BUSINESS ECONOMICS AND FINANCIAL ANALYSIS

UNIT-1: INTRODUCTION TO BUSINESS AND ECONOMICS

1. a) Define Business? 2M
b) Distinguish between equity shares and preference shares? 3M
c) Explain the characteristics and Factors that influence the choice of business Organization? 10M
2. a) Define sole proprietorship? 2M
b) List the duties or responsibilities of partners? 3M
c) Discuss the prominent theories on objectives of firm? 10M
3. a) Define National Income? 2M
b) Explain what are the causes of Inflation? 3M
c) Explain in detail source of capital for a company? 10M
4. a) Define micro economics? 2M
b) What is partnership deed? List main contents of partnership deed? 3M
c) Explain concept and Importance of National Income? 10M
5. a) Define Business Economics? 2M
b) Discuss GDP,GNP and NNP? 3M
c) Explain Nature and Scope of Business economics 10M
6. a) Define limited liability company ? what are its features? 5M
. b) Define partnership ? Explain its features , advantages and limitations? 5M
7. a) What is inflation? Discuss the causes and types of inflation? 5M
b) Explain in detail the role of business economist? 5M
8. Discuss how business economics is linked with other disciplines or discuss the multi- 10M
disciplinary nature of business economics?
9 a) What do you mean by Business Cycle? State its features and phases? 5M
b) Explain the causes and consequences/effects of business cycle? What are the remedial 5M
measures available for controlling business cycle?
10 Discuss Micro and Macro economics?
UNIT-2 : DEMAND AND SUPPLY ANALYSIS
1. a) Define Elasticity of demand 2M
b) Explain Giffen goods or Giffen Paradox? 3M
c) Discuss Law of demand? What are the assumptions and exceptions to Law of Demand? 10M
2. a) Define Demand Function? 2M
b) State the benefits of Demand Forecasting? 3M
c) Describe the factors influencing the Elasticity of Demand? 5M
d) How is elasticity of demand Measured? 5M
3. a) Define Cross elasticity of Demand? 2M
b) Distinguish between Perishable Goods and Durable Goods? 3M
c) Classify and explain types of Elasticity of Demand? Significance of Elasticity of Demand? 10M
4. a) Define Price Elasticity of Demand? 2M
b) What is Extension and Contraction Demand? illustrate 3M
c) “Elasticity of Demand used in Decision Making” Justify? 10M
5. a) Define Income Elasticity of Demand? 2M
b) Describe the Exceptions to the law of Supply? 3M
 c) Explain the Characteristics of Good Demand Forecasting and factors influencing it? 10M
6. a) Write about the need and sketch the steps involved in Demand Forecasting? 5M
b) Discuss the general Principles, Benefits and limitations of Demand Forecasting? 5M
7. a) What is the Purpose/Reasons/objectives of Demand Forecasting? Explain Survey Method? 5M
b) Discuss in detail the methods of demand forecasting based on non –statistical techniques or 5M
other methods?
8. Describe the methods of demand forecasting based on statistical Techniques? 10M
9 Discuss supply? How do output prices affect supply? What are the determinants of supply? 10M
Explain about supply function?
10 Explain law of supply? Discuss the assumptions and exceptions to the law of supply? 10M

UNIT-3 PRODUCTION, COST, MARKET STRUCTURES AND PRICING

1. a) Define Isocost? 2M
b) Discuss Cobb-Douglas Production Function? 3M
c) Define Production? Discuss the various factors of production? 5M
d) Explain production function with one variable input with an illustration? 5M
2. a) Define Isoquant? 2M
b) Define MRTS? 3M
c) Explain production function with two variable input with an illustration? 5M
d) Briefly explain what are the types of production function? 5M
3. a) Define cost, cost Function? 2M
b) Differentiate between explicit cost and implicit cost? 3M
c) Define law of Returns to scale, what are the types of return to scale? 5M
d) Differentiate between 1)Fixed cost and Variable cost 2)Historical cost and Replacement 5M
cost 3)Accounting cost and Economic cost
4. a) Define Angle of Incidence? 2M
b) Discuss Sunk cost , incremental cost, out-of-packet cost? 3M
c) Explain the nature of different cost curve in the short run? 5M
d) Explain the nature of different cost curves in the long run? 5M
5. a) Define Break –even –analysis? 2M
b) Explain in short 1)Margin of safety, 2)P/V ratio,3) Contribution 3M
c) From the following information you are required to calculate a)p/v ratio 5M
b) Margin of Safety c)BEP sales d)sales required to earn profit of Rs.1,00,000/-
2014 (Rs.) 2015(Rs.)
SALES 1,00,000 1,50,000
PROFIT 40,000 80,000
d) From the following information you are required to calculate break even point expressed in 5M
terms of units and also the new BEP, if selling price is reduced by 10%
Fixed Expenses RS. Variable Expenses RS.
Depreciation 1,00,000 Material 3 rs. Per unit
Salaries 1,00,000 Labour 2 rs per unit
Selling Price 10 rs. Per unit
6. a) Explain what are applications of Break-even- Analysis in Managerial Decision Making , 5M
advantages and disadvantage of BEA?
b) Explain about Graphical Presentation of BEA? 5M
7. a) Explain Market Structures in detail? 5M
b) Explain the price output determination in perfect competition? 5M
8. a) How is price output determined under Monopoly in short and long run? 5M
b) How is price output determined under Monopolistic in short and long run? 5M
9. a) Discuss about Oligopoly and Duopoly markets? 5M
b) Explain Product life cycle? Discuss pricing strategies adopted at different level of product 5M
life cycle?
10 a) Explain various methods of pricing?

UNIT-4 FINANCIAL ACCOUNTING

1. a) Define Account and Accounting? 2M
b) Sketch Accounting cycle? 3M
c) Explain Accounting Concepts? 5M
d) Explain Accounting Conventions? 5M
2. a) Define Book Keeping? 2M
b) Discuss Accounting Equation? 3M
c) Explain Double Entry system of Accounting? What are its advantages and limitations 10M
3. a) What is Journal? Construct the Proforma of Journal? 2M
b) Discuss the rules of Personal, Real and Nominal accounts? 3M
c) Prepare journal for the following transactions, post them in the ledger and Balance the 10M
accounts on 31st marc, 2008.
1. March 1st Abhishek started business with a Capital of 1,00,000/-
2. Goods purchased from sandeep on credit worth 20,000/-
3. Paid cash to sandeep of 10,000 against the goods purchased on credit
4. Abhishek sold goods to Chandan worth 22,000/-
5. Chandan paid 22,000/- to Abhishek against the goods purchased by him
6. Abhishek spent 1000/- towards office expenses.
4. a) What is Trail balance? construct the Proforma of Trail Balance? 2M
b) Discuss the purpose and importance of profit and loss account? 3M
Your are required to prepare the Trial Balanced as on 31-10-08 from the following given 10M
ledger account balances.
Particulars Amount Particulars Amount
Capital 65,500 Furniture 4,000
Creditors 18,200 Bills Receivables 21,300
Debtors 21,350 Salaries outstanding 7,200
Cash in hand 6,750 wages 3,150
Sales 1,20,000 Insurance Prepaid 4,200
Purchases 69,100 Rent 950
Cash at bank 7,800 Bills Payable 4,500
Machinery 35,000 Reserve for Bad Debts 3,250
Discount allowed 5,000 Tax Outstanding 1,110
Drawings 1,510 Interest on investment 2,150
Fixed Deposits 45,000
5. a) Define Outstanding Expenses? How it will be adjusted in final Account? 2M
b) Distinguish between profit and loss account and Balance sheet? 3M
c) From the following Trail balance of Sri Subba Rao as on 31-12-2016 prepare a Trading, 10M
Profit and Loss and Balance Sheet.
Particulars Amount(Rs.) Particulars Amount(Rs.)
Drawings 3000 Capital 15,000
Furniture 500 Creditors 13,500
Machinery 1000 Sales 80,000
Cycle 250 Returns Outwards 500
Debtors 15,000 Discount Allowed 425
Rent 2,400 Trading Expenses 1,800
Salaries 3,600 Stock(1-1-16) 15,000
Purchases 60,000 Return Inwards 1,000
Carriage inwards 750 Carriage outwards 1,000
Rates & taxes 850 Cash in Hand 2,425
Stock as on 31-12-16 Rs.11,000/-

6. A From the following Trail Balance of K traders , Prepare the Trading, Profit and Loss and 10M
Balance sheet for the year ended 31-12-2008.
Particulars Debit Amount(Rs.) Credit Amount (Rs.)
Travelling expenses 1,500
Debtors, Creditors 6,800 4,400
Discount 200
Stock(1-1-2008) 17,100
Machinery 6,000
Provision for Bad Debts 400
Tools 3,200
Bank overdraft 1,300
Motor car 3,000
Cash in hand 100
Commission 4,200
Returns 300 700
Purchases, sales 39,000 70,000
Factory Expenses 1,800
Advertisement 1,800
Carriage 300
Electricity : Factory 350
Office 150
Wages 4,700
Salaries 5,000
Rent & Rates 2,500
Capital 22,000
Drawing 1,200
99,000 99,000
Adjustments:1. Provide 5% Depreciation on Machinery and Tools
2. Maintain Provision for bad debts at Rs.600/-
 3. Closing Stock Rs. 17,000/-
Outstanding Salaries Rs.500/-
7. Prepare the final Accounts from the following Trail Balance for the year ended 21-12-15 of 10M
Sri Parameswaran.
Trail Balance as On 31-12-2015
Debit Amount(Rs.) Credit Amount(Rs.)
Purchases 2,00,000 Sales 4,71,004
Machinery 90,000 Capital 45,000
Returns 5,000 Returns 2,503
Debtors 92,000 Creditors 51,000
Cash at bank 28,000 Provision for bad debts 1,000
Stock(1-1-15) 50,205
Rate and Taxes 4,800
Wages 40,000
Furniture 8,000
Salaries 47,000
Freight 5,502
5,70,507 5,70,507
Adjustments: 1. Closing Stock Rs.56,000
2. outstanding salaries Rs. 6,000
3. Write off Rs.2000 as bad debts create a provision for doubtful debts at 3%
4. Provide 5% depreciation on machinery
5. Interest on Capital @ 5% is allowed.
8. Prepare a Trading and Profit and Loss account and a Balance sheet ended with 30-6-08 of 10M
Sri Sanjay.
Particulars Debit Amount (Rs.) Credit Amount(Rs.)
Capital - 37,000
Cash in hand 4,000 -
Purchases, Sales 45,000 95,000
Returns 500 600
Wages 8,500 -
Power & Fuel 3,500 -
Salaries 6,500 -
Carriage on Purchases 1,800 -
Stock(1-7-07) 7,200 -
Buildings 25,000 -
Machinery 15,000 -
Furniture 5,000 -
Debtors, Creditors 12,000 9,000
General Expenses 2,600 -
Drawings 5,000 -
Adjustments: 1.Closing Stock Rs.14,000
2. Depreciation Rs. 750 & 250 on Machinery and Furniture Respectively
3. Wage Outstanding Rs.500
4. Bad debts to be written off Rs.600/-
5. Charge 5% on drawings
9. From the following Trial Balance of Rao&Sons prepare the Final account, as on 31-12-17 10M
 Particulars Debit Amount(Rs.) Credit Amount(Rs.)
Debtors and Creditors 12,000 7,900
Capital 30,000
Drawings 2,900
Rent & Taxes 570
Trading Expenses 350
Purchases 8,640
Sales 14,290
Purchases Returns 280
Sales Returns 190
Carriage Inwards 250
Wages 2,920
Salaries 1,200
Stock (1-1-17) 3,100
Discount Allowed and received 80 240
Bad Debts 300
Machinery 3,510
Furniture and Fittings 1,000
Cash at Bank 300
Cash in Hand 15,400
52,710 52,710
Stock as on 31-12-17 : 14,220

10. Prepare final accounts from the following Trial Balance of Gopala Krishna for the year
ended 31-3-16.
Trial Balance as on 31-3-16
Debit Balance Amount (Rs.) Credit Balance Amount(Rs.)
Purchases 25,200 Sales 61,604
Furniture 1,600 Capital 35,000
Wages 3,500 Creditors 3,903
Machinery 20,000 Purchase Returns 222
Opening Stock 17,525
Sales Returns 1,200
Debtors 10,400
Carriage Inwards 200
Salaries 10,600
Carriage Outwards 503
Rent & Taxes 2,001
Cash at Bank 8,000
1,00,729 1,00,729
Adjustments: 1. Closing Stock 16,800/-
2. Outstanding salaries Rs.400 ; Prepaid rent Rs.201
 3. Provide 5% to Bad and Doubtful debts on debtors
4. Depreciation on machinery is 10%
Interest on capital 5%
UNIT-5 : FINANCIAL ANALYSIS THROUGH RATIOS
1. a) Define EPS? 2M
b) Distinguish between current ratio and Quick ratio? 3M
c) Explain the advantages and limitations of Ratio Analysis? 5M
d) Explain the objectives and users of ratio Analysis?
2. a) Define Stock Turnover Ratio? 2M
b) Relate “Ratio” and “ Ratio Analysis”? 3M
c) Explain about Proprietary Ratios, Profitability Ratios ? 10M
3. a) Define DTR? 2M
b) What are the limitations of Funds flow Statement?Explain 3M
c) From the following information, calculate 1) Current Ratio 2) Acid Test Ratio 3) ITR 10M
4)Average Debt Collection Period 5) Average Creditors Payment Period.
Give your meaningful inferences. Sales – 1500, cost of sales 1,000, Gross Profit 500
Current Assets : Inventories 125/-, Debtors 250/-, cash 225/-
Current Liabilities : Trade Creditor 200/-
4. a) Define Return on Capital Employeed? 2M
b) What are the Limitations of Cash Flow Statement?Discuss 3M
c) Your are given trading and Profit and loss Account of Mahesh company limited for the year 10M
ended31st December 2012.
Trading and Profit and loss Account
Particulars Amount Particulars Amount
To opening stock 30,000 By net sales 1,10,000
To Purchases 60,000 By Closing Stock 20,000
To Wages 10,000
To Gross Profit (c/d) 30,000
1,30,000 1,30,000
To Administrative Expenses 10,000 By Gross Profit 30,000
To S&D Expenses 5,000 By Sundry Receipt 5,000
To Net Profit 20,000
35000 35,000
Calculate : Gross Profit Ratio, Net Profit Ratio, operating Ratio and Operating Profit Ratio.
5. a) Define Funds flow Statement? 2M
b) Memorise the Report Form of Fund Flow Statement? 3M
c) Mohan Ranga and Co’s condensed Balance Sheets are as under, Prepare Funds flow 10M
statement:
Liabilities 1-4-2012 31-3-2013 Assets 1-4-2012 31-3-2013
Capital 60,000 72,000 Buildings 40,000 46,000
Loan from wife of ------ 18,000 Machinery 25,000 16,000
the M.D
Bank loan 40,000 30,000 Furniture 2,000 1,800
Creditors 16,000 21,000 Stock 25,000 41,000
Debtors 15,000 20,000
Cash 9,000 16,000
 1,16,000 1,41,000 1,16,000 1,14,000
Additional Information: 1. During the Year capital used for promoters expenses Rs.1500/-
2) Depreciation charged to profit and loss account ; Buildings Rs. 4000/-, Machinery
Rs.5000/- and Furniture Rs.200/-
3) Income Tax Paid is Rs. 14,000
6. From the following information prepare cash flow statement. 10M
Liabilities 31-12-2009 31-12-2010 Assets 31-12-2009 31-12-2010
Share capital 1,40,000 1,48,000 Cash 18,000 15,600
Debentures 24,000 12,000 Debtors 29,800 35,400
Reserve for bad 1,400 1,600 Stock 98,400 85,400
debts
Trade Creditors 20,720 23,680 Land 40,000 60,000
P&L account 20,080 21,120 Goodwill 20,000 10,000
2,06,200 2,06,400 2,06,200 2,06,400
In addition, you are given,
1. Total Dividend paid Rs.7,000/-
2. Land was purchased for Rs.20,000/-
3. Amount provided for amortization of goodwill Rs.10,000/-
4. Debentures paid off Rs.12,000/-
7. Following are the balance sheet of Krishna Ltd Jaipur, for the year 2008-2009 10M
BALANCE SHEET
Liabilities 31-3-08 31-3-09 Assets 31-3-08 31-3-09
Equity Share Capital 3,00,000 3,50,000 Machinery 5,10,000 6,20,000
15% Preference Share 2,00,000 1,00,000 Investments 30,000 80,000
15% Debentures 1,00,000 2,00,000 Current Assest 2,00,000 3,05,000
Reserves & Surplus 1,10,000 2,70,000 Cash in Hand 40,000 70,000
Current Liabilities 80,000 1,60,000 Discount on Issue of 10,000 5,000
debentures
7,90,000 10,80,000 7,90,000 10,80,000
Additional Information:
1. A machinery with book value 40,000 were sold for 25,000
2. 15% preference shares were redeemed a a premium of 15% on 31.3.09
3. Dividend on equity shares @ 15% was paid for the year 2008 during 2009
4. Depreciation charged during 2009 was 60,000
You are asked to prepare a Cash Flow Statement as Per AS-3 (revised)

8. The following information is obtain from the books of ever green co.ltd for the years ended 10M
31st dec 2001 and 2002.
Liabilities 2001 2002 Assets 2001 2002
Creditors 20,000 16,000 Cash at bank 15,380 26,020
Bills payables 12,750 6,500 Trade debtors 11,260 11,710
Debentures 1,00,000 1,00,00 Stock 56,160 49,020
Reserves 67,250 84,500 Fixed asstes 2,17,200 2,19,810
Capital 1,00,000 1,00,000
3,00,000 3,00,000 3,00,000 3,00,000
Additional Information:
2001 2001
 Sales 1,80,000 1,95,000
Net Profit 16,000 17,250
Gross Profit 40,000 60,000
You are required to arrange to above balance sheet figures in form suitable for analysis
and show separately the following ratios. 1) Gross profit ratio 2) Operating ratio
3) Proprietary ratio 4) Current Ratio 5) Debtors turnover ratio 6) Stock turnover ratio
9. From the following particulars, prepare the balance sheet of ABC limited, which has only 10M
one class of capital: Sales for the year Rs.20,00,000/-, Gross profit ratio 25%, Current
assets ratio 1.50 , Quick Asset Ratio(cash and Debtors) 1.25, Stock Turnover ratio 15%,
Debts Collection Period 1month 15 days , Turnover to Fixed assets 1.5, Ratio of Reserves
to share capital 0.33, Fixed assets to net Worth 0.83
10. From the following balance sheet of Thakur Publishers as on 31st Dec,2008 and 2009 10M
prepare:1. Statement of changes in Working Capital 2. A statement of Sources and uses of
funds.
Thakur Publishers Balance Sheet as on 31st December, 2008
Liabilities 2008 2009 Assets 2008 2009
Equity share capital 10,00,000 8,00,000 Good will 10,000 5,000
9% Redeemable 5,00,000 Land and Building 8,00,000 15,00,000
preference share 4,00,000
capital
12% Debentures 7,00,000 5,00,000 Plant &Machinery 15,00,000 10,00,000
General Reserve 3,00,000 2,00,000 Furniture 50,000 45,000
Profit and Loss A/c 5,00,000 7,00,000 Investments 5,00,000 4,00,000
Share Premium 50,000 80,000 Stock 6,00,000 4,00,000
13% public Deposit 8,00,000 12,00,000 Debtors 2,00,000 1,70,000
Sundary Creditors 80,000 1,00,000 Bills Receivables 80,000 90,000
Bill Payable 60,000 40,000 Accrued income 10,000 6,000
Bank overdraft 1,00,000 1,20,000 Prepaid Expenses 2,000
Outstanding 3,000 1,000 Cash at Bank 3,00,000 1,50,000
Expenses
Cash in Hand 43,000 23,000
40,93,000 41,41,000 40,93,000 41,41,000