Business Economics and Financial Analysis Course File: Deshmukhi, Hyderabad
Business Economics and Financial Analysis Course File: Deshmukhi, Hyderabad
Course File
OBJECTIVE QUESTIONS
1. 1. That portion of the capital which is invested in acquiring long term assets is
a) Fixed capital b) Working Capital c) Both d) None
2. The circulating capital is also called
a) Fixed capital b) Working Capital c) Tangible fixed capital d) None
3. Capital creates and enhances the level of
a) Capital gains b) Wealth Management c) Employment Opportunities d)
Current expenses
4. Sole Proprietorship has
a) Limited liability b) Unlimited Liability c) No liability d) None
5. Which of the following has subsidiaries?
a) Private company b) Public company c) Holding company d) None
6. Which partner can enjoy profits but bear no liability for losses
a) Active b) Nominal c) Sleeping d) Minor
7. The scarcity definition of economics was given by
a) Adam Smith b) Robbins c) Alfred Marshall d) None
8. The statements that contain the word ought to are
a) Prescriptive b) Normative c) Assertive d) Negative
9. Business Economics is related to
a) Traditional Economics b) Psychology c) Mathematics d) All of them
10. Persistent increase in the general price level is
a) Monetary Inflation b) Price Inflation c) Both d) None
LEARNING OBJECTIVE
SHORT QUESTIONS:
1. What is demand?
2. Explain supply function.
3. What is arc elasticity of demand?
4. What is the significance of elasticity of demand?
5. What is opinion poll method of demand forecasting?
6. What are the determinants of demand?
7. What are Giffen goods?
8. What is time series analysis?
9. What is the difference between change in demand and change in quantity demanded?
10. What are the determinants of supply?
ESSAY QUESTIONS
OBJECTIVE QUESTIONS
Unit – III
LEARNING OBJECTIVE
1. What is production?
2. What is opportunity cost?
3. What is sealed bid pricing?
4. What is break-even point?
5. What are fixed factors?
6. What is monopoly?
7. What is variable cost?
8. What is product life cycle?
9. What is the difference between price and cost?
10. What is economies of scale?
ESSAY QUESTIONS
6. A firm has a fixed cost of RS. 10000 and selling price/u nit is Rs5 and variable cost is Rs
3. Determine BEP in terms of Volume and Sales value.
7. What is an isoquant? What are the properties of an isoquant?
8. What are various stages in Law of return to scale?
9. Discuss the various types of costs.
10. Compare and contrast between perfect competition and monopolistic competition.
OBJECTIVE QUESTIONS
1. 1 Based on number of sellers, imperfect markets are categorized as
a) Monospony b) Duospony c) Oligospony d) Monopolistic
2. For equilibrium under perfect competition, MC curve should cut MR curve
a) Straight line b) From above c) From below d) Parabola
3. A monopolist can either control the price or _______________ but not both
a) Cost b)Output c) Input d) Profit
4. Contribution – Fixed cost is
a) Profit b) Loss c) Contribution d) None
5. Which of the following is a technique for profit planning and control?
a) Break-even analysis b) Profit theory c) Cost theory d) Firm theory
6. Isoquants are also called
a) Isoproduct curves b) isocost curves c) price indifference curve d) indifference
curves
7. Production function is not a factor of
a) Land b) Labour c) Cost of capital d) Organisation
8. Costs that cannot be recovered back are called
a) Opportunity cost b) Sunk cost c) Actual Cost d) Shut down cost
9. The pricing strategy for introduction of new product
a) Market Skimming b) Market Penetration c) Both d) None
10. Club membership is an example of
a) Incremental pricing b) Skimming pricing c) Two-part pricing d) Going rate pricing
11. The difference between the break even sales and the actual sales is called
_______________________
12. LAC is a flat ______________ shaped curve.
13. Telephone bill is an example of __________________
14. The LAC curve is _______________________ to all the SACs
15. The fixed cost curve is _____________ line.
16. In case of law of increasing returns, ________________________ increases at an increasing
rate.
17. The ratio of input to output is called ________________
18. ______________________the rate at which one input factor is substituted with the other to
attain the given level of output.
19. ______________________ refers to the curve the represents the combination of inputs that
with cost the firm the same amount of money.
20. ____________________ refers to the cost disadvantages which the firm has because of large
scale production.
Unit – IV
LEARNING OBJECTIVE
SHORT QUESTIONS:
1. What is a Journal?
2. Explain Ledger.
3. Enumerate the accounting concepts.
4. Enumerate the essentials of double entry book keeping.
5. What is Trial balance?
6. Enumerate the possible errors in trial balance.
7. What is bad debt?
8. What are the various types of account?
9. What do you understand by adjusted purchases?
10. Who are the users of accounting information?
ESSAY QUESTIONS
2. From the following balances extracted from the books of Amit Kumar you are
required to prepare final accounts
Dr (Rs) Cr (Rs)
Opening stock 60500
Purchases and sales 90,300 1,37,200
Returns 2,200 1,300
Drawings and capital 4,500 30,000
Land and buildings 38,000
Debtors and creditors 25,000 45,000
Cash on hand 13,500
Interest received 3,500
Postage expenses 12,000
Salaries 11,000
Bank overdraft 40,000
2,57,000 2,57,000
Adjusments:
4. What do you understand by final accounts? Explain the objectives and advantages of
preparing final accounts.
5. Illustrate the closing entries of a trading account and profit and loss account.
6. Explain all the accounting concepts and conventions.
7. What is trial balance? Why is it prepared? Is the agreement of trial balance, a conclusive
proof of the accuracy of accounts?
8. Explain the accounting process.
9. Record the following transactions in the suitable in a journal.
2004 Jan 1 Started business with cash 200000
2 Paid for purchase of machinery from M/s. Ram and Co. 3,0000
OBJECTIVE QUESTIONS
1. 1. Return outwards appearing in trial balance are deducted from:
a) Sales b) Purchases c) Return Inwards d) None
2. Good will is
a) Current asset b) fictitious asset c) tangible asset d) intangible
asset
3. Drawings are deducted from
a) Sales b) Purchases c) Return outwards d) Capital
4. Debit means
a) An increase in asset b) An increase in liability c) A decrease in asset d) An
increase in proprietors equity
5. Ledger is a book of
a) Original entry b) Secondary entry c) All cash transactions d) All non cash
transactions
6. Which of the following is a cash transaction?
a) Sold goods b) Sold goods to Ram c) Sold goods to Ram on credit d) None
7. Cash receipts are recorded
a) On the debit side b) On the credit side c) On both sides d) None
8. Closing stock appears in the
a) Trading account b) Profit and loss account c) Balance Sheet d) None
9. Purchases is a
a) Indirect expense b) Direct expense c) Both d) None
10. Prepaid expense is
a) Current asset b) Current Liability c) Fixed asset d) None
11. _______________ is also called return inwards.
12. Goods or money used for personal use is an example of ______________________
13. _______________________ concept assumes that business firms have perpetual life.
14. The difference between assets and liabilities is called_________________
15. The expenses yet to be paid are called _____________________
16. Building is an example of __________________
17. The rent paid in cash is credited to ___________________
18. _______________accounting concept says that assets=liabilities + Owner’s capital.
19. Purchase of stock for cash __________ the total assets.
20. Club fee collected is an example of ____________________
Unit – V
LEARNING OBJECTIVE
SHORT QUESTIONS:
1. What is a ratio?
2. Distinguish between gross profit and net profit
3. What are quick assets?
4. How does ratio analysis become less effective due to price level changes?
5. Who are the users of financial statements of a business unit?
6. Write short notes on ratios associated with working capital.
7. What does cash flow mean?
8. How can we ascertain the liquidity position of the firm?\
9. What are the objectives of financial analysis?
10. What are limitations of ratio analysis?
ESSAY QUESTIONS
Rs. Rs.
Debentures 1,40,000 Bank balance 30,000
Long term loans 70,000 Sundry Debtors 70,000
General reserve 40,000
Creditors 66,000
Bills payable 14,000
Share capital 1,20,000
2. Calculate Interest Coverage ratio from the following information.
Rs
Net profit after deducting interest and taxes 6,00,000
12% Debentures of the face value of 15,00,000
Amount provided towards taxation 1,20,000
3. Given the following information, compute a) asset turnover b) return on equity c) return on
assets d) net profit ratio and comment on the results:
2001 2002
4. Calculate a) Net sales to fixed assets b) Net sales to inventory c) Net Profit ratios from the
following information:
Net Sales 10,00,000
Inventory 2,20,000
8% debentures 6
Current liabilities 4
34 34
6. What is the difference between cash flow and funds flow statements?
7. What is the procedure of preparing funds flow statement?
8. The following is the balance sheet of A ltd as on 31-12-2000
Liabilities Amount Assets Amount
(2000 shares)
Preliminary 5000
expenses
290000 290000
12. From the following information relating to A Ltd., prepare Funds Flow Statement:
(Rs. ‘000)
Additional Information:
The company issued bonus shares for Rs. 50, 000 and for cash Rs. 50,000
KEY
UNIT - I
1)a 2)b 3)c 4)b 5)c 6) d 7) b 8)b 9)d 10)b 11) Transnational 12)
Interdisciplinary 13) Monetary inflation 14) GNP 15) Minor16) Private 17) LIC
18) Firm 19) Share 20) Low
UNIT - II
1)c 2)a 3)b 4)b 5)d 6) a 7) b 8)d 9)b 10)c 11) Barometric12) Correlation 13)
When historical data is available 14) Multiple Regression 15) One 16) Marginal
17) Industry 18) Convex 19) Indifference 20) Inelastic
UNIT - III
1)d 2)c 3)b 4)a 5)a6) a 7) c 8)b 9)c 10)c 11) Margin of safety 12) U shaped 13)
Fixed as well as variable 14) Tangential 15) Horizontal 16) Total Product 17)
Productivity 18) MRTS 19) Isocosts 20) Diseconomies of scale
UNIT - IV
1)b 2)d 3)d 4)a 5)b 6) a 7) a 8)c 9)b 10)a 11)Sales returns 12)Drawings
13)Going Concern 14)Capital 15)Outstanding 16)Fixed assets 17) Cash account
18)Dual aspect 19)Increases 20)Revenue account
UNIT - V
1)d 2)d 3)c 4)b 5)b 6) a 7) b 8)c 9)a 10)b 11)shareholders/investors 12)4:1
13)Net profits after interest and taxes/capital *100 14)Gross profit/Sales *100
15)Cost of goods sold/Avg inventory 16)Net Profits before interest and
taxes/Fixed Interest Charges 17)Market price per share/ earning per share
18)Nominal or face value of the share/market price of the share* dividend per
annum19)Operating expenses/Net sales * 100 20)DuPont Chart