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Business Economics and Financial Analysis Course File: Deshmukhi, Hyderabad

This document contains information about a business economics and financial analysis course for a B.Tech II year program. It includes unit objectives, sample questions, and learning objectives. The objectives cover topics like demand and supply, elasticity, demand forecasting techniques, costs, production functions, and market structures. The questions are a mix of short answer, essay, and multiple choice questions testing understanding of concepts in business economics.

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Deepthi Yadav
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0% found this document useful (0 votes)
134 views14 pages

Business Economics and Financial Analysis Course File: Deshmukhi, Hyderabad

This document contains information about a business economics and financial analysis course for a B.Tech II year program. It includes unit objectives, sample questions, and learning objectives. The objectives cover topics like demand and supply, elasticity, demand forecasting techniques, costs, production functions, and market structures. The questions are a mix of short answer, essay, and multiple choice questions testing understanding of concepts in business economics.

Uploaded by

Deepthi Yadav
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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BUSINESS ECONOMICS AND FINANCIAL ANALYSIS

Course File

B.Tech II yr – II Semester [Branch:EEE]

Department of Management Studies


V.I.T.S
(Affiliated to JNTU, Hyderabad)
Deshmukhi, Hyderabad.
UNIT-II

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

11. Company operates in more than one Country is called as _____________.


12. Business economics is ________________________ in nature.
13. The increase in the amount of currency in circulation is called
___________________
14. __________________is the money value of all final goods and services
produced within the domestic territory of a country during a year.
15. A __________________partner can be admitted for the benefit of the firm.
16. A __________________ company is prohibited from issue of prospectus.
17. One example of public corporation is _________________
18. The partners collectively are known as ________________
19. A unit of capital is called _______________
20. Fixed assets have ___________________ degree of liquidity.
Unit – II

LEARNING OBJECTIVE

The student must be able to:

 Understand the concept of demand and supply


 Concept of elasticity of demand
 Measurement of elasticity of demand
 Demand forecasting techniques

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

1. 1. Explain law of demand along with its assumptions and limitations.


2. What is price elasticity of demand? Explain the various cases of price elasticity.
3. What are the various quantitative techniques of demand forecasting?
4. What are the factors that affect the forecasting of demand?
5. What is supply? Discuss the Law of supply.
6. What are the steps in demand forecasting?
7. Explain in detail, the various statistical techniques for demand forecasting.
8. When does the demand curve move towards the right?
9. What are the reasons for downward sloping demand curve?
10. What is the significance of elasticity of demand in decision making?

OBJECTIVE QUESTIONS

1. 1. Total Utility is maximum when


a) Marginal utility is maximum b) marginal utility is minimum c) marginal utility is
zero d) None
2. The consumer is expected to behave
a) Rationally b) Emotionally c) Carefully d) Indifferently
3. Which of these are examples of substitutes
a) Tea and Sugar b) Tea and Coffee c) Shirt and Pant d) Car and Petrol
4. If the price rises, the demand
a) Rises b) Falls c) first falls and then rises d) First rises and then falls
5. If the income elasticity is positive and greater than one, it is a
a) Necessity b) Inferior good c) Normal good d) Superior good
6. In which case is the income elasticity of demand negative
a) Inferior good b) Luxury goods c) Medium goods d) Necessities
7. Which of the following does not hold good in case of indifference curve
a) Sloping downwards b) Sloping upwards c) Convex to the origin d) Constant
slope
8. Demand forecasting is not governed by
a) Forecasting level b) Degree of orientation c) Degree of competition
d) Market support
9. Forecasts in terms of total sales can be viewed as
a) Specific forecasts b) General forecasts c) Determined forecasts d) Leading
forecasts
10. Which of the following is long term trend?
a) Cyclic trend b) Seasonal trend c) Trend d) Erratic trend
11. _____________________ uses one set of data to predict another set.
12. _____________________describes the degree of association between two variables.
13. Judgemental approach is not useful when _________________
14. We use ___________________ when two variables influence each other.
15. In case of unitarily elasticity, ed is ______________
16. _______________________ is the utility that is derived by consuming an additional unit of
the product.
17. Group of firms carrying out similar activities is called ________________________
18. Indifference curve is ____________________ to the origin.
19. Which consumer theory uses ordinal measurement? ____________________
20. In case of habituated products, demand is ______________________

Unit – III

LEARNING OBJECTIVE

The student must be able to know:

 Long run and short run production function


 Various types of costs
 Long run and short run cost curves
 Competition based market structures
 Pricing strategies based on stages of product life cycle
 Break even analysis
SHORT QUESTIONS:

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

1. (a) What is production function? Explain the law of variable proportions.


2. What are the pricing strategies that are used at the various stages of product life cycle?
3. What are the features of perfect competition?
4. Why is average cost curve U shaped in the long run?
5. Calculate P/V ratio, BEP (value) and Margin of safety from the following data:
Year 2007 2008

Sales(units) 10000 15000

Profit 5000 6000

Fixed cost 20000

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

The student must be able to :

 To understand the accounting concepts & conventions


 To know the double entry system of accounting
 To understand the entire accounting cycle
 To be equipped in preparation of journal and ledger posting
 To understand the elements of financial statements
 Preparation of final accounts

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

1. Give a brief account on the important records of Accounting under Double


entry system and discuss briefly the scope of each.

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:

(a) Closing stock was valued at Rs.75,000


(b) Provide 5% reserve for bad and doubtful debts
(c) Provide depreciation @ 5% on land and buildings.
3. Explain the following adjustments and illustrate suitably with assumed
data.

(a) Closing stock

(b) outstanding expenses


(c) Prepaid Income

(d) Bad debts.

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

3 Paid insurance premium 200 0

5 Paid rent for the month of 5000

8 Paid cash for purchase of goods 3,000

10 Sold goods for cash 4,000

12 Drew cash for personal use 500

15 sold goods to Ram 5000

16 Purchased machinery from suresh 6000


10. Prepare a hypothetical profit and loss account.

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

The student must be able to know:


 Ratio as an analytical tool
 Concepts of liquidity, solvency & profit ability
 Types of liquidity ratio
 Types of activity ratio
 Types of solvency ratio
 Types of profitability ratio
 Limitations of ratio analysis
 Preparation of cash flow and funds flow statements

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

1. (a) From the following information, calculate [16]


i. Debt-Equity ratio ii. Current ratio

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

Net sales 86,000 71,000

Profits after taxes 12,000 11,000

Total assets 49,000 41,000

Shareholders’ equity 27,000 21,000

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

Fixed Assets 8,00,000

Inventory 2,20,000

Net Profits after taxes 69,840


5. From the following particulars, calculate the profitability ratios in relation to investment:
Balance sheet (in Rs. Lakhs)

Equity Share Capital 10 Good will 3

50,000 shares Fixed Assets 24

8% preference shares 6 Current assets 7

Reserves and Surplus 4

8% long term loans 4

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

Share capital 100000 Land and building 125000

(2000 shares)

Reserves and surplus 65000 Plant and furniture 75000

5%debentures 10000 Stock 50000

Creditors 18000 Debtors 10000

Bills payable 7000 Bills receivables 5000

Cash at bank 20000

Preliminary 5000
expenses

290000 290000

Sales for the year Rs.600000

Calculate a) current ratio b)debt -equity ratio c)proprietary ratio d)stock


turnover ratio e)quick ratio
9. From the following data calculate the following Current Ratio, quick ratio , net
profit ratio, gross profit ratio and fixed assets turnover ratio
Liabilities Amount Assets Amount
Capital 500000 Land and building 475000
Drawings 50000 Plant and machinery 100000
Net profit 125000 575000 Furniture and fittings 500000
Long term loan 500000 Stock 4000
Debentures 100000 Prepaid expenses 7500

Current liabilities Cash in hand 10000


Bank OD 10000 Cash at bank 7500
Bills payable 15000 Motor vehicle 100000
Outstanding Expenses 4000
Extra Info: Gross profit: Rs 89000 Sales :Rs 200000

10. What are the benefits of funds flow statement?


11. What are the three components by which cash enters and leaves a company through
which cash flow is determined?

12. From the following information relating to A Ltd., prepare Funds Flow Statement:

(Rs. ‘000)

2003 2004 2003 2004

Rs. Rs. Rs. Rs.

Share Capital 300 400 Cash 30 90

Reserve 100 50 Account Receivable 105 150

Retained Earnings 30 60 Inventory 150 195

Accounts Payable 45 135 Fixed Assets 190 210

475 645 475 645

Additional Information:

The company issued bonus shares for Rs. 50, 000 and for cash Rs. 50,000

Depriciation written off during the year Rs. 15,000

13. How do we determine the solvency position of the firm?


OBJECTIVE QUESTIONS

1. 1. Which would a business be most likely to use its solvency?


a) Gross profit ratio b) Debtors collection period c) Current ratio d) Debt-equity
ratio
2. Which of the following is useful to see if fixed assets are used efficiently in the business?
a) Gross profit ratio b) Debtors collection period c) Current ratio d)Asset
turnover ratio
3. A company’s return on investment indicates its
a) Solvency b) Stock turnover c) Profitability d) Debtor collection
4. If average collection period is more, it means
a) Better collection of receivables b) Poor collection of receivables c) Average collection of
receivables d) Satisfactory collection of receivables
5. Debt-equity ratio is a
a) Liquidity ratio b) Solvency ratio c) Profitability ratio d) None
6. Ratio of net profit before interest and tax to sales is a
a) Operating profit ratio b) Capital gearing c) Solvency ratio d) All
7. Long term solvency is indicated by
a) Current Ratio b) Debt/Equity ratio c) Net Profit Ratio d) None
8. Liquid ratio is also known as
a) Acid test ratio b) Quick assets ratio c) Both d) None
9. 100-Net profit ratio is equal to
a) Operating ratio b) Operating net profit ratio c) Gross profit ratio d) Current ratio
10. Amount from current assets is realised within
a) One month b) One year c) Two years d) Three years
11. Analysis of financial statements serves the purpose of ________________________
12. The satisfactory ratio between internal and external equity is ______________________
13. Return on capital employed is equal to ______________________________
14. Gross Profit ratio is equal to ______________________
15. Inventory turnover ratio is equal to _______________________
16. Interest coverage ratio is equal to____________________
17. Price/Earnings ratio is equal to _____________________________
18. Dividend yield is equal to ____________________
19. Operating ratio is equal to _______________________

20. The chart developed for computation of earning power is called


________________________

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

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