V semester B.

Com examination, December 2009

(Semester scheme)(New)
COMMERCE (Paper-5.3)
Entrepreneurship Development Programme
Time : 3 hrs max. marks:90

SECTION-A
1. Answer any 10 sub-questions. Each sub question carries 2 marks
(10x2=20)
a) What does ED mean?
Entrepreneurship is the process of starting a business or other organization.
The entrepreneur develops a business plan, acquires the human and other required resources,
and is fully responsible for its success or failure.

b) What is business opportunity?

A business opportunity (or bizopp) involves sale or lease of any product, service,
equipment, etc. that will enable the purchaser-licensee to begin a business.
c) What is Seed Capital?
Money used for the initial investment in a project or startup company

d) What is an 'Industrial Policy'?

Government policy to influence which industries expand and, perhaps implicitly,
which contract, via subsidies, tax breaks, and other aids for favored industries.

e) Define the term 'Entrepreneur'.

a person who sets up a business or businesses, taking on financial risks in the hope of profit.

f) What is a project?
It is defined as a typically has a distinct mission that it is designed to achieve and a
clear termination point, the achievement of the mission.

g) What do you mean by Sick Industrial Unit?

Industrial company(being a company registered for not less than five years) which
has at the end of any financial year accumulated loss equal to or exceeding its
entire net worth and which has also suffered cash losses in such a financial year
immediately preceding such financial year.

h) Expand i)KVIC ii) EDI.

Khadi and Village Industries Commission
Entrepreneurship development india

i) Mention any two advantages of a Joint Stock Company form of

organization.
1. Limited Liability : Liability of members of Joint Stock Company is limited to the extent of shares held
by them. Hence shareholders assets will not be on stake. This feature attracts large number of investors
to invest in the company.
2. Perpetual Existence : A company is an artificial legal person created by law which has its own
independent legal status. Its existence is not affected by the death or insolvency of its members.
3. Large Scale Operation : The capacity of the corporate organizations to raise the funds is
comparatively high which provide capital for large scale operations. Hence opens the scope for
expansion.
4. Transferability of Shares : In a joint stock company it is easy to transfer shares to anyone. But the
same is not permitted to private limited company.
5. Raising of Funds : It is easy to raise a large amount of funds as the number of persons contributing to
the capital are more.
6. Social Benefit : It offers employment to a large number of people. It facilitates promotion of various
ancillary industries. It also donates money for education, community service.
7. Research and Development : It invests a lot of money on research and development for improved
production process, improving quality of product, designing and innovating new products etc.
Disadvantages of Joint Stock Company:
1. Formation is not easy : To act as a legal entity a company has to fulfill various legal and procedural
formalities making it a complicated process.

2. Double Taxation : This is the biggest disadvantage which the company faces. Firstly, company needs
to pay tax for the earned profits and again the shareholders are taxed for the earned income.
3. Control by Board of Directors : After electing directors of the company which manage the business
for the company the shareholders become ignorant of their responsibilities. This may be due to lack of
interest and lack of proper and timely information.
4. Excessive Government Control : A company has to comply with provisions of several acts, noncompliance of which can cause a company heavy penalty. This affects the smooth functioning of a
company.
5. Delay in Policy Decisions : All the legal and procedural formalities which are required to fulfill before
making policies of the company delay the policy decisions.
6. Speculation and Manipulation: As the shares of a joint stock company are easily transferable thus
the shares are purchased and sold in the stock exchanges on the value or price of a share based on the
expected dividend and the reputation of the company.

j) What is meant by a business plan?

DEFINITION of 'Business Plan' A written document that describes in detail how a
new business is going to achieve its goals. A business plan will lay out a
written plan from a marketing, financial and operational viewpoint.
k) Mention any four types of Entrepreneurs.

The 4 different types of entrepreneurs:

1.
2.

The Traditional Entrepreneur

The Growth Potential Entrepreneur

3.

The Project-Oriented Entrepreneur

4.

The Lifestyle Entrepreneur

Overview of the 4 types of entrepreneurs

1.

Traditional businesses are those ones that have been around for many years; restaurants, shops,
carpenters, hair dressers, mechanics and other companies that help the local community function.

2.

A growth potential business typically works with software development, applications for smart
phones and tablets, consulting, communication and marketing, development of medical equipment,
business intelligence. The really good ones are scalable.

3.

The project oriented businesses are typically owned by well-educated entrepreneurs and they
work with tasks close to their education. Fx: translation, design of concepts, exhibitions at museums, they
are graphic designers, authors, psychologist, film makers, textile designers ...

4.

The lifestyle entrepreneur doesnt have an education as a basis for starting the company. It is a
"con amora business for love of the idea/service. The life style entrepreneur might be selling Aloe Vera
or slimming products, be a glass artist, childrens book author, do painting therapy, sell coaching or aura
interpretation.

l) Mention any two functions of a business plan.

to make the aim of your business clear.
to show the predicted expenditure of your business.
to display how much profit you are intending to make.
SECTION-B
Answer any five of the following. Each question carries 5 marks.
2. Explain the functions of Entrepreneur.
1. Planning
This is the first step in setting up an enterprise. The planning process involves:

Scanning for the best suitable idea

Selection of the product line

Determining the type of business organization (individual or partnership or

corporate)

Estimation of capital resources

Selection of location/site

Studying the government policies and regulations

Studying the availability of labour force

Studying of the market and marketing strategy to be adopted

2. Organization
An entrepreneur co-ordinates, assembles and supervises other factors of production
- land, labour and capital during the promotion and performance stage for optimum
utilization of resources.

3. Decision-making
As a decision maker, an entrepreneur takes various decisions regarding the
following matters:

Determining the objectives of the business enterprise

Procurement of machinery, material, men, etc

Acquisition of efficient technology and new equipment

Development of a market for the product

4. Management
This involves the operations of the venture and managing of day-to-day activities.
It involves direction of men, machine, material and other resources.
5. Innovation
This may involve:

Launching of a new product on the market

Introduction of new technology in production

Creation of new markets

Discovery of new and better sources of raw materials

6. Risk bearing
An entrepreneur undertakes the responsibility for loss that may arise due to un
foreseen circumstances in the future.
7. Uncertainty bearing
There are some risks which cannot be insured against and incalculable, for example
uncertain trends in the market.

3. Discuss the merits of partnership.

Advantages of Partnership

Capital Due to the nature of the business, the partners will fund the business with
start up capital. This means that the more partners there are, the more money they can

put into the business, which will allow better flexibility and more potential for growth. It
also means more potential profit, which will be equally shared between the partners.

Flexibility A partnership is generally easier to form, manage and run. They are less
strictly regulated than companies, in terms of the laws governing the formation and
because the partners have the only say in the way the business is run (without
interference by shareholders) they are far more flexible in terms of management, as
long as all the partners can agree.

Shared Responsibility Partners can share the responsibility of the running of the
business. This will allow them to make the most of their abilities. Rather than splitting
the management and taking an equal share of each business task, they might well split
the work according to their skills. So if one partner is good with figures, they might deal
with the book keeping and accounts, while the other partner might have a flare for sales
and therefore be the main sales person for the business.

Decision Making Partners share the decision making and can help each other out
when they need to. More partners means more brains that can be picked for business
ideas and for the solving of problems that the business encounters.

Disadvantages of Partnership

Disagreements One of the most obvious disadvantages of partnership is the danger

of disagreements between the partners. Obviously people are likely to have different
ideas on how the business should be run, who should be doing what and what the best
interests of the business are. This can lead to disagreements and disputes which might
not only harm the business, but also the relationship of those involved. This is why it is
always advisable to draft a deed of partnership during the formation period to ensure
that everyone is aware of what procedures will be in place in case of disagreement and
what will happen if the partnership is dissolved.

Agreement Because the partnership is jointly run, it is necessary that all the partners
agree with things that are being done. This means that in some circumstances there are
less freedoms with regards to the management of the business. Especially compared to
sole traders. However, there is still more flexibility than with limited companies where
the directors must bow to the will of the members (shareholders).

Liability Ordinary Partnerships are subject to unlimited liability, which means that
each of the partners shares the liability and financial risks of the business. Which can be

off putting for some people. This can be countered by the formation of a limited liability
partnership, which benefits from the advantages of limited liability granted to limited
companies, while still taking advantage of the flexibility of the partnership model.

Taxation One of the major disadvantages of partnership, taxation laws mean that
partners must pay tax in the same way as sole traders, each submitting a Self
Assessmenttax return each year. They are also required to register as self employed with
HM Revenue & Customs. The current laws mean that if the partnership (and the
partners) bring in more than a certain level, then they are subject to greater levels of
personal taxation than they would be in a limited company. This means that in most
cases setting up a limited company would be more beneficial as the taxation laws are
more favourable (see our article on the Advantages and Disadvantages of a Limited
Company).

Profit Sharing Partners share the profits equally. This can lead to inconsistency where
one or more partners arent putting a fair share of effort into the running or
management of the business, but still reaping the rewards.

4. Explain the advantages of a business plan.

1, You'll be able to tell if you are likely to make any profit
2, You'll know how much you will need to make in order to live
3, You'll be forced to see if this really is a workable business or not
4, You'll have a blue print to spot problems early and before they turn into business threatening problems
particularly in the first couple of years
5, If you want finance banks or investors will want to see what they can expect from your business this
helps them keep an eye on their investment

5. Explain the stages of project planning.

Projects are divided into six stages:
1.

Definition.

2.

Initiation.

3.

Planning.

4.

Execution.

5.

Monitoring & Control.

6.

Closure.

Each project stage is characterised by a distinct set of activities that take the project from the first idea to
its conclusion. Each stage is of equal importance and contributes to the overall success of the project.
1. Definition

Before a project starts the project manager must make sure the project goals, objectives, scope, risks,
issues, budget, timescale and approach have been defined. This must be communicated to all the
stakeholders to get their agreement. Any differences of opinion must be resolved before work starts.
2. Initiation

This is perhaps the most important stage of any project as it sets the terms of reference within which the
project will be run. If this is not done well, the project will have a high probability of failure. The
initiation stage is where the business case is declared, scope of the project decided and stakeholder
expectations set. Time spent on planning, refining the business case and communicating the expected
benefits will help improve the probability of success. It is tempting to start work quickly, but a poor
initiation stage often leads to problems and even failure.
3. Planning

The key to a successful project is in the planning. Creating a project plan is the first task you should do
when undertaking any project. Often project planning is ignored in favour of getting on with the work.
However, many people fail to realise the value of a project plan in saving time, money and for avoiding
many other problems.
4. Execution

This is where the work to deliver the product, service or wanted result is carried out. Most of the work
related to the project is realised at this stage and needs complete attention from the project manager.
5. Monitoring & Control

Once the project is running it is important the project manager keeps control. This is achieved by regular
reporting of issues, risks, progress and the constant checking of the business case to make sure that the
expected benefits will be delivered and are still valid.

6. Closure

Often neglected, it is important to make sure the project is closed properly. Many projects do not have a
clear end-point because there is no formal sign-off. It is important to get the customers agreement that the
project has ended, and no more work will be carried out. Once closed, the project manager should review
the project and record the good and bad points, so that in the future, successes can be repeated, and
failures avoided. A project that is not closed will continue to consume resources.

6. Explain the different symptoms of sickness.

Shortage of cash

Deteriorating financial ratios

Continuous decline in prices of the shares

Moral degradation of employees

Frequent request to banks and financial institutions

7. Mention the role of D.I.C. in the development of Small Scale Industry.

8. Explain the objectives of State Finance Corporation.
9. What is an Industrial Estate? Explain briefly any four of its objectives.
an area of land developed as a site for factories and other industrial businesses.

SECTION-C
Answer any three of the following. Each question carries 15 marks.

10. Explain the qualities of a Successful Entrepreneur.

Entrepreneurs tend to:
be passionate about achieving their goals
have a spirit of adventure (in fact, the word "adventure" is derived from the Latin word meaning "to
venture")
have a strong need to achieve and seek personal accomplishment
be self-confident and self-reliant
be goal-oriented
be innovative, creative, and versatile
be persistent
be hardworking and energetic
have a positive attitude
be willing to take initiative
have a strong sense of commitment
An eye for opportunity: Many entrepreneurs start by finding a need and quickly satisfying it.
Independence: Even though most entrepreneurs know how to work within the framework for the sake
of profits, they enjoy being their own boss.
An appetite for hard work: Most entrepreneurs start out working long, hard hours with little pay.
Self-confidence: Entrepreneurs must demonstrate extreme self-confidence in order to cope with all the
risks of operating their own business.
Discipline: Successful entrepreneurs resist the temptation to do what is unimportant or the easiest but
have the ability to think through to what is the most essential.
Judgment: Successful entrepreneurs have the ability to think quickly and make a wise decision.

11. Explain the factors affecting Entrepreneurial growth.

Factors affecting Entrepreneurship growth:

1. Economic factors
2. Social factors
3. Cultural factors
4. Personality factors
5. Psychological and sociological factors.
Economic Factors:
Lack of adequate basic facilities
Non- availability of capital
Non- availability of raw materials and finished goods.
Greater risk involved in business
Non- availability of skilled labour

Social factors
Customs and traditions
Rationality of the society
Social system
Social set-up
Personality Factors
Suspect personality
Emergence of planning
Psychological
Need Achievement
Withdrawal of Status Respect

12. Explain the importance of small scale industries in an economy.

Employment generation
Mobilisation of resources and entrepreneurial skill:
Equitable distribution of income:
Regional dispersal of industries:
Provides opportunities for development of technology:

13. Discuss the various steps involved before commencing a business.

1.

Do your market research: Just because you build it or sell it doesn't necessarily mean
anyone will buy it. The first essential step is to research your potential market. Who needs what
you are offering? Is there space for your product or service in the market or is the market
saturated? Is the market national? Is it a niche? Can you define your ideal customers? These
are all questions that need to be answered before you even consider starting a business. Too
many entrepreneurs have found out the hard way that there was not enough market share for
them to capture. Others have realized that their target market audience was far too limited to
make their business work.

2.

Show yourself the money: You can't start a business without capital. Determine what
you have, what you will need and how you will go about getting it. If you plan to seek investor
funding or financing, start writing a business plan and practice your pitch. Research the costs
associated with your business. Know how much money you'll need and decide where it could
come from.

3.

Hire a good business attorney: You don't necessarily need to have an attorney on a
retainer, but you'll want to hire an attorney experienced with new businesses to help you get
started. Your attorney can advise you about such things as drafting contracts, reviewing your
lease and determining the right business structure. "A good attorney will know what it is that you
are trying to do and help you structure your business in a way that will be beneficial to you,"
says Chris Talis, senior partner at Hedgerow Mergers Acquisitions in Teaneck, N.J. The best
way to find a good attorney is by referral or through networking.

4.

Hire a good accountant: An accountant will work in conjunction with your attorney and
be instrumental in determining the best form of ownership. He can also help you establish
bookkeeping and other record keeping procedures that can keep you on track for years. Most
important, a good accountant will help with tax planning. "You will also want an accountant who
understands the state laws, since every state has its own little intricacies, such as sales tax
issues," Talis says, adding that it's important for your accountant to be familiar with startup
ventures.

5.

Decide on a business structure: Your choices include sole proprietorship, partnership,

corporation, "S" corporation or limited liability corporation (LLC). Personal liability, taxes,
paperwork and regulations vary greatly among the different legal business structures. Your
attorney and accountant will play a key role in assisting you in this important decision.

6.

Decide on a business name: It may seem obvious and simple, but the name is how
your business will be known to the world. The right name says a lot about your company. Make
a list of potential names and narrow the list down to the one that best describes your company
in a few words, while being catchy, easy to remember, easy to pronounce and easy to spell. You

should also consider how it will translate to a web domain name. You'll also need to do research
to see if there are a) similar business names and b) similar domain names.
7.

Get all necessary licenses and permits: Along with a business license, you may need
to get additional licenses depending on the type of business and local laws. Many professionals,
such as contractors and real estate agents, need to be licensed in the states in which they work.
Additionally, you may need licenses to manufacture and/or sell specific products such as liquor,
firearms or even lottery tickets. Research all licenses applicable in your county and your state.
It's also extremely important to know the zoning laws before you open a business. Don't assume
the zoning laws don't apply to you. You can get information on zoning from your local county
clerk's office.

14. What are the causes of Industrial Sickness?

External Causes
1) Govt. policy
2) Erratic Supply of Inputs
3) Demand & credit restraints
4) Technological Factors
5) Power Cuts
Internal Causes
1) Out dated Technology
2) Financial Problem
3) Management problems
4) Labour Problem
5) Marketing & Sickness