Business Economic and Financial

Analysis

Subject Code:(SM405MS)
Regulations : R16 JNTUH
Class:II Year B.Tech ECE II Semester

Department of Electronics and communication Engineering

BHARAT INSTITUTE OF ENGINEERING AND TECHNOLOGY
Ibrahimpatnam -501 510, Hyderabad
 BUSINESS ECONOMICS AND FINANCIAL ANALYSIS
(SM405MS)
Course Overview:

The present course is designed in such a way that it gives an overview of concepts of Economics.
Managerial Economics enables students to understand micro environment in which markets operate
how price determination is done under different kinds of competitions. Financial Analysis gives
clear idea about concepts, conventions and accounting procedures along with introducing students
to fundamentals of ratio analysis and interpretation of financial statements. Break Even Analysis is
very helpful to the Business Concern for Decision Making, controlling and forward Strategic
Planning. Ratio analysis gives an idea about financial forecasting, financial planning, controlling
the business and decision making.

Prerequisites:

 Introduction to Managerial Economics & Concepts.

 Business and New Economic Environment.
 Financial Accounting Concepts.

Course Objectives:

 Understand the concepts of managerial economics and the market dynamics namely demand
elasticity of demand and pricing in different market structures.
 Gain the knowledge on the production theories and cost analysis while dealing with the
production and the concept of breakeven analysis.
 Examine the price-output decisions under different types of marketing structures and the
significance of different forms of business organizations existing in the modern business.
 Describe the significance of the project management, capital budgeting, estimation of the
projects through capital budgeting methods for choosing the best and optimal projects.
 Provide the optimal decisions for acquiring the knowledge on financial accounting,
management accounting and ratio analysis.

Course Outcomes:

 Understand the elasticity of the demand of the product, different types, and measurement of
elasticity of demand and factors influencing on elasticity of demand.
 Recognize the Production function, features of Iso-Quants and Iso-Costs, different types of
internal economies, external economies and law of returns with appropriate examples.
 Illustrate the features, merits and demerits of different forms of business organizations existing
in the modern business.
 Enumerate the concept of capital budgeting and allocations of the resources through capital
budgeting methods and compute simple problems for project management.

II Yr-ECE – II Sem. 107

  Evaluate different types of financial ratios for knowing liquidity and profitability positions of
business concern.

How Program Outcomes are assessed:

Program Outcomes Level Proficiency assessed by

Engineering knowledge: Apply the knowledge of mathematics,

science, engineering fundamentals, and an engineering Assignments, Tutorials,
PO1 2
specialization to the solution of complex engineering problems. Mock Tests
Problem analysis: Identify, formulate, review research literature,
and analyze complex engineering problems reaching substantiated Assignments, Tutorials,
PO2 2
conclusions using first principles of mathematics, natural sciences, Mock Tests
and engineering sciences.
Design/development of solutions: Design solutions for complex
engineering problems and design system components or processes Assignments, Tutorials,
PO3 2
that meet the specified needs with appropriate consideration for the Mock Tests
public health and safety, and the cultural, societal, and
environmental considerations.
Conduct investigations of complex problems: Use research-based
knowledge and research methods including design of experiments,
PO4 - -
analysis and interpretation of data, and synthesis of the information
to provide valid conclusions.
Modern tool usage: Create, select, and apply appropriate
techniques, resources, and modern engineering and IT tools
PO5 - -
including prediction and modeling to complex engineering activities
with an understanding of the limitations.
The engineer and society: Apply reasoning informed by the
contextual knowledge to assess societal, health, safety, legal and Assignments, Tutorials,
PO6 2
cultural issues and the consequent responsibilities relevant to the Mock Tests
professional engineering practice
Environment and sustainability: Understand the impact of the
professional engineering solutions in societal and environmental
PO7 - -
contexts, and demonstrate the knowledge of, and need for
sustainable development.
Ethics: Apply ethical principles and commit to professional ethics
PO8 and responsibilities and norms of the engineering practice.
- -
Individual and team work: Function effectively as an individual, Assignments, Tutorials,
PO9 and as a member or leader in diverse teams, and in multidisciplinary 3 Mock Tests
settings.
Communication: Communicate effectively on complex engineering
PO10 activities with the engineering community and with society at large,
- -
such as, being able to comprehend and write effective reports and

II Yr-ECE – II Sem. 108

 design documentation, make effective presentations, and give and
receive clear instructions.
Project management and finance: Demonstrate knowledge and
Assignments, Tutorials,
PO11 understanding of the engineering and management principles and 3 Mock Tests
apply these to one‟s own work, as a member and leader in a team, to
manage projects and in multidisciplinary environments.
Life-long learning: Recognize the need for, and have the
PO12 preparation and ability to engage in independent and life-long
- -
learning in the broadest context of technological change.
 End-of-course surveys (Quarterly).
 Instructor evaluation reports (Quarterly).
 Department performance report (Quarterly).
 Student exit survey (Yearly).
 Alumni survey (Yearly).
 Alumni Advisory Board (Once or twice yearly).
 Student Advisory Committee (Once or twice yearly).

How Program Specific Outcomes are assessed:

Program Specific Outcomes (PSO) Level Proficiency assessed by

Professional Skills: The ability to understand, analyze and develop
computer programs in the areas related to algorithms, system
- -
PSO1 software, multimedia, web design, big data analytics, and
networking for efficient design of computer-based systems of
varying complexity.
Problem-Solving Skills: The ability to apply standard practices and
strategies in software project development using open-ended
PSO2 - -
programming environments to deliver a quality product for business
success.
Successful Career and Entrepreneurship: The ability to employ
Assignments, Tutorials,
modern computer languages, environments, and platforms in 3
PSO3 Mock Tests
creating innovative career paths to be an entrepreneur, and a zest for
higher studies.

1: Slight (Low) 2: Moderate (Medium) 3: Substantial (High) 4:None

 Employer satisfaction survey (Yearly).

 Alumni survey (Yearly).
 Placement records, higher education records.

SCOPE OF THE COURSE:

The student will be given an insight into what is Business theory and how to integrate with the
Accounting Concepts.

II Yr-ECE – II Sem. 109

The student will understand the Business theories, Business environment, and business
related decisions in a day to day operations. The student will be in a position to understand
the following concepts:

 Business Economics, Demand Analysis

 Elasticity of Demand, Demand forecasting
 Theory of production & cost analysis, Production function, Break even Analysis
 Market Structures, Types of competition, Pricing Strategies
 Business & New Economic Environment
 Introduction to Financial accounting Financial Analysis through Ratios.

Towards the end of the course it is expected that the students would be matured enough to
understand and evaluate the Economics theories in real life situations of Business.

Course Content:

UNIT – I: - Introduction to Business and Economics:

Business: Structure of Business Firm, Theory of Firm, Types of Business Entities, Limited Liability
Companies, Sources of Capital for a Company, Non-Conventional Sources of Finance.

Economics: Significance of Economics, Micro and Macro Economic Concepts, Concepts and
Importance of National Income, Inflation, Money Supply in Inflation, Business Cycle, Features and
Phases of Business Cycle. Nature and Scope of Business Economics, Role of Business Economist,
Multidisciplinary nature of Business Economics.

UNIT – II: - Demand and Supply Analysis:

Elasticity of Demand:

Elasticity, Types of Elasticity, Law of Demand, Measurement and Significance of Elasticity of

Demand, Factors affecting Elasticity of Demand, Elasticity of Demand in decision making,
Demand Forecasting: Characteristics of Good Demand Forecasting, Steps in Demand Forecasting,
Methods of Demand Forecasting. Supply Analysis: Determinants of Supply, Supply Function &
Law of Supply.

UNIT- III: - Production, Cost, and Market Structures & Pricing:

Production Analysis: Factors of Production, Production Function, Production Function with one
variable input, two variable inputs, Returns to Scale, Different Types of Production Functions.
Cost analysis: Types of Costs, Short run and Long run Cost Functions.

II Yr-ECE – II Sem. 110

 Market Structures: Nature of Competition, Features of Perfect competition, Monopoly,
Oligopoly, and Monopolistic Competition. Pricing: Types of Pricing, Product Life Cycle based
Pricing, Break Even Analysis, & Cost Volume Profit Analysis.

UNIT - IV

Financial Accounting: Accounting concepts and Conventions, Accounting Equation, Double-

Entry system of Accounting, Rules for maintaining Books of Accounts, Journal, Posting to Ledger,
Preparation of Trial Balance, Elements of Financial Statements, and Preparation of Final Accounts.

UNIT - V

Financial Analysis through Ratios: Concept of Ratio Analysis, Liquidity Ratios, Turnover Ratios,
Profitability Ratios, Proprietary Ratios, Solvency, Leverage Ratios (simple problems), Introduction
to Fund Flow and Cash Flow Analysis (simple problems).

Books and References:

TEXT BOOKS

I. A.R. Aryasri, “Managerial Economics and Financial Analysis”, TMH Publications, 3nd Edition,
2007.

REFERENCE BOOKS:

I. D.N. Dwivedi, “Managerial Economics”, Vikas Publication House Pvt. Ltd, 2nd Edition, 2012.
II. S.N. Maheshwari & S.K.Maheshwari, “Financial Accounting”, Vikas Publication House
Pvt.Ltd, 4th Edition, 2012.
III. R. Narayana Swamy, “Financial Accounting- A managerial Perspective”, Pearson publications,
1st Indian Reprint Edition, 2012.
IV. J.V. Prabhakar Rao & P.V. Rao, “Managerial Economics & Financial Analysis”, Maruthi
Publishers, 1st Revised Edition, 2011.
V. M.Kasi Reddy & Saraswathi, “Managerial Economics and Financial Analysis”, PHI
Publications, New Delhi, 10th Revised Edition, 2012.
VI. Varshney & Maheswari, “Managerial Economics”, Sulthan Chand Publishers, 1st Revised
Edition, 2009.

NPTEL Web Course:

https://onlinecourses.nptel.ac.in/noc19_hs28/preview
https://onlinecourses.nptel.ac.in/noc19_ma07/preview
https://onlinecourses.nptel.ac.in/noc19_mg01/preview

II Yr-ECE – II Sem. 111

 NPTEL Video Course:

https://www.youtube.com/watch?v=51-
nXPx3cw4&list=PLbMVogVj5nJTG7ahmEJc4MlcGT0hCr5ik
https://www.youtube.com/watch?v=vLPpF0hunwc&list=PLbMVogVj5nJRTAVF4-
tueujAFiLKIV3Mo

Relevant syllabus for GATE: Not Applicable

Relevant syllabus for IES: Not Applicable

Course
Teaching
Session Week Topic Learning Reference
Methodology
Outcomes
Unit - 1
Business: Structure of Business Firm, Theory of
1
Firm Explain Chalk and talk
Types of Business Entities, Limited Liability
2 1
Companies Understand Chalk and talk
3 Sources of Capital for a Company Explain
Chalk and talk
4 Non-conventional Sources of Finance. Explain
Chalk and talk
Significance of Economics, Micro and Macro
8 2 Understand
Economic Concepts Chalk and talk
T1
Concepts and Importance of National Income,
6 Understand PPT
Inflation
7 Money Supply in Inflation, Business Cycle Explain
Chalk and talk
8 Features and Phases of Business Cycle Explain
Chalk and talk
3
Nature and Scope of Business Economics, Role of
9 Understand
Business Economis Chalk and talk
10 Multidisciplinary nature of Business Economics Understand
Chalk and talk
Unit - 2
11 Elasticity, Types of Elasticity, Law of Demand Understand
Chalk and talk
Measurement and Significance of Elasticity of
12 4 Demonstrate
Demand Chalk and talk
13 Factors affecting Elasticity of Demand, Understand
Chalk and talk T1

14 MOCK TEST-1

15 5 Elasticity of Demand in decision making Understand

Chalk and talk
16 Characteristics of Good Demand Forecasting Demonstrate
Chalk and talk

II Yr-ECE – II Sem. 112

 17 Steps in Demand Forecasting, Understand
Chalk and talk
18 Methods of Demand Forecasting Understand
Chalk and talk
6
19 Determinants of Supply, Explain
Chalk and talk
20 Supply Function & Law of Supply Explain
Chalk and talk
Unit - 3
21 Factors of Production, Production Function Understand
Chalk and talk
Production Function with one variable input, two
22 7 Understand
variable inputs Chalk and talk
Returns to Scale, Different Types of Production
23 Understand T1
Functions Chalk and talk
Types of Costs, Short run and Long run Cost
24 Understand
Functions Chalk and talk
Nature of Competition, Features of Perfect
25 8 Understand
competition Chalk and talk
Monopoly, Oligopoly, and Monopolistic
26 Explain
Competition Chalk and talk
I Mid Examinations
UNIT – 3 Contd.
27 Types of Pricing, Product Life Cycle based Pricing Understand
Chalk and talk
9 T1
Break Even Analysis, and Cost Volume Profit
28 Understand
Analysis Chalk and talk
UNIT – 4
29 Accounting concepts and Conventions Understand Chalk and talk
Accounting Equation, Double-Entry system of
30 10
Accounting
Understand Chalk and talk
31 Rules for maintaining Books of Accounts Understand Chalk and talk
32 Journal Solve T2
Chalk and talk
33 11 Posting to Ledger Solve
Chalk and talk
34 Preparation of Trial Balance Solve Chalk and talk
35 Elements of Financial Statements Solve
Chalk and talk
36 Preparation of Final Accounts Solve
12 Chalk and talk

37 MOCK TEST – II

UNIT – 5
38 13 Concept of Ratio Analysis, Liquidity Ratios Solve

II Yr-ECE – II Sem. 113

 Chalk and talk
39 Turnover Ratios, Profitability Ratios Solve
Chalk and talk
40 Proprietary Ratios, Solvency Ratios Solve T2
Chalk and talk
41 Ratios (simple problems) Solve
Chalk and talk
42 14 Introduction to Fund Flow Solve
Chalk and talk
43 Cash Flow Analysis Solve
Chalk and talk
44 Revision - 1st Chapter Solve Chalk and talk
45 Revision - 2nd Chapter Solve Chalk and talk
46 15 Revision - 3rd Chapter Solve Chalk and talk
th
47 Revision - 4 Chapter Solve Chalk and talk
48 Revision - 5th Chapter Solve Chalk and talk
II Mid Examinations

Mapping Course Outcomes Leading to the Achievement of Program Outcomes and Program
Specific Outcomes:

Program Specific
Program Outcomes (PO) Outcomes (PSO)
Outcomes
Course

PO PSO PSO
PO1 PO2 PO3 PO4 PO5 PO6 PO7 PO8 PO10 PO11 PO12 PSO1
9 2 3

CO1 2 3 2 - - 3 - - 2 - 3 - - - -
CO2 2 2 - - - - - - - - 2 - - - -
CO3 - 2 2 - - - - - - - - - - - -
CO4 2 2 - - - - - - 2 - 3 - - - 3
CO5 - 2 2 - - 2 - - 3 - 2 - - - 2

QUESTION BANK:

UNIT-I:
Short Answer Questions-
1. Define Business Economics. [L1:REMEMBERING]
2. What is the structure of Business Firm? [L1:REMEMBERING]
3. What are the types of Business Entities? [L1:REMEMBERING]
4. What is the difference between Micro Economics and Macro Economics?

II Yr-ECE – II Sem. 114

 [L1:REMEMBERING]
5. What is the meaning of Limited Liability Companies? [L1:REMEMBERING]
6. Explain National Income? [L2: UNDRESTANDING]

Long Answer Questions-

1. Define Business Economics (BE)? Explain its nature and scope. Illustrate how it helps in solving
managerial problems. Does it (BE) have any links with any other disciplines?
[L1:REMEMBERING]
2. What is the meaning of Business Cycle and what are the phases of Business Cycle?
[L1:REMEMBERING]
3. What are the sources of Capital for a Company and what are the non-conventional sources of
finance?
4. What are the types of Business Organizations and explain in detail?
[L1:REMEMBERING]

UNIT – II
Short Answer Questions-
1. Discuss the determinants of Demand? [L6: CREATING]
2. Define Elasticity of Demand. [L1:REMEMBERING]
3. Give a short note on Statistical method. [L1:REMEMBERING]
4. What is Demand forecasting? [L1:REMEMBERING]
5. What are the determinants of Supply? [L1:REMEMBERING]

Long Answer Questions-

1. What is demand analysis, its nature and types of demand, factors determining demand? Define
law of Demand, what are its exceptions & significance. [L1:REMEMBERING]
2. What do you understand by elasticity of demand? Explain the factors governing it, its different
types of elasticity of demand and their measurements? [L1:REMEMBERING]
3. What do you understand by demand forecasting? Explain different methods of demand
forecasting. [L1: REMEMBERING]
4. Is it necessary to accurately estimate the future demand for a product? How can you measure
future demand in respect of services? [L1: REMEMBERING]

UNIT – III

II Yr-ECE – II Sem. 115

Short Answer Questions-
1. Define Production Management. [L1:REMEMBERING]
2. Write a short note on Isocosts and Isoquants. [L1:REMEMBERING]
3. What are the Least cost combination Inputs? [L1:REMEMBERING]
4. Write a short note on Break even analysis. [L1:REMEMBERING]
5. Distinguish Output costs vs Input costs. [L2: UNDRESTANDING]
6. What are the characteristics of markets? [L1:REMEMBERING]
7. Define Perfect competition. [L1:REMEMBERING]
8. What is Monopoly? [L1:REMEMBERING]
9. What are the characteristics of Business? [L1:REMEMBERING]
10. Define Skimming and Penetration Pricing. [L1:REMEMBERING]

Long Answer Questions-

11. Please write Short notes with graphs on the following: (a) Isoquants and their features (b) Cobb-
Douglas production function (c) Law of increasing returns. [L1:REMEMBERING]
12. Explain Law of returns with appropriate examples and discuss the economies of scale that
accrue to a firm. [L1:REMEMBERING]
13. Explain the different cost concepts used in the process of cost analysis.
[L1:REMEMBERING]
14. Explain how the short run and long run influence the cost. [L1: REMEMBERING]
15. What is Break Even Point (BEP)? How do you determine it? [L1:REMEMBERING]
16. What is Break Even Analysis (BEA)? What are the assumptions of BEA and what is the
significance and what are the limitations of BEA? [L1:REMEMBERING]
17. What do you mean by Public Enterprises and explain the forms of public enterprises.
[L1:REMEMBERING]

UNIT – IV
Short Answer Questions-
1. Define Accounting. [L1:REMEMBERING]
2. What are the conventions of Accounting? [L1:REMEMBERING]
3. Give a short note on Journal and Ledger. [L1:REMEMBERING]
4. What is Trial balance? [L1:REMEMBERING]
5. Draw a format of Profit and Loss Account? [L1:REMEMBERING]
6. Draw a format of Balance Sheet? [L1:REMEMBERING]

Long Answer Questions-

II Yr-ECE – II Sem. 116

 1. Prepare Trail Balance from the following information in the Books of Hrishikesh: Sundry
debtors - 14,000; Hrishikesh Capital A/c - 15,000; Interest from bank A/c 750; Discount
received – 100; Sales returns a/c - 100; Purchase returns a/c - 200; Bank A/c - 9,500; Rent
A/c - 1,000; Salaries A/c - 400; Wages A/c - 50; Purchase A/c - 2000; Sales A/c - 11,000.
2. Write down the format of Trading, Profit & Loss a/c, Balance Sheet with contents?
3. A firm’s sale during the year was Rs. 4, 00, 000 of which 60% were on credit basis. The
balance of debtors at the beginning and end of the year were 25,000 and 15,000
respectively. Calculate debtors’ turnover ratio of the firm and find out debt collection
period.
4. Journalize the following in the books of Rama Krishna Ltd for the year ended 31-Mar-2012
and also prepare ledger accounts for the same. (All Amounts in Rs.)
March 1 Rama Krishna commenced business with 40,000
March 1 Deposited into bank 15,000
March 5 Purchase goods for cash 15,000
March 7 Purchase goods from Sirisha 8,000
March 9 Retuned goods to Sirisha 1,000
March 15 Sold goods for cash 10,000
March 17 Sold goods to Anupam 5,000
March 19 Depreciation on furniture 500
March 20 Salaries paid 1,000
March 25 Commission received 1,500

UNIT – IV
Short Answer Questions-
1 Give a short note on types of Ratio’s. [L1:REMEMBERING]
2 What are the Liquidity Ratios? [L1:REMEMBERING]
3 What are the Turnover Ratios? [L1:REMEMBERING]
4 What are the Profitability Ratios? [L1:REMEMBERING]
5 What are the Proprietary Ratios? [L1:REMEMBERING]
6 What are the Solvency Ratios? [L1:REMEMBERING]
7 What are the Leverage Ratios? [L1:REMEMBERING]
8 Difference between Cash Flow Analysis and Funds Flow Analysis? [L2:
UNDRESTANDING]
Long Answer Questions-
1. What is Ratio Analysis? What are its advantages and Disadvantages?
[L1:REMEMBERING]
2. What is Ratio Analysis? Write are the types of ratios (Liquidity, activity, capital structure &
profitability ratios) [L1:REMEMBERING]
UNIT – I

1. The form of business organization that has the largest sales volume is the:

II Yr-ECE – II Sem. 117

 a. partnership. b. corporation. c. cooperative. d. multinational.

2. The simplest form of business ownership is a:

a. proprietorship. b. partnership. c. corporation. d. cooperative.

3. Which of the following is an advantage of a sole proprietorship?

a. ease of starting a business. b. being your own boss.

c. pride of ownership. d. all of the above.

4. The main disadvantage of a general partnership is:

a. the unlimited liability of the partners. b. disagreement amongst partners.

c. shared management. d. difficulty of termination.

5. A ___________ is a business with two or more owners:

a. corporation. b.conglomerate. c.partnership. d. public corporation.

6. A partner who is not actually involved in the partnership but lends his name for public
relations purposes is a:

a. silent partner. b. general partner. c. nominal partner. d.

dominant partner.
7. A_____________partner is an owner who has unlimited liability and is active in managing
the firm:

a. senior partner. b. general partner. c. silent partner. d. limited

partner.

8. Which of the following is probably the most important reason for incorporating?

a. limited liability of shareholders. b. more money for investment.

c. increased flexibility. d. shared management.

9. A__________ provides for the greatest degree of continuity:

a. general partnership. b. joint venture. c. corporation. d. sole

proprietorship.

10. The major advantage of a franchise is:

a. training and management assistance. b. personal ownership.

c. nationally recognized name. d. all of the above.

11. Which of the following is a characteristic of a co-operative?

II Yr-ECE – II Sem. 118

 a. profits are not subject to income tax.
b. one vote per share.
c. dividends are paid on a per share basis.
d. all of the above.

12. The most effective form of business organization for raising capital is the:

a. joint venture. b. partnership. c. corporation. d. proprietorship.

13. Co-operatives play an important role in:

a. aerospace. b. agriculture. c. manufacturing. d. all of the

above.

UNIT – II
1) Who explained the “Law of Demand”? ( )
(a) Joel Dean (b) Cobb-Douglas
(c) Marshall (d) C.I.Savage&T.R.Small
2) Demand Curve always ________ sloping. ( )
(a) Positive (b) Straight line (c) Negative (d) Vertical
3) Geffen goods, Veblan goods and speculations are exceptions to___. ( )
(a) Cost function (b) Production function
(c) Law of Demand (d) Finance function
4) Who explained the “Law of Demand”? ( )
(a) Cobb-Douglas (b) Adam smith
(c) Marshall (d) Joel Dean
5) When PE =  (Price Elasticity of Demand is infinite), we call it ___. ( )
(a) Relatively Elastic (b) Perfectly Inelastic
(c) Perfectly Elastic (d) Unit Elastic
6) Income Elasticity of demand when less than ‘O’ (IE =  O), it is termed as ____. ( )
(a) Income Elasticity less than unity (b) Zero income Elasticity
(c) Negative Income Elasticity (d) Unit Income Elasticity
7) The other name of inferior goods is _______. ( )
(a) Veblan goods (b) Necessaries
(c) Geffen goods (d) Diamonds
8) Estimation of future possible demand is called ______. ( )
(a) Sales Forecasting (b) Production Forecasting
(c) Income Forecasting (d) Demand Forecasting
9) How many methods are employed to forecast the demand ( )
(a) Three (b) Four
(c) Two (d) Five
10) What is the formula for Price Elasticity of Demand? ( )
(a) % of change in the Price / % of change in the Demand
(b) % of change in the Demand / % of change in the
(c) % of change in the Demand / % of change in the Price
(d) % of change in the Demand of ‘X / % of change in the Price of ‘Y’

II Yr-ECE – II Sem. 119

11) When a small change in price leads great change in the quantity demand, we call it ________.
( )
(a) Inelastic Demand (b) Negative Demand
(c) Elastic Demand (d) None
12) When a great change in price leads small change in the quantity demand, we call it ________.
( )
(a) Elastic Demand (b) Positive Demand
(c) Inelastic Demand (d) None
13) “Coffee and Tea are the ________ goods”. ( )
(a) Relative (b) Complementary
(c) Substitute (d) None

14) Consumers Survey method is one of the Survey Methods to forecast the _____. ( )
(a) Sales (b) Income
(c) Demand (d) Production
15) What is the formula for Income Elasticity of Demand? ( )
(a) % of change in the Income (b) % of change in the Demand
% of change in the Demand % of change in the Price
(c) % of change in the Demand (d) % of change in the Demand of ‘X’
% of change in the Income % of change in the Price of ‘Y’
16) What is the formula for Cross Elasticity of Demand? ( )
(a) % of change in the Price of ‘X’ (b) % of change in the Demand
% of change in the Demand of ‘Y” % of change in the Price
(c) % of change in the Demand of ‘X’ (d) % of change in the Demand
% of change in the Price of ‘Y’ % of change in the Income
17) When PE = 0 (Price Elasticity of Demand is Zero), we call it ___. ( )
(a) Relatively Elastic demand (b) Perfectly Elastic demand
(c) Perfectly Inelastic demand (d) Unit Elastic demand
18) When PE =>1 (Price Elasticity of Demand is greater than one), we call it ___. ( )
(a) Perfectly Elastic demand (b) Perfectly inelastic demand
(c) Relatively Elastic demand (d) relatively inelastic demand

19) When PE =<1 (Price Elasticity of Demand is less than one), we call it ___. ( )
(a) Perfectly inelastic demand (b) Relatively Elastic demand
(c) Relatively inelastic demand (d) perfectly Elastic demand
20) When PE =1 (Price Elasticity of Demand is one), we call it ___. ( )
(a) Perfectly Elastic demand (b) Perfectly inelastic demand
(c) Unit elastic demand (d) Relatively Elastic demand
21) When Income Elasticity of demand is Zero (IE = 0), It is termed as ___. ( )
(a) Negative Income Elasticity (b) Unit Income Elasticity
(c) Zero Income Elasticity (d) Infinite Income Elasticity

UNIT – III
1) How many types of input-output relations discussed by the Law of production. ( )
(a) Five (b) Four
(c) Two (d) Three

II Yr-ECE – II Sem. 120

2) How many stages are there in ‘Law of Variable Proportions’? ( )
(a) Five (b) Two
(c) Three (d) Four
3) Congregation of body of persons assembling together to work at a certain
Time and place is called as ( )
(a) Firm (b) Industry
(c) Plant (d) Size
4) When a firm expands its Size of production by increasing all factors,
It secures certain advantages, known as ( )
(a) Optimum Size (b) Diseconomies of Scale
(c) Economies of Scale (d) None
5) When producer secures maximum output with the least cost combination
Of factors of production, it is known as_______ ( )
(a) Consumer’s Equilibrium (b) Price Equilibrium
(c) Producer’s Equilibrium (d) Firm’s Equilibrium
6) The ‘Law of Variable Proportions’ is also called as ____________. ( )
(a) Law of fixed proportions (b) Law of returns to scale
(c) Law of variable proportions (d) None
7) _________ is a ‘group of firms producing the same are slightly different products for the same
market or using same raw material’. ( )
(a) Plant (b) Firm
(c) Industry (d) Size
8) When proportionate increase in all inputs results in an equal
Proportionate increase in output, then we call____________. ( )
(a) Increasing Returns to Scale (b) Decreasing Returns to Scale
(c) Constant Returns to Scale (d) None
9) When different combinations of inputs yield the same level of output known as ___________.
( )
(a) Different Quants (b) Output differentiation
(c) Isoquants (d) Production differentiation
10) Conversion of inputs in to output is called as _________________. ( )
(a) Sales (b) Income
(c) Production (d) Expenditure
11) When Proportionate increase in all inputs results in more than equal
Proportionate increase in output, then we call _____________. ( )
(a) Decreasing Returns to Scale (b) Constant Returns to Scale
(c) Increasing Returns to Scale (d) None

12) When Proportionate increase in all inputs results in less than Equal
Proportionate increase in output, then we call _____________. ( )
(a) Increasing Returns to Scale (b) Constant Returns to Scale
(c) Decreasing Returns to Scale (d) None
13) A curve showing equal amount of outlay with varying Proportions of
Two inputs are called ________________. ( )
(a) Total Cost Curve (b) Variable Cost Curve
(c) Isocost Curve (d) Marginal Cost Curve

II Yr-ECE – II Sem. 121

14) The cost of best alternative forgone is_______________ ( )
(a) Outlay cost (b) Past cost
(c) Opportunity cost (d) Future cost
15) If we add up total fixed cost (TFC) and total variable cost (TVC), we get _____. ()
(a) Average cost (b) Marginal cost
(c) Total cost (d) Future cost
16) _____ costs are theoretical costs, which are not recognized by the Accounting system. ( )
(a) Past (b) Explicit
(c) Implicit (d) Historical
17) _____ cost is the additional cost to produce an additional unit of output. ( )
(a) Incremental (b) Sunk
(c) Marginal (d) Total
18) _______ costs are the costs, which are varies with the level of output. ( )
a) Fixed (b) Past
(c) Variable (d) Historical
19) _________________ costs are those business costs, which do not involve any cash payment.
( )
(a) Past (b) Historical
(c) Implicit (d) Explicit
20) The opposite of Past cost is ________________________. ( )
(a) Historical (b) Fixed cost
(c) Future cost (d) Variable cost
21) _____ is a period during which the existing physical capacity of the firm can be changed.
( )
(a) Market period (b) Short period
(c) Long period (d) Medium period
22) What is the formula for Profit-Volume Ratio? ( )
(a) (Sales/Contribution)*100 (b) (Variable cost/Sales)*100
(c) (Fixed cost/Sales)*100 (d) (Contribution/Sales)*100
23) _______ is a point of sales at which there is neither profit nor loss. ( )
(a) Maximum sales (b) Minimum sales
(c) Break-Even sales (d) Average sales

24) What is the formula for Margin of Safety? ( )

(a) Break Even sales – Actual sales (b) Maximum sales – Actual sales
(c) Actual sales – Break Even sales (d) Actual sales – Minimum sales
25) What is the formula for Break-Even Point in Units? ( )
(a) Contribution/Selling Price per unit (b) Variable cost/Contribution per unit
(c) Fixed cost/Contribution per unit (d) Variable cost/Selling Price per unit
26) What is the Other Name of Profit Volume Ratio? ( )
(a) Cost-Volume-Profit Ratio (b) Margin of safety Ratio
(c) Marginal Ratio (d) None

27) What is the break-even sales amount, when selling price per unit is 10/-, Variable cost per unit
is 6/- and fixed cost is 40,000/-. ( )
(a) Rs. 4, 00,000/- (b) Rs. 3, 00,000/-

II Yr-ECE – II Sem. 122

 (c) Rs. 1, 00,000/- (d) Rs. 2, 00,000/-
28) ‘Contribution” is the excess amount of Actual Sales over ______. ( )
(a) Fixed cost (b) Sales
(c) Variable cost (d) Total cost
29) Exchange value of a unit of good expressed in terms of money is called ( )
(a) Cost (b) Capital
(c) Price (d) Expenditure
30) The price of a product is determined by the ______of that product. ( )
(a) Place and time (b) Production and sales
(c) Demand and supply (d) Cost and income
31) The price at which demand and supply of a commodity equal is known as: ( )
(a) High price (b) Low price
(c) Equilibrium price (d) Marginal price
32) A market where large number of buyers and sellers dealing in homogeneous product with
perfect knowledge is called ( )
(a) Imperfect competition (b) Monopoly
(c) Perfect competition (d) Monopolistic competition
33) In which market, single market price prevails for the commodity ( )
(a) Monopoly market (b) Oligopoly market
(c) Perfect competition market (d) Duopoly market
34) The Price determined in the very short period is known as_____. ( )
(a) Secular price (b) Normal price
(c) Market price (d) Short run price
35) In which period, the supply of commodity is fixed ( )
(a) Short period (b) Long period
(c) Very short period (d) Very long period
36) Charging very high price in the beginning and reducing it gradually is called ( )
(a) Differential pricing (b) Sealed bid pricing
(c) Skimming pricing (d) Penetration pricing
37) If monopoly arises on account of legal support or as a matter of legal Privilege, it is called
as ( )
(a) Private monopoly (b) Government monopoly
(c) Legal monopoly (d) Single price monopoly
38) Under which pricing method, price just equals the total cost ( )
(a) Marginal cost pricing (b) Cost plus pricing
(c) Full cost pricing (d) Going rate pricing
39) ______ is a place in which goods and services are bought and sold. ( )
(a) Factory (b) Workshop
(c) Market (d) Warehouse

40) ___________________ is the example for perishable goods. ( )

(a) Pens (b) Belts
(c) Vegetables (d) Cloths
41) ____________________is a form of market organization in which there is only one seller of
the commodity. ( )
(a) Perfect Competition (b) Duopoly

II Yr-ECE – II Sem. 123

 (c) Monopoly (d) Oligopoly

42) If average Revenue is greater than the Average cost, monopolist earns _____. ( )
(a) Loss (b) No loss No profit
(c) Profit (d) None
43) The firm is said to be in equilibrium, when it’s Marginal Cost (MC) equals to ___. ( )
(a) Total cost (b) Total revenue
(c) Marginal Revenue (d) Average Revenue
44) ___________ is a position where the firm has no incentive either to expand or contrast its
output. ( )
(a) Maximum output (b) Minimum output
(c) Equilibrium (d) None
45) Marginal revenue, Average revenue and Demand are the same in ________ Market
Environment ( )
(a) Monopoly (b) Duopoly
(c) Perfect Competition (d) Imperfect Competition
46) ._________ is a period in which supply can be increased by altering the Variable factors and
fixed costs will remain constant. ( )
(a) Long – run (b) Mid – term
(c) Short – run (d) Market period
47) The total supply of a good is produced by a single private person or firm is called
as________. ( )
(a) Government Monopoly (b) Legal Monopoly
(c) Private Monopoly (d) Natural Monopoly
48) In perfect competition market, seller is the _________. ( )
(a) Price – Maker (b) Price changer
(c) Price – Taker (d) Price Dictator
49) Charging Very Low price in the beginning and increasing it gradually is called _____. ( )
(a) Differential pricing (b) Sealed bid Pricing
(c) Penetration Pricing (d) Skimming Pricing
50) If Average Revenue is less than the Average Cost, Monopoly secures _____. ( )
(a) Profits (b) Abnormal Profits
(c) Losses (d) Super Profits
51) In Monopoly market environment, seller is the __________. ( )
(a) Price - Taker (b) Price - Accepter
(c) Price - Maker (d) None
52) A Partnership firm can be formed with a minimum of Two Partners and it can have a
maximum of _______ Partners. ( )
(a) 50 (b) 40 (c) 20 (d) 30
53) “People may come and people may leave, but I go on forever” is applicable to ______
Business organization. ( )
(a) Sole proprietorship (b) Partnership
(c) Company (d) Joint Hindu Family
54) ______ is Supreme Authority for Company Organization. ( )
(a) Directors (b) Debenture holders

II Yr-ECE – II Sem. 124

 (c) Share holders (d) Creditors

55) “One man one vote” Principle is adopted in ______. ( )

(a) Partnership firms (b) Company
(c) Co-operative enterprises (d) Hindu family business
56) The management of ‘Joint Hindu Family’ business vests in the
eldest member of the family, called _____. ( )
(a) Director (b) Grand father
(c) Kartha (d) Manager
57) Minimum Two and maximum ___ members are permitted in private limited company. ( )
(a) Un-limited (b) 20 (c) 50 (d) 10
58) Minimum ___ and maximum ____ members are permitted in public limited company. ( )
(a) 50 ; Un-limited (b) 20 ; 50
(c) 7 ; Un-limited (d) 7 ; 50
59) Liability of sole proprietor is _______________ ( )
(a) Limited (b) Minimum
(c) Un-limited (d) None
60) Liability of Shareholder _______________( )
(a) Un-limited (b) Maximum
(c) Limited to the share capital (d) None
61) Certificate of commencement of business should be obtained by ___ Company to start its
functions. ( )
(a) Private (b) Statutory
(c) Public (d) Chartered
62) Company operates in more than one Country is called as _____ ( )
(a) Private company (b) Government company
(c) Multinational company (d) Indian company
63) ____ is not required to private company to start its functions. ( )
(a) Certificate of incorporation (b) Registration
(c) Certificate of commencement of business (d) None
64) ____ partner can enjoy profits but no liability for losses. ( )
(a) Active (b) Sleeping (c) Minor (d) Nominal
65) In public sector unit’s ownership is in the hands of _____. ( )
(a) Private persons (b) Public
(c) Government (d) None
66) Promoting balanced regional development is one of the objectives of _______ units. ( )
(a) Private sector (b) Joint sector
(c) Public sector (d) None
67) If either state government of central government or both have got not less than 51% of share
in the organization. Then that is called ____. ( )
(a) Private organization (b) Partnership organization
(c) Government organization (d) Joint sector organization

UNIT – IV
1. In which Book-keeping system, business transactions are recorded as two separate accounts
at the same time? ( )

II Yr-ECE – II Sem. 125

 (a) Single entry (b) Triple entry
(c) Double entry (d) none

2. In which Concept “Business is treated separate from the Proprietor? ( )

(a) Cost concept (b) Dual aspect concept
(c) Business entity concept (d) Matching concept

3. When a deduction allowed from the gross or catalogue price to traders; then it is called as
______. ( )
(a) Cash discount (b) Credit discount
(c) Trade discount (d) None

4. “Outstanding wages” is treated as _________. ( )

(a) Asset (b) Expense
(c) Liability (d) Income

5. How many types of accounts are maintained to record various types of all business
transactions? ( )
(a) Five (b) four
(c) Three (d) Two

6. Which connects the link between Journal and Trial Balance? ( )

(a) Trading Account (b) Profit & Loss account
(c) Ledger (d) Balance sheet

7. Which assets can be converted into cash in short period? ( )

(a) Fixed Assets (b) Intangible Assets
(c) Current Assets (d) Fictious Assets

8. “Bank overdraft” is a ________. ( )

(a) Asset (b) Expense
(c) Liability (d) Income

9. Profit and Loss account is prepared to find out the business ____. ( )
(a) Gross result (b) Financial position
(c) Net result (d) Liquidity position

10. The statement of “Debit and credit balances of Ledger accounts” is called as ____. ( )
(a) Journal (b) Ledger
(c) Trial balance (d) Balance sheet

11. _____ is a person who owes money to the firm. ( )

(a) Creditor (b) Owner
(c) Debtor (d) Share holder

12. The statement reveals the financial position of a business at any given date is called( )

II Yr-ECE – II Sem. 126

 (a) Trading account (b) Profit and loss account
(c) Balance sheet (d) Trial balance

13. ______ is called as ‘Book of Original Entry’. ( )

(a) Ledger (b) Trial Balance
(c) Journal (d) Trading account

14. Debit what comes in; Credit what goes out is ____ account principle? ( )
(a) Nominal (b) Personal
(c) Real (d) None

15. The process of entering transactions in to Ledge accounts known as ____. ( )

(a) Journal entry (b) First entry
(c) Posting (d) None

16. Debit Expenses and Losses; Credit Incomes and Gains is ______ account principle. ( )
(a) Personal (b) Real
(c) Nominal (d) None

17. “Prepaid Insurance Premium” is treated as _________. ( )

(a) Gain (b) Income
(c) Asset (d) Liability

18. “Net Profit” can be found out by preparing _______. ( )

(a) Trading account (b) Trial balance
(c) Profit and Loss account (d) Balance sheet

19. What is the current asset from the following? ( )

(a) Creditors (b) Bills payable
(c) Debtors (d) Bank over draft

20. What is the formula for Pay Back period? ( )

(a) Avg. Investment (b) Annual earnings
Avg. earnings Cost of the product
(c) Cost of the project (d) Cash inflow
Annual earnings Cash outflow

21. __________ Decision relates to the selection of assets in which funds will be invested by a
firm. ( )
(a) Finance (b) Dividend
(c) Investment (d) None

22. ______ Method is one of the traditional methods. ( )

(a) Net present value (b) Profitability index
(c) Payback period (d) internal rate of return

II Yr-ECE – II Sem. 127

 23. Funds needed for short-term purpose is known as ______. ( )
(a) Fixed capital management (b) Capital Budgeting
(c) Working capital management (d) Long-term capital management

24. What is the formula for Average Rate of Return (ARR)? ( )

(a) Cost of the project/ Avg. earnings (b) Present value of cash inflow/ Present value of
cash outflow (c) Avg. earnings/ Avg. investment (d) Avg. investment/ Avg. earnings

25. What is the current Liability from the following? ( )

(a) Bills Receivable (b) Closing stock
(c) Bills payable (d) Cash in hand

26. The Pay Back Period also called as ________. ( )

(a) Current Period (b) Pay reserve method
(c) Pay off Period (d) None

27. ______ holders have preference over dividends. ( )

(a) Equity share (b) Debenture
(c) Preference share (d) Ordinary share

28. ______ holders are the real owners of the company. ( )

(a) Debenture (b) Preference share
(c) Equity share (d) Liability

29. Interest is paid on loan and dividend is paid for _____. ( )

(a) Debenture (b) Public deposits
(c) Shares (d) Securities

30. . ______ are deducted from Current Assets, while calculating working Capital. ( )
(a) Fixed Assets (b) Fixed Liabilities
(c) Current Liabilities (d) Fictious Assets
UNIT – V

1. A company’s ‘return on investment’ indicates its ____. ( )

(a) Solvency (b) Stock turnover
(c) Profitability (d) Debtors collection

2. Which would a business be most likely to use its ‘solvency’ ( )

(a) Gross profit ratio (b) Debtors collection period
(c) Debt – Equity ratio (d) Current ratio

3. Higher ‘Assets turnover ratio’ explains ____. ( )

(a) More profitability (b) Higher sales turnover
(c) Better utilization of assets (d) large liability base

4. Which of the following measures company’s liquidity position ( )

II Yr-ECE – II Sem. 128

 (a) Stock Turnover ratio (b) Debtor’s collection period
(c) Current ratio (d) Net profit ratio

5. The difference between current assets and current liabilities is called ___. ( )
(a) Cost of goods sold (b) Outsiders funds
(c) Working capital (d) Shareholders funds

6. Debtor’s is a current asset, whereas creditor’s is ________. ( )

(a) Fixed Asset (b) Fixed Liability
(c) Current Liability (d) Long-term Liability

7. What is the Desirable current Ratio ______? ( )

(a) 1:2 (b) 3:2 (c) 2:1 (d) 1:1

8. Long-term stability of an enterprise indicates by ____ ratios. ( )

(a) Liquidity (b) Profitability
(c) Solvency (d) Turnover

9. The Liquidity ratios assess the capacity of the company to repay its _____ Liability. ( )
(a) Long-term (b) Profitability
(c) Solvency (d) Turnover

10. Acid Test Ratio is also called as ________. ( )

(a) Current Ratio (b) Absolute Liquid Ratio
(c) Quick Ratio (d) Debt-Equity Ratio

11. The relationship between two numerical values is called as ____. ( )

(a) Account (b) Ledger
(c) Ratio (d) Discount

12. “Gross Profit” can be found out by preparing _______. ( )

(a) Profit and Loss account (b) Balance sheet
(c) Trading account (d) Trial balance

WEBSITES:
1. www.economist.com
2. www.financialexpress.com
3. http://eac.gov.in
4. economics.harvard.edu/
5. http://www.econbiz.de
6. http://aeaweb.org/rfe/
7. http://www.bized.co.uk/

II Yr-ECE – II Sem. 129

 8. http://www.helsinki.fi/WebEc
9. in.reuters.com/finance/economy‎
10. finmin.nic.in/the_ministry/dept_eco_affairs/dea.asp‎

EXPERT DETAILS:
1. Prof. Amartya Sen is Thomas W. Lamont University Professor and Professor of Economics
and Philosophy, at Harvard University.
2. Philippe Aghion, Robert C. Waggoner, Professor of Economics, Harvard University.
3. Pol Antràs, Professor of Economics, Harvard University.
4. Robert J. Barro, Paul M. Warburg Professor of Economics, Harvard University.
5. Richard N. Cooper, Maurits C. Boas Professor of International Economics, Harvard
University.

JOURNALS (NATIONAL & INTERNATIONAL):

1. Annual Review of Economics
2. Business Economics
3. Cambridge Journal of Economics
4. Canadian Journal of Economics
5. Comparative Technology Transfer and Society
6. Contemporary Economic Policy
7. De Economist
8. Economic History Review
9. Economic Inquiry
10. The Economic Journal
11. National Institute Economic Review
12. Oxford Review of Economic Policy
13. Quarterly Journal of Economics
14. Student Economic Review

LIST OF TOPICS FOR STUDENT SEMINARS:

1. Business Economics, its scope & application areas.

II Yr-ECE – II Sem. 130

 2. Demand Analysis.
3. Impact of Demand Determinants on demand.
4. Elasticity of Demand, Types & Measurement.
5. Demand Forecasting & methods of demand forecasting.
6. Factors governing demand forecasting.
7. Production Function–Isoquants and Isocosts, MRTS, Least Cost Combination of Inputs.
8. Cobb-Douglas Production function, Laws of Returns.
9. Internal and External Economies of Scale.
10. Cost Analysis: Cost concepts.
11. Break-even Analysis (BEA) - & Its applications.
12. Market structures: Types of competition.
13. Objectives and Methods of Pricing.
14. Forms of Business Organizations.
15. Public Enterprises and their types.
16. Changing Business Environment in Post-liberalization scenario.
17. Financial Analysis through ratios.

CASE STUDIES/SMALL PROJECTS:

1. Case Analysis on Ratio Analysis
2. Case Analysis on Final account problems with adjustments

II Yr-ECE – II Sem. 131