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Financial and Economic Literacy for Managers

   

Added on  2020-01-28

15 Pages3771 Words88 Views
FINANCIAL AND ECONOMICLITERACY FOR MANAGERS

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3Question 1........................................................................................................................................3(a) Explain three classification of production and example of same..........................................3(b) Explain opportunity cost and give example .........................................................................3(c) Purpose and evaluation of UK standard industrial classification since 1948........................4(d) Explanation on demand curve and shift in same...................................................................4(e) Explain income and substitution effect on increase in price.................................................5Question 2........................................................................................................................................5(a) Explain two types of market and give example of each........................................................5(b) Define public goods and give examples................................................................................5(c) Three ways in which government intervene in the market with example.............................6(d) Four macroeconomic policy objectives that are pursued by the government.......................6(e) Explain circular flow of income ...........................................................................................7Question 3........................................................................................................................................7(a) Define and give examples on four major areas of finance....................................................7(b) Determinants of market interest rates and types of risk premium.........................................7(c) Explanation on four basic financial statements including formats and purpose...................8(d) Ratio analysis of Mark & Spencer.........................................................................................8Question 4........................................................................................................................................9(a) Importance of capital budgeting and process of making capital investment decisions........9(b) How NPV is used to make investment decisions................................................................10(c) Define yield curve reasons why same differ .......................................................................10(e) Project evaluation................................................................................................................10CONCLUSION..............................................................................................................................11

INDEX OF TABLESTable 1: Ratio analysis...................................................................................................................10LIST OF FIGURESFigure 1 Normal demand curve.......................................................................................................5Figure 2: Shift in demand curve......................................................................................................5Figure 3: Capital budgeting process..............................................................................................11Figure 4: Yield curve.....................................................................................................................12

INTRODUCTIONThis report is prepared on economics and under this various topics that comes undermicroeconomics and macroeconomics are discussed in detail in the report. Apart from thisproject evaluation methods are also described and applied to select most viable project.Question 1(a) Explain three classification of production and example of sameThree classification of production systems are job production, batch production and massor flow production. Job production refers to the production of goods according to thespecifications provided by the customer (Schumacher, 2011). In this production system there isno specific standard that is followed for producing goods in facility. Batch production is anothermanufacturing system under which goods are repeatedly produced which are identical in nature.On the basis of expected demand similar product is produced again and again in order to meetdemand of the people. Third and important production system is mass production under whichon large scale good are produced by the manufacturer in his plant. Under this system goods areproduced by following specific standards on regular basis (Jones, E and Sloman, J., 2014). Threeof above discussed production system are different from each other.(b) Explain opportunity cost and give example In business number of assets are used and some of them can be used to perform multipleactivities. Use of specific asset generate economic benefit for the firm in terms of cash inflow orcost curtailment. Some times in business situation comes when it is not possible to make multipleuse of the asset in single time period (Becker, 2010). In that case the economic benefit that firmis not able to receive by making other use of asset is assumed as cost which comes in existencebecause firm is not able to reap full benefit of same. For example there is building on the firmand its some part is vacant. Firm have two options either it can make investment in equity or itcan invest money on mutual funds. If it will invest in shares then it is expected that return of 10%will be ROI (Etzioni, 2010). Similarly, if investment will be made in mutual fund then return of15% can be earned on investment. Concern invest in equity and it earn return of 9%. Whereas,mutual fund give a return of 13%. This means that opportunity cost for the firm was (13-9= 4%).If it will make investment in mutual fund then it can earn 4% more return but it loose thisopportunity. Hence, 4% is opportunity cost for the firm.

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