Long Answer Type Question- Entrepreneurial Planning | Entrepreneurship Class 12 - Commerce PDF Download

Forms of Business Organization

Question.1:  Ram and Shyam the partners of an ‘Accounting firm’ wants to register their firm. Explain the procedure for registration of a Partnership Firm?

A Partnership Firm can be registered any time. To get the firm registered partners have to apply to the Registrar in a prescribed form along with the registration fees. Along with the application following information must be supplied:

1. Name of the firm.
2. Principal place of the business of the firm.
3. Date of admission of partners in the firm.
4. Names and address of all the partners.
5. The application must be signed by all the partners. The Registrar will verify the above said information and if satisfied, he will issue a Certificate of Registration.

Question.2: What are the characteristics/features of a sole proprietorship firm?

Following are the characteristics/features of a sole proprietorship business:

1. Individual Ownership: The sole proprietorship firm is exclusively owned by a single individual only. All the capital is supplied by the single individual from his own wealth or from borrowed funds. 
2. One-man Management and Control: The proprietor is the sole owner of the firm and the affairs of business are managed and controlled by the sole proprietor. Hence, the ownership and management lies in the hands of one person only. Though competent people or manager may be employed to help the owner for efficient management. 
3. Small Size: The sole proprietorship business operates on a very small scale. A sole proprietor can arrange limited funds and has limited ability. Therefore, the scale of operations is generally limited. 
4. Individual Financing: Generally, all funds are arranged by the sole proprietor from its own sources. Though, if required the sole proprietor has access to loans and debts to procure funds for smooth running of business. 
5. No Separate Legal Entity: A sole proprietorship has no separate legal entity, distinct from its owner. Law makes no difference between the owner and the proprietorship firm. Business and the owner exist together.
6. Limited Area of Operations: This form of business has limited area of operation due to:
   • Limited finance availability.
   • Limited managerial abilities. 
7. Unlimited Liability: In sole proprietorship firm, the sole proprietor is personally liable for all the debts of the proprietorship business. In case the business assets are insufficient to pay off all business liabilities, the proprietor’s personal property can be called upon to pay off the liabilities.
8. Sole Beneficiary: In a sole proprietorship business, the proprietor alone is entitled to all the profits and losses of the business.

Question.3: Enlist the privileges or benefits of a Private Company over a Public Company?

Following are some privileges or benefits of a Private Company over a Public Company:

1. A private company can be formed with only two members whereas in a public company at least seven members are needed.
2. A private company must have at least two directors, whereas a public company must have three directors.
3. It is not compulsory for a private company to maintain index of its members.
4. It is also not compulsory for a private company to hold a statutory meeting and file a statutory report with the Registrar, whereas it is essential for a public company.
5. Private company can commence its business after getting certificate of registration whereas public company can start business only after receiving the certificate for the commencement of business.
6. It is not necessary for a private company to issue a prospectus, whereas it is mandatory for a public company.

Question.4: Explain the meaning of Non-Economic Activities with the help of examples.

The activities which are undertaken by an individual with a motive of getting psychological satisfaction are known as non-economic activities. The end result of non-economic activities is not-earning profit or creation of wealth but self-satisfaction. Examples : Charity, production for self-consumption, etc.

Question.5: Jaishree started a ready-made garments shop for ladies in a residential area where mostly government servants live. Suggest her the ways to make her business a successful one.

To make her business successful she should have: 

1. Adequate industry experience: The internal resources of a firm must-match the needs of the environment in which it operates.
2. Adequate financing: Proper financing planning and support opportunities for growth. Entrepreneurs should plan in advance – quantity and sources of finance, capital structure, etc. 
3. Ensure adequate cash flow: Cash flow is the measure of a firm, ability to maintain sufficient funding to meet its expenses for the day-to-day activities of business. 
4. Effective business planning: A good business plan helps to identify the mission, cost structure, market, external influences, strengths and weakness of a business along with plans for operations, marketing, etc.
5. Good management competency: Good management efficiently implements and monitors the strategic and operational plan of a business. 
6. Eye on competitors/Analysis of competitors strategy: Customers are always looking for the best deal or at least a better deal. Keeping an eye on competitors and positioning the products accordingly is vital for staying in the business. 
7. Realistic Goods: A business should set smart goals balancing its risk taking capacity and optimism. 
8. Diversifying customer base: Flexibility in operations and openness towards adaptation of new trends and ideas are important for business success. 
9. Good control system: A lack of proper control on internal activities can lead to business failure. 
10. Entrepreneur skills: During the startup phase of a new business entrepreneurial skills in an owner is inevitable.

Question.6: Give some examples of economic activities which are involved in business.

Following are the activities involved in business:

1. Creating customers by promotion of goods and services produced.
2. Converting economic resources into goods and services keeping in mind the preferences of customers.
3. Innovating new products or services.
4. Marketing the innovating products and services so that they can reach the customer.

Question.7: Explain the categories of business enterprises. Give examples.

1. Private Sector Enterprise: The business enterprises which are owned, controlled and managed by private individuals are known as private sector enterprises. Their main object is to earn profits. Example: Wipro, TATA, etc. 
2. Public Sector Enterprises: The business enterprises which are owned, controlled and managed by the Central and State Government are known as public sector enterprises. Their main objective is service. Example : LIC. 
3. Joint Sector Enterprises: The business enterprises which are owned, controlled and managed jointly by private entrepreneur and government are called joint sector enterprises. The day-to-day management lies in the hands of private entrepreneurs whereas government control and supervise the enterprise with the help of its members which are part of the Board of Directors. Example : Maruti Udyog Ltd.

Question.8: Which form of business is suitable for following types of businesses and why ?
(i) Beauty Parlor
(ii) Shopping malls
(iii) Hotels
(iv) Medium size trading concerns

(i) Sole proprietorship as it requires personal touch.

(ii) Public company as huge capital outlay is needed.

(iii) Private company as it requires more capital and managerial skills.

(iv) Partnership as it requires involvement of more persons.

Question.9: Bob, Panny, Honey and Lily were childhood friends. They studied together till class XII. Bob and Panny became doctors and Honey and Lilly became Engineers. All of them had good earnings. They were creative and innovative and wanted to start a business. Bob and Panny gave an idea to manufacture a machine which would help the surgeons in doing surgery without much blood loss. Honey and Lily agreed to it, but they were short of capital. They estimated that approximately `2 crore would be required to finance the project, which would be collected by them from their friends and relatives. They also wanted that their private properties should not be used to pay off the liabilities of the business.
(i) Considering the above facts suggest the suitable ‘type of business organisation’ to be formed. 

(ii) State any three features of the suggested type of business organisation, including the one stated in the above para. 

(iii) List any four privileges of this type of business organisation.

(i) Private Ltd. Company (Joint Stock Company) 1

(ii) A features of company are :

(a) Has a minimum of 2 and maximum of 200 members excluding its part and present

employees.

(b) Restrict the right of its members to transfer shares.

(c) Prohibits an invitation to the parties to subscribe for any shares in or debentures of the company, or accepts any deposits from persons other than its directions, members or relatives. (Given in paragraph)

(d) Minimum paid-up capital of `1.00 lakh.

(e) Uses the word ‘Pvt. Ltd.’ at the end of its name.

(iii) Four privileges of this business are:

(a) It is not compulsory for a private company to maintain index of its members.

(b) It is also not compulsory for a private company to hold a statutory meeting and file a statutory report with the Registrar, whereas it is essential for a public company.

(c) Private company can commence its business after getting certificate of registration whereas public company can start business only after receiving the certificate for the commencement of business.

(d) It is not necessary for a private company to issue a prospectus, whereas it is mandatory for a public company

Question.10: What do you mean by HUF business and explain its features.

1. Private Ltd. Company (Joint Stock Company)
2. A features of company are: 
   • Has a minimum of 2 and maximum of 200 members excluding its part and present employees.
   • Restrict the right of its members to transfer shares. 
   • Prohibits an invitation to the parties to subscribe for any shares in or debentures of the company, or accepts any deposits from persons other than its directions, members or relatives. (Given in paragraph) 
   • Minimum paid-up capital of ₹1.00 lakh.
   • Uses the word ‘Pvt. Ltd.’ at the end of its name.
3. Four privileges of this business are: 
   • It is not compulsory for a private company to maintain index of its members. 
   • It is also not compulsory for a private company to hold a statutory meeting and file a statutory report with the Registrar, whereas it is essential for a public company. 
   • Private company can commence its business after getting certificate of registration whereas public company can start business only after receiving the certificate for the commencement of business. 
   • It is not necessary for a private company to issue a prospectus, whereas it is mandatory for a public company.

Question.11: Explain economic activities with the help of examples.

Activities which are undertaken by people with the object of earning money are known as economic activities. These activities are concerned with production, exchange and distribution of goods and services. The purpose of economic activities should be expectation of money income which is used for further creation of wealth or assets.

Examples: Production of goods in a factory, distribution of goods by a retailer, working as a teacher in a school, etc.

Question.12: How many choices are there to start a business by a businessman? Explain them.

A businessman has following choices to start a business: 

1. Sole Proprietorship: It is a business initiated and operated by one individual who carries all financial and administrative responsibilities, employing such assistants as may be necessary. 
2. Partnership: A partnership is an association of two or more persons to carry on, as co-owners, a business and to share its profits and losses. Two or more persons may form a partnership by making a written or oral agreement to carry a business jointly and share its proceeds. 
3. Joint stock company: A joint stock company is a voluntary association of individuals for profit, having a capital divided into transferable shares, the ownership of which is the condition of membership. 
4. Joint Hindu Family/HUFs: HUFs consists of males lineage of a common ancestor including their wives and unmarried daughters. The relation of HUFs arises from the status not from legal contracts. 
5. Co-operative Organizations: Co-operation is a form of organization wherein persons voluntarily associate together as human beings on the basis of equality for the promotion of the economic interest of themselves.

Question.13: Distinguish between a Private Company and a Public Company.

Question.14: What is a public sector enterprise? What are its various form?

When business enterprises are owned, controlled and operated by public authorities, with welfare as primary and profit as secondary objects, they are called public sector enterprises.

These enterprises have the following forms of organization:

(i) Departmental undertakings;

(ii) Public Co-operations;

(iii) Government Companies.

Question.15: Explain the categories of economic activities with the help of examples.

Three categories of economic activities are as follows:

1. Business: Business refers to those economic activities which are connected with the production, purchase, sale or distribution of goods or services with the main objective of earning profit. Example : fishing, mining, manufacturing, etc. 
2. Profession: Profession refers to the activities which require special knowledge and skill to be applied by an individual in his work to earn a living. These activities are subject to guidelines or codes of conduct laid down by the professional bodies. Example : lawyers, doctors, etc. 
3. Employment: Employment refers to an activity in which an individual works regularly for another person and gets remuneration in return. Those who are employed by others are called employees and those who engage these employees are called employers. Remuneration paid to employees is known as salary or wages. Examples : Working in banks, clerks, salesman, etc.

Question.16: What is Partnership form of Business? Explain its features.

Partnership is an association of two or more persons who have agreed to carry on a business and to share its profits and losses. The features of partnership firm is explained below: 

1. Agreement: There must be an agreement between the partners to form a partnership. This agreement can be oral or written. 
2. Membership: There must be minimum two members to form a partnership firm. Maximum there can be 50 members. 
3. Profit Sharing: The profits of the partnership firm, should be distributed between the partners in the ratio specified in the agreement. In case, if no ratio is specified in the agreement then, the profile is divided equally among all the partners.
4. Registration: According to the Partnership Act, 1932, it is not compulsory for a partnership firm to get itself registered. However, the partners prefer to get the partnership firm registered because there are certain advantages of registration. 
5. Non-Transferability of Share: No partner can transfer his/her share in the partnership firm to any other person. 
6. Liability: The liability of all the partners of a partnership firm is unlimited. The partners are individually and collectively liable to pay back the debts of the partnership firm. (Any five)

Various Plans

Question.1: Define Financial Plan. Explain the features of a good financial plan.

Financial plan deals with deciding in advance about the future financial requirements, sources of raising funds, assessment of the revenue, cost, profits, etc.

A good financial plan must have following features:

1. Clarity of objectives: A good financial plan has clearly defined objectives. The objectives are expressed in terms of money or quality of products, objects etc.
2. Simple: A good financial plan is simple to understand and implement. It is made simple by considering various factors related with the enterprise.
3. Flexibility: A good financial plan has a scope for making changes in the future. The plan is made flexible considering future obligations and future plans of the enterprise.
4. Risk: A good financial plan keep sufficient scope for the calculated risk rather than to say it is made by keeping the level of risk of the organization.

Question.2: Explain the essential areas to be covered while creating a plan.

Essential areas to be covered while creating a plan are:

1. Executive Summary: This is the most important section of a business plan. It is often written last but placed at the front of  business plan. It must be written carefully. It is a snapshot of the entire business plan. It gives the main points of entire business plan.
   Executive summary should include the following information:
   • A brief description of the industry and market environment in which business opportunities will flourish.
   • The uniqueness of business opportunity and the key strategies for success.
   • Profile of the company’s team.
   • Financial requirement and budget allocation.
   • The anticipated risks and reward of the business.
2. Background of Company: It includes a brief history of the company and outline of company’s objective.
3. The Product or Service: This explains the company’s product or service. This emphasis on:
   • Unique Selling Price (USP) of the product;
   • Stage of development of product;
   • Patent, trademark and other legal protection of the product.
4. Market Analysis and Business Strategy: This section provides the SWOT Analysis. It includes:
   (a) What is your share in the market, who are your competitors, what are your strengths and weaknesses.
   (b) Distribution channels: Direct or Indirect distribution channel.
   (c) Explain historic problems faced by the company and how they overcome such problems. Assess future potential problems and how they will be tackled or avoided.
5. Management Summary: This section of plan demonstrates that company has quality of  management team, who have ability to turn the business plan into reality as without the right management team no other matter can be carried on successfully. This section must include:
   (a) Special abilities and attributes of senior managers and highlight how they brought success in previous ventures.
   (b) List of your advisor and board of directors.
   (c) Your organization’s structure.
6. Marketing Plan: This plan includes:
   (a) Sale and marketing strategy;
   (b) Pricing strategy;
   (c) Branding strategy;
   (d) Promotion strategy; etc.
7. Operational Plan: This focuses on:
   (a) Operating factors;
   (b) Methods of converting raw material into finished products;
   (c) Stages of operating cycle;
   (d) Quality standard set up during operating cycle; etc.
8. Financial Plan/Financial Projections:
   Financial plan includes:
   (a) Realistic assessment of sale, cost, working capital, cash flow;
   (b) Budget statements;
   (c) Estimating the amount of capital required;
   (d) Sources of capital.
9. Appendix: This section of business plan contain the documents attachment. It includes:
   (a) Market survey report;
   (b) Financial projection report;
   (c) Photography;
   (d) Organizational chart;
   (e) Flow charts, technological specifications, etc.

Question.3: Briefly explain the objectives of an operation plan.

The objectives of an operational plan are as follows:

(i) Plan for production/operation in advance.

(ii) Establishing the exact route of each individual item, part of assembly.

(iii) Setting, starting and finishing dates for each important assignment/work.

(iv) Regulating the orderly movement of goods through the entire manufacturing cycle i.e., right from procurement of all materials to the shipping of finished goods.

Question.4: Explain are the various elements of an Operational plan?

1. Routing: Routing is a process concerned with determining exact route or path a product/ service has to follow right from raw material till its transformation into finished product.
2. Scheduling: It means fixation of time, day, date when each operation is to be commenced and completed. It is the determination of the time that should be required to perform each operation.
3. Dispatching: The process of initiating production in accordance with pre-conceived production plan is said to be dispatching. This includes issuing necessary orders instructions, guidelines and/or information to work pertaining to giving practical shape to the production plan.
4. Follow-Up: This element relates to evaluation and appraisal of work performed. A properly planned follow-up procedure is helpful in dispatching errors and defects in the work. Follow-up element helps the entrepreneurs in: a) Developing ways to review the present situation with regard to materials, work-inprogress and finished goods. b) Evolving ways to expedite the performance of those departments which lag behind. c) Removing obstacles in the way of production by suggesting remedial measures.
5. Inspection: Inspection is the art of comparing materials, product or performance with established standards. This element helps the entrepreneur to set up laboratories or evolve strategies/methods to ensure predetermined quality of product/service.
6. Shipping: This element is a detailed presentation by the entrepreneur explaining the chronological steps in completing a business transaction efficiently and profitably.

Question.5: Explain two components of Human Resource Plan.

1. Estimating Type of Manpower Planning: Human Resource Planning begins with the estimation of manpower requirement which means finding out the number and type of  employees needed by the organization in near future. Manpower requirement not only includes finding out number of people needed but also the type of people required. Type means what should be the qualification, educational background of the people whom we need to appoint. While assessing the type of manpower required, company should also make policy regarding the number of people to be appointed from backward classes, women force, minority, etc.
2. Procuring Personnel: It includes:
   • Recruitment: It refers to inducing the prospective candidates to apply for job. In this, the organization searches for suitable candidates and induces them to apply for the job. The end result of recruitment is receiving applications for jobs.
   • Selection: It refers to choosing the most prominent and suitable candidates to perform the job. It involves conducting test, interviews so that suitable candidates can be selected.
   • Training: It refers to equipping the employees with the necessary skill to perform the job. It also includes overall growth and development of employees.

Question.6: Identify and explain formal statement of business goals with the plan for reaching those goals along with background, information about the organization and team attempting to reach those goals. How is this statement valuable to the entrepreneurs, customers, advisors and others who are trying to familiarize themselves with the venture, its goals and objective? Explain with the help of any six ways.

The business plan is valuable to the entrepreneur, potential investors, venture capitalists, banks, financial institutions, new personnel’s suppliers, customers, advisors and others who are trying to familiarize themselves with the venture, its goals, and objectives. The business plan: 

1. Helps in determining the viability of the venture in a designated market.
2. Helps in providing guidance to the entrepreneur in organizing his/her planning activities as such:
   • Identifying the resources required.
   • Enabling obtaining of licenses, if required.
   • Working out with legal requirements as desired by the government.
3. Helps in satisfying the concerns, queries and issues of each group of people interested in the venture.
4. Provides room for self-assessment and self evaluation, requiring entrepreneur to think through various scenarios and plan ways to avoid obstacles.
5. Though not desirable, at times, business plan helps to realize the obstacles which cannot be avoided or overcome, suggesting to terminate the venture while still on paper without investing further time and money.
6. As the investors/lenders focus on the four Cs of credit: Character, cash flow, collateral and equity contribution, it is the business plan which reflects the entrepreneur’s credit history, the ability to meet debt and interest payments, and the amount of personal equity invested thus serving as an important tool in funds procurement.

Question.7: Explain the various steps involved in preparing a marketing plan?
OR
Write the steps in preparing a marketing plan.

Marketing plan provides the organisation with guidelines with respect to marketing objectives, strategies and activities to be followed. The various steps are:

1. Business situation analysis: If it is an existing enterprise then it’s past performance and achievements are looked into it. If it is a new enterprise then aspects like personal profile of the entrepreneur, product development, experience of the entrepreneur, the need the product satisfies and marketing segmentation is looked into.
2. Identify the target market: For any new venture, it is very essential to define clearly the specific group of potential customers whose needs the enterprise aims to fulfil.
3. Conduct SWOT analysis: The plan needs to consider the Strengths, Weakness, Opportunities and Threats of the organisation to ensure success.
4. Establish goals: The enterprise needs to set realistic, attainable goals. They need to quantify the goals so that they can be controlled and limit it to certain number. 
5. Define marketing strategy: The strategy should comprise various decisions pertaining to the following P’s: Product, Price, Promotion and Place 
6. Implementation and monitoring of the plan: It is important for the entrepreneur to understand that this plan should be flexible and he should be prepared to make necessary adjustments as and when required.
7. Shipping: This element is a detailed presentation by the entrepreneur explaining the chronological steps in completing a business transaction efficiently and profitably

Question.8: Kapish an unemployed graduate got training for automobile repairing and allied services under PMKVY (Pradhan Mantri Kaushal Vikas Yojana) for skill development. He is planning to start a digital workshop for which he needs ₹25 lacs. Though through MUDRA (Micro Units Development and Refinance Agency) he is able to get a loan of ₹10 lacs but still he is falling short of ₹15 lacs. He wants to pitch in his idea to potential investors through his business plan. Explain the different formats in which he can present his business plan for his start-up.
OR
Describe briefly the formats for the business plan that a start-up may have.

It is common, especially for start-ups, to have four formats as follows for the same business plan. 

1. Elevator pitch: It is a three minute summary of the business plan’s executive summary. This is often used as a teaser to awaken the interest of potential funders, customers, or strategic partners.
2. A pitch deck with oral narrative: A hopeful, entertaining slide show and oral narrative that is meant to trigger discussion and interest of potential investors in reading the written presentation, i.e. the executive summary and a few key graphs showing financial trends and key decision making benchmark. 
3. A written presentation for external stakeholders: A detailed, well written, and pleasingly formatted plan targeted at external stakeholders. 
4. An internal operational plan: A detailed plan describing planning details that are needed by management but may not be of interest to external stakeholders.

Question.9: Abhimanyu Industries Ltd. had a team of professionals and experts to draft a comprehensive yearly document with all the relevant details of internal and external elements in meaning the venture. This document acts as a decision-making tool for the management.

The Chief Executive Officer of the company always pays special focus on one element of this document that ensures the orderly flow of materials from raw state to finished product with a proper system of quality control, as according to him ‘work your plan’ is more important than ‘plan your work’.

(i) Identify the ‘comprehensive yearly document’ being prepared by Abhimanyu Industries.

(ii) How is this plan a ‘decision-making tool’ for the management ?

(iii) Identify the element that is the priority of the CEO of the company.

(iv) Why is the element as identified in (iii) important?

(i) Business plan

(ii) Business plans are decision-making tools:

(Any four)

(a) Describing all necessary inputs for the enterprise.

(b) Explaining the mode of utilization of the resources.

(c) Detailing the strategies for the execution of the project

(d) Outlining the desired goals

(e) Assessing market sensitivity and the profitability of the venture. (Any four)

(iii) Operational plan

(iv) Importance :

(a) Ensuing orderly flow of materials in the manufacturing process from the beginning (raw state) to the end (the finished products)

(b) Facilitating continuous production, lesser work-in-progress, minimization of wastage.

(c) Co–ordinating the work of engineering, purchasing, production, selling and inventory management.

(d) Describing the flow of goods / services from production point to the consumers.

(e) Introducing a proper system of quality control

(f) Undertaking the best and most economic production policies and methods.

Question.10:  ‘Anjali Exports’, a leading export house wants to diversify its business from cotton ladies dress, suits to bed sheets, handicraft items, etc., because of demand in foreign countries. For this she required capital of `1 crore. She decided to take this amount as loan from Bank of Baroda for a period of 10 years. In order to avoid any kind of risk, it conducted a market survey to have an edge over the competitors and to maximize its profits, capturing foreign markets.

1. Identify the type of plan Anjali export has to make to analyse her business situation.

2. Also explain the various steps in preparing such plan.

Anjali exports made a marketing plan for diversification of her business. Procedure for preparing the marketing plan involves the following steps:

1. Business Situation Analysis: This helps in finding out “where we have been”. Existing organizations review past performance and achievements of the enterprise but new ventures focus on:
   • Personal profile of the entrepreneur.
   • Emphasis on product development.
   • What needs it satisfies.
   • Any other enterprise/experience of the entrepreneur.
   • Any other market segmentation if planned.
2. Identify the Target Market: Target market refers to the group of customers who will be our potential buyers. Divide the target customers into smaller groups as per consumers characteristics and buying situations and then develop a marketing plan integrating product, price, plan and promotion.
3. Conduct SWOT Analysis: The entrepreneur must consider in the target market his enterprise’s:
   • Strength 
   • Weakness
   • Opportunities 
   • Threats
4. Establish Goals: Goal is the aim of an enterprise. A firm must set SMART goals. 
5. Marketing Strategy: The marketing strategies involve action plan and decisions related to four P’s i.e., product, price, place and promotion.
6. Implementation and Monitoring of the Plan: It is important for an entrepreneur to be flexible and be prepared to make adjustments if necessary in the plan.