Podcast
Questions and Answers
Which of the following represents elements of final expenditure on gross domestic products?
Which of the following represents elements of final expenditure on gross domestic products?
What does the term 'bank rate' refer to?
What does the term 'bank rate' refer to?
What characterizes the business cycle?
What characterizes the business cycle?
Which of the following is considered current assets?
Which of the following is considered current assets?
Signup and view all the answers
Which of the following options describes the 'repo rate'?
Which of the following options describes the 'repo rate'?
Signup and view all the answers
Which statement about working capital is true?
Which statement about working capital is true?
Signup and view all the answers
How does open market operation affect the economy during inflation?
How does open market operation affect the economy during inflation?
Signup and view all the answers
Which economic system is characterized by private ownership of production?
Which economic system is characterized by private ownership of production?
Signup and view all the answers
Which of the following is NOT a component of current liabilities?
Which of the following is NOT a component of current liabilities?
Signup and view all the answers
Which factor contributes to enhancing the goodwill of a firm?
Which factor contributes to enhancing the goodwill of a firm?
Signup and view all the answers
What is the function of the reverse repo rate?
What is the function of the reverse repo rate?
Signup and view all the answers
What does the variable reserve ratio control?
What does the variable reserve ratio control?
Signup and view all the answers
What is the primary purpose of working capital?
What is the primary purpose of working capital?
Signup and view all the answers
Which of the following expenditures is an example of investment expenditure?
Which of the following expenditures is an example of investment expenditure?
Signup and view all the answers
In a socialist economic system, who owns the production and distribution?
In a socialist economic system, who owns the production and distribution?
Signup and view all the answers
In which of the following countries is capitalism notably practiced?
In which of the following countries is capitalism notably practiced?
Signup and view all the answers
What does Net National Product (NNP) represent?
What does Net National Product (NNP) represent?
Signup and view all the answers
Which method of measuring national income considers the value added at each stage of production?
Which method of measuring national income considers the value added at each stage of production?
Signup and view all the answers
Which of the following is NOT a problem in estimating national income?
Which of the following is NOT a problem in estimating national income?
Signup and view all the answers
Which of the following describes the primary focus of the price policy in a country?
Which of the following describes the primary focus of the price policy in a country?
Signup and view all the answers
Which of the following factors is NOT considered a conceptual difficulty in measuring national income?
Which of the following factors is NOT considered a conceptual difficulty in measuring national income?
Signup and view all the answers
What encompasses Gross Domestic Product (GDP)?
What encompasses Gross Domestic Product (GDP)?
Signup and view all the answers
In which situation would the 'Income method' be utilized to measure national income?
In which situation would the 'Income method' be utilized to measure national income?
Signup and view all the answers
Which of the following statements about continuous learning in the economic environment is true?
Which of the following statements about continuous learning in the economic environment is true?
Signup and view all the answers
What is the Statutory Liquidity Ratio (SLR)?
What is the Statutory Liquidity Ratio (SLR)?
Signup and view all the answers
Which of the following describes a mixed economy?
Which of the following describes a mixed economy?
Signup and view all the answers
What is the primary focus of fiscal policy?
What is the primary focus of fiscal policy?
Signup and view all the answers
Which of the following is NOT a technique of fiscal policy in India?
Which of the following is NOT a technique of fiscal policy in India?
Signup and view all the answers
Which policy aims to manage the supply of money in a country?
Which policy aims to manage the supply of money in a country?
Signup and view all the answers
What are the two types of credit control in monetary policy?
What are the two types of credit control in monetary policy?
Signup and view all the answers
What is the purpose of foreign trade policy?
What is the purpose of foreign trade policy?
Signup and view all the answers
Which equation represents the relationship between Gross National Product (GNP) and Gross Domestic Product (GDP)?
Which equation represents the relationship between Gross National Product (GNP) and Gross Domestic Product (GDP)?
Signup and view all the answers
What does the Payback Period (PBP) measure?
What does the Payback Period (PBP) measure?
Signup and view all the answers
How is the Payback Period calculated when annual cash inflows are constant?
How is the Payback Period calculated when annual cash inflows are constant?
Signup and view all the answers
If a machine costs $100,000 and generates $20,000 annually, what is the Payback Period?
If a machine costs $100,000 and generates $20,000 annually, what is the Payback Period?
Signup and view all the answers
What is the primary concern regarding the length of the Payback Period?
What is the primary concern regarding the length of the Payback Period?
Signup and view all the answers
When annual cash inflows are not equal, what methodology is employed to calculate Payback Period?
When annual cash inflows are not equal, what methodology is employed to calculate Payback Period?
Signup and view all the answers
With an investment of $20,000 and annual cash inflows of $6,000, $8,000, $5,000, $4,000, and $4,000 over 5 years, what is the Payback Period?
With an investment of $20,000 and annual cash inflows of $6,000, $8,000, $5,000, $4,000, and $4,000 over 5 years, what is the Payback Period?
Signup and view all the answers
Which element does NOT influence the complexity of capital budgeting decisions?
Which element does NOT influence the complexity of capital budgeting decisions?
Signup and view all the answers
Why might a project with a longer Payback Period be considered less favorable?
Why might a project with a longer Payback Period be considered less favorable?
Signup and view all the answers
Study Notes
Economic Environment
- Economic Environment: External factors impacting businesses, including economic conditions, policies, and systems.
-
Economic Systems: Structures for producing and distributing goods and services.
- Capitalism: Private ownership, production based on supply and demand (Singapore, UK, USA).
- Socialism: Government ownership and control of production and distribution (China, Cuba).
- Mixed Economy: Combination of capitalism and socialism (France, India).
Economic Policy
-
Economic Policy: Government's tools to influence the economy.
-
Monetary Policy: Managing the money supply to achieve price stability and credit flow.
-
Quantitative Credit Control: Adjusting the overall money supply.
- Bank Rate Policy: Interest rate at which the central bank re-discounts bills from commercial banks.
- Repo Rate: Interest rate at which the central bank lends to commercial banks.
- Reverse Repo Rate: Interest rate paid by the central bank for deposits from commercial banks.
- Open Market Operations: Buying or selling securities to influence the money supply.
- Variable Reserve Ratio: Adjusting the SLR (Statutory Liquidity Ratio) and CRR (Cash Reserve Ratio) to control liquidity in the banking system.
- Qualitative Credit Control: Influencing the quality of credit.
-
Quantitative Credit Control: Adjusting the overall money supply.
-
Fiscal Policy: Managing government income and expenditure to encourage or restrict economic activity.
- Taxation Policy: Government use of taxes to control spending.
- Public Expenditure Policy: Government spending on infrastructure, education, etc.
- Public Debt Policy: Managing government borrowing.
- Deficit Financing Policy: Spending beyond current income.
- Foreign Trade Policy: Regulating trade between countries.
- Licensing Policy: Government control over industrial growth.
- Technology Policy: Utilizing modern techniques in business.
- Price Policy: Controlling commodity prices.
-
Monetary Policy: Managing the money supply to achieve price stability and credit flow.
Importance of Economic Environment
- Businesses need to understand the economic environment to identify opportunities and threats.
- It helps in providing direction for business growth, continuous learning, image building, and meeting competition.
National Income
-
National Income: Money value of all final goods and services produced in a country during a year.
- GDP (Gross Domestic Product): Value of goods and services produced within a country's territory.
- GNP (Gross National Product): Total value of goods and services produced by a country's residents.
- NNP (Net National Product): GNP minus depreciation.
Methods of Measuring National Income
- Product Method: Adding the value added at each stage of production.
- Income Method: Sum of all incomes earned in the economy (wages, salaries, profits, interest).
- Expenditure Method: Sum of spending on final goods and services (consumption, investment, government spending, net exports).
Business Cycle/Trade Cycle
- Business Cycle: Fluctuations in economic activity (boom, recession, depression, recovery).
Working Capital Management
- Working Capital: Investment in current assets (assets readily convertible to cash)
-
Components of Working Capital:
-
Current Assets:
- Inventory (raw materials, work-in-progress, finished goods)
- Sundry Debtors
- Bills Receivables
- Pre-payments
- Short-term investments
- Accrued income
- Cash and bank balances
-
Current Liabilities:
- Liabilities due within one year.
-
Current Assets:
Capital Budgeting
- Capital Budgeting: Process for making long-term investment decisions.
-
Steps in Capital Budgeting:
- Identify Investment Projects: Evaluate potential investment opportunities.
- Forecast Cash Flows: Estimate future income and expenses associated with an investment.
-
Evaluate Investment Proposals: Analyze the profitability of proposed projects using methods like:
-
Payback Period (PBP): Time required to recoup initial investment.
- For constant annual cash flow: PBP = Initial Investment/Annual Cash Inflow.
- For varying annual cash flows: Calculate cumulative cash inflows until the initial investment is recovered.
-
Payback Period (PBP): Time required to recoup initial investment.
Considerations in Capital Budgeting
- Irreversibility: Some decisions may be costly to reverse.
- Risk: Uncertainty about future cash flows.
- Complexity: Involves forecasting and applying statistical techniques.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Explore the key components of the economic environment including the various economic systems like capitalism, socialism, and mixed economies. This quiz also covers important aspects of economic policy, particularly monetary policy and its tools such as bank rate and repo rate. Test your knowledge on how these elements impact businesses and economies worldwide.
