Class 12 Entrepreneurship: CBSE Sample Question Paper- Term II (2021-22)- 3 | Sample Papers for Class 12 Commerce PDF Download

Class - XII

General Instructions :

• The paper is divided into 3 Sections.
• Section-wise overall choice is given to the students.
• Section A (2 markers) has 6 questions. Attempt any 4 out of 6.
• Section B (3 markers) has 5 questions. Attempt any 4 out of 5.
• Section C (5 markers) has 4 questions. Attempt any 3 out of 4.

Q.1. The annual quantity of jackets sold by Meghana Wool Mart is 12,000 at the rate of ₹ 1000/- per jacket. The cost of placing an order and receiving goods is ₹ 500/- per order. Inventory holding cost is ₹ 300/- per annum. What is the Economic Order Quantity for Meghana Wool Mart?

Q.2. State any two reasons for capital markets being the most important source of raising finance for entrepreneurs?

(i) Helps in mobilizing the financial resources on a nation-wide scale.
(ii) Securing the required foreign capital and know-how to promote economic growth at a faster rate.
(iii) Ensure the most effective allocation of the mobilized financial resources to highest yield projects or to underdeveloped priority areas to promote balanced and diversified industrialization.

Q.3. Anil signed a contract with Phelari group to bottle and distribute their soft drink brand ‘Kickapo’. The taste of this soft drink was unique and it became the most preferred soft drink consumed by teenagers. The agreement stated that Anil should use the same ingredients used by Phelari group while bottling the product. Identify and give the meaning of this type of enterprise growth opportunity.

Manufacturing franchise opportunity: These types of franchises provide an organization with theright to manufacture a product and sell it to the public, using the franchisor's name and trademark.

Q.4. Evaluate the two approaches used in sales strategy by a company while retaining it’s present customers and when attracting new customers.

Potential customers need communication that introduces the brand and product or service in ways that show how it can solve his or her problems. Current customers require more personal communication about new features or benefits to keep them engaged. Promotions and referral discounts work to motivate current customers to spend their money and to spread the word to others.

Q.5. What is operating synergy? How is it different from financial synergy?

Operating synergy refers to the cost savings that come through economies of scale or increased sales and profits. It leads to the overall growth of the firm.
Financial synergy is the direct result of financial factors such as lower taxes, higher debt capacity or better use of idle cash.

Q.6. Enlist any four main public relation tools?

(i) News creation and distribution (media releases)
(ii) Special events such as conferences, grand openings and product launches
(iii) Speeches and presentations
(iv) Educational programs
(v) Annual reports, brochures, newsletters, magazines and AV presentations
(vi) Community activities and sponsorships

Q.7.

(i) Identify the type of business whose operating cycle is represented above?

(i) The type of business whose operating cycle is represented is manufacturing business.

(ii) Analyze the working capital requirement for the type of business identified in (i).

(ii) Different products will have different operating cycles. If the conversion takes longer then the cycle will be longer. For trading, where there is no manufacturing (or conversion), the operating cycle will be shorter. Longer the operating cycle, working capital quantum is more; shorter the cycle, less working capital is needed. Therefore, the working capital required in manufacturing business is more.

Q.8. From the following information, calculate ‘Return on Equity’.
Capital ₹ 6,00,000
10% Loan ₹ 2,00,000
Net profit before interest ₹ 1,40,000, Also, state what is this return on rupees per lakh of equity.

Given Capital = ₹ 6,00,000

Loan @ 10% = ₹ 2,00,000

Net profit before interest = ₹ 1,40,000

Interest = ₹ 20,000
So,

i.e., for every rupee of own money invested the owner earned 30 paisa or ₹ 0.30.

Rupees per lakh of equity =₹ 0.30 × 1,00,000

= ₹ 30,000

Q.9. What is the purpose of logo?

The purpose of Logo can be understood from the following points
(i) Logos are critical aspect of business marketing. As the company's major graphical representation, a logo anchors company's brand.
(ii) Corporate Logo are intended to be the "Identity" of an enterprise because of displaying graphically enterprise's uniqueness.
(iii) Through a set of color combination, fonts, images, impression and/or pattern, logos provide essential information about a company that allows customers to relate with the enterprise's core brand.
(iv) Enterprises normally resort to logos' as a short path for advertising and other marketing materials.
(v) Logos act as the key visual component of an enterprise's overall brand identify.

Q.10. What do you think are the reasons for mergers and acquisitions? Explain any three.

Reasons for mergers and acquisitions are discussed below:
(i) Synergy: Synergy is the most essential component of mergers. In mergers, synergy between the participating firms determines the increase in value of the combined entity. In other words, it refers to the difference between the value of the combined firm and the value of the sum of the participants. Synergy accrues in the form of revenue enhancement and cost savings.
(ii) Acquiring new technology: To remain competitive, companies need to constantly upgrade their technology and business applications. To upgrade technology, a company need not always acquire technology. By buying another company with unique technology, the buying company can maintain or develop a competitive edge. A good example is a merger of a logistics company such as a land transport entity with an airline cargo company. Another example is a merger between Blackberry and Treo which can incorporate cellphone capability and e–mail connectivity in one device; palm pilots and tablet laptops can provide benefits to both the entities.

(iii) Improved profitability: Companies explore the possibilities of a merger when they anticipate that it will improve their profitability. The results of the International Business Owners Survey, 2004, carried out by Grant Thompson, conducted across 26 countries in Europe, Africa, Asia-Pacific, and the US, showed that 34% of business use M&A to maintain or improve profitability. For example, European Media Group Bertelsmann, Pearson, and others have driven their growth by expanding into the US through M&As.
(iv) Acquiring a competency: Companies also opt for M&A to acquire a competency or capability that they do not have and which the other firm does. For example, the ICICI, ITC alliance made the retailer network and depositor base available to the merging entity. Similarly, IBM merged with Daksh for acquiring competencies that the latter possessed.
(v) Entry into new markets: Mergers are often looked upon as a tool for hassle-free entry into new markets. Under normal conditions, a company can enter a new market, but may have to face stiff competition from the existing companies and may have to battle out for a share in the existing market. However, if the merger route is adopted, one can enter the market with greater case and avoid too much competition. For example, the merger of Orange, Hutch and Vodafone took place to achieve this objective.
(vi) Access to funds: Often a company finds it difficult to access funds from the capital market. This weakness deprives the company of funds to pursue its growth objectives effectively. In such cases, a company may decide to merge with another company that is viewed as fund-rich. For example, TDPL (Tamil Nadu Dadha Pharmaceuticals) merged with Sun Pharma since TDPL did not have funds to launch new products.
(vii) Tax benefits: Mergers are also adopted to reduce tax liabilities. By merging with a loss-making entity, a company with a high tax liability can set off the accumulated losses of the target against its profits gaining tax benefits. For example, Ashok Leyland Information Technology(ALIT) was acquired by Hinduja Finance, a group company, so that it could set off the accumulated losses in ALITs books against its profits.

Q.11. Identify and explain the type of marketing strategies used in the given situations:
(i) “Frizza” are the manufacturer of vegetarian frozen dessert food products made with coconut milk, agave syrup and other certified ingredients. The founders of the company originally developed this treat to meet their own needs but found that their friends and families around were also keen to use the products. The company started using all marketing activities to grow and expand. The company began sponsoring booths at festivals, drawing attention to its newly created vegetarian products. It also disseminated relevant information to media about its products and the people who helped in building the company’s reputation.

(i) Public relations is the marketing strategy used in the given situation. Public relations are the deliberate, planned and sustained effort to establish and maintain mutual understanding between an organisation (or individual) and its (or their) public. Public relations are about building good relations with the stakeholders(public) of the business by obtaining favourable publicity, building a good corporate image and handling or heading off unfavourable rumours,

stories and events. By building good relationships with the stakeholders, particularly customers, we can generate positive word of mouth and referrals from satisfied customers.

(ii) Bhoomi Hotel in Rajasthan was facing a problem of low demand for its rooms due to off season. The Managing Director (MD) of the hotel was very worried. The MD called upon the marketing Manager for his advice. He suggested that the hotel should announce an offer of ‘4 days and 3 nights hotel stay package’ with free breakfast and one-day tour to the attractions of famous places in Rajasthan. The MD liked the suggestion very much.

(ii) Advertising is the marketing strategy used in the given situation. Advertising is a paid form of communication designed to persuade potential customers to choose the product or service over that of a competitor. Successful advertising involves making the products or services positively known by that section of the public most likely to purchase them. It should be a planned, consistent activity that keeps the name of the business and the benefits of products or services uppermost in the mind of the consumer.

(iii) Rohan was a pen manufacturer. He used to make ball point pens in a small factory in the basement of his house. Daily he would go to the market place and distribute pens to the retailers. Some of the pens were sold by him of his own by meeting persons on road. He had not kept any name for his pens. They were just blue, black and red pens. One of his friends suggested him to keep a good name of his pens. He started selling pens with the name of Rolto Pens. Gradually his business started to pick up even more and he earned good revenue

(iii) Personal selling is the marketing strategy used in the given situation. It means selling products personally. It involves oral presentation of message in the form of conversation with one or more prospective customers for the purpose of making sales. Companies appoint salesperson to contact prospective buyers and create awareness about the company’s product.

Q.12. What is capital market? Explain how capital markets are the most important source of raising finance for an entrepreneur.

A capital market may be defined as an organized mechanism meant for effective and smooth transfer of money capital or financial resources from the investors to the entrepreneurs. Here, productive capital is raised and made available for industrial purposes.
Capital markets are the most important source of raising finance for the entrepreneurs as this market can:
(i) Mobilize the financial resources on a nation-wide scale.
(ii) Secure the required foreign capital and know-how to promote economic growth at a faster rate.
(iii) Ensure the most effective allocation of the mobilized financial resources by directing the same either to such projects which are capable of the highest yield or to the underdeveloped priority areas where there is an urgent need to promote balanced and diversified industrialization.
(iv) The needs of entrepreneurs who actually use the savings for productive purposes are varied. The capital market satisfies the tastes of savers and the needs of investors through its various financial instruments and institutions.

Q.13. Nishtha, a professionally qualified entrepreneur decided to start ‘kids furniture’ a website of designer furniture. It was relatively an untried area involving high risk. She lacked the necessary funds and experience to give shape to her idea. She knew that if she failed to get investment from the public her idea would die down before it is tried. So, she made a detailed business plan and presented her idea to ‘FiFa Finance Ltd’ a company run by a group of professional investors. They were impressed by her business plan and decided to fund her start-up in exchange for an equity stake in the business.
Identify the source of finance used by Nishtha. Also explain how this source of finance is different from raising debt.

Source of finance used by Nishtha is Venture Capital. Venture Capital is a type of private equity capital provided as seed funding to early-stage, high potential, high risk growth up companies/entrepreneurs who lack the necessary experience and funds to give shape to their ideas. Venture capital is an equity based investment in a growth-oriented small to medium business to enable the investors to accomplish objectives, in return for minority shareholding in the business or the irrevocable right to acquire. It is more accurate to view venture capital broadly as a professionally managed pool of equity capital. Venture capital is a way in which investors support entrepreneurial talent with finance and business skills to exploit market opportunities and obtain long-term capital gains.
This source is different from debt in the following ways:
(i) It is a permanent capital in business where as debt capital is to be repaid on maturity.
(ii) To pay regular dividend of fixed amount is not compulsory whereas in debt, a fixed rate of interest has to be paid regularly irrespective of profits or losses.

Q.14. Read the following article from a Business Newspaper and answer:

“Kamal Ltd. are manufacturers of textiles, having their plant in Surat, a city of Gujarat. Vastra Ltd. are the manufactures of readymade garments and sell their products throughout the country. They also export their products to America and European countries. Vastra Ltd. source their textiles from Kamal Ltd. The management of the two companies decided to merge to have economies of large scale production. The logic behind the merger is to increase synergies created by both the firms that would be more efficient operating as one.”
(i) Quoting the lines from the passage identify and explain the type of merger entered into by Kamal Ltd. and Vastra Ltd.

Vertical merger: A merger between two companies producing different goods or services for one specific finished product. A vertical merger occurs when two or more firms, operating at different levels within an industry's supply chain, merge operations. Most often the logic behind the merger is to increase synergies created by merging firms that would be more efficient operating as one.
Example: A vertical merger joins two companies that may not compete with each other, but exist in the same supply chain. Lines: “The logic behind the merger is to increase synergies created by both the firms that would be more efficient operating as one.”

(ii) Also, explain any two types of merger other than the one identified in (i) above.

(ii) Types of mergers: 
(a) Conglomerate merger: A merger between firms that are involved in totally unrelated

business activities. There are two types of conglomerate mergers: pure and mixed. Pure

conglomerate mergers involve firms with nothing in common, while mixed conglomerate

mergers involve firms that are looking for product extensions or market extensions.
Example: A leading manufacturer of athletic shoes merges with a soft drink firm. The

resulting company is faced with the same competition in each of its two markets after the

merger as the individual firms were before the merger. One example of a conglomerate

merger was the merger between the Walt Disney Company and the American Broadcasting

Company.

(b) Horizontal merger: A merger occurring between companies in the same industry.

Horizontal merger is a business consolidation that occurs between firms which operate

in the same space, often as competitors offering the same goods or service. Horizontal

mergers are common in industries with fewer firms, as competition tends to be higher and

the synergies and potential gains in market share are much greater for merging firms in

such an industry. Example: A merger between Coca-Cola and the Pepsi beverage division,

would be horizontal in nature. The goal of a horizontal merger is to create a new, larger

organization with more market share. If the merging companies' business operations are

very similar, there may be opportunities to join certain operations, such as manufacturing

and reduce costs.

(c) Market extension merger: A market extension merger takes place between two companies that deal in the same products but in separate markets. The main purpose of the market extension merger is to make sure that the merging companies can get access to a bigger market and that ensures a bigger client base. Example: A very good example of market

extension merger is the acquisition of Eagle Bancshares Inc. by the RBC Centura.

(d) Product extension merger: A product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market. The product extension merger allows the merging companies to group together

their products and get access to a bigger set of consumers. This ensures that they earn

higher profits. Example: The acquisition of Mobilink Telecom Inc. by Broadcom is a proper

example of product extension merger.

Q.15. What is marketing mix? How does market mix play an important role in enhancing the sale?

Marketing mix refers to the ingredients or the tools or the variables which the marketing mixes in order to interact with a particular market. Marketing mix is the term used to describe the combination of the four inputs which constitute the core of a company's marketing system: the product, the price structure, the promotional activities, and the distribution system.
Marketing mix plays an important role in enhancing the sales of the enterprise. Its following components help in raising the sale:
(i) Product: If various features and characteristics of the product are of the liking of majority of the potential customers, the sales is automatically going to be higher. Effective after sale service, efficient utilization of know-how, full capacity production will create good rapport of the product. Consequently sales will be enhanced.
(ii) Price: Price refers to the value that is put on a product. It depends on cost of production,

segment targeted, ability of the market to pay, supply - demand and a host of other direct and indirect factors. There can be several types of pricing strategies, each tied in with an overall  business plan. Pricing can also be used as a demarcation, to differentiate and enhance the image of a product. Favourable and adequate pricing depends upon the paying capacity of the customers. The loyalty towards the product is also enhanced which ensures maximum sales and also attracts new customers. Various pricing methods are available at the disposal of the entrepreneur. Selection of appropriate method can be used as a tool for raising sales.
(iii) Promotion: This refers to all the activities undertaken to make the product or service known to the user and trade. This can include advertising, word of mouth, press reports, incentives, commissions and awards to the trade. It can also include consumer schemes, direct marketing, contests and prizes. Publicity plays a leading role in promoting sales. Depending on the nature of the product the advertisement mode can be selected. Door to door selling, newspaper, radio, pamphlet, etc. are the various methods which can be used for increasing the number of customers.
(iv) Place: Place refers to the point of sale. In every industry, catching the eye of the consumer and making it easy for her to buy is the main aim of a good distribution or 'place' strategy. Retailers pay a premium for the right location. In fact, the mantra of a successful retail business is 'location, location, location'. A channel of distribution or trade channel is defined as the path or route along which goods move from producers or manufacturers to ultimate consumers or industrial users. In other words, it is a distribution network through which the producer puts his products in the market and passes it to the actual users. This channel consists of:
producers, consumers or users and the various middlemen like wholesalers, selling agents and retailers (dealers) who intervene between the producers and consumers. Various channels of distribution can be effectively used by entrepreneur depending on nature of market, preference of consumers and nature of the products. Shorter is the channel of distribution more efficient is distribution.