CUET Entrepreneurship-Chapter-Preparation of Project Report and Resource

(c)

Project report is a business plan stating all the strategies to be adopted by the entrepreneur for starting his enterprise.

(b)

Element of economic viability reflects the details about the product. Economic viability is an important consideration for the success of the enterprise. The project report should bring out clearly the viability of the project.

(d)

The real test of efficiency is the return on investment. This ratio reflects the overall profitability of the business. It is calculated by comparing the profit earned and the capital employed to earn it.

(c)

Working capital is also called circulating capital, as the money circulates in various forms of assets in a continuous manner.

(c)

Cost on erection of equipment is a fixed asset as this is the amount which is spent on the fixed asset so this cost will be added to the cost of the fixed asset.

(a)

In SWOT analysis, ‘W’ stands for Weaknesses. SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

(d)

Technical feasibility excludes consumer trends, as they are a part of economic viability and marketability.

(d)

The main objective of the project report is the financial appraisal to be taken from borrowed funds which can be raised by banks and financial institutions.

(c)

Commission to distributors is a component of working capital as it is a financial expenditure of recurring nature.

(a)

Project report is a blue print of all the activities that an entrepreneur proposes to engage in. This report is basically a business plan which describes all necessary inputs to the enterprise, explains the mode of utilization of the resources, gives details of the strategies for the execution of the project and outlines the desired goals of an organisation.

(a)

Competition is not a risk to an entrepreneur as it increases his efficiency to perform better.

(d)

Total Cost = Fixed cost + Variable cost

= Rs.45, 000 + Rs. 25, 000.

= Rs.60, 000

(c)

Break-even point (BEP) is equal to fixed cost/ P/V ratio. It is the sales volume at which there is neither profit or loss and sales excess of this point show profit.

(b)

Operating cycle of a business concern begins with outflow of cash as the money is spent in purchasing raw material.

(b)

Fixed costs per unit of output will be 6,000/300 = Rs. 20.

(a)

Manpower requirement does not form the part of economic viability, as it is a part of technical feasibility.

(a)

BEP =

P/V Ratio = Contribution/Sales X 100

= 50,000-25,000/ 50,000

= 50%

BEP = 12,000/50% = Rs. 24,000

(c)

The state of business where cost is equal to revenue is Break even point. The break even point is the sales volume at which there is neither profit nor loss or cost being equal to revenue.

(a)

Debt equity ratio is equal to total debt/owner’s capital. This ration expresses the relationship between long-term debts and shareholder’s funds. It indicates the proportion of funds, which are acquired by long-term borrowings in comparison to shareholders funds.

(d)

Elements of project work exclude costing pattern, rest all are the elements of the project report.

(c)

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

(c)

First element of the project report is description of the promoters. The project report should start with a brief introduction of the profile of the entrepreneur. it should carry his educational qualifications, professional qualifications, experience, specific qualities that characterize him as an entrepreneur etc.

(a)

Fixed costs per unit of output will be 5,000/500 = Rs. 10.

(a)

The name of the company is placed under description of the enterprise. This should also include the details of the product to e manufactured, the sources of raw materials and status of the company.

(a)

BEP =

P/V Ratio = Contribution/Sales X 100

= 60,000-30,000/ 60,000

= 50%

BEP = 10,000/50% = Rs. 20,000

(c)

The capital required for meeting all recurring expenditure is known as working capital. It is the difference between current assets and current liabilities. It is the total of all financial expenditure of recurring nature.

(b)

Cost of office equipment and furniture is a part of fixed capital as it is the fixed asset which will be used for more than one year.

(d)

Manpower requirement comes under technical feasibility. It includes the requirement of skilled, unskilled and semiskilled persons.

(b)

BEP = Fixed cost/Sales price – Variable cost

= 50,000/10 – 5

= 10,000 units.

(c)

If, sale price is reduced by 10%, then the BEP will be 50,000/9-5 = 12,500 units.

(a)

Net profit ratio = Net profit before taxes/ Sales turnover X 100. This ratio shows the relationship between net profit and sales.

(b)

Return on Investment = Net profit before Interest and Taxes/Total Investment. This ratio reflects the overall profitability of the business. It is calculated by comparing the profit earned and the capital employed to earn it.

(c)

Variable cost varies in direct or approximately direct proportion to the number of units produced. These costs keeps on changing with the change in the number of the units produced.

(d)

Machinery and equipments is an example of fixed capital. Fixed capital is that portion of the total capital that is invested in fixed assets (such as land, buildings, vehicles and equipment) that stay in the business almost permanently.

(b)

Project Report is a written statement of what the entrepreneur hopes to achieve in his business. It is a blue print of all those activities that an entrepreneur proposes to engage in the more informative manner and completes the business plan.

(a)

Circulating capital is also known as working capital. It is the money which keeps circulating in various forms of assets in a continuous manner.

(c)

Commission to distributors is not the component of the fixed capital as it is a component of working capital.

(b)

Element of economic viability reflects the details about the product. Economic viability is an important consideration for the success of the enterprise. The project report should bring out clearly the viability of the project. This will be reflected by the product quality, product needs, clientele requirements, market size, selling arrangements and several other factors.

(d)

The real test of efficiency is the return on investment.This ratio reflects the overall profitability of the business. It is calculated by comparing the profit earned and the capital employed to earn it.

(a)

Fixed Cost + Variable Cost is equal to total cost. Fixed costs are free of the level of production.

(c)

Office equipment is not included in working capital as it is a part of fixed capital.

(b)

Technical feasibility study does not include consumer trends as it is the part of economic viability and marketability.

(c)

Commission to distributors is not the component of the fixed capital as it is of recurring nature.

(a)

Project Report is a blue print of all the activities that an entrepreneur proposes to engage in. This report is basically a business plan which describes all necessary inputs to the enterprise, explains the mode of utilization of the resources, gives details of the strategies for the execution of the project and outlines the desired goals of an organisation.

(b)

Fixed costs per unit of output will be 12,000/600 = Rs. 20.

(a)

Margin of safety = Excess of actual sales over the BEP sales.

It can be expressed in rupees or in other unit or as a ratio. Large margin of safety shows sign of soundness of the business.

(d)

The ratio which shows the relationship between net profit and sales is net profit ratio. This ratio measures the rate of net profit earned on sales. It helps in determining the overall efficiency of the business operations.

(b)

Interest charges is an example of fixed cost as the amount of interest will remain same it will not change with the level of production.

(a)

Status of the company is placed under description of the enterprise. Status of the company means details like whether it’s a private, partnership, Private limited or Public Limited Company.

(c)

Explanation: The cost of scissor is Fixed cost because its cost will not change whether the Saloon owner gets the customers or not. Where as the cost of other three items change as his output (Customers) increases.

(a)

Net profit ratio = Net profit before taxes/ Sales turnover X 100. This ratio shows the relationship between net profit and sales.

(b)

Then the fixed costs per unit of output will be Rs.10.

Fixed Cost per unit = Fixed costs/No. of units produced.

= 10,000/1,000

= Rs.10.

(c)

In SWOT analysis, ‘O’ signifies opportunities. SWOT analysis means Strengths, Weaknesses, Opportunities, and Threats.

(a)

Financial ratio is a device used for measuring financial conditions of financial changes. Some of the financial ratios used by the firms are debt-equity ratio, net profit ratio, gross profit ratio, return on investment.

(c)

Commission to distributors is the component of the working capital as it is of recurring nature.

(a)

Variable cost varies in direct or approximately direct proportion to the number of units produced. These costs keeps on changing with the change in the number of the units produced.

(d)

The operating cycle ends with the cash inflow in terms of payments received from customers towards the sale of finished goods.

(d)

A relevant document is the last element of the Project Report. It gives the complete detail regarding the information and the addresses of various suppliers of raw materials, machineries, buyers and competitors. The report should also annex the machinery catalogues with their specifications.

(a)

Debt equity ratio is equal to Total debt/owner’s capital. This ration expresses the relationship between long term debts and shareholder’s funds. It indicates the proportion of funds which are acquired by long term borrowings in comparison to shareholders funds.

(b)

Return on Investment= Net profit before Interest and Taxes/Total Investment. This ratio reflects the overall profitability of the business. It is calculated by comparing the profit earned and the capital employed to earn it.

(c)

Probable profit is not an element of the project report. Project report only includes profitability assessment which deals with the cost of production, turnover and profit from the business operations.

(c)

Office equipment is not included in working capital as it is not of recurring nature.

(b)

The difference between sales turnover and the total cost of production determines the net profit. This ratio shows the relationship between net profit and sales.

(c)

BEP = Fixed cost/ Sales price - Variable cost = 60,000/10 – 5 = 12,000 units.

(d)

BEP = Fixed cost/ Sales price - Variable cost = 60,000/9 – 5 = 15,000 units.

(a)

BEP =

P/V Ratio = Contribution/Sales X 100

= 40,000-20,000/ 40,000

= 50%

BEP = 12,000/50% = Rs. 24,000

(d)

The ratio that is calculated to assess the ability of the firm to meet its long term liabilities is Debt-Equity ratio. If the debt equity ratio is more than it shows a rather risky financial position from the long term point of view, as it indicates that more and more funds invested in the business are provided by long term lenders.

(d)

A Pre operative expense is an example of fixed cost. fixed costs are defined as expenses that do not change in proportion to the activity of a business, within the relevant period or scale of production. For example, a retailer must pay rent and utility bills irrespective of sales.

(b)

Once the entrepreneur is satisfied with the feasibility study, the next step for him is the preparation of the project report. This report should assess the normal life span of a project in a changing scenario, market sensitivity and the profitability of the business.

(d)

Training of the promoter is not a component of the element of economic viability and marketability as it is a component of description of the promoter.

(c)

BEP =

P/V Ratio = Contribution/Sales X 100

= 80,000-40,000/ 80,000

= 50%

BEP = 10,000/50% = Rs. 20,000

(c)

The capital required for meeting all recurring expenditure is known as Working capital. Working capital is also known as circulating capital. It is the money which keeps circulating in various forms of assets in a continuous manner.

(b)

cash raw material finished goods sales

Firstly the cash is utilized for purchasing the raw material, then with the help of raw material, finished goods are produced and then these goods are sent to the market for sale.

(c)

Clientele requirement is placed under Economic viability. Economic viability is an important consideration for the success of the enterprise. The project report should bring out clearly the viability of the project. This will be reflected by the product quality, product needs, clientele requirements, market size, selling arrangements and several other factors.

(a)

Higher the debt equity ratio, better it is for the enterprise is false because. If the debt equity ratio is more than it shows a rather risky financial position from the long term point of view, as it indicates that more and more funds invested in the business are provided by long term lenders.