V semester B.Com examination, December 2009

(Semester scheme)(New)COMMERCE (Paper-5.3)Entrepreneurship Development Programme

Time : 3 hrs max. marks:90

SECTION-A

1. Answer any 10 sub-questions. Each sub question carries 2 marks (10x2=20)

a) What does ED mean?Entrepreneurshipis the process of starting a business or other organization. Theentrepreneurdevelops a business plan, acquires the human and other required resources, and is fully responsible for its success or failure.b) What is business opportunity?Abusiness opportunity(or bizopp) involves sale or lease of any product, service, equipment, etc. that will enable the purchaser-licensee to begin abusiness.c) What is Seed Capital?Money used for the initial investment in a project or startup company

d) What is an 'Industrial Policy'?Governmentpolicyto influence whichindustriesexpandand, perhaps implicitly, whichcontract, viasubsidies, taxbreaks, and otheraidsfor favored industries.

e) Define the term 'Entrepreneur'.a person who sets up a business or businesses, taking on financial risks in the hope of profit.

f) What is a project?It is defined as a typically has a distinct mission that it is designed to achieve and a clear termination point, the achievement of the mission.g) What do you mean by Sick Industrial Unit?Industrial company(being a company registered for not less than five years) which has at the end of any financial year accumulated loss equal to or exceeding its entire net worth and which has also suffered cash losses in such a financial year immediately preceding such financial year.h) Expand i)KVIC ii) EDI.Khadi and Village Industries Commission

Entrepreneurship development india

i) Mention any two advantages of a Joint Stock Company form of organization.

1.Limited Liability: Liability of members of Joint Stock Company is limited to the extent of shares held by them. Hence shareholders assets will not be on stake. This feature attracts large number of investors to invest in the company.

2.Perpetual Existence: A company is an artificial legal person created by law which has its own independent legal status. Its existence is not affected by the death or insolvency of its members.

3.Large Scale Operation: The capacity of the corporate organizations to raise the funds is comparatively high which provide capital for large scale operations. Hence opens the scope for expansion.

4.Transferability of Shares: In a joint stock company it is easy to transfer shares to anyone. But the same is not permitted to private limited company.

5.Raising of Funds: It is easy to raise a large amount of funds as the number of persons contributing to the capital are more.

6.Social Benefit: It offers employment to a large number of people. It facilitates promotion of various ancillary industries. It also donates money for education, community service.

7.Research and Development: It invests a lot of money on research and development for improved production process, improving quality of product, designing and innovating new products etc.

Disadvantages of Joint Stock Company:

1.Formation is not easy: To act as a legal entity a company has to fulfill various legal and procedural formalities making it a complicated process.

2.Double Taxation: This is the biggest disadvantage which the company faces. Firstly, company needs to pay tax for the earned profits and again the shareholders are taxed for the earned income.

3.Control by Board of Directors: After electing directors of the company which manage the business for the company the shareholders become ignorant of their responsibilities. This may be due to lack of interest and lack of proper and timely information.

4.Excessive Government Control: A company has to comply with provisions of several acts, non-compliance of which can cause a company heavy penalty. This affects the smooth functioning of a company.

5.Delay in Policy Decisions: All the legal and procedural formalities which are required to fulfill before making policies of the company delay the policy decisions.

6.Speculation and Manipulation: As the shares of a joint stock company are easily transferable thus the shares are purchased and sold in the stock exchanges on the value or price of a share based on the expected dividend and the reputation of the company.

j) What is meant by a business plan?DEFINITION of 'Business Plan' A written document that describes in detail how a newbusinessis going to achieve its goals. Abusiness planwill lay out a writtenplanfrom a marketing, financial and operational viewpoint.

k) Mention any four types of Entrepreneurs.The 4 different types of entrepreneurs:

1. The Traditional Entrepreneur

2. The Growth Potential Entrepreneur

3. The Project-Oriented Entrepreneur

4. The Lifestyle Entrepreneur

Overview of the 4 types of entrepreneurs

1. Traditional businesses are those ones that have been around for many years; restaurants, shops, carpenters, hair dressers, mechanics and other companies that help the local community function.

2. A growth potential business typically works with software development, applications for smart phones and tablets, consulting, communication and marketing, development of medical equipment, business intelligence. The really good ones are scalable.

3. The project oriented businesses are typically owned by well-educated entrepreneurs and they work with tasks close to their education. Fx: translation, design of concepts, exhibitions at museums, they are graphic designers, authors, psychologist, film makers, textile designers ...

4. The lifestyle entrepreneur doesnt have an education as a basis for starting the company. It is a "con amora business for love of the idea/service. The life style entrepreneur might be selling Aloe Vera or slimming products, be a glass artist, childrens book author, do painting therapy, sell coaching or aura interpretation.

l) Mention any two functions of a business plan. to make the aim of your business clear.

to show the predicted expenditure of your business.

to display how much profit you are intending to make.

SECTION-B

Answer any five of the following. Each question carries 5 marks.

2. Explain the functions of Entrepreneur.1. PlanningThis is the first step in setting up an enterprise. The planning process involves: Scanning for the best suitable idea Selection of the product line Determining the type of business organization (individual or partnership or corporate) Estimation of capital resources Selection of location/site Studying the government policies and regulations Studying the availability of labour force Studying of the market and marketing strategy to be adopted2. OrganizationAn entrepreneur co-ordinates, assembles and supervises other factors of production - land, labour and capital during the promotion and performance stage for optimum utilization of resources.3. Decision-makingAs a decision maker, an entrepreneur takes various decisions regarding the following matters: Determining the objectives of the business enterprise Procurement of machinery, material, men, etc Acquisition of efficient technology and new equipment Development of a market for the product4. ManagementThis involves the operations of the venture and managing of day-to-day activities. It involves direction of men, machine, material and other resources.5. InnovationThis may involve: Launching of a new product on the market Introduction of new technology in production Creation of new markets Discovery of new and better sources of raw materials6. Risk bearingAn entrepreneur undertakes the responsibility for loss that may arise due to un foreseen circumstances in the future.7. Uncertainty bearingThere are some risks which cannot be insured against and incalculable, for example uncertain trends in the market. 3. Discuss the merits of partnership.Advantages of Partnership Capital Due to the nature of the business, the partners will fund the business with start up capital. This means that the more partners there are, the more money they can put into the business, which will allow better flexibility and more potential for growth. It also means more potential profit, which will be equally shared between the partners.

Flexibility A partnership is generally easier to form, manage and run. They are less strictly regulated than companies, in terms of the laws governing the formation and because the partners have the only say in the way the business is run (without interference by shareholders) they are far more flexible in terms of management, as long as all the partners can agree.

Shared Responsibility Partners can share the responsibility of the running of the business. This will allow them to make the most of their abilities. Rather than splitting the management and taking an equal share of each business task, they might well split the work according to their skills. So if one partner is good with figures, they might deal with the book keeping and accounts, while the other partner might have a flare for sales and therefore be the main sales person for the business.

Decision Making Partners share the decision making and can help each other out when they need to. More partners means more brains that can be picked for business ideas and for the solving of problems that the business encounters.

Disadvantages of Partnership Disagreements One of the most obvious disadvantages of partnership is the danger of disagreements between the partners. Obviously people are likely to have different ideas on how the business should be run, who should be doing what and what the best interests of the business are. This can lead to disagreements and disputes which might not only harm the business, but also the relationship of those involved. This is why it is always advisable to draft a deed of partnership during the formation period to ensure that everyone is aware of what procedures will be in place in case of disagreement and what will happen if the partnership is dissolved.

Agreement Because the partnership is jointly run, it is necessary that all the partners agree with things that are being done. This means that in some circumstances there are less freedoms with regards to the management of the business. Especially compared to sole traders. However, there is still more flexibility than with limited companies where the directors must bow to the will of the members (shareholders).

Liability Ordinary Partnerships are subject to unlimited liability, which means that each of the partners shares the liability and financial risks of the business. Which can be off putting for some people. This can be countered by the formation of a limited liability partnership, which benefits from the advantages of limited liability granted to limited companies, while still taking advantage of the flexibility of the partnership model.

Taxation One of the major disadvantages of partnership, taxation laws mean that partners must pay tax in the same way as sole traders, each submitting aSelf Assessmenttax return each year. They are also required to register as self employed with HM Revenue & Customs. The current laws mean that if the partnership (and the partners) bring in more than a certain level, then they are subject to greater levels of personal taxation than they would be in a limited company. This means that in most cases setting up a limited company would be more beneficial as the taxation laws are more favourable (see our article on theAdvantages and Disadvantages of a Limited Company).

Profit Sharing Partners share the profits equally. This can lead to inconsistency where one or more partners arent putting a fair share of effort into the running or management of the business, but still reaping the rewards.

4. Explain the advantages of a business plan.1, You'll be able to tell if you are likely to make any profit2, You'll know how much you will need to make in order to live3, You'll be forced to see if this really is a workable business or not4, You'll have a blue print to spot problems early and before they turn into business threatening problems particularly in the first couple of years5, If you want finance banks or investors will want to see what they can expect from your business this helps them keep an eye on their investment

5. Explain the stages of project planning.Projects are divided into six stages:

1. Definition.

2. Initiation.

3. Planning.

4. Execution.

5. Monitoring & Control.

6. Closure.

Each project stage is characterised by a distinct set of activities that take the project from the first idea to its conclusion. Each stage is of equal importance and contributes to the overall success of the project.

1. Definition

Before a project starts the project manager must make sure the project goals, objectives, scope, risks, issues, budget, timescale and approach have been defined. This must be communicated to all the stakeholders to get their agreement. Any differences of opinion must be resolved before work starts.

2. Initiation

This is perhaps the most important stage of any project as it sets the terms of reference within which the project will be run. If this is not done well, the project will have a high probability of failure. The initiation stage is where the business case is declared, scope of the project decided and stakeholder expectations set. Time spent on planning, refining the business case and communicating the expected benefits will help improve the probability of success. It is tempting to start work quickly, but a poor initiation stage often leads to problems and even failure.

3. Planning

The key to a successful project is in the planning. Creating a project plan is the first task you should do when undertaking any project. Often project planning is ignored in favour of getting on with the work. However, many people fail to realise the value of a project plan in saving time, money and for avoiding many other problems.

4. Execution

This is where the work to deliver the product, service or wanted result is carried out. Most of the work related to the project is realised at this stage and needs complete attention from the project manager.

5. Monitoring & Control

Once the project is running it is important the project manager keeps control. This is achieved by regular reporting of issues, risks, progress and the constant checking of the business case to make sure that the expected benefits will be delivered and are still valid.

6. Closure

Often neglected, it is important to make sure the project is closed properly. Many projects do not have a clear end-point because there is no formal sign-off. It is important to get the customers agreement that the project has ended, and no more work will be carried out. Once closed, the project manager should review the project and record the good and bad points, so that in the future, successes can be repeated, and failures avoided. A project that is not closed will continue to consume resources.

6. Explain the different symptoms of sickness. Shortage of cash

Deteriorating financial ratios

Continuous decline in prices of the shares

Moral degradation of employees

Frequent request to banks and financial institutions

7. Mention the role of D.I.C. in the development of Small Scale Industry.8. Explain the objectives of State Finance Corporation.9. What is an Industrial Estate? Explain briefly any four of its objectives.an area of land developed as a site for factories and other industrial businesses.

SECTION-C

Answer any three of the following. Each question carries 15 marks.

10. Explain the qualities of a Successful Entrepreneur.Entrepreneurs tend to:

be passionate about achieving their goals

have a spirit of adventure (in fact, the word "adventure" is derived from the Latin word meaning "to venture")

have a strong need to achieve and seek personal accomplishment

be self-confident and self-reliant

be goal-oriented

be innovative, creative, and versatile

be persistent

be hardworking and energetic

have a positive attitude

be willing to take initiative

have a strong sense of commitment

An eye for opportunity: Many entrepreneurs start by finding a need and quickly satisfying it.

Independence: Even though most entrepreneurs know how to work within the framework for the sake of profits, they enjoy being their own boss.

An appetite for hard work: Most entrepreneurs start out working long, hard hours with little pay.

Self-confidence: Entrepreneurs must demonstrate extreme self-confidence in order to cope with all the risks of operating their own business.

Discipline: Successful entrepreneurs resist the temptation to do what is unimportant or the easiest but have the ability to think through to what is the most essential.

Judgment: Successful entrepreneurs have the ability to think quickly and make a wise decision.

11. Explain the factors affecting Entrepreneurial growth.Factors affecting Entrepreneurship growth: 1. Economic factors

2. Social factors

3. Cultural factors

4. Personality factors

5. Psychological and sociological factors.

Economic Factors: Lack of adequate basic facilities

Non- availability of capital

Non- availability of raw materials and finished goods.

Greater risk involved in business

Non- availability of skilled labour

Social factors Customs and traditions

Rationality of the society

Social system

Social set-up

Personality Factors Suspect personality

Emergence of planning PsychologicalNeed Achievement

Withdrawal of Status Respect

12. Explain the importance of small scale industries in an economy.Employment generation

Mobilisation of resources and entrepreneurial skill:

Equitable distribution of income:

Regional dispersal of industries:

Provides opportunities for development of technology:

13. Discuss the various steps involved before commencing a business.1. Do your market research:Just because you build it or sell it doesn't necessarily mean anyone will buy it. The first essential step is to research your potential market. Who needs what you are offering? Is there space for your product or service in the market or is the market saturated? Is the market national? Is it a niche? Can you define your ideal customers? These are all questions that need to be answered before you even consider starting a business. Too many entrepreneurs have found out the hard way that there was not enough market share for them to capture. Others have realized that their target market audience was far too limited to make their business work.

2. Show yourself the money:You can't start a business without capital. Determine what you have, what you will need and how you will go about getting it. If you plan to seek investor funding or financing, start writing a business plan and practice your pitch. Research the costs associated with your business. Know how much money you'll need and decide where it could come from.

3. Hire a good business attorney:You don't necessarily need to have an attorney on a retainer, but you'll want to hire an attorney experienced with new businesses to help you get started. Your attorney can advise you about such things as drafting contracts, reviewing your lease and determining the right business structure. "A good attorney will know what it is that you are trying to do and help you structure your business in a way that will be beneficial to you," says Chris Talis, senior partner at Hedgerow Mergers Acquisitions in Teaneck, N.J. The best way to find a good attorney is by referral or through networking.

4. Hire a good accountant:An accountant will work in conjunction with your attorney and be instrumental in determining the best form of ownership. He can also help you establish bookkeeping and other record keeping procedures that can keep you on track for years. Most important, a good accountant will help with tax planning. "You will also want an accountant who understands the state laws, since every state has its own little intricacies, such as sales tax issues," Talis says, adding that it's important for your accountant to be familiar with startup ventures.

5. Decide on a business structure:Your choices include sole proprietorship, partnership, corporation, "S" corporation or limited liability corporation (LLC). Personal liability, taxes, paperwork and regulations vary greatly among the different legal business structures. Your attorney and accountant will play a key role in assisting you in this important decision.

6. Decide on a business name:It may seem obvious and simple, but the name is how your business will be known to the world. The right name says a lot about your company. Make a list of potential names and narrow the list down to the one that best describes your company in a few words, while being catchy, easy to remember, easy to pronounce and easy to spell. You should also consider how it will translate to a web domain name. You'll also need to do research to see if there are a) similar business names and b) similar domain names.

7. Get all necessary licenses and permits:Along with a business license, you may need to get additional licenses depending on the type of business and local laws. Many professionals, such as contractors and real estate agents, need to be licensed in the states in which they work. Additionally, you may need licenses to manufacture and/or sell specific products such as liquor, firearms or even lottery tickets. Research all licenses applicable in your county and your state. It's also extremely important to know the zoning laws before you open a business. Don't assume the zoning laws don't apply to you. You can get information on zoning from your local county clerk's office.

14. What are the causes of Industrial Sickness? External Causes1) Govt. policy2) Erratic Supply of Inputs3) Demand & credit restraints4) Technological Factors5) Power Cuts Internal Causes1) Out dated Technology2) Financial Problem3) Management problems4) Labour Problem5) Marketing & Sickness