Entrepreneurship 3 Marks Question

Business activities result in creation of utilities i.e.

1. Form utility: Changing the form of raw material into finished product creates form utility.
2. Place utility: From the place of production, transporting goods to the place of consumption results in place utility.
3. Time utility: The process of storing the goods when not required to supplying them when required generates time utility.

In making a choice, entrepreneur will want to take into account the following:

1. Vision regarding the size and nature of the business.
2. The level of control the entrepreneur wishes to have.
3. The level of "structure" entrepreneur is willing to deal with.
4. The business vulnerability to lawsuits.
5. Tax implications of the different organisational structures.
6. Expected profit (or loss) of the business.

Importance of business plan:

1. Helps in determining the viability of the venture.
2. Helps in providing guidance.
3. Helps in satisfying the concerns, queries, and issues of each group.
4. Provides room for self-assessment and self-evaluation.
5. Helps to identify the road blocks or obstacles.
6. It gives the details of the investment, credit worthiness.

1. Limitation from which Gopal’s business suffered are:

1. Limited capital.
2. Limited managerial ability.
3. Limited continuity.

2. Consequences for non–registration of a partnership firm:

1. A partner cannot file a suit in any court against the firm or other partners for the arising from a contract or right conferred by the Partnership Act.
2. A right arising from a contract cannot be enforced in any Court by or on behalf party.
3. Further, the firm or any of its partners cannot claim a set off (i.e. mutual adjustment of parties to one another) or other proceedings in a dispute with a third party.

Physical infrastructure: Availability of the following items of infrastructure should be mentioned in the business plan.

1. Raw material: Whether indigenous or imported, sources of supply etc.
2. Labour: Type of labour required, provision for their training, number of manpower required etc.
3. Utilities: These include: Power, fuel, water, gas, electricity, etc. Business plan needs to clearly state:

• Type of utilities required.
• Load sanctioned.
• Sources and quality of water used quantum of coal, coke, oil etc. required andt he suppliers of the same.

4. Pollution control: The sewage system, and the sewage treatment plant, water harvesting system, arrangement for dumping and disposing of the other typesof waste or emission all need to be discussed in the plan.
5. Transport and communication system: Requirements for transportation and communication facilities, modes and means opted for, bottlenecks etc. are duly covered in by the business plan.

Formal legalities of HUF business:

1. Capital and members: For an HUF to be created the major requirements is the capital and persons. Capital can be in the form of ancestral property, assets gifted by relatives and friends, or received by the HUF through a will. The minimum no. of members required is two.
2. Select a suitable name: The HUF to be created should have proper name. Entrepreneur should select a proper name for the HUF, ensuring it does not violate the laws or have any negative impact.
3. Form a Deed: Formation of HUF should be embodied in a deed which provides that a proper legal deed or agreement is required before creating a HUF, disclosing the name of Karta, coparceners, address and source of funds in the corpus.

Pitch deck with oral narrative- it is an executive summary and a few key graphs showing financial trends and key decision-making benchmark.

Business situation analysis is a review of past performance and achievements of the enterprise.Identifying the target market - it defines clearly the specific group of potential customers who need the enterprise aims to fulfil.

Form utility.
Changing the form of raw material into finished products creates form utility.

1. Sole proprietorship is the kind of business set by Kareem.
2. Characteristics of sole proprietorship:

• Individual ownership: This business is exclusively owned by a single person.
• Individual management and control: "What is to be done, how it is to be done, and when it is to be donel-all affairs are managed and controlled by the sole proprietor''.
• Individual financing: All investment is made by the proprietor. Though, if required he/she has access to loans and debts to procure funds for business.
• No separate legal entity: Legally, the proprietor and proprietorship are one and the same business and owner exists together, thus with owner's death, business too dies.
• Easy formation and closure: Sole proprietorship is subjected to minimum legal formalities and regulations both at the time of commencing and/or closing.

1. Voluminous and Bulky goods- Short channels.
2. Capital goods- Direct channels.
3. Consumable goods with better shelf life- Indirect channels.
4. Goods with low shelf life- Retail channels.

Elements of a Project Report:

1. Description of the promoters of the enterprise.
2. Description of the enterprise.
3. Economic viability and marketability.
4. Technical feasibility.
5. Financial Projections.
6. Profitability analysis.
7. Relevent documents.

Marketing Strategies- Includes adequate advertising, creating a market need, making the product available at the reach of the customer, quality of the product, cost effectiveness and its user friendliness.
Financial Profile- An exact assessment of the revenue, costs, profits and losses, cash flow dynamics, stock of both raw materials and finished products, loans etc.. has to be to reflected in the financial profile of the feasibility report to have a realistic view.

Operational plan is the soul of the feasibility report. It shows the strategy adopted by the entrepreneur in maximising production. Shows the method of production, quality concerns, optimization of resources the cost effectiveness.

Basic function involved in selling are: Locating the buyers, understanding their needs and preferences, fixing price, deciding the mode of delivery. negotiating with the marks buyers finalizing the terms sale and payments, etc.

Step of the action plan of a production manager:

1. Plan the route of production.
2. Identify the standard capacity of each machine.
3. Decides how much load has to be put on each machine.
4. Schedule the work- What needs to be done, by whom and at what time.
5. Ensure availability of the materials.
6. Monitor the production, output, stocks.

Name of the element: Description of the enterprise. Other areas covered in this element are: product to be manufactured. Sources of raw materials, name of the company, requirement of raw materials, etc.

To mobilise resources an entrepreneur should:

1. Be able to sense the need-for the resources.
2. Identify the type of resources.
3. Be able to locate the resources.
4. Be able to identify die bottlenecks in mobilising the resources.
5. Effectively communicate with the people who would provide them the sources.
6. Be able to organise the finances tor obtaining the resources.
7. Be able to document the type, the quantum and the mode of obtaining the resources.
8. Plan receiving and stocking or managing the resources whether at one time or periodically.

Technical feasibility: This part of the project report indicates the manufacturing process, product design and drawings, the details of the machinery required, equipment and raw materials, man power requirements, etc.

Finance is regarded as the lifeblood of business. Finance is required to buy machinery, raw materials and other inputs necessary to carry on the operation in the enterprise.

A project report is basically a business plan which describes all necessary inputs to the enterprise, explains the mode of utilisation of the resources, details the strategy for the execution of the project and outlines the desired goal.

Factors to be kept in mind by any manufacturing or service enterprise as a part of production plan;

1. Supply of raw material.
2. Work schedule.
3. Maintenance.
4. Quality assurance.
5. Capacity utilization.
6. Sales forecasting.
7. Product storage and maintenance.

Care to Ecology and Environment: The entrepreneur should take care to keep pollution under control, to provide devices to prevent polluting materials from affecting public health.
Concern for Workers: The entrepreneurs have to discipline themselves to curb all tendencies causing labor exploitation, like employing child labor, different rate of wage payment for male and female workers, etc.

Market survey is important for a feasibility plan as it makes the entrepreneur aware of the customer needs & preferences, viability of the product in the market, Quality needs & level of consumption & competition.

Uses of a project report for an entrepreneur are as follows:

1. It is the interpretation of an idea of the entrepreneur on paper.
2. Project report is the blueprint that helps him to explain his idea in factual term to his associates, financers, clientele etc.
3. It facilitates him to plan his course of action and evolve business strategies.
4. It can be interpreted in the form of SWOT analysis, so that he can identify the challenges ahead of him and overcome them in time.

1. Economic viability and Marketability.
2. Technical Feasibility.
3. Technical Feasibility.
4. Financial projections.

Market Survey and Analysis
The entrepreneur should have a high sensitivity of the market. before venturing on an enterprise he should also know the market characteristics. He should be aware whether the production of a product is viable in the market, what are the customer needs and attributes etc. The feasibility report should carry a convincing analysis of the market trend.

1. Direct Cost refers to all the expenditure that is incurred to ensure the production of the material or service.

For example raw materials, power, wages etc which directly contribute to the product.

Indirect Cost are expenses which are indirectly attributed to the production like the wages of stores personnel, time keepers advertising, marketing, office management etc.

2. Semi-variable Cost are those which have no relationship with time or quantum of production. They vary disproportionately.

Variable Cost are those which vary with the output, the time and other factors.

For example, the labour required in a factory may vary with the Quantum of production and the man powers required for reaching the target production.

Project Report: It is an idea or business plan that is intended to be Carried out.

1. It has a starting point and ending point with some specific objectives.
2. It describes all necessary inputs to the enterprise.
3. It explains allocation and mode of utilisation of resources.
4. It details the strategies for the execution of the project.
5. It outlines the desired goals within specified period of time.

Factors in the process of sensing opportunities.

1. Ability to Perceive and Preserve basic ideas:- Basic ideas emerge from various sources. These ideas can be categorised as follows:

1. Problems:- Solution of a problem is often picked up as an opportunity E.g. Razor blade was invented with an intention of a sharp nick free and quick shaving.
2. Change:- Any kind of change like social, legal, technological, political etc. usher in new business opportunities e.g. Computer institutes in the present world.
3. Inventions:- These involve new things of value and creative processes That add Value to the already prevalent branch or products eg T.V and C.D.players were mode two in one.
4. Competition:- For getting ahead, the entrepreneur introduces new and improved ideas ego Free utensils with a new branch of tea.

1. Venture is a heavy and basic industry type.
2. Large scale operations are involved.
3. Business requires huge funds.
4. Enterprise involves heavy risks.
5. Enterprise is technologically complex and sophisticated.

1. Employment generation.
2. Import substitution.
3. Ancillarisation.
4. Export promotion.
5. Local resource utilisation.
6. Development of the area.

Meaning of partnership: A partnership is an association of two or more persons to carry on, as co-owners, a business and to share its profits and losses. Thus, two or more persons may form a partnership by making a written or oral agreement to carry a business jointly and share its proceeds
consequences of non registration:

• A partner cannot file a suit in any court against the firm or other partners for the enforcement of any right arising from a contract or right conferred by the Partnership Act.
• A right arising from a contract cannot be enforced in any Court by or on behalf of the firm against any third party.
• Further, the firm or any of its partners cannot claim a set off (i.e. mutual adjustment of debts owned by the disputant parties to one another) or other proceedings in a dispute with a third party.

Importance of business plan–

1. Helps in determining the viability of the venture.
2. Helps in providing guidance.
3. Helps in satisfying the concerns, queries, and issues of each group.
4. Provides room for self-assessment and self-evaluation.
5. Helps to identify the road blocks or obstacles.
6. It gives the details of the investment, credit worthiness.

The identification of the "target market” involves:

1. Deciding what the general market or industry entrepreneur wishes to pursue is based, on market research or industry analysis done and complied with by competent people or the entrepreneurs.
2. Divide the market into smaller groups based on:

1. Consumer's characteristics viz. Geographic (State, Country etc.)

• Demographic (Sex, age, etc.)
• Psychographics (Personality, life style, etc.)

2. Buying situations viz.

• Usage
• Desired benefits (features of product)
• Buying conditions (time available etc.)

Features: (Any three)

1. Voluntary organisation - it is an association of persons desirous of pursuing a common objective. They can come and leave the organisation at their own will without any coercion.
2. Democratic management - the management is vested in the hands of the managing committee elected by the members on the basis of one member-one vote.
3. Service Motive - the primary objective of this organisation render services to its members rather than to earn profits.
4. Capital and returns - the capital is procured from its members in the form of share capital. A member can subscribe subject to a maximum of 10% of the share capital. Shares cannot be transferred but surrendered to the organisation.
5. Government control - the activities are regulated by Co-operative Societies Act and state co-operative societies act. The organisations are required to submit their annual report to registrar of co-­operatives.
6. Distribution of surplus - the profits are distributed among the members on the basis of goods purchased by each member of the society.

Routing is a process concerned with determining exact route or path a product/service has to follow right from raw material till its transformation into finished product.
Scheduling means fixation of time, date, day when each operation is to be commenced and completed.

1. Internal Operational plan.
2. A detailed plan describing planning details that are required by management but may not be of interest to external stakeholders.

Features of leasing:

1. It is a way of getting the use of plant machinery and equipment without paying the full cost all at once.
2. Leases require the payment of deposits and involves contractual payments at regular intervals for the use of asset, i.e. plant, machinery, equipment etc.
3. Ownership reverts back to the lesser on the completion of the period if the lesser decides not to exercise the purchase option.

Breakeven point is the level of sales (or revenue generated) that equals all the
Expenses required for generating that revenue. It is not more than the expenses (i.e. no profit)
Nor is it less than the expenses (i.e. no loss). In other words there is neither loss nor profit.
At the breakeven level
Total revenue = Total expenses
(Qty × Unit Price) = (Qty × Unit Cost) + Fixed Exp
Qty × (Unit Price – Unit Cost) = Fixed Exp
Qty × Gross Margin (or Profit) per Unit = Fixed Exp
B.E. Qty for a single product =
Fixed expenses
Selling price per unit - variable cost per unit
B.E. quantity for multiple products
Fixed expenses
Weighted average selling price per unit - Weighted Average variable cost per unit
Please note: Gross margin and gross profit are one and the same.
Example: Formulas and calculation procedure.
Following information is related to sales mix of product A, B and C.

Product	A	B	C
Sales price per unit Variable cost per unit Sales mix percentage	₹15/- ₹9/- 20%	₹21/- ₹14/- 20%	₹36/- ₹19/- 60%
Total fixed cost	₹40, 000/-

Calculation:
Step 1: Calculate the contribution margin per unit for each product:

Product	A	B	C
Sales price per unit Variable cost per unit Contribution margin per unit	₹15/- ₹9/- ₹6/-	₹21/- ₹14/- ₹7/-	₹36/- ₹19/- ₹17/-

Six objectives of preparing the 'Project Report'

1. Identifying the requirement of the resources.
2. To assess the scope and range of the success of the enterprise before its actual commencement.
3. To obtain the opinions of experts from various fields viz. technical, financial, marketing, production, legal, etc.
4. For financial appraisal of the project by financial institution, banks, insurance companies, etc.
5. To enable the licensing of the enterprise by the concerned authorities and seeking registration for various utilities like land, water, electricity etc.
6. To find the critical components of the project idea.

Inventory Control is a systematic and detail record of purchase of materials, their storage capacity, quantity in order to supply quantity order for large discounts, handling delivery of materials etc. It is a process which facilitates an entrepreneur in smooth production operation and to take important decisions in a production line.

The entrepreneur must conduct a detailed survey and research in the market to find the viability of the project. He should know the market characteristics. He must find out in detail about costumer needs, level of consumption, likes and dislikes etc. The feasibility report must give a detailed analysis about the trend, fashion and demand in the market.

The element of a Project Report that deals with the manufacturing process. Product design and drawing is called 'Technical Feasibility'.
The other areas which find a place in this element are method of production to be used, machinery required. Raw material and input required skilled and unskilled manpower etc.

The important considerations that an entrepreneur should keep in mind while purchasing the right quality and quantity of material at the right time and price marks are:

1. Develop good relation with the supplier.
2. Prepare detailed specification of the purchases.
3. Find out current market price.
4. Calculate correct inventory level arrangement of finance.
5. Build up goodwill and credit worthiness.
6. Avoid dependence on single supplier.

Financial profile gives an exact assessment of the revenue, costs, profits and losses, cash-flow dynamics, stock of both raw materials and finished products, loans etc. Critical assessment of the finances and its dynamics help in the holistic assessment of the enterprise.

Project report is required to have adequate clarity of what an entrepreneur is doing, why he is doing and how he will do it. It will enlighten him to moderate and harmonise with various components of the project.

No.	Basis	Owner’s Fund	Borrowed Fund
a.	Fixed obligation.	Does not involve fixed obligation.	Involves fixed obligation i.e. paying interest and repayment of principal.
b.	Permanence.	It provides permanent capital which is not refundable.	Principal amount is refundable on maturity with interest.
c.	Risk Capital.	It provides risk capital as the owner bear the risk of losses.	It does not provide the risk capital.

 

Cost is defined as ‘the amount of expenditure (actual or notional) incurred on, or attributed to, a given thing’.
Major elements that determine cost are:

1. Cost of materials.
2. Cost of labour.
3. Cost of overheads.
4. Cost of other expenses.

1. Description of the promoters of the enterprise: It should carry the educational qualifications, professional qualifications, experience, specific qualities that characterise him as an entrepreneur. Brief account of his financial background and the likely investment he intends to make should also be given.
2. Economic viability and Marketability: This will be reflected by the product quality, product needs, clientele requirements, market size, selling arrangements and various other factors.