ENTREPRENEURSHIP

CLASS 12TH NOTES As Per New Syllabus Of JK BOSE 2020

PREPARED BY:
Dr Muzzamil Rehman

CO-OWNER OF WISDOM INSTITUTE OF LEARNING MAGAM

AND
KASHMARI SHIKARA .COM

“Winners never quit and quitters never win.”

Tel: - +918082670965, 7006764479, Email:-muzzamilsir786@gmail.com

 TABLE OF CONTENTS
UNIT -1

1) Entrepreneurial opportunities :Meaning and Objectivies

2) Enveronmental Scanning :Meaning & Importance
3) Market Assessment : Meaning & Steps in Market Assessment
4) Factors affecting Identification of Entrepreneural Opportunities
5) Factors in Selection of an Enterprise
6) Steps In setting up of an Enterprise
UNIT-2

1) Business Planning : Meaning importance and steps

2) Preparation of a Project Report.
3) Resource Assessment : Financial and Non Financial Meaning and Importance
4) Fixed and working Capital Requirement: Meaning and Factors affecting .
5) Mobilization of Financial and Non Financial Resources for setting up ana
enterprise .
UNIT -3

1) General Management : Basic Managerial Function

2) Managing Market: Functions of Marketing & Marketing Mix (4ps)
3) Managing Finance : Sources of Long and Short Term Finances
4) Huaman Resource Management : Meaning ,Objectivies and Functions .
5) Managing Growth & Sustences : Meaning & importance of Modernisation
and EDFM
6) Entrepreneurial Disciplines: Law of Land, Ecology, Consumers Concept,
Adherence to Contracts & Credits.

“A person who never made a mistake never tried anything new.” –

Albert Einstein
 CHAPTER NO 1
Entrepreneurial opportunities

Q1: WHAT IS OPPORTUNITY?

Ans: An opportunity may be defined as A time or set of circumstances that makes it possible to
do something.Opportunity may be explained as an Attractive project which an entrepreneur
accepts as an Investment decision.

Q2: WHAT IS AN ENTREPRENEURAL OPPORTUNITY?

Ans: Business opportunity can be described as an economic idea which can be implemented to
create a business enterprise and earn profits.So it is important to note that a business
posssibility becomes an opportunities only in case it is being capable of as commerical
feasible.what can be converted into reality ,otherwise a dream only.E.g Construction of a
colony on the moon is not an opportunity in the present era but can be in the future .

Q4:Elements of a business opportunity ?

A business opportunity may be described as an attractive economic idea which could be
implemented to create a business, earn profits and ensure further growth. A business
opportunity has five elements which are as follows:

Q3: WHAT ARE VARIOUS STEPS INVOLVED IN THE PROCESS OF OPPORTUNITY

IDENTIFICATION ?
 Opportunity spotting by analysing the needs and problems that exist in the
environment
 Evaluating the ideas received from different sources to find a creative solution
 Identifying a product or service through innovation
 Setting up a project and nurturing it to success.
Q5:WHAT IS SENSING ENTREPRENEURAL OPPORTUNITY AND FACTORS
INVOLVED IN IT ?
ANS: Sensing Entrepreneurial Opportunities is a process of perceiving the needs and
problems of people and society and arriving at creative solutions, converting these solutions
into Opportunity and then into an enterpreise.

Sensing entrepreneurial opportunities is thus a process of converting an idea into an

opportunity and then into an enterprise.

VARIOUS FACTORS INVOLVED THE PROCESS OF SENSING ARE AS

To sense an entrepreneurial opportunity, an entrepreneur employs his/her sharpened skills of
observation, analysis and synthesis to identify an opening. The most important factors
involved in the process are:
1)Ability to perceive and preserve basic idea
2) Ability to harness different sources of knowledge and informtion.
3)Vision and Creativity.
Ability to perceive and preserve basic ideas: Spotting an idea often triggers the process of
sensing an opportunity. The following are the various sources which lead to the emergence of
basic ideas.
a) Problems: When a problem exists, an idea leads to a solution to resolve that problem, it
emerges as a business opportunity.
b) Change: A change in social, legal, technological aspects etc. leads to new opportunities to
start a business.
c) Inventions: New products or services leads to new business opportunities.
d) Competition: Competition often results in emergence of new and better ideas that result in
new business opportunities.
e) 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.

Ability to harness different sources of information Various sources like magazines, journals,
books, seminars, trade shows, family members, customers, friends etc. help in getting
information that results in evolution of basic ideas. Bring together various sources of
information and knowledge, and analyze it to the best possible extent. The analysis helps in
the identification of the right opportunity to start a new business.
Vision and creativity Creativity in innovating a solution and vision. The entrepreneur should
be able to creatively identify an idea to generate a valuable solution to a problem. Once the
solution is identified their vision to convert the solution into business opportunity helps them
to move forward, overcoming all the obstacles.
Q:WHAT ARE THE MAJOR COMPETENCIES THE ENTREPRENEUR MUST
POSSESS TO SENSE OPPORTUNITY?

 Ambition. It is easy to give up when the going gets tough, but the most
successful entrepreneurs persist because of their ambitious nature. ...
 Willingness to Learn. ...
 Ability to Listen. ...
 Creativity. ...
 Assertiveness and Confidence. ...
 Perseverance. ...
 Courage and Risk Taking

"It takes 20 years to build a reputation and five minutes to ruin it. If you think about
that, you’ll do things differently."
 Chapter 2
ENVIRONMENTAL SCANNING
Q.No: Define Bunisess Environment and its types?
Ans: Business Environment is sum or collection of all internal and external factors that affect
the business directly or indirectly such as employees, customers needs and expectations,
supply and demand, management, clients, suppliers, owners, activities by government,
innovation in technology, social trends, market trends, economic changes, etc.

Environment and its types

Internal Business Environment:

Internal environment is a component of thebusiness environment, which is composed of
various elements present inside the organization, that can affect or can be affected with, the
choices, activities and decisions of the organization.
The internal environment Includes 6M’S
1.Man 2. Money 3. Machinery 4. Methods 5. Management and 6. Miscellaneous factors.
External environment or far environment : includes a combination of all factors
coming from the outside of the organization that affect its performance. The company itself,
however, does not affect on them.it simply can be defined as the environment which is beyond
the control of business.
Dimention of the Externial environment are as :

A PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a framework

or tool used to analyse and monitor the macro-environmental factors that may have a profound
impact on an organisation's performance. This tool is especially useful when starting a new
business or entering a foreign market.It is done to understand the external environment of the
enterprise.
The PESTEL Model
Political: The political environment includes taxation policy, government stability and
foreign trade regulations.
Economic: The economic environment includes interest rates, inflation, business cycles,
unemployment, disposable, income, energy, availability and cost.
Social: The social/cultural environment includes population demographics, social mobility,
income distribution, lifestyle changes, attitudes to work and leisure, levels of education and
consumerism.
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.
Ecological: It considers the ways in which the organisation can produce its goods or services
with minimum environmental damage.
Legal: It covers areas such as taxation, employment, law, monopoly, legislation and
environmental protection laws.
 Q.NO: Define Environmental Scanning and its importance?
Careful monitoring of an organization's internal and external environment for detecting early
signs of opportunities and threats that may influence its current and future plans. In a rapidly
changing environment, one rule of thumb applies: If you don't adapt, you don't endure. This is
the core idea behind environmental scanning. Definitions of the term refers to the means by
which organizations gather information on changing conditions and incorporate those
observations into a process where necessary changes are made. The right information,
combined with the right adaptations, can determine an organization's future viability. If an
entrepreneur is not aware of the environment surrounding his/her business, he/she is sure to
fail.
IMPORTANCE ENVERONMENTAL SCANNING
Sensitivity to environmental factors is crucial for an entrepreneur. If a company is able to
adapt to its environment, it would succeed in the long run. For example, Sony is failing to
understand the changing trends in mobile phones and therefore losing it‟s market share. The
benefits of understanding the relevant environment of business are:
 Identification of opportunities to get first mover advantage: By keeping in touch
with the changes in the external environment, an enterprise can identify opportunities.
Formulation of strategies and policies: It helps in identifying threats and
opportunities in the market. These can serve as the basis of formulation of strategies to
counter threats and capitalise on opportunities in the market.
 Tapping useful resources: If the company has a thorough knowledge of the external
environment, it can tap raw materials, technology and even financial resources from the
market at economical prices, at the right time.
 Better performance: Proper understanding of the various elements of the external
environment is necessary to take timely action to deal with threats and avail
opportunities for the purpose of improvement in the performance of the firm.
 Sensitisation of entrepreneurs to cope up with rapid changes: A keen watch on the
trends in the environment would help sensitise the entrepreneur to changing technology,
competition, government policies and changing needs of the customers. For example,
trends in clothing. i

Q.NO: Process of Environmental Scanning?

Environmental scanning is a process that systematically surveys and interprets relevant data to
identify external opportunities and threats that could influence future decisions.
Environmental scanning refers to possession and utilization of information about ...
Organizational environment consists of both external and internal factors.It is the process of
identifying the opportunities in the prevailing market and conveting that oppoertunity into a
business venture.
1) The first step of the environmental scanning process requires the identification of the

needs and the issues that have occurred that caused the organization to decide an

environmental scanning is required. Before starting the process there are several factors

that need to be considered which include the purpose of the scanning.

2) The second step of the scanning process is gathering the information.

3) The third steps analyzing all the information that the business have collected.

4) The step four of the environmental scanning process is all about the communication of

the results obtained in step three. The appropriate decision makers analyze the

translated information of the potential effects of the organization.

5) With all the information obtained from steps three and four, step five is all about

making informed decisions. Management creates appropriate steps that will position the

organization in the current business environment.

 Chapter 3
MARKET ASSESSMENT
Q.No :Define Market ?
ANS: A market is a place where people go to buy or sell things.A market is defined as the
sum total of all the buyers and sellers in the area or region under consideration. The area may
be the earth, or countries, regions, states, or cities. The value, cost and price of items traded
are as per forces of supply and demand in a market.
Q.No: Define Market Research?
ANS:The process of gathering, analyzing and interpreting information about a market, about a
product or service to be offered for sale in that market, and about the past, present and
potential customers for the product or service; research into the characteristics, spending
habits, location and needs of the customers.

Q.No: Define Market Assessment and what are its variouys methods ?
ANS: It is simply a process of understanding the market from all of its dimentions. Market
assessment is a detailed and objective evaluation of the potential of a new product, new
business idea or new investment. It is a comprehensive analysis of environment
forces, market trends, entry barriers, competition, risks, opportunities and the company's
resources and constraints.
 Methods of market assessment/Techniques of the Market assessment
Market Survey The first approach involves forecasting demand by collecting
information regarding the buying behavior of consumers from experts or through
conducting surveys.Under this method a group of customers are surveyed and data is
collected and demand is allocated.
2) statistical Method: In simple terms, statistical forecasting implies the use
of statistics based on historical data to project what could happen out in the future.In
this method demand is forecasted on the basis of past data.
3) Leading indicator Method: The economic indicators are used to predict the future
trends of the business. Based on future trends, the demand for the product is forecasted.
... The leading indicators are those that move up or down ahead of some other series.

Q.NO: What are the various stages involved in the market assessment?
Stages or Steps Involved in Marketing Research Process
1) Identification and Defining the Problem: ...
2) Statement of Research Objectives: ...
3) Planning the Research Design or Designing the Research Study: ...
4) Planning the Sample: ...
5) Data Collection: ...
6) Data Processing and Analysis: ...
7) Formulating Conclusion, Preparing and Presenting the Report:
Q.No: What is the signifiance or importance of the Market assessment?
ANS: Market assessment is of great importance of the following.
1) It helps in decision making.
2) Used as a planning tool.
3) It is used in problem solving.
4) Helpful in the controlling process
5) It informs us about the consumption pattern.
6) It is useful in making marketing strategies
 CHAPTER 4
IDENTIFICATION OF ENTREPRENEURIAL OPPORTUNITIES
Q.NO: Discuss major factors influence the process of opportunities identification ?
ANS: Various factors that influence the opportunity identification are as:
1) Alertness factor:All the successful entrepreneurs has one common trait I,e
alertness,they need to be very much casious in terms of catching the opportunities.
2) Prior Knowledge: Prior knowledge and experience atr the basic tools of searching the
opportunities.So entreprenurs must foucs on those areas where they have particular
prior knowledge.
3) Social Networking: The social network of the entrepreneur is vital in opportunitiy
identification.The most common source of these opportunities are friends,relativies,
4) Creative factor.The relation between the creativity and the opportunity is very
important in opportunity identifaction.Most of the successful entrepreneurs are highly
creative.

Q.NO: Objectivies of Entrepreneurial opportunities?

ANS:
1. Develop and Use of resources.
2. Size of the industrial Possibilities.
3. Scope for other industries.
4. Balanced Economic Growth.
5. Estimation of the Factors of production.
Q.NO: what are the various Sources of Opportunities?
Ans
 Dreams: It represents the type of creativity. It is directly associated with artists, some
designers and inventors.
 Technology transfer: in this type , opportunity development emphasizes search for the
applications more than a product or a service.
 Business Formation : in this type, opportunity development involves matching known
resources and requirements to establish enterprises.
 Problem solving :in this type the basic aim is to establish a particular product or a
service which could easily solve the Basic problem in a society.
Q.NO: Define Innoviation What are its types?
Ans: Innovation is the creation, development and implementation of a new product, process
or service, with the aim of improving efficiency, effectiveness or competitive advantage.
Innovation in its modern meaning is "a new idea, creative thoughts, new imaginations in form
of a product or a service.

What are its types

1) Technical Innovation : Technical Innovation is the process of implementing new
ideas, related with practical knowledge or experience, into a productive
process. Technical innovation results in lower production costs or greater value added.

2) Non Technical Innovation: Non-technological innovation is defined as the

introduction of new organisational methods or the introduction of new marketing
methods. ... However, non-technological innovation spurs success with product and
process innovation terms of sales with market novelties and cost reductions from new
processes.

Q.NO what is idea Generation ?

Ans: Idea generation is a creative process businesses use to generate new ideas, whether
they're tangible or intangible. It involves gathering ideas, research, testing, editing or revising,
and ultimately implementing the plan. There are many techniques that can be used.
Sources of idea Generation are as:
1) Customers: ...
2) Distribution Channel Members: ...
3) Competitors: ...
4) Own Sales Force: ...
5) Marketing Research and Advertising Agencies: ...
6) Suppliers & Vendors:
 CHAPTER 5
SELECTION OF AN ENTERPRISE

The various steps involved in the process of selection of an enterprise are as:
Pre-Feasibility analysis: Pre-feasibility study is a preliminary study undertaken to
determine, analyze, and select the best business scenarios. In this study, we assume we
have more than one business scenarios, then we want to know which one is the best,
both technically and financially.
Feasibility Analysis: A feasibility study is an assessment of the practicality of a
proposed project or system. It takes the most suitable project from pre-
feasibilty. A feasibility study is an analysis that takes all of a project's relevant factors
into account—including economic, technical, legal, and scheduling considerations—to
ascertain the likelihood of completing the project successfully.
Business planning and financing: The feasibility analysis discusses the various ways
of the business might operate and weather it is a worthy investment from a financial
point of view .The business plan explains the way the business will actually operate.

Q.NO: What are the main factors in the selection of an Enterprise of an Enterprise ?

1) Investment size :Actually investment size in dependend on the capacity of the

entrepreneur and the ways he/she uses to raise the capital.
2) Location : It plays a vital role in the selection of the entreprise ,location has to
attractive from all the dimentions of the business.
3) Technology: Entrepreneurs must go with a technology which is widely available in the
local market but must aviod the use of old fashioned tools and machines.
4) Marketing : Entrepreneurs must go with a product or a servise in which there is no cut
throat competition .
5) Powe and water: They must start their project in a place where there is sufficient
supply of both power and water.
6) Labour: Labour factor is very much important factor in the process of selection of an
enterprise .
7) Economic Viability : The project started should generate sufficient profits from the
beginning and must ensure regular profitibility.
8) Working capital requitement: entrepreneurs must aviod those projects which require
long operating cycle.
 Q.NO: Explain the planning Commision guidelines ?
In order to process investment proposals are arrive at investment decisions, the
planning commision has issued guidelines for preparing formulating industrial
projects.
These guide lines are as:
 General Information: The feasibility report should include an analysis of the
industry to which the project belongs. ...
 Preliminary Analysis of Alternatives:
 Project Description: ...
 Marketing Plan: ...
 Capital Requirements and Costs: ...
 Operating Requirements and Costs: ...
 Financial Analysis: ...
 Economic Analysis:
 CHAPTER 6
STEPS IN SETTING UP AN ENTERPRISE
Q.NO:1:Steps involved in the setting up of a small Business Enterprise ?
Ans: Steps involved in the process of setting up of a small Business Enterprise are as:
1) Idea of Self employment : first of all unemployed educated youth has to mentall ready
to become a job creater than a job seeker.
2) Analysis of the entrepreneurial opportunity:Entrepreneurs must come out of their
comforts to search and catch opportunities.
3) Project Identification: Then they must select a right project out of the various
alternativies available.
4) Selection of a product: The selection of a right product is again crutial step which an
entrepreneur has to take.
5) Selection of the organization: entrepreneur must think which type of organization
he/she wants to operate.
6) Preparation of a project report: Then a detailed booklet is prepared by him/her which
acts as a road map.
7) Location: then an attractive loctaion is searched for the purpose of starting an
entreprise .
8) Arrangement of finance : Money the life blood of every organization is then arranged
as per the need of the project.
9) Provisional Registration: Then the temporary registration id done for the purpose of
starting a project.
10) Purchase of Machinery : Then the required tools and equipments are purchased.
11) Apply for powe and Water Connection: The entrepreneus has to apply for the
registration of the water and power to the concerned authorities.
12) Recruitement and training: then workers are selected and trained as per the
requirement of the job.
13) Installation of Plant and Machinery: Then the machines purchased are installed in
their respective departments as per the requirement.
14) Purchase of Raw material:The proper arranagements rae made for the purpose of
purchasing the raw material from the selected suppliers.
15)Commencement of work: Then the actual work as per the report is started for the
purpose of converting the raw material into finished goods.
16) Marketing : Then the goods manufactured are marketed in the respective markets
which the entrepreneur has chosen from the demand analysis.
17) Perminant Registration: Then the permanent registration is done as per the law.
18) Profit Generation: And Finally the profits are earned from the selected projects.
Q.NO:2 :Explain the Objectivies of licencing?
The basic objective of licencing is to go give effect to the industrial policy of the Govt.
Some of the other objectivies are as:
1. To regulate the location of the industrial units.
2. To encourage the new Entrepreneurs.
3. To prevent the Monopoly in the market.
4. To protect and promote the small sector Business.
5. Preventing crime and disorder;
6. Securing public safety;
7. Preventing public nuisance;
8. Protecting and improving public health

Q.NO: 3: List of the Industries in which the licencing is compulsary?

List of industries with compulsory licensing
1) Coal and lignite.
2) Petroleum (other than crude) and its distillation products.
3) Distillation and brewing of alcoholic drinks.
4) Sugar.
5) Animal fats and oils, partly or wholly hydrogenated.
6) Cigars and cigarettes of tobacco and manufactured tobacco substitutes.
 CHAPTER NO 8
PREPARATION OF THE PROJECT REPORT
Q.NO 1: what is Project Report?
Ans : A Project Report is a document which provides details on the overall picture of the
proposed business. It is a road map which makes it easier to execute the work in the future. It
contains relevant data, on the basis of which the project has been appraised and found relevant
to the entrepreneur. A project Report is prepared by the expert after detailed study & analysis
of the various aspects of a project.
1) It is primarily a business plan.
2) It explains all essential resources to the entrepreneurial unit.
3) It high lights the goals of the enterprise.
4) It acts like a reference guide .
5) It makes the work easier.
Q.NO.2 : Importance of the Project Report ?
1) Project Report helps you to understand to move ahead and to understand what
is important for future plan success.
2) Project Report will help you in managing the budget which gonna investing in your
business. Complete details will get you from the market. Inviting Professional to
business for planning and presentation.
3) Project reports are valuable tools to both project teams and stakeholders. It provides
several benefits.
4) Through these reports, all those involved are able to track the current progress of
the project and compare it against the original plan.
5) They can identify risks early on, and take corrective action.
Q.NO.3 : What are the various elements of the project Report?
Ans: The various elements that are presented in the project report are as:
1) Brief Profile about the Entrepreneur: it contains the short information about the
entrepreneur like Name, education, Address, experience etc
2) Detail of Entreprise: It will contain information of the name, address,location nature
and size of the enterprise.
3) Economic Viability:it will deal about the quality of product ,needs and requirements
of people and much more.
4) Techinical Feasibility: Project report provides information about the technology and
technical aspects of a project. It covers information on Technology selected for the
project, Production process, capacity of machinery, pollution control plants etc.
5) Financial Projection : It deals with the working and fixed capital estimations.
Q.NO.4 : Formation of a project Report ?
The various steps that are involved in the process of a project report are as:
STEPS IN THE PREPARATION OF A PROJECT REPORT:
General Information Preliminary analysis of alternatives Project Description Marketing Plan
Capital Requirement & Costs Operating Requirement & Costs Financial Analysis Economic
Analysis Miscellaneous analysis
Step 1..General Information.
Step 2: Prelimanary Analysis of Alternativies.
Step 3: Project Description.
Step 4: Marketing Plan
Step 5: Capital Requirement and Costs .
Step 6: Operating Requirements and costs .
Step 7: Financial Analysis.
Step 8 Economic Analysis.

Q.NO.5 What is Project Report Appraisal?

Project appraisal is the structured process of assessing the viability of a project or proposal. It
involves calculating the feasibility of the project before committing resources to it. It is a tool
that company's use for choosing the best project that would help them to attain their goal.
Q.NO.6.What are the elements of the Project Report Appraisal?
Ans : The elements of the project report appraisal are as:
1) The Feasibility Analysis .
2) Techno-Economic Analysis.
3) Project design and network analysis.
4) Input analysis.
5) Finacial Analysis.
6) Social Cost Benefit Analysis
7) Project Appraisal.
 CHAPTER NO 7
BUSINESS PLANNING
Q.NO: Define Business plan?
Ans: The business plan is a comprehensively written down document prepared by the
entrepreneur describing formally all the relevant external and internal elements involved in
starting a new venture. It's a formal statement of a set of business goals, the reasons they are
believed attainable and the plan for reaching those goals along with the background
information about the organization or/and team attempting to reach those goals.
Planning, can thus be defined as "thinking in advance, what is to be done, when it is to be
done, how it is to be done and by whom it should be done."
Q.NO: Define the features of the business planning or Characteristics
of the Business planning?
1) Primary function :It must be the primary function of the entreprise before all other
functions.
2) Focus on Goals: the primary focus of every business planning has to be on the
objectivies of the business.
3) Planning is universal: all business firm weather big or small , urban or rular must do
planning.
4) Intellectual Process: Planning is intellectual process because it depends on
skill,vision,creativeness and imagenation of the entrepreneur.
5) Contineous Process: it is not a one time task but a contineous process .Entrepreneurs
must do plans again and again.
6) Flexible : Planning is a fixible process because we keep on changing the plans as the
environment keeps on changing.
Q.NO: Main principles of the Business planning?
1) Principal of Contributing To objectivies.
2) Principal of meaning ful objectivies.
3) Principal of Key factors.
4) Principal of flexibility.
5) Principal of Rational process.
6) Principal of communication.
7) Principal of adequate control.
Q.NO: What is the importance of planning ?
Ans: 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 –
a) helps in determining the viability of the venture in a designated market
b) 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.
c) helps in satisfying the concerns, queries, and issues of each group of people interested in
the venture.
d) provides room for self-assessment and self-evaluation, requiring entrepreneur to think
through various scenarios and plan ways to avoid obstacles.
e) 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.
f) 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.
Q.What are the various limitations in a busniess plan?
1) Planning is costly: : ...
2) Planning is a time consuming process: ...
3) Planning reduces initiative of employees: ...
4) Reluctance to change: ...
5) Capital invested in fixed assets limits planning: ...
6) Inaccuracy in planning: ...
7) Planning is effected by external limitations:
 CHAPTER NO 9
RESOURCE ASSESSMENT
Q.NO 1 What is a financial resource?
Ans : Financial Resource is the set of liquid assets of an organization, including cash, bank
deposits and liquid financial investments. ... Financial resources are used to carry out the main
operations of the business, like buying goods and services and to carry out long term
investments. Examples of financial resources are as:
A. Money and gold (in cash or in the bank account)
B. Shares.
C. Bonds.
D. Debentures.
E. Promissory notes.
F. Checks.

Q.NO 1 What do you mean by financial resource Assessment?

The Finance Function is a part of financial management. Financial Management is the activity
concerned with the control and planning of financial resources.In business, the finance
function involves the acquiring and utilization of funds necessary for efficient operations.
Finance is the lifeblood of business without it things wouldn’t run smoothly. It is the source to
run any organization, it provides the money, it acquires the money.
Financial Resource Assessment involves the following

 Identify Need of Finance-To starts a business you need to know how much is
required to open it. So, the finance function helps you know how much the initial
capital is, how much of it you have and how much you need to raise.

 Identify Sources of Finance-Once you know what needs to be raised you look at
areas you can raise these funds from. You can borrow or get from various
shareholders.

 Comparison of Various Sources of Finance– After identifying various fund

sources compare the cost and risk involved. Then choose the best source of financing
that suits your business needs.

 Investment-Once the funds are raised it is time to invest them. Investment decisions
should be done in a manner that a business gets higher returns. Cost of funds
procurement should be lower than the return on investment, this will show a wise
investment was made.
 Explain its Non Financial Aspect also?
Financial function of the business is closely related to the financial resources of the business
but at the same time ther are also other resources too in the business which are Non financial
in nature. The relationship between financial and non financial Functions are as:
1) Purchase Function: Material required for the production of commodities should be
procured on economic terms and should be utilised in efficient manner to achieve
maximum productivity.
2) Productivity Function. Production function occupies the dominant position in the
business activities and it is a continuous process.
3) Distribution Function: As goods produced are meant for sale distribution function is
an important business activity.
4) Accounting Function: It is the process of systematic recording of the all the
tranactions on the chronology .
5) Personnel Function: In every organization there must be a powerful personal policies
I,e proper wages, incentives Schemes , promotional opportunity.
6) Researech and development: For innoviations and development R&D has to
collectively work.
Q.NO 2 Explain the importance of financial Resources ?
Finance is the life blood and nerve cenre of a business. Finance is the driving force that
assists in the formation of new businesses, and allows businesses to take advantage of
opportunities to grow, employ local workers and in turn support other businesses and local,
state government through the remittance of income taxes.
Financial Management is so much important because of the following reasons.

1) Helps organisations in financial planning;

2) Assists organisations in the planning and acquisition of funds;
3) Helps organisations in effectively utilising and allocating the funds received
or acquired;
4) Assists organisations in making critical financial decisions;
5) Helps in improving the profitability of organisations;
6) Increases the overall value of the firms or organisations;
7) Provides economic stability;
8) Encourages employees to save money, which helps them in personal
financial planning.
Q.NO: What are the aims of finance function?
Ans: The primary aim of the finance function is to arrange as much funds for the business as
are required from time to time.
This function has the following aims.
 Acquring sufficient funds. The basic aim of the finance function is to make arrange
the required funds used for the business.
 Proper use of resources: The other aim of the function is to make the optimal use of
the collected resources.
 Increase Profitability: The planning and controlling aims of the finance function is to
increase the profitability of the enterprise.
 Maximising the Firm’s value: Finance function also aims at maximising the value of
the firm .
 CHAPTER NO 10
FIXED CAPITAL REQUIREMNT
Q.NO: What is a Fixed Capital ?
ANS: Fixed capital is capital or money that we invest in fixed assets. In other words, money
that we invest in assets of a durable nature. These are assets that we repeatedly use over a long
period.It is alos known as blocked capital.It is the Capital invested in Fixed Assets like land
building, Plant, Machinery ,Furniture ,fittings etc.

Q.NO: What are various sources of a Fixed capital?

The sources of fixed capital or long term finance are:
 Issue of Equity and Preference shares.
 Issue of Right shares.
 Private placement of shares.
 Issue of debentures.
 Term loans.
 Retained earnings.
 Lease financing.
Q.NO: Factors that affet the requirement of a Fixed Capital?
1) The requirement of fixed capital depends upon various factors which are
explained below:
2) Nature of Business: A manufacturing Business requires large Fixed Cpital at the same
time trading business requires very less fixed capital.
3) Scale of Operation: small Business requires less Fixed capital and large corporates and
enterpries requies large fixed capital.
4) Technique of Production: If manufacturing is done by labour then capital requires is
very less but if manufacturing is done by machines then capital required is very high.
5) Technology Up-gradation:Entreprises that work with old fashionized machines and
equipments require low working capital and organizations that work with modern tools
and machines require high working capital.
6) Growth Prospects: Higher growth of an organisation generally requires higher
investment in fixed assets.
7) Diversification: A fim may choose to diversify its operations for various reasons, With
diversification, fixed capital requirements increase
8) Mode of purchasing Assets : If the assets are purhased on credit or installment basis
then capital required is less but if the assets are purchased on cash basis then capital
required is very high
 CHAPTER NO 11
WORKING CAPITAL REQUIREMNT
Q :What is a working capital ?
Ans: Working capital typically means the firm’s holdings of current, or short-term, assets such
as cash, receivables, inventory, and marketable securities. ―It is also know as floating capital,
circulating capital, revolving capital and flctuating capital”.Working capital refers to that
part of firm’s capital which is required for financing short-term or current assets such as cash,
marketable securities, debtors, and inventories. In other words working capital is the amount
of funds necessary to cover the cost of operating the enterprise .
Q: what are the various types of working capital?
1) Gross Working Capital: Gross Working Capital refers to the firm’s investment in
Current Assets. Current assets are the assets, which can be converted into cash within
an accounting year or operating cycle. It includes cash, short-term securities, debtors
(account receivables or book debts), bills receivables and stock (inventory)

2) Net Working Capital: Net Net Working Capital Net Working Capital refers to the
difference between Current Assets and Current Liabilities are those claims of outsiders,
which are expected to mature for payment within an accounting year. It includes
creditors or accounts payables, bills payables and outstanding expenses. Net Working
Capital can be positive or negative. A positive net working capital will arise when
current assets exceed current liabilities and vice versa

3) Permanent working capital: Permanent working capital is the minimum investment

required in working capital irrespective of any fluctuation in business activity.
Regular working capital: minimum level of working capital required to circulate from
one form to another: from cash to inventory, inventory to receivables, receivables to
cash, and so on.

4) Varaible working capital: It is a working capital that keeps on changing as the Business
changes. Variable working capital is that portion of the total capital that is required over
and above the fixed working capital.
 Q : what is the importance of Adequate working capital?
Importance of Working Capital Working capital is the life blood and nerve centre of a
business. Just as circulation of blood is essential in the human body for marinating life,
working capital is very essential to maintain the smooth running of a business. No business
can run successfully without an adequate amount of working capital. The main advantages of
maintaining adequate amount of working capital are as follows:
1. Solvency of the business: Adequate working capital helps in maintaining solvency of the
business by providing uninterrupted flow of production.
2. Goodwill: Sufficient working capital enables a business concern to make prompt payments
and hence helps in creating and maintaining goodwill.
3. Easy Loans: A concern having adequate working capital, high solvency and good credit
standing can arrange loans from banks and other on easy and favourable terms.
4. Cash discounts: Adequate working capital also enables a concern to avail cash discounts
on the purchases and hence it reduces costs.
5. Regular supply of raw materials: Sufficient working capital ensures regular supply of raw
materials and continuous production.
6.Regular payment of salaries, wages and other day-to-day commitments: A company
which has ample working capital can make regular payment of salaries, wages.
7. Exploitation of favourable market condition: Only concern with adequate working
capital can exploit favourable market conditions such as purchasing its requirements in bulk
when the prices are lower and by holding its inventories for higher prices.
8. Ability to face crisis: Adequate working capital enables a concern to face business crisis in
emergencies such as depression because during such periods, generally, there is much
pressure on working capital.
10. High morale: Adequacy of working capital creates an environment of security,
confidence, and high morale and creates overall efficiency in a business.
Q :What are the various sources of working capital?
Ans:
Sources of Temporary Working Capital:

1) Indigenous Bankers: ...

2) Trade Credit: ...
3) Commercial Banks: ...
4) Installment Credit: ...
5) Advances: ...
6) Factoring/Account Receivable Credit:
Q: what are the various factors that affect the working capital requirement ?
Ans: The working capital requirement of a concern depends upon a large numbers of factors
such as :
 Nature or Character of Business: The working capital requirement of a firm basically
depends upon the nature of this business.
 Size of Business/Scale of Operations: The working capital requirement of a concern is
directly influenced by the size of its business which may be measured in terms of scale
of operations
 Production Policy: In certain industries the demand is subject to wide fluctuations due
to seasonal variations.
 Manufacturing Process/Length of Production Cycle: In manufacturing business the
requirement of working capital increases in direct proportion of length of manufacturing
process. Longer the process period of manufacture, larger is the amount of working
capital required.
 Rate of Stock Turnover: A firm having a high rate of stock turnover will need lower
amount of working capital as compared to affirm, having a low rate of turnover.
 Credit Policy: The credit policy of a concern in its dealing with debtors and creditors
influence considerably the requirement of working capital.
 Rate of Growth of Business: The working capital requirement of a concern increase
with the growth and expansion of its business activities.
 Price Level Changes: Changes in the price level also effect the working capital
requirement