Business Studies Form Two Mock Exam 2026 Solved Tunduru DC

BUSINESS STUDIES FORM TWO MOCK 01 EXAMINATION 2026 – Tunduru District Council

SECTION C (45 Marks)
Answer all questions in this section

Question 7 (15 Marks)

Entrepreneurs: Born or Made? (Five Theories of Entrepreneurship)

No.	Theory	Explanation
1	Innovation Theory	Associated with Joseph Schumpeter, it explains that entrepreneurs are innovators who introduce new ideas, products, or methods of production.
2	Risk-Bearing Theory	Linked to Richard Cantillon, it states that entrepreneurs take risks in business in order to earn profits.
3	Need for Achievement Theory	By David McClelland, it suggests entrepreneurs are driven by a strong desire to succeed and achieve goals.
4	Social Environment Theory	This theory explains that entrepreneurship is influenced by social, cultural, and environmental factors such as family background and education.
5	Economic Theory	It argues that entrepreneurship develops due to economic conditions such as availability of capital, market demand, and government policies.

Conclusion:
Entrepreneurs can be both born (natural traits like creativity) and made (through education, training, and experience).

Challenges Facing Sole Proprietors

No.	Challenge	Explanation
1	Limited capital	Sole proprietors often depend on personal savings, which may be insufficient for business growth.
2	Unlimited liability	The owner is personally responsible for all business debts and losses.
3	Lack of managerial skills	One person manages everything, which can lead to poor decision-making.
4	Limited continuity	The business may end if the owner dies or becomes unable to operate.
5	Limited expansion	Growth is restricted due to lack of funds and resources.

Type of Funding and Its Advantages/Disadvantages

Type of Funding:
This is Gift Capital (Non-repayable funding) since the money is given freely without expectation of repayment.

No.	Advantage	Explanation
1	No repayment required	The business owner does not need to return the money.
2	No interest charged	Unlike loans, it does not increase financial burden.
3	Encourages business growth	Provides capital to expand operations easily.

No.	Disadvantage	Explanation
1	Unreliable source	Such funds are not always available.
2	Limited amount	Usually small and may not sustain long-term growth.
3	Lack of accountability	The owner may misuse funds since there is no obligation to repay.