Entrepreneurship
What the exam tests
The path from product idea to registered small unit: market assessment, business plan, legal form, finance and the controls an owner must run.
Core rules
- Route: idea → market survey of demand, competition and price → feasibility (technical, financial, commercial) → detailed project report → finance → registration → launch.
- A DPR covers product, process, machinery, capacity, land and building, manpower, project cost, means of finance, break-even and profitability.
- Forms of organisation: sole proprietorship (simple, unlimited liability), partnership (2–50 partners), LLP (limited liability, lighter compliance), private limited company (separate legal entity).
- MSME registration is through the Udyam portal, classified by investment and turnover, and gives access to priority-sector credit and subsidy schemes.
- The balance sheet lists assets and liabilities on a date; the profit-and-loss statement shows earnings over a period. Working capital = current assets − current liabilities.
- Break-even units = fixed cost ÷ (price − variable cost per unit); margin of safety = (actual sales − break-even sales) ÷ actual sales.
- The marketing mix is product, price, place and promotion; quality certification and a proven order book strengthen the loan application.
Worked example
A fabrication workshop has fixed cost ₹3,60,000 a year, sells a job at ₹1,200 with variable cost ₹700. Contribution = ₹500, so break-even = 360,000/500 = 720 jobs a year, or 60 a month. If the owner expects only 50 jobs a month, price or cost must change, or the fixed cost cut, before the loan is taken.
Traps
- Classifying rent as variable and consumables as fixed.
- Writing a business plan with no market survey behind the sales figure.
- Ignoring working capital, so a profitable unit still runs out of cash.