CBSE Class 12 Entrepreneurship Sample Paper 2026 27 with Solutions PDF Download

SECTION A

1. Prakriti Packaging Ltd. is a company that provides eco-friendly packaging solutions. The establishment of the company was driven by the growing emphasis on sustainability and environmental responsibility. It was considered to be a promising idea to offer innovative, biodegradable packaging materials in the market.
Identify the source that led to the emergence of the business idea.
(Choose the correct option to fill up the blank) [1 Mark]
(A) Problem
(B) Competition
(C) Change
(D) Innovation

Answer: (C) Change

Teacher's Note:
a) Growing emphasis on sustainability represents a change in societal values and government policy, which is one of the sources of business ideas.
b) Do not confuse "change" with "innovation" - here the idea emerged because of a shift in the environment, not from the product itself.

2. Rohit wants to start a small venture but is unsure of what product or service to offer. His mentor explains him that business ideas may come from market trends, consumer needs, or even unexpected situations. Rohit begins observing problems around him, analysing what students need, and noting down ideas that occur to him randomly. He realises that this involves creating, developing, and communicating concepts and converting them into reality.
Identify the phase of opportunity spotting Rohit is engaged in and choose the correct option. [1 Mark]
(A) Idea generation
(B) Market segmentation
(C) Problem identification
(D) Product standardisation

Answer: (A) Idea generation

Teacher's Note:
a) Idea generation involves creating, developing and communicating ideas which are abstract, concrete or visual.
b) Note the keyword "converting them into reality", which points directly to idea generation and not mere problem identification.

3. Rohan, a young professional, found it difficult to compare and select suitable health insurance plans because different companies provided complex information, varied benefits, and confusing terms. Realising that many customers might be facing similar challenges, he developed "PolicySimplify.in", a single platform that presents insurance options in a clear and organised manner.
Identify the method of idea generation that Rohan's initiative represents. (Choose the correct option) [1 Mark]
(A) Environment scanning
(B) Problem identification
(C) Trend spotting
(D) Innovation

Answer: (B) Problem Identification

Teacher's Note:
a) Rohan noticed a common difficulty faced by customers - this is the essence of problem identification as a method of idea generation.
b) Trend spotting involves observing patterns across the market over time, which is not indicated here.

4. From the following idea fields in Column-I and the example of idea fields in Column-II, match the correct pair and choose the correct option:
Column-I | Column-II
P - Natural resources ideas | (I) "Teladoc Health" - Provides telemedicine facility, allowing patients to consult with doctors remotely.
Q - Trading related ideas | (II) "QuickFix Home Services" - An app that connects customers with electricians, plumbers, and repair professionals on demand; developed due to the increasing need for convenient and reliable home maintenance services.
R - Service sector ideas | (III) "Gotham Greens" - known for creating vertical farms and urban gardens.
S - Market driven or demand driven ideas | (IV) "Etsy" - An e-commerce platform where people can buy and sell handmade crafts and vintage items.
Options: [1 Mark]
(A) P - (III), Q - (I), R - (IV), S - (II)
(B) P - (IV), Q - (II), R - (I), S - (III)
(C) P - (III), Q - (I), R - (II), S - (IV)
(D) P - (III), Q - (IV), R - (I), S - (II)

Answer: (D) P - (III), Q - (IV), R - (I), S - (II)

Teacher's Note:
a) Natural resources ideas relate to farming/agriculture (Gotham Greens), trading ideas relate to buying and selling goods (Etsy), service sector ideas relate to providing a service (Teladoc), and demand-driven ideas arise from a felt need (QuickFix).
b) Match each idea field to its defining activity rather than the industry name alone.

5. Read the following statements- Assertion (A) and Reason (R). Choose one of the correct options given below:
Assertion (A): An idea that is innovative and socially relevant may still fail to qualify as a sound business opportunity.
Reason (R): A business opportunity must also be assessed on market demand, feasibility, expected returns, and the entrepreneur's competence.
Choose the correct option: [1 Mark]
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Answer: (A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).

Teacher's Note:
a) An opportunity must satisfy several criteria - not just innovation - to be commercially sound.
b) Always check whether the Reason logically explains "why" the Assertion is true before selecting option (A).

6. Roy and Tanzia are planning to start a financial advisory firm together. They want to ensure that their personal assets are protected from business liabilities and that their business is regulated by law.
Identify the form of business organization would best meet Roy and Tanzia's requirements. (Choose the correct option) [1 Mark]
(A) Sole proprietorship
(B) Public limited company
(C) Partnership
(D) Private limited company

Answer: (D) Private limited company

Teacher's Note:
a) Limited liability and legal regulation are the key features of a private limited company.
b) Partnership would not protect personal assets since partners have unlimited liability.

7. In preparing the __________, 'sales by month' must be calculated first, making use of forecasting techniques as the basis. (Choose the correct option to fill up the blank) [1 Mark]
(A) Proforma cash flow
(B) Proforma financing decision
(C) Proforma income statement
(D) Proforma investment decision

Answer: (C) Proforma income statement

Teacher's Note:
a) A proforma income statement begins with estimated sales, from which costs and profit are projected.
b) Remember: sales forecast is the starting point of most financial projections.

8. Tech Solutions, a startup producing solar-powered appliances, is planning to launch a new product line 'Surya-Kiran'. The founder assesses the existing workforce and decides to recruit skilled engineers and marketing professionals to ensure that the right people are available at the right time and place.
This reflects the concept of ______ planning in the business organisation. (Choose the correct option to fill up the blank) [1 Mark]
(A) Financial
(B) Manpower
(C) Operational
(D) Organisational

Answer: (B) Manpower

Teacher's Note:
a) Manpower planning ensures the right number and type of people are available at the right time and place.
b) Recruiting skilled engineers and marketers is a clear indicator of manpower planning, not organisational structuring.

9. Refer to the given image:
On the basis of the given image, recognize the media used for advertising and choose the correct option: [1 Mark]
(A) Outdoor
(B) Ambient
(C) Point of sale
(D) Window display

[Figure: A young woman sits on an outdoor public bench that has been wrapped with a large advertisement for "ChoccoBreak" chocolate, with the product name and a chocolate bar image printed directly on the bench itself.]

Answer: (B) Ambient

Teacher's Note:
a) Ambient advertising places the message on everyday objects like benches, shopping trolleys, or floors in a way that blends with the surroundings.
b) Do not confuse it with outdoor advertising, which uses hoardings and billboards in open spaces.

For Visually Impaired Candidates (in lieu of Q. 9)

Product placement and promotion help in creating brand awareness through various marketing channels.
From the following options, choose the effective way to increase brand awareness: [1 Mark]
(A) Using social media platforms regularly and engaging with the followers.
(B) Promoting products without using any marketing channels.
(C) Using customer testimonials only in product designing.
(D) Communicating with the customers occasionally.

Answer: (A) Using social media platforms regularly and engaging with the followers.

Teacher's Note:
a) Regular engagement on social media builds trust and consistent brand recall.
b) Options that avoid marketing channels or communicate rarely cannot build brand awareness effectively.

10. The 'Skimming Pricing Strategy' delivers best results, when_______. (Choose the correct option to fill up the blank)
(i) there are strict legal and government regulations regarding consumer rights
(ii) the product is perceived as enhancing the customer's status in society
(iii) the target market associates quality of the products with its price
(iv) the firm uses it as an entry strategy
Options: [1 Mark]
(A) (i) and (ii)
(B) (ii) and (iii)
(C) (ii) and (iv)
(D) (i), (ii) and (iv)

Answer: (B) (ii) and (iii)

Teacher's Note:
a) Skimming pricing works best when customers associate high price with high status or quality.
b) It is not primarily linked to legal regulation or being only an entry strategy - that is more typical of penetration pricing.

11. Read the following statements- Assertion (A) and Reason (R). Choose one of the correct options given below:
Assertion (A): A tagline helps a brand to communicate its message and improves brand recall among consumers.
Reason (R): A tagline is the legal name of the brand that distinguishes one product from another in the market.
Choose the correct option: [1 Mark]
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Answer: (C) Assertion (A) is true, but Reason (R) is false.

Teacher's Note:
a) A tagline is a memorable phrase, not the legal name of a brand.
b) The legal name that distinguishes a product is the brand name or trademark, not the tagline.

12. Beta Ltd., a steel manufacturing company with its headquarters at Mumbai and ranked as the tenth largest steel manufacturer in the world, decided to purchase Gama Ltd., a steel company based in Chennai. Gama Ltd. was facing significant worker unrest and chose to sell its business to the highest bidder. Beta Ltd. made the highest bid of Rs. 10 lakh crore.
Identify the type of external expansion indicated in the above scenario and choose the correct option. [1 Mark]
(A) Merger
(B) Franchising
(C) Acquisition
(D) Internal Expansion

Answer: (C) Acquisition

Teacher's Note:
a) Beta Ltd. bought out Gama Ltd. by making the highest bid, which is a case of acquisition/takeover.
b) In an acquisition, one company purchases another, unlike a merger where two companies combine into a new entity.

13. Read the following statements carefully:
Statement 1: A merger is a combination of two companies into one larger company that involves stock swap or cash payment to the target.
Statement 2: In any type of merger, at least one of the merging companies loses its entity.
In the light of the given statements, choose the correct option from the following: [1 Mark]
(A) Statement 1 is true and Statement 2 is false.
(B) Statement 1 is false and Statement 2 is true.
(C) Both statements 1 and 2 are true.
(D) Both statements 1 and 2 are false.

Answer: (C) Both statements 1 and 2 are true.

Teacher's Note:
a) A merger always results in stock swap/cash payment and loss of separate identity of at least one firm.
b) Remember: merger differs from acquisition mainly in how the combination is structured and agreed upon.

14. ABC Restaurant had 60 customers whose total billed amount stood at Rs. 18,000. The cost per unit was 65% of the sales price. The Gross Margin per unit is Rs. ____. (Choose the correct option to fill up the blank) [1 Mark]
(A) 105
(B) 175
(C) 210
(D) 300

Answer: (A) 105
Sales price per unit = \( \dfrac{18,000}{60} = Rs. 300 \)
Cost per unit = 65% of 300 = \( 0.65 \times 300 = Rs. 195 \)
Gross Margin per unit = \( 300 - 195 = Rs. 105 \)

Teacher's Note:
a) Always calculate sales price per unit first by dividing total billed amount by number of customers.
b) Gross margin = Selling price - Cost price, applied per unit here.

15. ______ refers to the funds which an organisation must possess to finance its day-to-day operations. (Choose the correct option to fill up the blank) [1 Mark]
(A) Seed Capital
(B) Working Capital
(C) Fixed Capital
(D) Retained earnings

Answer: (B) Working Capital

Teacher's Note:
a) Working capital funds day-to-day operations like paying wages, buying raw materials, etc.
b) Fixed capital, in contrast, is used for long-term assets like machinery and buildings.

16. Infotech Pvt. Ltd. wants to raise additional capital at a very short notice for expanding its AI-based product line. The Management decided not to raise funds from the general public. Instead, they decided to approach a small group of selected investors, including venture capitalists and high-net-worth individuals.
Identify, which of the following is NOT a benefit of the method of floatation of new issue opted in the above case? [1 Mark]
(A) Results in lower costs compared to public offerings.
(B) Provides access to sophisticated and institutional investors.
(C) Enables fund-raising without detailed public disclosure.
(D) Offered to the existing shareholders, who may either subscribe or renounce.

Answer: (D) Offered to the existing shareholders, who may either subscribe or renounce.

Teacher's Note:
a) The case describes a private placement, which is offered to a select group, not existing shareholders.
b) Option (D) describes a rights issue, which is a different method of floatation altogether.

17. Nova Pvt. Ltd., a rapidly growing technology startup, decides to convert into a public company to raise funds from the stock market. After public listing, the management faces several new challenges:
They are required to submit detailed reports to shareholders and regulatory authorities regularly.
Media attention increases and every corporate decision is scrutinised publicly.
Dividend expectations of shareholders put pressure on consistent profit growth.
The company becomes potentially vulnerable to hostile takeovers.
Senior management feels that their control over strategic decisions has reduced.
Based on the above situation, which of the following is NOT a drawback of going public? [1 Mark]
(A) Loss of privacy due to media attention.
(B) Pressure to maintain dividend and profit growth trends.
(C) Increased accountability to shareholders and regulatory bodies.
(D) Ability to raise additional capital from a larger pool of investors.

Answer: (D) Ability to raise additional capital from a larger pool of investors.

Teacher's Note:
a) Access to a larger pool of investors is actually an advantage, not a drawback, of going public.
b) All other options describe genuine challenges companies face after listing.

18. When a company raises capital by issuing securities to the public for the first time, it is considered to be __________ market activity.
(i) Primary Market
(ii) Secondary Market
(iii) Venture Capitalists
Options: [1 Mark]
(A) Only (i)
(B) Only (ii)
(C) (i) and (iii)
(D) (ii) and (iii)

Answer: (A) Only (i)

Teacher's Note:
a) The primary market deals with the issue of new securities for the first time.
b) The secondary market deals with trading of already-issued securities, so it does not apply here.

SECTION B

19. (A) Explain any two elements in the innovation process. [2 Marks]

Answer:
1. Analytical planning: This involves carefully identifying the product or service features, its design, and the resources that will be needed to bring the idea to life.
2. Resource organization: This involves obtaining the required resources such as materials, technology, human resources, or capital needed for the innovation.

Teacher's Note:
a) Mention the name of each element clearly before explaining it.
b) Keywords "planning" and "obtaining resources" are important scoring points.

OR

(B) Explain the concept of 'idea germination'. [2 Marks]

Answer: Idea germination is the seeding stage of a new idea, where the entrepreneur recognises that an opportunity exists. It happens according to the entrepreneur's interest and curiosity, through which the opportunity is explored and exploited to its best potential, often triggered by a specific problem or area of study.

Teacher's Note:
a) Remember "germination" as the seeding or starting stage, similar to a seed sprouting.
b) Link the idea to the entrepreneur's personal interest or curiosity for full marks.

20. Ritika runs a small pottery unit where different teams work on sourcing materials, designing products, and finishing the end products. Recently, she noticed delays in production and an increasing number of defects in the finished goods. To understand the situation better, Ritika begins regularly reviewing the status of raw materials, checking the progress of work-in-process, and identifying departments that are lagging behind. She also starts suggesting corrective steps to remove obstacles in production.
(I) Identify the element of one of the components of a business plan that Ritika is performing in this situation. [1 Mark]
(II) State how this element helps entrepreneurs. [1 Mark]

Answer:
(I) Ritika is performing Production Planning and Control, which is a part of the Production Plan.
(II) This element helps entrepreneurs by monitoring the flow of production, controlling quality, identifying delays or bottlenecks, and taking corrective measures so that goods are produced efficiently, on time, and with minimum defects.

Teacher's Note:
a) Reviewing raw materials and work-in-process status are clear indicators of production planning and control.
b) Always connect the identified element to how it solves the specific problem mentioned in the case (delays and defects).

21. (A) In a partnership firm, the business of partnership can be carried on by all the partners or any one of them acting for all.
(I) Identify the feature of partnership firm highlighted in the aforesaid statement. [1 Mark]
(II) State the applicability of the identified feature in a partnership firm. [1 Mark]

Answer:
(I) The feature highlighted is Mutual agency - every partner is a principal as well as an agent of the other partners and of the firm.
(II) Applicability: each partner is liable for acts performed by other partners, and each partner can bind the other partners and the firm through his acts done in the ordinary course of business.

Teacher's Note:
a) "Acting for all" is the key phrase that points directly to mutual agency.
b) Remember that mutual agency also creates unlimited liability for the acts of co-partners.

OR

(B) "Public Company and Private Company has varied criterion in terms of number of members and transferability of shares." Justify the given statement with valid arguments. [2 Marks]

Answer:
1. Number of members: A private company has a minimum of two and a maximum of fifty members, whereas a public company has a minimum of seven members with no maximum limit.
2. Transferability of shares: In a private company, the right to transfer shares is restricted, whereas in a public company, shares are freely transferable.

Teacher's Note:
a) Give the exact numeric limits for members to score full marks.
b) "Restricted" versus "freely transferable" is the key distinguishing phrase for shares.

22. Shoreal, a global leader in the cosmetics industry, has long been known for its innovative marketing strategies. In 2024, Shoreal decided to enhance its engagement with Indian consumers by launching a series of beauty workshops and makeup tutorials across major shopping malls in India. By offering a tangible and interactive experience, Shoreal not only showcased the value of its products but also fostered a deeper connection with its target audience.
(I) Identify the promotional approach used by 'Shoreal' to reach its customers. [1 Mark]
(II) Explain any one important feature of this approach. [1 Mark]

Answer:
(I) The promotional approach used is Below-the-Line Promotion.
(II) Personalised Communication: Below-the-line promotion allows direct and personal contact with customers, helping the firm communicate product features more effectively through interactive experiences like workshops and tutorials.

Teacher's Note:
a) Interactive, direct-contact activities like workshops are classic examples of below-the-line promotion.
b) Contrast this with above-the-line promotion, which uses mass media like TV or newspapers.

23. Refer to the given image carefully:
On the basis of the given image:
(I) Identify the pricing strategy used by the company. [1 Mark]
(II) State one advantage of this pricing strategy to the enterprise. [1 Mark]

[Figure: Two glass bottles of "Sparkle Fizz" soft drink displayed on a store counter - a smaller 200 ml bottle priced at Rs. 10 and a larger 1 litre bottle priced at Rs. 30.]

Answer:
(I) The pricing strategy used is Variable Pricing.
(II) Under variable pricing, the same product is sold at different prices based on quantity or size offered. This helps the enterprise attract different categories of customers and increase overall sales, as buyers can choose a pack size according to their needs and paying capacity.

Teacher's Note:
a) Different sizes at different prices for the same product is the key identifier of variable pricing.
b) Highlight how this strategy widens the customer base across different budgets.

For Visually Impaired Candidates (in lieu of Q. 23)

(I) State the meaning of cost-plus pricing strategy for a company. [1 Mark]
(II) Give one advantage of the cost-plus pricing strategy to the company. [1 Mark]

Answer:
(I) Under the cost-plus pricing strategy, a company first calculates the total cost of production of a product, including all costs, and then adds a fixed margin of profit to determine the selling price.
(II) This pricing strategy ensures recovery of all costs along with a guaranteed margin of profit, making it simple and safe for the company to use.

Teacher's Note:
a) Remember the formula: Selling Price = Total Cost + Profit Margin.
b) Simplicity and cost recovery are the two biggest advantages examiners look for.

24. (A) The quantity of jackets sold by a shopkeeper is 1,200 per month at Rs. 1,100 each. The cost of placing an order and receiving goods is Rs. 1,500 per order. The inventory holding cost is Rs. 40 per annum.
Calculate the economic order quantity for the shopkeeper. [2 Marks]

Answer:
\( EOQ = \sqrt{\dfrac{2PD}{C}} \)
\( = \sqrt{\dfrac{2 \times 1,500 \times 1,200}{40}} \)
\( = \sqrt{90,000} \)
\( = 300 \) units

Teacher's Note:
a) Use annual demand (D), ordering cost (P), and carrying cost per unit (C) correctly in the EOQ formula.
b) Ensure monthly demand is used directly as given, since the case already treats 1,200 as the demand figure used in the formula.

OR

(B) The following information is taken from the Balance Sheet of XYZ Enterprises:
Current Assets: Cash Rs. 30,000 | Trade Debtors Rs. 50,000 | Inventory Rs. 40,000
Current Liabilities: Creditors Rs. 35,000 | Short-term Loans Rs. 10,000 | Outstanding Expenses Rs. 5,000
Calculate the Working Capital of XYZ enterprise. [2 Marks]

Answer:
Working Capital = Current Assets - Current Liabilities
Current Assets = 30,000 + 50,000 + 40,000 = Rs. 1,20,000
Current Liabilities = 35,000 + 10,000 + 5,000 = Rs. 50,000
Working Capital = 1,20,000 - 50,000 = Rs. 70,000

Teacher's Note:
a) Add up all current assets and all current liabilities separately before subtracting.
b) Working capital shows the firm's ability to meet short-term obligations.

SECTION C

25. In 2025, Ashima Mehta, a young entrepreneur in Pune, noticed a growing demand for personalised online learning tools among students. She studied market reports and social media discussions to understand changing learning patterns and technological adoption. She also observed competitors and educational platforms to see what services were popular and which gaps existed. Additionally, she conducted surveys and interacted with students and teachers to understand their needs and challenges.
Using these insights, Ashima launched "Learn Smart", an AI-based platform offering customised study plans, practice tests, and performance analytics. Her venture quickly gained popularity among school and college students.
Quoting the lines, identify the three ways of trend spotting Ashima used. [3 Marks]

Answer:
1. Read Trend: "She studied market reports and social media discussions to understand changing learning patterns and technological adoption."
2. Watch Trend: "She also observed competitors and educational platforms to see what services were popular and which gaps existed."
3. Talk Trend: "She conducted surveys and interacted with students and teachers to understand their needs and challenges."

Teacher's Note:
a) Quote the exact line from the case for each trend to secure full marks.
b) Read = reports/media, Watch = observation of competitors, Talk = surveys/interaction - remember this order.

26. Urban Ride Cabs is a growing app-based taxi service operating in major Indian cities. Over the past year, the company has noticed rapid changes in fuel prices, customer expectations for safety features, and increasing competition from new low-cost cab aggregators.
To stay competitive, Urban Ride's management team began regularly scanning the business environment. They studied customer feedback, analysed competitor offerings, and monitored technological developments such as AI-enabled routing and in-car safety systems.
As a result, the company introduced GPS-enabled safety alerts, adopted fuel-efficient hybrid cars, partnered with banks to secure cheaper finance, and launched new features like live driver rating updates. These steps improved their reputation, attracted more users, and helped them respond quickly to market changes.
On the basis of the given text and common understanding, identify and explain three benefits Urban Ride gained by scanning the business environment. [3 Marks]

Answer:
1. Identification of Opportunities: Keeping track of external changes helped Urban Ride spot new opportunities like fuel-efficient technology early.
2. Formulation of Strategies: Understanding market threats and opportunities helped the company craft strategies such as introducing safety alerts to counter competition.
3. Tapping Useful Resources: Knowledge of the external environment enabled Urban Ride to partner with banks and acquire cheaper finance and technology efficiently.

Teacher's Note:
a) Link each benefit to a specific action taken by Urban Ride mentioned in the case.
b) Environment scanning benefits generally fall under opportunity spotting, strategy-making and resource access.

27. (A) Explain any three Product-related considerations for selecting the channel of distribution by an entrepreneur. [3 Marks]

Answer:
1. Nature of the Product: Perishable, fragile, or technical products require shorter and more direct channels, whereas durable goods can be distributed through longer channels.
2. Unit Value of the Product: High-value products generally use direct channels to reduce costs and maintain control, while low-value products are distributed through indirect channels.
3. Standardised vs Customised Product: Standardised products are suitable for indirect distribution, whereas customised or made-to-order products require direct contact with customers.

Teacher's Note:
a) Give the factor name first, then explain briefly - this structure earns full marks.
b) Remember other valid factors like technical complexity are also acceptable if explained correctly.

OR

(B) Explain the indirect distribution channels available to an entrepreneur. [3 Marks]

Answer:
1. Producer to Retailer to Consumer: Used when retailers purchase goods directly from producers and sell them to consumers.
2. Producer to Wholesaler to Retailer to Consumer: Suitable for large-scale distribution where wholesalers buy in bulk and supply to retailers.
3. Producer to Agent to Wholesaler to Retailer to Consumer: Agents act as intermediaries who help in selling goods on behalf of the producer.

Teacher's Note:
a) Draw the channel as an arrow-flow to make the answer clearer.
b) More intermediaries generally mean wider reach but less control over the final price.

28. (A) (I) Give the meaning of a franchise agreement. [1 Mark]
(II) State the main ingredients of a franchise agreement. [2 Marks]

Answer:
(I) A franchise agreement is the legal document that binds the franchisor and franchisee together, explaining what the franchisor expects from the franchisee in running the business.
(II) Main ingredients: Contract Explanation, Operations Manual, Proprietary Statements, and Ongoing Site Maintenance.

Teacher's Note:
a) A franchise agreement is essentially a legal binding contract - emphasise the word "legal".
b) List each ingredient as a separate keyword for easy marking.

OR

(B) Differentiate between internal and external expansion. [3 Marks]

Answer:
1. Meaning: Internal expansion refers to the growth of a business through a gradual increase in its own activities, such as adding new machines or increasing production capacity, using its own resources like retained profits or issue of shares. External expansion takes place when two or more existing concerns combine their operations to expand business activities and pursue common objectives.
2. Method: Internal expansion is carried out within the existing organisation, whereas external expansion involves business combination where separate units merge, cooperate or integrate.
3. Speed: Internal expansion is generally slower and organic, while external expansion allows faster growth by leveraging another firm's existing resources.

Teacher's Note:
a) "Own resources" is the keyword for internal expansion, "combination of firms" is the keyword for external expansion.
b) Present the differences in a point-wise, comparative manner for clarity.

29. Neha runs a small start-up called CleanRide Services, which offers doorstep car washing and detailing services using water-saving techniques. After one year of operations, she notices that although sales are increasing, she needs to know whether the money invested in her business is generating adequate profits.
Total Capital employed - Rs. 50,00,000
Equity - Rs. 25,00,000
Gross Profit - Rs. 6,00,000
Tax Rate - 20 %
(I) Identify the yardstick that can help Neha to ascertain the efficiency of her operations. [1 Mark]
(II) Calculate the profitability of CleanRide Services from the details given above. [2 Marks]

Answer:
(I) The appropriate yardstick is Return on Investment (ROI).
(II) Tax = 20% of 6,00,000 = Rs. 1,20,000
Net Profit = 6,00,000 - 1,20,000 = Rs. 4,80,000
\( ROI = \dfrac{\text{Net Profit}}{\text{Total Capital Employed}} \times 100 = \dfrac{4,80,000}{50,00,000} \times 100 = 9.6\% \)

Teacher's Note:
a) Deduct tax from gross profit first to arrive at net profit before applying the ROI formula.
b) ROI measures overall efficiency of capital employed, not just equity.

SECTION D

30. "Qudrat" is a Trivandrum, Kerala-based startup founded by Rohan Suri and Rishabh Suri that upcycles agricultural waste into sustainable disposable tableware products, focusing on eco-friendly solutions to reduce plastic waste. Their production process begins with sourcing agricultural waste and residue from nearby mills and farms. By working closely with the local community, Qudrat ensures a steady supply of raw materials, benefiting both the environment and the farmers.
Once a batch of raw materials is collected, it undergoes various processes including grinding, mixing, crushing, and compression molding. Leveraging advanced technology at a macro level - such as automated compression molding machines, precision mixers, and innovative material processing systems - Qudrat ensures high-quality, uniform products at scale, making the production process both efficient and sustainable. Using this technology-driven approach, Qudrat transforms agri-waste into a variety of products such as plates, tumblers, spoons, bowls, takeaway containers, trays, cup lids, and even edible straws.
What started as a deep-rooted concern for the environment has evolved into a thriving business, with Qudrat eyeing a revenue of Rs. 3 crore in their second year of operations.
(I) Identify the idea field that streamlined the launch of "Qudrat". [1 Mark]
(II) State the two elements of the PESTEL model emphasized in the given case. [2 Marks]
(III) Identify and explain the component of the financial plan illustrated in the given case. [2 Marks]

Answer:
(I) The idea field that streamlined the launch of Qudrat is Natural Resources ideas.
(II) Environmental factor: reflected through the use of eco-friendly raw materials and focus on reducing plastic waste and pollution. Technological factor: evident from the use of advanced and automated production processes such as compression molding machines to ensure quality and efficiency.
(III) The component of the financial plan illustrated is the sales forecast or revenue projection, as the enterprise estimates a revenue of Rs. 3 crore in its second year, indicating expected future sales and the economic feasibility of the venture.

Teacher's Note:
a) Agricultural waste sourced from farms is a direct clue for the natural resources idea field.
b) Link "eco-friendly" to environmental factor and "automated machines" to technological factor for the PESTEL part.
c) Any future revenue estimate given in a case usually points to the sales forecast component of a financial plan.

31. Urban Harvest Farms Pvt. Ltd. is preparing to raise funds for its hydroponic urban farming venture. To appeal to different stakeholders, the company's Chief Strategy Executive, Ms. Raina, presents the business plan in three separate meetings, each customised to the audience.
Meeting 1: Ms. Raina attends a networking event where she meets a group of potential angel investors. She gives them a quick, three-minute overview of the company's idea, highlighting the product concept, customer pain points, and the opportunity for scalable growth.
Meeting 2: The following week, Ms. Raina is invited by a venture capital firm. Here, she arrives with a visually engaging slide deck, supported by an energetic oral narrative. She walks the investors through key financial trend graphs, early traction data, and benchmark indicators.
Meeting 3: Later, she meets with a consortium of formal institutional investors. For this session, she presents a comprehensive, professionally written business plan that includes market analysis, operational design, financial projections, and risk management details.
(I) Identify the format of business plan being used in Meeting 1 and Meeting 2. [2 Marks]
(II) Describe the objective of format that is being used in Meeting 3. [2 Marks]
(III) State the format of the business plan that has not been used as yet by the company. [1 Mark]

Answer:
(I) Meeting 1 uses the Elevator Pitch format, while Meeting 2 uses the Presentation Business Plan format.
(II) The format used in Meeting 3 is a detailed, comprehensive written business plan, containing information on market analysis, operations, financial projections, and risk factors. Its objective is to provide complete and detailed information to formal investors for thorough evaluation of the business proposal.
(III) The format not yet used by the company is the Executive Summary.

Teacher's Note:
a) "Quick, three-minute overview" is the classic description of an elevator pitch.
b) A "slide deck with oral narrative" is a clear indicator of the presentation business plan format.
c) A comprehensive written document is the full/formal business plan meant for institutional investors.

32. Aurora Enterprises Ltd., a diversified Indian conglomerate, has been planning to strengthen its position in the fast-growing digital healthcare sector. Instead of developing its own online platform from scratch, Aurora chose to expand through its wholly owned subsidiary, Aurora Wellness Ventures Pvt. Ltd.
Through this subsidiary, Aurora purchased a controlling stake in Heal Kart Digital, a well-established e-pharmacy known for its doorstep delivery of medicines and wellness products.
Industry analysts observed that this move resembles how a leading Indian corporation in the past acquired an online pharmacy via its subsidiary to quickly gain a foothold in the digital healthcare market.
The acquisition instantly gave Aurora access to Heal Kart's technology, logistics network, and existing customer base, while HealKart benefited from Aurora's financial strength, wider reach, and improved supply chain.
On the basis of the given text and common understanding answer the following questions:
(I) Identify the expansion strategy used by Aurora. [1 Mark]
(II) State any four reasons behind the expansion strategy adopted by Aurora Enterprises Ltd. [4 Marks]

Answer:
(I) Aurora Enterprises Ltd. has adopted the Acquisition strategy for expansion.
(II) 1. Quick entry into a new market: It helped Aurora enter the digital healthcare market quickly without starting operations from scratch.
2. Access to existing resources and capabilities: The acquisition provided immediate access to Heal Kart's technology, logistics infrastructure and skilled manpower.
3. Reduction of risk and uncertainty: Business risk was reduced since Heal Kart already had a proven market presence and customer base.
4. Synergy and economies of scale: The combined strengths of both enterprises led to better efficiency and cost advantages for both parties.

Teacher's Note:
a) "Purchased a controlling stake" is the key phrase indicating acquisition rather than merger.
b) Give four distinct reasons, each with a short explanation, to secure full marks.
c) Mention mutual benefit to both companies as it strengthens the synergy point.

33. (A) Blew Brew Pvt. Ltd. manufactures three varieties of coffee, namely Classic Roast, Mocha Blend and Herbal Coffee. Each variety is sold in standard packs. The details relating to sales price, variable cost, and sales mix are given below:
Particulars | Classic Roast | Mocha Blend | Herbal Coffee
Sales Price per unit (Rs. ) | 100 | 80 | 50
Variable cost per unit (Rs. ) | 50 | 40 | 20
Sales Mix (%) | 20 | 30 | 50
The Total Fixed Cost of the company is Rs. 14,80,000.
Calculate the Break-even Point (BEP) in units for each variety of coffee. [5 Marks]

Answer:

Total Weighted-average contribution margin per unit (WACM) = \( 10 + 12 + 15 = Rs. 37 \)
Overall Break-even point = \( \dfrac{\text{Total Fixed Cost}}{\text{WACM per unit}} = \dfrac{14,80,000}{37} = 40,000 \) units
Break-even point of Classic Roast = \( 40,000 \times 20\% = 8,000 \) units
Break-even point of Mocha Blend = \( 40,000 \times 30\% = 12,000 \) units
Break-even point of Herbal Coffee = \( 40,000 \times 50\% = 20,000 \) units

Teacher's Note:
a) Always calculate the weighted average contribution margin using the sales mix percentages before finding overall BEP.
b) Multiply the overall BEP by each product's sales mix percentage to get product-wise BEP.
c) Double-check that the three product BEPs add up to the overall BEP (8,000 + 12,000 + 20,000 = 40,000).

OR

(B) Anaya runs a small venture called GlowVibe Candles, where she manufactures two products: Aura Lite (a basic scented candle) and Zen Glow (a premium scented candle). Both products contribute differently to the overall profits of the business because they have different selling prices and different variable costs.
Recently, Anaya noticed that although the sales volume has increased, profits did not increase in the same proportion. She also realised that the two products do not contribute equally - Zen Glow offers a higher profit per unit, while Aura Lite sells in larger quantities. This made it difficult for her to understand how the combination of both products is affecting her total profitability.
(I) Identify and explain the analytical tool Anaya should use in this situation. [2 Marks]
(II) Anaya can use this analysis to effectively manage her multi-product business. Justify the given statement, giving three advantages. [3 Marks]

Answer:
(I) The analytical tool Anaya should use is Break-even Analysis. It is a technique used to determine the level of sales or revenue that equals all the expenses required for generating that revenue - a point where there is neither profit nor loss.
(II) 1. It determines the minimum level of output to be produced, helping in setting profit goals and sales targets.
2. It identifies the products that are not contributing enough to meet fixed expenses, bringing up the question of their continuity in management discussions.
3. It shows the effect of a change in the quantity of output on overall profits.

Teacher's Note:
a) "Neither profit nor loss" is the defining phrase of break-even analysis - always include it.
b) Relate each advantage back to Anaya's problem of unequal product contribution.
c) Mention that this tool is especially useful for multi-product businesses to allocate resources wisely.

34. (A) (I) Give the meaning of an Angel Investor. [2 Marks]
(II) Explain the role of an Angel Investor in building an enterprise. [3 Marks]

Answer:
(I) An Angel Investor is an individual who provides financial support to start-ups or early-stage enterprises, usually in exchange for ownership equity, and often offers guidance and mentoring based on personal business experience.
(II) Most angel investors are current or retired executives, business owners or high-net-worth individuals who have the knowledge, expertise, and funds that help start-ups match up to industry standards. Apart from investing funds, they provide proactive advice, guidance, industry connections and mentoring to start-ups in their early days. Their objective is to create great companies while simultaneously helping investors realise a high return on investment.

Teacher's Note:
a) Mention both "financial support" and "ownership equity" for full marks in the meaning part.
b) Beyond money, emphasise mentoring and industry connections as the unique value angels add.

OR

(B) (I) State any two features of Venture Capital Finance. [2 Marks]
(II) Explain how Venture Capital supports startups during the early stage of their business. [3 Marks]

Answer:
(I) 1. Venture capital provides long-term capital to high-risk, high-growth businesses.
2. Investment is made in the form of equity or convertible securities, rather than loans.
(II) 1. Seed capital finance: capital required for conducting research at the pre-commercialisation stage, where the entrepreneur convinces the investor that the idea/product is worthwhile.
2. Startup finance: at this stage, a business plan is presented to the VC firm, a management team is formed, and a feasible production line is established to produce the product.
3. Second-round financing: once the idea has been transformed into a product and is being sold, the entrepreneur seeks VC assistance for expansion, modernisation and diversification to attain economies of scale and stability.

Teacher's Note:
a) Remember VC finance is always in the form of equity, not a loan - a common point of confusion.
b) Present the three stages (seed, startup, second-round) in the correct chronological order.
c) Link each stage to what the entrepreneur specifically needs help with at that point.