Managerial Economics and Financial Analysis Notes

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Code No: R05210102
Set No. 1
II B.Tech I Semester Supplimentary Examinations, November 2008
MANAGERIAL ECONOMICS AND FINANCIAL ANALYSIS
( Common to Civil Engineering and Metallurgy & Material Technology)
Time: 3 hours Max Marks: 80
Answer any FIVE Questions
All Questions carry equal marks

1. What is meant by Demand? Every one desires to own a Maruti car. Does this mean
that the demand for Maruti car is large? If it is otherwise, how do you narrate?
[16]

2. What is meant by Elasticity of demand. How do you measure it? [16]

3. Write short notes on the following:

(a) Isoquants
(b) Least cost combination of inputs

(c) Budget line
(d) Marginal rate of Technical substitution. [4+4+4+4]

4. (a) What are the principal di erences between monopoly and perfect competition?
(b) Supplement your answer with appropriate diagrams in both the cases. [8+8]

5. Distinguish between partnership and Joint sto ck company organization. [16]

6. A company is considering two investment opportunities (A and B) that cost Rs.
4,00,000 and Rs. 3,00,000 respectively. The rst project generates Rs. 1,00,000/- a
year for four years. The second generates Rs.60,000/-, Rs. 1,00,000/, Rs. 80,000/-
Rs, 90,000/- and Rs. 70,000 over a ve year period. The company’s cost of capital
is 8%. Which pro ject would you choose under NPV method? [16]

7. (a) How can you make use of data available in the trial balance for nalizingac-
counts?
(b) Explain the procedure to be followed while preparing Trading Account, Pro t
and Loss Account and Balance Sheet with the help of a trial balance. [8+8]

8. Discuss the importance of Ratio Analysis for inter rm and intra- rm comparison,
including circumstances responsible for its limitations, if any. [16]

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Code No: R05210102
Set No. 2

1. Managerial Economics is the application of Economic Theory to business manage-
ment. Discuss. [16]

2. What are the needs for demand forecasting. Explain the various steps involved in
demand forecasting. [16]

3. (a) What are Isoquants? Explain the chief characteristics of Isoquants?
(b) What do you understand by Least Cost Combination of inputs and how can
it be achieved. [8+8]

4. (a) What are the causes for the emergence of Monopoly?
(b) Elaborate how price output decisions can be taken by a monopolist. [6+10]

5. Write short note on the following. [4×4]

(a) Limited Liability
(b) Public and Private Companies

(c) Memorandum of Asso ciation
(d) Govt. Company.

6. Following is the information in respect of the three pro jects A,B and C. [16]

Item A B C
Initial Investment ( in Rs) 60,000/- 2150/- 4,25,000/-
Annual Cash Flow (in Rs) 12,000/- 1500/- 2,51,000/-
Life Period (in years) 15 3 20

If the cost of capital for all the three projects is 10%, rank them using NPV method
and simple pay back method.

7. The trail balance of Anil is given below, prepare the Trading Account, Pro t &
Loss Account for the year ending 31st December 2005 and Balance sheet as on that

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Code No: R05210102
Set No. 2
date. [16]

Debit Rs. Credit Rs.
Drawings and capital 72,000 6,00,000
Opening stock 2,05,000
Purchases and sales 6,80,000 14,05,000
Carriage inwards 15,000
Debtors and creditors 2,35,000 1,43,000
Cash
39,000
Salaries 2,53,000
Bills payable 42,000
Insurance 1,12,000
Machinery 3,00,000
Wages 2,15,000
Commission received 10,000
Trade expenses 69,000
Freight inwards 5,000
22,00,000 22,00,000

Adjustments

(a) Closing stock was valued at Rs.3,50,000
(b) Provide a reserve for bad and doubtful debts @ 2% on debtors.

8. (a) What are the parties that make use of nancial statements for their decision
making?
(b) How do they apply the same? Elaborate. [8+8]

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Code No: R05210102
Set No. 3

1. Managerial Economics is the study of allocation of resources available to a rm or
other unit of management among the activities of that unit. Explain. [16]


3. (a) De ne ‘Cost’. How are costs classi ed?
(b) Explain any ve important cost concepts useful for managerial decisions.
[6+10]

4. (a) What are the principal di erences between monopoly and perfect competition?
(b) Supplement your answer with appropriate diagrams in both the cases. [8+8]

5. Discuss about the short-comings of the public sector enterprises in India and what
is their future? [16]

6. (a) What is the importance of capital?
(b) What factors determine the working capital requirements of a company?
[6+10]

7. (a) What is the procedure to be followed while preparing a trial balance and how
can you validate the trial balance prepared.
(b) What are the ob jectives of preparing the trial balance. [10+6]

8. (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

(b) Calculate Interest Coverage ratio from the following information.

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Code No: R05210102
Set No. 3

Rs.
Net pro t 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

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Code No: R05210102
Set No. 4

1. What is meant by Demand? Every one desires to own a Maruti car. Does this mean
that the demand for Maruti car is large? If it is otherwise, how do you narrate?
[16]


3. (a) Draw a diagram of pro t graph.
(b) You are required to calculate
i. Margin of Safety
ii. Sales
iii. Variable Cost from the Following gures: Fixed Costs Rs.12000, Pro t,
Rs.1000, Break-Even Sales=Rs.60000 [4+12]

4. ‘A competitor under conditions of perfect competition is only price taker and quan-
tity adjustor’ - In the light of the above statement, discuss clearly the important
features of perfect competition and how price output decisions can be taken. [16]

5. Explain the features of sole trader form of organization. Discuss the merits and
demerits of sole trader form of organization. [16]

6. Explain the right procedure for a capital budgeting decision. [16]

7. The following trial balance belongs to Amzad Khan with the help of which prepare

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Code No: R05210102
Set No. 4
trading and pro t and loss A/c and balance sheet. [16]

Dr. Cr.
Drawing and capital 18,000 1,00,000
Furniture 32,500
Equipment 15,000
Loan payable 15,000
Interest on loan 900
Sales 1,00,000
Purchases 75,000
Opening stock(1.1.05) 25,000
Trade expenses 15,000
Wages 2,000
Insurance 1,000
Commission received 4,500
Sundry debtors 28,100
Cash at bank 20,000
Sundry creditors 10,000
Interest received 3,000
2,32,500 2,32,500

Adjustments:

(a) Closing stock as on 31st December 2005, was valued at Rs.60,000
(b) Wages were outstanding by Rs.500

(c) Provide depreciation @ 10% on furniture.

8. Discuss the importance of Ratio Analysis for inter rm and intra- rm comparison,
including circumstances responsible for its limitations, if any. [16]

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Managerial Economics and Financial Analysis Notes

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