JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD
JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY HYDERABAD B. Tech II Year BUSINESS ECONOMICS AND FINANCIAL ANALYSIS Previous Question Paper (August/September - 2022 - R18)
Answer any five questions. All questions carry equal marks.
Main
What is the role of business economists in a business organization?
Answer
The role of a business economist is to act as a bridge between economic theory and practical business decision-making. They provide analytical support to management to ensure efficient resource allocation and profit maximization. Their key roles include:
- Demand Forecasting: Utilizing statistical and econometric models to predict future demand for products, which is essential for production planning, inventory management, and capacity expansion.
- Cost and Production Analysis: Evaluating the cost structure of the firm to identify economies of scale and optimize the production process, ensuring that the firm operates at the minimum efficient scale.
- Pricing Strategies: Analyzing market structures (perfect competition, monopoly, oligopoly) to determine optimal pricing policies that maximize revenue while remaining competitive.
- Capital Management: Assisting in investment appraisal by evaluating the profitability of new projects using techniques like Net Present Value (NPV) and Internal Rate of Return (IRR).
- External Environment Analysis: Monitoring macroeconomic indicators such as inflation, interest rates, government fiscal policies, and global trade trends to assess their impact on the firm's operations and long-term strategy.
- Risk Assessment: Identifying potential business risks and formulating strategies to mitigate them through diversification or hedging.
What are the long-term sources of capital for a company?
Answer
Long-term sources of capital are financial instruments used by companies to fund permanent assets or major expansion projects, typically with a maturity period exceeding five years. The primary sources include:
- Equity Shares (Ordinary Shares): These represent ownership in the company. Shareholders have voting rights and receive dividends from profits. It is a permanent source of capital as it is not repaid during the company's lifetime.
- Preference Shares: These carry a fixed dividend rate and priority over equity shareholders in the payment of dividends and repayment of capital during liquidation. They act as a hybrid between debt and equity.
- Debentures and Bonds: These are debt instruments issued by the company to borrow funds from the public or financial institutions. The company is legally obligated to pay a fixed rate of interest, regardless of profit levels.
- Retained Earnings: This is the internal source of capital, representing the portion of net profits not distributed as dividends but reinvested back into the business for growth and expansion.
- Term Loans from Financial Institutions: Companies secure long-term loans from banks or specialized financial institutions (e.g., development banks) for capital expenditure, usually backed by collateral.
- Venture Capital and Private Equity: Often used by startups or firms in high-growth phases, these involve external investors providing capital in exchange for equity stakes and active management participation.
What are the various phases of business cycle? Briefly explain them.
Answer
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Why inflation affects poor more than rich?
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What would you expect to be the behavior of cross elasticity of the following pairs of products? Would they be positive, negative or zero? Why?
- Coca cola and Pepsi cola
- Desks and chairs
- Dark chocolate and children’s socks
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Explain why companies spend money for forecasting the future demand of their products and brief on methods of demand forecasting.
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What is the relevance of demand analysis to marketing people? Based on the given demand function
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Examine the determinants of supply and brief on law of supply.
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Distinguish between:
- Explicit costs and implicit costs
- Real cost and opportunity cost
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Indicate the type of market structures prevailing in India among the producers of each of the following goods and services: i) electricity ii) mobile phone services iii) airline transport service iv) toothpaste v) banking services vi) television transmission services.
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Explain the laws of returns to scale with an illustration.
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What are the applications of break-even analysis?
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Journalize the following transactions in the books of Mukesh & Co.:
- Jan 1: Started business with Rs. 1,00,000; Paid into bank Rs. 80,000
- Jan 3: Bought office furniture by paying through cheque Rs. 30,000
- Jan 5: Sold goods for cash Rs. 10,000
- Jan 8: Paid Anil Rs. 6,000 and was allowed a discount Rs. 600
- Jan 12: Received from Mahindra a cheque for Rs. 6,900 and allowed him a discount of Rs. 100; cheque deposited into bank
- Jan 18: Withdraw from bank for office use Rs. 10,000
- Jan 24: Received for cash sales by cheque Rs. 12,000
- Jan 31: Draw for personal use cash Rs. 1,000; salaries paid Rs. 5,000
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What are the errors disclosed by trial balance?
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Calculate i) Current ratio and ii) Quick ratio given the following:
| Liabilities | Rs. | Assets | Rs. |
|---|---|---|---|
| Bank overdraft | 40,00,000 | Cash in hand | 2,00,000 |
| Creditors | 60,00,000 | Cash in bank | 10,00,000 |
| Outstanding creditors | 7,00,000 | Bills receivable | 30,00,000 |
| Provision for taxation | 20,00,000 | Stock | 40,00,000 |
| Dividends proposed | 10,00,000 | Debtors | 70,00,000 |
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What is meant by “Funds from operations” and explain the procedure for preparation of funds flow statement?
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