Resources Mobilization Class 12 Entrepreneurship Exam Questions

Exam Questions Class 12

Please refer to the Resources Mobilization 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 Resources Mobilization

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

 SHORT ANSWER TYPE

Question: How can an entrepreneur, raises funds by selling the issue mainly to the institutional investors?
Answer: 
Private Placement: Any entrepreneur can directly sale of its securities of a company to a limited number of sophisticated investors. Entrepreneurs can raise funds by selling the securities mainly to the institutional investors like:

Resources Mobilization Class 12 Entrepreneurship Exam Questions

Entrepreneurs both from public limited and private limited sectors, banks heavily upon raising funds through the issues of varied financial instruments under this segment as at times they do not wish to disclose information to the open market.

Question: Entrepreneur can use the capital raised for a variety of purposes, what are they?
Answer: Entrepreneur can use the capital raised for a variety of purposes including:

1. Growth and expansion
2. Retiring existing debt
3. Corporate marketing and development
4. Acquisition capital.

 VERY SHORT ANSWER TYPE QUESTIONS

Question: When the right issue are proposed to the existing shareholders and if they are not ready to subscribe what is the next step taken by an entrepreneur?
Answer: When rights issues are proposed to the existing shareholders and in case they are not willing to subscribe, they can renounce the same in favour of another person.

Question: In what forms company can raise capital through primary market?   
Answer: An entrepreneur can raise the required capital in the primary market by the following methods:

Resources Mobilization Class 12 Entrepreneurship Exam Questions

Question: What is a secondary market?
Answer: It refers to the market for the purchase and some of existing securities i.e. the market securities issued earlier are sold by existinginvestors in this market.

Question: What is the need of secondary market?
Answer: The secondary capital market, which is also known as old securities market or stock exchange deals with buying and selling of old securities i.e. the market securities issued earlier are sold by existing investors in this market, thus paving way for the entrepreneurs that if they offer high returns to market, investors will remain inclined to invest therein. The secondary market enhances the marketability of securities and thereby provides liquidity to investments.

Question: What is meant by stock options or offering shares to the employees?
Answer: A stock option is granted to specified employees of a company. ESOs carry the right, but not the obligation, to buy a certain amount of shares in the company at a predetermined price. 

SHORT ANSWER TYPE QUESTIONS

Question: State some mushrooming sources of raising finance in the business.
Answer: A company may raise funds for different purposes depending on the time periods ranging from very short to fairly long duration. The total amount of financial needs of a company depends on the nature and size of the business. The scope of raising funds depends on the sources from which funds may be available. Here, we shall discuss some mushrooming sources available to an entrepreneur to raise finance; Long-Term and Medium- Term Capital, they have the following options:

1. Capital markets:
o Issue of Shares
o Equity shares: The rate of dividend on these shares depends on the profits available and the discretion of directors. Hence, there is no fixed burden on the company. Each share carries one vote.
o Preference shares: Dividend is payable on these shares at a fixed rate and is payable only if there are profits. Hence, there is no compulsory burden on the company’s finances. Such shares do not give voting rights.
o Issue of Debentures.

2. Angle investors: Business angle or an angle investor, is an affluent individual who provides capital for a business start-up and early stage companies having a high-risk, high- return matrix usually in exchange for convertible debt or ownership equity.

3. Venture capital: Venture capital is an equity based investment in agrowth-oriented small to medium business to enable the investors to accomplish objectives, in return for minority shareholding in the business. It is a way in which investors support entrepreneurial talent with finance and business skills to exploit market opportunities and obtain long-term capital gains.

4. Specialized financial institutions: Specialized Financial Institutions (SFIs) make an important source of medium and long term financing amongst all the financial institutions in India, to the industry.

A. At national level/All India development banks

1. Industrial Development Bank of India (IDBI)
2. Small Industries Development Bank of India (SIDBI)
3. Industrial Finance Corporation of India (IFCI)

B. At state level

1. State Financial Corporation (SFC)
2. Tourism Finance Corporation of India (TFCI)
3. State Industrial Development Corporations (SIDC).

Question: What is the need of finance?
Answer:
1. Finance is one of the important prerequisites to start an enterprise.
2. It helps an entrepreneur to arrange all other required resources together like, personnel, machines, materials, methods, land, etc. to start up the business systematically.
3. It helps an entrepreneur to start and run his business activities smoothly and convert a dream into reality.

LONG ANSWER TYPE QUESTIONS

Question: What do you understand by capital market? How can the capital market in India be broadly classified into different categories?
Answer: A capital market may be defined as an organized mechanism meant for effective and smooth transfer of money capital or financial resources from the investors to the entrepreneurs. The capital market in India may be broadly classified into:

Resources Mobilization Class 12 Entrepreneurship Exam Questions

Question: Explain how capital markets are the most important source of raising finance for an entrepreneur.
Answer: Capital markets are the most important source of raising finance for the entrepreneurs. This market:
1. Mobilises the financial resources on a nation-wide scale.
2. Secures the much required foreign capital and know-how to promote economic growth at a faster rate.
3. Ensures the most effective allocation of the mobilized financial resources by directing the same either to such projects which are capable of the highest yield or to the under developed priority areas where there is an urgent need to promote balanced and diversified industrialization. The needs of entrepreneurs who actually use the savings for productive purposes are varied. The capital market satisfies the tastes of savers and the needs of investors through its financial instruments and institutions.

 HIGHER ORDER THINKING SKILLS

Question: Why primary market is also known as new issue market? Give one reason.
Answer: When an entrepreneur decides to issues securities like shares, debentures to the public for the first time for the purpose of obtaining capital funds such issues of securities are even referred as “new money issues”. Primary market is known as new issue market.

VERY LONG ANSWER TYPE QUESTIONS

Question: Write down the features of stock exchanges.
Answer:
1. Association of persons: A stock exchange is an association of persons or body of individuals which may be registered or unregistered.
2. Recognition from central government: Stock exchange is an organized market. It requires recognition from the Central Government.
3. Market for securities: Stock exchange is a market, where securities of corporate bodies, government and semi-government bodies are bought and sold.
4. Deals in second hand securities: It deals with shares, debentures, bonds and such securities already issued by the companies. In short, it deals with existing or second hand securities and hence it is called secondary market.
5. Regulates trade in securities: Stock exchange does not buy or sell any securities on its own account. It merely provides the necessary infrastructure and facilities to its members and brokers who trade in securities. It regulates the trade activities so as to ensure free and fair trade.
6. Allow dealings only in listed securities: In fact, stock exchanges maintain an official list of securities that could be purchased and sold on its floor. Securities which do not figure in the official list of stock exchange are called unlisted securities. Such unlisted securities cannot be traded in the stock exchange.
7. Transactions effected only through members: All the transactions in securities at the stock exchange are effected only through its authorized brokers and members. Outsiders or direct investors are not allowed to enter in the trading circles of the stock exchange. Investors have to buy or sell the securities at the stock exchange through the authorized brokers only.
8. Working as per rules: Buying and selling transactions in securities at the stock exchange are governed by the rules and regulations of stock exchange as well as SEBI Guidelines. No deviation from the rules and guidelines is allowed in any case.
9. Specific location: Stock exchange is a particular market place where authorized brokers come together daily (i.e. on working days) on the floor of market called trading circles and conduct trading activities. The price of different securities traded are shown on electronic boards. After the working hours market is closed. All the working of stock exchange is conducted and controlled through computers and electronic system.
10. Financial barometers: Stock exchanges are the financial barometers and development indicators of national economy of the country. Industrial growth and stability is reflected in the index of stock exchange.

Question:  Explain the functions of stock exchange.
Answer: Stock exchange performs a number of functions in respect of marketability of different types of securities for investors and borrowing companies. It’s important functions are:
1. Continuous and ready market for securities:
• Stock exchange provides a central market for purchase and sale of securities.
• It provides ready and continuous outlet for buying and selling of securities.
• It facilitates and helps all buyers to buy and sell securities as and when they want.

2. Facilitates evaluation of securities:
• It is useful for the correct evaluation of industrial securities.
• It publishes price quotation of the shares of the companies that have been listed with them after thorough analysis of demand and supply position.
• This enables investors to know the true worth of their holdings at any time.

3. Checks on brokers:
• It checks and controls the activities of brokers and protect the investors from being deceived.
• While dealing,’if any broker is found indulging in malpractices as overcharging or giving wrong information, his/her licence may be cancelled.

4. Provides safety and security in dealings:

• All activities of the stock exchange are controlled by the provisions of the Securities Control (Regulation) Act and this creates confidence in the mind of investors.
• Each and every dealings and transactions are conducted as per well defined rules and regulations, fraudulent practices stands checked effectively ensuring safety, security and justice in dealings.
• Regulates company management: All listed companies in the stock exchange, compulsorily have to follow with rules and regulations of concerned stock exchange and work under the vigilance of their authorities.

VERY SHORT ANSWER TYPE QUESTIONS

Question:  What do you mean by stock exchange?
Answer: A stock exchange means anybody of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying and selling or dealing in securities,

Question:  What do you understand by angel investors?
Answer: Business angel or informal investor or an angel investor, is an individual who provides capital for a business start-up and early stage companies in exchange for convertible debt or ownership equity.

 SHORT ANSWER TYPE QUESTIONS

Question: Explain the powers SEBI has been vested with for discharging of its functions efficiently.
Answer: SEBI has been vested with the following powers:
1. To make and approve by-laws of stock exchanges.
2. To enquire the stock exchange to amend their by-laws.
3. Inspect the books of accounts and call for periodical returns from recognized stock exchanges.
4. Inspect the books of accounts of financial intermediaries.
5. Compel certain companies to list their shares in one or more stock exchanges.
6. Levy fees and other charges on the intermediaries for performing its functions.
7. Grant license to any person for the purpose of dealing in certain areas.
8. Delegate powers exercisable by it.
9. Prosecute and judge directly the violation of certain provisions of the Companies Act.
10. Power to impose monetary penalties.

Question: When can an entrepreneur seek venture capital financing?
Answer: An entrepreneur seeks venture capital financing under following circumstances:
1. High risk: Ventures which involve high risk due to various reasons like technological, creativity and innovation, etc. are subjected to high risk related to returns. Here the venture capitalist comes forward.
2. Seed funding: Seed money, is a form of securities offering in which an venture investor purchases part of a business. Interest of the venture capitalist for purchase of security is also a reason.
3. Expansion: If the entrepreneur wants to expand then he goes for venture capital.
4. Business skills: Lack of business skills also forces the entrepreneur to go for venture capital.

Question: What are the features of venture capital finance?
Answer: Venture capital finance has the following features:1. Equity: It is equity finance in relatively new ventures and new companies.
2. Long term: It is long-term investment in growth-oriented small or medium firms.
3. Skills: Venture capitalist also business skills to investee firms. This raises the chances of success of the emerging firm.
4. Risk: It involves high risk-return spectrum.
5. Private equity: It is a subset of private equity.
6. Involvement: The venture capital institutions make a continuous involvement in the business.

 SHORT ANSWER TYPE QUESTIONS

Question: Explain the need and importance of Specialized Financial Institutions in India.
Answer: As SFIs provide developmental finance, that is, finance for investment in fixed assets, they are also known as ‘development banks’ or ‘development financial institutions’. Establishing of SFIs facilitated:

1. Provision of sufficient long-term funds in the desired sectors in accordance with planned priorities to the industrial units and entrepreneurs.
2. New and small entrepreneurs in setting up industry.
3. Development of: (i) Small scale industry, and (ii) Projects in backward areas.
4. Provision of technical and managerial advice to the entrepreneurs, facilitating thus, in identification, evaluation and execution of new investment enterprises.
5. Underwriting of and direct subscription to the issue of shares and debentures in the capital market of the upcoming ventures.
6. Establishment of enterprises which require extraordinarily large amount of finance for their projects with a long-gestation period.

Question: Explain the objectives and functions of SIDC.
Answer:
1. SIDCs: The State Industrial Development Corporations (In-corporated under the Companies Act, 1956) were set up in different states as state government as companies wholly owned by them, the main objectives of SIDCs was promoting industrial development in all states of the countries.

Question: At present, 22 such SIDCs are functioning in India. 
Answer:

Resources Mobilization Class 12 Entrepreneurship Exam Questions

Question: Write the full form of and when it was established. 
(a) SIDC
(b) TFCI
(c) SFC’s
(d) NABARD
(e) IFCI
(f) IDBI
(g) ICICI
Answer:

Resources Mobilization Class 12 Entrepreneurship Exam Questions

LONG ANSWER TYPE QUESTIONS

Question: Write an explanatory note on the financing schemes of state level financial institutions and their importance in promotion of an entrepreneur in India.
Answer: At State Level State Financial Corporation (SFCs): To meet the financial needs of small and medium enterprises, the government of India passed the State Financial Corporation Act in 1951, empowering the state governments to establish development banks for their respective I

regions. There are 18 SFCs at present. Objectives: The objectives of State Financial Corporations are as under:
1. Provide financial assistance to small and medium industrial concerns. These may be from corporate or co-operative sectors as in case of IFCI or may be partnership, individual or Joint Hindu family business, engaged not only in the manufacture, preservation or processing of goods.
2. Provide long and medium-term loan repayment ordinarily within a period not exceeding 20 years.
3. Grant financial assistance to any single industrial concern under corporate or co-operative sector with an aggregate upper limit of r rupees Sixty lakhs. In any other case(partnership, sole proprietorship or Joint Hindu family) the upper limit is rupees thirty lakhs.
4. Provide financial assistance generally to those industrial concerns whose paid up share capital and free reserves do not exceed Rs 3 crore.
5. To lay special emphasis on the development of backward areas and small scale industries.

Functions:

1. Grant of loans and advances to or subscribe to debentures of, industrial concerns repayable within a period not exceeding 20 years.
2. Guaranteeing deferred payments due from an industrial concern for purchase of capital goods in India.
3. Underwriting of the issue of stock, bonds or debentures by industrial concerns.
4. Subscribing to, or purchasing of, the stock, shares, bonds or debentures of an industrial concern subject to a maximum of 30 per cent of the subscribed capital, or 30 per cent of paid up share capital and free reserve, whichever is less.
5. Act as agent of the Central government, State government, IDBI, IFCI or any other financial institution in the matter of grant of loan or business of IDBI, IFCI or financial institution. Tourism Finance Corporation of India (TFCI): The Tourism Finance Corporation of India (TFCI) was born as a result of the Government of India’s decision, in 1987, to promote a separate all- India financial institution for providing financial assistance to tourism-related activities/projects. 

1. TFCI provides financial assistance to enterprises for setting up or the development of tourism-related projects, facilities and services such as hotels, restaurants, holiday resorts, amusement parks, entertainment centres, education and sports, rope ways, cultural centres, convention halls, transport, travel and tour operating agencies, air services, tourism emporia and sports facilities.
2. It also provides advisory and merchant banking services in this field.
3. The projects with a capital cost of Rs 1 crore or above are generally eligible for assistance from TFCI. Smaller projects would also be considered.

State Industrial Development Corporation (SIDCs): Incorporated under the Companies Act, 1956 SIDCs were set up in different states as wholly owned companies for promoting industrial development in their respective states. The main functions of SIDCs are as follows:

1. Providing term finance to all small, medium, and large industrial enterprises set up in the state.
2. Underwriting and directly subscribing to shares, and debentures of industrial enterprises being set up in the state.
3. Preparing feasibility studies, conducting market surveys and motivating private entrepreneurs to set up their industrial ventures in the state.
4. Collaborating with private entrepreneurs to set up industrial ventures in joint and assisted sectors.
5. Implementing IDBI’s scheme of seed capital in the state.

Finance can be procured, just like any other resource, against a cost. Procurement of finance involves risk and formalities to comply with. Entrepreneurs need a careful attitude, to sensibly make a choice of sources to generate funds. No one source can be deemed to be the best source. Thus, it is always advisable to select a combination of sources so that both cost and risk can be kept at lowest.
1. Tourism Finance Corporation of India (TFCI)
2. State Industrial Development Corporations (SIDC)

Question: Write down the objectives of IDBI.
Answer. The main objectives of IDBI:   

Resources Mobilization Class 12 Entrepreneurship Exam Questions

 HIGHER ORDER THINKING SKILLS

Question: Hari is an entrepreneur who wants to start an amusement park in Indore. He knows that she needs a huge amount of initial capital. According to you, which of the financial institution will be more suitable to him? Suggest and Explain why?
Answer: Accordingly Hari should approach to Tourism Finance Corporation of India (TFCI), the financial institution. TFCI is playing vital role in the development of entrepreneurship in modern economy. The Tourism Finance Corporation of India (TFCI) was born as a result of the Government of India’s decision, in 1987, to promote a separate all-India financial institution for providing financial assistance to tourism-related activities/projects.It was incorporated as a public limited company under the Companies Act, 1956 on 27 January, 1989.It became operational with effect from 1 February, 1989. It is a specialized all- India development financial institution to cater to the needs of the tourism industry.

The various functions:
1. It provides financial assistance to enterprises for setting up or the development of tourism- related projects, facilities and services such as hotels, restaurants, holiday resorts, amusement parks, entertainment centres, education and sports, rope ways, cultural centres, convention halls, transport, travel and tour operating agencies, air services, tourism emporia and sports facilities.
2. It provides advisory and merchant banking services in this field.
3. The projects with a capital cost of? 1 crore or above are generally eligible for assistance from TFCI. Smaller projects would also be considered.

Values:

1. Providing employment opportunities
2. Cater to the financial needs of the tourism industry.
3. To protect national property.
4. Awareness of responsibility of citizenship
5. Initiative
6. Proper utilization of time and resources.

Question: Assuming that you wish to start a small scale industry for manufacturing and selling detergent powder, discuss how would you seek support of financial institutions.
Answer: Yes, to start with a small scale industries for manufacturing andselling is really a tough job in this competitive world where already many other detergent manufacturing units are there. Detergents are also known as synthetic detergents. They are different from oil-based soap though both soaps and detergents are surfactants. There are a number of varieties of detergents varying in percentages of active matter present in them and also different colours. Manufacturing process is very simple and only mixing is involved. Hence, this product is best suited for manufacturing in small-scale sector. An entrepreneur can seek support from various financial institutions and others.

1. Angle Investors:

• Business angle or an angle investor is an affluent individual who provides capital for a business start-up and early stage companies having a high- risk, high-return matrix usually in exchange for convertible debt or ownership equity.
• Apart from investing funds, most angles provide proactive advice, guidance, industry connections and mentoring start-ups in its early days.

2. Venture Capitalist:

• Venture capital is an equity based investment in a growth-oriented small to medium business to enable the investors to accomplish objectives, in return for minority shareholding in the business or the irrevocable right to acquire.
• The private equity capital provided as funding to early-stage, high potential, high risk, growth up companies/entrepreneurs who lack the necessary experience and funds to give shape to their ideas.
• Accordingly, it is more accurate to view and go for venture capital broadly as a professionally managed pool of equity capital.
• Venture capital is a way in which investors support entrepreneurial talent with finance and business skills to exploit market opportunities and obtain long-term capital gains.

State Financial Corporations (SFCs): 
1. It will be to meet the financial needs of small and medium enterprises, established as development banks for their respective regions. Under the Act, SFCs have been established by state governments to meet the financial requirements of medium and small sized enterprises. There are 18 SFCs at present. According to the location I can easily approach the same.
2. Grant of loans and advances to or subscribe to debentures of, industrial concerns repayable within a period not exceeding 20 years.
3. Guaranteeing loans raised by industrial concerns which are repayable within a period not exceeding 20 years.
4. Guaranteeing deferred payments due from an industrial concern for purchase of capital goods in India.

Question:“TFCI is playing vital role in the development of entrepreneurship in modern economy”. Comment.
Answer: The Tourism Finance Corporation of India (TFCI) was born as a result of the Government of India’s decision, in 1987, to promote a separate all- India financial institution for providing financial assistance to tourism-related activities/projects. It was incorporated as a public limited company under the Companies Act, 1956 on 27 January, 1989. It became operational with effect from 1 February, 1989.It is a specialized all-India development financial institution to cater to the needs of the tourism industry.

Functions:

1. It provides financial assistance to enterprises for setting up or the development of tourism- related projects, facilities and services such as hotels, restaurants, holiday resorts, amusement parks, entertainment centres, education and sports, rope ways, cultural centres, convention halls, transport, travel and tour operating agencies, air services, tourism emporia and sports facilities.
2. It provides advisory and merchant banking services in this field.
3. The projects with a capital cost of Rs 1 crore or above are generally eligible for assistance from TFCI. Smaller projects would also be considered. (d) TFCI has sanctioned assistance to 2003 projects aggregating to Rs 5.2 billion during the last five years, resulting in more than 12,217 hotel rooms and direct employment to 22,938 people.

Values:

1. Universal and equality
2. Resourcefulness
3. Services to others
4. Readiness to cooperate
5. National awareness
6. Employment opportunities
7. Fulfilling the needs of the people
8. Helpfulness and contributing to entrepreneur for the growth of the country.

 VERY SHORT ANSWER TYPE QUESTIONS 

Question. Name the institution which owned.an asset but allowed to be used by industrial concerns for a consideration called lease rent.
Answer: ICICI.

Question. What do you understand by listed securities?
Answer: When companies securities that are registered and traded in stock exchange are known as “Listed Securities”.

Question. Bhavin, Abhishek and Mohit are the directors of a newly established company at Indore. The paid-up capital equity share capital of a company is 4 crore, they are interested to trade its shares at all India level stock exchange. You are a finance manager of a company, suggest the name of the stock exchange for the purpose of trade.
Answer: National Stock Exchange of India (NSEI).

Question. Define Stock Exchange.
Answer: A stock exchange means anybody of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying and selling or dealing in securities. Securities Contracts (Regulation) Act, 1956.

Question. “SEBI is managed by its members”. How many members are there in SEBI and who nominate them?
Answer: SEBI is managed by its members

1. Chairman who is nominated by Union Government of India.
2. Two members, i.e. Officers from Union Finance Ministry.
3. One member from The Reserve Bank of India.
4. The remaining five members are nominated by Union Government of India, out of them at least three shall be whole-time members.

Question. Rahul wants to start an amusement park near Vishakhapatanam. This will require an investment of Rs 50 lakhs. Name the financial institution which Rahul should approach for financing this venture.
Answer: Tourism Finance Corporation of India (TFCI).

Question. What do you mean by capital market?
Answer: A capital market may be defined as an organized mechanism meant for effective and smooth transfer of money capital or financial resources from the investors to the entrepreneurs.

Question. Geeta Ram, an orange grower from Nagpur, wants to start a small juice producing factory using the oranges grown by him as well as by his fellow villagers. Name the financial institutions he should contact for obtaining loan for starting his factory.
 Answer: Geeta Ram should contact National Bank for Agricultural and Rural development (NABARD) for starting his factory.

Question. What do you mean by primary market?
Answer: Primary market refers to the market where issue of securities (shares, debentures and bonds) being issued for the first time by new companies or new issue of securities by existing companies to investors. It is basically to facilitate transfer of resources from the savers to entrepreneur for seeking more funds.

Class 12 Entrepreneurship Exam Questions Resources Mobilization