Entrepreneurship 3 Marks Question

Business finance is that activity because it is concerned with the planning, fund raising, controlling and administering and managing of all the funds to be used in the business enterprises whether business is small or large. Enumerate two major of financial decision-making by an entrepreneur. The two major areas of financial decision-making, requires on part of entrepreneur to take the:

1. Funds requirement decision: It is concerned with the estimation of total funds required to start and run the business enterprise.
2. Financing decisions: It is concerned with the sources from which the funds are to be raised.

Examples of Small Scale-Industries (SSIS) operational in different parts of the country are as follows:

1. Hosiery factories in Ludhiana.
2. Scientific instrument making factories in Ambala.
3. Carpet making factories in Panipat.
4. Radio and TV, manufacturing factories in Delhi.

The distinct features of overdraft facility are as follows:

1. Under this facility the bank permits the customer to overdraw his account upto a certain limit for an agreed period.
2. To avail this facility, a customer should have a current account with the bank.
3. Interest is charged on the amount actually overdrawn.
4. Overdraft may be allowed on the security of assets or on customer's personal security.

Small-scale industries are those industries in which investment in plant and machinery does not exceed ₹ 35 crores.
The main features of small-scale industries are:

1. Labour is kept on wages. Unlike, cottage industries, where owners work themselves, in SSIs owners employ workers who work for them.
2. Machines are used.
3. Machines are run on electricity.

The two types of financial requirements witnessed during early stage financing are as follows:

1. Seed capital: It is usually a small amount needed by the entrepreneur to prove the feasibility and viability of his project.
2. Start-up capital: This capital is needed to develop and sell some initial products to determine if commercial sales are feasible.

Factors that help in determining the resources required upon having the right type of resource, at the right time, at right price with making right use of acquired resources thus ensuring optimum utilization of the same.

It is a situation in some orgaisation/ business firms where few people work in a different mindset. In these the employees in the same organisation or departments employees do not wish to share information/ knowledge with other individuals or other departments.
It is also called as a attitude problem of an enterprise.

Those functions are as follows:

1. Mobilising the resources.
2. Organising the resources.
3. Managing them efficiently and effectively.

Business finance may be defined as the acquisition and utilization of capital funds in meeting the financial needs and overall objectives of a business enterprise.

Resource mobilization advocates upon having:

• The right type of resource.
• At the right time.
• At right price.
• Making right use of acquired resources thus ensuring optimum utilization of the same.

Equity shareholders are the virtual owners of the company. Thus, company is under no obligation to pay them either the principal amount or dividend and that's make them true risk bearers.

Those functions are as follows:

1. Mobilising the resources.
2. Organising the resources.
3. Managing them efficiently and effectively.

The two major areas of financial decision making, requires on part of entrepreneur to take the:

1. Funds requirement decision.
2. Financing decisions.

Sound financial planning is necessary for the success of a business enterprise as:

1. It entails policies and procedures for proper coordination between the various functional areas of business.
2. It involves proper allocation of resources amongst various departments.
3. In the absence of an accurate plan, the enterprise may have to face frequent difficulties that hamper its growth.

Resource mobilization is the process of getting resource from resource provider, using different mechanisms, to implement the organization‘s work for achieving the pre - determined organizational goals. It deals in acquiring the needed resources in a timely - cost effective manner‘.

Information sources can be:

1. Observation is boj.
2. People acconi Ona.
3. Speeches.
4. Documents.
5. Pictures.
6. Organisations.

If an entrepreneur runs his enterprise with outdated, obsolete, worn-out machinery or stick into sick units then it will result in bad capital budgeting decisions but also hamper the innovation and creativity of an entrepreneur.

The factors to be considered before making the final selection regarding 'place':

1. Capital cost.
2. Access to other resources.
3. Transport and communication cost.
4. Availability of manpower and its cost.
5. Cost of production.
6. Availability of other utilities like water, gas, fuel, etc.
7. Access to market for both raw material and finished Goods.
8. Pollution concerns involved.

According to Lillin Doris: Capitalisation of a corporation comprises the ownership capital and the borrowed capital as represented by long term indebtness. It may also mean the total accounting value of capital stock surplus in whatever form it may appear and funded long - term debt.

Business Finance may be defined as the acquisition and utilization of capital funds in meeting the financial needs and overall objectives of a business enterprise.

The features of fixed capital are as follows:

1. It is not easy to withdraw this capital from business.
2. It is generally procured through long-term financial resources.
3. It is invested in procuring fixed assets.
4. It is the basis of income generation.

Only those business enterprises are constituted under the tiny sector whose investment in plant and machinery is presently upto ₹ 25 lakhs, but it is to be raised further shortly.
This sector enjoys state patronage continuously in the form of:

1. Land allotment,
2. Electricity connection,
3. Technology upgradation
4. Monetary help from financial institutions
5. Getting priority in the list of government purchases orders.

An intangible asset is an asset that does not physically or materially exist. Though an individual may not be able to view or touch an intangible asset, it can still be extremely valuable. In most cases, it is the companies that possess intangible assets, such as business contracts.

The sources of fixed capital are as follows:

1. Issue of shares.
2. Issue of debentures.
3. Inviting public deposits.
4. Ploughing back of profits.
5. Long-term borrowings from banks and financial institutions.

The sources of working capital are as follows:

1. Short/ Medium-term borrowings from commercial banks/ financial institutions.
2. Public deposits.
3. Other finance companies.
4. From internal sources.

A unit is known as micro business enterprise if it has an investment in plant and machinery (their original cost excluding/ and building & items specified by Ministry of SSI in its notification No. S.O. 1722 (E) dated Oct. 5, 2006) does not exceed ₹ 25 lakh.

Equity financing refers to capital invested in an enterprise by its owners.
The distinct features of this form of financing are as follows:

1. Equity results in sharing of the ownership with the investors.
2. It is a permanent source of raising finance.
3. There is no fixed obligation in the form of dividend payment.
4. No charge over assets is created.
5. Maximum controlling rights through voting power are ensured.

The different forms of small-scale industrial units are as follows:

1. Tiny units.
2. Ancillary units.
3. Micro-business units.
4. Small-scale units owned and managed by women entrepreneurs.
5. Export-oriented units.
6. Cottage and rural units.

Those business enterprises are constituted under the tiny sector whose investment in plant and machinery is up to ₹ 25 lakhs, but would shortly be raised irrespective of location of the unit.

1. Group mentoring: This requires a mentor to work with 4-6 mentees at one time.
2. Peer mentoring: Mentoring relations, formally or informally with colleagues.

‘Kamna' is a women enterprise. If a small-scale industry's more than 51% share capital is owned by women or a group of women, individually or jointly, then it is referred to as a 'women enterprise'.
Such types of enterprises can avail the following concessions from the government:

1. Low rate of interest on loans,
2. Easy repayment facility.

The value being communicated by the government:
By promoting women entrepreneurs, the government is trying to bring gender-equality in the Indian society.

Finance is required whether the business is small or large. Sources of procurement of finance for small business: Own saving or raise loans from relatives, friends or some financial institutions.

Finance is required whether the business is small or large. Sources of procurement of finance for small business: Own saving or raise loans from relatives, friends or some financial institutions.

'Resource' refers to anything or means (physical tangible/ non-physical - tangible) required or required to support the activities of organisation to achieve pre - determined organizational goals.

Informal:

1. Goals of the relationship are not specified.
2. Outcomes are not measured.
3. Mentor and mentee self-select on the basis of personal chemistry.

As a teacher _____he teaches the mentee about a specific issue.
As a coach ______he coaches the mentee on a particular skill.
As a facilator _____he facilitates the mentee growth by sharing resources and networks.
As a challenger ________he challenges the mentee to move beyond his or her comfort zone.
And he always creates a safe learning environment for taking risks and focuses on the mentees total development.

Group mentoring requires a mentor to work with 4-6 mentees at one time. This form of mentoring is particularly valuable when the organisation has a greater pool of mentees than it has mentors and when mentees have similar roles and responsibilities in the organisation or some common learning agenda.

The proper planning for procurement and disbursement of funds requires on the part of the entrepreneur to take the following decisions:

1. The total amount of finance required for implementing qor the business plans.
2. The forms and proportion of various securities to be used for collecting the desired amount.
3. The policies of utilisation and administration of capital.

Professional services can be outsourced through:

1. Contractual arrangement.
2. Third party arrangement.
3. Lease basis.
4. Captive unit arrangement.
5. Part time arrangement.
6. Regular basis.

This established person who is capable and willing to offer invaluable advice, support and guidance to a new entrepreneur is referred as Business mentor.

On basis of ownership, business can be classified as:

1. Sole proprietorship business: The business is owned and managed by a single individual.
2. Partnership business: The business is owned and managed by a group of persons who voluntarily come together to manage a business and distribute profits.
3. Hindu undivided family business: The business is owned by hindu undivided family. The management of the business vests in the hands of the senior most male member known as 'Karta'.
4. Company form of business: The business is owned by a collective group of persons, known as shareholders. The management rests in the hands of salaried people in the Board of Directors. The company has an entity which is distinct from its shareholders.

In India, the Micro and Small Enterprise (MSE) sector plays a pivotal role in the industrial economy, as is indicated by the statistics given below:

1. This sector accounts for about 45% of manufacturing output and about 40% of total exports.
2. In recent years, this sector has registered a higher growth rate than the overall industrial sector.
3. The major advantage of this sector is its employment potential at a low capital cost. According to the statistics available from the 4th census of MSME sector, this sector employs estimated 59.7 million people in 26.1 million enterprises.
4. Labour intensity in this sector is estimated to be nearly four times that of large enterprises.

This decision making by the entrepreneur, well in advance regarding the future financial aspects of the enterprise, is called "Financial Planning".

The features of cash credit facility are as follows:

1. The bank allows the borrower to borrow upto a specified limit.
2. The amount is credited to the account of the borrower.
3. The customer can withdraw the amount as and when required by him.
4. Interest is charged on the amount actually withdrawn.
5. It is usually granted on a bond or some other security.

The features of formal mentoring are as follows:

1. Mentor and mentee are paired, based on their mutual compatibility.
2. Goals are established from the beginning by the organisation.
3. Outcomes are measured.

The pattern of capital structure available for Mukesh are as follows:

1. Personal financing only.
2. Personal financing and loan from bank.
3. Personal financing, loan from bank and loan from financial institutions.
4. Personal financing and loan from specialised financial institutions.

Any enterprise/ entrepreneur will start his business with an accurate plan embodying the financial needs of the company in the present and future. It is definite that the enterprise may have to face frequent difficulties and obstacles which may hamper the growth of an enterprise.

Capital structure is the composition or mix of different types of long - term capital whether owned or borrowed. It includes all the long term funds consisting of share capital, debentures, bonds, loans and reserves.

It refers to a situation when actual capitalisation is lower than the proper capitalisation. Under-capitalisation capital always shows the assets value may be more than the values reflected in the books of accounts.

1. Venture capitalist: These are investors and investment companies whose speciality is financing new, high potential, high-technology oriented entrepreneurial ventures. They are more interested in financing ventures which are in their second or third stage of development. They look for high rate of return.
2. Angel investors: These also referred to as 'business angels. They are individuals or virtually invisible group of wealthy investors, in the informal risk capital market, who are looking for equity type investment opportunities in a wide variety of entrepreneurial ventures. These investors provide the funds needed for all stages of financing, particularly the first stage financing.

It’s Working capital. Working capital refers to that part of the capital which is needed for the financing of the working or current requirements of the enterprises and for meeting out day-to-day operational expenses.