CBSE Class 12 Entrepreneurship Chapter 6: Resource Mobilization NCERT Solutions

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NCERT Solutions PDF Class 12 PDF

CBSE Class 12 Entrepreneurship Chapter 6 NCERT Solutions introduces the vital concept of resource mobilization, emphasizing finance as the essential lifeblood for any business. This chapter explores why finance is crucial for a venture's operations, survival, and growth, positioning it as a primary requirement for starting any enterprise. The solutions break down finance sources into internal (like owner's equity) and external categories. They also distinguish financial markets from others and highlight finance as the most critical element for entrepreneurial success. Entrepreneurs will learn about the essential questions they need to answer regarding their financial needs. The chapter further examines sources of long-term funds and identifies capital-demanding entities such as the industrial sector and government. It also covers the various reasons entrepreneurs raise capital, including expansion and debt retirement, providing a comprehensive understanding of financial management for entrepreneurial success.

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Quick info

BoardCBSE
ClassClass 12
SubjectEntrepreneurship
Session2026
LanguageEnglish
TypeNCERT Solutions
ChapterChapter 6

Chapter summary

Chapter 6 of the CBSE Class 12 Entrepreneurship syllabus, titled Resource Mobilization, focuses on the essential role of finance in business. The NCERT Solutions provided here clarify the definition and significance of finance, positioning it as a crucial prerequisite for starting and sustaining an enterprise. The chapter breaks down finance sources into internal and external categories and touches upon the capital market's role in supplying long-term funds. It also addresses the demand for capital and its various applications for business growth and development, offering a foundational understanding of financial resource management for entrepreneurs.

Learning outcomes

  • Understand the definition and significance of finance in an enterprise.
  • Identify finance as a key prerequisite for starting a business.
  • Differentiate between internal and external sources of finance.
  • Recognize the importance of finance for business survival and growth.
  • Explain the role of financial markets and capital sources.
  • List various purposes for which entrepreneurs raise capital.

Topics covered

Paper topics

  • Definition of Finance
  • Significance of Finance in Enterprise
  • Finance as a Prerequisite for Business
  • Factors for Business Survival
  • Classification of Finance Sources
  • Internal Sources of Finance
  • External Sources of Finance
  • Financial Markets vs. Other Markets
  • Criticality of Finance for Business
  • Sources of Long-Term Funds
  • Demand for Capital
  • Uses of Raised Capital

Important topics

  • Significance of Finance
  • Internal vs. External Sources
  • Finance as a Prerequisite
  • Criticality of Finance for Survival
  • Sources of Long-Term Funds

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Questions and Solutions

A. VERY SHORT ANSWER TYPE QUESTIONS

Question 1

What do you understand by finance?
Solution: Finance refers to the necessary funds or monetary resources required by individuals, business organizations, and governmental bodies to carry out their respective activities and functions.

Question 2

Give the significance of finance in an enterprise.
Solution: The significance of finance in an enterprise is profound; it acts as a crucial lubricant that enables the smooth functioning of the production process and all other operational activities, ensuring the business can run effectively.

Question 3

Name the most important prerequisite to start an enterprise.
Solution: The most important prerequisite to start any enterprise is finance, as it provides the necessary capital to initiate operations and cover initial expenses.

Question 4

State the most important factors for the survival of any business enterprise.
Solution: The most important factors for the survival of any business enterprise are financing, production, and marketing. Financing is considered paramount because no business can be started or sustained without money.

Question 5

State how sources can broadly be classified into two major categories.
Solution: Sources of finance can be broadly classified into two major categories:
  1. Internal sources
  2. External sources

Question 6

What do you understand by internal sources of finance?
Solution: Internal sources of finance refer to the funds that are generated from within the business itself. This primarily includes the owner's own money, also known as owner's equity. For small entrepreneurs, the owner's personal contribution is often a significant, though sometimes small, part of the initial funding.

Question 7

How will you differentiate between financial market with other market? Give one difference.
Solution: A financial market is a specific type of market where individuals and entities can trade financial securities (like stocks and bonds) and other financial instruments. In contrast, a general market refers to the broader aggregate of potential buyers and sellers for any good or service, where transactions occur based on supply and demand for that specific item. The key difference lies in the nature of the traded items: financial assets in a financial market versus goods and services in a general market.

Question 8

'Production', 'Marketing', and Financing' - deemed as the most important factors for any business's survival rates. Among these name the most critical element and why?
Solution: Among 'Production', 'Marketing', and 'Financing', the most critical element for business survival is 'Financing'. This is because no entrepreneur can start or sustain a business without adequate money. Before embarking on any venture, an entrepreneur must clearly answer three fundamental questions: 1. How much money is required? 2. Where will this money come from? 3. When does the money need to be available?

B. SHORT ANSWER TYPE QUESTIONS

Question 1

Which sources provide the supply for long-term funds?
Solution: The supply of long-term funds in the capital market primarily comes from the following sources:
  1. Household savings
  2. Foreign capital
  3. Institutional investors
  4. Corporate savings
  5. The government

Question 2

Name the sources of demand for capital comes from.
Solution: The demand for capital in the market primarily comes from:
  1. Industrial Sector: This includes private sector businesses that require capital for manufacturing and other economic activities.
  2. Government: The government also demands capital for public projects and economic development initiatives.
It's important to note that the capital market consists of both lenders who supply funds and investors (like the industrial sector and government) who demand funds.

Question 3

Entrepreneur can use the capital raised for a variety of purposes, what are they?
Solution: Entrepreneurs can utilize the capital they raise for a diverse range of strategic purposes, including:
  1. Growth and expansion: To scale up operations, enter new markets, or increase production capacity.
  2. Retiring existing debt: To pay off outstanding loans or other financial obligations, thereby reducing interest costs and improving the company's financial health.
  3. Corporate marketing and development: To invest in promotional activities, brand building, and research and development for new products or services.
  4. Acquisition capital: To fund the purchase of other companies or significant assets.

Question 4

How can an entrepreneur, raises funds by selling the issue mainly to the institutional investors?
Solution: An entrepreneur can raise funds by selling financial issues primarily to institutional investors through various mechanisms. This often involves public offerings like Initial Public Offerings (IPOs) or subsequent offerings, where shares or bonds are made available to a wide range of investors, including large financial institutions such as mutual funds, pension funds, insurance companies, and investment banks. These institutions have the capacity to invest significant amounts and often play a crucial role in underwriting and stabilizing the market for these securities. The process typically involves detailed documentation, regulatory compliance, and engagement with investment bankers to structure and market the issue effectively to these sophisticated investors.

Common mistakes

  • Underestimating the critical role of finance for business survival.
  • Confusing internal and external sources of finance.
  • Not clearly defining financial needs before seeking funds.
  • Failing to understand the diverse purposes for which capital is raised.

Revision tips

  • Focus on understanding why finance is the most critical factor for business success.
  • Clearly distinguish between internal and external sources of finance.
  • Memorize the key questions an entrepreneur must answer regarding financial needs.
  • Review the different entities that supply and demand capital in the market.

Practice MCQs

Q1. What is the primary role of finance in an enterprise?

Q2. Which of the following is considered the most important prerequisite to start an enterprise?

Q3. Internal sources of finance are primarily referred to as:

Q4. Which of these is NOT typically listed as a source of long-term funds?

Q5. According to the text, what is the most critical element for business survival among 'Production', 'Marketing', and 'Financing'?

Frequently asked questions

What is 'finance' in the context of entrepreneurship?

Finance refers to the funds or monetary resources that are essential for individuals, businesses, and governments to operate and achieve their objectives.

Why is finance considered the most important prerequisite for starting an enterprise?

Finance is crucial because no business activity, from setup to daily operations, can commence or continue without adequate monetary resources.

What are the two broad categories of finance sources?

The two major categories are internal sources, which typically involve the owner's own funds (owner's equity), and external sources, which involve funds from outside the business.

What is the significance of finance for the survival of a business?

Finance is vital for survival as it enables production, marketing, and other essential functions. Without sufficient financing, a business cannot sustain its operations.

Who are the main entities that demand capital in the market?

The primary demand for capital comes from the industrial sector (private businesses involved in manufacturing or other economic activities) and the government.

What are some common purposes for which entrepreneurs raise capital?

Entrepreneurs raise capital for various reasons, including business growth and expansion, retiring existing debts, corporate marketing and development, and acquisition purposes.

Important links

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