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(PDF) Financial Literacy among Business Management

   

Added on  2020-01-06

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FINANCIALECONOMIC LITERACY FOR MANAGERS

TABLE OF CONTENTSIntroduction .....................................................................................................................................3TASK ..............................................................................................................................................3Question 1........................................................................................................................................3a) The classification of production along with examples ...........................................................3b) Explaining opportunity cost with example..............................................................................4c) Explaining the purpose of the UK standard industrial classification.......................................4d)Explaining the concept of shift in demand curve and movement along the curve ..................4e) Explaining the income and substitution impact on increase in price ......................................5Question 2........................................................................................................................................6a) The types of market along with examples ..............................................................................6b) The public good and its example. ...........................................................................................6c) Explaining the ways in which government intervene in the market........................................6d)Explaining the four key macro economic policy objectives.....................................................6e) Explaining the circular flow of income involving the inner flow, withdrawal, injection etc. 7Question 3........................................................................................................................................8a) Defining the four major areas of finance with examples ........................................................8b) The determinants of market interest rate with different types of risk premium. ....................8c) Explaining the four basic financial statements .......................................................................8d) Calculating ratios of M&S.....................................................................................................12Question 4......................................................................................................................................13a) Describing the importance of capital budgeting decisions ...................................................13b) Describing the use of NPV technique for investment decisions ..........................................13c) Explaining the yield curve involving the reason for difference.............................................14d) Calculating expected return on two projects .......................................................................14Conclusion ....................................................................................................................................14REFERENCES .............................................................................................................................162

INTRODUCTION The managers hold position within the organisation as are responsible for entire controland management of firm or group of employees. They are in charge of specific group of task.The profitability, long term success and sustainability of company depends upon theeffectiveness of decision taken by managers (MacNeilage, 2012). In this report, various aspectsof financial, economic literacy for managers will be studied in the context of Marks and Spencer.It is multinational company of UK that is renowned for its fashion apparels, home and luxuryfood products. In this report, ratio analysis of M&S in UK economy will be provided. The yieldcurve will be explained along with reason for its difference. Further, description about the NPVtechnique and its use in making investment decision will be discussed. TASK QUESTION 1a) The classification of production along with examples The production function refers to modification of different inputs into needed output. It ismethod that determines the way in which manufacturing function is executed in M&S. Further,production system is classified into various types which are explained as follows:Continuous production: In this method, the products are manufactured for the stock andnot for particular orders. The main feature of this system is that it have standardizeproduction process as it use specific processes, plant and equipment ( Weale and Blake.,2015). For instance, food industry use this production system. Mass production: This system aims at manufacturing of discrete components using aconstant method called mass production. Here, manufacturing system is reasoned due tobulk production. Example, Ford motors have mass production. Job shop production: It is featured by producing few or one quantity of productsdesigned and manufactured as per the customized requirement of customers withinpredetermined time and cost. The repair shop, commercial printers etc have this kind ofproduction method (Rapetti, 2013). 3

b) Explaining opportunity cost with example.The opportunity cost can be defined as cost of an option that must be forgone so as topursue a specific action. It further help in understanding the relationship between scarcity andchoice. The aim of this is to assure optimum utilization of limited resources (Baker, Singleton,and Veit, 2011). For example, employee of M&S want to leave its job and attend highereducation for career growth. Here, opportunity cost of such decision is loss of remuneration for ayear. c) Explaining the purpose of the UK standard industrial classification The standard industrial classification (SIC)is a four digit code system that ascertain themode of economic function. It was initiated in 1948 in UK with the objective of categorizingbusiness enterprises and other statistical units by the kind of economic functions in which theyare involved. The SIC codes are allotted as per the common features in business offerings,manufacturing and delivery system of a business (Borras and et.al., 2011). d)Explaining the concept of shift in demand curve and movement along the curve The shift in demand curve represent the state when demand changes in market. It meansmodification in the components other than the price of offerings . Example, increase in incomeof customer may cause him/her to purchase more products offered by M&S. Such as infollowing diagram price is consistent at 15 $but quantity demanded increased from 8 to 12 units.4Illustration 1: Shift in demand curve

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