MEFA COURSE FILE,CDF,SYLLABUS ,MEFA 2 MARKS QUESTION S

                                                                             

Lecture Plan

Course: B.Tech                                                                                             Academic Year: 2019-20

Name of the Subject: MEFA                                                                        Class/Sec: II-II SEM                       

Name of the Staff:                                                      Department:

                                                                                               

S.No	Planned Date	Unit	Topics to be  Covered	Teaching aids/Tools	Text Books/ Referance Books Referred	Remarks
UNIT-I  :Introduction to Managerial Economics
1	30/12/19		Nature and scope of  Managerial Economics	Chalk/ Duster	T1&T2
2	31/12/19		Demand Analysis, Demand Determinants	Chalk/ Duster	T1&T2
3	2/01/20		Law of demand and  exceptions of demand	Chalk/ Duster	T1&T2
4	3/01/20		Measurement, Types and significance of elasticity of demand	PPT	T1&T2
5	06/01/20		Demand Forecasting, Factors governing demand forecasting	Chalk/ Duster	T1&T2
6	07/01/20		Methods of demand forecasting	Chalk/ Duster	T1&T2
UNIT-II-THEORY OF PRODUCTION COST ANALYSIS
7	08/01/20		Production function,	PPT	T1&T2
8	09/01/20		,Iso quant and Iso costs, MRTS	Chalk/ Duster	T1&T2
9	10/01/20		Cobb-Douglas Production function,	Chalk/ Duster	T1&T2
10	13/01/20		Laws of returns	Chalk/ Duster	T1&T2
11	17/01/20		economies of scale	Chalk/ Duster	T1&T2
12	20/01/20		Cost Analysis	Chalk/ Duster	T1&T2
13	21/01/20		Cost concept and cost behaviour	PPT	T1&T2
14	22/01/20		Break Even analysis, Assumptions of BEP	Chalk/ Duster	T1&T2
15	23/01/20		Significance & Limitations of BEP	Chalk/ Duster	T1&T2
16	24/01/20		Problems on BEP	Chalk/ Duster	T1&T2
17	27/01/20		Study hour
18	28/01/20		Study hour
19	29/01/20		Problems on BEP	Chalk/ Duster	T1&T2
UNIT-III-INTRODUCTION TO MARKETS AND NEW ECONOMIC ENVIRONMENT
20	30/01/20		Introduction to markets and Types to markets	Chalk/ Duster	T1&T2
21	31/01/20		Perfect Competition	NPTEL	T1&T2
22	03/02/20		Imperfect Competition	Chalk/ Duster	T1&T2
23	04/02/20		Features of Markets	Chalk/ Duster	T1&T2
24	05/02/20		Monopoly markets	Chalk/ Duster	T1&T2
26	06/02/20		Price – output on monopoly	Chalk/ Duster	T1&T2
27	07/02/20		Monopolistic Competition	Chalk/ Duster	T1&T2
28	10/02/20		Study hour
29	11/02/20		Study hour
30	12/02/20		Oligopoly market, Price – output on oligopoly	Chalk/ Duster	T1&T2
31	13/02/20		Monopolistic competition   Price –output determination	Chalk/ Duster	T1&T2
32	14/02/20		Pricing strategies and methods	Chalk/ Duster	T1&T2
34	17/02/20		Sole trading Form	Chalk/ Duster	T1&T2
35	18/02/20		Partnership Form	Chalk/ Duster	T1&T2
37	19/02/20		Joint-stock Company	Chalk/ Duster	T1&T2
38	20/02/20		Public enterprise and their types	Chalk/ Duster	T1&T2
39	24/02/20		New Economic Environment	Chalk/ Duster	T1&T2
40	25/02/20		Study hour
41	26/02/20		Study hour
42	27/02/20		Liberalization, Privatization, Globalization	Chalk/ Duster	T1&T2
43	28/02/20		Liberalization, Privatization, Globalization	Chalk/ Duster	T1&T2
			MID EXAMINATION  29-02-20 to 06-03-20
44	09/03/20		Financial accounting, Need and importance	Chalk/ Duster	T1&T2
45	11/03/20		Double-entry bookkeeping	PPT	T1&T2
46	12/03/20		Classification of Accounts  and Rules of Accounting	Chalk/ Duster	T1&T2
47	13/03/20		Accounting Principles	Chalk/ Duster	T1&T2
48	16/03/20		Preparation of journal	Chalk/ Duster	T1&T2
49	17/03/20		Study hour	Chalk/ Duster	T1&T2
50	18/03/20		Study hour	Chalk/ Duster	T1&T2
51	19/03/20		Preparation of Trial balance	Chalk/ Duster	T1&T2
52	20/03/20		Trading A/C, Profit, and Loss A/C, Balance sheet	Chalk/ Duster	T1&T2
53	23/03/20		Adjustments and Problems	Chalk/ Duster	T1&T2
54	24/03/20		Problems	Chalk/ Duster	T1&T2
55	25/03/20		Study hour
56	26/03/20		Study hour
57	27/03/20		Financial analysis	Chalk/ Duster	T1&T2
58	30/03/20		Types of Ratios	PPT	T1&T2
59	31/03/20		Liquidity ratios	Chalk/ Duster	T1&T2
60	01/04/20		Leverage ratios	Chalk/ Duster	T1&T2
61	03/04/20		Profitability ratios	Chalk/ Duster	T1&T2
62	07/04/20		Activity ratios	Chalk/ Duster	T1&T2
63	08/04/20		Problems	Chalk/ Duster	T1&T2
64	09/04/20		Study hour
65	15/04/20		Study hour
66	16/04/20		Problems	Chalk/ Duster	T1&T2
67	17/04/20		Problems	Chalk/ Duster	T1&T2
UNIT – V CAPITAL AND CAPITAL BUDGETING										Chalk/ Duster
68	20/04/20		Concept of capital  , Over and undercapitalization	Chalk/ Duster	T1&T2
69	21/04/20		Sources of short term finance and long term capital	Chalk/ Duster	T1&T2
70	22/04/20		Estimating Working capital requirements	Chalk/ Duster	T1&T2
71	23/04/20		Capital budgeting Methods	NPTEL	T1&T2
72	24/04/20		Payback Period	Chalk/ Duster	T1&T2
73	27/04/20		Study hour
74	28/04/20		Study hour
75	29/04/20		The average rate of return	Chalk/ Duster	T1&T2
76	30/04/20		Net present value method	Chalk/ Duster	T1&T2
77	01/05/20		Internal rate of return method	Chalk/ Duster	T1&T2
MID EXAM II										Chalk/ Duster

S.No	Name of the Text Book/Reference Book		Name of the Author
1	Managerial Economics and Financial Analysis, 4/e, TMH, 2009.	T1	Aryasri:
2	Varshney & Maheswari: Managerial Economics, Sultan Chand, 2009.	T2	Varshney & Maheswari:

Signature of the Staff                                                            HOD                                                                   Principal

NARAYANA ENGINEERING COLLEGE : NELLORE

Managerial Economics & Financial Analysis

UNIT - I

Managerial Economics:

Managerial economics serves several purposes in business decision-making. To start with, managerial economics provides a logical and experiential framework for analyzing the question. To the somewhat vague question of "what or how much should I make, and who should I sell it to?", or "should I try to retail something like 'this'?", it provides the framework for applying to your question concepts such as supply and demand, market segmentation, competition, and so on

Microeconomics

The study of an individual consumer or a firm is called microeconomics (also called the Theory of Firm).  Micro means ‘one millionth’. Microeconomics deals with behavior and problems of a single individual and of micro organization. Managerial economics has its roots in microeconomics and it deals with the micro or individual enterprises.

Macro Economics

            Macroeconomics examines the economy as a whole to explain broad aggregates and their interactions "top-down", that is, using a simplified form of general-equilibrium theory. Such aggregates include national income and output, the unemployment rate, and price inflation and sub aggregates like total consumption and investment spending and their components. It also studies effects of monetary policy and fiscal policy.

Nature:

·         Close to microeconomics

·         Operates against the backdrop of macroeconomics

·         Normative statements

·         Prescriptive actions

·         Applied in nature

·         Offers scope to evaluate each alternative

·         Interdisciplinary

·         Assumptions and limitations

Scope:

a) Production decisions

b) Investment decisions

c) Business expansion decisions

d) Selling/buying decisions

e) Demand decisions   

Managerial economics relationship with other disciplines

·         Economics

·         Accountancy

·         Mathematics

·         Statistics

·         Operation Research

·         Psychology

·         Organizational Behavior

Demand Analysis

            Demand the analysis is used to identify who wants to buy a given product, how much they are likely to pay off it, how many units they have purchased and other factors that can be used to determine product design, selling cost and advertising strategy for a product.

Factors

·         Price of the Commodity

·         The income of the Consumer

·         Prices of related goods

·         Tastes of the Consumers

·         Population

·         Government Policy

·         Expectations regarding the future

·         Climate and weather

Law of Demand

            Law of demand shows the relation between price and quantity demanded of a commodity in the market. In the words of Marshall, “the amount demand increases with a fall in price and diminishes with a rise in price”.

EXCEPTIONS OF LAW OF DEMAND

·         Giffen or Inferior Goods

·         Veblen or Demonstration effect

·         Ignorance

·         Speculative effect

·         Fear of shortage

·         Necessaries

Elasticity of Demand:

The elasticity of demand can be defined as “The elasticity of demand in a market is great or small according to as 
 the amount demanded increases much or little for a given fall in the price and diminishes much or little for a given rise in Price”.

Types of Elasticity of Demand:

There are three types of elasticity of demand:

1.      Price elasticity of demand

2.      Income elasticity of demand

3.      Cross elasticity of demand

Measurements of Elasticity of Demand:

·         Perfectly elastic demand

·         Perfectly Inelastic Demand

·         Relatively elastic demand

·         Relatively inelastic demand

·         Unit elasticity of demand

Demand Forecasting

The demand forecast is the activity of estimating the quantity of a product or service that consumers will purchase. Demand forecasting may be used in making pricing decisions, in assessing future capacity requirements or in making decisions on whether to enter a new market. The forecast means the future.

Methods of forecasting

·         Survey Method

·         Statistical Methods

·         Other Methods

UNIT - II

Production Function:-

The production function expresses a functional relationship between physical inputs and physical outputs of a firm at any particular time period. The output is thus a function of inputs. Mathematically production function can be written as

Q= f (A, B, C, D)

Cobb-Douglas production function:

The production function of the linear homogenous type is invested by Junt Wicksell and first tested by C. W. Cobb and P. H. Douglas in 1928. This famous statistical production function is known as the Cobb-Douglas production function. Originally the function is applied on the empirical study of the American manufacturing industry. Cobb – Douglas's production function takes the following mathematical form.

Y= (AK^X L^1-x)

Isoquants

            An isoquant is a curve representing the various combinations of two inputs that produce the same amount of output. An isoquant curve is also known as an iso-product curve, equal-product curve and production indifference curve. A curve that shows the different combinations of the two inputs producing a given level of output.

Features of Isoquant

·         Downward sloping

·         Convex to origin

·         Do not intersect

·         Do not touch axes

The marginal rate of technical substitution

The marginal rate of technical substitution (MRTS) is: "The the rate at which one factor can be substituted for another while holding the level of output constant".

MRTS_LK = ΔK        ΔL

Law of Returns

Laws of returns to scale refer to the long-run analysis of the laws of production. In the long run, the output can be increased by varying all factors. Thus, in this section, we study the changes in output as a result of changes in all factors. In other words, we study the behavior of output in response to changes in the scale. When all factors are increased in the same proportion an increase in scale occurs.

Types of returns to scale

·         Constant Returns to Scale

·         Increasing returns to scale

·         Decreasing returns to scale

BREAKEVEN ANALYSIS

The study of cost-volume-profit relationship is often referred to as BEA. The term BEA is interpreted in two senses. In its narrow sense, it is concerned with finding out BEP; BEP is the point at which total revenue is equal to the total cost. It is the point of no profit, no loss. In its broad determine the probable profit at any level of production

Economies of Scale:

Internal Economies

External economies

Types of internal Economies:

·         Technical Economies

·         Managerial Economies

·         Marketing Economies

·         Financial Economies

·         Risk bearing Economies

·         Economies of Research

·         Economies of welfare

Types of external economies

·         Economies of Concentration

·         Economies of Information

·         Economies of Welfare

Cost Analysis

Profit is the ultimate aim of any business and the long-run prosperity of a firm depends upon its ability to earn sustained profits. Profits are the difference between selling price and cost of production. In general the selling price is not within the control of a firm but many costs are under its control. The firm should therefore aim at controlling and minimizing costs. Since every business decision involves cost consideration, it is necessary to understand the meaning of various concepts for clear business thinking and application of the right kind of costs.

COST CONCEPTS

·         Opportunity Cost

·         Fixed and variable costs

·         Explicit and Implicit costs

·         Out-of-pocket costs and Book costs

·         Post and Future costs

·         Traceable and common costs

Break-Even Point

An analysis to determine the the point at which revenue received equals the costs associated with receiving the revenue. Break-even analysis calculates what is known as a margin of safety, the amount that revenues exceed the break-even point. This is the amount that revenues can fall while still staying above the break-even point.

Determinants on BEP:

Contribution = Sales – Variable cost

Contribution = Fixed Cost + Profit.

Break even sales     or      

P/V ratio= X 100

Breakeven point (Units) =

 Breakeven point (In Rupees) = X sales

UNIT - III

In Economics, however, the term “Market” does not refer to a particular place as such but it refers to a market for a commodity or commodities. It refers to an arrangement whereby buyers and sellers come in close contact with each other directly or indirectly to sell and buy goods.

Definition:

“The term market refers not necessarily to a place but always to commodity or commodities and the buyers and sellers of the same who are in direct competition with each other.”

Types of Markets:

·         Perfect Competition

·         Imperfect Competition

 

Characteristics of the perfect market:

·         A large number of Sellers and Buyers

·         Product Differentiation

·         Selling Costs

·         Free Entry and exit of Firms

·         Price-makers

·         Blend of Competition and Monopoly

Imperfect Competition:

·         Monopoly

·         Monopolistic competition

·         Oligopoly

·         Duopoly

Forms of business Organizations:

·         Sole Trader

·         Partnership

·         Joint Stock Company

Sole Trading:

The the sole trader is the simplest, oldest and natural form of business organization. It is also called sole proprietorship. ‘Sole’ means one. ‘Sole trader’ implies that there is only one trader who is the owner of the business.

Partnership:

The partnership is improved form sole trader in certain respects. Where there are like-minded persons with resources, they can come together to do the business and share the profits/losses of the business in an agreed ratio. Persons who have entered into such an agreement are individually called ‘partners’ and collectively called ‘firm’. The relationship among partners is called a partnership.

Joint Stock Company:

The the joint-stock company emerges from the limitations of partnership such as joint and several liability, unlimited liability, limited resources, and uncertain duration and so on. Normally, to take part in a business, it may need large money and we cannot foretell the fate of the business. It is not literally possible to get into business with little money. Against this background, it is interesting to study the functioning of a joint-stock company. The main principle of the joint-stock company from is to provide an opportunity to take part in business with low investment as possible.

Public Enterprises:

Public enterprises occupy an important position in the Indian economy. Today, public enterprises provide the substance and heart of the economy. Its investment of over Rs.10,000 crore is in heavy and basic industry, and infrastructure like power, transport and communications. The concept of public enterprise in Indian dates back to the era of pre-independence.

Public Corporation:

A public corporation is defined as a ‘body corporate create by an Act of Parliament or Legislature and notified by the name in the official gazette of the central or state government. It is a corporate entity having perpetual succession, and common seal with power to acquire, hold, dispose of property, sue and issued by its name”.

Government Company:

Section 617 of the Indian Companies Act defines a government company as “any company in which not less than 51 percent of the paid up share capital” is held by the Central Government or by any State Government or Governments or partly by Central Government and partly by one or more of the state Governments and includes and company which is subsidiary of government company as thus defined”.

Pricing Methods:

·         Cost Based Pricing

·         Competition based pricing

·         Demand Based Pricing

·         Strategy based pricing

UNIT- VI

Working Capital Management:

Working capital management is concerned with the management of the current assets. As we know, the short-term survival is a pre-requisite to long-term success. The major thrust of working capital management is the trade-off between profitability and risk (liquidity), which are inversely related to each other.

Gross working capital:

In the broader sense, the term working capital refers to the gross working capital. The notion of the gross working capital refers to the capital invested in total current assets of the enterprise. Current assets are those assets, which in the ordinary course of business, can be converted into cash within a short period, normally one accounting year.

Net working capital:

In a narrow sense, the term working capital refers to the net working capital. Networking capital represents the excess of current assets over current liabilities.

Importance of working capital:

·         Solvency of the business

·         Good will

·         Easy loans

·         Cash Discounts

·         Regular supply of raw materials

·         Regular payments of salaries wages and other day to day commitments

·         Exploitation of favorable market conditions

·         Ability to face crisis

·         Quick and regular return on Investments

·         High morale

Factors determining the working capital:

·         Nature or character of business

·         Nature or character of business

·         Production policy

·         Manufacturing process

·         Seasonal variations

·         Working capital cycle

·         Credit policy

·         Business cycles

·         Rate of growth of business

Source of Finance:

Long Term Finance

·         Issue of Shares

·         Issue of Preference Shares

·         Issue of Equity Shares

·         Issue of Debentures

·         Loans from financial Institutions

·         Retained Profits

·         Public Deposits

Short Term Finance

·         Trade credit

·         Bank loans and advances

·         Short term loans from finance companies

Capital Budgeting:

Capital budgeting is the process of making investment decision in long-term assets or courses of action. Capital expenditure incurred today is expected to bring its benefits over a period of time. These expenditures are related to the acquisition & improvement of fixes assets.

Capital Budgeting Process:

1. Project generation
2. Project evaluation
3. Project selection
4. Project execution

Capital budgeting Techniques

1.      Traditional methods

2. Discounted Cash flow methods

Traditional methods

·         Pay-back period method

·         Accounting (or) Average rate of return method

Discounted cash flow methods

·         Net present value method

·         Internal Rate of Return Method

·         Probability Index Method

Formula:

                                                Cash outlay (or) original cost of project

            Pay-back period =          -------------------------------------------                                            

                                                                 Annual cash inflow

  

                                     Average net income after taxes

                         ARR=   ----]--------------------------------- X 100

                                           Average Investment

                                                         Total Income after Taxes

Average net income after taxes =   -----------------------------

                                                           No. Of Years

                                              Total Investment

    Average investment =         ----------------------

                                                         2

NPV= Present value of cash inflows – investment.

                                                   P1 - Q

                                    IRR = L+ --------- X D

                                                   P1 –P2

                              Present Value of Future Cash Inflow

  Probability index =  ----------------------------------------

                                          Investment

UNIT – V

Book – Keeping:  Book – Keeping involves the chronological recording of financial transactions in a set of books in a systematic manner.

Accounting:    “The art of recording, classifying and summarizing in a significant manner and in terms of money transactions and events, which are in part at least, of a financial character and interpreting the results thereof.”

Distinction between Book – Keeping and Accountancy

·         Object

·         Level of Work

·         Principles of Accountancy

·         Final Result

Branches of Accounting

·         Financial Accounting

·         Cost Accounting

·         Management Accounting

Functions of an Accountant

·         Designing Work

·         Recording Work

·         Summarizing Work

·         Analysis and Interpretation Work

·         Reporting Work

·         Preparation of Budget

·         Taxation Work

·         Auditing

USERS OF ACCOUNTING

·         Managers

·         Investors

·         Creditors

·         Workers

·         Customers

·         Government

·         Public

·         Researchers

Advantages from Accounting

·         Provides for systematic records

·         Facilitates the preparation of financial statements

·         Provides control over assets

·         Provides the required information

·         Comparative study

·         Less Scope for fraud or theft

·         Tax matters

·         Ascertaining Value of Business

·         Documentary evidence

·         Helpful to management

Limitations of Accounting

·         Does not record all events

·         Does not reflect current values

·         Estimates based on Personal Judgment

·         Inadequate information on costs and Profits

Accounting Concepts

·         Business Entity concept

·         Going Concern Concept

·         Money Measurement Concept

·         Cost Concept

·         Accounting Period Concept

·         Dual Accept Concept

·         Matching Cost Concept

·         Realization Concept

Accounting Conventions

·         Full Disclosure

·         Materiality

·         Consistency

·         Conservatism

Classification of Accounts

1. Personal accounts      

2. Real accounts

3. Nominal accounts

Rules of Accounting:

Personal Account

Debit----The Receiver

              Credit---The Giver”

Real Account

“Debit----What comes in

              Credit---What goes out”

Nominal Accounts

“Debit----All expenses and losses

              Credit---All incomes and gains”

JOURNAL: The word Journal is derived from the Latin word ‘journ’ which means a day. Therefore, journal means a ‘day Book’ in day-to-day business transactions are recorded in chronological order.

Date                  Date	Particulars	L.F. no	Debit RS.	Credit RS.
1998 Jan 1	Purchases account to cash account(being goods purchased for cash)		10,000/-	10,000/-

Ledger

A ledger is a book which contains various accounts.” The process of transferring entries from journal to ledger is called “POSTING

Particulars account

Date	Particulars	Lfno	Amount	Date	Particulars	Lfno	amount

TRAIL BALANCE

A trail balance is a statement of debit and credit balances. It is prepared on a particular date with the object of checking the accuracy of the books of accounts. It indicates that all the transactions for a particular period have been duly entered in the book, properly posted and balanced.

PROFORMA FOR TRAIL BALANCE:

Trail balance for MR……………………………………  as on …………

NO	NAME OF ACCOUNT (PARTICULARS)	DEBIT AMOUNT(RS.)	CREDIT AMOUNT(RS.)

FINAL ACCOUNTS

In every business, the business man is interested in knowing whether the business has resulted in profit or loss and what the financial position of the business is at a given time. In brief, he wants to know (i)The profitability of the business and (ii) The soundness of the business.

TRADING ACCOUNT

The first step in the preparation of final account is the preparation of trading account. The main purpose of preparing the trading account is to ascertain gross profit or gross loss as a result of buying and selling the goods.

PROFIT AND LOSS ACCOUNT

The business man is always interested in knowing his net income or net profit.Net profit represents the excess of gross profit plus the other revenue incomes over administrative, sales, Financial and other expenses. The debit side of profit and loss account shows the expenses and the credit side the incomes. If the total of the credit side is more, it will be the net profit. And if the debit side is more, it will be net loss.

Balance Sheet:

A balance sheet is an item wise list of assets, liabilities and proprietorship of a business at a certain state.

TYPES OF SUBSIDIARY BOOKS:-- Subsidiary books are divided into eight types. They are,

1. Purchases Book

2. Sales Book

3. Purchase Returns Book

4. Sales Returns Book

5. Cash Book

6. Bills Receivable Book

7. Bills Payable Book

8. Journal Proper

Ratio Analysis

Ratio is an expression of one number is relation to another. It is one of the methods of analyzing financial statement. Ratio analysis facilities the presentation of the information of the financial statements in simplified and summarized from. Ratio is a measuring of two numerical positions. It expresses the relation between two numeric figures. It can be found by dividing one figure by another ratios are expressed in three ways.

Limitations of Ratio Analysis

·         False results if based on incorrect accounting data.

·         No idea of probable happenings in future.

·         Variation in accounting methods

·         Price level change

·         Only one method of analysis

·         No common standards

·         Different meanings assigned to the some term

·         Ignores qualitative factors

·         No use if ratios are worked out for insignificant and unrelated figure

Classification of ratios:

1. Profitability ratios
2. Turn over ratios
3. Financial ratios
4. Leverage ratios

Formulas:

Gross profit ratio =

Net profit ratio: X 100

Operating ratio (Operating expenses ratio)

X 100

Expenses ratio =                        X 100

Return on investments:                                                         X 100

Return on equity capital:                                                                    X 100

Earnings per share=

Return on capital employed =                          x 100

Return on total assets =

Stock turnover ratio = 

Average stock=

Working capital turnover ratio =

Fixed assets turnover ratio =

Total assets turnover ratio

Capital turnover ratio=

Debtors turnover ratio=

Debtors collection period=

 

 JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY ANANTAPUR

B. Tech II-II Sem. (C.E) L T P C 3 1 0 3 (15A52301)

MANAGERIAL ECONOMICS AND FINANCIAL ANALYSIS

Course Objectives: The objective of this course is to equip the student with the basic inputs of Managerial Economics and Economic Environment of business and to impart analytical skills in helping them take sound financial decisions for achieving higher organizational productivity.

 Unit I: INTRODUCTION TO MANAGERIAL ECONOMICS Managerial Economics – Definition- Nature- Scope - Contemporary importance of Managerial Economics - Relationship of Managerial Economics with Financial Accounting and Management. Demand Analysis: Concept of DemandDemand Function - Law of Demand - Elasticity of DemandSignificance - Types of Elasticity - Measurement of elasticity of demand - Demand Forecasting- factors governing demand forecasting- methods of demand forecasting.

 UNIT II: THEORY OF PRODUCTION AND COST ANALYSIS www.android.universityupdates.in Production Function- Least cost combination- Short-run and Long- run production function- Isoquants and Isocosts, MRTS - Cobb-Douglas production function - Laws of returns - Internal and External economies of scale - Cost Analysis: Cost concepts and cost behavior- Break-Even Analysis (BEA) -Determination of Break Even Point (Simple Problems)-Managerial significance and limitations of Break- Even Point.

UNIT III: INTRODUCTION TO MARKETS AND NEW ECONOMIC ENVIRONMENT Market structures: Types of Markets - Perfect and Imperfect Competition - Features of Perfect Competition- Monopoly Monopolistic Competition-Oligopoly-Price-Output Determination - Pricing Methods and Strategies-Forms of Business Organizations- Sole Proprietorship- Partnership – Joint Stock Companies - Public Sector Enterprises – New Economic Environment- Economic Liberalization – Privatization - Globalization.

UNIT IV: INTRODUCTION TO FINANCIAL ACCOUNTING AND ANALYSIS Financial Accounting – Concept - Emerging need and Importance - Double-Entry Book Keeping- Journal - Ledger -Trial Balance - Financial Statements - Trading Account – Profit & Loss Account – Balance Sheet (with simple adjustments). Financial Analysis – Ratios – Liquidity, Leverage, Profitability, and Activity Ratios (simple problems).

UNIT V: CAPITAL AND CAPITAL BUDGETING Concept of Capital - Over and Undercapitalization – Remedial Measures - Sources of Shot term and Long term Capital - Estimating Working Capital Requirements – Capital Budgeting – Features of Capital Budgeting Proposals – Methods and Evaluation of Capital Budgeting Projects – Pay Back Method – Accounting Rate of Return (ARR) – Net Present Value (NPV) – Internal Rate Return (IRR) Method (simple problems)

 Learning Outcome:  After completion of this course, the student will able to understand various aspects of Managerial Economics and analysis of financial statements and inputs therein will help them to make sound and effective decisions under different economic environment and market situations.

TEXT BOOKS: 1. Managerial Economics 3/e, Ahuja H.L, S.Chand, 2013.

2. Financial Management, I.M.Pandey, Vikas Publications, 2013.

REFERENCES 1. Managerial Economics and Financial Analysis, 1/e, Aryasri, TMH, 2013.

2. Managerial Economics and Financial Analysis, S.A. Siddiqui and A.S. Siddiqui, New Age International, 2013.

3. Accounting and Financial Management, T.S.Reddy & Y. Hariprasad Reddy, Margham Publishers.

MANAGERIAL ECONOMICS AND FINANCIAL ANALYSIS (2MARKS)

UNIT-I 

INTRODUCTION TO MANAGERIAL ECONOMICS

1) Define managerial economics?

2) What are the main areas of managerial economics?

3) What is the meaning of micro and macro economics?

4) What is demand?

5) Define law of demand and its exceptions?

6) Define demand function and write mathematical formula of demand function?

7) Define elasticity of demand?

8) Explain price elasticity of demand?

9) Explain income elasticity of demand?

10) What is the need of demand forecasting?

11) What is the meaning of test marketing?

12) Explain controlled experiment method?

13) What is the meaning of normative statement?

14) Define law of demand

15) Define demand forecasting?

16) Explain about short term demand forecasting?

17) Explain about short term demand forecasting?

18) Define survey method?

19) Define statistical methods?

20) Define cross elasticity of demand?

UNIT-II THEORY OF PRODUCTION ANS COST ANALYSIS

1) Define production function and write formula for production function?

    2) Meaning of Isoquant?

3) Meaning of Isocost?

4) Explain cobb –douglas production function?

         

  5) MRTS.

   

6) Define cost?

7) Explain about BEA point?

8) What is the meaning of laws of returns?

9) Explain about internal economies of scale?

10) Explain about external economies of scale?

11) Explain explicit cost and implicit cost?

12) Explain out of pocket cost and book cost?

13) Explain fixed cost and variable cost

14) Write formulas of breakeven point ?

15) What are diseconomies of scale?

  16) What are the merits of BEA

17) What are demerits of BEA

18) What is the meaning of contribution?

19) What is margin of safety?

20) What is angle of incidence?

UNIT-III

INTRODUCTION TO MARKET AND NEW ECONOMIC ENVIRON MENT

1) Define market?

2) What is the meaning of perfect competition and perfect market?

3) Explain about price skimming method?

4) Explain about price penetration method?

5) Define monopolistic competition?

6) Define sole trader?

7) What is the meaning of partnership deed?

8) What is the meaning of privatization?

9) What is the meaning of globalization?

10) What is the meaning of Liberlization?

11) What are documents required to formation of Joint Stock Company?

12) Define Government Company?

13) Define monopoly?

14) Define oligopoly market?

15) Define partnership act?

16) Define company?

17) Explain about departmental undertacking?

18) Explain about public corporation?

19) Define proprietary ship of business?

20) Explain memorandum of association?

UNIT-IV CAPITAL&CAPITAL BUDGETING

1. what is capital?

2. Define fixed capital?

3. What is working capital?

4. Defines current assets?

5. What is share?

6. Define debentures?

  7.  What is capital budgeting ?

8. What ate the capital budgeting methods?

9. What is discounting?

10. What is PV factor?

11. What is capital rationing?

12. What are the cash inflows?

13) What is trade credit ?

14) What is payback period?

15) Write formula of accounting rate of return

16) How to calculate net present value ?

17) How to calculate internal rate of return ?

18) How to calculate profitability index?

19) Explain the process of capital budgeting ?

20) What are the steps involved in capital budgeting process?

UNIT-V: FINANCIAL ACCOUNTING AND ANALYSIS

1.  Define accounting?

2. What are the branches of accounting?

3 .Define accounting cycle?

 4. What is journal?

5. What is ledger?

 6. What is meant by trial balance?

7. What is capital expenditure?

8. What is deferred revenue expenditure?

9. What is contra entry?

10. What is journal   proper?

11. What is ratio analysis?

12. What is EPS?

13. What is the formula for current ratio?

14) Define ratio analysis?

15) Define profitability ratios

16) Write formula of inventory turnover ratio?

17) Define liquidity ratio?

18) Define solvency or leverage ratios

19) Formula of debt equity ratio?

20) Write formula of current ratio

MANAGERIAL ECONOMICS AND FINANCIAL ANALYSIS (2MARKS)

UNIT-I 

INTRODUCTION TO MANAGERIAL ECONOMICS

1) Define managerial economics?

a) The integration of economic theory with business practice for the purpose of facilitating decision making     and forward planning by management (Spencer )The managerial economics is the application of economic theory and methodology to business administration practices (Brigham  and Pappas)

2) What are the main areas of managerial economics?

a) The main areas of applications in managerial economics include demand decision, input output decision, price output decision, profit related decision, investment decision and economic forecasting and forward planning

3) What is the meaning of micro and macro economics?

a) Micro economics is the study of an individual, a firm or an industry. it is also called theory of firm or price theory ,Macro economics is the study of aggregates of individuals or firms. It is the important tool for national income analysis, balance of payments

4) What is demand?

a)Every want supported by the willingness and ability to buy constitutes demand for a particular product or service .in other words ,if I want a car and I cannot pay for it .there is no demand for the car from my side .

Demand conditions are

 *desire to buy

 *Willingness to pay

 *Ability to pay

5) Define law of demand and its exceptions?

 a) The law of demand states: other things remaining the same ,the amount of quantity demanded rises with every fall in the price

 Exceptions: necessities, Giffens’ paradox

6) Define demand function and write mathematical formula of demand function?

a) Demand function is a function which describes a relationship between one variable and its determinants               

  Mathematical formula Qd=f(P,I,T,PR,EP,EI,SP,Dc,A,O)

7) Define elasticity of demand?

a)The term elasticity is define as the rate of responsiveness in the demand of a commodity for a given change in price or any other determinants of demand .in other words ,it explains the extent of change in quantity demanded because of a given change in the other determining factors

8) Explain price elasticity of demand?

a)price elasticity of demand refers to the ratio of proportionate change in quantity demanded for  product X to the proportionate change in the price of X .price demanded for a particular product may be elastic (Edp.1) or inelastic(Edp,1)

9) Explain income elasticity of demand?

a) Income elasticity of demand refers to the ratio of proportionate change in quantity demanded for product x to the proportionate change in the income of the consumer, income demand for a particular product may be elastic (Edi>1) or inelastic (Edi<1)

10) What is the need of demand forecasting?

a) Forecasting helps to assess the likely demand for products and services and to plan production accordingly. Demand forecasting is helpful not only at the firm level but also at national level.

11) what is the meaning of test marketing?

a) Test marketing means releasing the product on a test basis in a well choosen, limited but representative market. Based on the result of the test marketing, the manufacturer can assess the rate of success for his product.

12) Explain controlled experiment method?

a) Controlled experiments, as the name itself suggests, the company can experiments different homogeneous markets releasing its products with different types of appeal such as different prices, packing, models and so on

13)what is the meaning of normative statement ?

a) : A normative statement usually includes or implies the words ‘ought’ or ‘should’. They reflect people’s moral attitudes and are expressions of what a team of people ought to do

14)Define law of demand

a) Law of demand shows the relation between price and quantity demanded of a commodity in the market. In the words of Marshall, “the amount demand increases with a fall in price and diminishes with a rise in price”.

15)Define demand forecasting ?

a) The information about the future is essential for both new firms and those planning to expand the scale of their production. Demand forecasting refers to an estimate of future demand for the product.

16)Explain about short term demand forecasting ?

a) Short-term demand forecasting is limited to short periods, usually for one year. It relates to policies regarding sales, purchase, price and finances. It refers to existing production capacity of the firm.

17)Explain about short term demand forecasting ?

a) In long-term forecasting, the businessmen should now about the long-term demand for the product. Planning of a new plant or expansion of an existing unit depends on long-term demand

18)Define survey method ?

a) Under this method, information about the desires of the consumer and opinion of exports are collected by interviewing them

19)Define statistical methods ?

A) Statistical method is used for long run forecasting. In this method, statistical and mathematical techniques are used to forecast demand. This method relies on post data.

20)Define cross elasticity of demand ?

a) A change in the price of one commodity leads to a change in the quantity demanded of another commodity. This is called a cross elasticity of demand. The formula for cross elasticity of demand is:

                            Proportionate change in the quantity demand of commodity “X”

Cross elasticity =   -----------------------------------------------------------------------

                            Proportionate change in the price of commodity “

UNIT-II THEORY OF PRODUCTION ANS COST ANALYSIS

1) Define production function and write formula for production function?

a)Production function is defined as a technical relationship between a given set of inputs and the possible output from it.it is a function that defines the maximum amount of output that can be produced with a given set of output

Q=f(L1,L2,C,O,T) (LAND, LABOUR, CAPITAL ,ORGANIZATION ,TECHNOLOGY)

      

 2) Meaning of Isoquant?

 a)Isoquant refers to the curve throughout which equal quantity is obtained from several combinationof inputs underlying it. 

3) Meaning of Isocost?

a) Isocost refers to that cost curve which represents the combination of inputs that will cost the firm the same amount of money .

4) Explain cobb –douglas production function?

a)      Cobb and douglas formulated a production function,in the contest of USA,which revealed constant returns to scale.there were no economies or  diseconomies resulting from large scale production.according to cobb and douglas

                 P=bL^aC^1-a  

        P=total output

        L=the index of employment of labour in manufacturing

         a,a-1 are the elasticities of production

          

  5) MRTS.

    a)Marginal rate of technical substitution refers to the rate at which one input factor is substituted with the other to attain a given level of output

 

 MRTS=  Change in one input,say,capital

.               Change in another input, say, labour

6) Define cost?

a) Cost is defined as the sacrifice made to acquire some benefit. cost is the expenditure incurred to produce a particular product or service

7) Explain about BEA point?

A) Break even analysis refers to analysis of the breakeven point. The BEP is defined as no profit or no loss point. In another words, it points out how much minimum is to be produced to see the profits.BEP= (TR=TC)

8) What is the meaning of laws of returns?

a) Laws of returns to scale, refers to the returns enjoyed by the firm as a result of change in all the inputs. There are three returns

  a) Laws of increasing returns to scale

  b) Laws of constant returns to scale

  c) Laws of decreasing returns to scale

9) Explain about internal economies of scale?

a) Internal economies refer to the economies in production costs which accrue to the firm alone when it expands its output. The internal economies occur as a result of increase in the scale of production.

10) Explain about external economies of scale?

a) External economies refer to all the firms in the industry, because of growth of the industry as a whole or because of growth of ancillary industries. External economies benefit all the firms in the industry as the industry expands

11) Explain explicit cost and implicit cost?

a)Explicit costs are those expenses that involve cash payments. These are the actual or business costs that appear in the books of accounts. These costs include payment of wages and salaries

Implicit costs are the costs of the factor units that are owned by the employer himself. These costs are not actually incurred but would have been incurred in the absence of employment of self – owned factors.

12) Explain out of pocket cost and book cost?

a)Out-of pocket costs also known as explicit costs are those costs that involve current cash payment. Book costs also called implicit costs do not require current cash payments. But the book costs are taken into account in determining the level dividend payable during a period.

13) Explain fixed cost and variable cost

a)Fixed cost is that cost which remains constant for a certain level to output. It is not affected by the changes in the volume of production. But fixed cost per unit decrease, when the production is increased. Fixed cost includes salaries, Rent, Administrative expenses depreciations etc.

Variable is that which varies directly with the variation is output. An increase in total output results in an increase in total variable costs and decrease in total output results in a proportionate decline in the total variables costs. The variable cost per unit will be constant. Ex: Raw materials, labour, direct expenses, etc.

14)write formulas of breakeven point ?

1.       Break Even point (Units) =

2.       Break Even point (In Rupees) = X sales

15)what is diseconomies of scale?

 a) Internal and external diseconomies are the limits to large-scale production. It is possible that expansion of a firm’s output may lead to rise in costs and thus result diseconomies instead of economies.

16)what are the merits of BEA

A)

1.  Information provided by the Break Even Chart can be understood more easily then those contained in the profit and Loss Account and the cost statement.
2. Break Even Chart discloses the relationship between cost, volume and profit. It reveals how changes in profit. So, it helps management in decision-making.

17)What are  demerits of BEA

A)

1. Break-even chart presents only cost volume profits. It ignores other considerations such as capital amount, marketing aspects and effect of government policy etc., which are necessary in decision making.
2. It is assumed that sales, total cost and fixed cost can be represented as straight lines. In actual practice, this may not be so.
3. It assumes that profit is a function of output. This is not always true. The firm may increase the profit without increasing its output.

18)what is the meaning of contribution ?

a) Contribution is the difference between sales and variable costs and it contributed towards fixed costs and profit.

Contribution = Sales – Variable cost

Contribution = Fixed Cost + Profit.

19)what is margine of safety ?

 a)Margin of safety is the excess of sales over the break even sales. It can be expressed in absolute sales amount or in percentage. The formula for the margin of safety is

Present sales – Break even sales     or    

20)what is angle of incidence ?

a)This is the angle between sales line and total cost line at the Break-even point. It indicates the profit earning capacity of the concern.

UNIT-III

INTRODUCTION TO MARKET AND NEW ECONOMIC ENVIRON MENT

1) Define market?

a) Market is defined as a place or point at which buyers and sellers negotiate their exchange of well-defined product or service

2) What is the meaning of perfect competition and perfect market?

a) A market structure in which all firms in an industry are price takers and in which there is freedom of entry into and exit from the industry is called perfect competition. The market with perfect competition conditions is known as perfect market.

3) Explain about price skimming method?

a) Skimming pricing refers to the practice where the products are offered at the highest possible price, which only the creamy layer of the customers can afford. Once the demand from that segment starts fading, then the price will be slowly reduced to make product available to the next segment of the creamy layer. this method is more prevalent in pricing new products and services.

4) Explain about price penetration method?

a) Penetration pricing where the products are priced so low to start with, perhaps to familiarize the products, and as the market picks up, the price also is slowly raised

5) Define monopolistic competition?

a) Monopolistic competition is said to exit when there are many firms and each one produces such goods and services that are close substitutes to each other. They are similar but not identical.

6) Define sole trader?

a) The sole trader is the simplest, oldest and natural forms of business organization. It is also called sole proprietorship. Sole means one, ‘sole trader’ implies that there is only one trader who is the owner of the company

7) What is the meaning of partnership deed?

a) The written agreement among the partners is called the partnership deed. It contains the terms and conditions governing the working of partnership

8) What is the meaning of privatization?

a) It means inducting private ownership in state owned public enterprises with a strategy to reduce the role of government in business.

9) What is the meaning of globalization?

a) Globalization means integrating the economy of a country with the world economy with a view to eliminating supply bottlenecks, improving investment climate, providing a wide choice of quality goods and services to the ultimate consumers.

10) What is the meaning of Liberlization?

a) Liberlization is the process of freeing the economy from the ‘licence-permit raj’

11) What are documents required to formation of Joint Stock Company?

 a)Memorandom of association ,articles of association,prospectus                                                                                   

12) Define Governament Company?

a)      Any company in which not less than 51 percent of the paid up share capital is held by the central governament or by any state government or partly by central governament and partly by one or more of the state govrnaments.

13)define monopoly?

a) The word monopoly is made up of two syllables, Mono and poly. Mono means single while poly implies selling. Thus monopoly is a form of market organization in which there is only one seller of the commodity

14)Define oligopoly market ?

a) The term oligopoly is derived from two Greek words, oligos meaning a few, and pollen meaning to sell. Oligopoly is the form of imperfect competition where there are a few firms in the market, producing either a homogeneous product or producing products, which are close but not perfect substitute of each other.

15)define partnership act?

a) Indian Partnership Act, 1932 defines partnership as the relationship between two or more persons who agree to share the profits of the business carried on by all or any one of them acting for all.

16)define company?

a) Lord justice Lindley explained the concept of the joint stock company from of organization as ‘an association of many persons who contribute money or money’s worth to a common stock and employ it for a common purpose.

17)explain about departmental under tacking ?

a) This is the earliest from of public enterprise. Under this form, the affairs of the public enterprise are carried out under the overall control of one of the departments of the government. The government department appoints a managing director (normally a civil servant) for the departmental undertaking

18)explain about public corporation ?

a) A public corporation is defined as a ‘body corporate create by an Act of Parliament or Legislature and notified by the name in the official gazette of the central or state government. It is a corporate entity having perpetual succession, and common seal with power to acquire, hold, dispose off property, sue and be sued by its name”.

19)define propritory ship of business ?

a) The sole trader is the simplest, oldest and natural form of business organization. It is also called sole proprietorship. ‘Sole’ means one. ‘Sole trader’ implies that there is only one trader who is the owner of the business.

20)explain memorondom of association ?

a) The Memorandum of Association is also called the charter of the company. It outlines the relations of the company with the outsiders. If furnishes all its details in six clause such as (ii) Name clause (II) situation clause (iii) objects clause (iv) Capital clause and (vi) subscription clause duly executed by its subscribers.

UNIT-IV CAPITAL&CAPITAL BUDGETING

1. what is capital?

a).capital refers to the total amount of finances the business requires to meet its business operations both the short run and long-run. Capital is divided into two major types they are

          A )fixed capital         b) working capital

2. Define fixed capital?

A).fixed capital is permanent nature, it is used in the business for acquiring of fixed assets like land and buildings, machinery etc .promotions its sales and e4xpanding operations

3. What is working capital?

A).working capital is the part of total business capital, it is used in the business for day-to-day expenses like wages, raw material purchases etc.

  It is the excess of current assets over and above current liabilities. The following formula is used to determine working capital.

  WORKING CAPITAL = CURRENT ASSETS- CURRENT LIABILITIES

4. Defines current assets?

A) . Current assets are tangible, those assets are used in short period in the business or those are   convertible in to cash easily with in one accounting year.

     Example: cash, stock, sundry debtors, bills receivables etc.

5. What is share?

A). Share is a part of total company’s capital, total capital is divided into parts is called share. Shares are divided into different types these are

1). Equity shares &  2) preference shares.

6. Define debentures?

A). Debentures are the certificates acknowledging the loan taken by the company, they carry fixed rate of interest rate. The debentures are different types..

  1). Convertible and non-convertible debentures.

  2). Secured and unsecured debentures.

  3). Redeemable and irredeemable debentures.

7.  What is capital budgeting ?

A).capital budgeting is the process of evaluating the relative worth of long-term investment proposals based on their profitability. The capital budgeting proposals are replacement of assets , expansions, research & developments.

8. What ate the capital budgeting methods?

A). There are two methods

        I). Traditional methods.

            A).pay-back period method

            B).account-rate of return method

       II). Discounted cash flow methods.

              A). Net present value method

             B). Internal rate of return method

             C). Profitability index method.

9. What is discounting?

A). The process of reducing the future cash inflows to their present values is called discounting.

10. What is PV factor?

A). the present value factor is also called discounting factor. It is used to discount the future cash flows (both in-flows & out-flows) to their present value. The present value of Re.1 over a period of time for different discounting factors used table is PV FACTOR table.

11. What is capital rationing?

A).where the given projects are equally viable and all of these are necessary for the survival of the company. But the company does not have enough resources to finance all these projects. Based on the priorities, the company has to allocate funds for each of the projects

12. What are the cash inflows?

A). cash Inflows refers to cash receipts. It does not refer to future incomes. It may be calculated for a particular project or asset or for the wgole business for one year or series of years.

13) what is trade credit ?

a) Credit is a common source of short-term finance available to all companies. It refers to the amount payable to the suppliers of raw materials, goods etc. after an agreed period, which is generally less than a year

14) What is payback period ?

a) It is the most popular and widely recognized traditional method of evaluating the investment proposals. It can be defined, as ‘the number of years required to recover the original cash out lay invested in a project

15) Write formula of accounting rate of return

a) According to ‘Soloman’, accounting rate of return on an investment can be calculated as the ratio of accounting net income to the initial investment, i.e.,

                                     Average net income after taxes

                         ARR=   ----]--------------------------------- X 100

                                           Average Investment

16) How to calculate net present value ?

a) NPV is the difference between the present value of cash inflows of a project and the initial cost of the project.

NPV= Present value of cash inflows – investment.

17) How to calculate internal rate of return ?

a) The IRR for an investment proposal is that discount rate which equates the present value of cash inflows with the present value of cash out flows of an investment. The IRR is also known as cutoff or handle rate.

                                                       P1 - Q

                                    IRR = L+ --------- X D

                                                   P1 –P2

18) How to caliculate profitability index?

a)                               Present Value of Future Cash Inflow

  Probability index =  ----------------------------------------

                                          Investment

19) Explain the process of capital budgettin ?

a) Capital budgeting is the process of making investment decision in long-term assets or courses of action. Capital expenditure incurred today is expected to bring its benefits over a period of time. These expenditures are related to the acquisition & improvement of fixes assets.

20) What are the steps involved in capital budgeting process ?

          Project generation

1. Project evaluation
2. Project selection
3. Project execution

UNIT-V: FINANCIAL ACCOUNTING AND ANALYSIS

1.  Define accounting?

A).   Accounting also refers to the process of summarizing, analyzing and reporting the business transactions

     According to American Accounting   Association, “accounting is the process of identifying, measuring, and communicating economic information to permit informed judgments and decisions by the users of the information”.

2. What are the branches of accounting?

A). there are various branches of accounting system these are,

    1. Financial accounting 2. Cost accounting 3. Management accounting

3 .Define accounting cycle?

A). accounting cycle covers all the important stages in accounting. It includes the process journal, ledger, trial balance and final accounts.

              

4. What is journal?

A). journal is a French word come from “jour” it means ‘a day’. Journal is a primary entity books of accounting in which transactions are record in chronological order, the moment they take place in business. Recording entries in journal is called journalizing.

5. What is ledger?

A). Ledger is a book that contains several accounts. The process of preparations of accounts  from the journal in to ledger is called posting in the ledger. The example of ledger accounts are sales a/c, cash a/c etc.

    

Format of ledger

Dr                                                                   ACCOUNT                                                                      Cr

date	particulars	L.F no	amount	Date	particulars	L.F.NO	amount
1/02/2012	To cash a/c		xxxxx	21/2/2012	By bank a/c		Xxxxx

6. What is meant by trial balance?

A). trial balance is a statement containing debit and credit balances of various accounts taken out from ledger books as on a particular date. A trial balance must agree on that date.

7. What is capital expenditure?

A). capital expenditure refers to that expenditure incurred to acquire a fixed asset used continuously in the business for the purpose of earning revenue. any amount spent to increase the earning capacity of the asset is also called capital expenditure .

For example: cost of plant and machinery, buildings etc.

8. What is deferred revenue expenditure ?

A).it refers to that portin of expenditure that remains euchanged to profit and loss account of a given period.

9. What is contra entry?

A). contra entry means opposite, it implies that for an entry in cash column of debit side, there is an entry in the opposite side in the bank column.

Example:: cash is deposited into bank , cash is drawn from bank for office use.

10. What is journal   proper?

A). such transactions which can’t be recorded in any of the above subsidiary books are recorded in journal proper

For example:: opening entries ,  closing entries, adjustment entries, purchase / sale of assets on credit basis etc.

11. What is ratio analysis?

A). Ratio analysis is the process of determining  and interpreting numerical relation ship based on financial statements . by computing ratios, it is easy to understand the financial position of the firm . it is used to focus on financial issues such as liquidity, profitability and solvency of a given firm.

12. What is EPS?

A). EPS refers earnings for share is relationship between net profits and the number of shares outstanding at the end of the given period.

EPS= NETPROFIT AFTER TAXES/NO OF SHARES OUT STANDING

13. What is the formula for current ratio?

A). Current ratio is relation ship between the current assets and current liabilities it is standard ratio is 2:1. The following formula is used for computing current ratio..

             Current ratio= current assets/current liabilities

14) Define ratio analysis ?

a) Ratio Analysis stands for the process of determining and presenting the relationship of items and groups of items in the financial statements. It is an important technique of financial analysis. It is a way by which financial stability and health of a concern can be judged

15) Define profitability ratios

a) Profitability ratios: These ratios are calculated to understand the profit positions of the business. These ratios measure the profit earning capacity of an enterprise.

16) Write formula of inventory turnover ratio ?

a)

1. Stock turnover ratio = 

Here,

Average stock=

17) Define liquidity ratio ?

a) Liquidity refers to ability of organisation to meet its current obligation. These ratios are used to measure the financial status of an organisation. These ratios help to the management to make the decisions about the maintained level of current assets & current libraries of the business.

18) Define solvency or leverage ratios

a) Solvency refers to the ability of a business to honour long item obligations like interest and installments associated with long term debts. Solvency ratios indicate long term stability of an enterprise. These ratios are used to understand the yield rate if the organisation.

19) Formula of debt equity ratio ?

a)

1. Debt – equity ratio= =

20) Write formula of current ratio

a)

                Current ratio =

Note: The ideal ratio is 2:1