Assingnmemt Mba 1

MBA Semaester 1 MB0040-Statistics for Management-4credits (Book ID:B1129) Assignment set-2(60 marks Question1(a). What are the characteristics of a good measure of central tendency? Answer: a). The characteristics of a good measure of central tendency are: present mass data in aconcise form The mass data is condensed to make the data readable and to use it for furtheranalysis. •Facilitate comparison It is difficult to compare two different sets of mass data. But we can compare those two after computing the averages of individual data sets. While comparing, the same measure of average should be used. It leads to incorrect conclusions when the mean salary of employees is compared with the median salary of the employees. •Establish relationship between data setsThe average can be used to draw inferences about the unknown relationships between the data sets. Computing the averages of the data sets is helpful for estimating the average of population. •Provide basis for decision-making In many fields, such as business, finance, insurance and other sectors, managers compute the averages and draw useful inferences or conclusions for taking effective decisions. The following are the requisites of a measure of central tendency: •It should be simple to calculate and easy to understand •It should be based on all values •It should not be affected by extreme values •It should not be affected by sampling fluctuation •It should be rigidly defined •It should be capable of further algebraic treatment Question1 (b). What are the uses of averages? Answer1(b) Appropriate Situations for the use of Various Averages 1. Arithmetic mean is used when: a. In depth study of the variable is needed b. The variable is continuous and additive in nature c. The data are in the interval or ratio scale d. When the distribution is symmetrical 2. Median is used when: a. The variable is discrete b. There exists abnormal values

c. The distribution is skewed d. The extreme values are missing e. The characteristics studied are qualitative f. The data are on the ordinal scale 3. Mode is used when: a. The variable is discrete b. There exists abnormal values c. The distribution is skewed d. The extreme values are missing e. The characteristics studied are qualitative 4. Geometric mean is used when: a. The rate of growth, ratios and percentages are to be studied b. The variable is of multiplicative nature 5. Harmonic mean is used when: a. The study is related to speed, time b. Average of rates which produce equal effects has to be found.

2. Calculate the 3 yearly and 5 yearly averages of the data in table below. [ 10 marks] Table 1: Production data from 1988 to 1997 Year 1988 198 199 199 1992 1993 1994 1995 1996 199 9 0 1 7 18 16 22 19 24 20 28 22 30

Productio 15 n (in Lakh ton)

Calculate values of 3-yearly

3-yearly moving Year Production(lakh ton) totals 1988 15 _ 1989 18 1990 16

3-yearly moving totals Ye Short term fluctuations(Y-Yc) _ _ 49 16.33 1.67 58 19.33 -3.33

1991 1992 1993 1994 1995 1996 1997

22 19 24 20 28 22 30 _

57 65 60 72 70 80 _

19 21.66 20 24 23.33 26.66 _

3 -2.66 4 -4 4.67 4.67

Calculate values of 5-yearly
1998 1989 1990 1991 1992 1993 1994 1995 1996 1997 5-yearly moving Production(lakh ton) totals 15 _ 18 _ 16 22 19 24 20 28 22 _ 30 _ 5-yearly moving totals Ye _ _ 18 19.8 20.2 22.6 22.6 24.8 _ _ Short term Fluctuation(Y-Yc) _ _ -2 2.2 1.2 1.4 -22.6 3.2 _ _

90 99 101 113 113 124

Question3(a)What is meant by secular trend? Discuss any two methods of isolating trend values in a time series. Answer3(a)Secular trend refers to the smooth or regular long term growth or decline of the series. This movement can be characterized by a trend curve. If this curve is a straight line, then it is called a trend line. If the variable is increasing over a long period of time, then it is called an upward trend. The variable is decreasing over a long period of time then it is called a downward trend. If the variable moves upward or downward along a straight line then the trend is called a linear trend, otherwise it is called a non-linear trend. There are many method of isolating trend values in a time series are given bellow:Free hand or graphic methods Semi average method Moving average method Method of least squares

Free hand or graphic method:This is simplest method of drawing a trend curve. We plots the values of the variable against time on a graph paper and join these points. The trend line is then fitted by inspecting the graph of the time series. Fitting a trend line by this method is arbitrary. The trend line is drawn such that the numbers of fluctuations on either side are approximately the same. The trend line should be a smooth curve.

Semi-average method:The methods of a linear trend with the help of semi average method are as follows:When the number of years is ; then the data of the time series is divided into two equal parts. The total of the times in each of the part is done and it is then divided by the number of items to obtain arithmetic means of the two parts. Each average is then centred in the period of time from which it has been computed and plotted on the graph paper. A straight line is drawn passing through these points. This is the required trend line. When the number of years is odd, then the value of the middle year is omitted to divide the time series into two equal parts. fitting

Question3 (b) What is seasonal variation of a time series? Describe the various methods you know to evaluate it and examine their relative merits. Answer 3(b)Variations in a time series that are periodic in nature and occur regularly over short periods of time during a year are called seasonal variations. By definition, these variations are precise and can be forecasted.

Method of variation of a time series:Free hand or graphic methods Semi average method Moving average method Method of least squares Free hand or graphic method:This is simplest method of drawing a trend curve. We plots the values of the variable against time on a graph paper and join these points. The trend line is then fitted by inspecting the

graph of the time series. Fitting a trend line by this method is arbitrary. The trend line is drawn such that the numbers of fluctuations on either side are approximately the same. The trend line should be a smooth curve.

Merits:It is not depends on individual judgement. This is the simplest method of drawing a trend curve.

Semi-average method:The method of fitting a linear trend with the help of semi average method are as follows:When the number of years is ; then the data of the time series is divided into two equal parts. The total of the times in each of the part is done and it is then divided by the number of items to obtain arithmetic means of the two parts. Each average is then centred in the period of time from which it has been computed and plotted on the graph paper. A straight line is drawn passing through these points. This is the required trend line. When the number of years is odd, then the value of the middle year is omitted to divide the time series into two equal parts.

Merits:The semi average method is simple The trend line can be extended on either side in order to obtain pasr or future estimates. This is an objective method, as any one applying this method get the same trend line.

Method of moving average :Moving averages method is used for smoothing the time series . that is, it smoothes the fluctuations of the data by the method of moving averages.

Merits:This method is objective in the sense that anybody working on a problem with this method will get the same result.

The method is used for determining seasonal, cyclic and irregular variations besides the trend values . The method is flexible enough to add more figures to the data because the entire calculations are not changed.

Method of least squares:Under this method, the trend curve is determined by fitting a mathmetical equation. This method is more accurate and precise and can be used even for forcasting . We can fit either a straight line or a parabolic curve from the given data by this method.

Merits:This method is a completely objective method. This method gives the trend values for the entire time period. This method can be used to forecast future trend because trend line establishes a functional relationship between the value and the time.

Question5(a) Discuss the errors that arise I statistical survey. Answer5(a) The term ‘errors ’denotes the difference between population value and its estimate providedby sampling technique. Therefore, the term is not reffered in its ordinary sense in statistics. There are four types of errors as shown in bellow:-

Sampling errors:The sample results are bound to differ from population results, since sample is only a small portion of the population. It is also known as inherent error and cannot be avoided. It is not worth to eliminate them completely. These errors may be due to the following factors:Faculty selection of sample Substitution of units to be studied Faulty demarcation of sampling units Errors due to bias in estimation

Non-sampling:Non-sampling errors are attributed to factors that can be controlled and eliminated by suitable actions. It is worth to eliminate these errors. They are due to the following factors:Faulty planning, Faulty definitions Defective methods of interviewing Personal bias of investigator Lack of trained and qualified investigators Respondents’ failure to answer Improper coverage Compiling errors Publication errors

Biased errors:It arises in both census and sampling methods. These errors occur due to personal bias of the investigator and the instruments used for measuring. They are also due to faculty collection of data , respondent’s bias and bias due to non-response. Biased errors have a tendency to grow with sample size. Therefore, they are also known as cumulative errors. The magnitude of biased errors is directly proportional to the sample size.

Unbiased errors:The errors that are due to over-estimation and under-estimation such that they are equal are known as unbiased errors. They are also know as compensatory errors. They do not increase with sample size.

Question 5(b) What is quota sampling and when do we use it? Answer 5(b) It is type of judgment sampling. Under this design, quotas are set up according to some specified characteristic such as age groups or income groups. From each group a specified number of units are sampled according to the quota alloted to the group the selection of sample units depends on personal judgment. It has a risk of personal prejudice and bias entering the process. This method is often used in public opinion studies.

Question6(a) Why do we use chi-square test? Answer6(a) We used chi –square test because:The chi-square test is based on frequencies and not on parameters. It is a non-parametric test where no parameters regarding the rigidity of population of population are required. Additive property is also found in chi-square test. The chi-square test is useful to test the hypothesis about the independence of attribute. The chi-square test can be used in complex contingency tables. The chi-square test is very widely used for research purposes in behavioral social science including business research.

Question6(b). why do we use analysis of variance? Answer6(b).The technique of analysis of variance is referred to as ANOVA. Initially the technique was applied in the field of Zoology and Agriculture, but in a later stage, it was applied to other fields also . In analysis of variance , the degree of variance between two or more data as well as the factors contributinig towards the variance is studied. Analysis of variance is the classification and cross-classification of statistical data with the view of testing whether the means of specific classification differ significantly or whether they are homogeneous. The analysis of variance is a method of splitting the total variance of data into constituent parts which measure different sources of variations. The total variation is split up into the following two- components. Variance within the subgroupsof samples. Variation between the subgroups of the samples.

Master of Business Administration - MBA Semester 1 Managerial Economics MBA-1 Semester

Q.1 Income elasticity of demand has various applications. Explain each application with

the help of an example? Ans: Income elasticity of demand may be defined as the ratio or proportionate change in the quantity demanded of a commodity to a given proportion change in the income. In short, it indicates the extent to which demand changes with a variation in consumer’s income. The following formula helps to measure the income elasticity (Ey).

Or Where

· Ey is income elasticity of demand · D is change in demand · D is original demand · Y is change in income · Y is original income Example

Original demand=400 units Original income= 4000 units

New demand =700 units New income= 6000 units

Change in demand= 700-400= 300 units change in income=6000-4000=2000

Hence Ey=300/2000*4000/400=1.5

Generally speaking Ey is positive. This is because there is a direct relationship between income and demand, i.e. higher the income; higher would be the demand and vice versa. On the basis of the numerical value of the co-efficient, Ey is classified as greater than one, less than one, equal

to one, equal to zero and negative. The concept of ey helps us in classifying commodities in to different categories.

1. When Ey is positive, the commodity is normal (used in day-to-day life) 2. When Ey is negative, the commodity is inferior. ( for example jowar, beedi etc) 3. When Ey is positive and greater than one, the commodity is luxury. 4. When Ey is positive but less than one, the commodity is essential. 5. When Ey is zero, the commodity is neutral. E.g. salt, match box etc. Practical application of income elasticity of demand

1. Helps in determining the rate of growth of the firm. If the growth rate of the economy and income growth of the people is reasonable forecasted, in that case it is possible predict expected increase in the sales of a firm and vice versa.

2. Helps in the demand forecasting of a firm. It can be in estimating future demand provided the rate of increase in income and Ey for the products are known. Thus, it helps in demand forecasting activities of a firm.

3. Helps in production planning and marketing. The knowledge of Ey is essential for production planning, formulating marketing strategy, deciding advertising expenditures and nature of distribution channel etc in the long run.

4. Helps in ensuring stability in production. Proper estimation of different degrees of income elasticity of demand for different types

of product helps in avoiding over-production or under-production of a firm. One should know whether rise or fall in income is permanent or temporary.

5. Helps in estimating construction of houses. The rate of growth in incomes of people also helps in housing programs in a country. Thus it helps a lot in managerial decisions of a firm.

Q.2 When is the opinion survey method used and what is the effectiveness of the method? Ans: Survey of buyer’s intention or preference is one of the important methods of demand forecasting. It is also called “Opinion Survey Method”.

Under this method, consumer buyers are requested to indicate their preference and willingness about a particular product. They are about to reveal their future purchase plans with respect to specific items.

They are expected to give answer to question like what items they intends to buy, in what quantity, why, where, what quality they expect, how much they are planning to spend etc. Generally, the field surveys are conducted by the marketing research departments of the company or hiring the services of outside research organization consisting of learned and highly qualified professionals.

The heart of the survey is questionnaire. It is a comprehensive one covering almost all questions either directly or indirectly in a most intelligent manner. It is prepared by an expert body who are specialist in the field or marketing.

The questionnaire is distributed among the consumer either through mail or in person by the company. Consumers are requested to furnish all relevant and correct information.

The next step is to collect the questionnaire from the consumers for the purpose of evaluation. The materials collected will be classified, edited and analyzed. If any bias prejudices, exaggerations, artificial or excess demand creation are found at the time of answering they would be eliminated.

The information so collected will now be consolidated and reviewed by the top executives with lot of experiences. It will be examined thoroughly. Inferences are drawn and conclusions are arrived at. Finally a report is prepared and submitted to the management for taking final decisions.

The success of the survey method depends on many factors:

1. The nature of the question asked. 2. The ability of the surveyed. 3. The representative of the sample 4. Nature of the product 5. Characteristics of the market 6. Consumer behavior 7. Techniques of analysis 8. Conclusion drawn etc. The management should not entirely depend on the result of survey reports t project future demand. Consumer may not express their honest and real views and as such they may give only the broad trends in the market. In order to arrive, at right conclusion, field surveys should be regularly checked and supervised.

This method is simple and useful to the producers who produce goods in bulk. Here the

burden of forecasting is put on the customers.

However this method is not much useful in estimating the future demand of the household as they run in a large numbers and also do not freely express their future demand requirements. It is expensive and so difficult. Preparation of questionnaire is not an easy task. At best it can be used for short term forecasting.

Q.3 Show how price is determined by the forces of demand and supply, by using forces of equilibrium. Ans: The word equilibrium is derived from the Latin word “aequilibrium” which means equal balance. It means a state of even balance in which opposing forces or tendencies neutralize each other. It is a position of rest characterized by absence of change. It is a state where there is complete agreement of the economic plans of the various market participants so that no one has a tendency to revise or alter his decision. In the words of professor Mehta: “Equilibrium denotes in economics absence of change in movement.”

Market Equilibrium

There are two approaches to market equilibrium viz., partial equilibrium approach and the general equilibrium approach. The partial equilibrium approach to pricing explains price determination of a single commodity keeping the prices of other commodities constant. On the other hand, the general equilibrium approach explains the mutual and simultaneous determination of the prices of all goods and factors. Thus it explains a multi market equilibrium position.

Earlier to Marshall, there was a dispute among economists on whether the force of demand or the force of supply is more important in determining price. Marshall gave

equal importance to both demand and supply in the determination of value or price. He compared supply and demand to a pair of scissors – “ We might as reasonably dispute whether it is the upper or the under blade of a pair of scissors that cuts a piece of paper, as whether

value is governed by utility or cost of production. ” Thus neither the upper blade nor the lower blade taken separately can cut the paper; both have their importance in the process of cutting. Likewise neither supply alone, nor demand alone can determine the price of a commodity, both are equally important in the determination of price. But the relative importance of the two may vary depending upon the time under consideration. Thus, the demand of all consumers and the supply of all firms together determine the price of a commodity in the market.

Equilibrium between demand and supply price:

Equilibrium between demand and supply price is obtained by the interaction of these two forces. Price is an independent variable. Demand and supply are dependent variables. They depend on price. Demand varies inversely with price, a rise in price causes a fall in demand and a fall in price causes a rise in demand. Thus the demand curve will have a downward slope indicating the expansion of demand with a fall in price and contraction of demand with a rise in price. On the other hand supply varies directly with the changes in price, a rise in price causes a rise in supply and a fall in price causes a fall in supply. Thus the supply curve will have an upward slope.

At a point where these two curves intersect with each other the equilibrium price is established. At this price quantity demanded is equal to the quantity demanded. This we can explain with the help of a table and a diagram.

Price in Rs Demand in units Supply in units State of market Pressure on price 30 5 25 D<S P 25 10 20 D<S P 20 15 15 D=S Neutral 10 20 10 D>S P 5 30 5 D>S P

In the table at Rs.20 the quantity demanded is equal to the quantity supplied. Since the price is agreeable to both the buyer and sellers, there will be no tendency for it to change; this is called equilibrium price. Suppose the price falls to Rs.5 the buyer will demand 30 units while the seller will supply only 5 units. Excess of demand over supply pushes the price upward until it reaches the equilibrium position supply is equal to the demand. On the other hand if the price rises to Rs.30 the buyer will demand only 5 units while the sellers are ready to supply 25 units. Sellers compete with each other to sell more units of the commodity. Excess of supply over demand pushes the price downward until it reaches the equilibrium. This process will continue till the equilibrium price of Rs.20 is reached. Thus the interactions of demand and supply forces acting upon each other restore the equilibrium position in the market.

In the diagram DD is the demand curve, SS is the supply curve. Demand and supply are in equilibrium at point E where the two curves intersect each other. OQ is the equilibrium output. OP is the equilibrium price. Suppose the price OP2 is higher than the equilibrium price OP. at this point price quantity demanded is P2D2. Thus D2S2 is the excess supply which the

seller wants to push into the market, competition among the sellers will bring down the price to the equilibrium level where the supply is equal to the demand. At price OP1, the buyers will demand P1D1 quantity while the sellers are ready to sell P1S1. Demand exceeds supply. Excess demand for goods pushes up the price; this process will go until equilibrium is reached where supply becomes equal to demand.

Q.4 Distinguish between fixed cost and variable cost using an example? Ans: Fixed cost: These costs are incurred on fixed factors like land, building, equipments, plants, superior types of labour, top management etc. fixed costs in the short run remains constant because the firm does not change the size of plant and the amount of the fixed factors employed. Fixed costs do not vary with either expansion or contraction in output. These cost are to be incurred by a firm even output is zero. Even if the firm close down its operation for some time temporarily in the short run, but remains in business, these cost have to be borne by it. Hence, these costs are independent of output and are referred to as unavoidable contractual cost.

Prof. Marshall called fixed cost as supplementary costs. They include such items as contractual rent payments, interest on capital borrowed, insurance premium, depreciation and maintenance allowance, administrative expenses like manager’s salary or salary of the permanent staff, property and business taxes, license fees, etc. They are called as over-head costs because these costs are to incurred whether there is production or not. These costs are to be distributed on each units of output produced by a firm. Hence, they are called as indirect costs.

Variable Costs: The costs corresponding to variable factors are described as variable costs. These costs are incurred on raw materials, ordinary labour, transport, power, fuel, water etc, which directly vary in the short runs.

Variable costs are directly and proportionately increases or decreases with the level of output. If a firm shut down for some times in the short run; then it will not use the variable factors of production and will not therefore incurs any variable costs. Variable costs are incurred only when some amount of output is produced. Total variable cost increases with the level of increase in the level of production and vice-versa. Prof. Marshall called variable costs as prime costs or direct costs because the volume of output produced by a firm depends directly upon them.

It is clear from the above description that a production cost consists of both fixed as well as variable costs. The difference between the two is meaningful and relevant only in the short run. In the long run all costs become variable because all factors of production become adjustable and variable in the long run.

However, the distinction between the fixed and variable costs is very important in the short because it influences the average costs behavior of the firm. In the short run, even if a firm wants to close down its operation but wants to remain in the business, it will have to incur fixed costs but it must cover at least its variable costs.

Q.5 Discuss Marris Growth Maximization model and show how it is different from the Sales maximization model? Ans: Marris assumes that the ownership and control of the firm is in the hands of two groups of people, i.e. owner and managers. He further points out that both of them have two distinctive goals. Managers have a utility function in which the amount of salary, status, position, power,

prestige and security of job etc are the most import variable where as in case of are more concerned about the size of output, volume of profits, market shares and sales maximization.

Utility function of the manager and that the owner are expressed in the following manner-

Uo= f [size of output, market share, volume of profit, capital, public esteem etc.]

Um= f [salaries, power, status, prestige, job security etc.]

In view of Marris the realization of these two functions would depend on the size of the firm. Larger the firm, greater would be the realization of these functions and vice-versa. Size of the firm according to Marris depends on the amount of corporate capital which includes total volume of the asset, inventory level, cash reserve etc. He further points out that the managers always aim at maximizing the rate of growth of the firm rather than growth in absolute size of the firms. Generally managers like to stay in a grouping firm. Higher growth rate of the firm satisfy the promotional opportunity of managers and also the share holders as they get more dividends.

How Profit Maximization model differs from Sales Maximization model:

The sale maximization model differs on the following grounds: •

Emphasis is given on maximizing sales rather than profit. • Increase the competitive and operational ability of the company. • The amount of slack earning and salaries of the top managers are directly linked to it. • It helps in enhancing the prestige and reputation of top management, distributes more dividends to share holders and increases the wage of the workers and keeps them happy. • The financial and other lending institutions always keep a watch on the sales revenue of a firm as it is an indication of financial health of the firm.

Q.6 Explain how fiscal policy is used to achieve economic stability? Ans: In order to achieve a stable economic condition, fiscal policy has to play a positive and constructive role both in developed and developing nations. The specific role to be played by fiscal policy can be discussed as follows:

• To act as optimum allocator of resources: As most of the resources are scarce in their supply, careful planning is needed in its allocation so as to achieve the set targets. Rational allocation would ensure fulfillment of various objectives. • To act as a saver: 1. It should follow a rational consumption policy reduces the MPC and raises the MPS. 2. Taxation policy has to be modified to raise the rates of old taxes, introduces new

additional taxes, and extends the tax-nets. 3. Profit earning capacity of public sector units are to be raise substantially to mop-up financial resources. 4. The government should borrow more money both in the country and outside the country. 5. Higher the rate of interest are to be offered for government bonds and security. • To act as an investor: Mere mobilization of financial resources is not an end in itself. It should result in the creation of real resources which are more important in accelerating the growth process. Rapid economic growth depends upon the volume of investment. Hence, fiscal policies have to be ensuring higher volume of investment in both private and public sectors. • To act as price stabilizer: price stability is of paramount of importance in an economy. Extreme levels of both inflation and deflation would disrupt and disturb the normal and regular working of an economic system. This would come in the way of stable and persistent growth. Hence all measures are to be taken to check these two dangerous situations so as to create necessary congenial atmosphere to prepare the background for rapid economic growth. • To act as an economic stabilizer: Price stability would create the necessary background for over all economics stability. Upswing and downswing in the level of economic activities are to be avoided. If an economy is subject to frequent fluctuation in the form of trade cycle, certainly, it would undermine and disturb the growth process. Instability would come in the way of persistent and consistent growth in a country. Hence all measure to be taken to ensure economic stability. •

To act as an employment generator: Fiscal policy should help in mobilizing more financial resources, convert them in to investment and create more employment opportunity to absorb the huge unemployed man power. • To act as balancer: There must be proper balance between aggregate saving and aggregate investment, demand and supply, income and output and expenditure, economic overhead capital and social overhead capital etc. Any sort of imbalance would result in either surpluses or scarcity in different sectors of the economy leading to fast growth in some sectors followed by lagging of some other sectors.

• To act as growth promoter: The basic objective of any economic policy is to ensure higher economic growth rates. This is possible when there is higher national savings, investment, production, employment and income. Hence, fiscal policy is to be designed in such a manner so as to promote higher growth in an economy. • To act as in come redistribute: Fiscal policy has to minimize inequalities and ensure distributive justice in an economy. This is possible when a rational taxation and public expenditure policy is adopted. More money is collected from richer section of the society through various imaginative taxation policies and a larger amount of money is to be spent in favor of poorer sections of the society. Thus, inequality is to be reduced to the minimum. • To act as stimulator of living standards of people: the final objective is to raise the level of living standards of the people. This is possible when there is higher output, income and employment leading to higher purchasing power in the hands of common man. Hence, fiscal policy should help in creating more wealth in the economy. If there is

economic prosperity, then it is possible to have a satisfactory, contended and peaceful life. Thus, fiscal policy has to play a major role in promoting economic growth in a country.

Master of Business Administration - MBA Semester 1 Subject Name – Business Communication 1 Explain the deffirent type of communication with relevant example? Answer - 1 Shareholders are important internal stakeholders of an organization, since they are the owners of the company. Since the capital required is huge, there are no proprietors and partners any more. As organization grows, shareholding is widely scattered. Therefore, it is essentials to retain the shareholders, confidence in the company’s management, through effective communication with them on a regular basis. There are two situations when shareholder communication is extremely vital – 1. If a company is doing well and wants to expand its scope of operations, or diversify into unrelated areas. In this case, good shareholder relations can help to raise the required capital and minimize borrowing from banks and financial institutions. 2. If a company is going through a crisis or difficult times, more communication with shareholders is needed. Take the example of coke and Pepsi during the pesticide controversy. In such a situation, the company should be open with its shareholders and explain the problem clearly, including the steps being taken to overcome the crisis. Crisis communication is an important, but often overlooked area of shareholder communication. Lack of communication during a crisis encourages the grapevine among shareholders and leads to false rumours. For example: Rumours may spread that the company is going to close down. On the other hand, if you tell the truth, changes are that your shareholders will stand by you. The appropriate media for communication with shareholder include both oral and written periodic mailers should be sent to all shareholders, giving a fair and truthful representation of the company’s results and progress on various fronts. In areas where there is an aggregation or concentration of shareholders, shareholder meeting and conferences should be held, making presentations on the company’s progress. When the company is going through a crisis, shareholders should be taken on project site and factory visits, to show them the measures that are being taken to solve the problem.

The overall guiding factor in communicating with shareholders should be that they are the owners of the company. Two examples are giving below of two companies, cognizant and reliance that are well known for effective shareholders communication.

COGNIZANT’S COMMUNICATION WITH SHAREHOLDERS Stream is a leading provider of IT services, based in New Jersey, USA. They have won national acclaim in the US financial media for being one of the most shareholder friendly companies in the US. In a survey where respondents were asked to rate various companies on criteria such as financial performance, communication with shareholder, investor relations and quality of corporate governance, Stream was ranked the highest. Shareholder friendly companies were described was described by respondents as those that are known for their policy of openness and high quality of communication with their shareholders.

RELIANCE’S COMMUNICATION WITH SHAREHOLDERS In India, one out of every four investors is a shareholder of Reliance. The company has set up a firm of chartered Accountants as Internal Security Auditors, to audit the transactions and communication with shareholders. The board of directors of the company has also appointed shareholders’/Investors’ Grievance Committee, for examining and responding to shareholders’ complaints with regard to transfer of shares, non-receipt of balance sheet, declared dividends, etc. The committee also makes recommendations on how to improve the overall quality of investor services.

Question-2 What are the general principles of writing especially business writing? Answer - 2 Business letters are used primarily to communicate with stakeholder such as consumers, intermediaries, government and bankers. The principle of business letter writing is somewhat different from the principles of writing general letters. Before we go into the specifics of business letter writing, let us look briefly at some of these principles1. Consideration and Courtesy: It is very important to retain the goodwill of customers and other external publics. A discourteous, rude letter can make you lose business. Therefore, the business letter should be extremely polite at all times and mindful of the ‘P’s and “Q”s, i.e. the words “please, thank you and sorry.” Even if you happen to get a rude letter from a customer, you must respond politely, in order to retain the customer. If the company has been at fault, it is important to apologize to the customer for the mistake and for the inconvenience caused. The overall tome should not be negative. For example, avid saying “We cannot grant your request.” Instead state it in a more tactful way, explaining the reasons for not being able to grant the request. If you are sending a job rejection letter to a candidate, it should be worded politely and in a positive tone. Consideration means that you should appeal to the reader’s interest. The importance of stressing the “you attitude” rather than the

“me attitude” was dealt with in an earlier unit. This is similar to the language of advertisements, which talk about the benefits of the product to the end user. For example, instead of saying “We will be open 24 hours”, say “You can avail of round-the-clock service.” 2. Directness and conciseness: Business letter should be brief and to the point, avoiding unnecessary details and about expressions. A typical Indian tendency is to be too wordy or verbose. Using redundancies and unnecessary words. Business letters should give maximum information to the reader, using minimum words. 3. Clarity and precision: Business letters should be clearly worded, avoiding the use of jargon or technical terms, and slang words. Concrete words should be used, so that there is no ambiguity. Example: Instead of saying “I received your communication”, it is better to be more precise by saying “I received your letter.” The letter should include a single main idea and paragraphs should be used to elaborate on sub ideas. 4. Appearance: Apart from the content, the format, layout and overall look of the letter should be equally appealing to the reader. Attention should be paid to the qu 5. ality of paper used. The margins should be appropriate, including one inch on each side and one and a half inches on top and at the bottom. A business letter should include the following standard components1. Date in the upper right hand corner 2. The “To” address above the salutation in the upper left hand corner 3. The salutation – when addressing a firm, “Messr” should be used before the name of the firm. Since business letters are formal, the appreciate salutation when addressing an individual is “Dear Mr./Ms.” Followed by the last name, rather than the first name, which is informal. If salutation, such as “Dear Customer or Investor” 4. Sometimes an Attention Line may be included below the salutation, in order to ensure prompt action. For example, “Attention”: John Smith, HR manager. 5. The Body of the letter includes an explanation of the main ideas. 6. The Close is the ending of the letter and should be polite and friendly, so as to retain goodwill. A standard close for a business letter is Your faithfully or sincerely. 7. Enclosure- Sometimes, a business letter may include an enclosure such as a pamphlet or a brochure, in which case this should be indicated at the end, below the signature line, as Encl: 2”, meaning two enclosures. Question-3How would you prepare yourself for an oral business presentation? Answer - 3 According to a 2005 study published in the Journal of Employment Counselling, oral communication skills are being increasingly sought after by employers. When surveying over 100 successful businesses, researchers found that more and more employers are emphasizing the development of good speaking skills in their employees. With this in mind, the concept of oral communication is an important idea to study and understand in the context of business. Presentations:

One form of oral communication in a business setting is a presentation. Presentations are usually an organized conveyance of information to a group of people. Stylistically, they tend to be far more formal than informal, and rely more heavily on data and facts than they do analysis. Presentations are sometimes more persuasive in nature, like a pitch for an ad campaign, but tend to be informative more often, such as an employee briefing or a report on quarterly earnings. Presentations may include some dialog after the sender of the message has finished their speech, but they are, by and large, much more monologue reliant. This makes it important for the speaker to anticipate possible objections to the message and address them in the actual speech. Client Interaction Another form of oral communication in business encompasses interaction with clients. Depending on the level of connection between the employee and the client, the communication in these interactions can range from incredibly formal to informal and casual. These interactions usually include a combination of data and analysis, and will be more persuasive than informative in nature, as the employee is trying to encourage continued and expanded business with the client. Because of the nature of these interactions, the communication is definitely a dialog, making listening skills incredibly important. Interoffice Interaction Oral communication in the office can be referred to as interoffice interaction. This is comprised of conversations with superiors, subordinates and co-workers. Depending on the levels of power separation between the individuals engaging in conversation, the communication will fluctuate between formal and informal, though it should always remain professional. Conversations in this context may reference data, but will be much more analysis heavy, and will be a dialog by nature. Benefits: Oral communication in business provides a variety of benefits. First, oral communication is accompanied by nonverbal signifiers, which provides context that can enhance understanding in the communication process. Posture, facial expressions, and habitual movements may provide clues as to an individual’s feelings about the ideas being discussed. Even in telephone conversations, pitch, rate, volume and tone of the respective speakers can help in understanding sentiments. Oral communication also provides a springboard for relational development. Unlike with email, memos and chat functions, which tend to take a task-oriented approach to communication, the immediacy involved in oral communication allows for instant feedback and a more relational approach. This is important, as strong relationships in business often lead to more profitable and productive cooperation. Question-4 You are a team manager having 15 members in your team. Two of your key team members are on 3- weeks leave. You have to call for a monthly team meeting within a week. How effectively you would plan and carry out this meeting ? Answer - 4 Networks are another aspect of direction and flow of communication. Bavelas has shown that communication patterns, or networks, influence groups in several important ways. Communication networks may affect the group's completion of the assigned task on time, the position of the de facto leader in the group, or they may affect the group members' satisfaction from occupying certain positions in the network. Although these findings are based on laboratory experiments, they have important implications for the dynamics of communication in formal organizations. There are several patterns of communication:   Chain Wheel

  

Star All-Channel network, Circle

The Chain can readily be seen to represent the hierarchical pattern that characterizes strictly formal information flow, "from the top down," in military and some types of business organizations. The Wheel can be compared with a typical autocratic organization, meaning one-man rule and limited employee participation. The Star is similar to the basic formal structure of many organizations. The All-Channel network, which is an elaboration of Bavelas's Circle, is analogous to the free-flow of communication in a group that encourages all of its members to become involved in group decision processes. The All-Channel network may also be compared to some of the informal communication networks. If it's assumed that messages may move in both directions between stations in the networks, it is easy to see that some individuals occupy key positions with regard to the number of messages they handle and the degree to which they exercise control over the flow of information. For example, the person represented by the central dot in the "Star" handles all messages in the group. In contrast, individuals who occupy stations at the edges of the pattern handle fewer messages and have little or no control over the flow of information. These "peripheral" individuals can communicate with only one or two other persons and must depend entirely on others to relay their messages if they wish to extend their range. In reporting the results of experiments involving the Circle, Wheel, and Star configurations, Bavelas came to the following tentative conclusions. In patterns with positions located centrally, such as the Wheel and the Star, an organization quickly develops around the people occupying these central positions. In such patterns, the organization is more stable and errors in performance are lower than in patterns having a lower degree of centrality, such as the Circle. However, he also found that the morale of members in high centrality patterns is relatively low. Bavelas speculated that this lower morale could, in the long run, lower the accuracy and speed of such networks. In problem solving requiring the pooling of data and judgments, or "insight," Bavelas suggested that the ability to evaluate partial results, to look at alternatives, and to restructure problems fell off rapidly when one person was able to assume a more central (that is, more controlling) position in the information flow. For example, insight into a problem requiring change would be less in the Wheel and the Star than in the Circle or the Chain because of the "bottlenecking" effect of data control by central members. It may be concluded from these laboratory results that the structure of communications within an organization will have a significant influence on the accuracy of decisions, the speed with which they can be reached, and the satisfaction of the people involved. Consequently, in networks in which the responsibility for initiating and passing along messages is shared more evenly among the members, the better the group's morale in the long run. Question-5 Distinguish between circulars and notice along with formats? Answer - 5 Business letter is an old form of official correspondence. A business letter is written by an individual to an organization or an organization to another organization. Business letters are written for various purposes. One writes a letter to enquire information, apply for a job, acknowledge someone's work, and appreciate one's job done, etc. As the motive of writing the letter is different, the style of the letter changes and you get different types of business letters. The various types of business letters are used by different people to serve their purpose of sending the message across. Let's take look at the most common types of business letters: Acknowledgement Letter: This type of letter is written when you want to acknowledge someone for his help or support when you were in trouble. The letter can be used to just say thanks for something you have received from someone, which is of great help to you.

Apology Letter: An apology letter is written for a failure in delivering the desired results. If the person has taken up a task and he fails to meet the target then he apologizes and asks for an opportunity to improve in this type of letter. Appreciation Letter: An appreciation letter is written to appreciate some one's work in the organization. This type of letter is written by a superior to his junior. An organization can also write an appreciation letter to other organization, thanking the client for doing business with them. Complaint Letter: A complaint letter is written to show one that an error has occurred and that needs to be corrected as soon as possible. The letter can be used as a document that was used for warning the reader. Inquiry Letter: The letter of inquiry is written to inquire about a product or service. If you have ordered a product and yet not received it then you can write a letter to inquire when you will be receiving it. Order Letter: This letter is as the name suggests is used for ordering products. This letter can be used as a legal document to show the transaction between the customer and vendor. Letter of Recommendation: This type of letter is written to recommend a person for a job position. The letter states the positive aspects of the applicant's personality and how he/she would be an asset for the organization. Letter of recommendation is even used for promoting a person in the organization. Question-6 You are sales manager for a particular brand of mixer and blender. Frame a ssample bad news letter telling a customer about that her claim for the product replacement is rejected on the grounds that the product didn’t have any defect during the sale? Answer - 6

A

job

Pravin Omprakash Upadhyay C-404, Shailesh CHS, Sai krupa Complex, Kashimira, Post Mira, Dist. Thane - 401104 Phone (080)- XXXXXXXX; Mobile: +91XXXXX XXXXX Email – [email protected] OBJECTIVE: Middle to senior level position in the area of client servicing, in an Advertising Agency. EDUCATION: M.S., Advertising & Marketing, the University of Texas at Austin, Texas, USA, September 2005. B.A. Mass Communication, N. L. Dalmia College, Mumbai, May 2001. EXPERIENCE: Account Supervisor, Ogilvy & Mather, Mumbai, October 2005 – present. Independently handle the advertising campaigns of prestigious FMCG. Clients, such as Hindustan Unilever. Supervisor a team of client service executives. Client Service Executive: Orange and Green, Mumbai, June 2002 – June 2003. Assisted account supervisor in pre-launch advertising activities for a number of new product launches. Management Trainee, Hindustan Thompson associates, Mumbai, June 2001 – 2002. Went through all-round training in the different departments of an advertising agency, with emphasis on client servicing. ACTIVITIES & INTERESTS: Member, Advertising Club, Mumbai, 2007- present Member, Mumbai Management Association, Mumbai, 2006 – present Consulting Editor, Advertising & Marketing magazine, Mumbai, 2005 – present. REFERENCES: Available on request.

application letter is also known as a “cover letter”, since it introduces or covers the major points mentioned in the resume. It is prepared after the resume. A resume by itself is incomplete, unless it is accompanied by a cover letter. The cover letter, like the resume, should be well written and presented, since it creates a first impression and can get you an interview. Cover letter should be written much like sales letters, using all the techniques of persuasion. You have to sell yourself to a prospective employer, in the same way that you sell a product to a prospective customer. Cover letter can also be used to personalize your qualification for your specific job.

The HR Manager East West Infotainment Siddhipura Industrial area Kurla, Mumbai - 400 070 July 2, 2011 Dear HR manager, Sub. Application for the position of management trainee. I am writing this with respect to your advertisement in the Times of India Ascent, dated June, 28 2011, for the position of management trainee with specialization in human resources. I believe that my qualification and experience will match the needs of the above position. I have recently completed my MBA from Sikkim Manipal University via distance education, with specialization in human resources. My final MBA project was on “HR Recruiting Policies” in ampersand information system, Mumbai. In addition, I have also work on a part time basis with IT recruitment in Mumbai, for around 6 month. I am enclosing my resume along with an executive summary of my project report, for your review. I request to give me the opportunity of an Interview with you at your earliest convenience. Thanking you, Sincerely Pravin Omprakash Upadhyay

Master of Business Administration - MBA Semester 1 Finance and Management Accounting

Question-1 Assure you have just started a Mobile store. You sell mobile sets and currencies of Airtel, Vodaphone, Reliance and BSNL. Take five transactions and prepare a position statement after every transaction. Did you firm earn profit or incurred loss at the end? Make a small comment on your financial position at the end Answer-1 Assure you have just started a mobile store. You sell mobile sets and currencies of airtel…………………………… Particulars Started business with cash purchased nokia handsets purchased BSNL and Reliance recharge vouchers sold a handset for 6000 costing 5850 Sold recharge vouchers of 1500 profit 6% Puchased a second hand cell on crerdit sold a handset for 10000 costing 9150 Repair work of the second hand set Sold the hand set for 5000 Sold a hand set on credit for 10000 costing 9500 on credit Realised 70% from the customer Customer became bad debt Stock Hand set 25000 5000 -5850 -1500 3000 -9150 -3000 -9500 10000 -7000 -3000 0 vouchers 40000 -25000 -5000 6000 1590 10000 -1000 5000 7000 38590 -3000 39590 3000 42590 40000 Debtors Cash Capital Creditors

150 90 3000 850 -1000 2000 500

500

3500 42590

Question.2a List the accounting Standards as issued by ICAI. Answer.2a List the accounting Standards as issued by ICAI:Accounting Standards (ASs) AS 1 Disclosure of Accounting Policies AS 2 Valuation of Inventories AS 3 Cash Flow Statements AS 4 Contingencies and Events Occurring after the Balance Sheet Date AS 5 Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies AS 6 Depreciation Accounting AS 7 Construction Contracts (revised 2002) AS 8 Accounting for Research and Development AS 9 Revenue Recognition AS 10 Accounting for Fixed Assets AS 11 The Effects of Changes in Foreign Exchange Rates (revised 2003), AS 12 Accounting for Government Grants AS 13 Accounting for Investments AS 14 Accounting for Amalgamations

AS 15 (revised 2005) Employee Benefits Limited Revision to Accounting Standard (AS) 15, Employee Benefits (revised 2005) AS 15 (issued 1995) Accounting for Retirement Benefits in the Financial Statement of Employers AS 16 Borrowing Costs AS 17 Segment Reporting AS 18, Related Party Disclosures AS 19 Leases AS 20 Earnings Per Share AS 21 Consolidated Financial Statements AS 22 Accounting for Taxes on Income. AS 23 Accounting for Investments in Associates in Consolidated Financial Statements AS 24 Discontinuing Operations AS 25 Interim Financial Reporting AS 26 Intangible Assets AS 27 Financial Reporting of Interests in Joint Ventures AS 28 Impairment of Assets AS 29 Provisions,Contingent` Liabilities and Contingent Assets AS 30 Financial Instruments: Recognition and Measurement and Limited Revisions to AS 2, AS 11 (revised 2003), AS 21, AS 23, AS 26, AS 27, AS 28 and AS 29 AS 31, Financial Instruments: Presentation Accounting Standard (AS) 32, Financial Instruments: Disclosures, and limited revision to Accounting Standard (AS) 19, Leases

Question.2b Write short notes of IFRS. Answer.2b IFRS The IFRS Foundation is an independent, not-for-profit private sector organisation working in the public interest. Its principal objectives are:  to develop a single set of high quality, understandable, enforceable and globally accepted international financial reporting standards (IFRSs) through its standard-setting body, the IASB;  to promote the use and rigorous application of those standards;  to take account of the financial reporting needs of emerging economies and small and medium-sized entities (SMEs); and  to bring about convergence of national accounting standards and IFRSs to high quality solutions. The governance and oversight of the activities undertaken by the IFRS Foundation and its standard-setting body rests with its Trustees, who are also responsible for safeguarding the independence of the IASB and ensuring the financing of the organisation. The Trustees are publicly accountable to a Monitoring Board of public authorities. Standard-setting The IASB (International Accounting Standards Board) The IASB is the independent standard-setting body of the IFRS Foundation. Its members (currently 15 full-time members) are responsible for the development and publication of IFRSs, including the IFRS for SMEs and for approving Interpretations of IFRSs as developed by the IFRS Interpretations Committee (formerly called the IFRIC). All meetings of the IASB are held in public and webcast. In fulfilling its standard-setting duties the IASB follows a thorough, open and transparent due process of which the publication of consultative documents, such as discussion papers and exposure drafts, for public comment is an important component. The IASB engages closely with stakeholders around the world, including investors, analysts, regulators, business leaders, accounting standard-setters and the accountancy profession.

The IFRS Interpretations Committee The IFRS Interpretations Committee (formerly called the IFRIC) is the interpretative body of the IASB. The Interpretations Committee comprises 14 voting members appointed by the Trustees and drawn from a variety of countries and professional backgrounds. The mandate of the Interpretations Committee is to review on a timely basis widespread accounting issues that have arisen within the context of current IFRSs and to provide authoritative guidance (IFRICs) on those issues. Interpretation Committee meetings are open to the public and webcast. In developing interpretations, the Interpretations Committee works closely with similar national committees and follows a transparent, thorough and open due process.

Question.3

Prepare a Three-column Cash Book of M/s Thuglak & Co. from [10 Marks]

The following particulars: 20X1 Jan

1. Cash in hand Rs. 50,000, Bank Overdraft Rs. 20,000 2. Paid into bank Rs. 10,000 3. Bought goods from Hari for Rs, 200 for each 4. Bought goods for Rs. 2,000 paid cheque for them, discount allowed 1% 5. Sold goods to Mohan for each Rs. 1.175 6. Received a cheque from Shyam to whom goods were sold for Rs. 800.Discount allowed 12.5% 7. Shyam’s cheque deposited into bank 8. Purchased an old typewriter for Rs. 200 , Spent Rs. 50 on its repairs 9. Bank notified that Shyam’s cheque has been returned dishonored and debited the account in respect of charges Rs. 10 10. Received a money order Rs. 25 from Hari 11. Shyam settled his account by means of a cheque for Rs. 820, Rs. 20 being for interest charged. 12. Withdrew from the bank Rs. 10,000 18. Discounted a B/E for Rs. 1,000 at 1% through bank 20. Honored our own acceptance by cheque Rs. 5,000 22. Withdrew fir personal use Rs. 1,000 24. Paid tread expenses Rs. 2,000 25. Withdrew from bank for private expenses Rs. 1,500 26. Purchased machinery from Rajiv for 5,000 and paid him by means of a bank draft purchased for Rs. 5,005 27. Issued cheque to Ram Saran for cash purchased of furniture Rs. 1,575 28. Received a cheque for commission Rs. 500 from R.& Co.

and deposited into bank 29. Ramesh who owned us Rs. 500 became bankrupt and paid us 50 paise in the rupee 30. Received payment of a loan of Rs. 5,000 and deposited Rs. 3,000 out of into bank 31. Paid rent to landlord “Mohan” by cheque of Rs. 220 31. Interest allowed by bank Rs. 30 31. Half-yearly bank charges Rs. 50

Answer.3 Cash Book Dr Date 2011 1Jan 2Jan 5Jan 6Jan 7Jan 10Jan 11Jan 12Jan 18Jan 28Jan 29Jan 30Jan 31Jan Partriculars To, Balance B/d To, Cash To, Mohan To, Shyam To, Cash To, Hari To, Shyam To, Bank To, Bills Receivable To, Commission To, Ramesh To, Loan Repayment To, Interest © © © L F In the books of M/s Tuglak& Co. Cash Book V Dis N Cash Bank c Date Partriculars 2011 5000 1- By, Balance 0 Jan B/d 1000 20 Jan By, Bank 31175 Jan By, Hari 4700 100 Jan By, Purchase 7700 Jan By, Bank 825 Jan By, Typewriter 9820 Jan By, Shyam 1000 90 Jan By, Charges 12990 Jan By, Cash 20- By, Bills 500 Jan Payable 22250 Jan By, Drawings 242000 3000 Jan By, Trade Exp 2530 Jan By, Drawings 26Jan By Machinery 27- By, furniture Cr Dis c

L F

V N

Cash

Bank 2000 0

©

1000 0 200

1980 © 700 250 700 10 1000 0 5000 1000 2000 1500 5005 1575

20

©

31Jan To, Balance c/d 6390 0

2975 0 4604 0

Jan 31Jan 31Jan 31Jan 100

By, Rent By, Bank Charge By, Balance c/d 4975 0 6390 0

220 50 4604 0

20

Question.4

Choose an Indian Company of your choice that has adopted Balance Score Card and detail on it.

Answer.4 BSC in Indian Company Tata Motors is the first Indian company to be inducted in the Balance Scorecard Hall of Fame. Joins the thirty-member elite club of organisations including Hilton Hotels, BMW Financial Services, US Army, Korea Telecom, Norwegian Air Force and the city of Brisbane for achieving excellence in company performance. The commercial vehicle business unit (CVBU) of Tata Motors, India's largest automobile manufacturer, has been inducted in the exclusive club of organisations and corporate houses recognised by the prestigious Balanced Scorecard Collaborative, Inc for achieving excellence in overall company performance. The coveted Steuben crystal 'Rising Star' trophy was presented to the company at the Balanced Scorecard Asia Pacific Summit held at Gold Coast, Queensland Australia. Tata Motors-CVBU has been recognised for having achieved a significant turnaround in its overall performance. The implementation of the Balanced Scorecard has enabled greater focus on different elements of operational performance. Defining, cascading and communicating strategies across the organisation have brought about transparency and alignment. The scorecard incorporates SQDCM (safety, quality, delivery, cost and morale) and VMCDR (volume, market share, customer satisfaction, dealer satisfaction and receivables). Ravi Kant, executive director, CVBU, Tata Motors, said, "While we were conscious of the benefits of the Balanced Scorecard when we began implementing it three years back, we are extremely pleased that it has helped us achieve significant improvements in our overall performance. I am quite positive that the BSC will play an important part in our objective to become a world-class organisation." Balanced Scorecard Collaborative president Dr David P Norton said, "We created the Hall of Fame to publicly acknowledge the hard work and remarkable results of implementing the Balanced Scorecard to create the strategy-focused organisation. The Balanced Scorecard Hall of Fame pays tribute to the success that each organisation has attained." Tata Motors- CVBU shares the honour with the city of Brisbane and Korea Telecom (KT). The Balanced Scorecard (BSC) concept-created by Dr Robert S Kaplan and Dr David P Norton in 1992, has been implemented in thousands of corporations, organisations, and government agencies worldwide. Based on the simple premise that "measurement motivates," the BSC puts strategy at the centre of the management process, allowing organisations to implement strategies rapidly and reliably. Balanced Scorecard Collaborative, Inc. is a new kind of professional services firm dedicated to the worldwide awareness, use, enhancement, and integrity of the Balanced Scorecard as a value-added management process. Tata Motors range of commercial vehicles spans over 135 models and can haul loads ranging from 2 to 40 tonnes. The product portfolio also includes 12 to 60-seater buses, tippers and tractor-trailers. Tata Motors

vehicles meet the stringent Euro emission norms. The company currently has an export base in most parts of South Asia, Africa, Middle East and Europe. Tata Motors recently crossed the 3-million production milestone. Question.5 From the following data of Jagdish Company prepare (a) a statement of source and uses of working capital (funds) (b) a schedule of changes in working capital

Assets Cash Short-term investment Debtors Stock Long term Investment Machinery Building Land Total Liabilities and Equity Accumulated depreciation Creditors Bills Payable Secured loans Share capital Share premium Reserves and surplus Total

2008 1,26,000 42,400 60,000 38,000 28,000 2,00,000 2,40,000 14,000 7,48,400

2007 1,14,000 20,000 50,000 28,000 44,000 1,40,000 80,000 14,000 4,90,000

1,10,000 40,000 20,000 2,00,000 2,20,000 24,000 1,34,400 7,48,400

60,000 30,000 10,000 1,00,000 1,60,000 Nil 1,30,000 4,90,000

Income statement Sales Cost of goods sold Gross Profit Less Operating expenses: Depreciation – machinery Depreciation – building Other expenses Net profit from operation 13,200 Gain on sale on long-term investment Total Loss on sale of machinery Net Profit 4,800 18,000 2,000 16,000 20,000 32,000 40,000 92,000 2,40,000 1,34,600 1,05,200

Adjustments: 1) Machinery worth Rs.70000 was purchased and worth Rs.10000 was sold during the year [Accumulated depreciation on machinery is Rs.18000 after adjusting depreciation on machinery sold]. Proceeds from the sale of machinery were Rs.6000 2) Dividends paid during the year Rs.11600 [ 10 Marks]

Answer.5 Schedule of change in working capital Effect in working Capital 2007 2008 Increase Decrease 114000 20000 50000 126000 42400 60000 12000 22400 10000

Particulars Current Assets Cash Short term investment Debtors

Stock (A) Current Liabilities Creditors Bills Payable (B) Net working capital (A-B) Increase in working capital

28000 212000 30000 10000 40000 172000 34400 206400

38000 266400 40000 20000 60000 206400 206400

10000

10000 10000

54400

34400 54400

Partriculars dividend paid Depreciation on building Depreciation on machinery loss on sale of machinery To, Balance c/d

Adjusted P/L A/c Rs Partriculars 11600 By balance b/d profit on sale of 32000 investment 20000 Fund from operation 2000 134400 200000

Rs 130000 4800 65200

200000

Source Loan taken share issued at premium Sale of investment sale of machinery Fund from operation Sale of machinery

Fund flow statement Rs Application increase in working 100000 capital 84000 dividend paid 20800 purchase of building 6000 purchase machinery 65200 32000 308000

Rs 34400 11600 192000 70000

308000

Question.6 Answer.6

What is a cash budget? How it is useful in managerial decision making?

Cash budget is n estimation of the cash inflows and outflows for a business or individual for a specific period of time. Cash budgets are often used to assess whether the entity has sufficient cash to fulfill regular operations and/or whether too much cash is being left in unproductive capacities. A cash budget is extremely important, especially for small businesses, because it allows a company to determine how much credit it can extend to customers before it begins to have liquidity problems. For individuals, creating a cash budget is a good method for determining where their cash is regularly being spent. This awareness can be beneficial because knowing the value of certain expenditures can yield opportunities for additional savings by cutting unnecessary costs. For example, without setting a cash budget, spending a dollar a day on a cup of coffee seems fairly unimpressive. However, upon setting a cash budget to account for regular annual cash expenditures, this seemingly small daily expenditure comes out to an annual total of $365, which may be better spent on other things. If you frequently visit specialty coffee shops, your annual expenditure will be substantially more. The importance of cash budget may be summarized as follow:(1) Helpful in Planning. Cash budget helps planning for the most efficient use of cash. It points out cash surplus, or deficiency at selected point of time and enables the management to arrange for the deficiency before time or to plan for investing the surplus money as profitable as possible without any threat to the liquidity. (2) Forecasting the Future needs. Cash budget forecasts the future needs of funds, its time and the amount well in advance. It, thus, helps planning for raising the funds through the most profitable sources at reasonable terms and costs. (3) Maintenance of Ample cash Balance. Cash is the basis of liquidity of the enterprise. Cash budget helps in maintaining the liquidity. It suggests adequate cash balance for expected requirements and a fair margin for the contingencies. (4) Controlling Cash Expenditure. Cash budget acts as a controlling device. The expenses of various departments in the firm can best be controlled so as not to exceed the budgeted limit. (5) Evaluation of Performance. Cash budget acts as a standard for evaluating the financial performance.

(6) Testing the Influence of proposed Expansion Programme. Cash budget forecasts the inflows from a proposed expansion or investment programme and testify its impact on cash position. (7) Sound Dividend Policy. Cash budget plans for cash dividend to shareholders, consistent with the liquid position of the firm. It helps in following a sound consistent dividend policy. (8) Basis of Long-term Planning and Co-ordination. Cash budget helps in co-ordinating the various finance functions, such as sales, credit, investment, working capital etc. it is an important basis of long term financial planning and helpful in the study of long term financing with respect to probable amount, timing, forms of security and methods of repayment.

Set 2 1. Year 2009 2010 Year 2009 2010 Current Assets 12000 24100 Quick Assets 6500 12700 Current Liabilities 11000 16000 Quick Liability 11000 16000 Average Debtors 4500 6100 Debtors Turnover 9.555555556 11.31147541 Current Ratio 1.090909091 1.50625

Year Credit Sales 2009 43000 2010 69000 Year Year in days 2009 365 2010 365 Cost of Year goods sold 2009 32500 2010 57000

Quick ratio 0.590909091 0.79375 Debtors Turn over 9.555555556 11.31147541 Debt Collection period 38.19767442 32.26811594 Stock Turnover Inventory period 5500 5.909090909 11400 5

2. Job Costing: This is a product related classification of costing system. The cost is ascertained for each job or work order processed. This systems is used where most of the manufacturing activities are planned and carried out for distinct jobs or customers. The utility of this method increases when there is great variability in nature of jobs or work orders processed. Batch Costing : This method determines the cost associated with each batch pf products manufactured. This differs from job or work order costing in the variability of the production batches. In this case the production batches consist of mostly standard products or components. What varies is mostly the size of batches and the timing of their processing. Process Costing: In this method of costing the costs are determined for various different manufacturing activities or processes. These costs are the assigned to different products on the basis of some criteria like quantity processed or the time taken for processing. This method of costing is suitable for manufacturing units that use continuous processes or mass production techniques. This method is particularly suitable where there are many different products and process routes, where output of one process becomes input for another. Operation Costing: This method is similar to the process costing. However the products manufactured have limited variation. For example a cement plant may use this method. Multiple costing: Most of the organizations use a combination of different costing method rather than just one method. Multiple costing refers to such combinations of different methods.

3. Variable costs are costs that can be varied flexibly as conditions change. In the John Bates Clark model of the firm that we are studying, labor costs are the variable costs. Fixed costs are the costs of the investment goods used by the firm, on the idea that these reflect a long-term commitment that can be recovered only by wearing them out in the production of goods and services for sale. The idea here is that labor is a much more flexible resource than capital investment. People can change from one task to another flexibly (whether within the same firm or in a new job at another firm), while machinery tends to be designed for a very specific use. If it isn't used for that purpose, it can't produce anything at all. Thus, capital investment is much more of a commitment than hiring is. In the eighteen-hundreds, when John Bates Clark was writing, this was pretty clearly true. Over the past century, a) education and experience have become more important for labor, and have made labor more specialized, and b) increasing automatic control has made some machinery more flexible. So the differences between capital and labor are less than they once were, but all the same, it seems labor is still relatively more flexible than capital. It is this (relative) difference in flexibility that is expressed by the simplified distinction of long and short run. Of course, productivity and costs are inversely related, so the variable costs will change as the productivity of labor changes. Here is a picture of the fixed costs (FC), variable costs (VC) and the total of both kinds of costs (TC) for the productivity

Output produced is measured toward the right on the horizontal axis. The cost numbers are on the vertical axis. Notice that the variable and total cost curves are parallel, since the distance between them is a constant number -- the fixed cost.

4. Less less Sundry debtors Bad debt PBD 205000 5000 20000 180000 Particulars Bad debt A/c ………………………………………………………. Dr LF Dr 5000 Cr 5000

Date

To, Debtors A/c P/L A/c ………………………………………………………………… Dr To Bad debt A/c P/L A/c ……………………………………………………………….. Dr To, Provision for bad debt A/c 5000 5000 20000 20000

Dr Date

Partriculars To P/L A/c

Bad Debt A/c LF Rs Date 5000

Partriculars By, Debtors A/c

LF

Cr Rs 5000

5000

5000

Dr Date

Partriculars To Bad debt A/c To, PBD

LF

P/L A/c Rs Date 5000 20000 25000

Partriculars

LF

Cr Rs

Liability

Balance Sheet Rs

Assets

Rs 205000 5000 20000 180000

Sundry debtors LESS Bad debt LESS PBD

6. Accounting plays a very important role in all businesses but it is not just the business itself that finds accounting information useful. There are other stake holders who rely on accounting information to make decisions. These stakeholders include: 1. Shareholders - Shareholders use the balance sheet and profit and loss account produced by limited companies to decide if they are going to increase or decrease their holding. 2. Management - Management in every level of the business from director level to supervisor level rely on accounting information to do their job properly. They all use the same information for different purposes. For example, directors use it for strategic purposes and middle management can use it to see if they are meeting their financial targets. 3. Suppliers - Along with other data suppliers will look at a company's balance sheet and profit and loss account to see if and how much credit they are willing to give to present and potential customers. 4. Lenders - Similar to suppliers lenders also need to make sure a company is in a healthy financial situation before they start to lend money. 5. Government - Governments use the information provided by a company about its finances to levy tax on the profits.

6. Customers - Before another company becomes a customer or enters into a joint venture, they will look at the company's finances to make sure the company is not in trouble and that their supplies are not about to dry up. 7. Employees - Employees also have an interest in how well their employer is doing so use financial accounting information for this purpose.