Chapter – 6

Resource
Mobilization
 CBSE 2023-24 Sample Paper

Q1. Identify the place where transaction happens in shares or debentures subsequent to its primary
offering. (1 Mark)
a. Primary market
b. Secondary market
c. Capital market
d. Securities and Exchange Board of India

Ans b. Secondary market

Q2. Which among the following is NOT a method of raising the required capital in the primary market? (1
Mark)
a. Xma Ltd. raised additional finance from existing shareholders by offering securities to them in proportion
to the shares they are holding
b. Prabhat Luminous Ltd. raised funds by selling its shares mainly to the General Insurance Corporation of
India and Army Group Insurance
c. To increase the efficiency of the employees and reduce the labour turnover, the management of CVK ltd.
made employees the shareholders and enabled them to share the profits of the company
d. Sujata AI ltd. raised funds from Mr. Bansal, an affluent individual in exchange for ownership equity.

Ans d. Sujata AI ltd. raised funds from Mr. Bansal, an affluent individual in exchange for ownership equity.

Q3. Assertion (A): The Angel Investors were given the acronym FFF – i.e. FRIENDS, FAMILY, AND FOOLS.
Reason (R): Angel investors are high net-worth individuals who have the knowledge, expertise, and funds
that help start-ups without due diligence.
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

Ans c. Assertion (A) is true but Reason (R) is false

Q4. ‘Finance is the elixir for any business’. Justify the given statement. (3 Marks)

Ans a. Finance assists in the formation of new businesses and allows businesses to take advantage of
opportunities to grow and expand.
b. A business needs funds to:
a) Promote or establish the business
b) Acquire fixed assets
c) Make market investigations
d) Develop products
e) Keep men and machines at work
f) Encourage management to make progress and create value.
g) Expand, diversify, improve, and grow.
c. The significance of finance in an enterprise is like a lubricant to the process of production. Finance is the
elixir for any business as nothing happens without money.

Q5. In its vital role as a financial intermediary, capital markets satisfy the tastes of the savers and the need
of the investors. Evaluate the given statement. (3 Marks)
Ans a) Mobilize the financial resources on a nation-wide scale.
b) Secure the required foreign capital and know-how to promote economic growth at a faster rate.
c) Ensure the most effective allocation of the mobilized financial resources by directing the same either to
such projects which are capable of the highest yield or to the underdeveloped priority areas where there is
an urgent need to promote balanced and diversified industrialization.
The capital market satisfies the tastes of savers and the needs of investors through its various financial
instruments and institutions.

Q6. The role of a venture capitalist in an organization is dependent on the stage at which an organization is
being funded by the venture capitalist. Evaluate. (5 Marks)

Ans Seed capital finance: It refers to the capital required by an entrepreneur for conducting research at
the pre-commercialization stage. During this stage, the entrepreneur has to convince the investor (VC) why
his idea/product is worthwhile. The investor will investigate the technical and economical feasibility of the
idea. In some cases, there is some sort of prototype of the idea/product that is not fully developed or
tested. As the risk element at this stage is very high, the investor (VC) may deny assisting if he does not see
any potential in the idea.

Start-up finance: If the idea/product/process is qualified for further investigation and/or investment, the
process will go to the start-up stage. A business plan is presented by the entrepreneur to the VC firm. A
management team is being formed to run the venture. If the company has a board of directors, a person
from the VC firms will take seats on the board of directors.

Second-round financing: At this stage, we presume that the idea has been transformed into a product and
is being produced and sold. The entrepreneur, at this stage, needs assistance from the Venture Capitalist
for expansion, modernization, and diversification so that economies of scale and stability could be
attained. At this time, larger funds than the other early-stage financing are required, entrepreneur should
be extra careful because only if they and their management team can prove their capability of standing
against the competition, only then is the VC firm interested in financing.
 CBSE 2022-23 Compartment Paper

Q1. “Transferring of financial resources from the surplus units to the deficit units is the role of which of the
following? (1 Mark)
a. Financial marketing
b. Financial intermediation
c. Financial planning
d. Financial budgeting

Ans b. Financial Intermediation

Q2. Saurabh Engineering Ltd. is expanding its product line for which it needs an additional capital of ₹ 3
crores. The financial manager proposed that the required finance be raised by offering securities to the
existing shareholders on pro rata basis.
a. Identify and state the source of raising finance proposed by the financial manager.
b. State the benefit of using the source suggested by the financial manager (2 Marks)

Ans a. The source is - Rights issue

It is a method of raising additional finance from existing shareholders by offering securities to them on a
pro-rata basis i.e., giving them a right to a certain number of shares in proportion to the shares they are
holding.
b. The benefit of using this method is-
It is inexpensive as it does not require any brokers, agents, underwriters, prospectus or enlistment, etc.

Q3. State any six features of ‘Venture Capital’ finance. (3 Marks)

Ans Features of venture capital finance:

i. It is basically equity finance in relatively new companies.
ii. It is a long-term investment in growth-oriented small or medium firms.
iii. Venture capitalists not only provide capital but also business skills to the investee firms.
iv. It involves high risk-return spectrum.
v. It is a subset of private equity.
vi. The venture capital institutions have a continuous involvement
in the business after making the investment.
vii. Such institutions disinvest the holdings either to the promoters or in the market.
(Any six points)

Q4. Give the meaning of an Angel Investor. State any four points how does an angel investor help an
entrepreneur. (3 Marks)

Ans An angel investor is an affluent individual who provides capital for a business start-up and early-stage
companies having a high-risk, high-return matrix usually in exchange for convertible debt or ownership
equity.
An angel investor helps an entrepreneur in following ways:
i. Investment of funds.
ii. Provide proactive advice and guidance.
iii. Help in establishing industry connections and mentoring, start-ups in its early days.
iv. Create companies by providing value creation, and simultaneously helping investors realize a high
return on investments.
v. Keeps abreast of current developments in a particular business arena, mentoring another generation of
entrepreneurs by making use of their vast experience. (Any four points)
Q5. ‘Fine Lines Ltd.’, is a well renowned company in the field of medical equipment. Now it wants to
diversify itself into pharmaceuticals. The expansion plan needs huge financial resources which would not
be possible from debt alone. The company decides to go public.
(a) What type of company can raise funds from public?
(b) Which document would be prepared by ‘Fine Lines Ltd’. to raise funds from the public?
(c) State the primary advantage that ‘Fine Lines Ltd.’ would have once it goes public.
(d) State any four purposes for which ‘Fine Lines Ltd.’ may use the capital raised from public. (5 Marks)

Ans a. Public Company

b. Prospectus
c. Primary Advantage - An entrepreneur stands to gain by going public is access to capital. The capital does
not have to
be repaid and does not involve an interest charge.
d. Purposes for which capital is raised:
Growth and expansion
Retiring existing debt
Corporate marketing and development
Acquisition capital
 CBSE 2022-23 All India Paper

Q1. Assertion(A): Offer to employees means sale of its securities by a company to a limited number of
sophisticated investors.
Reason(R): Offer to employees enables employees to become shareholders and share the profits of the
company.
Evaluate the statements given above and choose the most appropriate option from the following: (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 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.

Ans d. Assertion (A) is false, but Reason (R) is true

Q2. The decision of ‘going public’ by a company is considered to be a complex decision that requires
careful consideration and planning as it requires additional obligations and reporting requirements. (2
Marks)

Ans While there are benefits to going public, it also means additional obligations and reporting
requirements such as:
(i) Increasing accountability to shareholders
(ii)Need to maintain dividend and profit growth trends
(iii)Becoming more vulnerable to an unwelcome takeover
(iv)Need to observe and adhere strictly to the rules and regulations by governing bodies
(v)Increasing costs in complying with higher level of reporting requirements
(vi)Relinquishing some control of the company following the public offering
(vii)Suffering a loss of privacy as a result of media interest
(Any two)

Q3. Why are capital markets regarded as financial intermediaries? State. (2 marks)

Ans Capital markets are regarded as financial intermediaries as they perform the function of financial
intermediation i.e., transferring financial resources from the surplus units to the deficit units.

Q4. ‘Angel Investment’ not only brings in funds but also an invaluable mentor to the business. In the light
of this statement state any three features of angel investors. (3 Marks)

Ans Features of Angel Investor as mentor.

1) Apart from investing funds, most angels provide proactive advice, guidance, industry connections and
mentoring start-ups in its early days.
2) Their objective is to create great companies by providing value creation, and simultaneously helping
investors realize a high return on investments.
3) They have a sharp inclination to keep abreast of current developments in a particular business arena,
mentoring another generation of entrepreneurs by making use of their vast experience.

Q5. Give the meaning of ‘Venture Capital’. Entrepreneurs can seek venture capital to assist various stages
in the company’s development. Explain ‘Seed Capital stage’ and ‘Pre- start -up stage’ of financing by
venture capitalists. (5 Marks)
Ans Venture capital is a type of private equity capital provided as seed funding to early-stage, high
potential, high risk, growth up companies/entrepreneurs who lack the necessary experience and funds to
give shape to their ideas.

a) Seed capital finance - It refers to the capital required by an entrepreneur for conducting research at pre
commercialization stage. During this stage, the entrepreneur has to convince the investor (VC) why his
idea/product is worthwhile. The investor will investigate into the technical and the economic feasibility of
the idea. In some cases, there is some sort of prototype of the idea/product that is not fully developed or
tested. As the risk element at this stage is very high, investor (VC) may deny to assist if he does not see any
potential in the idea. Entrepreneur's ability, technological skills and competencies are required to match
with the market opportunities so as to successfully convince about product/idea's feasibility to the venture
capitalist.
b) Pre-start up and start up finance: If the idea/product/process is qualified for further investigation
and/or investment, the process will go to the second stage; this is also called the start-up stage. A business
plan is presented by the entrepreneur to the VC firm. A management team is being formed to run the
venture. If the company has a board of directors, a person from the VC firms will take seats at the board of
directors. While the organisation is being set up, the idea/product gets its form. The prototype is being
developed and fully tested. In some cases, clients are being attracted for initial sales. The management-
team establishes a feasible production line to produce the product. The VC firm monitors the feasibility of
the product and the capability of the management-team from the board of directors.
 CBSE 2022-23 Sample Paper

Q1. Who plays a very vital role as a financial intermediary? (1 Mark)

a. Primary Market
b. Capital Market
c. Stock Market
d. Securities and Exchange Board of India.

Ans b. Capital Market

Q2. State any one advantage each for a company that opts for private placement and rights issue as a
source to raise funds. (2 Marks)

Ans Private placement: The company can keep its confidentiality as at times they do not wish to disclose
information to the open market.
Rights Issue: It does not require any brokers, agents, underwriters, prospectus or enlistment, etc.

Q3. State the role of an angel investor in an entrepreneurial pursuit. (2 Marks)

Ans i. Angel investors bear extremely high risk and are usually subject to dilution from future investment
rounds.
ii. Apart from investing funds, most angels provide proactive advice, guidance, industry connections and
mentoring start-ups in its early days.
iii. Their objective is to create great companies by providing value creation, and simultaneously helping
investors realize a high return on investments.
iv. They have a sharp inclination to keep abreast of current developments in a particular business arena,
mentoring entrepreneurs by making use of their vast experience.
(Any two)

Q4. An entrepreneur may need the venture capitalist in the second stage of financing or as a source of
bridge financing but he should always go in for a due diligence before opting venture capital as a source of
finance. Comment on the given statement from the perspective of an entrepreneur. (3 Marks)

Ans i. An entrepreneur’s business is typically confidential and proprietary. Most venture capitalists will
require significant detail with respect to a company’s business plan. Entrepreneurs must remain vigilant
about sharing information with venture capitalists that are investors in their competitors.
ii. Most venture capitalists treat information confidentially, but as a matter of business practice, they do
not typically enter into non–disclosure agreements because of the potential liability issues those
agreements entail.
iii. Entrepreneurs are typically well-advised to protect truly proprietary intellectual property.

Q5. While there are benefits of going public as a source of finance for a company, it also means additional
obligations. Analyse and justify the statement. (5 Marks)

Ans Benefits:
1) Access to capital: The primary advantage an entrepreneur stands to gain by going public is access to
capital. In addition, the capital does not have to be repaid and does not involve an interest charge.
2) Other advantages
i. Mergers and acquisitions: Public stock of a company can be used for businesses to grow through
acquisitions.
ii. Higher valuations: Public companies are typically valued more than private companies.
iii. Benchmark trading price: The trading price of a public company’s stock serves as a benchmark of the
offer price of other securities.
iv. Capital formation: Raising capital later is typically easier because of the extra liquidity for the investors.
v. Less dilution: There is less dilution of ownership control compared to an IPO.

Drawbacks:
i. Increasing accountability to public shareholders
ii. Need to maintain dividend and profit growth trends
iii. Becoming more vulnerable to an unwelcome takeover
iv. Need to observe and adhere strictly to the rules and regulations by governing bodies
v. Increasing costs in complying with higher level of reporting requirements
 CBSE 2021-22 Compartment Paper

Q1. Who are Business Angels? State their objectives in giving assistance to start-ups. (2 Marks)

Q2. What is meant by Venture Capital? Enlist the four stages in the company's development when an
entrepreneur can seek venture capital. State any two situations when a venture capitalist can deny to
assist an entrepreneur's venture. (5 Marks)

Q3. Life Care Ltd.' was incorporated in 2019 as a medium enterprise manufacturing lifesaving equipments
under the Start-up India scheme.
Since the company has started to gain momentum and growth, the founder, the Chief Finance Officer of
the company, Ranjan, is exploring avenues to raise funds. In a meeting with the finance department, it was
decided that
(i) 70% of the required funds would be arranged by direct sale of its securities to a limited number of
sophisticated investors.
(ii) 20% of the funds would be arranged from professional investors in return of private equity.
(iii) 10% of the funds would be arranged by offering shares to the existing employees as an opportunity to
become owners of the company.
(iv) The company will not go for issue through prospectus because of the cost involved.

On the basis of the above information, answer the following questions: (5 Marks)
(а) Identify and explain the ways through which the funds would be raised.
(b) Why did the company not go for issue through prospectus? Explain.
(c) What will be the benefit of offering shares to the employees to become owners of the company?
 CBSE 2021-22 All India Paper

Q1. What is the job of Angel investors? State any one feature of Angel investors. (2 Marks)

Ans Angel investors fill the gap in start-ups or early-stage financing between ‘friends and families’ by
providing seed funding and formal venture capital.
Features of angel investors (any one):
(a) Most angel investors are current or retired executives, business owners or high net worth individuals
who have their knowledge, expertise and funds that help start-ups match up to industry standards.
(b) An angel investor bears extremely high risk and are usually subject to dilution from future investment
rounds. They expect a very high return on investment.
(c) Most angels provide pro-active advice, guidance, industry connections and mentoring start-ups in its
early days.
(d) Their objective is to create great companies by providing value creation, and simultaneously helping
investors realise a high return on investments.
(e) They have a sharp inclination to keep abreast current developments in a particular business area,
mentoring another generation of entrepreneurs by making use of their vast experience.

Q2. What is meant by ‘Venture Capital’? State any four features of venture capital finance. (5 Marks)

Ans Venture capital is a type of private equity provided as seed funding at early stage, high potential, high
risk, growth up companies.
Features of Venture Capital Finance (any four):
(a) It is basically equity finance in relatively new companies.
(b) It is long-term investment in growth-oriented small or medium firms.
(c) Venture capitalist not only provide capital but also business skills to investee firms.
(d) It involves high-risk-return-spectrum.
(e) It is a subset of private equity.
(f) The venture capital institutions have a continuous involvement in the business after making the
investment.
(g) Such institutions disinvest the holding either to the promoters or in the market.

Q3. ‘Pratap Furnitures Ltd.’ is the market leader in moulded furniture. Now it is planning to enter into a
new product line, that is, furniture made of wood and bamboo.
To start production, it needs new machine and skilled labour along with good quality wood. For all this it
needs ₹2crore. ‘Pratap Furniture Ltd.’ is planning to raise funds by issue of prospectus. But its Board of
Directors decided to honour the existing shareholders by offering them the shares on pro-rata basis, before
going for issue through prospectus.
(a) Identify and explain the type of capital market from which ‘Pratap Furnitures Ltd.’ is going to raise
funds.
(b) Explain the two methods of raising funds discussed in the above case.
(c) What reward do the investors get when shares are issued through prospectus? (5 Marks)

Ans (a) Primary market: Primary market is also called as new issue market and is basically to facilitate
transfer of resources from the savers to the entrepreneurs’ seeking funds for:
a) Setting new enterprises
b) Expanding
c) Diversifying.
(b) (i) Public issue: Public issue is the most popular method of raising capital these days by the
entrepreneurs. This involves raising of funds directly from the public through the issue of prospectus. An
enterprise organizing itself as a public limited company can raise the required funds commonly by
preparing a prospectus. When an entrepreneur a offers shares to the public for subscription he/she is
required to comply with all the restrictions and formalities pertaining to the initial issues, prospectus
drafting and launch.
(ii) Rights issue: Rights issue is a method of raising additional finance from existing shareholders by offering
securities to them on pro-rata basis i.e., giving them a right to a certain number of shares in proportion to
the shares they are holding. Normally, through a circular, rights issues are proposed to the existing
shareholders and in case they are not willing to subscribe, they can renounce the same in favour of
another person. This method of issuing securities is considered to be inexpensive as it does not require any
brokers, agents, underwriters, prospectus or enlistment, etc.
(c) Appreciation of their investment.
 CBSE 2021-22 Sample Paper Term 2

Q1. State any two reasons for capital markets being the most important source of raising finance for
entrepreneurs? (2 Marks)

Ans a) Helps in mobilizing the financial resources on a nation-wide scale.

b) Securing the required foreign capital and know-how to promote economic growth at a faster rate.
c) Ensure the most effective allocation of the mobilized financial resources to highest yield projects or to
underdeveloped priority areas to promote balanced and diversified industrialization.

Q2. Who are Angel Investors? State any four features of Angel Investors. (5 Marks)

Ans Business angel or informal investor or an angel investor, is an affluent individual who provides capital
for a business start-up and early-stage companies usually in exchange for convertible debt or ownership
equity.
Any four features.
1) 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.
2) As angel investors bear extremely high risk and are usually subject to dilution from future investment
rounds. They expect a very high return on investment.
3) Apart from investing funds, most angels provide proactive advice, guidance, industry connections and
mentoring start-ups in its early days.
4) Their objective is to create great companies by providing value creation, and simultaneously helping
investors realize a high return on investments.
5) They have a sharp inclination to keep abreast of current developments in a particular business arena,
mentoring another generation of entrepreneurs by making use of their vast experience.

Q3. ‘Ganpati Steel Ltd.’ is a large and creditworthy company manufacturing steel for the Indian market. It
now wants to cater to the Asian market and decides to invest in new hi-tech machines. Since the
investment is large, it requires long-term finance. The company decided to raise funds through the capital
market.
40% of the funds will be raised directly from the public through the issue of prospectus. 40% of the shares
will be directly sold to a limited number of sophisticated investors. 20% of the shares will be offered to the
employees.
Identify the methods of flotation of new issues used by the company. Also state one benefit of each
method. The issue was very well accepted by the investors. Mr. Raman, an investor could not get shares
allotted when the offer was made to the public. He wishes to invest in the company. State the option
available to him now and how will it benefit Raman? (5 Marks)

Ans 40% of the funds will be raised directly from the public through the issue of prospectus - IPO. The
primary advantage an entrepreneur stands to gain by going public is access to capital.
40% of the shares will be directly sold to a limited number of sophisticated investors - Private Placement.
This method is useful at times when the company does not wish to disclose information to the open
market.
20% of the shares will be offered to the employees - Offer to employees - Benefit: Higher efficiency (any
other stated in the textbook)
Raman can go to the Secondary market/ Stock exchange and buy shares. Benefit – This market imparts
liquidity to the long-term securities held by them by providing an auction market for these securities.
 CBSE 2020-21 Sample Paper

Q1. Evaluate the different options available for an entrepreneur to raise funds from the primary markets.
(6 Marks)

Ans 1. Public issue/going public: Public issue is the most popular method of raising capital these days by
the entrepreneurs. This involves raising of funds directly from the public through the issue of prospectus.
An enterprise organizing itself as a public limited company can raise the required funds commonly by
preparing a prospectus.
When an entrepreneur offers shares to the public for subscription, he/she is required to comply with all
the restrictions and formalities pertaining to the initial issues, prospectus drafting and launch.
2. Rights issue: Rights issue is a method of raising additional finance from existing shareholders by offering
securities to them on a pro-rata basis i.e., giving them a right to a certain number of shares in proportion to
the shares they are holding.
This method of issuing securities is considered to be inexpensive as it does not require any brokers, agents,
underwriters, prospectus or enlistment.
3. Private placement: Private placement means the direct sale by a company of its securities to a limited
number of sophisticated investors. Entrepreneurs, herein, raise funds by selling the issues mainly to the
institutional investors like: i) Unit Trust of India ii) Life Insurance Corporation of India. Entrepreneurs both
from public limited and private limited sector, bank heavily upon raising funds through the issue of varied
financial instruments under this segment as at times they do not wish to disclose information to the open
market.
4. Offer to employees: Stock options or offering shares to the employees has gained much popularity in
many countries of the world. This method enables employees to become shareholders and share the
profits of the company leading to: a) Higher efficiency b) Low labour turnover c) Low floatation cost
 CBSE 2019-20 Compartment Paper

Q1. The role of transferring financial resources from the surplus units to the deficit units is referred to as
___________. (1 Mark)

Q2. State whether the following statement is true or false: (1 Mark)

Rights Issue means direct sale of securities by a company to a limited number of sophisticated investors.

Q3. Which of the following statements is not true for National Bank for Agriculture and Rural
Development? (1 Mark)
(A) It provides credit for the promotion of Small-Scale Industries.
(B) It provides credit to Medium Scale Industries.
(C) It provides credit to Cottage and Village Industries.
(D) It provides credit to Handicrafts and other Rural Crafts.

Q4. Naveen wants to start an amusement park in a remote area of Andhra Pradesh. This is a highly
potential and high-risk business plan that has not been tried by anybody so far. For this, he requires
professionally qualified persons. Naveen knows that the business has high risk and may not attract
investments from public. He approached J.H. Ltd. that provides equity to small and medium growth-
oriented businesses in
return for minority shareholding. Identify the type of capital being provided by J.H. Ltd. and state any two
features of such type of capital. (2 Marks)

Q5. (a) What is meant by ‘finance’?

(b) List the two major categories of sources from which an enterprise can raise the required funds.
(c) State any four purposes for which finance is required. (3 Marks)

Q6. (a) When was Securities and Exchange Board of India given statutory powers?
(b) What was the purpose of establishing Securities and Exchange Board of India?
(c) State any four powers of Securities and Exchange Board of India. (3 Marks)
 CBSE 2019-20 Delhi Paper

Q1. ___________________ is an affluent individual, who provides capital for a business start-up having a
high-risk, high-return matrix usually in exchange for convertible debt or ownership equity. (1 Mark)

Ans Business Angel/Informal investor/Angel investor (any one)

Q2. State whether the following statement is true or false: (1 Mark)

Primary Market facilitates transfer of resources from the savers to the entrepreneurs’ seeking funds for
setting new enterprises

Ans True

Q3. State whether the following statement is true or false: (1 Mark)

The secondary market enhances the marketability of securities and provides liquidity to investments.

Ans True

Q4. How many whole-time members are nominated by the Union Government of India to Securities and
Exchange Board of India? (1 Mark)
(a) 2
(b) 3
(c) 4
(d) 6

Ans b) 3
(In case the candidate has given any other answer it should be marked correct)

Q5. ‘Pipro Ltd.’ is a software company based in Bengaluru, India. It is already listed at National Stock
Exchange. In order to expand its business in north - east, under the ‘Look East Policy’ of the government, it
needs financial resources.
State any two methods through which she can fulfill her financial requirements through Primary Market
other than public issue. (2 Marks)

Ans a) Rights issue: Rights issue is a method of raising additional finance from existing shareholders by
offering securities to them on pro-rata basis i.e., giving them a right to a certain number of shares in
proportion to the shares they are holding.
b) Private placement: It means the direct sale by a company of its securities to a limited number of
sophisticated investors and the institutional investors like:
i) Unit Trust of India
ii) Life Insurance Corporation of India
iii) General Insurance Corporation of India
iv) Army Group Insurance
v) State Level Financial Corporations, etc.
c) Offer to employees: This method enables employees to become shareholders and share the profits of
the company.
(ANY TWO)
Q6. State any six features of Venture Capital Finance. (3 Marks)

Ans Features of Venture Capital Finance: -

1) It is basically equity finance in relatively new companies.
2) It is long-term investment in growth-oriented small or medium firms.
3) Venture capitalist not only provides capital but also business skills to investee firms.
4) It involves high risk-return spectrum.
5) It is a subset of private equity.
6) The venture capital institutions have a continuous involvement in the business after making the
investment.
7) Such institutions disinvest the holdings either to the promoters or in the market.
(ANY SIX)

Q7. From the given situations, identify and explain the methods of floatation of new issues:
(i) ICICI is in need of additional capital for its new venture. It decides to raise funds by selling the issues
mainly to General Insurance Corporation of India and Life Insurance Corporation of India.
(ii) Jay is holding 100 shares of a company. He has been given a privilege offer to subscribe to a new issue
of the same company in proportion of his current shareholdings with the company. Jay was unwilling to
subscribe, so he renounced the offer in favour of Veeru who bought the shares.
(iii) Gopal is working as the Regional Chairman in a well reputed Non- Banking Finance Company which is
listed in Stock Exchange. As performance bonus, the company gave 25 equity shares to Gopal.

Ans (i) Private placement: It means the direct sale by a company of its securities to a limited number of
sophisticated investors and the institutional investors like: i) Unit Trust of India ii) Life Insurance
Corporation of India iii) General Insurance Corporation of India iv) Army Group Insurance v) State Level
Financial Corporations, etc.
(ii) Rights issue: Rights issue is a method of raising additional finance from existing shareholders by offering
securities to them on pro-rata basis i.e., giving them a right to a certain number of shares in proportion to
the shares they are holding.
(iii) Offer to employees: This method enables employees to become shareholders and share the profits of
the company
 CBSE 2019-20 All India Paper

Q1. The Securities and Exchange Board of India performs various functions which makes it very powerful.
But to create accountability there is an appeal process which lies with ___________ and ___________. (1
Mark)

Ans Securities Appellate Tribunal, Supreme Court

Note: In case the candidate has given any other answer it should be marked correct.

Q2. ___________ is an equity-based investment in a growth-oriented, small to medium sized business,

which in most cases would not qualify for receiving bank loans. (1 Mark)

Ans Venture Capital

Q3. The organization, management, membership and functioning of Stock Exchange in India is governed by
the provisions of _____________. (1 Mark)

Ans The Securities Contracts (Regulation) Act, 1956

Q4. State whether the following statements is true or false: (1 Mark)

The secondary market offers opportunity to an entrepreneur to issue additional capital as and when
required.

Ans False

Q5. State whether the following statements is true or false: (1 Mark)

Devidayal Ltd. is into manufacturing of stainless steel and copper utensils from last 20 years and has a good
reputation in the market. The company needs funds for expansion. It decided to bring a new issue of
shares worth Rs. 1 crore. Through a circular, these shares will be proposed to the existing shareholders and
in case they are not willing to subscribe, they can renounce the same in favour of another person.
Devidayal Ltd. is raising capital through private placement.

Ans False

Q6. State whether the following statements is true or false: (1 Mark)

Direct sale of its securities by a company to a limited number of sophisticated investors is known as Rights
Issue.

Ans False

Q7. How does stock exchange ensure the safety of the investment of an investor? Explain by giving any two
reasons. (2 Marks)

Ans 1. Dissemination of useful information: Stock exchange publishes useful information regarding price
lists, quotations, etc., of securities through newspapers and journals. The interested persons buy and sell
their securities on the basis of information provided by the stock exchanges.
2. Investors' interests protected: Stock exchanges formulate rules and regulations so that members may
not exploit the investors.
3. Genuine guidance about the securities listed: The investors can safely depend upon the information
provided by the stock exchanges.
(Any two) (If an examinee has not given the headings as above but has given the correct explanation, full
credit will be given)

Q8. State how obtaining venture capital is different from raising loan from a lender. Also state any two
areas where venture-capitalists decide to invest. (2 Marks)

Ans Obtaining venture capital is substantially different from raising debt or a loan from a lender. Lenders
have a legal right to interest on a loan and repayment of the capital, irrespective of the success or failure of
a business. But a venture capital is invested in exchange for an equity stake in the business.
(Any two areas where venture capitalists decided to invest)
a. They may invest in any of the many opportunities presented to them.
b. Looks for the extremely rare, yet sought after qualities such as innovative technology, potential for rapid
growth, a well-developed business model, an impressive management team
c. Looks for an ‘exit’ in the time frame of typically 3-7 years
d. Inclined towards ventures with exceptionally high growth potential.
 CBSE 2019-20 Sample Paper

Q1. The only reward the Initial Public Offer investors seek is ________________ of their investment. (1
Mark)

Ans Capital appreciation

Q2. In April, 1998 the _______________ was constituted as the regulator of capital markets in India under
a resolution of the Government of India. (1 Mark)

Ans Securities and Exchange Board of India (SEBI)

Q3. State whether the following statement is ‘true’ or ‘false’. (1 Mark)

Start-up finance is the capital required by an entrepreneur for conducting research at pre
commercialization stage.

Ans False

Q4. ABC Ltd., decided to raise funds by issuing shares. The finance department felt that the company
should offer the shares to existing shareholders on a pro-rata basis. Out of the following, identify the
method of raising the funds being suggested by the finance department? (1 Mark)
a. Public Issue
b. Rights Issue
c. Private Placement
d. Offer to Employees

Ans b. Rights Issue

Q5. Raghav is a very creative person and has always been working on innovating products and services that
can make living healthy and hygienic. He developed a design of an air conditioner with an inbuilt air
purifier as well. Since he did not get any financial support from any bank, he approached Nirvana Vent
(VC), a venture capitalist firm. Though VC liked the idea but it refused to help Raghav at the seeding stage
and asked him to come again if needed during second round financing.
Why was seed capital not given by VC when it was ready to fund the second-round financing? (2 Marks)

Ans Venture capitalists are typically very selective in deciding what to invest in and as a rule of thumb:
1) They may invest in one in four hundred opportunities presented to it,
2) Looks for the extremely rare, yet sought after qualities, such as :
a) innovative technology,
b) potential for rapid growth,
c) a well-developed business model.
d) an impressive management team.
3) Looks for an "exit" in the time frame of typically 3-7 years.
4) Is inclined towards ventures with exceptionally high growth potential.
The VC do not fund for seed capital as its result and return both are not sure.

Q6. State any six drawbacks of “Public Issue”. (3 Marks)

Ans Drawbacks
While there are benefits to going public, it also means additional obligations and reporting requirements
such as:
a. Increasing accountability to public shareholders
b. Need to maintain dividend and profit growth trends
c. Becoming more vulnerable to an unwelcome takeover
d. Need to observe and adhere strictly to the rules and regulations by governing bodies
e. Increasing costs in complying with higher level of reporting requirements
f. Relinquishing some control of the company following the public offering
g. Suffering a loss of privacy as a result of media interest
(Any Six)

Q7. State six points of importance of Stock Exchange from the Investors point of view. (3 Marks)

Ans Following are the importance of Stock Exchange from the Investors point of view:
(a)They publish useful information regarding price lists, quotations, etc., of securities through newspapers
and journals.
(b) It provides a ready market for converting shares into cash.
(c) Stock exchanges formulate rules and regulations so that members may not exploit the investors.
(d)The investors can safely depend upon the information provided by the stock exchanges.
(e)They remove the barriers of distance with regard to securities listed in a stock exchange.
(f) Stock exchange helps the investor in calculating profit or loss on investments.
 CBSE 2018-19 Compartment Paper

Q1. Identify this specialized financial institution that was established as a wholly owned subsidiary of the
Reserve Bank of India and is regarded as the apex institution for term finance of industries in India. (1
Mark)

Q2. Raghav is a very creative person and has always been working on innovating products and services that
can make the living healthy and hygienic. He developed a design for an air-conditioner with an inbuilt air
purifier. Since he did not get any financial support from any bank, he approached Nirvana Vent, a venture
capitalist firm. Though Nirvana Vent liked the idea but it refused to help Raghav at the seeding stage and
asked him to come again in case he needed funds during the second-round financing. Why was seed capital
not given by Nirvana Vent whereas it was ready to fund the second-round financing? Explain. (2 Marks)

Q3. In addition to the benefits to going public, i.e., bringing public issue to generate funds for the
organization, there are many additional obligations and reporting requirements. State any six such
obligations and requirements for an organisation. (3 Marks)

Q4. State any three development functions and any three regulatory functions of National Bank for
Agriculture and Rural Development. (3 Marks)

Q5. Explain ‘early-stage financing’ with respect to ‘Venture Capital Finance’. (4 Marks)

Q6. Explain any four features of ‘Angel Investors’. (4 Marks)

 CBSE 2018-19 Delhi Paper

Q1. Karan was an entrepreneur. He always identified the opportunities and made strategies to capitalize
on the opportunities at the earliest. He was running a restaurant. Now, he thought of converting it into a
Holiday Resort with some sports facilities. He also wanted to start a rope-way as no recreational activity
was available in nearby areas. He prepared a project report and identified that approximately Rs.
3.5 crore is required for this. Identify and explain about the specialized financial institution Karan should
approach to meet his financial requirements. (1 Mark)

Ans TFCI- Tourism Finance Corporation of India helps in providing financial assistance to tourism related
activities.

Q2. Manika ltd. an Indian company registered under the Companies Act, 1956 started functioning in the
year 2000. The company got a banking license in 2015 and the process of conversion from a nonbanking
financial body into a bank started immediately. It came in news that two of its directors were charged with
insider trading and misappropriation of the funds of the company. It severely affected the share prices of
the company and the securities market. Securities Exchange Board of India ordered for an inquiry and on
being the charges proved imposed heavy monetary penalty of Rs.5 crore on the company.
(a) State the function being performed by SEBI
(b) Where can Manika Ltd. Appeal against SEBI’s decision? What will be the way out if the appeal is not
granted? (2 Marks)

Ans (a) Quasi-executive and Quasi-Judicial

(b) Securities Appellate Tribunal and Supreme court

Q3. State any three features of Stock Exchange. (3 Marks)

Ans Features of stock exchange:

1) It is an association of persons which may be registered or unregistered.
2) It requires recognition from the Central Government.
3) Stock exchange is a market, where securities of corporate bodies, government and semi-government
bodies are bought and sold.
4) It deals in second hand securities.
5) It regulates trade in securities
6) It allows dealings only in listed securities
7) Transactions can be affected only through members
8) Working as per SEBI guidelines
9) It has a specific location
10) They are the financial barometers and development indicators of national economy of the country.
(Any three)

Q4. What is meant by Capital Market? Explain its type. (3 Marks)

Ans Capital market may be defined as an organized mechanism meant for effective and smooth transfer of
money capital or financial resources from the investors to the entrepreneurs.

The two types are: Primary and Secondary market

Primary market- It basically transfers resources from savers to the entrepreneurs who seek funds.
Secondary market- deals with buying and selling of old securities.
Q5. With regards to ‘public issue’ as a source of finance, answer the following questions:
i. Which type of enterprise can raise funds by ‘Public Issue’?
ii. What is the benefit to an investor while investing in ‘Public Issue’?
iii. Despite many benefits, this source of finance has some additional obligations and reporting
requirements. State any six such obligations and requirements. (4 Marks)

Ans i. Public Limited Company

ii. The reward investors seek is an appreciation of their investment and possibly dividends.
iii. While there are benefits to going public, it also means additional obligations and reporting requirements
such as:
a. Increasing accountability to public shareholders
b. Need to maintain dividend and profit growth trends
c. Becoming more vulnerable to an unwelcome takeover
d. Need to observe and adhere strictly to the rules and regulations by governing bodies
e. Increasing costs in complying with higher level of reporting requirements
f. Relinquishing some control of the company following the public offering
g. Suffering a loss of privacy as a result of media interest (Any 6)

Q6. Besides providing continuous and ready market for securities, safety and security in dealings and
regulating company’s management, stock exchange performs a number of functions in respect of
marketability of different types of securities for investors and companies. Explain any six functions of stock
exchange other than those mentioned above. (4 Marks)

Ans
 CBSE 2018-19 All India Paper

Q1. Name the specialized financial institution that was incorporated by a special Act of Parliament to
provide medium- and long-term credit to eligible industrial enterprises in the corporate sector, particularly
to those industries to which banking facilities are not available. Also state any one of its objectives, other
than the one mentioned above. (1 Mark)

Ans Industrial Finance Corporation of India.

Objectives: (any one)
a) The period of credit can be as long as 25 years and should not exceed that period.
b) To grant credit to a single concern up to a maximum amount of rupees one crore. This limit can be
exceeded with the permission of the
government under certain circumstances.
c) Guarantee loans and deferred payments.
d) Underwrite and directly subscribe to shares and debentures issued by companies.
e) Assist in setting up new projects as well as modernization of existing industrial concerns in medium and
large-scale sector, and
f) Assist project under co-operatives and in backward areas.

Q2. Abhiraj Ltd. an Indian company, started functioning in 1999 and was registered under the companies
Act, 1956. The Securities and Exchange Board of India performed one of its functions and conducted
investigations against Abhiraj Ltd. The investigations resulted into the fact that the company did not follow
the proper procedure. Therefore, the Securities and Exchange Board of India imposed penalty upon the
company.
(a) Identify the function being performed by the Securities and Exchange Board of India (SEBI).
(b) Can Abhiraj Ltd. appeal against SEBI’s decision? If yes, where? (2 Marks)

Ans a) Quasi-Judicial and Quasi Executive

b) Yes, Abhiraj Ltd. can appeal against SEBI’s decision to Securities Appellate Tribunal

Q3. State any three functions of stock exchange. (3 Mark)

Ans Functions of Stock exchange are: (any three)

1. Continuous and ready market for securities: It provides ready and continuous outlet for buying and
selling of securities.
2. Facilitates evaluation of securities: It publishes price quotation of the shares of the companies that have
been listed with them after thorough analysis of demand and supply position.
3. Checks on brokers: Stock exchanges control the activities of brokers and protect the investors from
being deceived.
4. Provides safety and security: Activities of the stock exchange are controlled by the provisions of the
Securities Control (Regulation) Act. Fraudulent practices stand checked effectively ensuring safety, security
and justice in dealings.
5. Regulates company management: Listed companies have to comply with rules and regulations of
concerned stock exchange.
6. Intensifying capital formation: Stock exchange accelerates the process of capital formation through
creating the habit of saving, investing and risk taking among the investing class by converting their savings
into profitable, safe investments.
7. Facilitates raising of new capital: Because of stock exchange the need for more capital by the existing
companies is easily met out.
8. Facilitates public borrowing: It enables government to raise public debt easily and quickly.
9. Facilitates healthy speculation: Excessive speculation is undesirable as it is dangerous to investors & the
growth of corporate sector.
10. Serves as economic barometer: Stock exchange indicates the state of health of companies and the
national economy.
11. Facilitates bank lending: Banks offer loans to customers against corporate securities.

Q4. State any three points of importance of stock exchange from the viewpoint of investors. (3 Marks)

Ans From the viewpoint of investors: (any three)

(a) Dissemination of useful information: Stock exchange publishes useful information regarding price lists,
quotations, etc., of securities through newspapers and journals.
(b) Ready market: Persons desirous of converting their shares into cash may easily do so through a
member of stock exchange.
(c) Investors' interests protected: Stock exchanges formulate rules and regulations so that members may
not exploit the investors.
(d) Genuine guidance about the securities listed: The investors can safely depend upon the information
provided by the stock exchanges.
(e) Barriers of distance removed: Stock exchange removes the barriers of distance with regard to
securities listed there.
(f) Knowledge of profit or loss on investments: By comparing the original amount invested and the price
of securities on a particular day.

Q5. Explain the following as methods of new issues: (4 Marks)

(a) Public issue; and
(b) Rights issue

Ans a) Public issue / going public: This involves raising of funds directly from the public through the issue
of prospectus. When an entrepreneur offers shares to the public for subscription, he/she is required to
comply with all the restrictions and formalities pertaining to the initial issues, prospectus drafting and
launch.
b) Rights issue: Rights issue is a method of raising additional finance from existing shareholders by offering
securities to them on pro-rata basis i.e., giving them a right to a certain number of shares in proportion to
the shares they are holding. This method of issuing securities is considered to be inexpensive as it does not
require any brokers, agents, underwriters, prospectus or enlistment, etc.

Q6. What is meant by Capital Market? Why is it considered as the most important source of raising
finance? (4 Marks)

Ans Capital Market may be defined as an organised mechanism meant for effective and smooth transfer of
money capital from investors to the entrepreneurs.
Importance:
1. Mobilise the financial resources on a nation-wide scale.
2. Secure the required foreign capital and knowhow to promote economic growth.
3. Ensure effective allocation of mobilized financial resources.
 CBSE 2018-19 Sample Paper

Q1. Patamadai, a small town resides along the banks of the Tamaraparani river, 20Kms away from
Tirunelveli in Tamil Nadu. This place is world famous for its silken mats woven from grass. The majority of
mats made in here have cotton warps and korai wefts. The process of mat weaving is time consuming and
painstaking. This handicraft industry has gone through a cycle of transition from being most coveted to the
most ignored. Producers had changed the method of production but off late many of them are reverting
back to traditional methods of dyeing and processing the korai grass. Mass production now requires more
finance. Which financial institution these producers should approach for help? (1 Mark)

Ans NABARD-National Bank for Agriculture and Rural Development

Q2. Shillong is famous for its pristine beauty. Ariel Pvt. Ltd. wanted to build an ecofriendly amusement park
which will not only be known for fun activities but will also educate the public about various sustainable
development home projects. The company felt that it their duty to educate the present generation about
Do-it-yourself projects. This will bring awareness about saving our environment for a better future. The
company estimated the project to cost around 15 crore. Which financial institution should they approach?
(1 Mark)

Ans TFCI- Tourism Finance Corporation of India

Q3. The agarbatti market in India is estimated at whopping Rs.3,500 crore annually and growing. Indian-
made agarbattis are also making rapid inroads into foreign countries. Agarbatti manufacturing is one of the
small-scale manufacturing businesses that show promise of exponential growth over coming years.
Karnataka has been famous for Agarbatti manufacturing due to easy availability of raw materials.
Identify and state any two objectives of the financial institution which will provide financial aid to this
sector. (2 Marks)

Ans SIDBI objectives

i. Initiate steps for technological upgradation, and modernization of existing units.
ii. expand channels for marketing of SSI sector products in India and abroad.
iii. Promote employment - oriented industries (Any two)

Q4. State the regulatory functions of NABARD. (3 Marks)

Ans Regulatory Functions

a. NABARD is empowered to undertake inspection of RRBs and Cooperative Banks, other than the Primary
Cooperative Banks.
b. To open a new branch, a recommendation of NABARD is imperative by RRBs or Cooperative Banks to
seek permission from RBI.
c. RRBs and Cooperative Banks, along with RBI, are required to file returns and documents with NABARD.

Q5. Explain any four importance of stock market from the viewpoint of investors. (4 Marks)

Ans a. Dissemination of useful information: Stock exchange publishes useful information regarding price
lists, quotations, etc., of securities through newspapers and journals.
b. Ready market: Persons desirous of converting their shares into cash may easily do so through a member
of stock exchange.
c. Investors' interests protected: Stock exchanges formulate rules and regulations so that members may
not exploit the investors.
d. Genuine guidance about the securities listed: The investors can safely depend upon the information
provided by the stock exchanges.
e. Barriers of distance removed: Stock exchange removes the barriers of distance with regard to securities
listed there.
f. Knowledge of profit or loss on investments: The investors can estimate the profit or loss on the total
amount of investments in securities, by comparing the original amount invested and the price of securities
on a particular day.
(Any four)
 CBSE 2017-18 All India Paper

Q1. Deepak Industries is a sugar unit in U.P. Due to various factors it started running into losses and was
declared a sick unit by the State Confederation of Industries. It had assets and probability to revive if
financial assistance could be made available.
Name the financial organization can help Deepak Industries in this situation knowing well that it cannot
furnish any collateral security against loan sanctioned? (1 Mark)

Ans Industrial Investment Bank of India Ltd. (IIBI)

Q2. State any four powers of Securities and Exchange Board of India. (2 Marks)

Ans For the discharge of its functions efficiently, SEBI has been vested with the following powers:
1. To approve by-laws of stock exchanges, SEBI
2. To enquire the stock exchange to amend their by-laws.
3. Inspect the books of accounts and call for periodical returns from recognized stock exchanges.
4. Inspect the books of accounts of financial intermediaries.
5. Compel certain companies to list their shares in one or more stocks exchanges.
6. Levy fees and other charges on the intermediaries for performing its functions.
7. Grant license to any person for the purpose of dealing in certain areas.
8. Delegate powers exercisable by it.
9. Prosecute and judge directly the violation of certain provisions of the Companies Act.
10. Power to impose monetary penalties.
(Any four)

Q3. This is a market where there is an option to sell and buy new and old financial instruments. It facilitates
the transferring of financial resources from surplus units to deficit units.
a. Identify this market and define it.
b. What is its function of transferring of financial resources from surplus units to deficit units called? (3
Marks)

Ans a. Capital Market: A capital market may be defined as an organized mechanism meant for effective
and smooth transfer of money capital or financial resources
from the investors to the entrepreneurs. Here, productive capital is raised and made available for industrial
purposes.
b. Financial Intermediation

Q4. Industrial finance is a very complicated problem. To meet the growing needs of the industries and
entrepreneurs, heavy flow of finance is required. For this, various financial institutions have been
established at the National and State levels. These institutions provide developmental finance.
(a) Give the name of the group of financial institutions
(b) Also, give any six points stating the need for such institutions. (4 Marks)

Ans (a). Specialised Financial Institutions

(b). Establishing of SFIs facilitated:
a) Provision of sufficient long-term funds in the desired sectors in accordance with planned priorities to the
industrial units and entrepreneurs.
b) new and small entrepreneurs in setting up industry.
c) Development of (i) small scale industry and (ii) projects in backward areas.
d) Provision of technical and managerial advice to the entrepreneurs, facilitating thus, in identification,
evaluation and execution of new investment enterprises.
e) Underwriting of and direct subscription to the issue of shares and debentures in the capital market of
the upcoming ventures.
g) Establishment of enterprises which require extra-ordinarily large amount of finance for their projects
with a long-gestation period.
(0.5 marks for each point)
 CBSE 2017-18 Sample Paper

Q1. Gupta ltd., are the manufacturers of sports motorcycles. They want to manufacture low-cost scooters
using latest technology. For financing the project, they have estimated a capital requirement of Rs. 50
lakhs. The company wants to finance the project by borrowing from a financial institution. Name any two
financial institutions they can approach for the same. (1 Mark)

Ans Industrial Development Bank of India; Small Industries Development Bank of India; Industrial Finance
Corporation of India; Industrial Credit and Investment Corporation of India (Any two)

Q2. List any four advantages of Employees Stock Option Plan. (2 Marks)

Ans Higher Efficiency; Low labour turnover; Better industrial locations; Low flotation cost; Wider higher
generation of funds (Any four)

Q3. In 2015 Jaya Ltd, started a toy manufacturing unit using robot technology. The toys manufactured by
the company became popular amongst children. But since the cost of the toys was high, the company
could not earn good profit. The business is of high risk along with higher expected returns. The company
wants to increase production so that they can reduce cost per unit. For this the company wants additional
investment of Rs. 50 lakhs. The company approached Ashok who has just retired from Indian Space
Research Organisation and who is an influential person.
Ashok agreed to give the loan to the company provided that his loan is converted into equity shares after
two years. The company agreed to Ashok’s proposal.
(a) What type of investor is Ashok?
(b) State any two features of the same. (3 Marks)

Ans (a) Angel Investor

(b) Features (Any two)
1. 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.
2. As angel investors bear extremely high risk and are usually subject to dilution from future investment
rounds. They expect a very high return on investment.
3. Apart from investing funds, most angels provide proactive advice, guidance, industry connections and
mentoring start-ups in its early days.
4. Their objective is to create great companies by providing value creation, and simultaneously helping
investors realize a high return on investments.
5. They have a sharp inclination to keep abreast of current developments in a particular business arena,
mentoring another generation of entrepreneurs by making use of their experience.

Q4. To regulate and supervise the securities market in India, this statutory body was constituted in 1998.
(a) Identify this body
(b) Give any three powers of this body.
(c) State any one value which the statutory body as identified in (a) above tires to inculcate among the
members of the securities market. (4 Marks)

Ans a. Securities and Exchange Board of India

b. For the discharge of its functions efficiently, SEBI has been vested with the following powers: (Any three)
(a) To approve by-laws of stock exchanges, SEBI
(b) To enquire the stock exchange to amend their by-laws.
(c) Inspect the books of accounts and call for periodical returns from recognized stock exchanges.
(d) Inspect the books of accounts of financial intermediaries.
(e) Compel certain companies to list their shares in one or more stocks exchanges.
(f) Levy fees and other charges on the intermediaries for performing its functions.
(g) Grant license to any person for the purpose of dealing in certain areas.
(h) Delegate powers exercisable by it.
(i) Prosecute and judge directly the violation of certain provisions of the Companies Act.
(j) Power to impose monetary penalties.

c. Discipline; Honesty (Any other relevant value)

 CBSE 2016-17 Compartment Paper

Q1. Ravi started an organic food processing unit in his village situated on National Highway Number 8 in
Alwar district of Rajasthan with an initial investment of ₹ 10 lakhs. He also took a loan of ₹ 5,00,000 from
his father and a loan of ₹ 3,00,000 from his friend Naresh. After six months, for the expansion of his
business he again felt that business required more funds. So, he contacted Harish, who was a retired
executive and had expertise and experience in similar type of business besides his good industry
connections. Harish also knew that because of high-risk involved in the business there was a possibility of
high return. Therefore, he agreed to invest ₹ 7 lakhs in Ravi’s business with a condition that the amount
invested by him will be converted into equity after two years. Name and explain the source of raising
finance used by Ravi. (2 Marks)

Q2. It is a specialized financial institution which was established as a statutory corporation on 1st July,
1948, by a Special Act of Parliament. On 1st July, 1993 it was converted into a public limited company. Its
main object is to provide medium- and long-term credit to eligible industrial enterprises in corporate sector
of the economy, particularly in those industries in which banking facilities are not available.
(a) Identify the financial institution described in the above para.
(b) Can a partnership firm engaged in manufacturing obtain loan from the financial institution identified in
(a) above? Give reason in support of your answer.
(c) State any two objectives and any two main functions of the institution identified. (6 Marks)
 CBSE 2016-17 Delhi Paper

Q1. ‘It is an organized mechanism meant for effective and smooth transfer of financial resources from the
investors to the entrepreneurs.’
(a) Identify the mechanism and list its different types.
(b)Name the association of persons established under the mechanism identified in (a) above. Also explain
any four points of its importance to investors. (6 Marks)

Ans (a) Capital market; primary and secondary market

(b) Stock exchange
Importance:
(i) Dissemination of useful information
(ii) Ready Market
(iii) Investors interests protected
(iv) Genuine guidance about the securities listed
(v) Barriers of distance removed
(vi) Knowledge of profit and loss on investments
(Any four points with brief explanation)
 CBSE 2016-17 All India Paper

Q1. Geeta has completed her B. Tech. in Chemical Engineering from a famous Indian Institute of
Technology. She wants to start a chemical production unit wherein such chemicals will be produced which
are used in automobile colouring and are being imported from other countries now a days. The technology
to be used by Geeta is new and untried involving high risk factors along with high growth potential. She
wants to raise funds for her project from such a source that provides private equity capital as seed funding
to early stage, to give shape to her ideas.
(a) Suggest Geeta the source of finance from where she can fund her project.
(b) Give the meaning of the source suggested in (a) above and state any four features of this source. (4
Marks)

Ans (a) Venture Capitalist

(b)Venture capital is a type of private equity capital provided as seed funding to early-stage, high potential,
high risk, growth up companies/entrepreneurs who lack the necessary experience and funds to give shape
to their ideas.
Features of venture – capital
1) It is basically equity finance in relatively new companies.
2) It is long-term investment in growth-oriented small or medium firms.
3) Venture capitalist not only provide capital but also business skills to investee firms.
4) It involves high risk-return spectrum.
5) It is a subset of private equity.
6) The venture capital institutions have a continuous involvement in the business after making the
investment.
7) Such institutions disinvest the holdings either to the promoters or in the market.
(Any four)

Q2. ‘’It is an organized mechanism meant for effective and smooth transfer of financial resources from the
investors to the entrepreneurs”.
(a) Identify the mechanism and list its different types.
(b) Name the association of persons established under the mechanism identified in
(a) above. Also, explain any four points of its importance to investors. (6 Marks)

Ans (a) Capital market; primary and secondary market

(b) Stock exchange
Importance:
(i) Dissemination of useful information
(ii) Ready Market
(iii) Investors interests protected
(iv) Genuine guidance about the securities listed
(v) Barriers of distance removed
(vi) Knowledge of profit and loss on investments
(Any four points with brief explanation)
 CBSE 2016-17 Sample Paper

Q1. Deepak Ltd., has been manufacturing cycles since 2010. Their market share in this field is 35%. They
decided to introduce new cycles with advanced gear systems in 2015. For the same they estimated their
financial requirements to be 20 crores.
They decided to raise the same through a limited number of sophisticated investors. Identify this kind of
issue? (1 Mark)

Ans Private placement

Q2. What is meant by seed capital financing? What the entrepreneur has to do to convince the investor to
get money? (2 Marks)

Ans It refers to the capital required by an entrepreneur for conducting research at pre commercialization
stage.
The entrepreneur has to convince that his idea was worthwhile to the investor.

Q3. Bhushan and Vinay were pursuing Electrical Engineering from a prestigious engineering college. During
their third year they developed a solar LED bulb which can be used indoors. The bulb had a small panel
which had to be charged at a stretch for 10 hours in the sun and it would last for 200 hours of usage.
The idea was risky as there was a possibility that the market might not accept such a product, but if they
do so, then, there would be a revolution in the power industry as it would lead to saving of power in every
household.
The prototype was made but to manufacture and distribute the same, they required around 5 crores.
Both Bhushan and Vinay approached some affluent individuals who were ready to invest in their business
in exchange for a convertible debt.
Identify the type of investors and state any two features of the same. (3 Marks)

Ans Angel Investor

Features (Any two)
1. 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.
2. As angel investors bear extremely high risk and are usually subject to dilution from future investment
rounds. They expect a very high return on investment.
3. Apart from investing funds, most angels provide proactive advice, guidance, industry connections and
mentoring start-ups in its early days.
4. Their objective is to create great companies by providing value creation, and simultaneously helping
investors realize a high return on investments.
5. They have a sharp inclination to keep abreast of current developments in a particular business arena,
mentoring another generation of entrepreneurs by making use of their experience.

Q4. Hemant’s grandfather owned a huge agricultural firm in the name of ‘Organica’. The company had
huge acres of land in Kerala where it grew spices. The company planned to expand and was planning to
buy land in Coorg, Karnataka where it will grow coffee. While visiting the place, Hemant saw that the
villagers had to walk more than 10 kms of hilly terrain to reach the hospital and he also felt that the
villagers did not have any work in the evening apart from doing agricultural work in the morning.
For expansion purposes he required money and the chief financial officer of his company suggested that
they raise the required funds directly from the public. Hemant also decided to open a hospital and a skill
development centre for the villagers in the evening wherein they can learn a lot of new skills.
Explain the method of raising funds directly from the public and the primary advantage that Hemant stands
to gain from it. Also state any two values that he wants to spread. (4 Marks)
Ans Public issue- it is the most popular method of raising capital. It can be raised directly from the public
through issue of prospectus. The entrepreneur is required to comply with all the restrictions and
formalities pertaining to the initial issues.

The primary advantage that an entrepreneur stands to gain is – access to capital

Values: Teaching the villagers new skills which can lead to more means of earning money.
Opening a hospital – giving accessible medical facilities
 CBSE 2015-16 Delhi Paper

Q1. State any two points of importance of Stock—Exchange from the view point of investors. (2 Marks)

Ans (Any two of the mentioned points)

(i) Dissemination of useful information
(ii) Ready Market
(iii) Investors interests protected
(iv) Genuine guidance about the securities listed

Q2. Nitin, an entrepreneur, is living in a beautiful village of Kerala. This village was famous for its natural
beauty but very few people know about it. Due to this entrepreneurial inclination he always tried to find
out opportunities. People of the village are very poor as they are mostly dependent on fishing. Nitin
thought of Starting a 'Holiday Resort' with cultural centre, restaurant and other facilities in the village. All
the villagers agreed and supported Nitin for this project. They agree to co- operate to make this project a
success. Nitin needed capital of for this project.
(a) Name the specialized financial institution which Nitin should approach to meet his requirements.
(b) When was this institution incorporated as a public limited company and became operational?
(c) What is the main function of this institution?
(d) State any one value which Nitin wants to communicate to the society. (4 Marks)

Ans (i) Tourism Finance corporation of India

(ii) On 21st January 1989 and became operational w.e.f 1st Feb 1989.
(iii) Main function is to provide financial assistance to enterprises for setting up or development of tourism
related projects.
(iv) Value — providing job opportunities to villagers. (or any other Suitable value)
 CBSE 2015-16 All India Paper

Q1. State any two points of importance of Stock-Exchange from the view point of entrepreneurs. (2 Marks)

Ans Importance of stock-exchange from the point of view of entrepreneur (any two)
(i) Recognition: reputation of company is enhanced when the market value is published in important
dailies.
(ii) Wide market: market for the securities of such companies is considerably widened.
(iii) Higher share values: demand for shares which have a premium value is always on an increase.

Q2. Neeraj an entrepreneur is living in a beautiful village of Himachal Pradesh. This village was very famous
for its natural beauty but very few people knew about it. Due to his entrepreneurial inclination he always
tried to find out the opportunities. People of the village are poor as they are mostly dependent on farming.
Neeraj thought of starting a 'Holiday Resort' with cultural centre, restaurant and other facilities in the
village. All the villagers agreed and supported Neeraj for this project. They agreed to co — operate to make
this project a Success. Neeraj needed capital of 3 crores for this Projects.
(a) Name the specialized financial institution, which Neeraj Should approach to meet his requirements.
(b) When was this institution incorporated as a public limited company and became operational?
(c) What is the main function of this institution?
(d) State any one value which Neeraj wants to communicate to the society. (4 Marks)

Ans (i) Tourism finance corporation of India

(ii) On 27 January, 1989 and because operational w.e.f 1st Feb, 1989
(iii) Main function is to provide financial assistance to enterprises for setting up or development of tourism
related projects.
(iv) Values- providing job opportunities to villagers (or any other suitable value)
 CBSE 2015-16 Sample Paper

Q1. Ram was very thrilled with his new job. He was placed in a small factory manufacturing door knob as a
stock keeper. After a few days, while taking stock he understood that nuts and various small parts
constituted majority of the cost of production. After some time, the firm went into a loss and the owner
decided to look into the various factors that could have constituted the loss. Ram expressed his concern
that inventory was not properly maintained and that there are various techniques which are involved and
if followed properly the company will not be in a loss. The owner agreed to the suggestion. He also decided
to take help from some specialized government institution initiate steps for technological up gradation,
and modernization of existing units.
a. What technique was suggested by Ram? Explain it.
b. Which specialized financial institution is the owner thinking of approaching and state any one of it’s
objectives? (3 Marks)

Ans ABC Analysis

a. The inventory control technique known as ABC analysis builds on Pareto's Principle. In ABC analysis, a
company reviews its inventory and sorts all SKUs into three categories, called "A”,"B" and "C" items.
The typical breakdown might look like this: "A" inventory: 20 percent of
SKUs, 80 percent of value. "B" inventory: 30 percent of SKUs, 15 percent of value. "C" inventory:50 percent
of SKUs, 5 percent of value.
A particular company's numbers may be different, but the pattern would be similar we should be able to
discern a similar kind of pattern.

b. SIDBI (Small Industries Development Bank of India)

Objectives of SIDBI are: (Any one)
1) Initiate steps for technological up gradation, and/or modernization of existing units.
2) Expand channels for marketing of SSI sector products in India and abroad.
3) Promote employment – oriented industries.

Q2. Why is stock exchange important for an investor? (4 Marks)

Ans Importance of stock exchange from the viewpoint of investors

(a) Dissemination of useful information: Stock exchange publishes useful information regarding price lists,
quotations, etc., of securities through newspapers and journals.
The interested persons buy and sell their securities on the basis of information provided by the stock
exchanges.
(b) Ready market: Persons desirous of converting their shares into cash may easily do so through a
member of stock exchange.
(c) Investors' interests protected: Stock exchanges formulate rules and regulations so that members may
not exploit the investors.
(d) Genuine guidance about the securities listed: The investors can safely depend upon the information
provided by the stock exchanges.
(e) Barriers of distance removed: Stock exchange removes the barriers of distance with regard to
securities listed there. Without stock exchange the securities of a Delhi company may have a limited
market in Delhi only.
(f) Knowledge of profit or loss on investments: The investors can estimate the profit or loss on the total
amount of investments in securities, by comparing the original amount invested and the price of securities
on a particular day.
 CBSE 2014-15 Delhi Paper

Q1. Rahul wants to start an amusement park near Vishakhapatnam. This will require an investment of
Rs.50 lakhs. Name the financial institution which Rahul should approach for financing this venture. (1
Mark)

Ans Tourism Finance Corporation of India (TFCI)

Q2. ‘For the smooth and orderly functioning of corporate sector in a free market economy, stock
exchanges are indispensable because of different roles played by them for different groups. Explain the
importance of stock exchange to investors in the light of this statement. (3 Marks)

Ans Importance of stock exchange to investors:(any three points)

1. Dissemination of useful Information: Stock exchange publish useful information regarding price lists,
quotations, etc., of securities through newspapers and journals. The interested persons buy and sell their
securities on the basis of information provided by the stock exchanges.
2. Ready Market: Persons desirous of converting their shares into cash may easily do so through a member
of stock exchange.
3. Investors' Interests Protected: Stock exchanges formulate rules and regulations so that members may
not exploit the investors.
4. Genuine Guidance about the Securities Listed: The investors can safely depend upon the information
provided by the stock exchanges.
5. Barriers of Distance Removed: Stock exchange removes the barriers of distance in regard to securities
listed there. Without stock exchange the securities of a Delhi company may have a limited market in Delhi
only.
6. Knowledge of Profit or Loss on Investments: The investors can estimate the profit or loss on the total
amount of investments in securities, by comparing the original amount invested and the price of securities
on a particular day.

Q3. Naveen after completing his M.Tech in Nano technology wanted to start his own business. He thought
to manufacture sophisticated instruments used in surgery. He knew that his knowledge of Nano
technology will help the surgeons to operate upon the patients with accuracy, with minimum blood loss
and quick post operation recovery. Such types of instruments are used in advanced countries only and
there was a risk in marketing the same. The cost price of machinery required, for manufacturing such
instruments was very high and more research was required in this field of Nano technology. For seed
funding, Naveen approached, ‘Himani Capital Ltd.’ Who finance such types of projects. ‘Himani Capitals
Ltd’ after analysing the proposal agreed to provide seed capital to Naveen.
Explain the different stages of ‘Early-stage financing’ to seek venture capital finance after the one discussed
above. (3 Marks)

Ans (a) Pre-start up and start up finance:

A business plan is presented by the entrepreneur to the VC firm. A management team is being formed to
run the venture. If the company has a board of directors, a person from the VC firms will take seats at the
board of directors. The VC firm monitors the feasibility of the product and the capability of the
management-team from the board of directors.
(b) Second round financing
This is the first encounter with the rest of the market. The entrepreneur, at this stage, needs assistance
from the Venture Capitalist for expansion, modernization, diversification so that the economies of scale
and stability could be attained.
 CBSE 2014-15 All India Paper

Q1. Geeta Ram, an orange grower from Nagpur, wants to start a small juice producing factory using the
oranges grown by him as well as by his fellow villagers. Name the financial institutions he should contact
for starting his factory. (1 Mark)

Ans National Bank for Agricultural and Rural development (NABARD).

Q2. Angel investor and venture capital are two sources of raising finance for an entrepreneur. Explain the
concept of both the sources stating one distinguishing feature of each. (3 Marks)

Ans Angel investor- is an affluent individual who provides capital for a business start-ups and early-stage
companies using a high-risk, high return matrix usually in exchange for convertible debt or ownership
equity.
Venture capital- is a type of a private equity capital provided as seed funding to early stage, high potential,
high risk, growth up companies/entrepreneurs.
Distinguishing feature: Angel investors participate in the management of the business but venture
capitalists do not take part in the management of the business.

Q3. Ganga Dhar was working as the production manager in a German company. The company was
producing remote operated high-end kitchen equipments. He resigned from his job and returned to his
hometown, Patna. In Patna, he met his old friend Aditya, who had been managing his factory producing
steel utensils with old technology. Ganga Dhar encouraged Aditya for the production of high-end kitchen
equipments. He also promised to help Aditya by providing funds and expertise so that the production unit
run by Aditya can develop into a big production house and its investors may get high returns on
investment.
Identify the kind of ‘source of capital’ provided by Ganga Dhar to Aditya and explain the same. (3 Marks)

Ans Angel investors.

Features (Any two)
1. They are current or retired executives, business owners or high net worth individuals who have the
knowledge, experience, and funds.
2. They bear extremely high risk and expect a very high return.
3. They provide proactive advice, guidance industry connections and mentoring start-ups in its early days.
4. Their objective is to create great companies by providing value creation.
5. They have a sharp inclination to keep abreast of current developments in a particular business arena.
 CBSE 2014-15 Sample Paper

Q1. Ram Prasad, a cotton grower from Bihar, wants to start a cottage industry for weaving cotton into
handloom. Which specialized financial institution should he approach to meet the credit requirements of
his industry. (1 Mark)

Ans NABARD

Q2. ‘Public issue is the most popular method of raising capital by an entrepreneur’. Explain the method
and any two advantages of it. (3 Marks)

Ans This method involves raising of funds directly from the public through issue of prospectus.
Advantages: a. access to capital; b. Mergers and acquisitions; c. higher valuations; d. benchmark trading
price; e. capital formation; f. incentives; g. reduced business requirements; h. less dilution; i. liquidity; j.
prestige. (Any two)

Q3. Mr. Raghav retired as CEO of a well reputed IT company after having worked for 40 years in USA. He
returned to India with a desire to encourage entrepreneurial ventures in IT sector. He was approached by
Nitin, a budding entrepreneur in IT sector whose venture was in a start-up stage and was falling short of
funds. Apart from investing funds, Mr. Raghav also provided proactive advice, guidance and industry
connection and thus, simultaneously helping them in raising high returns on investment.
Identify and explain the source of raising finance used by Nitin. (3 Marks)

Ans Angel Investor: Business angel or angel investor, is an affluent individual who provides capital for a
business start-up and early-stage companies having a high-risk, high-return matrix usually in exchange for a
convertible debt or ownership equity.