MAHARAJA COLLEGE OF ENGINEERING AND TECHNOLOGY

ENGINEERING ECONOMICS AND FINANCIAL ACCOUNTING

CLASS/SEM: FINAL YEAR/V11 SEM
TWO MARK QUESTIONS AND ANSWERS
UNIT I
INTRODUCTION
1. Defie M!!"e#i!$ E%&&'i%(
By combining the basic definition of the two terms Manager and
Economics you get the definition of managerial economics . Managerial
Economics is the study of directing resources in a way that it most efficiently achieves
the managerial goals.
Managerial Economics is also the application of the tools of economics
analysis in decision making in actual business situations.
). W*!+ i( 'e!+ ,- Mi%#& e%&&'i% !!$-(i( .
Micro economic analysis deals with the problems of an individual firm,
industry or consumer etc. It helps in dealing with issues which go on within the firm such
as putting the resources available with the firm to its best use, allocating resources within
various activities of the firm to its best use, allocating resources within various activities
of the firm and also deals with being technically and economically efficient.
/. W*!+ i( 'e!+ ,- 0#e(%#i1+i2e !11#&!%* .
rescriptive or normative approach tells !ow things ought to be done.
3. W*!+ i( 'e!+ ,- 4e(%#i1+i2e !11#&!%* .
"escriptive approach tells how things are done.
5. S%&1e &f M!!"e#i!$ E%&&'i%(:
#he following aspects constitute the scope of managerial economics$
%. &b'ectives of a business firm
(. "emand analysis and forecasting
). *ost analysis
+. roduction management
,. -upply analysis
.. ricing decisions, policies and practices
/. rofit management
0. *apital budgeting and investment decisions
1. "ecision theory under uncertainty
%2. *ompetition
6.Gi2e +*e O,7e%+i2e( &f ! ,8(ie(( fi#'
#he ob'ectives of a business firm may be varied. 3part from generating profits a
firm has many other ob'ectives like being a market leader , being a cost leader, achieving
superior efficiency, achieving superior 4uality, achieving superior customer
responsiveness etc.
9.W*!+ i( 'e!+ ,- S811$- A!$-(i(.
-upply analysis deals with the various aspects of supply of a commodity. *ertain
important aspects of supply analysis are supply schedule, curves and function, elasticity
of supply, law of supply and its limitations and factors influencing supply.
:.W*!+ i( 'e!+ ,- C!1i+!$ ;84"e+i" .
*apital budget is the planning of e5penditure on assets.
<.U(e &f E"iee#i" E%&&'i%(:
Engineering economics accomplishes several ob'ectives. It presents the aspects of
traditional economics that are relevant for business and engineering decision making in
real life.
1=.Defie L&"i(+i%(:
It is the movement of goods from one place to the other.
11.Defie I,&84 L&"i(+i%(:
It is the movement of raw materials to the factory premises.
1).Defie O8+,&84 $&"i(+i%(:
It is the movement of finished goods to wholesaler or retail outlets and to the final
consumers.
1/. Defie S+!+i(+i%(:
-tatistics provide the basis for empirical testing of theory. 6enerali7ations or
theory cannot be accepted for practice unless these theories are checked against the data
from the reality. #his way, theories become more practical and useful in real life business
situation.
13. Defie E%&&'i%( !4 4efie +*e 4i2i(i&( &f E%&&'i%(:
Economics has two divisions namely micro economics and macro economics.
Micro economics is the branch of economics where the unit of study is an individual or a
firm while macro economics is branch of economics where the unit of study is
aggregative in character and considers the entire economy.
15. Defie A%%&8+i":
3ccounting can be defined as the recording of financial operations of an
organi7ation. Managerial decisions on profits and sales etc. derive input largely from the
accounting statement of a firm.
16. Defie M!!"e#i!$ E%&&'i%( !4 M!+*e'!+i%(:
Many of the theories in mathematics will find use in economics. *oncepts such as
calculus, vectors, logarithms and e5ponentials, determinants and matri5, algebra etc are
some to name a few. Managerial economics is metrical in character. It estimates various
economic relationships prediction relevant economic 4uantities and uses them in decision
making and planning for the future. -o mathematics becomes an important tool in
managerial economics.
19. Defie O1e#!+i&( #e(e!#%*:
&perations research was developed as science during the -econd 8orld 8ar to
solve the comple5 operations problems of planning and resource allocation in defence
and in basic industries which specifically supplied military e4uipments. #hese theories
find high usage in various field of management to solve problems pertaining to logistics,
both inbound and outbound and also the movement of material within the factory
premises etc.
1:. Defie ! %&'1e+i+&#.
#he competitors of the firm are also likely to react or even pro9act to any decisions made
by the firm. *ompetitors always try to navigate the competitive advantage gained by the
firm. #hus managers will have to make wise investments in pro'ects that will be hard to
be imitated by the competition.
1<.Defie De%i(i& +*e&#- 84e# 8%e#+!i+-:
Most of the business decisions taken by the managers are done under
uncertainty. :ncertainties pertaining to demand, cost, price, profit, capital etc prevail
most of the time when decisions are made. #his makes the whole decision making
process difficult and comple5. #he tools used in economic analysis have been modified
and refined so as to take into account the uncertainty and thus help decisions making in
logical and scientific manner.
)=.Defie 0#&fi+ M!!"e'e+:
3ll business firms are motivated and committed to produce profits. rofits are one
of the tangible yardsticks to measure the performance of the firm and the managers
concerned. It also signifies the health of the firm. rofits are influenced by various factors
such as cost of production, revenues and other factors both internal and e5ternal to the
firm. rofits are hard to predict.
)1.Defie 0#i%i" De%i(i&(
3 firm;s profitability and success greatly depend on the pricing decisions and the
pricing policies of the firm. #he patroni7ation of the firm;s products by the customers, the
competition faced by the product along with the profits of the firm, largely depends on
the price of the product. ricing also depends on the environment in which the firm
operates, competitions, customers etc.
)).Defie 0#&48%+i& M!!"e'e+:
8hen a manager organi7es and plans the firm;s production functions i.e. when he
tries to convert the raw materials to finished product, he faces a number of economic
problems. #he study of <production function; describes the input output relationship.
)/.Defie C&(+ A!$-(i(:
&ne way to earn higher profits is by controlling the cost involved in producing the
product. -tudy of cost is necessary for making efficient and effective managerial
decisions. If a detailed cost analysis and estimation is done, the firm can move upon
effective profit management and sound pricing practices.
)3.W*!+ !#e +*e M!%#& e%&&'i% C&4i+i&(:
=a> #he economy in which firms operate is predominantly a free enterprise
economy.
=b> #he present day economy is undergoing rapid technological and
economic changes and,
=c> #he government intervening in the economic affairs has increased in
the recent times and is likely to go up further.
)5. W*!+ !#e +*e C&''& 1&i+( i M!!"e#i!$ E%&&'i%( .
%.Managerial economics deals with the decision making by managers, e5ecutives
and engineers of economic nature.
(.Managerial economics is goal oriented.
).Managerial Economics is both conceptual and metrical.
+.Managerial economics is pragmatic.
UNIT II
DEMAND AND SU00LY ANALYSIS
1.Defie De'!4.
"emand indicates the 4uantities of products =goods service> which the firm is
willing and financially able to purchase at various prices, holding other factors constant.
). Defie De+e#'i!+( &f De'!4:
3n individual;s demand for a commodity depends on his desire and capability to
purchase it. 3part from the desire to purchase, there are many other factors which
influence the purchase of a product =demand>. #hese are known as demand determinants.
/. W*!+ i( 'e!+ ,- T!(+e( !4 1#efe#e%e( &f C&(8'e#(:
#he change of tastes and preferences of consumers in favor of a commodity will
result in a greater demand for the commodity. #he opposite also holds good i.e. if the
tastes and preferences of consumer change against the commodity, the demand will
suffer.
3. W*!+ !#e +*e +>& ?i4( &f C&(8'e#( e@1e%+!+i&(.
*onsumers have two kind of e5pectations one pertains to their future income and
the second is related to the future prices of the goods and its related goods.
5. Defie A42e#+i(i"
3dvertisements provide information about the presence of 4uality products in the
market and induces customer;s to buy more. It also promotes the latest preferences of the
general public to masses.
6. Defie +*e L!> &f De'!4:
#he relation of price to 4uantity demanded ? sales is known as the law of
demand. @aw of demand states that the higher the price is the lower the demand is and
vice versa, holding other factors as constant.
9. Defie +*e 1#i%e A8!+i+- #e$!+i&.
#his price 4uantity relation can be e5pressed as demand being a function of price
"Af=p>.
:. W*!+ Hi"*$i"*+( &f +*e $!> &f 4e'!4:
%. #he relationship between price and 4uantity demanded is inverse.
(. rice is the independent variable and demand the dependent variable.
). @aw of demand assumes that e5cept for price and demand, other
factors remain constant.
<. W*!+ i( De'!4 S*if+: BC*!"e i 4e'!4C
Bactors shift the demand for a particular product either on the right side of
the demand curve or to the left side of the demand curve based on the changes in price.
#hese factors, other than the price of a good that influence demand are known as demand
shifters. #he shift in the demand either to the left or right is called the demand shift.
1=. W*!+ !#e +*e E@%e1+i&( +& $!> &f 4e'!4:
%. In share markets on would have noticed that the rise in price of the
shares increases, the sales of the shares while decrease in the price of
the shares results in decrease of sale of the shares.
(. -ome goods which act as status symbol and have a snob appeal fall
under this category. !ere when the price of the product rises then the
appeal of the product also rises and thus the demand. -ome e5ample
are diamonds and anti4ues.
). Binally, ignorance on the part of the consumer may cause the
consumer to buy at a higher price, especially when the rise in price is
taken to mean an improvement in 4uality and a reduction in price as
deterioration in 4uality.
11.Defie I4i2i48!$ 4e'!4 :
#he 4uantity of a product demanded by an individual purchaser at a given price is
known as individual demand.
1).Defie M!#?e+ 4e'!4 :
#he total 4uantity demanded by all the purchasers together is known as the market
demand.
1/. W*!+ !#e +*e +-1e( &f De'!4 f8%+i&
%. *onsumption function
(. roduct consumption function
). "ifferences in regional incomes
4. Income expectation and demand
13. W*!+ !#e +*e C*!#!%+e#i(+i%( &f 4e'!4 f8%+i& .
%. #he long run relationship between consumption and income is some
what stable, and e5penditure on consumption is usually about 0, to
12C of the income.
(. #he consumption function is highly unstable in short runs and the
relationship between income and consumption cannot be predicted by
any mathematical formula.
). "uring the periods of economic prosperity, there is an absolute
increase in the e5penditure on consumption, but decrease as a
percentage of income during periods of depression, the consumption
declines absolutely but the e5penditure on the consumption increases
as a percentage of income.
+. In the periods of economic recovery, the rate of increase in
consumption is higher than the rate of the decline in consumption in
times of recession.
15. Defie 0#&48%+ %&(8'1+i& f8%+i&:
#his function can be defined as the relationship between the total income
of the consumer and sales of particular products. It means that when there is a change in
income there is a change in the demand for particular products.
16. Defie I%&'e e@1e%+!+i&( !4 De'!4:
E5pectations are related to people;s estimates of the level and durability of
the future economic conditions. #he demand for many consumer durables =household
appliances like #D, 8ashing machine, etc> is often sensitive to general e5pectations
regarding income level.
19. W*!+ !#e +*e fe!+8#e( &f !42e#+i(i" 4e'!4 #e$!+i&(*i1 .
%. Even when there is no advertising effort done, there will be a certain
amount of sales possible for a particular product by virtue of its
presence in the market.
(. #here is a direct relationship between advertising and sales. #hus
when there is an increased spending on advertisements. It will bring in
more sales.
). Increase in advertisements will lead to more than proportionate
increase in sales only to a point. 3fter that any increase in
advertisement will have only less than proportionate effect on sales.
1:. Defie E$!(+i%i+- &f De'!4:
Elasticity of demand is defined as <the percentage change in 4uantity demanded
caused by one percent change in the demand determinant under consideration, while
other determinants are held constant;.
1<. Defie 4e'!4 4e+e#'i!+
It is the degree of change in demand to the degree of change in any of the demand
determinants.
)=.W*!+ !#e +*e V!#i&8( E$!(+i%i+ie( .
1. rice elasticity of demand
(. Income elasticity of demand
). *ross elasticity of demand
+. romotional elasticity
,. E5portations elasticity of demand
)1. Defie 0#i%e E$!(+i%i+- &f De'!4
rice elasticity of demand can be defined as the degree of responsiveness
of 4uantity demanded to a change in price.
)). W*!+ !#e +*e T-1e( &f 1#i%e e$!(+i%i+-:
%. erfectly elastic demand
(. 3bsolutely inclastic demand or perfectly inelastic demand
). :nit elasticity of demand
+. Eelatively elastic demand
,. Eelatively inelastic demand
)/.Defie A,(&$8+e$- ie$!(+i% 4e'!4 &# 1e#fe%+$- ie$!(+i% 4e'!4 Be1DC:
3bsolutely inelastic demand is where a change in price howsoever large, causes
no change in the 4uantity demanded of a product. !ere, the shape of the demand curve is
vertical.
)3.Defie Re$!+i2e$- e$!(+i% 4e'!4 Be1E1C:
It is where a reduction in price leads to more than proportionate change in
demand. !ere the shape of the demand curve in flat.
)5.W*!+ !#e +*eF!%+&#( 4e+e#'ii" 1#i%e e$!(+i%i+- &f De'!4 .
#he elasticity of demand depends on the following factors namely
%. Fature of the product
(. E5tent of usage
). 3vailability of substitutes
+. Income level of people
,. roportion of the income spent of the product
.. :rgency of demand and
/. "urability of a product.
UNIT III
1. S!- (&'e &f +*e '!i %&(+ %&%e1+(.
%> 3ctual costs and opportunity costs
(> Incremental costs and sunk costs
)> E5plicit costs and implicit costs
+> ast costs and future costs
,> 3ccounting costs and economic costs
.> "irect cost and indirect cost
/> rivate costs and social costs
0> *ontrollable costs and non controllable costs
1> Eeplacement costs and original costs
%2> -hutdown costs and abandonment costs
%%> :rgent costs and postponable costs
%(> Bussiness costs and full sosts
%)> Bi5ed costs and variable costs
%+> -hort run and long run costs
%,> Incremental costs and marginal costs
). W*!+ !#e !%+8!$ %&(+( !4 &11&#+8i+- %&(+( .
3ctual costs which a firm incurs for producing or ac4uiring a product or a service.
3s e5ample for this is the cost on raw materials, labor, rent, interest.
/. W*!+ !#e i%#e'e+!$ %&(+( !4 (8? %&(+( .
Incremental cost is the additional cost due to change in the level of nature or
business activity. -unk costs are the costs that are not altered by a change in
4uantity produced and cannot be recovered.
3. W*!+ !#e E@1$i%i+ %&(+( !4 i'1$i%i+ %&(+( .
E5plicit or paid out costs are those e5penses which are actually paid by the firm.
Implicit costs are the theoretical costs in the sense that they go unrecogni7ed by
the accounting system.
5. W*!+ !#e 1!(+ %&(+( !4 f8+8#e %&(+( .
ast costs are the actual costs incurred in the past are generally contained in the
financial accounts. Buture costs are costs that are e5pected to occur in some future
period or periods.
6. W*!+ !#e !%%&8+i" %&(+( !4 e%&&'i% %&(+( .
3ccounting costs are the actual outlay costs. Economic cost relate to the future,
9. W*!+ i( 4i#e%+ !4 i4i#e%+ %&(+ .
"irect cost are traceable cost or assignable cost are the ones that have direct
relationship with a unit of operation like a product, a process or a product, or a
department of the firm. &n the otherhand, indirect costs or non traceable costs or
common or non assignable costs are the costs whose course cannot be easily and
definitely traced to the plant.
:. W*!+ !#e 1#i2!+e %&(+( !4 (&%i!$ %&(+( .
rivate costs are those which are actually incurred or provided for the business
activity by an individual or the business firm. -ocial costs on the otherhand are
the total costs to the society on account of production of a good.
<. W*!+ !#e %&+#&$$!,$e !4 & %&+#&$$!,$e %&(+( .
*ontrollable costs are those which are capable of being controlled or regulated by
the managers ant A d it can be used to assess the managerial efficiency in
controlling the cost in his department. Fon controllable costs are those which
cannot be sub'ected to administrative controls and supervision.
1=. W*!+ !#e #e1$!%e'e+ %&(+( !4 &#i"i!$ %&(+( .
&riginal costs or the historical costs are the costs paid for assets such as land,
building, cost of plant, e4uipment and materials. Eeplacement costs are the costs
that the firm incurs if it wants to replace or ac4uire the same assets now.
11. W*!+ i( (*8+ 4&> %&(+ !4 !,!4&'e+ %&(+ .
-hutdown costs are costs in which the firm incurs if it temporarily stop its
operation. 3bandonment costs are the costs of retiring altogether a fi5ed asset
from use.
16C>*!+ !#e i%#e'e+!$ %&(+ !4 '!#"i!$ %&(+.
Incremental cost is important when dealing with decisions where discrete
alternatives are to be compared.marginal cost deals with unity unit output.
19C>*!+ !#e +*e 4e+e#'i!+( &f %&(+.
%> level of output
(> price of inputs.
)> si7e of plant
+> output stability
,> production lot si7e
.>level of capability utili7ation
/> technology
0> learning effect
1> breadth of product range.
%2> geographical location
1:C >*!+ !#e +*e +>& !(1e%+( i %&(+ &8+18+ #e$!+i&(*i1(.
%> cost output relationship in short run.
(>cost output relationship in long run.
1<C >*!+ !#e +*e +e#'( i2&$2e4 i %&(+ &8+18+ #e$!+i&(*i1.
%> 3verage fi5ed cost.
(> 3verage variable cost.
)> 3verage total cost.
)=C >*!+ i( $e2e$ &f %!1!%i+- 8+i$iF!+i&.
#he higher the capacity utili7ation fi5ed cost per unit of output in bound to be low.
)1C >*!+ i( &8+18+ (+!,i$i+-.
-tability of output leads to savings in various kinds of hidden cost interruption and
learning.
))C>*!+ i( (iFe &f 1$!+(.
roduction costs are usually lower in bigger plants than smaller plants.
)/C>*!+ i( %&(+.
*ost is the money spent on producing and selling a product to the customers.the cost
of a product starts from the raw materials through production costs till selling costs
include the cost in maintaining outlets.
)3C>*!+ i( +*e (i"ifi%!%e &f %&(+ i '!!"e#i!$ 4e%i(i& '!?i".
-tudy of costs is essential for making a choice from among the competing
production plans.production decisions are not possible without their respective cost
considerations.
)5C>*!+ i( 1#i%e &f i18+.
If the price of the raw materials labor,power increases then naturally the cost of
production goes up.this cost of productions varies directly with the prices of inputs.
UNITGIV
1C >*!+ !#e +*e +>& f!%+&#( i 1#i%i" (+#!+e"ie(.
%> e5ternal factors
(> internal factors
)C>*!+ !#e +*e e@+e#!$ f!%+&#( i 1#i%i" (+#!+e"ie(.
i. #he competition in the market
ii. #he elasticity of supply and demand
iii. #rends of the market
iv. purchasing power of buyers.
v. government policies towards prices.
/C>*!+ !#e +*e +>& f!%+&#( i 1#i%i" (+#!+e"ie(.
%> #he costs
(> Management policy towards the gross margin and the sales turnover
3C>*!+ !#e +*e 4e+e#'i!+(.
%>ob'ectives of business
(>competition
)>product and promotional strategies
+>Fature of price sensitivity
,>influrnce of middle men
.>Eoutinisation of pricing
/>6overnment regulation
5CW*!+ i( &,7e%+i2e( &f ,8(ie((.
#he fundamental ob'ective of a firm is to survive in the business and then thrive.#he
pricing strategy adopted by a firm is very much by these factors.
6C>*!+ i( %&'1e+i+i& i 1#i%i" (+#!+e"-.
#o come out with a pricing policy that will be advantages to the firm,managers re4uire
a perfect understanding of the competitive environment in which the firm is placed.
9C>*!+ !#e 1#&48%+ !4 1#&'&+i&!$ (+#!+e"ie(.
i. product itself
ii. pricing
iii. promotion activities
iv. distribution of products through the channel to the consumer.
:C>*!+ i( !+8#e &f 1#i%e (e(i+i2i+-.
8e know that many factors contribute to the increase of price sensitivity,but
managers should not ignore the factors that minimi7e price sensitivity .when designing
pricing strategies.
<C>*!+ i( if$8e%e &f 'i44$e'e.
Middlemen are the ones who stock the finished product of the manufacturer to sell it to
the customers.these are also called the channel for distribution.
1=C W*!+ i( #&8+iiF!+i& &f 1#i%e.
#his strategy of pricing relies on the tried and trusted pricing strategies which the
organi7ation has followed all along. #his pricing practice is often routini7ed but the
e5tend varies from company to company and from product to product.
11C W*!+ i( +*e "&2e#'e+ #e"8$!+i& i 1#i%i".
Inorder to safeguard the interests of the public the government acts on their behalf
to prevent the abuse of the monopolistic power and collusion among business.
1)C S!- (&'e &f +*e &,7e%+i2e( &f +*e 1#i%i" 1&$i%-.
i. profit ma5imi7ation.
ii. long term welfare of the firm.
iii. facing competition.
iv. fle5ibility to economic changes.
v. satisfying rate of returns.
1/C W*!+ !#e +*e %&(+ &#ie+e4 1#i%i" 'e+*&4.
i. cost plus pricing or full cost pricing.
ii.marginal cost pricing or incremental or direct cost pricing.
iii.target pricing or rate pricing.
iv. programme pricing.
13C W*!+ !#e +*e %&'1e+i+i& &#ie+e4 1#i%i" 'e+*&4.
i.going rate pricing.
ii.loss reader pricing.
iii.customery pricing.
iv.price leadership pricing.
v.trade association pricing.
vi.cyclical pricing.
vii.imitative pricing.
viii.turnover pricing.
15C W*!+ !#e +*e 1#!i(i" ,!(e4 'e+*&4(.
i.administered pricing.
ii.dual pricing.
iii.price discrimination or differential pricing.
16C W*!+ !#e %&(+ &#ie+e4 1#i%i" 'e+*&4(.
i> cost plus.
ii> marginal cost pricing.
iii> target pricing.
19C W*!+ i( "&i" #!+e 1#i%i" 'e+*&4.
In going rate pricing the emphasis is on the market situation unlike the full cost
pricing where the emphasis was on costs.
1:C W*!+ i( $e!4e#(*i1 1#i%i" 'e+*&4.
#he pricing strategy is widely used in retailing buiness. Because the names
has the word loss in it this policy may be confused with the pricing which results in
losses.
1<C W*!+ i( %8(+&'!#- 1#i%i" 'e+*&4.
In case of some products their prices get more or less. #his does not happen
due to deliberate action on the seller;s part but it happens as the results of the product
prevailing in the market for a long period of time.
)=C W*!+ i( 1#i%e $e!4e#(*i1 'e+*&4.
In any industry, out of all the firms operating industry, atleast one firm
will have its cost of production lower than all other firms.
)1C W*!+ i( +#!4e !((&%i!+i& 1#i%i" 'e+*&4.
#he kind of pricing arises out of an unsaid understanding agreement
between the firms operating in the market.
))C W*!+ i( +*e %-%$i" 1#i%i" 'e+*&4.
#he pricing method which is done to capitali7e on the cycles of the season
in nature and the cycle in the economy are known as cyclical pricing.
)/C W*!+ i( i'i+!+i2e 1#i%i" 'e+*&4.
It is very similar to the loss leader pricing method. #his pricing policy is
often used in retail business.
)3C W*!+ i( +8#&2e# 1#i%i" 'e+*&4.
#urnover is the word which denotes the sales of the product. #he higher
the turnover means higher the sales.
)5C W*!+ i( 48!$ 1#i%i" 'e+*&4.
:sually the firms which produce essential commodities have part of
their product under administrating pricing and part of the product is solid in the free
market.
)6C W*!+ i( 1#i%e.
rice is the source of revenue for the firm and it decides the health of the firm.the
customer acceptance or re'ection of a product is most of the time predominantly
influenced by price.
)9C W*!+ !#e +*e e@+e#!$ f!%+&#( if$8e%i" +*e 1#H%i(i" 4e%i(i&.
i.the ccompetition in the market.
ii.the elasticity of supply and demand.
iii.trends of the market.
iv.purchasing power of buyers.
v.government policies towards prices.
:FI#9D
1C W*!+ i( ,!$!%e4 (*ee+.
#he balanced sheet provides the financial position of a company at any given
point of time.
)C S!- (&'e &f +*e i'1&#+!+ fi!%i!$ (+!+e'e+(.
i.profit and loss account.
ii.balance sheet.
iv.fund flow statement.
/C W*!+ !#e +*e %&+e+( &f ! ,!$!%e (*ee+.
i.assets
ii.liabilities.
3C S!- (&'e &f +*e +-1e( &f !((e+(.
i.fi5ed assets.
ii.investments.
iii.current assets.
iv.loans and advances.
v.miscallaneous e5penditure
5C W*!+ i( fi@e4 !((e+(.
#heir life period is very long, these are purchased for carrying out the operation in
a company. :sing this the company can generating revenue.
6C W*!+ i( i2e(+'e+.
#he long term and short term financial securities owned by a company comes
under this category. !ere lomg term investments means buying shares of the other
companies.
9C W*!+ i( %8##e+ !((e+(.
3ny asset that can be converted into cash within one year of time is called as
current asset. #hey would be converted into cash at the end of the operating cycle of a
firm.
:C W*!+ !#e +*e i+e'( %&'e 84e# +*i( %8##e+ !((e+(.
i.cash.
ii.debtors.
iii.inventories.
<C W*!+ i( $&!( !4 !42!%e(.
It is the amont that a company loans to its employees, advances given to supplies,
government contractors and other agencies it is also include prepaid e5penses.
1=C W*!+ !#e +*e +-1e( &f $i!,i$i+ie(.
i.share capital.
ii.resreves and surpluses.
iii.secured loans.
iv.unsecured loans.
v.current liabilities.
11C W*!+ i( 'e!+ ,- (*!#e %!1i+!$.
It includes both e4uity share capital and preference share capital. E4uity share
holders are the owners of a company they take risk and their dividend is not fi5ed but is
case of preference share capital the dividend rate is fi5ed.
1)C W*!+ i( 'e!+ ,- Re(e#2e( !4 S8#1$8(e(.
It is nothing but the profit that is retained by accompany not by not paying it as
dividend to the shareholders.
1/C W*!+ !#e +*e +-1e( &f #e(e#2e( .
i.revenue reserve.
ii.caapital reserve.
13C W*!+ i( 'e!+ ,- (e%8#e4 $&!(.
@oan amount borrowed by the firm by pledging assets =ie> securities are provided
for these loans.
15C W*!+ i( 'e!+ ,- 8(e%8#e4 $&!(.
In this case nosecurity is provided e5amples are fi5ed deposits, loans and
advances.
16C W*!+ i( 'e!+ ,- %8##e+ $i!,i$i+ie(.
#his consists of amount that is to the suppliers when goods are purchased on a
credit basis, advance payments received accured e5penses, provisions for ta5.
19C W*!+ i( 'e!+ ,- i%&'e (+!+e'e+.
#he companies act does not any particular way in which the profit and loss
account or the income statement has to be prepared. #his statement reflects the
performance of a company over a period of time.
1:C W*& !#e !$$ +*e 8(e#( &f fi!%i!$ (+!+e'e+.
i.management.
ii.shareholders, investors, anlyst.
iii.lenders
iv.suppliers.
v.customers.
vi.employees.
vii.government and regularity agencies.
viii.others
1<C W*!+ i( 'e!+ ,- %!(* f$&> (+!+e'e+.
3 firm would enter into trouble if it spends more cash than it is able to generate.
#he firm should generate ade4uate capital for it survival.
)=C H&> +*e %!(* f$&> &f ! ,8(ie(( %! ,e %$!((ifie4.
a. operating activities
b. investing activities
c. financing activities
)1C>*!+ i( 'e!+ ,- #!+i& !!$-(i(.
It is one of the powerful tool for financial statement analysis. Eatio is nothing but
the relationship between two or more items.
))C W*!+ !#e +*e 4iffe#e+ >!-( &f %!##-i" &8+ !!$-(i(.
a. past ratio
b. competitors ratio
c. industrial ratio
d. pro'ected ratio
)/C W*!+ i( 'e!+ ,- 1!(+ #!+i&.
#he current financial years ratios can be compared with the previous years ratio to
find whether the financial position has improved over the years or not.
)3C W*!+ i( 'e!+ ,- %&'1e+i+&#( #!+i&.
#he ratio of a company can be compared with the ratio of the competitors and
with the market leader.
)5C W*!+ i( 'e!+ ,- i48(+#- #!+i&.
#he ratios of a firm can be compared with the ratios of the industry to which the
particular firm belongs to.
3E# G B
%. E5plain the ob'ectives of the firm and analy7e different theories governing the same.
(.8rite short notes on programmed and non9programmed decisions.
).!ow can you make decision process more effectiveH
+. Enumerate the nature of Managerial Economics.
,. In %111, the demand for electronic gadgets was %2 million per annum and the price
was Es. (22 each. In (222, the price rose to Es. +22 =because of latest technology>, the
demand fell to 0.million. *alculate 3rc Edp. !ow do you interpret itH =Edp G rice
Elasticity of "emand>
.. "iscuss the significance of Elasticity of "emand.
/. E5plain and Enumerate the factors determining Elasticity of -upply.
0. E5plain how supply and demand determine the e4uilibrium price.
1. E5plain the concept of Eeturns on investments with appropriate e5amples.
%2. "iscuss the economies of scale that can accrue to a firm.
%%. Enumerate the features of short run average cost curve and long range average cost
curve.
%(. E5plain any four methods of pricing based on -trategy.
%). Fame the five pricing strategies in times of stiff price competition.
%+ 8hy is pricing significant in the conte5t of businessH E5plain.
%,. "iscuss any three pricing methods that are followed in real9life business situation.
%.. E5plain the limitations of financial statements.
%/.Illustrate a profit and loss statement with assumed data.
=b> E5plain the following evaluation methods with illustrations $
=i> 3verage Eate or Eeturn
=ii> ay Back eriod
=iii> Fet resent Dalue.
%1. E5plain the relationship of Managerial Economics with other
(2.Managerial Economics is Economics applied in "ecision MakingIG
(%."escribe the Elasticity of -upply.
(( 8rite a short note on Iso4uant and its types.
(). Elucidate the returns to scale.
(+."escribe cost of production in the long run average cost curve.
(,.8hat are the factors affecting production functionH "iscuss.
(..8rite a note on cost9oriented pricing.
(/.E5plain common pricing practices in Eetail #rade.
(0.8rite briefly on the limitations of financial statements.
(1. 6ive the meaning of Eatio analysis and its significance.
)2. 8hat are the steps involved in Fet resent Dalue Method=FD>H
)%. =ii> E5plain ay Back method in detail.