Mefa-nov2003-rr211701-

Set No.

1

Code No.RR-211701 II B.Tech. I-Semester Regular Examinations, November-2003 MANAGERIAL ECONOMICS AND FINANCIAL ANALYSIS (Common to Electronics and Telematics, Electronics and Computer Engineering and Instrumentation and Control Engineering) Time: 3 hours Max.Marks:80 Answer any FIVE questions All questions carry equal marks --1.

What is managerial economics? Explain its focus areas.

2.

Discuss in detail the different methods of production functions.

3.

Write short notes on the following: a) Profit-Volume Ratio b) Margin of Safety

4.

Compare and contrast between perfect competition and monopoly.

5.

Explain the need for public enterprise in India. Do you think public enterprises as a whole have fulfilled that need?

6.

Consider the case of the company with the following two investment alternatives each costing Rs. 9 lakhs. The details of the cash inflows are as follows;

Year 1 2 3

Rs. In Laks. Project 1 3 5 6

Project 2 6 4 3

the cost of capital is 10 % per year. Which one will you choose (a) under NPV method (b) under IRR method

(Contd…2)

Code No.RR-211701 7.

-2-

Set No.1

The total debit side of a Trail Balance of a company as at 31st December’2000 is Rs. 25,000 and credit de is Rs.5,000. The following mistakes were discovered.

Correct figure Figure in Trail Balance Opening stock 17,500 25,700 Rent and rates 250 250 Sundry creditors 15,000 5,000 Commission 750 750 Taken on debit side Miscellaneous 60 8.

30

The following is an extract of balance sheet of a company during the last year. Compute current ratio and quick ratio. Also interpret the ratios. Rs. Land and Buildings 1,50,000 Plant and machinery 3,00,000 Furniture and fixtures 1,25,000 Closing stock 25,000 Sundry debtors 62,500 Wages prepaid 7,500 Sundry creditors 18,000 Rent outstanding 12,000 ***

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Set No.

2

Code No.RR-211701 II B.Tech. I-Semester Regular Examinations, November-2003 MANAGERIAL ECONOMICS AND FINANCIAL ANALYSIS (Common to Electronics and Telematics, Electronics and Computer Engineering and Instrumentation and Control Engineering) Time: 3 hours Max.Marks:80 Answer any FIVE questions All questions carry equal marks --1.

Point out the importance of managerial economics in decision making.

2.

How will you define economies of scale? Explain the factor, which cause increasing returns to scale.

3.

Write short notes on the following: (a) Fixed cost (b) Variable cost

4.

Compare between monopoly and perfect competition.

5.

Evaluate the Government Company form of public enterprise.

6.

The following are the details pertaining to a company which is considering to acquire a fixed asset: Project A: Cost of the proposal : Rs. 42,000, Life 5 years, Average annual cash inflow Rs.14,000. Project B: Cost of the proposal Rs. 45,000, Life 5 years Annual cash inflows: 1st year Rs.28000, 2nd year Rs.12000, 3rd year Rs.10,000 4th year Rs.10,000 and 5th year Rs.10,000. Determine IRR. Which projects do you recommend?

(Contd…2)

Code No.RR211701 7.

-2-

Set No.2

From the following Trail Balance of Sri Krishna and Company prepare trading and profit and loss account for the year ended December 31, 2000 and a Balance Sheet as on that date. Rs. Rs. Debit Credit Machinery 3,67,60 0 Opening stock 1,16,80 0 Purchases and sales 8,00,00 9,52,000 0 Returns 16,80 15,200 0 General expenses 40,00 0 Stationery 4,00 0 Loan from Andhra Bank 2,76,800 Cash 25,30 0 Apprentice premium 6,400 12% loan 20,000 Bad debts 13,60 0 Debtors and Creditors 2,56,00 80,000 0 Provision for bad debts 8,000 Interest 30 0 Sri Krishna Capital 2,82,000 a) b) c) d)

8.

Adjustments Purchases include Rs.8,000 being the Value of Machinery purchased in Jan 2000 Provide 5% per cent per annum as interest on capital. Provide 10 % depreciation on machinery Value of stock on 31-12-2000 was Rs.68,000

The following data is extracted from the financial statements of a firm dealing in fertilizers. The fertilizer business in general has an inventory ratio of six times. Determine and interpret the following ratios a) b) Inventory turnover ratio

c) Average period of holding the stocks d) Debtor’s Turnover Ratio Sales Rs. 8,00,000 Sales returns Rs. 90,000 Average Debtors Rs. 1,40,000 ***

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Set No.

3

Code No.RR-211701 II B.Tech. I-Semester Regular Examinations, November-2003 MANAGERIAL ECONOMICS AND FINANCIAL ANALYSIS (Common to Electronics and Telematics, Electronics and Computer Engineering and Instrumentation and Control Engineering) Time: 3 hours Max.Marks:80 Answer any FIVE questions All questions carry equal marks --1.

State and Explain the Law of Demand. What are its exceptions?

2.

Define and explain isoquants. What are the properties of isoquants? How do they compare with the properties of indifference curves?

3.

Write short notes on: (a) Out of pocket costs

(b) Imputed costs

4.

What is Perfect Competition? How is Market Price determined under conditions of Perfect Competition?

5.

Discuss the factors affecting the choice of forms of business organisation.

6.

A project involves initial outlay of Rs. 1,29,600. Its working life is expected to be 3 years. The cash inflows are likely to be as follows: 1st years: Rs.64,000 2nd year: Rs.56000 3rd year: Rs. 24,000. Compute the internal rate of return.

(Contd…2)

Code No.RR-211701 7.

-2-

Set No.3

From the following trail balance of Vikram Foundary Works prepare trading account and profit and loss account for the year ending 31st March 2003. Also prepare a balance sheet as on that date. Trail Balance Dr. Rs. Cr. Rs. Electricity 12,000 Interest 14,000 Land 1,40,00 Discount 6,000 0 Interest 16,00 Sales 8,00,000 0 Wages 50,00 Returns 10,000 0 Opening Stock 20,00 Sundry creditors 60,000 0 Rent 24,00 Capital 3,02,000 0 Office expenses 30,00 Bills payable 15,000 0 Buildings 4,00,00 0 Salaries 90,00 0 Power, gas and water 30,00 0 Returns 20,00 0 Furniture 15,00 0 Sundry debtors 60,00 0 Adjustments: a) Outstanding salaries Rs.10,000 b) Closing stock Rs. 80,000 c) Depreciate building at 10 per cent per annum d) Interest received in advances Rs. 2,000 e) Write off bad debts Rs. 10,000

8.

Calculate the following ratios from the balance sheet given below: (a) Debt –Equity ratio (b) Liquidity Ratio (c) Fixed Assets to Current Assets (d) Fixed Assets/Turnover BALANCE SHEET Liabilities Rs.

Assets

Rs.

Equity shares of Rs.10ea 100000 Reserves 20000 Profit and loss a/c 30000 Secured loan 80000 Sundry Creditors 50000 Provision for taxation 20000 ------------300000 The sales for the year were Rs.500000 ***

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Goodwill 60000 Fixed assets (at cost) 140000 Stock 30000 Sundry Debtors 30000 Advances 10000 Cash balance 30000 ----------300000

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Set No.

4

Code No.RR-211701 II B.Tech. I-Semester Regular Examinations, November-2003 MANAGERIAL ECONOMICS AND FINANCIAL ANALYSIS (Common to Electronics and Telematics, Electronics and Computer Engineering and Instrumentation and Control Engineering) Time: 3 hours Max.Marks:80 Answer any FIVE questions All questions carry equal marks --1.

What is meant by elasticity of demand? Ho do you measure it?

2.

Explain and illustrate the Law of Variable proportions.

3.

Write short notes on (a) Sunk costs (b) Abandonment costs

4.

Define Monopoly. How is price under Monopoly determined?

5.

What do you understand by Joint Stock Company? What are its salient features?

6.

Given that a project yields the following cash inflows for six years at an original cost of Rs.50,000, determine IRR Year Cash inflows after taxes Rs. 1 10,000 2 16,000 3 24,000 4 30,000 5 30,0000 6 30,000

(Contd…2)

Code No.RR211701 7.

-2-

Set No.4

Prepare Trading and Profit and Loss account for the year ended 31.12.2000 and a Balance Sheet as on that date from the following Trail Balance.

Purchases Debtors Interest earned Salaries Sales Purchases returns Wages Rent Sales returns Bad debts written off Creditors Capital Drawings Printing and Stationery Insurance Opening stock Office Expense Furniture and fittings

Debit Rs. 45,000 60,000

Credit Rs. 1,200

9,000 96,300 1,500 6,000 4,500 3,000 2,100 36,600 31,800

7,200 2,400 3,600 15,000 3,600 6,000 1,67,400 1,67,400 Adjust the following a) closing stock Rs.20,000 b) Write off furniture @ 15% per annum. 8.

The balance Sheet of X & Co as on 31-12-1998 show as follows Liabilities Rs. Assets Rs. Equity capital 100000 Fixed Assets 180000 9% Preference Shares 50000 Stores 25000 8% debentures 50000 Debtors 55000 Retained earnings 20000 Bills Receivables 3000 Creditors 45000 Bank 2000 ----------------265000 265000 Calculate the following: (a) Debt Equity Ratio (b) Current Ratio (c) Fixed Asset Ratio (d) Liquidity Ratio ***

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