JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD

JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD B. Tech II BUSINESS ECONOMICS AND FINANCIAL ANALYSIS Previous Question Paper (April/May-2023 - R16)

B. Tech | II | II | R16 | April/May-2023

Answer PaperPaper Code: 134AGMaximum Marks: 75Time: 3 Hours

i) Question paper consists of Part A, Part B. ii) Part A is compulsory, which carries 25 marks. In Part A, answer all questions. iii) In Part B, Answer any one question from each unit. Each question carries 10 marks and may have a, b as sub questions.

Part A

125 marks
a

What is inflation? Distinguish between demand-pull and cost-push inflation.

2 marks

Answer

JNTU

BUSINESS ECONOMICS AND FINANCIAL ANALYSIS

B.Tech, IT, R16, II-II Semester

Inflation refers to a sustained increase in the general price level of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money. It is typically measured as a percentage increase in a price index, such as the Consumer Price Index (CPI).

There are two primary types of inflation:

1. Demand-Pull Inflation: This occurs when there is an increase in aggregate demand for goods and services without a corresponding increase in aggregate supply. Essentially, 'too much money chasing too few goods'. This can be caused by:

  • Increased consumer spending (e.g., due to tax cuts or increased confidence).
  • Increased government spending.
  • Increased export demand.
  • Expansionary monetary policy (e.g., lower interest rates, increased money supply).

When demand outstrips supply, businesses can raise prices, leading to inflation.

2. Cost-Push Inflation: This occurs when the costs of production increase, forcing businesses to raise prices to maintain their profit margins. This is often driven by supply shocks or increased input costs. Causes include:

  • Rising wages (wage-push inflation).
  • Increases in the price of raw materials (e.g., oil price shocks).
  • Increased taxes on businesses.
  • Natural disasters or geopolitical events disrupting supply chains.

Businesses pass these higher costs onto consumers in the form of higher prices.

b

Discuss the merits and demerits of sole proprietorship.

3 marks

Answer

JNTU

BUSINESS ECONOMICS AND FINANCIAL ANALYSIS

B.Tech, IT, R16, II-II Semester

A sole proprietorship is a business owned and run by one individual, with no legal distinction between the owner and the business. It is the simplest form of business organization.

Merits of Sole Proprietorship:

  • Ease of Formation and Dissolution: Requires minimal legal formalities, often just registration. It can be started and closed down quickly.
  • Direct Control and Decision Making: The owner has complete control over all business decisions, allowing for quick adaptation to market changes.
  • All Profits to the Owner: The sole proprietor receives all the profits generated by the business.
  • Secrecy: Business information and strategies can be kept confidential as there is no obligation to disclose them publicly.
  • Personal Satisfaction: The owner derives satisfaction from running their own business and being their own boss.
  • Lower Taxes: Profits are typically taxed as the owner's personal income, which can sometimes be lower than corporate taxes.

Demerits of Sole Proprietorship:

  • Unlimited Liability: The owner's personal assets are at risk to cover business debts and obligations. There is no legal separation between business and personal assets.
  • Limited Capital: Access to capital is often limited to the owner's personal funds and their ability to secure loans, restricting growth potential.
  • Limited Managerial Skills: The business relies on the skills of a single individual, who may not possess expertise in all areas (e.g., marketing, finance, operations).
  • Lack of Continuity: The business's existence is tied to the owner. Death, retirement, or incapacitation of the owner can lead to the business's demise.
  • Difficulty in Expansion: Limited capital and managerial resources make it challenging to scale the business significantly.
  • Limited Bargaining Power: As a single entity, a sole proprietorship may have less bargaining power with suppliers and customers compared to larger firms.
c

Differentiate between movement along a demand curve and shift in the demand curve.

2 marks

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d

Explain, briefly, the survey method of demand forecasting.

3 marks

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e

Define the following: i) Production function ii) Isoquant.

2 marks

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f

Explain the ways by which P/V ratio can be improved.

3 marks

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g

What is accounting period concept? What is its significance?

2 marks

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h

What are the limitations of Financial Statements? Explain them briefly.

3 marks

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i

Distinguish between fund flow analysis and cash flow analysis.

2 marks

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j

Explain the merits of ratio analysis as a tool for interpretation of financial statements.

3 marks

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Part B

2

What are the major sources of funding for a company? Discuss the advantages and disadvantages in each case.

10 marks

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OR
310 marks
a

What are business cycles? What are their various phases?

5 marks

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b

Discuss the effects of business cycles and the measures to be initiated at the firm level and government level to control business cycles.

5 marks

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4

The demand function for a firm is estimated as:

Q = 55 - 0.5P
(where P=Price and Q=Rate of output) and the total cost function
TC = 20 + Q + 0.2Q²
where TC=Total cost, determine:

a) The total revenue function of the firm.

b) The marginal revenue and marginal cost functions and find the rate of output for which marginal revenue equals marginal cost.

c) An equation for profit and the level of output that maximizes total profit.

10 marks

Answer

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OR
510 marks
a

The price of a commodity X falls from Rs.5 per kg to Rs.4 per kg and quantity demanded by consumer A increases from 4kg to 6 kg. Comment on the nature of demand for commodity X in this case.

4 marks

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b

What would you say about the price-elasticity of commodity X, if the quantity demanded remains unchanged?

3 marks

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c

Discuss the smoothing techniques of demand forecasting.

3 marks

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610 marks
a

Distinguish between fixed and variable costs.

3 marks

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b

Discuss the characteristics of long run costs.

3 marks

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c

On the basis of the following cost function:

TC = 250Q - 10Q² + 2Q³
Estimate TC, MC and AC if the output is 200 units.

4 marks

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OR
710 marks
a

What are the features of monopolistic competition.

4 marks

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b

Explain the differences between monopolistic competition and perfect competition.

6 marks

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8

Record the following transactions in the Journal of Hyderabad furniture mart.

2023 January 1Started business with cash Rs.10,000.
January 2Deposited into bank Rs.9,000.
January 3Purchased machinery for Rs. 5,000 from Jatin and gave him a cheque for the amount.
January 15Paid installation charges of machinery Rs.100.
January 20Purchased timber from Navin of the list price of Rs.2,000. He allowed 10% Trade Discount.
January 23Furniture costing Rs.500 was used in furnishing the office.
January 25Sold furniture to Naresh of the list price of Rs.1,000 and allowed him 5% Trade Discount.
January 28Received a cheque from Naresh for Rs.930 in full settlement and sent the cheque to the bank.
January 29Sent to Navin in full settlement a cheque for Rs.1,750.
January 31Paid wages Rs.250 and rent Rs.200.
10 marks

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OR
9

The following is the trial balance of Mr Sivaram on 31st March, 2022. Considering the following adjustments, prepare Trading and Profit & Loss Account for the year ended 31st March, 2022 and a Balance sheet as on that date.

a) Closing stock was valued at Rs.10,000.

b) Wages were outstanding to the tune of Rs.500.

c) Interest received in advance amounted to Rs.150 out of the given balance.

10 marks

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1010 marks
a

On the basis of the following information calculate: i) Gross Profit ratio ii) Debt Equity ratio iii) Working Capital turnover ratio.

5 marks

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b

Calculate Interest coverage ratio from the provided information.

5 marks

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OR
1110 marks
a

Classify the following into cash flows(inflow/outflow) from operating activities, investing activities and financing activities: i) Cash sale of goods ii) Cash payments of salaries and wages iii) Cash paid to suppliers iv) Cash payment for fixed assets v) Cash proceeds from shares vi) Payment of dividend vii) Interest received viii) Interest on debenture ix) Payment of income tax x) Cash payment of a long term loan.

5 marks

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b

Is depreciation a source of funds? Explain.

5 marks

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About this paper

This page contains the question paper of BUSINESS ECONOMICS AND FINANCIAL ANALYSIS from JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD for B. Tech CE II II, April/May-2023, R16.

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