Chapter 2

Question 1

Meaning of business plan

Answer 1

It is an written representation of the entrepreneur’s vision for his business. It is an comprehensively written document prepared by an entrepreneur describing formally all the external and internal factors involved in starting a new venture.

Question 2

Business plan : a decision making tool

Answer 2

1. Describe all the necessary inputs for the enterprise
2. Explain all mode of utilisation of the resources
3. Detail all the strategies for the execution of the project
4. Outline the desired goals
5. Assess the market sensitivity and the profitability of the venture

Question 3

Importance of Business plan

Answer 3

Road map required to start a venture because of the following reasons:
1. Helps in determining the viability of the venture in the designated market
2. Guides the entrepreneur in planning his activities such as
a. identifying resources required
b. obtaining licenses, if required
c. meeting the legal requirements as desired by the government
3. Satisfying the concerns and queries of all the group of peoples interested in the venture
4. Provides room for self assessment and self evaluation
5. Helps identify obstacles which can’t be overcome, suggesting to terminate while still on paper
6. Important tool for procuring funds. 4c’s - Character, Cash Flow, Collateral and Contribution
7. What, Why, How the entrepreneur is doing it

Question 4

Formats of Business Plan

Answer 4

1. Elevator Pitch
2. A Pitch Deck With Oral Narrative
3. A Written Presentation for External Stakeholders
4. An Internal Operational Plan

Question 5

Format/Outline of Business Plan

Answer 5

1. Introductory Page
2. Executive Summary
3. Industry Analysis
4. Description of Venture
5. Production of Plan
6. Operational Plan
7. Marketing Plan
8. Organisational Plan
9. Assessment of risk
10. Financial Plan
11. Appendix

Question 6

Organisational Plan

Answer 6

Forms of ownership:
1. Sole proprietor
2. Partnership
3. Joint Hindu family
4. Company
5. Corporation

Basic categories under which business falls:
1.Manufacturing
2.Wholesale
3. Retail
4. Service

Question 7

Elements Of Organaisational Plan

Answer 7

1. The terms and conditions associated with the selected form.
2. Lines of authority and responsibility of members of the new venture
3. The names designation addresses and resumes of the members 4. Stake of the members in the organisation
4. Roles and responsibilities of each member
5. Procedure for solving conflicts and disputes among members
6. Forms of payment for members of the organisation
7. Voting rights, managerial and controlling rights of the members

Question 8

Production Plan

Answer 8

Process in which raw material are transformed into finished products, PLAN YOUR WORK
1. No Manufacturing Involved
2. Partial Manufacturing Involved
3. Complete Manufacturing Involved

Question 9

Operational Plan

Answer 9

WORK YOUR PLAN
Operational plan is a blueprint prepared in advance of actual operations.

1. Ensure orderly flow of materials in the manufacturing process right from the acquisition of raw materials to the completion of the product
2. Facilitate continuous production, lesser work in progress and minimising the wastage
3. Co-ordinate the work of Engineering purchasing production selling and inventory management
4. Describe the flow of goods or services from production to the consumers
5. Introduce the proper system of quality control
6. Undertake the best and most economic production policies and methods

Question 10

Elements Of Operational Plan

Answer 10

1. Routing
2. Scheduling
3. Dispatching
4. Follow up
5. Inspection
6. Shipping

Question 11

Financial Plan

Answer 11

Financial plan is basically a projection of key financial data about the potential investment commitment needed for the new venture and the economic feasibility of the enterprise.

Question 12

Components of Financial Plan

Answer 12

1. Proforma investment decisions
2. Proforma financing decision
3. Proforma income statement
4. Proforma cash flow
5. Proforma balance sheet
6. Break even point
7. Economic and social variables

Question 13

Socio-economic Benefits of Financial Plan

Answer 13

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

Question 14

Marketing Plan and Steps

Answer 14

Describes the market condition and strategies related to how products/services will be distributed, price, promoted and where to be distributed.

1. Business situation analysis
2. Identify the target market
3. Conduct SWOT analysis
4. Establish Goals
5. Define marketing strategy
6. Implementation and monitoring of the plan

Question 15

HR Plan, Manpower Plan

Answer 15

Organisation’s performance resulting productivity are directly proportional to the quality and quantity of its manpower, so Manpower Plan is required.

1. What kind of people are required?
2. How many people are required?
3. How will they be selected? / How to procure personnel?

Question 16

Sole proprietorship

Answer 16

One of the world is simplest and most commonly used form of business organisation which is owned, financed, controlled and managed by only one person is called soul proprietorship.

Question 17

Characteristics of Sole proprietorship

Answer 17

1. Individual ownership
2. Individual management and control
3. Individual financing
4. Unlimited liabilities
5. Sole beneficiary
6. Easy formation and closure
7. No separately legal entity
8. Limited area of operation/scope

Question 18

Partnership

Answer 18

This is the most accepted business form for small scale and medium scale businesses. Partnership is a relationship between persons who have agreed to share the profits of a business carried on by all, or any of them acting for all.

Question 19

Characteristics of partnership

Answer 19

1. Two or more persons
2. Agreement
3. Profit sharing
4. Unlimited liability
5. Implied authority
6. Mutual agencies
7. Utmost good faith
8. Restriction on transfer of shares
9. Continuity

Question 20

Joint stock company

Answer 20

Joint stock company is a voluntary association of individuals for profit having a capital divided into transferable shares the ownership of which is the condition of membership.

Question 21

Company

Answer 21

It is a separate legal entity which is incorporated under Companies Act 2013, which is basically a creation of law, i.e. is bought to life by law and can be put to death by law only.

Question 22

Characteristics of a company

Answer 22

1. Voluntary association
2. Artificial person
3. Separate legal entity
4. Common seal
5. Limited liability
6. Transferability of share
7. Diffusion of ownership and management
8. Number of members
9. Limitation of action
10. Winding up

Question 23

Forms of company

Answer 23

1. Private company
2. Public company
3. One person company

Question 24

Private company

Answer 24

Private company means a company having a minimum paid up share capital as maybe prescribed and which by its articles.

Question 25

Public company

Answer 25

Public company means a company which is not a private company and has a minimum paid up share capital as maybe prescribed.

Question 26

One person company

Answer 26

As per provision of section 2(62) of Companies act 2013. It is a company in corporate as a private company which has only one member.

Question 27

Private companies more desirable

Answer 27

1. Only two members are required to form a private company against 7 members for a public company 2. Only two directors are required to constitute 3. Private companies are not required to fill a prospectus and neither a statement in lieu prospectus 4. Private company can commence its business immediately after receiving certificate of incorporation.