๐ RTU Managerial Economics & Financial Accounting Solved Paper 2023
Click the button below to start the 15-second timer.
Rajasthan Technical University (RTU) Solutions
B.Tech. III-Semester (Feb 2023) | Managerial Economics and Financial Accounting (3E1200)
PART - A (Short Answer Questions - 2 Marks Each)
Q1. Define Managerial Economics.
Application of economic concepts, theories, and analytical tools to business decision-making to solve managerial problems effectively.
Q2. Define National Income.
Total aggregate monetary value of all final goods and services produced by normal residents of a country in a financial year.
Q3. What do you mean by Law of Demand?
Keeping other factors constant (ceteris paribus), the quantity demanded of a commodity varies inversely with its price.
Q4. Define price elasticity of demand.
Degree of responsiveness of quantity demanded to a change in the price of a commodity.
Q5. Define Production Function.
Technological relationship between physical inputs (labor, capital) and maximum output produced.
Q6. What is opportunity cost?
Value of the next best alternative foregone when making a choice.
Q7. What do you mean by Monopoly?
Market structure with a single firm selling a unique product with no close substitutes and high entry barriers.
Q8. Define Financial Statement Analysis.
Process of evaluating a firm's financial position and performance using ratios and analytical tools.
Q9. What is Pay Back Period?
Time required for a project to recover its initial investment outlay through cash inflows.
Q10. Explain Debtors Turnover Ratio.
Measures efficiency in collecting receivables by showing how many times debtors convert into cash during a period.
PART - B (Analytical & Problem Solving - 4 Marks Each)
Q1. Distinguish between deductive and inductive methods in Economics.
- Deductive Method: Moves from general assumptions to specific conclusions (Abstract/Top-down).
- Inductive Method: Moves from specific observations to general theories (Empirical/Bottom-up).
Q2. Concepts of National Income
- GNP: Total market value of output by domestic factors (GDP + NFIA).
- NNP: Net production value after deducting depreciation (GNP - Depreciation).
- Personal Income (PI): Actual income received by individuals before direct taxes.
- Disposable Income (DI): Income available for spending/saving (PI - Direct Taxes).
Q3. Methods of Demand Forecasting
- Survey Methods: Direct interviews or Delphi expert opinion technique.
- Statistical Methods: Time-series analysis, trend projection, and regression models.
Q4. Monopolistic vs. Perfect Competition
| Feature | Perfect Competition | Monopolistic Competition |
|---|---|---|
| Product | Homogeneous | Differentiated |
| Price Control | Price Taker | Partial Control |
| Selling Cost | None | High (Ads/Promotions) |
Q5. Degrees of Price Elasticity of Demand
- Perfectly Elastic (Ed = ∞): Infinite change in demand at a specific price.
- Perfectly Inelastic (Ed = 0): Demand remains unchanged with price change.
- Unitary Elastic (Ed = 1): % change in demand equals % change in price.
- Relatively Elastic (Ed > 1): % change in demand exceeds % change in price.
- Relatively Inelastic (Ed < 1): % change in demand is less than % change in price.
Q6. Cost Schedule Calculation
Given: AFC at Q=4 is 5. TFC = 5 * 4 = 20 (Constant for all units). TVC = TC - TFC
| Quantity (Q) | Total Cost (TC) | Total Fixed Cost (TFC) | Total Variable Cost (TVC) |
|---|---|---|---|
| 1 | 50 | 20 | 30 |
| 2 | 65 | 20 | 45 |
| 3 | 75 | 20 | 55 |
| 4 | 95 | 20 | 75 |
| 5 | 130 | 20 | 110 |
| 6 | 185 | 20 | 165 |
Q7. Balance Sheet Definition & Characteristics
Financial statement showing a firm's assets, liabilities, and equity on a specific date.
Characteristics:
Characteristics:
- Reflects financial position at a given point in time.
- Satisfies equation: Total Assets = Total Liabilities + Capital.
PART - C (Detailed Solutions - 10 Marks Each)
Q1. Financial Ratio Analysis for Riddhima Motors
Values:
Current Assets = 50k + 20k + 15k = ₹85,000
Liquid Assets = 20k + 15k = ₹35,000
Current Liabilities = 30k + 10k = ₹40,000
Shareholders' Equity = 200k + 100k + 50k + 70k = ₹4,20,000
Long-Term Debt = ₹1,00,000 | Total Assets = ₹5,60,000
Answers:
(a) Current Ratio = 85,000 / 40,000 = 2.125 : 1
(b) Liquid Ratio = 35,000 / 40,000 = 0.875 : 1
(c) Debt-Equity Ratio = 1,00,000 / 4,20,000 = 0.238 : 1
(d) Proprietary Ratio = 4,20,000 / 5,60,000 = 0.75 (75%)
(e) Solvency Ratio = 1,40,000 / 5,60,000 = 0.25 (25%)
Q2. Nature and Scope of Managerial Economics
Nature: Microeconomic, practical, and normative (prescriptive).
Scope: Demand forecasting, production/cost analysis, pricing strategies, and capital budgeting.
Scope: Demand forecasting, production/cost analysis, pricing strategies, and capital budgeting.
Q3. Law of Variable Proportions
States that adding variable input to fixed inputs causes output to increase at an increasing rate, then decreasing rate, and finally decline.
STAGES:
Stage 1: Increasing Returns (TP rises fast, MP increases)
Stage 2: Diminishing Returns (TP rises slow, MP falls - Rational Zone)
Stage 3: Negative Returns (TP falls, MP < 0)
Q4. Price & Output under Perfect Competition (Short Run)
Firms are price takers where Price = MR = AR. Equilibrium occurs where MC = MR and MC cuts MR from below.
Outcomes: Supernormal Profit (AR > SAC), Normal Profit (AR = SAC), or Loss (AR < SAC).
Outcomes: Supernormal Profit (AR > SAC), Normal Profit (AR = SAC), or Loss (AR < SAC).
Q5. Capital Budgeting: NPV Comparison
Project A:
PV of Inflows = (100k * 0.909) + (20k * 0.826) + (10k * 0.751) + (10k * 0.683)
= 90,900 + 16,520 + 7,510 + 6,830 = ₹1,21,760
NPV = 1,21,760 - 1,18,720 = +₹3,040
Project B:
PV of Inflows = (10k * 0.909) + (10k * 0.826) + (20k * 0.751) + (100k * 0.683)
= 9,090 + 8,260 + 15,020 + 68,300 = ₹1,00,670
NPV = 1,00,670 - 1,00,670 = ₹0
Conclusion: Select Project A due to positive NPV (+₹3,040).