CBSE Class 12 Entrepreneurship Sample Paper-02 (2016-17 by CBSE) PDF Download

 Page 1


EP/SAMPLE PAPER/16-17 Page 1 
 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2016-17 
Time allowed: 3 hours       Maximum Marks: 70 
S. No. Questions/ Expected Value Points Unit/Typo Marks 
1. Name the two things that are taken care in a reorder point? 5 (U) 1 
Ans. Lead time and Demand during lead time.    
2. Deepak Ltd., has been manufacturing cycles since 2010. Their market 
share in this field is 35%. They decided to introduce new cycles with 
advanced gear systems in 2015. For the same they estimated their financial 
requirements to be 20 crore. 
They decided to raise the same through a limited number of sophisticated 
investors. Identify this kind of issue? 
6 (App) 1 
Ans. Private placement   
3. Rishabh lives in Vijay Nagar, a residential colony near Delhi University 
(DU). Being close to DU this area is a hub for students who come from 
outside Delhi to study here as they find good accommodation with Tiffin 
service readily available. Rishabh has a vacant residential building there. 
He found it to be an attractive economic idea to start a Paying Guest 
House. He knows that he has a good market because of the location of his 
building. State the other requirement he has to ensure before opting for this 
opportunity. 
1(HOTS) 1 
Ans. The rate of return on the investment has to be attractive to be accepted by 
him. 
  
4. What is meant by ‘private sector enterprise’? 2/ (R) 1 
Ans. Private sector enterprises are those which are owned, controlled, and 
managed by private individuals, with the main objective of earning profit. 
  
5. State the role of a sales person in personal selling. 3/ (R) 1 
Ans. Companies appoint salesperson to contact prospective buyers and create 
awareness about the company’s product. 
  
6. What is meant by seed capital financing? What the entrepreneur has to do 
to convince the investor to get money? 
6 (R) 2 
Ans. It refers to the capital required by an entrepreneur for conducting research 
at pre commercialization stage.  
The entrepreneur has to convince that his idea was worthwhile to the 
investor. 
  
7. Ragini, a career oriented mother, hardly got time to cook for the family. 
She decided to hire a cook but was not able to find one who could cook 
according to the taste of the family. Her sister Abha sensed that this 
problem is not only faced by her sister but also by many working women. 
She launched a website namely ‘Dial for food’ where housewives who had 
culinary ability and were interested to cook could drop in their contact 
details and households where specific cuisine was required could leave in 
their requirements so that through the website home cooked food could be 
delivered. The website mainly helped in identifying the requirement and 
fulfilled it through providing delivery service. Identify any two uses of 
problem identification to Abha. 
1/App 2 
Ans. 1. Bring out new products in the market 
2. Increase employment generation 
  
Page 2


EP/SAMPLE PAPER/16-17 Page 1 
 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2016-17 
Time allowed: 3 hours       Maximum Marks: 70 
S. No. Questions/ Expected Value Points Unit/Typo Marks 
1. Name the two things that are taken care in a reorder point? 5 (U) 1 
Ans. Lead time and Demand during lead time.    
2. Deepak Ltd., has been manufacturing cycles since 2010. Their market 
share in this field is 35%. They decided to introduce new cycles with 
advanced gear systems in 2015. For the same they estimated their financial 
requirements to be 20 crore. 
They decided to raise the same through a limited number of sophisticated 
investors. Identify this kind of issue? 
6 (App) 1 
Ans. Private placement   
3. Rishabh lives in Vijay Nagar, a residential colony near Delhi University 
(DU). Being close to DU this area is a hub for students who come from 
outside Delhi to study here as they find good accommodation with Tiffin 
service readily available. Rishabh has a vacant residential building there. 
He found it to be an attractive economic idea to start a Paying Guest 
House. He knows that he has a good market because of the location of his 
building. State the other requirement he has to ensure before opting for this 
opportunity. 
1(HOTS) 1 
Ans. The rate of return on the investment has to be attractive to be accepted by 
him. 
  
4. What is meant by ‘private sector enterprise’? 2/ (R) 1 
Ans. Private sector enterprises are those which are owned, controlled, and 
managed by private individuals, with the main objective of earning profit. 
  
5. State the role of a sales person in personal selling. 3/ (R) 1 
Ans. Companies appoint salesperson to contact prospective buyers and create 
awareness about the company’s product. 
  
6. What is meant by seed capital financing? What the entrepreneur has to do 
to convince the investor to get money? 
6 (R) 2 
Ans. It refers to the capital required by an entrepreneur for conducting research 
at pre commercialization stage.  
The entrepreneur has to convince that his idea was worthwhile to the 
investor. 
  
7. Ragini, a career oriented mother, hardly got time to cook for the family. 
She decided to hire a cook but was not able to find one who could cook 
according to the taste of the family. Her sister Abha sensed that this 
problem is not only faced by her sister but also by many working women. 
She launched a website namely ‘Dial for food’ where housewives who had 
culinary ability and were interested to cook could drop in their contact 
details and households where specific cuisine was required could leave in 
their requirements so that through the website home cooked food could be 
delivered. The website mainly helped in identifying the requirement and 
fulfilled it through providing delivery service. Identify any two uses of 
problem identification to Abha. 
1/App 2 
Ans. 1. Bring out new products in the market 
2. Increase employment generation 
  
EP/SAMPLE PAPER/16-17 Page 2 
 
3. Understand the problems and needs of the market. (Any two) 
8. Explain the first two elements in the innovation process?  1/U 2 
Ans. 1. Analytical planning: carefully identifying the product or service 
features, design as well as the resources that will be needed. 
2. Resource organization: obtaining the required resources, materials, 
technology, human or capital resources. 
  
9. Sanjiv was developing a business plan for his organization. While working 
on the financial plan he realised that his financial requirements will be for 
fixed assets and their installations, preliminary expenses, working capital, 
expenses on research and development and investment in short-term assets 
viz. raw material, level of cash, etc. To decide on the sources of funds for 
the venture, he tried to ensure the selection of the best overall mix of 
financing for the enterprise. 
a. Identify the elements of financial plan discussed here. 
b. Why is it important for an entrepreneur to ensure the selection of the 
best overall mix of financing for the enterprise? 
2/App 2 
Ans.  a. a) Proforma investment decisions 
     b) Proforma financing decisions 
 
b. The entrepreneur's job is to ensure the selection of the best overall mix 
of financing for the enterprise so that: 
a) the cost of capital and the financial risk stands minimized, 
b) return on investment and profitability stands maximized. 
  
10. Rohan a budding musician created a lot of musical notes for his upcoming 
video. He was extremely thrilled to listen to his compositions. He 
presented his compositions to his friend Victor. The release of musical 
video of Rohan was getting delayed for a few months due to shortage of 
cash.  Meanwhile Victor used most of the musical compositions of Rohan 
in his video.  
Rohan was extremely upset to know that his friend had cheated him and 
used all his work. What could have Rohan done to save his work? 
Identify and explain it. 
3/HOTS 2 
Ans. Rohan should have copyrighted his work. It gives the creator of original 
work exclusive rights to it, usually for a limited time. 
  
11. Bhushan and Vinay were pursuing Electrical Engineering from a 
prestigious engineering college. During their third year they developed a 
solar LED bulb which can be used indoors. The bulb had a small panel 
which had to be charged at a stretch for 10 hours in the sun and it would 
last for 200 hours of usage. 
The idea was risky as there was a possibility that the market might not 
accept such a product, but if they do so, then, there would be a revolution 
in the power industry as it would lead to saving of power in every 
household. 
The prototype was made but to manufacture and distribute the same, they 
required around 5 crores.  
Both Bhushan and Vinay approached some affluent individuals who were 
ready to invest in their business in exchange for a convertible debt.  
Identify the type of investors and state any two features of the same. 
6/HOTS 3 
Ans. Angel Investor 
Features (Any two) 
1. Most angel investors are current or retired executives, business 
  
Page 3


EP/SAMPLE PAPER/16-17 Page 1 
 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2016-17 
Time allowed: 3 hours       Maximum Marks: 70 
S. No. Questions/ Expected Value Points Unit/Typo Marks 
1. Name the two things that are taken care in a reorder point? 5 (U) 1 
Ans. Lead time and Demand during lead time.    
2. Deepak Ltd., has been manufacturing cycles since 2010. Their market 
share in this field is 35%. They decided to introduce new cycles with 
advanced gear systems in 2015. For the same they estimated their financial 
requirements to be 20 crore. 
They decided to raise the same through a limited number of sophisticated 
investors. Identify this kind of issue? 
6 (App) 1 
Ans. Private placement   
3. Rishabh lives in Vijay Nagar, a residential colony near Delhi University 
(DU). Being close to DU this area is a hub for students who come from 
outside Delhi to study here as they find good accommodation with Tiffin 
service readily available. Rishabh has a vacant residential building there. 
He found it to be an attractive economic idea to start a Paying Guest 
House. He knows that he has a good market because of the location of his 
building. State the other requirement he has to ensure before opting for this 
opportunity. 
1(HOTS) 1 
Ans. The rate of return on the investment has to be attractive to be accepted by 
him. 
  
4. What is meant by ‘private sector enterprise’? 2/ (R) 1 
Ans. Private sector enterprises are those which are owned, controlled, and 
managed by private individuals, with the main objective of earning profit. 
  
5. State the role of a sales person in personal selling. 3/ (R) 1 
Ans. Companies appoint salesperson to contact prospective buyers and create 
awareness about the company’s product. 
  
6. What is meant by seed capital financing? What the entrepreneur has to do 
to convince the investor to get money? 
6 (R) 2 
Ans. It refers to the capital required by an entrepreneur for conducting research 
at pre commercialization stage.  
The entrepreneur has to convince that his idea was worthwhile to the 
investor. 
  
7. Ragini, a career oriented mother, hardly got time to cook for the family. 
She decided to hire a cook but was not able to find one who could cook 
according to the taste of the family. Her sister Abha sensed that this 
problem is not only faced by her sister but also by many working women. 
She launched a website namely ‘Dial for food’ where housewives who had 
culinary ability and were interested to cook could drop in their contact 
details and households where specific cuisine was required could leave in 
their requirements so that through the website home cooked food could be 
delivered. The website mainly helped in identifying the requirement and 
fulfilled it through providing delivery service. Identify any two uses of 
problem identification to Abha. 
1/App 2 
Ans. 1. Bring out new products in the market 
2. Increase employment generation 
  
EP/SAMPLE PAPER/16-17 Page 2 
 
3. Understand the problems and needs of the market. (Any two) 
8. Explain the first two elements in the innovation process?  1/U 2 
Ans. 1. Analytical planning: carefully identifying the product or service 
features, design as well as the resources that will be needed. 
2. Resource organization: obtaining the required resources, materials, 
technology, human or capital resources. 
  
9. Sanjiv was developing a business plan for his organization. While working 
on the financial plan he realised that his financial requirements will be for 
fixed assets and their installations, preliminary expenses, working capital, 
expenses on research and development and investment in short-term assets 
viz. raw material, level of cash, etc. To decide on the sources of funds for 
the venture, he tried to ensure the selection of the best overall mix of 
financing for the enterprise. 
a. Identify the elements of financial plan discussed here. 
b. Why is it important for an entrepreneur to ensure the selection of the 
best overall mix of financing for the enterprise? 
2/App 2 
Ans.  a. a) Proforma investment decisions 
     b) Proforma financing decisions 
 
b. The entrepreneur's job is to ensure the selection of the best overall mix 
of financing for the enterprise so that: 
a) the cost of capital and the financial risk stands minimized, 
b) return on investment and profitability stands maximized. 
  
10. Rohan a budding musician created a lot of musical notes for his upcoming 
video. He was extremely thrilled to listen to his compositions. He 
presented his compositions to his friend Victor. The release of musical 
video of Rohan was getting delayed for a few months due to shortage of 
cash.  Meanwhile Victor used most of the musical compositions of Rohan 
in his video.  
Rohan was extremely upset to know that his friend had cheated him and 
used all his work. What could have Rohan done to save his work? 
Identify and explain it. 
3/HOTS 2 
Ans. Rohan should have copyrighted his work. It gives the creator of original 
work exclusive rights to it, usually for a limited time. 
  
11. Bhushan and Vinay were pursuing Electrical Engineering from a 
prestigious engineering college. During their third year they developed a 
solar LED bulb which can be used indoors. The bulb had a small panel 
which had to be charged at a stretch for 10 hours in the sun and it would 
last for 200 hours of usage. 
The idea was risky as there was a possibility that the market might not 
accept such a product, but if they do so, then, there would be a revolution 
in the power industry as it would lead to saving of power in every 
household. 
The prototype was made but to manufacture and distribute the same, they 
required around 5 crores.  
Both Bhushan and Vinay approached some affluent individuals who were 
ready to invest in their business in exchange for a convertible debt.  
Identify the type of investors and state any two features of the same. 
6/HOTS 3 
Ans. Angel Investor 
Features (Any two) 
1. Most angel investors are current or retired executives, business 
  
EP/SAMPLE PAPER/16-17 Page 3 
 
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. 
You have started a beauty parlor business. You spent 5,00,000 to open the 
parlor of which you invested 3,00,000/- of your own money and 
borrowed a loan for 2,00,000. Interest rate per annum is 4%. Sales 
revenue per month is 35,000. Cost of goods sold is 10,000 per month. 
Fixed expenses per month is 15,000 (salary 7,000, rent and utility 
8,000), depreciation 1,000/- and tax @ 8%. Calculate the Return on 
Equity.  
5/App 3 
Ans.   Amount 
 Source Of Funds  
 Equity = Y 3,00,000 
 Loan = Z 2,00,000 
 Total Capital Employed/ Total Investment 5,00,000 
 Income Statement For One Year  
A Sales Revenue (35,000 × 12) 4,20,000 
B Less Cost Of Goods Sold (10,000 × 12) 1,20,000 
C  Gross Margin = ( A-B) 3,00,000 
 Fixed Expenses:  
 ? Salary Etc. (7000 × 12) 84,000 
 ? Rent, Utility Etc. (8000 × 12) 96,000 
 ? Interest (2,00,000 × 4÷100) 8,000 
 ? Depreciation & Amortization 1,000 
D  Less: Total Fixed Expense 1,89,000 
 1+2+3
=6 
Page 4


EP/SAMPLE PAPER/16-17 Page 1 
 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2016-17 
Time allowed: 3 hours       Maximum Marks: 70 
S. No. Questions/ Expected Value Points Unit/Typo Marks 
1. Name the two things that are taken care in a reorder point? 5 (U) 1 
Ans. Lead time and Demand during lead time.    
2. Deepak Ltd., has been manufacturing cycles since 2010. Their market 
share in this field is 35%. They decided to introduce new cycles with 
advanced gear systems in 2015. For the same they estimated their financial 
requirements to be 20 crore. 
They decided to raise the same through a limited number of sophisticated 
investors. Identify this kind of issue? 
6 (App) 1 
Ans. Private placement   
3. Rishabh lives in Vijay Nagar, a residential colony near Delhi University 
(DU). Being close to DU this area is a hub for students who come from 
outside Delhi to study here as they find good accommodation with Tiffin 
service readily available. Rishabh has a vacant residential building there. 
He found it to be an attractive economic idea to start a Paying Guest 
House. He knows that he has a good market because of the location of his 
building. State the other requirement he has to ensure before opting for this 
opportunity. 
1(HOTS) 1 
Ans. The rate of return on the investment has to be attractive to be accepted by 
him. 
  
4. What is meant by ‘private sector enterprise’? 2/ (R) 1 
Ans. Private sector enterprises are those which are owned, controlled, and 
managed by private individuals, with the main objective of earning profit. 
  
5. State the role of a sales person in personal selling. 3/ (R) 1 
Ans. Companies appoint salesperson to contact prospective buyers and create 
awareness about the company’s product. 
  
6. What is meant by seed capital financing? What the entrepreneur has to do 
to convince the investor to get money? 
6 (R) 2 
Ans. It refers to the capital required by an entrepreneur for conducting research 
at pre commercialization stage.  
The entrepreneur has to convince that his idea was worthwhile to the 
investor. 
  
7. Ragini, a career oriented mother, hardly got time to cook for the family. 
She decided to hire a cook but was not able to find one who could cook 
according to the taste of the family. Her sister Abha sensed that this 
problem is not only faced by her sister but also by many working women. 
She launched a website namely ‘Dial for food’ where housewives who had 
culinary ability and were interested to cook could drop in their contact 
details and households where specific cuisine was required could leave in 
their requirements so that through the website home cooked food could be 
delivered. The website mainly helped in identifying the requirement and 
fulfilled it through providing delivery service. Identify any two uses of 
problem identification to Abha. 
1/App 2 
Ans. 1. Bring out new products in the market 
2. Increase employment generation 
  
EP/SAMPLE PAPER/16-17 Page 2 
 
3. Understand the problems and needs of the market. (Any two) 
8. Explain the first two elements in the innovation process?  1/U 2 
Ans. 1. Analytical planning: carefully identifying the product or service 
features, design as well as the resources that will be needed. 
2. Resource organization: obtaining the required resources, materials, 
technology, human or capital resources. 
  
9. Sanjiv was developing a business plan for his organization. While working 
on the financial plan he realised that his financial requirements will be for 
fixed assets and their installations, preliminary expenses, working capital, 
expenses on research and development and investment in short-term assets 
viz. raw material, level of cash, etc. To decide on the sources of funds for 
the venture, he tried to ensure the selection of the best overall mix of 
financing for the enterprise. 
a. Identify the elements of financial plan discussed here. 
b. Why is it important for an entrepreneur to ensure the selection of the 
best overall mix of financing for the enterprise? 
2/App 2 
Ans.  a. a) Proforma investment decisions 
     b) Proforma financing decisions 
 
b. The entrepreneur's job is to ensure the selection of the best overall mix 
of financing for the enterprise so that: 
a) the cost of capital and the financial risk stands minimized, 
b) return on investment and profitability stands maximized. 
  
10. Rohan a budding musician created a lot of musical notes for his upcoming 
video. He was extremely thrilled to listen to his compositions. He 
presented his compositions to his friend Victor. The release of musical 
video of Rohan was getting delayed for a few months due to shortage of 
cash.  Meanwhile Victor used most of the musical compositions of Rohan 
in his video.  
Rohan was extremely upset to know that his friend had cheated him and 
used all his work. What could have Rohan done to save his work? 
Identify and explain it. 
3/HOTS 2 
Ans. Rohan should have copyrighted his work. It gives the creator of original 
work exclusive rights to it, usually for a limited time. 
  
11. Bhushan and Vinay were pursuing Electrical Engineering from a 
prestigious engineering college. During their third year they developed a 
solar LED bulb which can be used indoors. The bulb had a small panel 
which had to be charged at a stretch for 10 hours in the sun and it would 
last for 200 hours of usage. 
The idea was risky as there was a possibility that the market might not 
accept such a product, but if they do so, then, there would be a revolution 
in the power industry as it would lead to saving of power in every 
household. 
The prototype was made but to manufacture and distribute the same, they 
required around 5 crores.  
Both Bhushan and Vinay approached some affluent individuals who were 
ready to invest in their business in exchange for a convertible debt.  
Identify the type of investors and state any two features of the same. 
6/HOTS 3 
Ans. Angel Investor 
Features (Any two) 
1. Most angel investors are current or retired executives, business 
  
EP/SAMPLE PAPER/16-17 Page 3 
 
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. 
You have started a beauty parlor business. You spent 5,00,000 to open the 
parlor of which you invested 3,00,000/- of your own money and 
borrowed a loan for 2,00,000. Interest rate per annum is 4%. Sales 
revenue per month is 35,000. Cost of goods sold is 10,000 per month. 
Fixed expenses per month is 15,000 (salary 7,000, rent and utility 
8,000), depreciation 1,000/- and tax @ 8%. Calculate the Return on 
Equity.  
5/App 3 
Ans.   Amount 
 Source Of Funds  
 Equity = Y 3,00,000 
 Loan = Z 2,00,000 
 Total Capital Employed/ Total Investment 5,00,000 
 Income Statement For One Year  
A Sales Revenue (35,000 × 12) 4,20,000 
B Less Cost Of Goods Sold (10,000 × 12) 1,20,000 
C  Gross Margin = ( A-B) 3,00,000 
 Fixed Expenses:  
 ? Salary Etc. (7000 × 12) 84,000 
 ? Rent, Utility Etc. (8000 × 12) 96,000 
 ? Interest (2,00,000 × 4÷100) 8,000 
 ? Depreciation & Amortization 1,000 
D  Less: Total Fixed Expense 1,89,000 
 1+2+3
=6 
EP/SAMPLE PAPER/16-17 Page 4 
 
E Profit Before Tax = C - D 1,11,000 
 Tax @ 8% (1,11,000 × 8÷100)    8,880 
F Profit After Tax = E - F  1,02,120 
 CALCULATION OF ROE  
 Return on Equity = 
 Net Profit after Tax x   100 
            Equity  
 
1,02,120     x 100 
3,00,000 
34.04 % 
 
13. Explain how the following factors affect idea and opportunity assessment. 
a. Application and use 
b. Level of operation 
c. Competition 
1/R 3 
Ans. 1. 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, and 
then we may think of modifying it for better use. In the above mentioned 
example, we can clearly see that even though there are many companies 
manufacturing pen drives, the latest will be in consonance with the 
upcoming trends. 
 
2. 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. 
 
3. 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. 
  
14. Sensitivity to environmental factors is crucial for an entrepreneur. With an 
appropriate example explain the relevance of the statement. 
1/EV 3 
Ans. Importance of environment: (Any three) 
For example, Sony failing to understand the changing trends in mobile 
phones and therefore losing its market share.  
 
The benefits of understanding the relevant environment of business are:  
i) Identification of opportunities to get first mover advantage:  By 
keeping in touch with the changes in the external environment, 
an enterprise can identify opportunities and find strategies to 
capitalise on the opportunities at the earliest. For example, 
Volvo, the Swedish brand has 74% share in the luxury bus 
segment as it had entered India earlier.  
ii) Formulation of strategies and policies:  It helps in identifying 
threats and opportunities in the market. These can serve as the 
  
Page 5


EP/SAMPLE PAPER/16-17 Page 1 
 
 
ENTREPRENEURSHIP 
SAMPLE PAPER 
2016-17 
Time allowed: 3 hours       Maximum Marks: 70 
S. No. Questions/ Expected Value Points Unit/Typo Marks 
1. Name the two things that are taken care in a reorder point? 5 (U) 1 
Ans. Lead time and Demand during lead time.    
2. Deepak Ltd., has been manufacturing cycles since 2010. Their market 
share in this field is 35%. They decided to introduce new cycles with 
advanced gear systems in 2015. For the same they estimated their financial 
requirements to be 20 crore. 
They decided to raise the same through a limited number of sophisticated 
investors. Identify this kind of issue? 
6 (App) 1 
Ans. Private placement   
3. Rishabh lives in Vijay Nagar, a residential colony near Delhi University 
(DU). Being close to DU this area is a hub for students who come from 
outside Delhi to study here as they find good accommodation with Tiffin 
service readily available. Rishabh has a vacant residential building there. 
He found it to be an attractive economic idea to start a Paying Guest 
House. He knows that he has a good market because of the location of his 
building. State the other requirement he has to ensure before opting for this 
opportunity. 
1(HOTS) 1 
Ans. The rate of return on the investment has to be attractive to be accepted by 
him. 
  
4. What is meant by ‘private sector enterprise’? 2/ (R) 1 
Ans. Private sector enterprises are those which are owned, controlled, and 
managed by private individuals, with the main objective of earning profit. 
  
5. State the role of a sales person in personal selling. 3/ (R) 1 
Ans. Companies appoint salesperson to contact prospective buyers and create 
awareness about the company’s product. 
  
6. What is meant by seed capital financing? What the entrepreneur has to do 
to convince the investor to get money? 
6 (R) 2 
Ans. It refers to the capital required by an entrepreneur for conducting research 
at pre commercialization stage.  
The entrepreneur has to convince that his idea was worthwhile to the 
investor. 
  
7. Ragini, a career oriented mother, hardly got time to cook for the family. 
She decided to hire a cook but was not able to find one who could cook 
according to the taste of the family. Her sister Abha sensed that this 
problem is not only faced by her sister but also by many working women. 
She launched a website namely ‘Dial for food’ where housewives who had 
culinary ability and were interested to cook could drop in their contact 
details and households where specific cuisine was required could leave in 
their requirements so that through the website home cooked food could be 
delivered. The website mainly helped in identifying the requirement and 
fulfilled it through providing delivery service. Identify any two uses of 
problem identification to Abha. 
1/App 2 
Ans. 1. Bring out new products in the market 
2. Increase employment generation 
  
EP/SAMPLE PAPER/16-17 Page 2 
 
3. Understand the problems and needs of the market. (Any two) 
8. Explain the first two elements in the innovation process?  1/U 2 
Ans. 1. Analytical planning: carefully identifying the product or service 
features, design as well as the resources that will be needed. 
2. Resource organization: obtaining the required resources, materials, 
technology, human or capital resources. 
  
9. Sanjiv was developing a business plan for his organization. While working 
on the financial plan he realised that his financial requirements will be for 
fixed assets and their installations, preliminary expenses, working capital, 
expenses on research and development and investment in short-term assets 
viz. raw material, level of cash, etc. To decide on the sources of funds for 
the venture, he tried to ensure the selection of the best overall mix of 
financing for the enterprise. 
a. Identify the elements of financial plan discussed here. 
b. Why is it important for an entrepreneur to ensure the selection of the 
best overall mix of financing for the enterprise? 
2/App 2 
Ans.  a. a) Proforma investment decisions 
     b) Proforma financing decisions 
 
b. The entrepreneur's job is to ensure the selection of the best overall mix 
of financing for the enterprise so that: 
a) the cost of capital and the financial risk stands minimized, 
b) return on investment and profitability stands maximized. 
  
10. Rohan a budding musician created a lot of musical notes for his upcoming 
video. He was extremely thrilled to listen to his compositions. He 
presented his compositions to his friend Victor. The release of musical 
video of Rohan was getting delayed for a few months due to shortage of 
cash.  Meanwhile Victor used most of the musical compositions of Rohan 
in his video.  
Rohan was extremely upset to know that his friend had cheated him and 
used all his work. What could have Rohan done to save his work? 
Identify and explain it. 
3/HOTS 2 
Ans. Rohan should have copyrighted his work. It gives the creator of original 
work exclusive rights to it, usually for a limited time. 
  
11. Bhushan and Vinay were pursuing Electrical Engineering from a 
prestigious engineering college. During their third year they developed a 
solar LED bulb which can be used indoors. The bulb had a small panel 
which had to be charged at a stretch for 10 hours in the sun and it would 
last for 200 hours of usage. 
The idea was risky as there was a possibility that the market might not 
accept such a product, but if they do so, then, there would be a revolution 
in the power industry as it would lead to saving of power in every 
household. 
The prototype was made but to manufacture and distribute the same, they 
required around 5 crores.  
Both Bhushan and Vinay approached some affluent individuals who were 
ready to invest in their business in exchange for a convertible debt.  
Identify the type of investors and state any two features of the same. 
6/HOTS 3 
Ans. Angel Investor 
Features (Any two) 
1. Most angel investors are current or retired executives, business 
  
EP/SAMPLE PAPER/16-17 Page 3 
 
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. 
You have started a beauty parlor business. You spent 5,00,000 to open the 
parlor of which you invested 3,00,000/- of your own money and 
borrowed a loan for 2,00,000. Interest rate per annum is 4%. Sales 
revenue per month is 35,000. Cost of goods sold is 10,000 per month. 
Fixed expenses per month is 15,000 (salary 7,000, rent and utility 
8,000), depreciation 1,000/- and tax @ 8%. Calculate the Return on 
Equity.  
5/App 3 
Ans.   Amount 
 Source Of Funds  
 Equity = Y 3,00,000 
 Loan = Z 2,00,000 
 Total Capital Employed/ Total Investment 5,00,000 
 Income Statement For One Year  
A Sales Revenue (35,000 × 12) 4,20,000 
B Less Cost Of Goods Sold (10,000 × 12) 1,20,000 
C  Gross Margin = ( A-B) 3,00,000 
 Fixed Expenses:  
 ? Salary Etc. (7000 × 12) 84,000 
 ? Rent, Utility Etc. (8000 × 12) 96,000 
 ? Interest (2,00,000 × 4÷100) 8,000 
 ? Depreciation & Amortization 1,000 
D  Less: Total Fixed Expense 1,89,000 
 1+2+3
=6 
EP/SAMPLE PAPER/16-17 Page 4 
 
E Profit Before Tax = C - D 1,11,000 
 Tax @ 8% (1,11,000 × 8÷100)    8,880 
F Profit After Tax = E - F  1,02,120 
 CALCULATION OF ROE  
 Return on Equity = 
 Net Profit after Tax x   100 
            Equity  
 
1,02,120     x 100 
3,00,000 
34.04 % 
 
13. Explain how the following factors affect idea and opportunity assessment. 
a. Application and use 
b. Level of operation 
c. Competition 
1/R 3 
Ans. 1. 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, and 
then we may think of modifying it for better use. In the above mentioned 
example, we can clearly see that even though there are many companies 
manufacturing pen drives, the latest will be in consonance with the 
upcoming trends. 
 
2. 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. 
 
3. 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. 
  
14. Sensitivity to environmental factors is crucial for an entrepreneur. With an 
appropriate example explain the relevance of the statement. 
1/EV 3 
Ans. Importance of environment: (Any three) 
For example, Sony failing to understand the changing trends in mobile 
phones and therefore losing its market share.  
 
The benefits of understanding the relevant environment of business are:  
i) Identification of opportunities to get first mover advantage:  By 
keeping in touch with the changes in the external environment, 
an enterprise can identify opportunities and find strategies to 
capitalise on the opportunities at the earliest. For example, 
Volvo, the Swedish brand has 74% share in the luxury bus 
segment as it had entered India earlier.  
ii) Formulation of strategies and policies:  It helps in identifying 
threats and opportunities in the market. These can serve as the 
  
EP/SAMPLE PAPER/16-17 Page 5 
 
basis of formulation of strategies to counter threats and 
capitalise on opportunities in the market. For example, to 
understand new trends in the market. 
iii) Tapping useful resources:  If the company has a thorough 
knowledge of the external environment, it can tap raw 
materials, technology and even financial resources from the 
market at economical prices at the right time. For example, 
resources or raw materials which can be obtained from different 
countries. 
iv) Better performance:  Proper understanding of the various 
elements of the external environment is necessary to take timely 
action to deal with threats and avail opportunities for the 
purpose of improvement in the performance of the firm. For 
example, new entry of a competitor with advanced 
technological product.  
v) Sensitisation of entrepreneurs to cope up with rapid changes:  A 
keen watch on the trends in environment would help to sensitise 
the entrepreneur to the changing technology, competition, 
government policies and changing needs of the customers. For 
example, changing trends in clothing. 
15. Deepak and Gaurav joined the prestigious law university in Ahmedabad in 
the year 2010. During the course of study they became good friends and 
they both realized that their common interest lies in the field of corporate 
law. After completion of their degree they decided to start a firm of their 
own, namely ‘Corpo Law Firm’ wherein both of them will be co-owners 
dividing the profit and loss. After successfully running the firm for a year, 
they realized that there are certain rights which are denied to their firm as it 
is not registered.  
Explain the consequences of non-registration of their firm.  
2/HOTS 3 
Ans. Consequences of non-registration of a partnership firm: 
a. A partner cannot file a suit in any court against the firm or other 
partners for the enforcement of any right arising from a contract or 
right conferred by the Partnership Act. 
b. A right arising from a contract cannot be enforced in any court by 
or on behalf of the firm against the third party. 
c. The firm or any of its partners cannot claim a set off or other 
proceedings in a dispute with a third party. 
  
16. Explain any three characteristics of a company. 2/R 3 
Ans. Characteristics of a company (any three) 
1) Voluntary association 
 At least two persons, voluntarily, must join hands to form a private 
company, while a minimum of seven persons are required for a public 
company. 
2) Artificial person 
A company is created by law. Though, it has no body and no conscience, it 
still exists as a person, having a distinct personality of its own. Because 
like a human being it can buy, sell and own property, sue others, be sued 
by others, hence called as an artificial person. 
3) Separate legal entity 
A company has an independent status, different from its members. This 
implies that a company cannot be held liable for the actions of its members