CBSE Sample Paper

General Instructions
1. All the questions are compulsory.
2. Marks are indicated against each question.
3. Questions No. 1 to 5 are very short answer type questions, carrying 1 mark
each. Answer to each of these questions should not exceed 15 words.
4. Questions No. 6 to 10 are short answer type questions, carrying 2 marks each.
Answer to each of these questions should not exceed 50 words.
5. Questions No. 11 to 17 are long answer (LA-1) type questions, carrying 3
marks each. Answer to each of these questions should not exceed 75 words.
6. Questions No. 18 to 21 are long answer (LA-2) type questions, carrying 4
marks each. Answer to each of these questions should not exceed 150 words.
me :

3 hours Max. Marks : 70

1. Name the two things that are taken care in a reorder point. (1)

Ans. The two things that are taken care in a reorder point are

(i) maximum rate of consumption (ii) maximum lead time.

2. Deepak Ltd has been manufacturing cycles since 2010. Their market share in this
field is 35%. They decided to introduce new cycles with advanced gear systems in 2015.
For the same they estimated their financial requirements to be 20 crore.

They decided to raise the same through a limited number of sophisticated investors.
Identify this kind of issue. (1)

Ans. The kind of issue is private placement

3. Rishabh lives in Vijay Nagar, a residential colony near Delhi University (DU). Being
close to DU this area is a hub for students who come from outside Delhi to study here as
they find good accommodation with Tiffin service readily available. Rishabh has a
vacant residential building there. He found it to be an attractive economic idea to start a
Paying Guest House. He knows that he has a good market because of the location of his
building. State the other requirement he has to ensure before opting for this
opportunity. (1)

Ans. The other requirement that Rishabh should assess is the expected return on his
investment.

4. What is meant by 'private sector enterprises?' (1)

Ans. Private sector enterprises are owned, controlled and managed by private
individuals with the intention of earning profit.

5. State the role of sales person in personal selling. (1)

Ans. The role of sales person in personal selling is that of a persuader.

6. What is meant by seed capital financing? What the entrepreneur has to do to
convince the investor to get money? (2)

Ans. Seed capital financing it refers to the capital required by an entrepreneur to

conduct market research and prove the financial feasibility of his business idea.

The entrepreneur has to convince the investor to get money that his idea/product is
worth investing and is capable of generating profits.

7. Ragini, a career oriented mother, hardly got time to cook for the family. She decided
to hire a cook but was not able to find one who could cook according to the taste of the
family. Her sister Abha sensed that this problem is not only faced by her sister but also
by many working women. She launched a website namely 'Dial for food' where
housewives who had culinary ability and were interested to cook could drop in their
contact details and households where specific cuisine was required could leave in their
requirements so that through the website home cooked food could be delivered. The
website mainly helped in identifying the requirement and fulfilled it through providing
delivery service. Identify any two uses of problem identification to Abha.
(2)

Ans. Two uses of problem identification to Abha are

(i) To understand the needs and problems of the market.

(ii) To increase employment generation.

8. Explain the first two elements in the innovation process. (2)

Ans. The first two elements in the innovation process are

(i) Analytical planning It involves identification of the features of the product/service,

it's design and the resources needed to produce the product/service.

(ii) Resource organisation It involves organising the human resources, material,

technology and the capital needed.

9. Sanjiv was developing a business plan for his organisation. While working on the
financial plan he realised that his financial requirements will be for fixed assets and
their installations, preliminary expenses, working capital, expenses on research and
development and investment in short-term assets viz. raw material, level of cash, etc. To
decide on the sources of funds for the venture, he tried to ensure the selection of the
best overall mix of financing for the enterprise.

(i) Identify the elements of financial plan discussed here.

(ii) Why is it important for an entrepreneur to ensure the selection of the best overall
mix of financing for the enterprise? (2)

Ans. (i) The elements of financial plan discussed in the above paragraph are
(a) Proforma investment decisions (b) Proforma financing decisions (ii) It
is important for an entrepreneur to ensure the selection of the best overall mix
offinancingfor the enterprise so that
(a) The cost of capital and financial risk stands minimised.
(b) Return on investment and profitability stands maximised.
10. Rohan a budding musician created a lot of musical notes for his upcoming video. He
was extremely thrilled to listen to his compositions. He presented his compositions to
his friend Victor. The release of musical video of Rohan was getting delayed for a few
months due to shortage of cash. Meanwhile Victor used most of the musical
compositions of Rohan in his video.

Rohan was extremely upset to know that his friend had cheated him and used all his
work. What could have Rohan done to save his work? Identify and explain it. (2)

Ans. In order to save his original compositions, Rohan should have copyrighted his
work. Copyright gives the creator of original work exclusive rights to his creative work,
usually for a limited period of time.

11. Bhushan and Vinay were pursuing Electrical Engineering from a prestigious
engineering college. During their third year they developed a solar LED bulb which can
be used indoors. The bulb had a small panel which had to be charged at a stretch for 10
hours in the sun and it would last for 200 hours of usage.

The idea was risky as there was a possibility that the market might not accept such a
product, but if they do so, then, there would be a revolution in the power industry as it
would lead to saving of power in every household.

The prototype was made but to manufacture and distribute the same, they required
around 5 crores.

Both Bhushan and Vinay approached some affluent individuals who were ready to
invest in their business in exchange for a convertible debt.

Identify the type of investors and state any two features of the same. (3)

Ans. Bhushan and Vinay approached 'angel investors'.

Two features of angel investors are stated below

(i) Most angel investors are current or setired executives, business owners or high net
worth individuals, who have the knowledge, expertise and funds that help start-ups to
match upto the industry standards.

(ii) Apart from investing funds, they also provide proactive advice, guidance, industry
connections and mentoring start-ups in their early stage.

12. You have started a beauty parlor business. You spent Z 5,00,000 to open the parlor
of which you invested t 3,00,000/- of your own money and borrowed a loan for Z
2,00,000. Interest rate per annum is 4%. Sales revenue per month is Z 35,000. Cost of
goods sold is Z 10,000 per month. Fixed expenses per month is Z 15,000 (salary Z 7,000,
rent and utility Z 8,000), depreciation Z 1,000/- and tax @ 8%. Calculate the return on
equity. (3)

Ans. Income Statement for One year

A Sales Revenue (35,000 x 12 ) 4,20, 000

B Less Cost of Goods Sold (10,000 x 12) 1,20,000

 C Gross Margin = (A - B) 3,00,000
Fixed Expenses:
Salary Etc. (7,000 x12) 84,000
Rent, Utility Etc. (8,000x 12) 96,000
Interest (2,00,000x 4+100) 8,000
Depreciation and Amortisation 1,000

D Less: Total Fixed Expense 1,89,000

E Profit Before Tax =C-D 1,11,000

Tax @ 8% (1,11,000 x 8+100) 8,880

F Profit After Tax = E F 1,02,120

(Equity 3,00,000)
Calculation of Return on Equity (ROE) = Net Profit after Tax x 100
Equity
= 1,02,120 = 34.04%
3,00,000

13. Explain how the following factors affect idea and opportunity assessment.

(i) Application and use

(ii) Level of operation
(iii) Competition (3)

Ans. The effect of given factors on idea and opportunity assessment has been explained
below
(i) Application and use Ideas should be examined for their real life use and an
application. If it is an existing product, then the proposed modification should lead to its
better use.
(ii) Level of operation The level of operation will depend on the type of product, skill,
use of labour and level of expertise/technology required. The entrepreneurs should
decide whether he/she will produce it in cottage industry, small scale industry or large
industry.
(iii) Competition Competitive analysis should be done through demand and supply
position.

14. Sensitivity to environmental factors is crucial for an entrepreneur. With an

appropriate example explain the relevance of the statement. (3)

Ans. Sensitivity to environmental factors is crucial for an entrepreneur. For example,

Sony failed to understand the changing trends in mobile phones and therefore lost its
market share.

The following benefits arise by understanding the environment

(i) Identification of opportunities to get first mover advantage By being always
vigilant (careful) and aware, an enterprise can identify the opportunities at the earliest.
(ii) Formulation of strategies and policies The threats are always present from the
competitors, for which counter strategies have to be formulated to combat (tackle)
competition. Also, opportunities can only be capitalised by formulating suitable
strategies and policies.
(iii) Tapping useful resources If a company has a thorough knowledge of environment,
then it can tap resources like financial resources, human resources, physical resources,
etc. from the market at economical prices at the right time.
(iv) Better performance It can be increased with the timely action in dealing with
threats and availing opportunities for the purpose of improvement in the performance
of the firm.
(v) Sensitisation of entrepreneurs to cope up with rapid changes A keen watch on
trends in the environment would help to sensitise the entrepreneur to become proactive
towards the needs of customers, changing trends, government policy, technology, etc.
(vi) Image building If a company is sensitive to the external environment, it will come
out with new products and services or bringing out better goods and services which
help in image building or reputation.

15. Deepak and Gaurav joined the prestigious law university in Ahmedabad in the year
2010. During the course of study they became good friends and they both realised that
their common interest lies in the field of corporate law. After completion of their degree
they decided to start a firm of their own, namely 'Corpo Law Firm' wherein both of them
will be co-owners dividing the profit and loss. After successfully running the firm for a
year, they realised that there are certain rights which are denied to their firm as it is not
registered.

Explain the consequences of non-registration of their firm. (3)

Ans. If the firm does not get registered, following rights are denied to it
(i) A partner cannot file suit in any court against the firm or other partners for the
enforcement of any right arising from a contract or any right conferred by the
Partnership Act.
(ii) A case cannot be filed against a third party for claiming any right conferred by a
contract. (iii) The firm or any of its partners cannot claim a set off (i.e. mutual
adjustment of debts owned by the disputant parties to one another) in a dispute with a
third party.

16. Explain any three characteristics of a company. (3)

Ans. Three characteristics of a company explained below

(i) Voluntary association A company is a voluntary association of two or more
than two persons, joining hands out of their free will, to form a company. A single
person cannot constitute a company except in the case of one person company.
(ii) Artificial person A company is created by law. Though, it has no body and no
conscience, it still exists as a person, having distinct personality of its own and like a
natural person, it can buy, sell and own property, sue other and be sued by others.
(iii) Separate legal entity A company has an entity or personality, which is
absolutely independent and separate from the entity of its members. This implies that a
company cannot be held liable for the actions of its members and vice-versa.

17. Differentiate between price shimming and price penetration techniques of

pricing. (3)

Ans. The differences between price skimming and price penetration techniques of
pricing are

Basic Price Skimming Price Penetration

Price fixed Under this technique of pricing, Under this technique of pricing,
 Price fixed Under this technique of pricing, initially a very high price is fixed for
the product/service. Objective This technique is used to that the cost of investment
could be recovered in a short period. Target This technique of pricing targets those
customers customers who like to adopt new and technologically improved products/
services, i.e., the early adopters of products or services.
Price Penetration
Under this technique of pricing, initially the prices are set very low.
The objective of this technique is to increase the market share of the product/service.
This technique of pricing targets those customers who are cost conscious.

18. Explain the four types of acquisition. (4)

Ans. The four types of acquisition are explained below

(i) Friendly acquisition The companies involved approve of the acquisition under
friendly terms. There is no forceful acquisition and the process is cordial.
(ii) Reverse acquisition In this type of acquisition, a private company takes over a
public company.
(iii) Back flip acquisition In this form of acquisition, the purchasing company
becomes the subsidiary of the purchased company. It is very rare.
(iv) Hostile acquisition The whole transaction is carried out through force. The
target company is driven to such extreme situations, that it has to agree with the
acquisition contrary to its own will. Or in another way, the purchasing company can buy
majority of shares of the targeted company, thereby, initiating acquisition.

19. Hemant's grandfather owned a huge agricultural firm in the name of 'Organica'. The
company had huge acres of land in Kerala where it grew spices. The company planned to
expand and was planning to buy land in Coorg, Karnataka where it will grow coffee.
While visiting the place, Hemant saw that the villagers had to walk more than 10 kms of
hilly terrain to reach the hospital and he also felt that the villagers did not have any
work in the evening apart from doing agricultural work in the morning.

For expansion purposes he required money and the chief financial officer of his
company suggested that they raise the required funds directly from the public. Hemant
also decided to open a hospital and a skill development centre for the villagers in the
evening wherein they can learn a lot of new skills.

Explain the method of raising funds directly from the public and the primary advantage
that Hemant stands to gain from it. And state any two values that he wants to
spread. (4)

Ans. The method of raising funds directly from the public is referred to as public issue of
shares. Public issue involves raising of funds directly from the public through the issue
of prospectus. It is the most popular method of raising finance. This method requires
compliance to various statutory laws relating to prospectus drafting, listing agreements,
etc.
The primary advantage of raising finance through public issue is Access to capital. In
addition, the capital does not have to be repaid and does not involve an interest charge.
Entrepreneur can use the capital raised for
. growth and expansion. . retiring existing debt.
. corporate marketing and development. . as a source of acquisition capital.

Two values that Hemant wants to spread are

(i) Care and concern for the health of the villagers.
 (ii) Care and concern for the economic development of the villagers.

20. 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 Z 25 lacs. Though through
MUDRA (Micro Units Development and Refinance Agency) he is able to get a loan of Z 10
lacs but still he is falling short of Z 15 lacs. He wants to pitch in his idea to potential
investors through his business plann. Explain the different formats in which he can
present his business plan for his start-up.

Ans. The different formats in which Kapish can present his business plan are explained
below
(i) Elevator pitch It is basically a 3 minute summary of the business plan's executive
summary. This format is often used as a teaser to awaken the interest of the potential
investors, customers or strategic partners.
(ii) A pitch deck with oral narrative This format presents the business plan in the
form of an entertaining slide show complemented with an oral narrative. It is meant to
trigger discussion and awaken the interest of the potential investors and induce them to
read the written presentation. It includes executive summary, important graphs
showing financial trends and key decision-making benchmarks.
(iii) A written presentation for external stakeholders A detailed, well written and
pleasingly formatted plan targeted at external stakeholders.
(iv) An internal operational plan A detailed plan describing planning details that are
n'eeded by management, but may not be of interest to external stakeholders.

21. 'Employee relationship management is a process that a company used to effectively

manage interactions with employees to achieve the goals of the organisation'. In the
light of the statement;
(i) Explain any three factors that lead to effective employee relationship.
(ii) State any two values that the company may communicate when it tries to
maintain healthy relationship with their employees. (4)

Ans. (i) Three factors which lead to effective employee relationship are explained below
(a) Identifying objectives The first step towards effective employee
relationship management is identifying the objectives of employee relationship
management plan. For most companies, relationship management centers around items
like attracting and retaining employees. Common measures of the effectiveness of these
relationships include time taken to hire an employee, employee turnover rate and the
level of employee satisfaction.
(b) Determining employee needs An organisation should not only focus on
identifying and achieving its objectives but should also be sensitive towards employees'
needs. Needs of employees are not uniform. They differ from person to person, based on
their individual characteristics such as age, gender, etc. So, for an organisation, it would
be a good idea to find out directly from employees what their needs are.

(c) Balancing work aid life needs In the present era of 21st century, it has been
recognised by the organisations that effective employee relationship management
requires consideration of the whole employee, i.e. the organisation should cover both
the professional and personal aspects of its employees. So, an organisation should take
steps to ensure that employee's work-life needs are well balanced. So, organisation
should look at work-life effectiveness of their employees from two different
perspectives, viz., organisation's needs and employee's needs.

(ii) Two values that the company wants to communicate are

 (a) Encouraging the welfare of employees.
(b) Sharing and compassion.

22. Sheila has a degree in robotics and she loves to design products. She started her
career in 'Robotech' which uses high and technology in all their products. Her job profile
included traveling a lot also. Whenever she travelled she noticed that disabled people
have difficulty in maneuvering their wheelchair from one place to another because in
some places ramp is not provided and there is no way they can walk up the stairs.

She came up with an idea of a wheelchair which can be used on stairs easily. She decided
to quit her job and start her own company. She realised that her idea was the first stage
in the process of innovation. Identify the concept and explain the steps in its process. (6)

Ans. The concept discussed is 'creativity' the steps. The process of creativity are
explained below
Step 1 Idea germination It is the seeding stage, where the new idea grows. The idea
germinates from the interest and curiosity of the entrepreneur. He then explore and
exploits it to its best potential. The ideas can also germinate from the need of a specific
problem or area of study.
Step 2 Preparation Now, with the germination of idea, it needs to be implemented. For
this, the entrepreneur takes up market research to see whether the product will have
any future or not.
Step 3 Incubation This is the subconscious assimilation of information. This is the
transition period. The entrepreneur think about his idea, its pros and cons, process of its
implementation in his mind. The idea is spreading its roots.
Step 4 Illumination The fourth stage or the illumination stage occurs when the idea re-
surfaces in a realistic way. The entrepreneur comes with a viable plan to give practical
shape _to his idea by collecting raw materials, arranging for finance, etc.
Step 5 Verification This is also called the validation or testing stage. In this, the idea or
plan is translated into useful application which has value. It is a stage when knowledge
is developed into application.

23. What is meant by break-even point? State any two assumptions of calculating break-
even point for sales mix.
Calculate the break-even point in units and in rupees for the following
Product A B C
Sales Price/ unit 30 45 60
Variable cost/unit 15 30 20
Sales mix percentage 30% 30% 40%

Total Fixed Cost are 50,000

Ans. Break-even point is that level of activity where total cost equals total selling price.
Two assumptions of calculating break-even point for sales-mix are
(i) The sales-mix must not change within the relevant time period.
(ii) Sales price per unit, variable cost per unit and total fixed cost are constant.

Computation of break-even point for products A, B and C

A B C
Sale prices unit 30 45 60
Less : Variable cost/unit 15 30 20
Contribution margin/unit 15 15 40
x Sales mix percentage 30% 30% 40%
4.5 4.5 40
Weighted average CM per unit 25 (4.5 + 4.5 * 16)
Total fixed cost 50,000
-:- Weighted average CM per unit 25
Break-even point in units of sales mix 2000
Break-even point in units

Product A B C
Sales mix ratio 30% 30% 40%
x Total break even units 2000 2000 2000
Product units at break-even 600 600 800
Break-even in rupees 18000 27000 48000

24. Slurrpy is a new mixed fruit juice introduced by Amit Beverages Ltd. The mixed fruit
juice has been fortified using various vitamins and minerals. The company designed a
unique package for the product which made it very attractive. Their sales figures were
an indication of their success.
In order to capture huge market share, they decided to give exclusive rights to retailers
to manufacture and sell the product to the public.
Identify and explain this concept. State two factors which help start-ups and also state
the advantages to Amit Beverages Ltd in doing so. (6)

Ans. The concept discussed above is 'manufacturing franchise'.

Under this model, the franchise is conferred with exclusive rights to manufacture
and sell a product, using the franchisor's name and trademark. This type of franchise is
common in food and beverage industry.
Franchising helps start-ups in the following ways
(i) Franchising provides the start-ups with a ready market which is the most difficult
part of business to establish. For this, the start-ups are required to pay royalty to the
franchisor.
(ii) The franchisors impart training to the start-ups, so that they are able to market their
products or services. The start-ups are usually granted such training on the payment of
a fee.

The advantages a franchisor gains through franchising are discussed below

(i) Quick expansion The first and foremost advantage of franchising for franchisor is
that, it allows a business to expand quickly, using little capital. A franchisor can expand a
business nationally and even internationally, by authorising and selling franchises in
selected locations. Also, operating a franchised business requires fewer employees, thus
cutting down an operational cost.
(ii) Cost advantages The huge size of a franchised company offers many advantages to
the franchisor. The franchisor can purchase supplies in large quantities, thus achieving
economies of scale. Many franchise businesses produce parts, accessories, packaging
and raw materials in large quantities and then sell them to franchisees, earning a certain
amount of profit in between.
Also, one of the biggest cost advantage of franchising a business is the ability to commit
larger sums of money towards advertising.