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business
understanding management

Questions and Answers of Understanding Management

32. The management of Superfast Transport Company is considering whether to buy or lease an additional small truck it needs in order to extend its service. An analysis of costs and potential demand
33. The manager of Good-Morning Stores is considering opening a new store in the rapidly expanding NOIDA. Two sizes of the store are under consideration: Regular and Large. The initial costs,
Two businesses, AB Ltd. and CD Ltd. sell the same type of product in the same market. Their budgeted profit and loss accounts for the year ending 30th June 20XX are as follows:Now, (a) calculate the
37. A firm is engaged in manufacturing four products: ~. ~. ~. and JJ.i. The data on the product-mix, selling prices and variable costs are:Compute (a) the contribution margin ratio, and (b) the
40. (a) Kolkata Company Ltd. manufactures and sells four types of products under the brand names ACE, UTILITY, LUXURY, and SUPREME. The sales mix in value comprises:The total budgeted sales (100%)
The demand for an item is observed for 15 months and recorded below:Calculate (i) 3-monthly and (ii) 4-monthly moving averages. What is the forecast for month 16 for each one? Month Demand Month
The demand for a particular item during the ten months of a year is as given below. The manager is considering how well the exponential smoothing serves as an appropriate technique in forecasting the
Calculate mean squared error (MSE), and mean absolute percentage error (MAPE) for the forecasts obtained in Example 19.2 using a= 0.5.These measures are shown calculated in Table 19.3. TABLE 19.3
Calculate trend-adjusted forecasts using the following data:Further, given initial estimate = 208, initial trend = 0, a = 0.2 and 13 = 0.1 Quarter: 1 2 3 4 5 6 7 8 9 10 10 Demand: 213 201 198 207 220
The sales of a company, in millions of rupees, are given below:Using the principle of least squares, fit a straight line trend equation to the above data. Show that the sum of deviations is equal to
The sales data given in Example 19.5 are reproduced below, with the break-up of the yearly sales on a quarterly basis. You are required to (a) obtain seasonal indices, and (b) forecast the sales for
A car manufacturer has recently held 3-day road side exhibits on the introduction of a new model of its deluxe cars. The number of sales personnel employed at each of a sample of 10 exhibitions and
Given the following data:(i) Develop the estimating equation best describing these data.(ii) If an employee scored 83 on the aptitude test and had a prior experience of 7, what performance evaluation
Using the following data on the demand of a product, calculate (i) 3-monthly moving averages,(ii) exponentially smoothed averages, assuming initial forecast = 250 and a = 0.3, and (iii)
An analysis of the past data reveals the following information:On the basis of the given data, forecast the demand for the months of January, 2011 through June, 2011 Trend equation: Y 1,008+15.8X
In the following table are recorded data showing the experience of machine operators and their performance rating as given by the number of good parts turned out per 100 piecesObtain the regression
A company keeps track of its expenditure on advertising (X1) and its spending on in-store displays (X2) over a period of 10 weeks. The resulting sales for each week are recorded as the dependent
1. Qualitative methods of forecasting are employed where the variable under consideration cannot be quantified. Mark the statement as T (True) or F (False).
2. Opinions and judgements play no role in quantitative forecasting. Mark the statement as T (True) or F (False).
3. Delphi method is the most important method of forecasting involving judgements. Mark the statement as T (True) or F (False).
4. Exponential smoothing is a causal method of forecasting. Mark the statement as T (True) or F (False).
5. Decomposition of a time series involves breaking down the historical data into explained and unexplained variation. Mark the statement as T (True) or F (False).
6. In moving averages method, the broader the base (for calculating moving average), the better the results, since forecasts are then made on the basis of more data. Mark the statement as T (True) or
7. In exponential smoothing, the weight applied to actual value of a period k is (1 -a) times the weight applied to the value of the period k- 1. Mark the statement as T (True) or F (False).
8. In the exponential smoothing method of forecasting, the previous forecast is adjusted by a fraction of the error in that forecast to obtain the next forecast. Mark the statement as T (True) or F
9. Exponential smoothing method of forecasting is the appropriate one under all conditions. Mark the statement as T (True) or F (False).
10. A high value of a would always lead to better forecasts since it allows making quick adjustements to the forecasts. Mark the statement as T (True) or F (False).
11. For demand forecasting purposes, a company should always use the same value of a for reasons of stability. Mark the statement as T (True) or F (False).
12. MAPE represents the mean of absolute forecast errors expressed as a percentage of the forecasted values. Mark the statement as T (True) or F (False).
13. The choice ofa determined by MAD, MSE and MAPE is always identical and therefore, only one of these may be considered. Mark the statement as T (True) or F (False).
14. In a regression-based forecast, the standard error of estimate gives the maximum error of forecast. Mark the statement as T (True) or F (False).
15. The simple regression analysis is based on the assumption that the changes in the dependent variable are caused by changes in the independent variable only and none else. Mark the statement as T
16. The coefficient of determination is equal to the ratio SSR/SST. Mark the statement as T (True) or F (False).
17. Multiple regression analysis allows to have multiple dependent and independent variables. Mark the statement as T (True) or F (False).
18. In multiple regression analysis, constants b1, b2, b3 and so on are termed as partial regression coefficients. Mark the statement as T (True) or F (False).
19. The coefficient of determination measures the percentage variation in the dependent variable which is explained by the independent variable/s. Mark the statement as T (True) or F (False).
20. For a given set of data, about 95% of the actual data points are likely to fall within twice the standard error of estimate. Mark the statement as T (True) or F (False).
1. What is the difference between qualitative and quantitative techniques of forecasting? When is a qualitative model appropriate?
2. Briefly discuss the Delphi method of making forecasts.
3. What is a time-series forecasting model? Explain the principle underlying the trend line.
4. Discuss the moving average model of forecasting and mention its drawbacks.
5. Do you think the exponential smoothing model of forecasting is in any way better than the moving average model?
6. How would you make a choice between selected values of smoothing constants for making forecasts?
7. Discuss the method of obtaining trend-adjusted exponential smoothed forecasts.
8. What is MAD? Discuss its importance in selection and use of forecasting models.
9. What is coefficient of determination in the regression model of forecasting? How is it measured?
10. What is standard error of estimate? What does it indicate?
1. You are given the following information about demand of an item:Calculate forecasted values using (i) 3-monthly moving averages, (ii) 5-monthly moving averages, and (iii) 4-monthly weighted moving
Obtain the profit forecasts using (i) 4-Yearly moving averages, and (ii) 5-Yearly moving averages, from the following data relating to profits (in '000 Rs): Year Profit Year Profit Year Profit Year
3. Given the following data about the demand of an item, use exponential smoothing to forecast demand taking a= 0.1 and a= 0.3. Also, plot the original data and the forecasts on graph.Further,
4. Using the following data, compute the exponential forecasts using a= 0.3 but use MAD as a tracking signal. Whenever the MAD exceeds 50, switch to a= 0.8, and when the MAD is less than or equal to
5. Demand (in '000 metric tonnes) for sugar of Sweet India is given below:(i) Fit a straight line trend by method ofleast squares.(ii) Calculate trend values and plot observed and trend values on a
6. Fit a straight line trend to the following data on demand of steel ingots (in millions) and project the demand for the year 2009. Year : 2002 2003 2004 2005 2006 2007 2008 Demand: 80 44 84 90 90
7. Fit a straight line trend to the following data on average monthly domestic demand (in millions of barrels) for motor fuel:What is the forecast of demand for the Year 2009? Year Demand : 1998 1999
The data on monthly sales (in thousands of Rs) of a company are given as follows:Assuming there is no trend, compute the monthly seasonal indices. Using these indices, prepare the monthly sales
9. Obtain the least squares regression equation of Yon X from the following data:Use the regression equation to forecast values of Y when (i) X = 70, and (ii) X = 85. X : Y : 1 % 86 91 57 4 75 74 84
10. In security analysis, the returns on a share are related to the returns on the market portfolio to calculate the beta of that security. For a share the return is usually calculated as (P1-P1_
11. Ashish, owner of a business unit is concerned about the sales behaviour of his product. He realises that there are many factors that might help explain sales, but believes that advertising and
12. A company recently embarked on an in-store promotional compaign, with displays of its antacid featured prominently in the supermarkets. The company also ran its usual radio and television
39. Aggarwal and Company sold in two successive years 7,000 and 9,000 units and incurred a loss of Rs 10,000 and earned Rs 10,000 as profit, respectively. The selling price per unit is Rs 100.
38. The PN ratio for an item is 40% and the margin of safety is 50%. Find out the net profit and the breakeven point if the sales volume is Rs 8,00,000.
36. Caravan Company sold 1,00,000 units of its product at Rs 20 per unit. Variable costs are Rs 14 per unit(manufacturing costs of Rs 11 and selling costs of Rs 3). Fixed costs are incurred uniformly
34. Calculate the break-even point and the profit made in the following case:The fixed costs for the year are Rs 96,000; variable cost per unit of the single product being made is Rs 4 while each
20. A firm is considering the introduction of a new product which will have a life of 5 years. Two alternative methods of promoting the product have been identified:Alternative 1: This will involve
17. A company is considering the following two mutually exclusive projects:Project X : Initial cost Rs 2,00,000; Rs 30,000 per year after-tax inflows for 10 years Project Y : Initial cost Rs
16. Agfa p.l.c. is considering purchasing for Rs 50 thousand a machine that will reduce cash outlays by Rs 10,500 each year for the next seven years. At the end of the 7-year period, the machine will
15. The Omega Company is considering two alternative capital investment proposals (a) renovating the existing machine at an initial cash outlay of Rs 25,000, or (b) replacing the existing machine
13. A company can acquire a new machine at a cost of Rs 72,000 to replace a manual process. The annual net cash flow saving would be Rs 18,000 for a period of 7 years at the end of which there would
12. The SOFTOUCH Company is engaged in manufacturing software equipment for computers. The company can either build its own factory building for Rs 20 lakhs or rent an equivalent building with a
11. Anil Corporation provides a multitude of benefits to its employees, including a company funded pension plan. Biren is due to retire in five years and will receive annual pension cheques starting
10. (a) If a perpetuity is worth 20 years' purchase, find the annuity of Rs 1,000 to continue for 2 years.(b) If 20 year' purchase must be paid for an annuity to continue k years and 25 years'
9. A person is invited to quote the annual rent for a freehold property he has just bought for Rs 30 lakhs.What should the quotation be if the money's worth is 10% pa?
8. A company wishes to establish a sinking fund to replace a machine by a new one at the end of 8 years.The payments to the sinking refund shall be made at the year-ends, the first one being at the
7. An employee of a factory takes a loan of an amount of Rs 75,000 from Our-Own-Society. It is to be repaid in yearly instalments of Rs 3,750. If the rate of interest charged is 3.5%, how many
6. A building owner gets two offers from a prospective buyer:(a) Rs 5 lakhs payable now.(b) Rs 6,20,000 in five equal instalments, payable at the year-ends, the first of the payments to be made 3
5. Mr Green buys a colour TV set for which he has to make a down payment of Rs 2,000 and Rs 500 as monthly instalment for a total of 30 months. What is the cash down price of the TV set if the money
4. A housewife is looking at ways of producing domestic hot water and considers two possibilities-an electrical immersion heater having an installation cost of Rs 160 and estimated annual electrical
3. Mr K has just retired and received a sum of Rs 3 lakhs as retirement benefits. He wants to invest so that the amount may be repaid to him in 10 equal annual instalments. An insurance company
2. Determine the amount of an annuity of Rs 120 payable at the end of each year for 20 years from now, if money is worth 5% per annum.
1. A company has three offers for its existing equipment in one of the divisions. The first buyer is willing to pay Rs 50,000 at the end of 8 years' period. The second buyer offers Rs
19. Explain the concept of 'margin of safety'. How can the margin of safety be measured?
18. What is P/Vratio? What does it measure and how is it useful?
17. What is break-even analysis? How is it useful? How can the break-even point for the multi-product firm be calculated?
16. What is sensitivity analysis in the context of investment decisions? Explain.
15. What do you understand by decision-tree analysis? Give its role for investment decisions.
14. Discuss the decision-tree and simulation approaches to the consideration of risky investment proposals.Illustrate each of these.
13. How can the EVPJ of an investment proposal be obtained?
12. Explain the statistical distribution approach to evaluate risky proposals. How would the variance be obtained when the cash flows of the successive time periods are (a) perfectly correlated, and
11. Discuss the certainty-equivalent and risk-adjusted discount rate methods of incorporating risk into capital budgeting process. Which of the two is superior? Why?
10. What do you mean by risk in investment proposals? How can it be measured?
9. Critically examine the Net Present Value and Internal Rate of Return methods used in appraising capital projects. Also discuss a few simple approaches for incorporating risk factor in such
8. How do you differentiate between NPVand IRR methods of evaluating investment proposals? Do they always lead to same conclusion with respect to (a) accept/reject decision for different proposals,
7. Discuss the discounted cash flow method and its role in investment decision.
6. Discuss the various methods of evaluating investment proposals.
5. What is investment analysis? Why is it of great significance to a firm? Write a note on OR and investment decision. (CA, May, 1978)
4. What is a perpetuity? How can we determine the present value of a perpetuity at a given interest rate?
3. Derive expressions for obtaining (a) the amount of an annuity, (b) the present value of an annuity, and(c) the present value of a deferred annuity.
2. What is an annuity? Distinguish between various types of annuities on the basis of (a) their terms, and(b) the payment times.
1. 'In financial decision-making, time is of a paramount importance'. Discuss, giving a detailed account of the concept of time value of money.
35. Division of fixed cost plus desired profit by PN ratio gives the required volume of sales necessary to earn such amount of profit. Mark the statement as T (True) or F (False).

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