CBSE Class 12 Question Paper 2023 Solution Entrepreneurship

e s t i o n P a p er
Qu
Solu t i o n
2023

Marking Scheme

Strictly Confidential

(For Internal and Restricted use only)

Senior School Certificate Examination, 2023

SUBJECT NAME ENTREPRENEURSHIP .(SUBJECT CODE 066) ,(PAPER CODE 98)

General Instructions: -

1 You are aware that evaluation is the most important process in the actual
and correct assessment of the candidates. A small mistake in evaluation
may lead to serious problems which may affect the future of the
candidates, education system and teaching profession. To avoid
mistakes, it is requested that before starting evaluation, you must read
and understand the spot evaluation guidelines carefully.

2 “Evaluation policy is a confidential policy as it is related to the
confidentiality of the examinations conducted, Evaluation done and
several other aspects. Its’ leakage to public in any manner could
lead to derailment of the examination system and affect the life and
future of millions of candidates. Sharing this policy/document to
anyone, publishing in any magazine and printing in News
Paper/Website etc may invite action under various rules of the
Board and IPC.”

3 Evaluation is to be done as per instructions provided in the Marking
Scheme. It should not be done according to one’s own interpretation or
any other consideration. Marking Scheme should be strictly adhered to
and religiously followed. However, while evaluating, answers which
are based on latest information or knowledge and/or are innovative,
they may be assessed for their correctness otherwise and due
marks be awarded to them. In class-X, while evaluating two
competency-based questions, please try to understand given
answer and even if reply is not from marking scheme but correct

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competency is enumerated by the candidate, due marks should be
awarded.

4 The Marking scheme carries only suggested value points for the
answers

These are in the nature of Guidelines only and do not constitute the
complete answer. The students can have their own expression and if the
expression is correct, the due marks should be awarded accordingly.

5 The Head-Examiner must go through the first five answer books
evaluated by each evaluator on the first day, to ensure that evaluation
has been carried out as per the instructions given in the Marking
Scheme. If there is any variation, the same should be zero after
delibration and discussion. The remaining answer books meant for
evaluation shall be given only after ensuring that there is no significant
variation in the marking of individual evaluators.

6 Evaluators will mark( √ ) wherever answer is correct. For wrong answer
CROSS ‘X” be marked. Evaluators will not put right (✓)while evaluating
which gives an impression that answer is correct and no marks are
awarded. This is most common mistake which evaluators are
committing.

7 If a question has parts, please award marks on the right-hand side for
each part. Marks awarded for different parts of the question should then
be totaled up and written in the left-hand margin and encircled. This may
be followed strictly.

8 If a question does not have any parts, marks must be awarded in the
left-hand margin and encircled. This may also be followed strictly.

9 If a student has attempted an extra question, answer of the question
deserving more marks should be retained and the other answer scored
out with a note “Extra Question”.

10 No marks to be deducted for the cumulative effect of an error. It should
be penalized only once.

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11 A full scale of marks 70 has to be used. Please do not hesitate to award
full marks if the answer deserves it.

12 Every examiner has to necessarily do evaluation work for full working
hours i.e., 8 hours every day and evaluate 20 answer books per day in
main subjects and 25 answer books per day in other subjects (Details are
given in Spot Guidelines).This is in view of the reduced syllabus and
number of questions in question paper.

13 Ensure that you do not make the following common types of errors
committed by the Examiner in the past:-

● Leaving answer or part thereof unassessed in an answer book.

● Giving more marks for an answer than assigned to it.

● Wrong totaling of marks awarded on an answer.

● Wrong transfer of marks from the inside pages of the answer
book to the title page.

● Wrong question wise totaling on the title page.

● Wrong totaling of marks of the two columns on the title page.

● Wrong grand total.

● Marks in words and figures not tallying/not same.

● Wrong transfer of marks from the answer book to online award
list.

● Answers marked as correct, but marks not awarded. (Ensure
that the right tick mark is correctly and clearly indicated. It
should merely be a line. Same is with the X for incorrect
answer.)

● Half or a part of answer marked correct and the rest as wrong,
but no marks awarded.

14 While evaluating the answer books if the answer is found to be totally
incorrect, it should be marked as cross (X) and awarded zero (0)Marks.

15 Any un assessed portion, non-carrying over of marks to the title page, or
totaling error detected by the candidate shall damage the prestige of all

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the personnel engaged in the evaluation work as also of the Board.
Hence, in order to uphold the prestige of all concerned, it is again
reiterated that the instructions be followed meticulously and judiciously.

16 The Examiners should acquaint themselves with the guidelines given in
the “Guidelines for spot Evaluation” before starting the actual
evaluation.

17 Every Examiner shall also ensure that all the answers are evaluated,
marks carried over to the title page, correctly totaled and written in figures
and words.

18 The candidates are entitled to obtain photocopy of the Answer Book on
request on payment of the prescribed processing fee. All
Examiners/Additional Head Examiners/Head Examiners are once again
reminded that they must ensure that evaluation is carried out strictly as
per value points for each answer as given in the Marking Scheme.

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General Instructions

a. The Marking Scheme carries only suggested value points for the answers.

b. These are only Guidelines and do not constitute the complete answer.

c. The students can have their own expression and if the expression is correct, the

marks be awarded accordingly.

d. The candidates would be permitted to obtain a photocopy of the Answer Book on

request on payment of the prescribed processing fee. All Evaluators/Additional

Head Examiners/Head Examiners are once again reminded that they must ensure

that evaluation is carried out as per value points for each answer as given in the

Marking Scheme.

e. All the Head Examiners/ Additional Head Examiners/ Evaluators are instructed

that while evaluating the Answer Books if the answer is found to be totally

incorrect, (X) should be marked on the incorrect answer and awarded ‘0’ marks.

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MARKING SCHEME 2022-2023

ENTREPRENEURSHIP (066)

General Instructions:

Read the following instructions carefully and follow them:

(i) This question paper contains 34 questions. All questions are compulsory.
(ii) The question paper is divided into four Sections A, B, C and D.
(iii) In Section A: Questions number 1 to 18 are Multiple Choice Questions carrying 1 mark each.
(iv) In Section B: Questions number 19 to 24 are Short Answer type-I questions carrying 2 marks each.
(v) In Section C: Questions number 25 to 29 are Short Answer type-II questions carrying 3 marks each.
(vi) In Section D: Questions number 30 to 34 are Long Answer type questions carrying 5 marks each.
(vii) There is no overall choice. However, an internal choice has been provided in Section B, C and D of the question
paper. A candidate has to attempt only one of the alternatives in such questions.

Section A
All questions are compulsory
1 Given below are some of the elements of a business opportunity. Identify the 1
correct combination of the elements:
i. Assured market scope
ii. Overcome adversity
iii. Practicability of the idea
iv. Potential of future growth

a. (i), (ii), (iv)
b. (i), (iii), (iv)
c. (ii), (iii), (iv)
d. (i), (ii), (iii)

Ans (b) (i), (iii), (iv) 1

2 Which of the following statements is related to ‘Below - the - Line’ 1
promotion approach that a company can use to promote its products?
a. It targets mass audience
b. It targets identified small groups
c. It helps in establishing brand loyalty
d. It includes conventional media like print, online, television and
cinema advertising.

Ans (b) It targets identified small groups. 1

3 Ramandeep is a technical entrepreneur who started developing interactive 1
websites of businesses. Due to lot of competition in this field he is
experiencing a decline in the demand. He wishes to understand his revenue
position as compared to his investment. Which one of the following
combinations would help him in assessing the profitability of his business?
(i) Economic Order Quantity

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(ii) Return on Investment
(iii) Return on Equity
(iv) Break - even analysis

a. (i) and (iii)
b. (iii) and (iv)
c. (ii) and (iii)
d. (i) and (iv)

Ans (c) (ii) and (iii) 1

4 When two companies that may not compete with each other but exist in the 1
same supply chain merge, it is known as:
a. Horizontal merger
b. Vertical merger
c. Market extension merger
d. Product extension merger

Ans (b) Vertical merger 1

5 From the following, identify the form of business organization that generally 1
has a limited area of operation due to limited finance availability and limited
managerial abilities:
a. Sole proprietorship
b. Partnership firm
c. Private company
d. Public company

Ans (a) Sole proprietorship 1

6 Krishiv manufactures lamp shades in his cottage industry where labour 1
intensive techniques are used. He is selling these lamp shades under the -
designers are using lamp shades to give an aesthetic look to the houses they
design. For Krishiv, the per unit cost of each lamp shade is ₹450 and he sells
it for ₹900. Similar lamp shades are available in the market and on online
websites in the range of ₹1,000 - ₹1,100 per unit. The pricing strategy used
by Krishiv is the one where the price of the product is initially set at a price
lower than the eventual market price to attract new customers. His objective
is to increase the sales volume, rather than to make profit in the short-run.
The pricing strategy adopted by Krishiv is:
a. Cost plus pricing
b. Penetration pricing
c. Skimming pricing
d. Variable pricing

Ans (b) Penetration pricing 1

7 From the information given below, calculate the circulating capital of a 1
company:

Assets (₹) Liabilities
(₹)
Stock 60,000 Trade payables 20,000
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Debtors 55,000 Short-term loans 10,000
Cash 65,000 Outstanding expense 5,000
Short-term investments 20,000

a. ₹35,000
b. ₹1,65,000
c. ₹2,00,000
d. ₹2,35,000

Ans 1
(c) ₹ 2,00,000
(Circulating capital = Gross working capital = stock + Debtors + Cash +
Short-term investments)

8 Prabhas is the creative head of an advertising agency. His latest project is to 1
design a campaign for super food for children in the age group of 6 months
to 2 years. He developed a jingle in Hindi as well as in English language to
reach out to the maximum audience of the market segment. By doing this, he
is not only informing and selling the product but also improving the image
of the business. When any advertising activity is planned, there are four
rules to be considered. From the following, identify the rule/rules that are
taken into consideration by Prabhas in the above case:
(i) Aim
(ii) Target
(iii) Media
(iv) Competitors

a. (i)
b. (i) and (ii)
c. (i), (ii) and (iii)
d. (i), (ii) and (iv)

Ans (b) (i) and (ii) 1

9 Sahiba has a boutique in Nagpur, which she started in 2020. She had 1
invested ₹2,00,000 from her savings and borrowed ₹3,00,000 from the bank
@10% per annum. She made a net profit of ₹50,000 in the year 2021-22.
In the above case the ‘Return on Equity’ is:
a. 10%
b. 20%
c. 25%
d. 40%

Ans Option (a) - 10% OR Option (c) - 25% 1

(Either of the two is to be accepted as the correct answer)

(The student is to be assessed on the correct option ONLY, no
calculation is required to be shown by the student.)

ROE = Net Income/Equity ✖ 100
ROE = Net Profit-Interest/Equity ✖ 100
ROE = 50000-30000/200000 ✖ 100
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ROE = 20000/200000 ✖ 100 = 10%

OR

ROE = Net Income/Equity ✖ 100
ROE = Net Profit/Equity ✖ 100
ROE = 50000/200000 ✖ 100
ROE = 25%

10 Assertion(A): A problem is a road block in a situation that forces the 1
entrepreneur to find its solution.
Reason(R): One of the objectives of problem identification is to identify the
target group facing the problem.
Evaluate the statements given above and choose the most appropriate option
from the following:
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion (A).
b. Both Assertion (A) and Reason are true, but Reason (R) is not the
correct explanation of Assertion (A).
c. Assertion (A) is true, but Reason (R) is false.
d. Assertion (A) is false, but Reason (R) is true.

Ans (b) Both Assertion (A) and Reason (R) are true, but Reason (R) is 1
not the correct explanation of Assertion (A).

11 Assertion(A): Offer to employees means sale of its securities by a company 1
to a limited number of sophisticated investors.
Reason(R): Offer to employees enables employees to become shareholders
and share the profits of the company.
Evaluate the statements given above and choose the most appropriate option
from the following:
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion (A).
b. Both Assertion (A) and Reason are true, but Reason (R) is not the
correct explanation of Assertion (A).
c. Assertion (A) is true, but Reason (R) is false.
d. Assertion (A) is false, but Reason (R) is true.

Ans 1
d. Assertion (A) is false, but Reason (R) is true

12 Assertion(A): Backflip acquisition is a rare case of acquisition in which the 1
purchasing company becomes a subsidiary of the purchased company.
Reason(R): Both the companies approve of the acquisition but the entire
process is done by force.
Evaluate the statements given above and choose the most appropriate option
from the following:
a. Both Assertion (A) and Reason (R) are true and Reason (R) is the
correct explanation of Assertion (A).
b. Both Assertion (A) and Reason are true, but Reason (R) is not the
correct explanation of Assertion (A).
c. Assertion (A) is true, but Reason (R) is false.
d. Assertion (A) is false, but Reason (R) is true.

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Ans (c) Assertion (A) is true, but Reason (R) is false. 1

13 Break-Even Point is the level where: 1
a. The revenue generated is equal to all the expenses required for
generating the revenue.
b. The revenue generated is less than all the expenses required for
generating the revenue.
c. The revenue generated is more than all the expenses required for
generating the revenue.
d. Both (a) and (b)

Ans (a) The revenue generated is equal to all the expenses required for 1
generating the revenue.

Read the article given below and answer the questions from 14 - 18
Shopping malls are an integral part of the community and a one-stop-shop
for all the consumer’s needs- from shopping and dining to entertainment and
special occasions. Additionally, malls today are synchronizing with
customer’s needs by offering constant engagements, activities and niche
campaigns to cater to each target audience that visits the mall. The latest
departmental stores which are opened in malls also want to provide their
customers a wholesome experience. They are often hypermarkets having all
products under one roof. The concept of ‘retailment’ has been around for
quite a while, as upscale malls have slowly transformed into recreational
destinations. A plethora of restaurants serving luscious delicacies has seen
massive footfall. Thus, to create memorable experiences, shopping malls
must strive to provide a high level of engagement by focusing heavily on
unique experiential content.

The future malls will integrate virtual and augmented reality, will provide
highly immersive retail experience to consumers in the days to come.
Deliveries will be carried out using drones and virtual reality will be used as
a sales channel.

14 Identify the prominent Idea field from the following sentence: 1
'Additionally, malls today are synchronising with customer's needs by
offering constant engagement, activities and niche campaigns to cater to
each target audience that visits the mall
a. Natural resources
b. Service-related
c. Market-driven
d. Creative efforts

Ans (c) Market-driven 1

15 'A plethora of restaurants serving luscious delicacies has seen massive 1
footfall in many malls.' The idea field reflected in the given statement is:
a. Natural resources
b. Service-related
c. Market-driven
d. Creative efforts

Ans (b) Service-related 1

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16 The idea field which is depicted in the sentence ‘Deliveries will be carried 1
out using drones and virtual reality will be used as a sales channel’ is:
a. Natural resources
b. Service- related
c. Market driven
d. Creative efforts

Ans d. Creative efforts 1

17 From the following, which form of business organisation is best suited for 1
owning and managing shopping malls?
a. Sole proprietorship
b. Partnership firms
c. Joint Stock company
d. Both (a) and (c)

Ans c. Joint stock company 1

18 From the following, identify the element of macro environment that would 1
play a dominant role in the transformation of shopping malls in future.
a. Economic
b. Social
c. Technological
d. Legal

Ans c. Technological 1

Section B
There is no overall choice. Internal choice is given
19 a. Give the meaning of ‘Implied Authority’ and ‘Mutual Agency’ as 2
characteristics of a partnership form of business organization.

OR

b. State any two characteristics of partnership which overcome the inherent
limitations of sole proprietorship form of business organisation.

Ans (a) Implied authority: Any partner can act on behalf of the firm. Firm 1 + 1
stands bound by the act.
There is an implied authority that any partner can act on behalf of the
firm. The firm stands bound by the acts of partners.

Mutual Agency: Business can be carried out by any one partner for all,
or all acting for one.
The business of partnership can be carried on by all the partners or any
one of them acting for all. Thus, every partner is principal as well as
agent of other partners and of the firm. Thus, (i) Each partner is liable
for acts performed by other partners, (ii) Each partner can bind other
partners and the firm by his acts done in the ordinary course of
business.

OR

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Characteristics of partnership which overcome the limitation of sole
proprietorship.
1+1
a) More capital: The capital contributed by the partners can be
comparatively more than the capital invested by a sole proprietor.

b) Increased managerial ability: ‘Two heads are better than one’.
Decision making in a partnership is balanced as the partners generally
discuss amongst themselves before they arrive at a decision.

c) Continuity: Death, retirement, insolvency of one partner may not
impact the continuity of the firm if the remaining partners decide on
continuing with the firm.

d) Sharing of loss: When there are partners, the loss amongst all may be
shared.

Any other suitable explanation can be accepted.
(Any two points)

20 Merger between ‘Larsen and Toubro (L&T)’ with key business area in 2
construction engineering and manufacturing critical equipment and ‘Voltas
limited’, an Indian multinational electronics company specialized in
manufacturing home appliances, whose business fields are totally unrelated,
has taken place.
Identify and explain the type of merger between ‘Larsen and Toubro(L&T)
and ‘Voltas Limited’.

Ans Conglomerate 1 mark for
A merger between firms that are involved in totally unrelated business identification
activities.
+
There are two types of conglomerate mergers: pure and mixed. Pure 1 mark for
conglomerate mergers involve firms with nothing in common, while explanation
mixed conglomerate mergers involve firms that are looking for product
extensions or market extensions.

(If the student has explained the meaning of conglomerate AND/OR types of
conglomerate, marks may be awarded in both the situation ONLY the types
of conglomerate , answer given by the student must be considered)

21 Read the following newspaper article and identify and explain the two 2
elements of PESTEL model which have been presented in this article:

A popular brand of mobile phones has used repurposed fishing nets in its
latest models of smart phones. Fishing nets are made of nylon which has the
basic property of absorbing moisture and water. Use of this material would
make the phones waterproof and dust resistant. Every year around 6,40,000
tons fishing nets end up in oceans, posing a serious threat to the marine
ecosystem.
According to the Managing Director, Research and Development
Department, they are working to replace fossil-based raw materials with

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bio-based raw materials which are renewable. The company has been
researching and developing sustainable materials.

Ans (1) Ecological
It considers the ways in which the organization can produce its 1+1
goods or services with minimum environmental damage.

(2) Technological
It is influenced by government spending on research, new
discoveries and development, government and industry focus of
technological effort, speed of technological transfer and rates of
obsolescence.

22 (a) Explain ‘SWOT analysis’ as a step in preparing a marketing plan. 2

OR

(b) ‘Preparing a good business plan can’t guarantee success, but it can go
a long way towards reducing the odds of failure.’ Justify this
statement by giving any two points.

Ans SWOT ANALYSIS ½ mark for each
It is important for the entrepreneur to consider the 'target market' of statement
his/her enterprise's:
a) Strength - of the organization. It identifies the products or services it
can produce with the available resources effectively.
b) Weakness- of the organization. It tries to find out the area where the
organization may face challenges or have difficulty.
c) Opportunities- that exist in the external business environment
d) Threats - that are posed by different external factors / macro
elements of the business environment.

OR
Importance of the business plan
(a) Needs to consider the strength and weakness of the new venture to
ensure its success. 1 mark for each
(b) helps in determining the viability of the venture in a designated importance
market
(c) helps in providing guidance to the entrepreneur in organizing his/her
planning activities as such:
i) identifying the resources required
ii) enabling obtaining of licenses if required etc.
iii) working out with legal requirements as desired by the government.
(d) helps in satisfying the concerns, queries, and issues of each group of
people interested in the venture.
e) provides room for self-assessment and self-evaluation,
f) 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.
g) 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.
(Any two points of importance of Business Plan)

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23 Identify the term that is used to identify the products of one firm and 2
differentiate them from those of the competitors. Also, explain the term.

Ans Brand 1 Mark for
identification
+
It is a name, term, sign, symbol or design, or a combination of them, 1
which is intended to identify the goods of one seller or group of sellers Mark for
explanation
and to differentiate them from those of competitors.

24 (a) The decision of ‘going public’ by a company is considered to be a 2
complex decision that requires careful consideration and planning as
it requires additional obligations and reporting requirements.

OR

(b) Why are capital markets regarded as ‘financial intermediaries’?
State.

Ans (a) While there are benefits to going public, it also means additional 1+1
obligations and reporting requirements such as:
(i) Increasing accountability to shareholders
(ii)Need to maintain dividend and profit growth trends
(iii)Becoming more vulnerable to an unwelcome takeover
(iv)Need to observe and adhere strictly to the rules and regulations
by governing bodies
(v)Increasing costs in complying with higher level of reporting
requirements
(vi)Relinquishing some control of the company following the public
offering
(vii)Suffering a loss of privacy as a result of media interest

(Any two)

OR

(b) Capital markets are regarded as financial intermediaries as they 2
perform the function of financial intermediation i.e. transferring
financial resources from the surplus units to the deficit units.

Section C

There is no overall choice. Internal choice is given
25 Kartik works as a production analyst at ‘Shree Tyres’. During the board 3
meeting for the financial year 2022 - 23, the target production of tyres for
the year was decided at 6 lakh units. The Managing Director of the company
asked Kartik to prepare a blueprint in advance and ‘work your plan’. He also
added that this blueprint will ensure orderly flow of materials in the
manufacturing process from the beginning to the end.
Identify and explain the component of ‘Business Plan’ being discussed by
the Managing Director.

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Ans (a) Operational Plan 1 mark for
Where the production plan aims at "plan your work", there identificatio
operations plan ensures "work your plan". It is actually a blue n
print prepared right in advance of actual operations —
+
(b)
i) Ensuing orderly flow of materials in the manufacturing process
1+1
from the beginning (raw state) to the end (the finished products)
ii) Facilitating continuous production, lesser work-in-progress and
minimization of wastage.
iii) Co–ordinating the work of engineering, purchasing, production,
selling and inventory management.
iv) Describing the flow of goods / services from production point to
the consumers.
v) Introducing a proper system of quality control
vi) Undertaking the best and most economic production policies and
methods.
(Any Two)

26 (a) State by giving any three points how direct channel of distribution is 3
helpful to producers.
OR

(b) What is meant by a ‘Sales Strategy’? State how a successful sales
strategy helps the sales force?

Ans (a)
● It is the simplest and the shortest channel in which there is 1 mark for each
no middleman and the producers directly sell their point
1+1+1
produce/ products to the consumers.
● It is the fast and economical channel of distribution.
● As all activities related to marketing are performed by the
producer himself, he has full control over activities.
● It cuts down the distribution cost of products of high value.
(Any three points)
OR

(b)
Meaning: A sales strategy consists of a plan that positions a
company’s brand or product to gain a competitive advantage. 1 for meaning

● A successful sales strategy helps the salesforce by focusing on +
target market customers and communicating with them in
relevant and meaningful ways. 2
● Conveying the sales representatives, that the salesforce is
spending time targeting the correct customers at the right time.

27 ‘Pretty You’ is an established brand in the salon and makeover industry. It is 3
currently operating in Delhi with a network of 5 branches. It now wants to
make its presence known in different cities of North India and gradually
establish its identity throughout the country. For this, the company decides to

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give exclusive rights to independent retailers to take advantage of the brand
“Pretty You” in return for their payment of royalties and conformance to
standardized operating procedures.

Identify and explain the form of expansion discussed above.

Ans (a) External expansion 1 Mark for
identification
External expansion refers to business combination where two or
more concerns combine and expand their business activities. +

2 Marks for
In the process of combination, two or more units engage in similar explanation
business or related process or stages. Sometimes stages of the same
business join with a view to carry on their activities or shape, their
polices on common basis some other or in coordination for mutual
benefit or maximum profits.
The combination may be among competing units or units engaged
in different processes. After combination, the constituted firm
pursues some common objectives or goals.

OR

(a) Franchising

Franchising is as "an arrangement whereby the manufacturer or
sole distributor of a trademarked product or service gives
exclusive rights of local distribution to independent retailers in
return for their payment of royalties and conformance to
standardized operating procedures".

The person offering the franchise is known as the franchisor. The
franchisee is the person who purchases the franchise and is given
the opportunity to enter a new business.
They both enter into a Franchise Agreement. This agreement is
the legal document that binds the franchisor and franchisee
together.

(Either of the two given answers can be accepted)

28 ‘Ability to perceive and preserve basic ideas’ is an important factor involved 3
in the process of sensing opportunities.
Identify and state any three sources that lead to emergence of these basic
ideas.

Ans (i) Problems: When a problem exists, an idea leads to a solution to 1 mark for each
resolve that problem, it emerges as a business opportunity. point

(ii) Change: A change in social, legal, technological aspects etc. leads to 1+1+1
new opportunities to start a business.

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(iii) Invention: New products or services leads to new business
opportunities.

(iv) Competition: Competition often results in emergence of new and
better ideas that result in new business opportunities.

(v) Innovation: Creating new things of value as well as new and creative
processes that add value to the existing products or services. For
example, computers to tablets.

(Any three points in complete statements)

29 (a) Give the meaning of ‘cash conversion cycle’. How does the nature of 3
business influence its cash conversion cycle? Explain with the help
of a diagram.

OR

(b) ‘Angel Investment’ not only brings in funds but also an invaluable
mentor to the business.
In the light of this statement state any three features of angel
investors.

Page 17 of 24

Ans (a) Cash Conversion Cycle (CCC) – Length of line between firms,
purchase of inventory and the receipt of cash from accounts receivable. 1 for
meaning
+

½+½

Trading concerns require shorter CCC
For trading, where there is no manufacturing (or conversion), the
operating cycle will be shorter. Trading concerns require shorter CCC.
For trading, where there is no manufacturing (or conversion), the
operating cycle will be shorter.

Manufacturing has longer CCC.
In manufacturing, since it involves conversion of raw material into semi ½+½
finished goods or finished goods, the operating cycle will be longer.

OR

(b) Features of Angel Investor as mentor.

1) Apart from investing funds, most angels provide proactive advice, guidance,
industry connections and mentoring start-ups in its early days.
2) Their objective is to create great companies by providing value creation, and
simultaneously helping investors realize a high return on investments. 1+1+1
3) 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 vast experience.

Section D

There is no overall choice. Internal choice is given

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30 (a) ‘Mergers and Acquisitions’ are inspired by a desire to diversity or 5
achieve higher growth rate due to varied reasons. Explain any five
such reasons for mergers and acquisitions.
OR
(b) Give the meaning of ‘Skimming method of pricing’. State any two
advantages and two disadvantages of the method of pricing.

(a) Any five reasons for mergers and acquisitions.

1. Synergy: Synergy is the most essential component of mergers. In
mergers, synergy between the participating firms determines the 1 mark for each
point
increase in value of the combined entity. 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.
2. 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.
3. Improved profitability: Companies explore the possibilities of a
merger when they anticipate that it will improve their profitability.
4. 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.
5. 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 comfort and avoid too much competition.

Page 19 of 24

6. 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.
7. 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.

OR

Creaming or skimming method of pricing

In the skimming method, goods are sold at higher prices so that
fewer sales are needed to break even. Selling a product at a high 1 mark for meaning
price sacrificing high sales to gain a high profit is therefore +
2 marks for
"skimming" the market.
advantages
+
(b) Advantages (Any Two) 2 marks for
1. Price skimming helps the company in recovering the disadvantages
research and development costs which are associated with
the development of a new product.

2. If the company caters to consumers who are quality
conscious rather than price conscious, then this type of
strategy can work in a great way for a company.

3. This strategy targets 'early adopters’ of the product or
service who generally have a relatively lower price-
sensitivity.

Disadvantages of skimming price (Any two)

1. This strategy can backfire if there are close competitors
and they also introduce the same products at lower price
then consumers will think that the company always sells
the products at higher prices which will result in consumers
abandoning other products of the company also.

2. Price skimming is not a viable option when there are strict
legal and government regulations regarding consumer
rights.

3. If the company has a history of price skimming then
consumers will never buy a product when it is newly
launched, they would rather wait for a few months and buy
the product at a lower price.

31 Give the meaning of ‘Venture Capital’. Entrepreneurs can seek venture 5
capital to assist various stages in the company’s development. Explain ‘Seed
Capital stage’ and ‘Pre- start -up stage’ of financing by venture capitalists.

Page 20 of 24

Ans Meaning of Venture Capital
Venture capital is a type of private equity capital provided as seed 1
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.
+
a) Seed capital finance - It refers to the capital required by an
entrepreneur for conducting research at pre commercialization stage.
During this stage, the entrepreneur has to convince the investor (VC)
why his idea/product is worthwhile. The investor will investigate into
the technical and the economic feasibility of the idea. In some cases, 2
there is some sort of prototype of the idea/product that is not fully
developed or tested. As the risk element at this stage is very high,
investor (VC) may deny to assist if he does not see any potential in the
idea. Entrepreneur's ability, technological skills and competencies are
required to match with the market opportunities so as to successfully +
convince about product/idea's feasibility to the venture capitalist.

b) Pre-start up and Start up finance: If the idea/product/process is 2
qualified for further investigation and/or investment, the process will go
to the second stage; this is also called the start-up stage. A business plan
is presented by the entrepreneur to the VC firm. A management team is
being formed to run the venture. If the company has a board of
directors, a person from the VC firms will take seats at the board of
directors. While the organisation is being set up, the idea/product gets
its form. The prototype is being developed and fully tested. In some
cases, clients are being attracted for initial sales. The management-team
establishes a feasible production line to produce the product. The VC
firm monitors the feasibility of the product and the capability of the
management-team from the board of directors.

32 (a) What is meant by innovation? Explain the elements in the
5
innovation process.
OR
(b) Why is trendspotting important for the success of any
business? Explain the four ways in which an entrepreneur spots
trends.

(a) Meaning of Innovation – Translation of a useful idea into an 1
Ans
application which has commercial value.

Four elements +

● Analytical Planning - Carefully identifying the product or
service features, design as well as the resources that will be
1 mark for each point
needed
● Organizing Resources - Obtaining the required resources,
materials, technology, human or capital resources

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● Implementation - Applying the resources in order to
accomplish the plans and delivering results.
● Commercial Application - The provision of value to customers,
reward employees, and satisfy the stakeholders.
OR
(b)Trendspotting is important to understand the market and
produce goods in sync with market trends.
1

1.Read Trend: They regularly read the leading publications and
websites affecting their business. This could include industry
+
publications, trade association sites, major newspapers, key
business magazines, thought leaders and influential bloggers.

2. Talk Trend: Talking to people is an equally important trend-spotting
tactic. They get involved in a specific industry’s trade association and 1 mark for each point
attend events both online and offline. They also take advantage of social
networking tools like social network websites and forums. They even
start or join groups on the networks and see what people are talking
about.

3. Watch Trend: There is no substitute for getting out in the
marketplace. They make it a point to regularly go where their
target customers meet often.

4. Think Trend: As an entrepreneur begins gathering all their
information regularly, they will start to develop a “trend-spotter
mind.” As they absorb what they have read, heard and observed,
they will start to make connections and observations that will lead
to business-boosting insights.

33 The Covid - 19 pandemic has ushered in an era of new business
opportunities for many businesses. 5
Rajat, an entrepreneur, designed a unique N - 95 face mask which would not
only filter the air inhaled but also change its colour when the mask is no
longer good for use. Not only this, it would also send an alert in case the
user of the mask comes in contact with any virus in the air. The idea sounds
good and marketable, but Rajat needs to impress the investors to fund his
idea. Rajat prepared a three - minute summary of the business plan executive
summary to awaken the interest of the potential funders, customer’s funders,
customers or strategic partners.
(a) Give the meaning of ‘business plan’ and identify the format of
business plan used by Rajat.
(b) Explain three formats of business plan other than the one identified
in (a) above.

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Ans (a)Meaning of Business Plan: The business plan is a comprehensively 1 mark for
written down document prepared by the entrepreneur describing meaning
formally all the relevant external and internal elements involved in
starting a new venture. +

Format of business plan used by Rajat – Elevator Pitch 1 mark for
identification

(b) Three formats of business plan other than the one identified above +

(i) Pitch deck with oral narrative - A hopeful, entertaining slide show
and oral narrative that is meant to trigger discussion and interest
potential investors in reading the written presentation, i.e. the executive
summary and a few key graphs showing financial trends and key 1 mark for each
decision making benchmark. point

(ii) Written presentation - A detailed, well written, and pleasingly
formatted plan targeted at external stakeholders.

(iii) Internal operational plan or service - A detailed plan describing
planning details that are needed by management but may not be of
interest to external stakeholders.

34 ‘Baked Delight Ltd.’ is a well-known name in breads and bakery products. It 5
has diversified into flavoured fox nuts and popcorn. The two were
introduced as smart snacking options for health and diet conscious people.
To start with, both will be sold in a standard packing of 50 gm each. Fixed
cost for these will be ₹1,00,00. Sale price and variable cost per unit is as
follows:

Particulars Classic salted Caramel salted
fox nuts popcorn

Sale price per unit (₹) 120 80
Variable cost per unit (₹) 70 30
Sales mix percentage (₹) 40 60
Sales Mix percentage

From the given information calculate Break - Even Point in units and rupees.

Ans Step 1: Calculation of contribution margin per unit for each product. 1 mark for each
Product Fox Nuts Popcorn step
Selling Price (Per Unit) ₹ 120 80
Less: Variable Cost (Per Unit) ₹ 70 30 1+1+1+1+1

Contribution Margin (Per Unit) ₹ 50 50

Step 2: Weighted Average Contribution Margin per unit = Contribution
Margin (per unit) × Sales Mix Percentage

Contribution Margin (Per Unit) ₹ 50 50
Sales Mix Percentage 40% 60%
_______ _______

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Sales Mix % in ₹ 20 30
________ _______

Weighted Average CM per unit = ₹ 50

Step 3: Breakeven point in units of Sales Mix

Total fixed cost______ = 1,00,000 = 2000 units
Weighted Average CM per unit 50

Step 4: Product units of Fox nuts and popcorn at Break-Even Point

Product Fox Nuts Popcorn

Sales Mix Ratio × BEP in Units 40% x 2000 60% x
2000

800 1200

Step 5: Breakeven point in Rupees

Product Fox Nuts Popcorn

BEP in Units × Selling Price per unit 800 x 120 1200 x 80
₹96,000 ₹96,000

Break Even Point in Rupees ₹1,98,000

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