1. Entrepreneurship Development Revision Exercises
Faculty: Engineering
Department: MEE
Year: Four
Date: 06th December 2012
Question 1: Mr. Peter has failed to determine his financial status. He however has the
following information;
- Land 20,000,000
- Motor vehicles 60,000,000
- Bank loan 35,000,000
- Creditors 10,000,000
- Bank overdraft 5,000,000
- Equipment 15,000,000
- Stock (Closing) 7,000,000
- Debtors 3,000,000
- Bank 5,000,000
- Sales 70,000,000
- Purchases 40,000,000
- Rent 10,000,000
- Communication 2,000,000
- EWSA 6,000,000
- Depreciation 9,000,000.
- There was no opening stock.
You are therefore required to help Mr. Peter
a) To arrange the above items into
i) Non-current assets/Fixed assets
ii) Current assets
iii) Long-term liabilities
iv) Current liabilities

2. v) Income and
vi) Expenses.
b) To prepare the Income Statement.
c) To determine the capital of Mr. Peter’s business and prepare the balance sheet.
Answer:
a) Non Current Assets/Fixed Assets
1. Land 20,000,000
2. Motor vehicles 60,000,000
3. Equipment 15,000,000
b) Current Assets.
1. Stock (Closing) 7,000,000
2. Debtors 3,000,000
3. Bank 5,000,000
c) Long term liabilities
1. Bank loan 35,000,000
d) Current liabilities
1. Creditors 10,000,000
2. Bank overdraft 5,000,000
e) Income
1. Sales 70,000,000
f) Expenses
1. Purchases 40,000,000
2. Rent 10,000,000
3. Communication 2,000,000
4. EWSA 6,000,000
5. Depreciation 9,000,000.

3. B) INCOME STATEMENT
Sales = 70,000,000 Rwf
Less: Cost of goods sold. (Purchases-closing stocks)= (40,000,000-7,000,000) =33,000,000
Rwf
Purchases = 40,000,000 Rwf
Less: Closing stock =7,000,000 Rwf
Gross Profit (Salas - cost of goods sold) = (70,000,000-33,000,000) =37,000,000 Rwf
Less: Expenses: (Rent+ communication+ AWSA+ Depreciation) = 27,000,000 Rwf
1. Rent = 10,000,000
2. Communication = 2,000,000
3. EWSA= 6,000,000
4. Depreciation = 9,000,000
Net Profit (Gross Profit – Expenses) = 37,000,000-27,000,000 = 10,000,000 Rwf
C) BALANCE SHEET. 7MARKS.
ASSETS.
Non Current Assets (Land +Motor vehicles + Equipments)
Land ……………………………………………………………20,000,000 Rwf
Motor vehicles ……………………………………………………60,000,000 Rwf
Equipment …………………………………………………… 15,000,000 Rwf
95,000,000 Rwf
Current Assets (Stock+ Debtors+ Bank)
Stock (Closing) …………………………………………………….7, 000,000
Debtors ……………………………………………………3,000,000
Bank ……………………………………………………. 5,000,000
15,000,000 Rwf
TOTAL ASSETS (Fixet assets+current assets)= 110,000,000 Rwf

4. LIABILITIES (Owners capital+ Retained Earnings)
Equity
Owner’s capital……………………………………………………………….50, 000,000 Rwf
Retained Earnings/Net profit…………………………………………………10,000,000 Rwf
Long term liabilities
Bank loan …………………………………………………………………..35,000,000 Rwf
Current liabilities (Creditors + Bank overdraft)
Creditors …………………………………………………………… 10,000,000 Rwf
Bank overdraft ………………………………………………………….. 5,000,000 Rwf
TOTAL LIABILITIES (Equity +LTL+CL) 110,000,000 Rwf
Question 2
a) Describe clearly the major components of a business plan.
b) Explain the characteristics of a good business plan.
Answer
a) Components of a business plan. /5 Marks.
1. Title Page
◦ The title of the document,
◦ the name of the business,
◦ the logo if applicable,
◦ the address and telephone number of the business,
◦ The name(s) of the owner(s).
2. Executive summary
◦ Summarize the plan’s most important points from every section in the
Executive Summary.
◦ A condensed version of the entire business plan.
◦ Maximum two pages approximately.
◦ Compose this section after the plan has been written in its entirety.
3. Business Profile
◦ History of your company:
◦ Structure of your company:
◦ Who are the owners and investors and what is their proportion of ownership?
◦ What is the legal structure?

5. ◦ Type of business: retail, wholesale, service, manufacturing, contracting,
professional, importing/exporting, etc.
◦ Mission of the company.
◦ Long-term goals:
◦ Description of the products and/or services
5. Market Research and Analysis
◦
customer description,
◦
market analysis,
◦
Competitive analysis.
◦
Market plan
◦ Objective
◦ Product and service
◦ Pricing
◦ Promotion
◦ Place
◦ Ongoing Marketing Evaluation
6. Operations
o Business Operations
o Facility
o Office equipment
o Business Forms
o Accounting and Bookkeeping System
o Suppliers
7. Human Resources Management
◦ Local Labor Market Conditions
◦ Personnel Management
◦ Outside Assistance
8. Financial Plan
◦ Sources and Uses of Funds
◦ Depreciation Schedule
◦ Sales and Cost of Goods or Services Sold Schedules
◦ Loan Amortization Schedule

6. ◦ Income Statement
◦ Cash Flow Statement
◦ Balance Sheet
◦ Breakeven Analysis
9. Critical risk factors
◦ Management risks
◦ Marketing risks
◦ Operating risks
◦ Financial risks
10. Conclusion and recommendation
B. Five quality of a good business plan.
1. The business plan should give clear and concise information on all the important
aspects of the proposed venture.
2. It must be long enough to provide sufficient information yet short enough to maintain
the reader’s interest.
3. Normally 21 pages are sufficient, supporting documents such as resumes(CVs) can
appear in an appendix.
4. Content may be less or more depending on the intent of the planner.
5. Whether brief or detailed, make sure that the major parts are taken into consideration
and the target audience will easily understand it.
6. After a business plan is completed, it should be reviewed for spelling and grammar
and to check whether no critical information has been omitted.
7. Imagine if you focus on the content of the plan and forget to indicate the contact
information, the amount of funds needed
8. The appearance of the business plan must be carefully thought of.
9. It should look sharp but not give an impression that a lot of money was spent on it.
10. When writing the plan, avoid getting carried away with the design elements included
in word processing programs such as word art, different font sizes and colors…
11. Overuse of these tools makes a business plan look amateurish rather than professional.
Question 3
One of the most challenging issues for entrepreneurs is to raise finance to transform their
business ideas into reality.

7. a) What are the basic questions that an entrepreneur needs to answer to know his/her
capital requirements.
Answer
1. Set-up costs (the costs that are incurred before the business starts to trade)
2. Starting investment in capacity (the fixed assets that the business needs before it can
begin to trade)
3. Working capital (the stocks needed by the business –e.g. r raw materials + allowance
for amounts that will be owed by customers once sales begin)
4. Growth and development (e.g. extra investment in capacity)
b) Explain at least six alternatives that an entrepreneur has for getting the venture capital
to start the business.
◦ Personal Savings.
◦ Founder’s capital.
◦ Asset sales.
◦ Retained earnings.
◦ Limiting credit to customers.
◦ Stock reduction.
◦ Depreciation.
◦ Bank loans.
◦ Loans from family and friends.
◦ Government grants.
◦ Hire-purchase.
◦ Leasing.
◦ Investors.
Question 4
It is not always possible to manufacture or sell a product or service that satisfies the entire
market in a similar way. Customers have got differences in their tastes and preferences. This
makes the market generally heterogeneous.

8. a) As entrepreneur explain in details how you can deal with this situation.
b) Is it necessary to understand the customers’ needs, tastes and preferences before
offering them a product or service? If yes or no, justify your position with at least 4
relevant facts.
Answer
a) The process of defining and subdividing a large homogenous market and subdividing
into clearly identifiable segments having similar needs, wants, demand characteristics.
Its objective is to design a marketing mix that precisely matches the expectations of
customers in the targeted segment.
 Geographic segmentation ; continent, Nations, states, Regions and cities
 Demographic segmentation; age, family size, gender, income, occupation, education,
religion, race, generation, social class, etc.
 Psychographic segmentation ; personality traits, lifestyle or values and
 Behavior segmentation; attitude towards the product.
b)
- When the business understands the needs of the customer, they will be to effectively
satisfy them.
- It creates the sustainability of the business since a stratified customer will come back
to buy and make mouth to mouth marketing for the business.
- The business ‘survival largely depends on the customers ‘satisfaction.
Question 5
You have been approached by a friend who wants to start a business. She would like you to
advise her on which legal form of business to choose. Advise her and give supportive reasons
to your advice.
Question 6

9. a. How would you define an entrepreneur?
Answer
An entrepreneur is someone who always searches for change, responds to it and
exploits it as an opportunity by using innovation as specific tool to exploit these
opportunities for different businesses or services
b. List and explain five attribute most of the successful entrepreneurs share
Answer
Creativity
Dedication
Determination
Flexibility
Leadership
Passion
Self-confidence
Smarts
c. - Explain the position of the government in regards to the entrepreneurship(7.5
marks)
Answer
Government point of view
o Employment Generation
o Entrepreneurs increase the national income
o Dispersal of economic power amongst the population

10. o Balanced regional development
o Nursery for entrepreneurship talent
o Reduce the harmful effect of monopoly
d. how an entrepreneur can contribute to the economic growth of the country.
Answer
o A new type of product in the market
o A new type of technology
o A new market
o A new source of supply of inputs
o A new organization
Question 7
a. Define Management and explain 5 functions of Management
Answer
Management is the activity of controlling and organizing activities and resources
to get certain things done. Management is concerned with organizing, planning,
coordinating, commanding and controlling the people, the resources and the
activities of a business.
Five function of management
i. Planning: managers plan for the business by setting aims and targets so as
to give the business a sense of directions
ii. Organizing: the manager organizes people and resources within the
business or organization to perform specific tasks
iii. Controlling: the manager measures and evaluate the work that other
workers do to make sure that it is done in the right way
iv. Coordinating: the manage coordinate different workers and different
department of the business so that they work in harmony
v. Commanding: managers give orders to other staff so that targets and
deadlines are met.
vi. Staffing: staffing is the process of identifying the need for the people to
work in the business recruiting them, training them and paying them for

11. the work done. It is the functions of the manager to ensure that the
business has the right number and quality of people who are well
motivated to do what is required of them.
vii. Budgeting: it is the function of the manager to plan for the budget of the
business so as to know what resources are required and where the
resources will be used
viii. Motivating: manager should inspire and encourage their workers by
showing appreciation for the work done, allowing them to participate in
decision making process paying their salaries regularly and giving them
incentives, bonuses and benefits.
b. Give the three advantages and disadvantages of sole proprietorship and company
Answer
Sole proprietorship
Advantages Disadvantages
simple Limited funds
Freedom Limited ability
Secrecy Limited life
Easy dissolution Unlimited liability
Company
Advantages Disadvantages
Limited liability Lack of secrecy
Perpetual existence Management mischief
Diffusion of risk Lack of personal interest
Expansion potential Legal restriction
c. With justification explain the type of business that is common in Rwanda ?
Answer
The most common and simplest form of business is a sole proprietorship. An
individual proprietor owns and manages the business and is responsible for all
transactions if necessary, he may take the help of his family members, relatives
and employs some employees. The owner is also responsible for all debts and

12. liabilities. A sole proprietor can own the business for any duration of time and
sell it when he or she sees fit. This is the simplest form of Legal business to start.
Question 8
a. What is marketing? (5 marks)
Answer
All activities intending to satisfy consumer needs by providing right product at
the right price, in the right place and time
b. Differentiate between market oriented company and selling oriented company and
give one advantages and disadvantages for each
Answer
1. Marketing orientation:
- Core = needs and want of target markets (customer needs)
- Coordinated marketing efforts
- Profit through customer satisfaction
Advantage of marketing orientation
Retention of customers
Disadvantage of marketing orientation
Susceptible to loss because of more marketing strategies
2. Selling orientation:
- Selling and promotion efforts
- “additional efforts are needed to sell”
- Profit through sales volume
Advantage of selling orientation
More profit in short time
Disadvantage of selling orientation

13. Loss of customer’s loyalty because of no opportunity for complaining
c. Explain which marketing strategy would you apply while introducing an existing
product or service to an existing market?
Answer
Market penetration strategies
• Increase market share
• Increase product share
– Increase frequency of use
– Increase quantity used
– New application
Question 9
Define in brief
a. income statement
The Income Statement is a financial statement showing the revenues earned by a
business, the expenses incurred in earning these revenues, and the resulting Net
Income or Loss.
b. cash flow statement
The Cash Flow Statement is a financial statement that accounts for the increase
or decrease in a company’s cash during a period by showing where the company
got cash and how it used it.
c. balance sheet (5 marks)
The Balance Sheet is a financial statement reporting the assets, liabilities, and
owner’s equity of a business on a specific date
d. break even analysis

14. The Breakeven Analysis is a technique for evaluating the relationship between a
firm’s fixed costs, variable costs, profits, and sales
The breakeven analysis tells the business owner how much sales must be
generated to cover both fixed and variable expenses
e. Business Plan
A business plan is any plan that works for a business to look ahead, allocate resources,
focus on key points, and prepare for problems and opportunities.
QUESTION 10
a. Mr. Michael wants to start a business. He has a capital of Rwf 1,000,000. He is wondering
which factors he should consider before choosing the legal form of his business. Advise him
accordingly.
Factors to consider when choosing a legal structure for the business:
• The government regulations
• Transferability and continuity of ownership interest
• Management control
• Profit and loss distributions
• Liability of business owner(s)
• Ease of establishing and terminating the business
• Tax treatments
QUESTION 11
a. The government of Rwanda is spending a part of its budget to encourage people to become
entrepreneurs. How is it relevant to the country?
• Employment Generation
• Entrepreneurs increase the national income
• Dispersal of economic power amongst the population
• Balanced regional development
• Nursery for entrepreneurship talent
• Reduce the harmful effect of monopoly
b. Provide the 5 benefits of a well structured business opportunity and 5 consequence of a
poorly structured business opportunity

15. Benefit of a well structured business opportunity
• Less costly
• Reduced Risk of failure
• Ready market
• High level of one’s potential for competence
• Better financing options
• Professional and less wasteful advertising and promotion
• Improved bargaining and purchasing power.
Consequences of a poorly structured Business Opportunity
 Mismanagement
 Lack of will power( No confidence)
 Lack of financial support
 Exclusivity clauses: The entrepreneur may be restricted to selling only the manufacturer’s
merchandise.
Parent-company bankruptcy
QUESTION 12
a. “Entrepreneurs are motivated primarily by money”. Do you agree with statement?
Substantiate your answer.
No, entrepreneur are not only motivated by money , entrepreneur is considered as
innovators who always search for creating something new and something different for
the purpose of creating wealth for the individual and adding value to the society, the
fundamental activity of an entrepreneur is the new venture creation by recognizing
opportunity and exploring it. So the aim of an entrepreneur is primary based on the
improvement of the current situation for a better situation for his own profit and that of
the society
i. While some people think that becoming an entrepreneur is a risky job and prefer to
work for others, other people prefer creating their businesses. What do you think
may be the motivation for those people who want to become entrepreneurs?
• It’s very exciting to start a business of your own.

16. • Owning your own business gives you a sense of freedom and power, which makes
you feel you are in charge of your own destiny.
• It provides the ability to be involved in the total operation of the business, from
concept to design and creation, from sales to business operations and customer
response.
• It presents the opportunity to determine your own income.
• Entrepreneurship offers a greater possibility of achieving significant financial
rewards than working for someone else.
• It gives an individual the opportunity to build equity, which can be kept, sold, or
passed on to the next generation.
• Entrepreneurship creates an opportunity for a person to make a contribution. Most
new entrepreneurs help the local economy. A few—through their innovations—
contribute to society as a whole.
ii. What could you advise them before starting a business?
Go through the checklist of questions to help you determine whether it would be advisable
to start your own business or not
• It’s important, to go into the business venture with your eyes wide open, as starting
and running a business is not for everyone and you need to be sure that you have what
it takes otherwise you could be in for a lot of problems and possible financial ruin.
• In addition, it’s very stressful moving into strange territory on your own and you have
to be able to handle pressure and uncertainty without allowing them to affect you
negatively.
QUESTION 13
a. What are the steps for the marketing strategy development?
1. Develop a goal
2. Set objectives
3. Select major market / segment
4. Set policy: courses of action
5. Assemble & implement
b. Define the term “environmental force”? list 5 environmental forces
Environment in which companies operate, Consists of: External, exogenous forces =
uncontrollable factors
1. Economic forces
2. Structural forces

17. 3. Political forces
4. Social forces
5. Technological forces
c. Differentiate between attractive industry and unattractive industry
Attractive industry Unattractive industry
High entry barriers Low entry barriers
Suppliers and buyers have weak position Suppliers and customers have strong position
Few threats from substitute products Strong threats from substitute products
Moderate rivalry among competitors Intense rivalry among competitors
.QUESTION 14
a. Why is it important to choose a legal form for your enterprises?
Legal form of an enterprise is necessary for various reasons. In case the entrepreneur
wishes to raise capital by loan, obvious the lending institution such as the bank or even a
private money lender would like to know the ownership form of an enterprise.
b. i. What do you understand by dissolution of a firm?
Dissolution of firm refers to winding up the business. In case of dissolution of partnership,
the business of the firm does not come to an end but there is a new agreement between
the remaining partners. But in case of dissolution of firm, the business of the firm is closed
up
iii. Explain four ways in which a firm may be dissolve?
Dissolution by agreement: The partnership firm may be dissolved in accordance with a
contract already made between the partners.
Compulsory dissolution: For example, by the happening of any such event that makes the
business unlawful.
Dissolution due to contingencies: for example; due to expiry of a partnership period, death
of a partner etc.
Dissolution by court: For example, in case of any of the partner become of unsound mind.