Class 12 Entrepreneurship: CBSE Sample Question Paper- Term II (2021-22)- 5 | 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 Fancy Store’ a readymade garments retail shop sold 8,000 shirts at ₹ 400 per shirt during the year ended 31st March, 2014. Cost of placing an order and receiving goods is ₹ 2,000 per order. Inventory holding cost is ₹ 500 per year. Calculate the ‘Economic Ordering Quantity’ for ‘The Fancy Store’.

Q.2. What is the most popular method of flotation of new issues?

Public issue is the most popular method of raising capital these days by the entrepreneurs. This involves raising of funds directly from the public through the issue of prospectus. An enterprise organizing itself as a public limited company can raise the required funds commonly by preparing a prospectus. When an entrepreneur offers shares to the public for subscription he/she is required to comply with all the restrictions and formalities pertaining to the initial issues, prospectus drafting and launch.

Q.3. Coal Ltd. is a public company and running its business on the terms defined by government. Stones Ltd. is a private firm owned by Sunny Stone and his brother, Rocky Stone. Stone brothers are planning to expand the business. For that, Sunny wants to merge the company with another private company in order to increase production and earn more profits. But, Rocky wants to acquire a public limited company in order to expand their business to the government market as well. Identify and give the meaning of this type of enterprise growth opportunity.

Reverse acquisition: In case of reverse acquisition, a private company takes over a public company. Acquisition is a corporate action in which a company buys most, if not all, of the target company's ownership stakes in order to assume control of the target firm. Acquisitions are often made as part of a company's growth strategy whereby it is more beneficial to take over an existing firm's operations and niche compared to expanding on its own. Acquisitions are often paid in cash, the acquiring company's stock or a combination of both. An acquisition, also known as a takeover, is the buying of one company (the target) by another.

Q.4. What are the various types of brand names from the entrepreneur’s perspective? Give any two.

Various types of brand names available are:
(i) Individual brand name: Here, every product is promoted by the entrepreneur on the basis of a separate brand name, like:
Liril—brand name with the “freshness” concept.
Lux — brand name for “beauty soap for film stars”

(ii) Family brand name (Umbrella branding): Here, the entrepreneur’s name or the company’s name is used for all the products, like:
Kissan, is brand name for jam, sauces, etc.
AMUL, has been used to market a large variety of dairy products viz. milk, ghee, butter, chocolates, etc.
(iii) Corporate names: Here, entrepreneur can choose their corporate name or logo together with some brand names of individual products for example, Godrej, Tata, Bajaj, etc.
(iv) Alpha-numeric names: In many industrial products, an alpha-numeric name often signifies its physical characteristics, thus creating a distinctive identify of the product. Entrepreneur has an option available to brand his/her products alpha-numerically too. For example, SX4, Liv52, ANX Grindlay, i10, i20, etc.

Q.5. Explain the types of acquisition.

There are four types of acquisitions:

(i) Friendly acquisition: Here, both the companies approve of the acquisition under friendly

terms. There is no use of force or pressure and everything gets over cordially.

(ii) Reverse acquisition: Here, a private company takes over a public company.

(iii) Back flip acquisition: Here, the purchasing company becomes a subsidiary of the purchased company.

(iv) Hostile acquisition: Here, as the name suggests, the entire process is done by force. The smaller company is either driven to such a condition that it has no option but to say yes to the acquisition to save its skin or the bigger company just buys off all its shares, thereby establishing majority and hence initiating the acquisition.

Q.6. Enlist any two typical sales promotion activities.

Following are the typical sales promotion activities:

(i) Consumer sales promotions:
(a) Point of purchase display material
(b) In-store demonstrations, samplings and celebrity appearances
(c) Competitions, coupons, sweepstakes and games
(d) On-pack offers, multi-packs and bonuses
(e) Loyalty reward programmes

(ii) Business promotions:
(a) Seminars and workshops
(b) Conference presentations
(c) Trade show displays
(d) Telemarketing and direct mail campaigns
(e) Newsletters
(f) Event sponsorship
(g) Capability documents

(iii) Trade promotions:
(a) Reward incentives linked to purchases or sales
(b) Reseller staff incentives
(c) Competitions
(d) Corporate entertainment
(e) Bonus stock

(iv) Sales force promotions:
(a) Commissions
(b) Sales competitions with prizes or awards
(c) Product samples, freebies

Q.7.

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

(i) Trading Business

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

(ii) For trading, where there is no manufacturing (or conversion), the operating cycle will be shorter so the working capital requirement would be less.

Q.8. Calculate the Return on Equity (ROE) for Multi International Limited manufacturing pre mix for instant shakes and smoothies from the details given below:

• Investment ₹ 10,00,000/-
• Borrowed Funds ₹ 6,00,000/-
• Interest rate per annum is 10%.
• Monthly sales revenue is ₹ 6,00,000/- and Cost of goods sold is ₹ 3,00,000/-.
• Fixed expenses per month ₹ 2,00,000/- (salary ₹ 1,50,000/-, rent and utility ₹ 50,000/-)
• Depreciation ₹ 10,000/-
• Tax @ 20%.

If Multi International Limited wishes to know how their own money is being used, which parameter for performance evaluation, ROE or ROI, should be used?

ROE for Multi Enterprises is 226%

ROE is a good indicator for performance evaluation.

Q.9. Explain the various approaches used in promotion strategy.

(i) Above-the-line promotions use mass media methods. This type of promotion focuses on advertising to a large audience. It includes conventional media like print, online, television and cinema advertising.

(ii) Below-the-line methods are very specific, memorable activities focused on targeted groups of consumers. They are under the control of the organisation. The purpose of these activities has been to develop the brand by creating awareness and building a brand profile.

(iii) Through-the-line refers to an advertising strategy involving both above and below the line communications in which one form of advertising points the target to another form of advertising thereby crossing the "line".

Q.10. Elaborate on any three types of mergers?

(i) 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.

(ii) 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.

(iii) 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.
(iv) 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.

(v) 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.

Q.11.  Identify and explain the type of pricing method used by the following companies:

(i) Toothcare, a new brand in the field of toothpastes decided to launch their small packs at a cost of ₹ 5 only which will be sold in the rural market to capture more market share.

(i) Penetration pricing: It is a pricing strategy where the price of a product is initially set at a price lower than the eventual market price, to attract new customers. The strategy works on the expectations that customers will switch to the new brand because of the lower price.

(ii) Drinko Ltd., decided to sell their new energy drink initially only in the urban market. The

Marketing and Finance team decided together that 200 ml tetra pack will be sold at ₹ 10 and

1000 ml will be sold at ₹ 40.

(ii) Variable price method: Variable pricing is a marketing approach that permits different rates to be extended to different customers for the same goods or services. It may come into play when the customer is committing to the purchase of large volumes of goods or services.

(iii) Bukno, a startup firm in the field of Artificial Intelligence decided to sell their voice enabled vacuum cleaner in the market for ₹ 1,00,000 for a limited time period to cover the initial research and development costs.

(iii) Creaming or skimming: Goods are sold at higher prices so that fewer sales are needed to break even. Selling a product at a high price, sacrificing high sales to gain a high profit is therefore "skimming" the market. Skimming is usually employed to reimburse the cost of investment of the original research.

Q.12. What is venture capital? Explain its features.

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 share holding 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.
Features of venture capital:
Venture capital can be best characterized as a long-term investment discipline, usually occurring over a five-year period that helps in the creation of early-stage companies, the expansion and revitalization of existing businesses and the financing of leveraged buyouts of existing divisions of major or privately owned enterprises.

(i) It is basically equity finance in relatively new companies.

(ii) It is long-term investment in growth-oriented small or medium firms.

(iii) Venture capitalist not only provides capital but also business skills to investee firms.

(iv) It involves high risk-return spectrum.

(v) It is a subset of private equity.

(vi) The venture capital institutions have a continuous involvement in the business after making the investment.

(vii) Such institutions disinvest the holdings either to the promoters or in the market.

Q.13. SPS Ltd. is planning to expand their business and they have decided to merge with ARX Ltd. After the merger is completed and all the formalities have been performed, SPS Ltd. will need some additional funds to expand and meet the manufacturing costs. In order the meet the need for these additional funds, the management has decided to offer its securities to their existing shareholders on a pro-rata basis. Sudip, the managing director of SPS Ltd. saw that there are a lot of employees who were very efficient but due to lack of incentives were looking for another job. He didn’t want to lose them. So, he decided to ask those employees to buy the shares of the company and become a shareholder of the company. As SPS Ltd. was known for their high returns the employees agreed to the offer.
Identify and explain the methods of flotation of new issues used by the company.

“In order the meet the need for these additional funds, the management has decided to offer its securities to their existing shareholders on a pro-rata basis”. –Rights issue.

Rights issue is a method of raising additional finance from existing shareholders by offering securities to them on pro-rata basis i.e. giving them a right to a certain number of shares in proportion to the shares they are holding. Normally, through a circular, rights issues are proposed to the existing shareholders and in case they are not willing to subscribe, they can renounce the same in favour of another person. This method of issuing securities is considered to be inexpensive as it does not require any brokers, agents, underwriters, prospectus or enlistment, etc.
“So, he decided to ask those employees to buy the shares of the company and become a shareholder of the company” – Offer to employees.
Stock options or offering shares to the employees has gained much popularity in many countries of the world. This method enables employees to become shareholders and share the profits of the company leading to higher efficiency, low labour turnover, better industrial locations, low floatation cost, wider/higher generation of funds.

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

“Edeck” is a company manufacturing electronic devices. The company has its headquarters at Mumbai. It is currently, one of the fastest growing companies in India and the tenth largest company of the world. It is also the first company to manufacture high-strength and advanced high end electronic products. “Mulberk” are also manufacturers of electronic devices with their headquarters in Australia. For a long period, the company Mulberk had been facing workers unrest and it decided to sell its business to an international bidder. The highest bid for this was made by Edeck for ₹ 60 crores. Afterwards Edeck realised that the assets of Mulberk were overvalued and liabilities were under assessed and hence the price paid by them was higher. The employees of the two entities have different corporate cultures and styles of leadership which led to the problem of co-ordination.
Ultimately Edeck had to close its business.
(i) Quoting the lines from the passage identify and explain the type of acquisition mentioned in the above text?
(ii) Also explain the other types of acquisitions apart from the one identified in part (i).

For a long period, the company Mulberk had been facing workers unrest and it decided to sell its business to an international bidder. The highest bid for this was made by Edeck for ₹ 60 crores.
(i) Reverse acquisition: Reverse acquisition takes place when a private company takes over a public company. It is an act where a private company purchases a publicly traded company and shifts its management into the latter. A reverse acquisition is used to acquire and convert a private company into a public company without being required to go through a lengthy registration process.
(ii) Types of acquisitions:
(a) Friendly acquisition: Both the companies approve of the acquisition under friendly terms. There is no forceful acquisition and the entire process is cordial.
(b) Back flip acquisition: A very rare case of acquisition in which the purchasing company becomes a subsidiary of the purchased company.
(c) Hostile acquisition: Here, as the name suggests, the entire process is done by force. The smaller company is either driven to such a condition that it has no option but to say yes to the acquisition to save its skin or the bigger company just buys off all its share, thereby establishing majority and hence initiating the acquisition.

Q.15. Discuss the components of product mix.

The components of Product mix are:

(i) Branding: 'Branding' is a process, a tool, a strategy, an orientation whereby a name, a sign, or a

symbol, etc. is given to a product by the entrepreneur so as to differentiate his/her product from

the rival products. Once a brand name is established in the market, then it becomes difficult

to compete with it. A brand is "a name, term, sign, symbol, or design or a combination of them

which is intended to identify the goods or services of one seller or group of sellers and to

differentiate them from those of the competitors." Brand has three components:
(a) Brand name: A brand name is "that part of a brand which can be vocalized i.e. can be spoken. It is like naming a newborn child. Mercedes, Woodland, Asian Paints, Pepsi, Maggie, Uncle Chips, etc. are few examples of the brand names.
(b) Brand mark: A brand mark is that part of a brand which can be recognized but cannot be vocalized i.e. is non-utterable. It appears in the form of a symbol, design or distinct colour scheme. For example: 'Girl’ of Amul, 'Maharaja' of Air India, 'Ronald' of McDonald, etc.
(c) Trade mark: A brand or part of a brand that is given legal protection against its use by other firms is called a trade mark. Thus, a trade mark is essentially a legal term, protecting the seller's exclusive right to use the brand name/mark.
(ii) Labelling: Labelling refers to designing and developing the label to be put on the package. Labelling is the display of information about a product on its container, packaging, or the product itself. The label may vary from a simple tag to complex graphics. The important function performed by labels is to help in identifying the product or brand.
(iii) Packaging: Packaging is often the key element in assisting, mainly consumer goods companies, to achieve a comparative advantage. Packaging refers to designing and developing the package for the products. The critical decisions that must be made on the package are concerned with the functions, the product pack will perform as well as with the mix of packaging components best able to perform in different degrees, the particular functions of the packaging. Packaging greatly helps in identification of the products. For example, Colgate in red colour, or Ponds cream jar can be easily identified by its package. Packaging protects the contents of a product from spoilage, breakage, leakage, pilferage, damage, climatic effect, etc. This kind of protection is required during storing, distribution and transportation of the product.