Entrepreneurial Planning Class 12 Entrepreneurship Exam Questions

Please refer to the Entrepreneurial Planning Class 12 Entrepreneurship Exam Questions provided below. These questions and answers for Class 12 Entrepreneurship have been designed based on the past trend of questions and important topics in your class 12 Entrepreneurship books. You should go through all Class 12 Entrepreneurship Important Questions provided by our teachers which will help you to get more marks in upcoming exams.

Class 12 Entrepreneurship Exam Questions Entrepreneurial Planning

Class 12 Entrepreneurship students should read and understand the important questions and answers provided below for Entrepreneurial Planning which will help them to understand all important and difficult topics.

VERY SHORT ANSWER TYPE QUESTIONS 

Question.  What is break even analysis?
Answer: The break even analysis is a process of determining a point where firm neither makes profit nor a loss. At this point the total revenue is equal to the total cost of a firm at the given level of capacity.

Question.  How many formats are available to design a successful business plan?
Answer: Three or four formats are available to design a successful business plan.

Question. What is TAN?
Answer: TAN or Tax Deduction and Collection Account Number is a 10 digit alpha numeric number required to be obtained by all persons who are responsible for deducting or collecting tax.

Question. What is meant by a target market?
Answer: Target market refers to the specific group of potential customers whose needs the enterprise aims to fulfil.

SHORT ANSWER TYPE QUESTIONS I

Question. What is a production plan?
Answer: Production plan is the planning of industrial operations involves four considerations, namely, what work shall be done, how the work shall be done and lastly, when and by whom the work shall be done. Production being a highly complex and tedious process in nature, the manufacturing operations needs to be well planned through production plan.

Question.  How many services of funds are there for arranging the fund for business enterprises?
Answer: Sources of funds for business for any enterprise are from:
(i) Owners i.e. Owner’s funds
(ii) Outsiders i.e. borrowed fundsC.

SHORT ANSWER TYPE QUESTIONS-II 

Question. Briefly, explain the objectives of operational plan.
Answer: Following are the objectives of operation plan:
(i) Advance production: For production in advance of operations,
(ii) Exact route: Establishing the exact route of each individual item, part of assembly,
(iii) Dates: Setting, starting and finishing dates for each important assignment/ work.
(iv) Orderly movement of goods:Regulating the orderly movement of goods through the entire manufacturing cycle i.e. right from procurement of all materials to the shipping of finished goods.

Question. What is PAN? Why is it required?
Answer: Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by the Income Tax Department. It is required because it enables the department to link all transactions of the enterprise with the department. These transactions include tax payments, TDS/ TCS credits, returns of income/wealth/ gift/FBT, etc.

LONG ANSWER TYPE QUESTIONS 

Question. What are the key areas to work a sound financial plan?
Answer: Following are the key areas to work a sound financial plan:
(i) Financial requirements
(ii) Sources of raising funds
(iii) Exact assessment of the revenue, cost, profits, cash flow dynamics, stock of inventory loans, etc.

Question. Define organisational plan. A business can clarified in how many categories?
Answer: Organizational plan is a part of the business plan that describes the proposed venture’s form of ownership. Business can be classified as:
(i) Manufacturing business—making of a tangible product.
(ii) Wholesale business—buying of products in bulk from the manufacturers to be sold in smaller lot to retailers.
(iii) Retail business—selling product directly to the final consumer for finalsatisfaction.
(iv) Service business—selling intangible such as time or expertise.

Question. What are the major financial items that should be included in the financial plan?
Answer: Following are the major financial items that should be included in the financial plan:
(i) Proforma Investment Decisions
(ii) Proforma Financing Decisions
(iii) Proforma Income Statements
(iv) Proforma Cash Flow
(v) Proforma Balance Sheet
(vi) Break-even analysis
(vii) Economic and Social Variables

VERY LONG ANSWER TYPE QUESTIONS

Question. What is a financial plan? What are its objectives?
Answer: Financial plan is a process of determining firm’s financial needs or goals for the future and the means to achieve them. Objectives of financial plan:
(i) To assess the amount of finance needed by enterprise.
(ii) To develop suitable capital structure for the enterprise.
(iii) To make the policies related with the finance for the enterprise.
(iv) To safeguard the enterprise for financial risk.

Question. Explain in detail the various formalities required to start a business. Or Aman has decided to start a small leather belt manufacturing unit. He is not aware of the various formalities involved in the process of setting up the unit. Explain to him the procedure.
(HOTS)
Answer:Various formalities for starting a business in India include the following :
(i) Obtain PAN Number from Income Tax Department:
(a) Permanent Account Number (PAN) a ten-digit alphanumeric number, issued by the Income Tax Department enables the department to link all transactions of the person with the department.
(b) These transactions include tax payments, TDS/TCS credits, returns of income/wealth/gift/FBT, specified transactions, etc.
(c) It is mandatory to quote PAN in all documents related to financial transactions like sale or purchase of any immovable property valued at five lakh rupees or more, sale or purchase of a motor vehicle or vehicle, a time deposit, exceeding fifty thousand rupees, with a banking company, a deposit, exceeding fifty thousand rupees, in any account with Post Office Savings Bank, a contract of a value exceeding one lakh rupees for sale or purchase of securities, etc.
(ii) Open a Current Account in any Commercial Bank:
(a) Any person(s) competent to contract and satisfactorily introduced to the Bank may open an account in his/her own name.
(b) Accounts can be opened for sole proprietorship firms, partnership firms, private limited and public limited companies, Joint Hindu families, trusts, clubs, associates, etc.
(c) Accounts can be opened by minors of 14 years and above, if able to read and write, (a) Various documents related to firm are also to be provided.

(iii) Register a Limited Liability Partnership (LLP): Limited Liability Partnership (LLP)

(a) The Limited Liability Partnership (LLP) is an alternative corporate business vehicle which provides the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.
(b) The LLP form enable entrepreneurs, professionals and enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles suited to their requirements.
(c) It is governed by the provisions of the Limited Liability Partnership Act, 2008.
(d) TO register an Indian LLP, firstly apply for a Designated Partner Identification Number (DPIN), which can be done by filing e-Form.
(e) Acquire the Digital Signature Certificate (DSC) and register the same on the portal. This is the only secure and authentic way that a document can be submitted electronically.
(f) All filings done by the LLP(s) are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.
(g) Thereafter, entrepreneur need to get the LLP name approved by the Ministry.
(h) Once the LLP name is approved, entrepreneur can register the LLP by filing the incorporation form.

(iv) Register Company (Pvt. Ltd/ Public Limited Company): The following steps are involved in incorporating a private

or public company in India:
(a) Name of the Business Entity
(b) Register for e-filing at MCA (Ministry of Corporate Affairs) portal
(c) Apply for Director Identification Number (DIN)
(d) Obtain Digital Signature Certificate (DSC)
(e) Register DSC at MCA website
(f) Apply for approval of the name of the company
(g) F ormulate Memorandum of Association
(h) Formulate Articles of Association
(i) Verify, Stamp & Sign Articles of Association
(j) Verify the various forms required for incorporation of company

(v) Register for Service Tax:

(a) Service tax, an indirect tax, which normally the service provider pays the tax and recovers the amount from the recipient of taxable service.
(b) Normally, the person who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government.
(c) In the following situations, the receiver of the services is responsible for the payment of Service tax:
• Where taxable services are provided by Foreign Service providers with no establishment in India, the recipient of such services in India is liable to pay Service Tax.
• For the services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be paid by the Insurance Company.
• For the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight is liable to pay Service Tax, if the consignor or consignee falls under any of the seven categories viz. a factory, a company, a corporation, a society, a co-operative society, a registered dealer of excisable goods, a body corporate or a partnership firm.
• For the taxable services provided by Mutual Fund Distributors in relation to distribution of Mutual Fund the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.

(vi) Register for VAT/Sales Tax:

(a) VAT is a tax on the final consumption of goods or services and is ultimately borne by the consumer.(b) The State Governments, through Taxation Departments, are carrying out the responsibility of levying and collecting VAT in the respective States.
(c) The Central Government is playing the role of a facilitator for the successful implementation of VAT.(d) The entire design of VAT with input tax credit is crucially based on documentation of tax invoice, cash memo or bill.
(e) Every registered dealer, having turnover of sales above an amount specified, needs to issue to the purchaser serially numbered tax invoice with the prescribed particulars.
(f) This tax invoice is to be signed and dated by the dealer or his regular employee, showing the required particulars.
(g) For identification/registration of dealers under VAT, the Tax Payer’s Identification Number (TIN) is used. Sales Tax: Sales tax is levied on the sale of a commodity, which is produced or imported and sold for the first time. If the product is sold subsequently without being processed further, it is exempt from sales tax. It is levied under the authority of both Central Legislation (Central Sales Tax) and State Governments Legislations (Sales Tax). Some states also levy additional tax, surcharge, turnover tax, etc. Sales tax is recovered from the buyer as a part of consideration for sale of goods.
Under state Sales Tax ID number entrepreneur(s) collect and pay tax for any service or product sold, which, qualifies for taxation in the state.

(vii) Excise Duty (If Applicable): Excise duty is a tax on manufacture or

production of goods. “State Excise” duty and “Central Excise” duty are the two type of excise duty which are to be paid to state government and central government respectively. Subject to specified conditions, generally the following categories of persons are required to get themselves registered with the Central Excise department. Subject to specified conditions, the various categories of persons need not obtain Central Excise registration. Apply to the nearest Central Excise Division Office in Form A.l along with a self-attested copy of the PAN issued by the Income Tax Department. After post verification, a regular Registration certificate in form RC is normally issued immediately.

(viii) Shop and Establishment Act: Shop and Establishment Act is to provide statutory obligation and rights to employees and employers in the unorganised sector of employment, i.e., shops and establishments. Shops and Establishment Act is a State Act and therefore State specific Shops and Establishment Rules should be followed for getting knowledge on registration and maintenance of different registers.

(ix) Customs Duty: Customs Duty is levied on goods imported into India as well as on goods exported from India. Taxable event is import into or export from India.

(x) File Entrepreneurship Memo-randum at DIC (Optional): Entrepreneur may File Part I of Entrepreneurs Memorandum to the District Industries Centre. This may be necessary for claiming certain incentives/subsidies and for certain formalities at the state level.
(xi) Apply for TAN: All persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN.

(xii) Permissions required at the Construction Stage: Following permissions are required to be obtained from the government:
(a) Application for plot/shed, offer letter etc, Allotment of plot/shed, payment of balance occupancy price, taking over possession thereof, Application for issuance of NOC/ SSI registration, Execution of Lease Agreement, Application for grant of connection for construction water, Application for grant of connection for construction power.
(b) Post Construction Clearances: It includes: Building completion/ drainage completion/tree plantation certificate, Permission for mortgage, NOC from Pollution Control Board, Final Fire clearance, NOC from Environment department, Industrial safety permit, Sanction of permanent power, Sanction of permanent water and sewerage connection.

(xiii) Employee’s Provident Fund:Applicable for establishments employing 20 or more persons and engaged in industry

(xiv) Employee’s State Insurance (ESI) Scheme: The Act is applicable to non-seasonal factories employing 10 or more persons and is extended to shops, hotels, restaurants, cinemas including preview theatres, road- motor transport undertakings and newspaper establishments employing 20 or more persons.

VALUE BASED QUESTIONS

Question. An individual wants to start an enterprise that manufactures steam iron which can be imported from Germany. The material available in Germany is a little better in quality. However, there are no safety issues with the one available in India which material would you go for and why? (Social responsibility, import substitution).
Answer: As an entrepreneur I will go for the material available in India. This is because:
(i) It is the social responsibility of the entrepreneur to go for the betterment and the development of the country.
(ii) This will also mean that the entrepreneur is going for import -substitution. This will save the precious foreign exchange for the country.
(iii) National awareness value will be reflected here. It means that the entrepreneur is aware about the national problem.
(iv) By import substitution he will be fulfilling the requirement of the people, indicating that he cares for the society and the problems of the people.

Question. While doing the manpower planning an entrepreneur decides to keep less qualified manpower and give them low wages and salaries to enable higher profits. Do you think his approach is correct and justified? Why?
Answer: No, this approach of the entrepreneur is incorrect. This is because:
(i) In such situation he will not be utilising the resources fully and this will mean more likely wastage of the resources.
(ii) Entrepreneur will be not fulfilling his responsibility of doing social service.
(iii) He will not be doing social justice as he will be exploiting the people for his selfish motive. (iv) He is also not following self control. Self control is a essential trait for the long term success of the enterprise.

Question. You are an entrepreneur who is deciding the operational plan for your business. While deciding for the technology to be used, you come across two alternatives:
(i) Use a cheaper technology which lets you dispose off the waste water and lets you fix the price of your product low. (ii) Use a technology that is a little expensive as it lets you recycle that waste water into water fit for drinking. In this case you will have to fix the price a little higher in order to earn profits. (iii) Use the technology that recycles the waste, do not change the price. And go about cost cutting though efficient utilization of resources. Give reasons for your selection of alternative.
Answer: As an entrepreneur I will go for the third alternative i.e. alternative £c’. This is because of following:
(i) It indicates the efficient utilization of resources.
(ii) It will also mean proper utilisation and re-utilisation of resources. It showsthe entrepreneur’s concern for environment.
(iii) This step indicates that the entrepreneur is aware of his responsibility as a mark of citizenship.
(iv) This step reflects the resourse fullness trait of the entrepreneur.

Question. Raghav, an entrepreneur realises that the enterprise he wants to start has a potential risk of fire because the production process poses such a threat. Should he develop strategies to:
(i) Prevent the risk
(ii) Respond to the risk
(iii) Prevent as well as respond to the risk? Give reasons.
Answer: Raghav should prevent as well respond to risk. This is because of following reasons:
(i) Initiative: This will reflect that he is ready to take initiative which is an essential trait for a successful entrepreneur.
(ii) Creative: This will indicate that the entrepreneur is creative which will mean that the entrepreneur will have more chances of being successful in future.
(iii) Discipline: Prevention and responding will require the entrepreneur to be disciplined. This will inculcate the disciplined environment in the enterprise.
(iv) Compassion: Passion is what required by an entrepreneur for the growth and development of the enterprise

  VERY SHORT ANSWER TYPE QUESTIONS

Question. What is Inspection?
Answer: Inspection is the art of comparing materials, product or performance with established standards.

Question.‘Where have we been’, this question focuses on what aspects of marketing plan of a new venture?
Answer: It focuses on some history of the market place, marketing strengths and weaknesses of the new venture and market opportunities and threats.

Question. What is Shipping?
Answer: Shipping is a process that describes the flow of goods/services from production to the consumers.

Question. A financial plan is a projection of which financial data?
Answer: Financial plan is a projection of key financial data about:
(i) The potential investment commitment needed for the new venture, and
(ii) Economic feasibility of the enterprise.

Question. What is of paramount importance for the success of any organization?
Answer: Human resource is of paramount need for the sucess of any organsation.

Question. What is PAN?
Answer: Permanent Account Number (PAN) is a ten-digit alphanumeric number, issued by the Income Tax Department.

Question. What does manpower planning ensures?
Answer: Manpower planning ensures that enterprise has the right number of people, and the right kind of people with appropriate skills, at the right place and the right time to do work for which they are economically most suitable.

Question. What is Follow-up?
Answer: Follow-up or expediting function relates to evaluation and appraisalof work performed

Question. An organisation’s performance and productivity is directly proportional to what?
Answer: An organisation’s performance and resulting productivity are directly proportional to the quantity and quality of its manpower.

Question.  What is Dispatching?
Answer: The process of initiating production in accordance with preconceived production plan is said to be dispatching. 

Question. The question ‘Where do we want to go’ addresses to which thing on an enterprise?
Answer: This primarily addresses the marketing objectives and goals of the
enterprise in the next twelve months or the near future. 

Question. What is abatement cost?
Answer: Abatement costs is the cost of controlling the environmental damage by a firm.

Question. Define Planning.
Answer: Planning, is 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.

Question. What is Scheduling?
Answer: Scheduling means fixation of time, day, date when each operation is to be commenced and completed. In general, it’s the determination of the time that should be required to perform each operation.

Question. Define co-operative as per the Indian Co-operative Societies Act, 1912.
Answer: The Indian Co-operative Societies Act, 1912 defines co-operative in Section 4 as, “Society which has its objectives of the promotion of economic interests of its members in accordance with co-operative principle.”

Question. What is a service tax?
Answer: Service tax is a tax on Services and is levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994.

Question. What lends credibility to the potential success of the new venture.
Answer: Reasonable profit with conservative estimates lends credibility to the potential success of the new venture.

Question.  What is the difference between Profit and Cash flow?
Answer: Sales minus expenses, is profit whereas cash receipts minus cash payments, is cash flow.

Question. What is Custom duty?
Answer: Custom Duty is a type of indirect tax levied on goods imported into India as well as on goods exported from India.

Question .In general, the financial plan will need how many years of projected financial data to satisfy any outside investors?
Answer: The financial plan will need three years of projected financial data to satisfy any outside investors.

Question .. How to procure personnel? Or How can an enterprise procure personnel?
Answer: Any enterprise can procure personnel through: (a) Recruitment (b) Selection (c)Training.

Question. What is the objective of Human resource plan?
Answer: Procurement of “Right man, at right job, at right time” is the objective of Human Resource plan.

Question. Who is liable to pay service tax?
Answer: Normally, the person who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government. 

Question. Who must apply for TAN?
Answer: All those persons who are required to deduct tax at source or collect tax at source on behalf of Income Tax Department are required to apply for and obtain TAN. 

Question. What is production?
Answer: Production is transformation of raw material into finished product with the help of energy, capital, manpower and machinery.

Question. What is VAT?
Answer: VAT is a system of taxation, in which tax is levied on value addition at each stage of transaction in the production/’ distribution chain.

Question. Distinguish between ‘Sales Tax’ and ‘Excise Duty’.
 Answer: Sales tax is levied on the sale of the commodity which is sold for the first time. Excise duty is a tax on manufacture/ production or import of goods.

Question. What is TIN?
Answer: Tax Payer’s Identification Number (TIN) consists of 11 digit numerals throughout the country. Its first two characters represent the State Code and the set-up of the next nine characters can vary in different States. It is for identification/ registration of dealers under VAT. 

Question. Distinguish between a ‘Joint Stock Company’ and a ‘Joint Hindu Family Business’ on the basis of ‘liability of its members’. 
Answer: In case of a Joint Stock Company the liability of members is limited whereas in case of HUF liability of karta is unlimited and that of other members is limited.
Question

Question. How is Excise duty different from Sales Tax?
Answer: Sales Tax is different from the Excise duty as excise is a tax on the act of sale while the sales is a tax on the act of manufacture or production of goods.

Question. List any two categories of persons that are required to obtain registration from ‘Central Excise Department’
Answer: Following categories of persons that are required to obtain registration from ‘Central Excise Department’:
(i) Every manufacturer of dutiable excisable goods.
(ii) First and second stage dealers or importers desiring to issue cenvatable invoices.
(iii) Persons holding bonded warehouses for storing non-duty paid goods.
(iv) Persons who obtain excisable goods for availing end-use based exemption.
Question

Question. What is meant by ‘mutual agency of partners’?
Answer: The business of partnership can be carried on by all partners or any one of them acting for all.

SHORT ANSWER TYPE QUESTIONS

Question. Gaurav started a factory for manufacturing bags for the students of nursery and primary classes. He invested X 2,00,000 of his own and obtained a loan of X 10,00,000 from bank. He made the instruction plan describing the details that were needed for the operation of machines by the workers. Identify and explain the format of ‘business plan’ described in the above para.
Answer: (i) Internal Operational Plan.
(ii) A detailed plan describing planning details that are required by management but may not be of interest to external stakeholders.

Question. Name and define the form of business organization inwhich the liability of its members is limited. State one more feature of this form of business organization.
Answer: (i) Joint Stock Company.
(ii) It is an association of persons who contribute money in the shape of shares and the company gets a legal entity and enjoys a permanent existence.
(iii) It has the following features: voluntary association; artificial person; separate legal entity; common seal; limited liability; transfer ability of shares; diffusion of ownership and management; number of members; limitation of action; winding up.

Question. Cooperative organisation is not desirable structure to start as new venture for an entrepreneur. Why?
Answer: Entrepreneur does not find desirable due to his/her:
(i) Quest for excellence.
(ii) Drive for independence.
(iii) Tendency to be a project champion.
(iv) Strong desire to succeed and earn profit.
(v) Creative and innovative nature.
(vi) Love for being a leader in the field.

Question. Selection of form of organisation is mostly affected by which factors?
Answer: Selection of form of organisation is mostly affected by following factors:
(i) Capital requirement of the firm.
(ii) Risk and liability involved.
(iii) Managerial control desired.
(iv) Scale of operation of the firm.
(v) Continuity and stability desired.
(vi) Government regulations involved.
(vii) Tax burden of the firm.
(vii) Nature of business.

Question. Give the meaning of‘Business situation analysis’ and ‘Identification of the target market’ as steps in preparing the marketing plan.
Answer: Business situation analysis is a review of past performance and achievements of the enterprise. Identifying the target market defines clearly the specific group of potential customers who need the enterprise aims to fulfill the goals.

Question. Fizz & Lime is an established beverage company whichstarted bottling Wheat Grass Juice; Bitter gourd with Jamun and Amla with Aloevera. It is planning to expand externally without compromising on the unique taste of these drinks. Belligio Juices got exclusive rights to manufacture and sell Wheat Grass and Amla Aloe under the name Fizz & Lime. Belligio Juices had to use only the ingredients supplied by Fizz & Lime to produce, bottle and distribute the two drinks.
(i) Identify and explain the form of external expansion adopted by Fizz & Lime.
(ii) State any one feature of this form of expansion.
Answer: (i) Manufacturing franchise opportunity: These types of franchises provide an organization with the right to manufacture a product and sell it to the public, using the franchisor’s name and trademark. This type of franchise is found most often in the food and beverage industry.
(ii) Franchisee must use the ingredients given by the franchisor to produce, bottle and distribute the soft drinks.

Question. “ Human life is built around works”. Identify the form of Business Organisation being talked about in the following sentences:
(i) ‘The one-man control is the best in the world if that man is big enough to manage everything.”
(ii) “Two heads being better than one.
”(iii) “Self-help as well as mutual help system.”
(iv)The birth of this legal person is by law and can be put to death by law only.
Answer: (i) Sole proprietorship
(ii) Partnership
(iii) Cooperative
(iv) Company.

Question. Rahul wants to start a small shoe manufacturing factory. As a part of his business plan he prepared an ‘entertaining slide show and oral narrative’ that was meant to trigger discussion and create interest in potential investors for reading the written presentation. Identify and explain the format of the business plan referred in the above paragraph.
Answer: Format of Business Plan described in above para is Pitch deck with oral narrative. It is an executive summary and a few key graphs showing financial trends and key decision making benchmark. It is a hopeful, entertaining slide show and oral narrative which is for starting discussion and interest potential investors in reading the written presentation, i.e. the executive summary. It has few graphs showing financial trends and is key for decision making.

Question. Chacko Ltd. has been manufacturing umbrellas since 1980. They are the market leaders in manufacturing small hand size umbrellas. They have their production unit in Kochi. The MD’s son-Abraham Chacko took over the family business in 2010. He had finished graduation from USA. Using his educational and networking skills, he was able to take up an export order. He also decided to operate an exclusive export oriented unit in Chellanam. The production work for this unit began in 2014. A dedicated team framed an operational plan for the entire process. Abraham visited the plan to evaluate and take appraisal of the work performed in the unit. State two ways as to how itwill help Abraham.
Answer:
(i) Developing ways to review the present situation with regard to materials, work-in-pi ogress and finished goods.
(ii) Evolving ways to expedite the performance of those departments which lag behind.

Question. Ashok is engaged in the production of readymade garments using cotton cloth. Identify the business activity in which Ashok is involved. Also name and define the utility created by Ashok.
Answer: Utility created by Ashok is Form Utility. Form utility: It is changing the form of raw material into finished products creates form utility.

LONG ANSWER TYPE QUESTIONS

Question. Describe the characteristics of business.
Answer: Following are the characteristics of business:
(i) Entrepreneur: There must be a person(s) to take initiative for establishing a business and undertake the risk.
(ii) Economic Activity: All those activities related to the production and/or distribution of goods and services, with economic motive i.e. profit can form part of business.
(iii) Production and Procurement of Goods and Services: Business either produces or procures goods and services for offering them to consumers.
(iv) Sale of Goods and Services: Business involve sale, exchange ortransfer of goods and/or services for the satisfaction of human needs against a price.
(v) Regularity: One time transaction or dealing in goods and services is not business even if one earns profit in return. Business is done regularly.
(vi) Utility Creation: Business activities result in creation of utilities i.e.
(a)Form Utility,
(b) Place Utility,
(c) Time Utility
(vii) Profit Earning: Point Sector Profit is the reward for undertaking a business activity and no business can survive for long without earning profits.
(viii) Uncertainty of Return: Business does not guarantee for the return of either principal amount invested in the business or the profit.
(ix) Element of Risk: Business involves risk i.e. uncertainty. ‘Higher the risk, higher the profit’.

Question. Describe the types of economic activities.
Answer: Following are the types of economic activities:
(i) Profession,
(ii) Employment,
(iii) Business
(i) Profession: “Profession is that occupation in which one professes to have acquired specialized knowledge, which is used either in instructing, guiding or advising others,” Webster’s Dictionary. It includes Lawyers, Doctors, Chartered Accountants, Company Secretaries, etc. Here, individual apply special knowledge and skills.
(ii) Employment: Employment is an activity in which an individual works regularly for others and get remuneration/compensation in return, undertaking personal services as per the agreement of employment.
(iii) Business: Business may be defined as “An activity in which different persons exchange something of value whether goods and services for mutual gain or profit.”Peterson and Plowman It is a continuous economic activity undertaken with objective to earn profit by producing, and buying and selling of goods and services.

Question. Explain the meaning of Company.
Answer: (i) According to Section 3 of Indian Companies Act, 1956, “A company means a company formed and registered under this act or any previous act.”
(ii) It is an association of persons who contribute money in the shape ofshares and the company gets a legal entity and enjoys a permanent existence.
(iii) It is an voluntary association of a person’s formed for some common object with capital divisible into units of equal value called ‘shares’ and with limited liability.
(iv) It is a creation of law that is the birth of this artificial human being is by law and it can be put to death by law only

Question. Explain the various forms of enterprises.
Answer: Business enterprises may be broadly classified under following three categories: (i) Private Sector Enterprises: Those enterprises which are owned, controlled, and managed by private individuals. These enterprises can be:
(a) Sole-proprietorship
(b) Partnership
(c) Joint Hindu Family Business
(d) Co-operative
(e) Company
(ii) Public Sector Enterprises: These enterprises are owned, controlled and operated by public authorities, with welfare as primary and profit as secondary goals, are called public sector enterprises. These enterprises can be of following types:
(a) Departmental Undertaking
(b) Public Corporations
(c) Government Companies
(iii) Joint Sector Enterprises: It is a form of partnership between the private sector and the government where management is generally in the hands of private sector, and with enough representation on Board of Directors by the Government too. Resources are mostly shared equally.