Resources Mobilization Class 12 Entrepreneurship Important Questions

Important Questions Class 12

Please refer to Resources Mobilization Class 12 Entrepreneurship Important Questions with solutions provided below. These questions and answers have been provided for Class 12 Entrepreneurship based on the latest syllabus and examination guidelines issued by CBSE, NCERT, and KVS. Students should learn these problem solutions as it will help them to gain more marks in examinations. We have provided Important Questions for Class 12 Entrepreneurship for all chapters in your book. These Board exam questions have been designed by expert teachers of Standard 12.

Class 12 Entrepreneurship Important Questions Resources Mobilization

Very Short Answer Type Questions

Question. What do you mean by stock exchange?
Answer :
A stock exchange is a body of individuals, either incorporated or not incorporated, constituted for the purpose of Assisting, Controlling or Regulating the business of buying and selling or dealing in securities.

Question. State three functions of SEBI rolled into one body
Answer :
SEBI has three functions rolled into one body.
a. quasi-legislative: It can draft regulations in its legislative capacity.
b. quasi-judicial: It passes rulings and orders in its judicial capacity.
c. quasi-executive: It conducts investigation and enforcement action in its executive function.

Question. What do you understand by angel investors?
Answer :
Angel investors are affluent individuals who can arrange capital for a start-up company or those companies which are still in the incubation stage and have high-risk, high-return matrix. The arrangement of the capital is usually in exchange of convertible debt or ownership equity. Angel investors are also called as Business angel or informal investor.

Question. Define capital market.
Answer :
A capital market is a well organized mechanism for a effective and smooth transfer of money to capital or financial resources from the investors to the entrepreneurs.

Question. Identify the reward IPO investors seek as an appreciation of their investment.
Answer :
The IPO investors seek the following rewards in return of their investment.
a. Appreciation of their investment
b. Dividends

Question. What do you understand by pro-rata allotment of securities?
Answer :
a. A circular is issued to the existing shareholders proposing the Rights issue.
b. If they like the offer, they can subscribe.
c. Otherwise, they can refuse the offer and other persons gets the opportunity to acquired the rights issue.

Question. When the right issue are proposed to the existing shareholders and if they are not ready to subscribe what is the next step taken by an entrepreneur?
Answer :
When the existing shareholders are not ready to purchase the shares issued to them under the Rights issue, the shares are offered to other persons who are willing to purchase them.

Question. What do you understand by private placement?
Answer :
Private placement is the method in which the companies directly sell their securities to a finite set of sophisticated investors.

Question. Name the method which enables employees to become shareholders and share the profits of the company.
Answer :
Stock Options is the method in which the employees of a company are offered to own the shares and become the shareholders. This leads to much better growth of the company.

Question. What is the need of secondary market?
Answer :
Secondary markets are required because
a. they increase the marketability of the securities
b. and this leads to liquidity of investments.

Short Answer Type Questions

Question. What is SEBI and what is its role?
Answer : SEBI:
SEBI is acronym for Securities and Exchange Board of India. It is the regulator of the securities market in India. It was established on 12th April, 1992 through the SEBI Act, 1992. This act was passed by the Indian Parliament.
Roles of SEBI:
a. It supervises and regulates the securities market to eliminate any malpractices and to promote the securities market in India.
◆quasi-legislative: It can draft regulations in its legislative capacity.
◆quasi-judicial: It passes rulings and orders in its judicial capacity.
◆quasi-executive: It conducts investigation and enforcement action in its executive function.

Question. Explain briefly the three functions of SEBI rolled into one body.
Answer :
SEBI has three functions rolled into one body.
a. quasi-legislative: It can draft regulations in its legislative capacity.
b. quasi-judicial: It passes rulings and orders in its judicial capacity.
c. quasi-executive: It conducts investigation and enforcement action in its executive function.

Question. Enlist several categories of financing possibilities in which smaller ventures sometimes rely on.
Answer :
The following financing options are available for the small ventures.
a. Venture capital
b. Seed capital finance
c. Pre-start-up and start-up finance
d. Second-round financing
e. Specialized financial institutions at both national and state levels.

Question. What do you understand by finance?
Answer :
Finance refers to the funds or monetary resources needed by either individuals or business houses or by the government and is needed by the businesses to start and to allow businesses to exploit the opportunities to grow and expand.

Question. Name the most important pre-requisite to start an enterprise.
Answer :
Before starting an enterprise, the most important pre-requisite that the entrepreneur must consider is finance as it helps
a. to start
b. and to allow businesses to exploit the opportunities to grow and expand.

Question. State how sources can broadly be classified into 2 major categories.
Answer :
The finance sources are majorly classified into the following two categories.
1. Internal Sources
2. External Sources

Question. How will you differentiate between financial market with other market? Give one difference.
Answer :
Financial markets would trade in financial assets such as financial securities, stocks etc. In other-words, financial markets trade the ownership or similar value proposition of an enterprise where as the other markets trade in products or real assets.

Long Answer Type Questions

Question. a) Which sources provide the supply for long-term funds?
Answer :
The following sources provide the supply for long-term funds.
1. Capital Markets: A capital market is an organized means meant for effective and smooth mobilization of the money capital or financial resources from the investors to the entrepreneurs. In capital markets production capital is raised and it is made available to the entrepreneurs to be used in the establishment or operations of their enterprises.
2. Angel investors: Angel investor, also known as business angel or informal investors is a wealthy person who can provide the capital for starting an enterprise or for the initial stage operations of an enterprise. They usually have high-risk, high-return matrix. In return they expect convertible debt or ownership equity in the enterprise.
3. Venture capital: This source is a kind of private equity capital and supplies seed &funding while staring up the enterprise. Suitable for high potential, high risk, growth-up enterprises run by the entrepreneurs who are in need of necessary experience and finances to implement their ideas.
4. Specialized financial institutions: These specialized financial institutions provide the finance to
a. Small and medium sized concerns
b. New enterprises established by the new entrepreneurial groups
c. Specific industries that are in need of finance to implement modernization
d. Enterprises established to implement innovations and new technological developments
e. Enterprises in need of huge funds to sustain long gestation period
f. Enterprises established in backward regions

Question. Entrepreneur can use the capital raised for a variety of purposes, what are they?
Answer :
The entrepreneurs can use the raised capital for a variety of purposes like
a. Acquisition capital to buy a competitor or another business or supplier.
b. Business debt that is existing can be repaid with the acquired capital and there by saving on the interest (if any)
c. Corporate marketing and development to increase the sales and revenues
d. Development and expansion/growth of the business more rapidly

Question. How stock options lead to enable employees to become shareholders and share the profits of the company?
Answer :
Stock options or offering shares enable the employees to become share holders and share the profits of the company. When an employee opts for a stock option, the employee goes through an agreement to stay with the company for a specified period of time. If the employee leaves the company before the specified period or is fired, they’ll not be able to utilize their stock options.
Availing the stock options requires the employees to stay with the company for a specified period of time after which they can purchase the stocks. They benefit from the stock options if the value of the share is increased during this period.

Question. What are the features of venture capital finance?
Answer :
The following are the features of the venture capital.
a. Equity finance in relatively new start-up companies.
b. Long-term investment in small or medium firms which have growth possibilities.
c. Venture capitalists mentor business skills to the companies in which they are investing.
d. Lies in the high risk-return spectrum
e. Subset of private equity
f. Continuously involve in the affairs of the business after investing in them.
g. Dis -invest the holdings either to the promoters or in the markets.

Question. Answer each of these questions in about two hundred and fifty words:
a) Explain the characteristics of angle investors.
Answer :
The following are the features of the angel investors.
a. They are currently working or retired executives, business owners or high net worth individuals. They possess the knowledge, expertise and funds that are needed for a firm to start and grow.
b. They bear very high risk and go for dilution from future investment stages.
They seek high return for their investments.
c. They also assist the entrepreneurs with advice, provide guidance, help them network with the people in the industry and also mentor the entrepreneurs.
d. They aim at creating great companies through value creation. In addition they help the investor get a high return on their investment.
e. They keep a close watch on the current development in a specific industry/sector; mentor the entrepreneurs to become next generation leaders.

Value Based Question

Question. By offering shares to its employers what values are promoted by a company .
Answer :
The following values are exhibited by the companies by offering the shares to their employees.
a. Encourage employees to stay with the company for longer periods of time.
b. Gain Reputation as employee friendly
c. Gain employee trust.
d. Induce a sense of ownership among the employees.
e. Employees will be more enthusiastic to work and there by productivity and profits will increase.
f. Promote savings among employees.
g. Socially responsible to increase the standards of their employees.