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Business Arithmetic

CBSE · Class 12 · Entrepreneurship

NCERT Solutions for Business Arithmetic — CBSE Class 12 Entrepreneurship.

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An infographic explaining how 'Unit of Sale' is determined in businesses selling multiple products or services, using examples like a grocery store (customer as unit) and a restaurant (diner as unit).
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34 Questions Solved · 6 Sections

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Review Crossword Puzzle

Across-2Collective process in which operating units prepare their plans in conformity with corporate goals published by top management.Show solution
Answer: PARTICIPATIVE BUDGETING

In participative (or bottom-up) budgeting, each operating unit prepares its own budget in line with the corporate goals set by top management. It is a collective, collaborative process that ensures alignment between departmental plans and overall organisational objectives.

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Across-3Selling price per unit - cost price per unitShow solution
Answer: PROFIT (per unit)

The difference between the selling price per unit and the cost price per unit gives the profit per unit (also called unit margin or unit contribution at a basic level).
Profit per unit=Selling Price per unit−Cost Price per unit\text{Profit per unit} = \text{Selling Price per unit} - \text{Cost Price per unit}

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Across-5It takes place on intangible assetsShow solution
Answer: AMORTISATION

Amortisation is the process of gradually writing off the initial cost of an intangible asset (e.g., patents, trademarks, goodwill) over its useful life. It is the intangible-asset equivalent of depreciation (which applies to tangible assets).

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Across-6Gain generated on an investment relative to the amount of money invested.Show solution
Answer: ROI (Return on Investment)

ROI=Net Gain from InvestmentCost of Investment×100\text{ROI} = \frac{\text{Net Gain from Investment}}{\text{Cost of Investment}} \times 100

ROI measures the efficiency or profitability of an investment by expressing the gain as a percentage of the amount invested.

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Across-8The concept by which monetary value of an asset decreases over time due to use, wear and tear or obsolescenceShow solution
Answer: DEPRECIATION

Depreciation is the systematic reduction in the recorded cost of a tangible fixed asset over its useful life due to use, wear and tear, or obsolescence. It is a non-cash charge that reduces the book value of the asset each accounting period.

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Across-9The money needed to fund the normal, day to day operations of your businessShow solution
Answer: WORKING CAPITAL

Working capital is the funds required to meet the day-to-day operational expenses of a business.
Net Working Capital=Current Assets−Current Liabilities\text{Net Working Capital} = \text{Current Assets} - \text{Current Liabilities}

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Across-10Time between the initiation of a process and its completionShow solution
Answer: LEAD TIME

Lead time is the total elapsed time from the moment an order is placed (or a process is initiated) to the moment it is fulfilled or completed. It is a critical concept in inventory management and supply chain planning.

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Across-11The movement of money in and out of a business during a specific period of time.Show solution
Answer: CASH FLOW

Cash flow refers to the net movement of money into and out of a business over a defined period.
- Cash Inflow: money received (sales, loans, investments).
- Cash Outflow: money paid out (expenses, purchases, loan repayments).

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Across-12A party to whom money is owedShow solution
Answer: CREDITOR

A creditor is an individual, institution, or organisation to whom a business owes money. For example, a supplier who has provided goods on credit is a trade creditor of the business.

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Down-1A plan that shows how much one can spend against what they earn over a given timeShow solution
Answer: BUDGET

A budget is a formal financial plan that estimates expected income and expenditure over a specific future period. It acts as a benchmark, allowing a business to compare actual performance against planned targets and control spending.

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Down-4An estimate of future sales, often broken down into both units and currency.Show solution
Answer: SALES FORECAST

A sales forecast is a projection of expected sales revenue (and/or units) for a future period. It forms the foundation of the budgeting process because most other budgets (production, cash, etc.) are derived from it.

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Down-7Costs that vary depending on a company's production volumeShow solution
Answer: VARIABLE COSTS

Variable costs are expenses that change in direct proportion to the level of production or sales volume. Examples include raw materials, direct labour, and packaging costs.
Total Variable Cost=Variable Cost per unit×Number of units produced\text{Total Variable Cost} = \text{Variable Cost per unit} \times \text{Number of units produced}

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Let's Revise — Section A (Answers not exceeding 15 words)

A1aExplain the term SKU with a proper example.Show solution
Given: Term to be explained — SKU.

Answer:
SKU stands for Stock Keeping Unit — a unique code assigned to each distinct product for inventory tracking.
*Example:* A red T-shirt (size M) and a blue T-shirt (size M) are two different SKUs.

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A1bExplain the term Cash Flow with a proper example.Show solution
Answer:
Cash Flow is the movement of money into and out of a business over a period.
*Example:* A shop receiving ₹10,000 from sales and paying ₹4,000 as rent.

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A1cExplain the term Cash Inflow with a proper example.Show solution
Answer:
Cash Inflow is money received by the business.
*Example:* ₹50,000 received from a customer for goods sold.

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A1dExplain the term Cash Outflow with a proper example.Show solution
Answer:
Cash Outflow is money paid out by the business.
*Example:* ₹20,000 paid to a supplier for raw materials purchased.

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A1eExplain the term Re-order Point with a proper example.Show solution
Answer:
Re-order Point is the inventory level at which a new order must be placed.
*Example:* Reorder when stock falls to 200 units.

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A1fExplain the term Cash Flow Projection with a proper example.
A1gExplain the term Cash Conversion Cycle with a proper example.
A2Pareto's Law formed the basis for a technique. Name it.

Let's Revise — Section B (Answers not exceeding 30 words)

B1What is ABC analysis?
B2What is Pareto's Principle?
B3Differentiate between cash flow projection and cash flow statement.
B4What is financial management? What is the main objective of financial management?

Let's Revise — Section C (Answers not exceeding 75 words)

C1There are three key elements in the process of financial management. Explain them.
C2What are the key aspects of financial decision making?
C3What is a budget? What are the essentials of a budget?
C4Explain Inventory Control and state its objectives.

Let's Revise — Section D (Answers not exceeding 250 words)

D1What is a budgeting process?
D2There is a Budget to suit every business and its need. Elucidate.
D3Explain the two dominant forms of budgeting process.
D4What is working capital? What is the need for working capital?

Let's Revise — Section E: HOTS (High Order Thinking Skills)

E1Calculate working capital. Raja & Co. has the following items in its Balance sheet: Stock – ₹50,000; Trade creditors – ₹32,000; Debtors – ₹75,000; Cash – ₹1,00,000; Dividend payable – ₹50,000; Tax – ₹44,000; Short term loan – ₹61,000; Short term investments – ₹76,000. Calculate gross and net working capital.
E2Ramu is buying and selling ice-cream. Explain his working capital requirement.

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Frequently Asked Questions

What are the important topics in Business Arithmetic for CBSE Class 12 Entrepreneurship?
Key topics in Business Arithmetic include Business Arithmetic — Complete Chapter Overview, Business Arithmetic - Chapter Overview, Business Arithmetic – Chapter Overview Mind Map. These are the concepts CBSE Class 12 examiners draw on most — study them first, then practise related questions.
How to score full marks in Business Arithmetic — CBSE Class 12 Entrepreneurship?
Start by understanding all key concepts. Practise previous year questions from this chapter. Revise formulas and definitions regularly. Use flashcards for quick revision before the exam.
Where can I get free NCERT Solutions for Business Arithmetic Class 12 Entrepreneurship?
This page has free step-by-step NCERT Solutions for every exercise question in Business Arithmetic (CBSE Class 12 Entrepreneurship) — written the way examiners award marks: given, formula, working, answer.

Sources & Official References

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