Set No.

Code No.RR-211701
II B.Tech. I-Semester Regular Examinations, November-2003
1
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;

Rs. In Laks.
Project 1 Project 2
Year 1 3 6
2 5 4
3 6 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 -2- Set No.1

7. 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 30

8. 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.

Code No.RR-211701
II B.Tech. I-Semester Regular Examinations, November-2003
2
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 -2- Set No.2

7. 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

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

8. 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.

Code No.RR-211701
II B.Tech. I-Semester Regular Examinations, November-2003
3
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 -2- Set No.3

7. 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 Goodwill 60000
Reserves 20000 Fixed assets (at cost) 140000
Profit and loss a/c 30000 Stock 30000
Secured loan 80000 Sundry Debtors 30000
Sundry Creditors 50000 Advances 10000
Provision for taxation 20000 Cash balance 30000
------------- -----------
300000 300000
The sales for the year were Rs.500000

*** *** ***

 Set No.

Code No.RR-211701
II B.Tech. I-Semester Regular Examinations, November-2003
4
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 -2- Set No.4

7. 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.

Debit Credit
Rs. Rs.
Purchases 45,000
Debtors 60,000
Interest earned 1,200
Salaries 9,000
Sales 96,300
Purchases returns 1,500
Wages 6,000
Rent 4,500
Sales returns 3,000
Bad debts written off 2,100
Creditors 36,600
Capital 31,800
Drawings 7,200
Printing and Stationery 2,400
Insurance 3,600
Opening stock 15,000
Office Expense 3,600
Furniture and fittings 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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