Gandhi International Airport. He wants 
to start a guest house there because he knows that many visitors require low cost 
accommodation near the airport. State two things that he has to ensure before opting 
for this opportunity.  
1 
Ans. ? To ensure that there is a good market for the service 
? The rate of return on the investment is attractive  
 
4. Give the meaning of a ‘Joint Hindu Family Business’. 1 
Ans. It is a business which is owned, managed and controlled by the male members of a 
Joint Hindu Family. 
 
5. What is a trade mark? 1 
Ans. It is a recognizable sign, design or expression which distinguished products or 
services of a particular trade from the similar products or services of other traders. 
 
6. List any four advantages of Employees Stock Option Plan. 2 
Ans. Higher Efficiency; Low labour turnover; Better industrial locations; Low flotation 
cost; Wider higher generation of funds (Any four) 
 
7. 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 spotter to help her with the 
same. The trend spotter demanded Rs. 2,00,000 from Ritu to help her. Looking at the 
high fee demanded, she decided to do the trendspotting by herself. She decided to 
identify the trend by talking to the parents of the newly born.  
Explain the method that Ritu adopted to spot the trend. 
2 
Ans. Talk Trends: talking to people is equally important trend spotting activity which helps 
the entrepreneur to get inputs on the needs of the customer. This can be done both 
online and offline.  
 
8. The first step in the creative process is ‘Idea germination’. Explain the next step that 
follows.  
2 
Ans. Preparation: on the basis of the idea generated the entrepreneur starts looking for the  
EP/SAMPLE PAPER/17-18 Page 2 
 
answers to implement the idea. If the idea is to launch a new product or service then 
market research is conducted.  
9. Mohan and Radha want to start a shop to sell Rajasthani Sweets. They did not know 
how to enter into the agreement. Therefore, they approached a Chartered Accountant 
who advised them to prepare a document which may stipulate the terms and 
consolidation of the agreement.  
Name the document about which the chartered accountant advised Mohan and Radha.  
Also state any four important items they should include in the agreement besides the 
name, nature and place of business. 
2 
Ans. Partnership Deed;  
 
Contents of the deed: 
1. Amount of capital to be contributed by each partner. 
2. Profit sharing ratio between the partners. 
3. Loans and advances from the partners and the rate of interest thereon. 
4. Drawings allowed to the partners and the rate of interest thereon. 
5. Amount of salary and commission, if any, payable to the partners. 
6. Duties, powers and obligations of partners. 
7. Maintenance of accounts and arrangement for their audit. 
8. Mode of valuation of goodwill in the event of admission, retirement and death of a 
partner. 
9. Settlement of accounts in the case of dissolution of the firm. 
10. Arbitration of case of disputes among the partners. 
11. Arrangements in case a partner becomes insolvent. (Any four) 
 
10. Quick Rasoi is a fast food chain selling Indian items like Kathi Roll, Samosa, Idli, 
Dhoklas Etc., Now, they want to sell Kulfi in their outlets. Kulfi has been an item in 
their menu earlier also but was withdrawn because of 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 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 
Ans. 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. 
 
11. In 2015 Jaya Ltd, started a toy manufacturing unit using robot technology. The toys 
manufactured by the company became popular amongst children. But since the cost of 
the toys was high, the company could not earn good profit. The business is of high 
risk along with higher expected returns. The company wants to increase production so 
that they can reduce cost per unit. For this the company wants additional investment 
of Rs. 50 lakhs. The company approached Ashok who has just retired from Indian 
Space Research Organisation and who is an influential person.  
Ashok agreed to give the loan to the company provided that his loan is converted into 
equity shares after two years. The company agreed to Ashok’s proposal. 
3 
EP/SAMPLE PAPER/17-18 Page 3 
 
(a) What type of investor is Ashok? 
(b) State any two features of the same. 
Ans. (a) Angel Investor 
(b) Features (Any two) 
1. 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. 
2. 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.  
3. Apart from investing funds, most angels provide proactive advice, guidance, 
industry connections and mentoring start-ups in its early days.  
4. Their objective is to create great companies by providing value creation, and 
simultaneously helping investors realize a high return on investments.  
5. 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 
 
 
12. Following are the balances of current assets and current liabilities of X ltd., Cash – 
Rs.20,000; outstanding expenses- Rs.5000; Creditors- Rs.15,000; Debtors-Rs.50,000; 
Short term loans- Rs.4000; Short term investments-Rs.30,000; Long term loans- 
Rs.1,00,000; Stock-Rs.70,000. 
Calculate the gross and net working capital of X Ltd., 
3 
Ans. Gross Working capital = Sum total of all Current Assets 
= Cash + Debtors + Short term investment + Stock 
= 20,000+50,000+30,000+70,000= Rs.1,70,000 
 
Net working capital = Current Assets-Current Liabilities 
Current Liabilities = Outstanding expenses + Creditors + Short term loans 
= 5000 + 15,000 + 4000= Rs. 24,000 
 
Net working capital = 1,70,000-24,000= Rs. 1,46,000 
 
13. Explain creative efforts as an idea field and also list the ways in which these ideas can 
be generated. 
3 
Ans. Creativity is an important and key component of the talents and abilities 
needed for an entrepreneur for spotting and to harness opportunities. It can also be 
applied to develop new products and services. 
 
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. 
 
14. Some important factors are involved in the process of sensing entrepreneurial 
opportunity. State these factors. 
3 
Ans. 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: 
 
Page 4


EP/SAMPLE PAPER/17-18 Page 1 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2017-18 
 
Time Allowed: 3 hours             Maximum Marks: 70 
 
S.no. Questions/ Expected Value Points Marks 
1. Differentiate between capital budget and cash budget.  1 
Ans. Capital budget is used to determine whether an organisation’s long term investment 
plans are worth pursuing, whereas cash budget determines when income will be 
sufficient to cover expenses and when the company will need to seek outside 
financing. 
 
2. Gupta ltd., are the manufacturers of sports motorcycles. They want to manufacture 
low cost scooters using latest technology. For financing the project they have 
estimated a capital requirement of Rs. 50 lakhs. The company wants to finance the 
project by borrowing from a financial institution. Name any two financial institutions 
they can approach for the same. 
1 
Ans. Industrial Development Bank of India; Small Industries Development Bank of India; 
Industrial Finance Corporation of India; Industrial Credit and Investment Corporation 
of India (Any two)   
 
3. Naveen owns a 10 room building near Indira Gandhi International Airport. He wants 
to start a guest house there because he knows that many visitors require low cost 
accommodation near the airport. State two things that he has to ensure before opting 
for this opportunity.  
1 
Ans. ? To ensure that there is a good market for the service 
? The rate of return on the investment is attractive  
 
4. Give the meaning of a ‘Joint Hindu Family Business’. 1 
Ans. It is a business which is owned, managed and controlled by the male members of a 
Joint Hindu Family. 
 
5. What is a trade mark? 1 
Ans. It is a recognizable sign, design or expression which distinguished products or 
services of a particular trade from the similar products or services of other traders. 
 
6. List any four advantages of Employees Stock Option Plan. 2 
Ans. Higher Efficiency; Low labour turnover; Better industrial locations; Low flotation 
cost; Wider higher generation of funds (Any four) 
 
7. 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 spotter to help her with the 
same. The trend spotter demanded Rs. 2,00,000 from Ritu to help her. Looking at the 
high fee demanded, she decided to do the trendspotting by herself. She decided to 
identify the trend by talking to the parents of the newly born.  
Explain the method that Ritu adopted to spot the trend. 
2 
Ans. Talk Trends: talking to people is equally important trend spotting activity which helps 
the entrepreneur to get inputs on the needs of the customer. This can be done both 
online and offline.  
 
8. The first step in the creative process is ‘Idea germination’. Explain the next step that 
follows.  
2 
Ans. Preparation: on the basis of the idea generated the entrepreneur starts looking for the  
EP/SAMPLE PAPER/17-18 Page 2 
 
answers to implement the idea. If the idea is to launch a new product or service then 
market research is conducted.  
9. Mohan and Radha want to start a shop to sell Rajasthani Sweets. They did not know 
how to enter into the agreement. Therefore, they approached a Chartered Accountant 
who advised them to prepare a document which may stipulate the terms and 
consolidation of the agreement.  
Name the document about which the chartered accountant advised Mohan and Radha.  
Also state any four important items they should include in the agreement besides the 
name, nature and place of business. 
2 
Ans. Partnership Deed;  
 
Contents of the deed: 
1. Amount of capital to be contributed by each partner. 
2. Profit sharing ratio between the partners. 
3. Loans and advances from the partners and the rate of interest thereon. 
4. Drawings allowed to the partners and the rate of interest thereon. 
5. Amount of salary and commission, if any, payable to the partners. 
6. Duties, powers and obligations of partners. 
7. Maintenance of accounts and arrangement for their audit. 
8. Mode of valuation of goodwill in the event of admission, retirement and death of a 
partner. 
9. Settlement of accounts in the case of dissolution of the firm. 
10. Arbitration of case of disputes among the partners. 
11. Arrangements in case a partner becomes insolvent. (Any four) 
 
10. Quick Rasoi is a fast food chain selling Indian items like Kathi Roll, Samosa, Idli, 
Dhoklas Etc., Now, they want to sell Kulfi in their outlets. Kulfi has been an item in 
their menu earlier also but was withdrawn because of 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 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 
Ans. 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. 
 
11. In 2015 Jaya Ltd, started a toy manufacturing unit using robot technology. The toys 
manufactured by the company became popular amongst children. But since the cost of 
the toys was high, the company could not earn good profit. The business is of high 
risk along with higher expected returns. The company wants to increase production so 
that they can reduce cost per unit. For this the company wants additional investment 
of Rs. 50 lakhs. The company approached Ashok who has just retired from Indian 
Space Research Organisation and who is an influential person.  
Ashok agreed to give the loan to the company provided that his loan is converted into 
equity shares after two years. The company agreed to Ashok’s proposal. 
3 
EP/SAMPLE PAPER/17-18 Page 3 
 
(a) What type of investor is Ashok? 
(b) State any two features of the same. 
Ans. (a) Angel Investor 
(b) Features (Any two) 
1. 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. 
2. 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.  
3. Apart from investing funds, most angels provide proactive advice, guidance, 
industry connections and mentoring start-ups in its early days.  
4. Their objective is to create great companies by providing value creation, and 
simultaneously helping investors realize a high return on investments.  
5. 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 
 
 
12. Following are the balances of current assets and current liabilities of X ltd., Cash – 
Rs.20,000; outstanding expenses- Rs.5000; Creditors- Rs.15,000; Debtors-Rs.50,000; 
Short term loans- Rs.4000; Short term investments-Rs.30,000; Long term loans- 
Rs.1,00,000; Stock-Rs.70,000. 
Calculate the gross and net working capital of X Ltd., 
3 
Ans. Gross Working capital = Sum total of all Current Assets 
= Cash + Debtors + Short term investment + Stock 
= 20,000+50,000+30,000+70,000= Rs.1,70,000 
 
Net working capital = Current Assets-Current Liabilities 
Current Liabilities = Outstanding expenses + Creditors + Short term loans 
= 5000 + 15,000 + 4000= Rs. 24,000 
 
Net working capital = 1,70,000-24,000= Rs. 1,46,000 
 
13. Explain creative efforts as an idea field and also list the ways in which these ideas can 
be generated. 
3 
Ans. Creativity is an important and key component of the talents and abilities 
needed for an entrepreneur for spotting and to harness opportunities. It can also be 
applied to develop new products and services. 
 
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. 
 
14. Some important factors are involved in the process of sensing entrepreneurial 
opportunity. State these factors. 
3 
Ans. 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: 
 
EP/SAMPLE PAPER/17-18 Page 4 
 
1. Ability to perceive and preserve basic ideas which could be used commercially 
2. Ability to harness different sources of information and analyse it to the best 
possible extent 
3. Vision and creativity helps them to convert solution into business opportunity and 
helps them to move forward overcoming all the obstacles. 
15. Gopi, in order to promote local craftsmen of Gujarat, formed an organization where in 
the persons voluntarily associate themselves to promote common economic interest. 
The basic purpose of this organization was to help these craftsmen to find market for 
their products. It had a managing committee that was elected on the basis of ‘one 
member one vote’. 
a. Identify the form of business organization set up by Gopi. 
b. Quoting the lines form the above para, state any two features of this form of 
organization. 
 
3 
Ans. Co-operative organization; 
Features:  
a. ‘Formed an organization where in the persons voluntarily associate…..’- voluntary 
association, anybody can become a member of a co-operative society 
b. ‘managing committee that was elected in the basis of one member one vote’- 
democratic management, the management of the co-operative society is 
democratically elected. 
c. ‘the purpose of this organization is to help these craftsmen to find market for their 
products’- service motive, the main objective of a co-operative society is to provide 
service to it’s members and not to earn profits. (Any two)  
 
16. What will be the effect on Production Plan in the following situations: 
a. When there is no manufacturing 
b. When there is partial manufacturing 
c. When there is complete manufacturing 
 
3 
Ans.  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. 
b) Partial manufacturing: If some or all the manufacturing process is to be 
subcontracted or outsourced, then the production plan should describe: 
i) Name and location of subcontractor(s) 
ii) Reasons for their selection 
iii) Cost and time involved 
iv) 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. 
c) Complete Manufacturing: If the manufacturing is to be carried out in whole by 
the entrepreneur, he/she will need to describe: 
i) the physical plant layout, 
ii) the machinery and equipment required to perform the manufacturing operations, 
iii) raw materials and suppliers names, addresses, terms and conditions, 
iv) cost of manufacturing 
v) any future capital equipment required etc. 
 
17. When is it advisable for an entrepreneur to opt for a direct channel of distribution? 3 
Page 5


EP/SAMPLE PAPER/17-18 Page 1 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2017-18 
 
Time Allowed: 3 hours             Maximum Marks: 70 
 
S.no. Questions/ Expected Value Points Marks 
1. Differentiate between capital budget and cash budget.  1 
Ans. Capital budget is used to determine whether an organisation’s long term investment 
plans are worth pursuing, whereas cash budget determines when income will be 
sufficient to cover expenses and when the company will need to seek outside 
financing. 
 
2. Gupta ltd., are the manufacturers of sports motorcycles. They want to manufacture 
low cost scooters using latest technology. For financing the project they have 
estimated a capital requirement of Rs. 50 lakhs. The company wants to finance the 
project by borrowing from a financial institution. Name any two financial institutions 
they can approach for the same. 
1 
Ans. Industrial Development Bank of India; Small Industries Development Bank of India; 
Industrial Finance Corporation of India; Industrial Credit and Investment Corporation 
of India (Any two)   
 
3. Naveen owns a 10 room building near Indira Gandhi International Airport. He wants 
to start a guest house there because he knows that many visitors require low cost 
accommodation near the airport. State two things that he has to ensure before opting 
for this opportunity.  
1 
Ans. ? To ensure that there is a good market for the service 
? The rate of return on the investment is attractive  
 
4. Give the meaning of a ‘Joint Hindu Family Business’. 1 
Ans. It is a business which is owned, managed and controlled by the male members of a 
Joint Hindu Family. 
 
5. What is a trade mark? 1 
Ans. It is a recognizable sign, design or expression which distinguished products or 
services of a particular trade from the similar products or services of other traders. 
 
6. List any four advantages of Employees Stock Option Plan. 2 
Ans. Higher Efficiency; Low labour turnover; Better industrial locations; Low flotation 
cost; Wider higher generation of funds (Any four) 
 
7. 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 spotter to help her with the 
same. The trend spotter demanded Rs. 2,00,000 from Ritu to help her. Looking at the 
high fee demanded, she decided to do the trendspotting by herself. She decided to 
identify the trend by talking to the parents of the newly born.  
Explain the method that Ritu adopted to spot the trend. 
2 
Ans. Talk Trends: talking to people is equally important trend spotting activity which helps 
the entrepreneur to get inputs on the needs of the customer. This can be done both 
online and offline.  
 
8. The first step in the creative process is ‘Idea germination’. Explain the next step that 
follows.  
2 
Ans. Preparation: on the basis of the idea generated the entrepreneur starts looking for the  
EP/SAMPLE PAPER/17-18 Page 2 
 
answers to implement the idea. If the idea is to launch a new product or service then 
market research is conducted.  
9. Mohan and Radha want to start a shop to sell Rajasthani Sweets. They did not know 
how to enter into the agreement. Therefore, they approached a Chartered Accountant 
who advised them to prepare a document which may stipulate the terms and 
consolidation of the agreement.  
Name the document about which the chartered accountant advised Mohan and Radha.  
Also state any four important items they should include in the agreement besides the 
name, nature and place of business. 
2 
Ans. Partnership Deed;  
 
Contents of the deed: 
1. Amount of capital to be contributed by each partner. 
2. Profit sharing ratio between the partners. 
3. Loans and advances from the partners and the rate of interest thereon. 
4. Drawings allowed to the partners and the rate of interest thereon. 
5. Amount of salary and commission, if any, payable to the partners. 
6. Duties, powers and obligations of partners. 
7. Maintenance of accounts and arrangement for their audit. 
8. Mode of valuation of goodwill in the event of admission, retirement and death of a 
partner. 
9. Settlement of accounts in the case of dissolution of the firm. 
10. Arbitration of case of disputes among the partners. 
11. Arrangements in case a partner becomes insolvent. (Any four) 
 
10. Quick Rasoi is a fast food chain selling Indian items like Kathi Roll, Samosa, Idli, 
Dhoklas Etc., Now, they want to sell Kulfi in their outlets. Kulfi has been an item in 
their menu earlier also but was withdrawn because of 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 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 
Ans. 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. 
 
11. In 2015 Jaya Ltd, started a toy manufacturing unit using robot technology. The toys 
manufactured by the company became popular amongst children. But since the cost of 
the toys was high, the company could not earn good profit. The business is of high 
risk along with higher expected returns. The company wants to increase production so 
that they can reduce cost per unit. For this the company wants additional investment 
of Rs. 50 lakhs. The company approached Ashok who has just retired from Indian 
Space Research Organisation and who is an influential person.  
Ashok agreed to give the loan to the company provided that his loan is converted into 
equity shares after two years. The company agreed to Ashok’s proposal. 
3 
EP/SAMPLE PAPER/17-18 Page 3 
 
(a) What type of investor is Ashok? 
(b) State any two features of the same. 
Ans. (a) Angel Investor 
(b) Features (Any two) 
1. 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. 
2. 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.  
3. Apart from investing funds, most angels provide proactive advice, guidance, 
industry connections and mentoring start-ups in its early days.  
4. Their objective is to create great companies by providing value creation, and 
simultaneously helping investors realize a high return on investments.  
5. 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 
 
 
12. Following are the balances of current assets and current liabilities of X ltd., Cash – 
Rs.20,000; outstanding expenses- Rs.5000; Creditors- Rs.15,000; Debtors-Rs.50,000; 
Short term loans- Rs.4000; Short term investments-Rs.30,000; Long term loans- 
Rs.1,00,000; Stock-Rs.70,000. 
Calculate the gross and net working capital of X Ltd., 
3 
Ans. Gross Working capital = Sum total of all Current Assets 
= Cash + Debtors + Short term investment + Stock 
= 20,000+50,000+30,000+70,000= Rs.1,70,000 
 
Net working capital = Current Assets-Current Liabilities 
Current Liabilities = Outstanding expenses + Creditors + Short term loans 
= 5000 + 15,000 + 4000= Rs. 24,000 
 
Net working capital = 1,70,000-24,000= Rs. 1,46,000 
 
13. Explain creative efforts as an idea field and also list the ways in which these ideas can 
be generated. 
3 
Ans. Creativity is an important and key component of the talents and abilities 
needed for an entrepreneur for spotting and to harness opportunities. It can also be 
applied to develop new products and services. 
 
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. 
 
14. Some important factors are involved in the process of sensing entrepreneurial 
opportunity. State these factors. 
3 
Ans. 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: 
 
EP/SAMPLE PAPER/17-18 Page 4 
 
1. Ability to perceive and preserve basic ideas which could be used commercially 
2. Ability to harness different sources of information and analyse it to the best 
possible extent 
3. Vision and creativity helps them to convert solution into business opportunity and 
helps them to move forward overcoming all the obstacles. 
15. Gopi, in order to promote local craftsmen of Gujarat, formed an organization where in 
the persons voluntarily associate themselves to promote common economic interest. 
The basic purpose of this organization was to help these craftsmen to find market for 
their products. It had a managing committee that was elected on the basis of ‘one 
member one vote’. 
a. Identify the form of business organization set up by Gopi. 
b. Quoting the lines form the above para, state any two features of this form of 
organization. 
 
3 
Ans. Co-operative organization; 
Features:  
a. ‘Formed an organization where in the persons voluntarily associate…..’- voluntary 
association, anybody can become a member of a co-operative society 
b. ‘managing committee that was elected in the basis of one member one vote’- 
democratic management, the management of the co-operative society is 
democratically elected. 
c. ‘the purpose of this organization is to help these craftsmen to find market for their 
products’- service motive, the main objective of a co-operative society is to provide 
service to it’s members and not to earn profits. (Any two)  
 
16. What will be the effect on Production Plan in the following situations: 
a. When there is no manufacturing 
b. When there is partial manufacturing 
c. When there is complete manufacturing 
 
3 
Ans.  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. 
b) Partial manufacturing: If some or all the manufacturing process is to be 
subcontracted or outsourced, then the production plan should describe: 
i) Name and location of subcontractor(s) 
ii) Reasons for their selection 
iii) Cost and time involved 
iv) 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. 
c) Complete Manufacturing: If the manufacturing is to be carried out in whole by 
the entrepreneur, he/she will need to describe: 
i) the physical plant layout, 
ii) the machinery and equipment required to perform the manufacturing operations, 
iii) raw materials and suppliers names, addresses, terms and conditions, 
iv) cost of manufacturing 
v) any future capital equipment required etc. 
 
17. When is it advisable for an entrepreneur to opt for a direct channel of distribution? 3 
EP/SAMPLE PAPER/17-18 Page 5 
 
Ans. It is advisable for an entrepreneur to opt for a direct channel of distribution in the 
following cases: 
a. Where the producer or entrepreneur wants to have full control over distribution.  
b. when an entrepreneur wants to deal directly with the consumers.   
c. To cut distribution costs.   
 
 
18. Explain any two advantages and two disadvantages of franchising to franchisee. 4 
Ans. Advantages: (Any two) 
a. Product acceptance : 
The franchisee usually enters into a business that has an accepted name, product or 
service. The franchisee does not have to spend resources trying to establish the 
credibility of the business. That credibility already exists based on the years the 
franchise has existed.  
2. Management expertise 
Another important advantage to the franchisee is the managerial assistance provided 
by the franchisor. Each new franchisee is often required to take a training program on 
all aspects of operating the franchise. This training could include classes in 
accounting, personnel management marketing and production.  
3. Capital requirements 
Starting a new venture can be costly in terms of both time and money. The franchise 
offers an opportunity to start a new venture with up-front support that could save the 
entrepreneur's significant time and possibly capital.  
4. Knowledge of the market 
Any established franchise business offers the entrepreneur years of experience offered 
to the franchisee that details the profile of the target customer and the strategies that 
should be implemented once the operation has begun. This is particularly important 
because of regional and local differences in markets.  
5. Operating and structural controls 
Two problems that many entrepreneurs have in starting a new venture are maintaining 
quality control of products and services and establishing effective managerial controls. 
And this can be overcome with the help of franchising. 
 
Disadvantages: (Any two) 
1. Right and the only way of doing things: Entering into a franchise contract limits the 
degree of freedom for the franchise. As such, one gets an over-guided and over-
influenced degree of control exerted by the franchisor. This results in losing the 
freedom to innovate to some 
extent. 
2. Continuing cost implication: Over and above the original franchise fee and 
royalties, a percentage of revenue gets shared perpetually with the franchisor. The 
franchisor may also charge additional amounts towards sharing the cost for services 
provided such as advertising and training.  
3. Risk of franchisor getting bought: The franchisee faces serious problems and 
difficulties when the franchisor either fails or gets bought out by another company. 
4. Inability to provide services: The disadvantages to the franchisee usually centre 
around the inability of the franchisor to provide services advertising and location. 
When promises made in the franchise agreement are not kept, the franchisee may be 
left without any support in important areas.