Commerce New Sample PDF

Unit 1: Business Environment & International Business
Unit 1: Business
Environment &
International
Business
2020
DIWAKAR EDUCATION HUB

1 8/14/2020
Unit 1: Business Environment and International Business (NOTES)
Introduction to Business Environment

Business Environment is the most important aspect of any business. The forces
which constitute the business environment are its suppliers, competitors, media,
government, customers, economic conditions, investors and multiple other
institutions working externally
Definitions of Business Environment
The term ‘business environment’ connotes external forces, factors and institutions
that are beyond the control of the business and they affect the functioning of a
business enterprise. These include customers, competitors, suppliers, government,
and the social, political, legal and technological factors etc. While some of these
factors or forces may have direct influence over the business firm, others may
operate indirectly. Thus, business environment may be defined as the total
surroundings, which have a direct or indirect bearing on the functioning of
business. It may also be defined as the set of external factors, such as economic
factors, social factors, political and legal factors, demographic factors, technical
factors etc., which are uncontrollable in nature and affects the business decisions
of a firm.
 Business Environment has been defined by Bayard O. Wheeler as “the total

of all things external to firms and industries which affect their organization
and operation”.
 According to Arthur M. Weimer, business environment encompasses the

‘climate’ or set of conditions, economic, social, political or institutional in
which business operations are conducted.
 According to Glueck and Jauch, “The environment includes factors outside

the firm which can lead to opportunities for or threats to the firm. Although
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there are many factors, the most important of the sectors are socio-economic,
technological, supplier, competitors, and government.”
 According to Barry M. Richman and Melvgn Copen “Environment consists

of factors that are largely if not totally, external and beyond the control of
individual industrial enterprise and their managements. These are essentially
the ‘givers’ within which firms and their management must operate in a
specific country and they vary, often greatly, from country to country”.
From the above definitions we can extract that business environment consists of
factors that are internal and external which poses threats to a firm or these provide
opportunities for exploitation.
Concept of Business Environment
A business firm is an open system. It gets resources from the environment and
supplies its goods and services to the environment. There are different levels of
environmental forces. Some are close and internal forces whereas others are
external forces. External forces may be related to national level, regional level or
international level. These environmental forces provide opportunities or threats to
the business community. Every business organization tries to grasp the available
opportunities and face the threats that emerge from the business environment.
Business organizations cannot change the external environment but they just react.
They change their internal business components (internal environment) to grasp the
external opportunities and face the external environmental threats. It is, therefore,
very important to analyze business environment to survive and to get success for a
business in its industry. It is, therefore, a vital role of managers to analyze business
environment so that they could pursue effective business strategy. A business firm
gets human resources, capital, technology, information, energy, and raw materials
from society. It follows government rules and regulations, social norms and
cultural values, regional treaty and global alignment, economic rules and tax
policies of the government. Thus, a business organization is a dynamic entity
because it operates in a dynamic business environment.
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Features of Business Environment
On the basis of the above discussion the features of business environment can be
summarized as follows.
 Business environment is the sum total of all factors external to the business
firm and that greatly influence their functioning.
 It covers factors and forces like customers, competitors, suppliers,

government, and the social, cultural, political, technological and legal
conditions.
 The business environment is dynamic in nature, that means, it keeps on

changing.
 The changes in business environment are unpredictable. It is very difficult to

predict the exact nature of future happenings and the changes in economic
and social environment. .
 Business Environment differs from place to place, region to region and

country to country.
Importance of Business Environment
There is a close and continuous interaction between the business and its
environment. This interaction helps in strengthening the business firm and using
its resources more effectively. As stated above, the business environment is
multifaceted, complex, and dynamic in nature and has a far-reaching impact on the
survival and growth of the business. To be more specific, proper understanding of
the social, political, legal and economic environment helps the business in the
following ways:
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 Identifying Firm’s Strength and Weakness: Business environment helps to

identify the individual strengths and weaknesses in view of the technological
and global developments
 Determining Opportunities and Threats: The interaction between the

business and its environment would identify opportunities for and threats to
the business. It helps the business enterprises for meeting the challenges
successfully.
 Giving Direction for Growth: The interaction with the environment leads to
opening up new frontiers of growth for the business firms. It enables the
business to identify the areas for growth and expansion of their activities.
 Continuous Learning: Environmental analysis makes the task of managers

easier in dealing with business challenges. The managers are motivated to
continuously update their knowledge, understanding and skills to meet the
predicted changes in realm of business.
 Image Building: Environmental understanding helps the business

organisations in improving their image by showing their sensitivity to the
environment within which they are working.
 Meeting Competition: It helps the firms to analyse the competitors’

strategies and formulate their own strategies accordingly.
Factors Affecting Business Environment
The business environment or the external forces acting on the business consists of
a large number of forces. These are;
1. Demographic Factors
Demography is a study of human population with reference to its size, density,

distribution and other connected vital statistics. This information is very essential in
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modern days for planning and development and also for framing laws relating to
society and business. The density of population, the extent of their standard of
living, the level of their education and the nature of their occupation etc., greatly
influence the type of business the entrepreneurs could undertake. The business
units require customers for its survival and growth; naturally business can thrive in
populace regions, though now-a day’s transportation helps a lot in bringing the
commodities to the scarcely populated areas.
2. Economic Factors
The business enterprise is affected by various economic forces which cannot be
controlled by the business. These economic forces, can be divided into two
categories, ie. Demand Force and Competitive Force. For a business firm to survive
and thrive, it should have adequate demand for its products. At the same time, the
firm has to complete with the rival firm producing similar products or substitute
products.
Economic forces affecting demand:
For customers to buy the commodity of the firm, they should have the ability to
buy and willingness to buy. The ability to buy a commodity depends on the income
of the customer, to be very precise, the disposable income of the customer. Out of
the total income, the individual has to pay taxes due to the government and the
disposable income will be less if the taxes are high. Secondly, if the individual
wants to save more, the amount for spending will be less. Thus, the ability to buy a
commodity depends on the a) Total income earned out of the employment of the
individual b) The taxes of the government and c) The savings of the individual.
An increase in tax will reduce the demand for the commodity. The attitude of the
individual towards ‘Saving’ will affect the demand. A change in ‘Price’ of the
commodity will affect the demand. Expectation of a further change in price or
change in taxes will also affect the demand.
• Competitive forces: The competitive tools are price cutting, advertisement,

product differentiation, marketing strategies and consumer service.
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• Price cutting: Price cutting or price reduction is a method which has to be

adopted very cautiously, as it may ultimately lead to price-war between firms
competing, resulting in reduction of profits.
• Advertisement: Advertisements in modern days have become a very powerful

tool in persuading the consumers of a product to a particular brand. In monopolistic
competition, a large share of the market is entrenched by firms making effective
and aggressive advertisement.
• Product differentiation: A firm tries to get competitive strength by
differentiating its product from those of its rivals. By having special design, color,
packing and features, the firm tries to get competitive edges.
• Marketing strategies and Consumer Service: Modern firm adopt various types
of marketing strategies to create market for their products. Installment system,
credit system, hire-purchase, etc., are the prominent ways by which firms try to cut
through the poor segments of the society and convert them their customers. Besides
customer service like, free door delivery, quick service, after sales service,
guarantee from defects up to a certain period are adopted to have more and more
demand for their commodities.
3. Geographical and Ecological Environment
Geographical conditions, to a greater extent, influence the type of industries and

business in a region. Generally, the people of a particular geographical region will
have similar tastes, preferences and requirements. The geographical situation, the
physical feature, the climate, rainfall, humidity, the vegetation, etc., decide the type
of living in a particular region and only those industries which could cater to the
needs of the people, could develop. In other words, geographical conditions exert
profound influence on the location of the business.
Ecological is a study “dealing with the interaction of living organism with each
other and with their non-living environment”. It is a science telling about the
relationship of all living beings. (ie., human beings, animals, plants) with non-
living beings (air, water, soil represented by atmosphere, rivers, lakes, mountains
and land).
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4. Social and Cultural Environment

Social and Cultural attitudes of a region influence the business organizations of the
region influence the business organizations of the region in a verity of ways. The
business practices and the management technique of the organization should cope
with the social and cultural attitudes of the people.
The modern business is a social system in itself, but it is also part of a larger social
system represented by society in general. Clearly, there should be some reciprocal
relationship between business and this larger society. To put it shortly, the business
should adopt itself to the social and cultural environment.
It is the class structure of the society. It tells about the social roles and
organizations and the development of social institutions. The class-structure depend
upon the occupation of the people, their education, income level, social status, their
mobility, their attitude towards living, work and social relationship and above all,
their attitude towards business.
Every society develops its own ‘culture’ which means how the members of that
society behave and interact with each other in society, as well as outside society.
The term culture includes values, norms, customs, ethics, goals and other accepted
behavior patterns.
5. Political and Legal Environment

Political Environment: All business firms are directly affected to a greater or lesser
degree by the government and its programmes. Political forces will decide the
nature of business, programmes and projects to be undertaken for the development
of the country. These political forces can be classified as long term forces, quick
changes, cyclical changes and regional factors.
• Long term forces denote the secular trends in business activities due to the
political conditions prevailing and the adoption of a particular line of policy in
business.
• Quick Changes consist of sudden political changes due to army coup or revolt
or capturing of the government machinery by the dissident group. The quick
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1:
Match List-I with List-II and select the correct answer using the codes given below the lists :
List-I List-II
(Financing facilities of IMF) (Their establishment years)
a. CCFF l 1979
b. SFF II. 1974
c. EFF III. 1963
A.a b c
III II I
B. a b c
II I III
C.a b c
I II III
D.a b c
III I II
Answer Report Discuss

Option: D
Explanation :
Click on Discuss to view users comments.
2:
Which of the following is the function of UNCTAD?
A.To promote international trade
B. To formulate principles and policies on international trade

C.To negotiate multinational trade agreements
D.All of the above.
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Option: B
Explanation :
3:
In which aspect does the IMF act as the guardian of a code set up by its articles?
A.Regulatory
B. Consultative
C.Financial
D.Functional

Option: D
Explanation :
4:
Members of IMF are free to choose the form of exchange arrangements that they intend to
apply subject to
A.Their obligations to the Fund
B. The Fund's surveillance of their exchange rate policies.

C.Both (A) and (B)
D.Directive principles of the IMF.
Answer
Option: C
5:
The international monetory system introduced by Bretton Woods rested on
A.The maintenance of stable exchange rates
B. A multilateral credit mechanism institutionalised in the IMF

C.The principle of gold standard
D.Both (A) and (B)
Option: C
Under the "Par value system" each member country of IMF was required to define the

value of its currency in terms of gold or the US dollar and to maintain the market value
of its currency within
A.± 10% of the par value
B. ± 7% of the par value
C.± 1 % of the par value
D.± 3% of the par value.

Option: C
Explanation :
7:
Which of the following is a function of WTO?
A.To facilitate the implementation of Multilateral Trade Agreement

B. To administer the Trade Review Mechanism
C.To administer the understanding on rules and procedures governing the settlement
of disputes.
D.All of the above

Option: D
Explanation :
8:
If a country differs from the rest of the world n taste patterns but not in production
capabilities, trade will lead to some international specialisation in
A.Consumption
B. Production
C.Exports
D.Imports

Option: A
Explanation :

9:
The income terms of trade indicates a nation's capacity
A.To import
B. To export
C.To improve its trade
D.None of the above
Answer
Option: : C
10:
The current account of balance of payments includes
A.Merchandise exports
B. Merchandise imports
C.Invisible exports and imports
D.All of the above
Answer
Option: D
11:
The payment of interest on loans and dividend payments are recorded in the
A.Unilateral transfer account
B. Official settlements account
C.Capital account
D.Current account
Answer
Option: C.
12:
Consider the following 'Debit' entries in the Balance of Payments Account
1. Direct investments abroad
2. Tourist expenditure abroad
3. Income paid on loans and investments in the home country

2019
Accounting and
Auditing (unit-1)
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DIWAKAR RAJPUT,ANURIDDHA GUPTA,ROHANI PURI

DIWAKAR EDUCATION HUB 4/11/2019
Basic accounting principles
A number of basic accounting principles have been developed through common usage. They form the basis upon which the
complete suite of accounting standards have been built. The best-known of these principles are as follows:
 Accrual principle. This is the concept that accounting transactions should be recorded in the accounting periods when they
actually occur, rather than in the periods when there are cash flows associated with them. This is the foundation of the accrual
basis of accounting. It is important for the construction of financial statements that show what actually happened in an accounting
period, rather than being artificially delayed or accelerated by the as sociated cash flows. For example, if you ignored the accrual
principle, you would record an expense only when you paid for it, which might incorporate a lengthy delay caused by the payment
terms for the associated supplier invoice.
 Conservatism principle. This is the concept that you should record expenses and liabilities as soon as possible, but to record
revenues and assets only when you are sure that they will occur. This introduces a conservative slant to the financial statements
that may yield lower reported profits, since revenue and asset recognition may be delayed for some time. Conversely, this
principle tends to encourage the recordation of losses earlier, rather than later. This concept can be taken too far, where a business
persistently misstates its results to be worse than is realistically the case.
 Consistency principle. This is the concept that, once you adopt an accounting principle or method, you should continue to use it
until a demonstrably better principle or method comes along. Not following the consistency principl e means that a business could
continually jump between different accounting treatments of its transactions that makes its long -term financial results extremely
difficult to discern.
 Cost principle. This is the concept that a business should only record its assets, liabilities, and equity investments at their original
purchase costs. This principle is becoming less valid, as a host of accounting standards are heading in the direction of adjusting
assets and liabilities to their fair values.
 Economic entity principle. This is the concept that the transactions of a business should be kept separate from those of its owners
and other businesses. This prevents intermingling of assets and liabilities among multiple entities, which can cause consider able
difficulties when the financial statements of a fledgling business are first audited.
 Full disclosure principle. This is the concept that you should include in or alongside the financial statements of a business all of
the information that may impact a reader's understanding of those statements. The accounting standards have greatly amplified
upon this concept in specifying an enormous number of informational disclosures.
 Going concern principle This is the concept that a business will remain in operation for the foreseeable future. This means that
you would be justified in deferring the recognition of some expenses, such as depreciation, until later periods. Otherwise, you
would have to recognize all expenses at once and not defer any of them.

 Matching principle. This is the concept that, when you record revenue, you should record all related expenses at the same time.
Thus, you charge inventory to the cost of goods sold at the same time that you record revenue from the sale of those inventory
items. This is a cornerstone of the accrual basis of accounting. The cash basis of accounting does not use the matching the
principle.
 Materiality principle. This is the concept that you should record a transaction in the accounting re cords if not doing so might have
altered the decision making process of someone reading the company's financial statements. This is quite a vague concept that is
difficult to quantify, which has led some of the more picayune controllers to record even the smallest transactions.
 Monetary unit principle. This is the concept that a business should only record transactions that can be stated in terms of a unit of
currency. Thus, it is easy enough to record the purchase of a fixed asset, since it was bought for a specific price, whereas the
value of the quality control system of a business is not recorded. This concept keeps a business from engaging in an excessiv e
level of estimation in deriving the value of its assets and liabilities.
 Reliability principle. This is the concept that only those transactions that can be proven should be recorded. For example, a
supplier invoice is solid evidence that an expense has been recorded. This concept is of prime interest to auditors, who are
constantly in search of the evidence supporting transactions.
 Revenue recognition principle. This is the concept that you should only recognize revenue when the business has substantially
completed the earnings process. So many people have skirted around the fringes of this concept to commit reporting fraud that a
variety of standard-setting bodies have developed a massive amount of information about what constitutes proper revenue
recognition.
 Time period concept. This is the concept that a business should report the results of its operations over a standard period o f time.
This may qualify as the most glaringly obvious of all accounting principles, but is intended to create a standard set of comparable
periods, which is useful for trend analysis.
Definition and introduction

The worldview of accounting and accountants may certainly involve some unhelpful characters poring
over formidable figures stacked up in indecipherable columns.
However, a short and sweet description of accounting does exist:
Accounting is the language of business efficiently communicated by well-organised and honest professionals
called accountants.
A more academic definition of accounting is given by the American Accounting Association:
The process of identifying, measuring and communicating economic information to permit informed judgments
and decisions by users of the information.
The American Institute of Certified Public Accountants defines accounting as:

The art of recording, classifying, summarising in a significant manner and in terms of money, transactions and
events which are, in part at least of financial character, and interpreting the results thereof.
Accounting not only records financial transactions and conveys the financial position of a business
enterprise; it also analyses and reports the information in documents called “financial statements.”
Recording every financial transaction is important to a business organisation and its creditors and
investors. Accounting uses a formalised and regulated system that follows standardised principles and
procedures.
The job of accounting is done by professionals who have educational degrees acquired after years of
study. While a small business may have an accountant or a bookkeeper to record money transactions, a
large corporation has an accounts department, which supplies information to:
 Managers who guide the company.

 Investors who want to know how the business is doing.
 Analysts and brokerage firms dealing with the company’s stock.
 The government, which decides how much tax should be collected from the company.
Accounting Principles
Obviously, if each business organisation conveys its information in its own way, we will have a babel of
unusable financial data.
Personal systems of accounting may have worked in the days when most companies were owned by sole
proprietors or partners, but they do not anymore, in this era of joint stock companies.
These companies have thousands of stakeholders who have invested millions, and they need a uniform,
standardised system of accounting by which companies can be compared on the basis of their
performance and value.
Therefore, accounting principles based on certain concepts, convention, and tradition have been
evolved by accounting authorities and regulators and are followed internationally.
These principles, which serve as the rules for accounting for financial transactions and preparing
financial statements, are known as the “Generally Accepted Accounting Principles,” or GAAP.
The application of the principles by accountants ensures that financial statements are both informative
and reliable.
It ensures that common practices and conventions are followed, and that the common rules and
procedures are complied with. This observance of accounting principles has helped developed a widely
understood grammar and vocabulary for recording financial statements.
However, it should be said that just as there may be variations in the usage of a language by two people
living in two continents, there may be minor differences in the application of accounting rules and
procedures depending on the accountant.
For example, two accountants may choose two equally correct methods for recording a particular
transaction based on their own professional judgement and knowledge.

Accounting principles are accepted as such if they are (1) objective; (2) usable in practical situations; (3)
reliable; (4) feasible (they can be applied without incurring high costs); and (5) comprehensible to those
with a basic knowledge of finance.
Accounting principles involve both accounting concepts and accounting conventions. Here are brief
explanations.
Accounting Concepts
1. Business entity concept: A business and its owner should be treated separately as far as their
financial transactions are concerned.
2. Money measurement concept: Only business transactions that can be expressed in terms of money
are recorded in accounting, though records of other types of transactions may be kept separately.
3. Dual aspect concept: For every credit, a corresponding debit is made. The recording of a transaction
is complete only with this dual aspect.
4. Going concern concept: In accounting, a business is expected to continue for a fairly long time and
carry out its commitments and obligations. This assumes that the business will not be forced to stop
functioning and liquidate its assets at “fire-sale” prices.
5. Cost concept: The fixed assets of a business are recorded on the basis of their original cost in the first
year of accounting. Subsequently, these assets are recorded minus depreciation. No rise or fall in
market price is taken into account. The concept applies only to fixed assets.
6. Accounting year concept: Each business chooses a specific time period to complete a cycle of the
accounting process—for example, monthly, quarterly, or annually—as per a fiscal or a calendar year.
7. Matching concept: This principle dictates that for every entry of revenue recorded in a given
accounting period, an equal expense entry has to be recorded for correctly calculating profit or loss
in a given period.
8. Realisation concept: According to this concept, profit is recognised only when it is earned. An
advance or fee paid is not considered a profit until the goods or services have been delivered to the
buyer.
Accounting Conventions
There are four main conventions in practice in accounting: conservatism; consistency; full disclosure;
and materiality.
Conservatism is the convention by which, when two values of a transaction are available, the lower-value
transaction is recorded. By this convention, profit should never be overestimated, and there should
always be a provision for losses.
Consistency prescribes the use of the same accounting principles from one period of an accounting cycle
to the next, so that the same standards are applied to calculate profit and loss.
Materiality means that all material facts should be recorded in accounting. Accountants should record
important data and leave out insignificant information.
Full disclosure entails the revelation of all information, both favourable and detrimental to a business
enterprise, and which are of material value to creditors and debtors.
Basic Accounting Terms

Here is a quick look at some important accounting terms.

Accounting equation: The accounting equation, the basis for the double-entry system (see below), is
written as follows:
Assets = Liabilities + Stakeholders’ equity
This means that all the assets owned by a company have been financed from loans from creditors and
from equity from investors. “Assets” here stands for cash, account receivables, inventory, etc., that a
company possesses.
Accounting methods: Companies choose between two methods—cash accounting or accrual accounting.
Under cash basis accounting, preferred by small businesses, all revenues and expenditures at the time
when payments are actually received or sent are recorded. Under accrual basis accounting, income is
recorded when earned and expenses are recorded when incurred.
Account receivable: The sum of money owed by your customers after goods or services have been
delivered and/or used.
Account payable: The amount of money you owe creditors, suppliers, etc., in return for goods and/or
services they have delivered.
Accrual accounting: See “accounting methods.”
Assets (fixed and current): Current assets are assets that will be used within one year.
For example, cash, inventory, and accounts receivable (see above). Fixed assets (non-current) may
provide benefits to a company for more than one year—for example, land and machinery.
Balance sheet: A financial report that provides a gist of a company’s assets and liabilities and owner’s
equity at a given time.
Capital: A financial asset and its value, such as cash and goods. Working capital is current assets minus
current liabilities.
Cash accounting: See “accounting methods.”
Cash flow statement: The cash flow statement of a business shows the balance between the amount of
cash earned and the cash expenditure incurred.
Credit and debit: A credit is an accounting entry that either increases a liability or equity account, or
decreases an asset or expense account. It is entered on the right in an accounting entry. A debit is an
accounting entry that either increases an asset or expense account, or decreases a liability or equity
account. It is entered on the left in an accounting entry.
Double-entry bookkeeping: Under double-entry bookkeeping, every transaction is recorded in at least
two accounts—as a credit in one account and as a debit in another.
For example, an automobile repair shop that collects Rs. 10,000 in cash from a customer enters this
amount in the revenue credit side and also in the cash debit side. If the customer had been given credit,
“account receivable” (see above) would have been used instead of “cash.” (Also see “single-entry
bookkeeping,” below.)
Financial statement: A financial statement is a document that reveals the financial transactions of a
business or a person. The three most important financial statements for businesses are the balance
sheet, cash flow statement, and profit and loss statement (all three listed here alphabetically).
General ledger: A complete record of financial transactions over the life of a company.
Journal entry: An entry in the journal that records financial transactions in the chronological order.
Profit and loss statement (income statement): A financial statement that summarises a company’s
performance by reviewing revenues, costs and expenses during a specific period.
Single-entry bookkeeping: Under the single-entry bookkeeping, mainly used by small or businesses,
incomes and expenses are recorded through daily and monthly summaries of cash receipts and
disbursements. (Also see “double-entry bookkeeping,” above.)
Types of accounting: Financial accounting reports information about a company’s performance to
investors and credits. Management accounting provides financial data to managers for business
development.

Important Topics in Accounting
Financial Accounting | Basic Concepts and Principles
Definition and introduction

Profit, it has been said often, is the sole objective of business. Therefore, for those running a business,
information about the financial performance of the enterprise is a most important requirement.
This information is not available easily and can be obtained only by systematically recording,
classifying, and summarising all the business transactions. The branch of accounting that accomplishes
these tasks under internationally standardised procedures is called financial accounting.
However, financial accounting is not limited to recording, classifying, and summarizing information
about business transactions. It also deals with reporting this information to stakeholders outside the
organisation, such as investors and creditors, who are the important, primary recipients of the
information.
There may be secondary recipients, too, such as competitors, customers, employees, and stock-market
analysts, but the information generated by financial accounting is mainly aimed at external stakeholders
who are not part of the business organisation per se.
Therefore, to put together a formal definition of financial accounting, it is a specialized branch of
accounting that records and reports information about the financial position and performance of a
company, mainly for use by the business entity’s external stakeholders.
How does financial accounting achieve its tasks? Financial accounting mainly generates three financial
statements to provide the information required—the balance sheet, income statement, and cash flow
statement.
These documents provide the stakeholders a clear idea about the performance of the business during a
particular period and its financial position at a specific time. The objective of the financial accountants
is not to estimate the value of a company but to facilitate this valuation by others.
According to the International Financial Reporting Standards, financial accounting provides
information about a business organisation that is useful to existing and potential investors, lenders, and
other creditors in making decisions about providing resources to the organisation.
Objectives
The objectives of financial accounting can be put in four categories, as follows:
 Record financial transactions as and when they occur (bookkeeping), so that the data can be
analysed for preparing financial statements
 Calculate profit or loss, to enable management to take course-correction strategies if required
 Ascertain the financial strength of the company by determining its assets and liabilities
 Communicate the information to stakeholders through statements and reports, so that these
stakeholders can take appropriate decisions on their investments in the business

Financial statements
For meeting these objectives, financial accountants mainly prepare three types of documents, as briefly
mentioned in the introduction above—the balance sheet, which reflects the assets and liabilities; income
statement, which shows the profit and loss; and, cash flow statement, which charts the cash inflow and
outflow.
The external users of financial statements look at the balance sheet to find out how strong the business
is, financially (assets vs. liabilities), and at the income statement to find out how well the business is
doing (profit vs. loss).
Creditors and other lenders would be happy to see a positive balance sheet so that they know their
investments are safe, and investors would like to see an income sheet with profit so that they know some
money would be coming to them from the company in the form of dividend or interest.
Almost all stakeholders want to see the cash flow statement to know the cash availability with the
company and whether it will be able to clear its liabilities.
Among the internal users of financial statements are managers, who can take decisions on the basis of
the financial statements, and among the external users are government authorities, who can initiate tax
measures.
Here are some additional notes on the three financial statements mentioned above.
Balance sheet: The balance sheet of a company shows its assets, liabilities, and stockholders’ equity as on
the last day of the accounts-reporting period. Assets include cash, stocks, buildings, and machinery,
while liabilities include loans, interest, and wages. Stockholders’ equity is the difference between the
assets and the liabilities. Read more about balance sheets.
Income statement: The income statement (issued quarterly or annually) reports the company’s
profitability in a given period. It presents the revenues (sales and service revenues), expenses (operating
expenses, such as wages and rent, and non-operating expenses, such as loan interest), gains, and losses.
Read more on Profilt and Loss.
Cash flow statement: The cash statement shows the inflow and outflow of cash and its use for operating,
financing, and investing activities. Here are some details on the cash flow statement.
Concepts of Financial Accounting

At the core of financial accounting is the double-entry accounting method, by which each financial
transaction is entered in at least two accounts (assets, liabilities, and expenses are examples of
accounts)—as a debit in one account and as a credit in another account.
“Debit” simply means to enter a transaction on the left side of an account, and credit means to enter a
transaction on the right side. A debit increases some accounts and decreases some others. Similarly, a
credit increases some accounts and decreases some others.
Imagine that a company takes a bank loan. Under the double-entry system, this transaction has to be
entered as a credit in one account and as a debit in another account. Bolstered by the loan, the
company’s cash/assets increase, and this transaction, where the assets have increased, is a debit
transaction. Therefore, it is entered as a debit transaction under the assets account.
However, with the loan, the company’s liabilities also increase, and this transaction, where the liabilities
have increased, is a credit transaction. So, it is entered as a credit transaction under the liabilities
account. This procedure is followed under the double-entry system of accounting.

Accounting & Auditing

UNIT -2 Question
Answer
UGC NET COMMERCE
2020

Q1] Which accounting concept satisfy the (i)The cost of an asset Rs.23,000 has been taken
valuation criteria as an expense
A] Going concern, Realisation, Cost (ii)The firm anticipated a profit of Rs.12,000 on

the sale of an old furniture
b) Going concern, Cost, Dual aspect
(iii)Salary of Rs.7,000 outstanding for the year has
c) Cost, Dual aspect, Conservatism not been taken into account.
d) Realisation, Conservatism, Going concern. (iv)An asset of Rs.85,000 was purchased for
Ans. A Rs.75,000 and was recorded in the books at
Rs.85,000.
Q2] A trader has made a sale of Rs.75,500 out of
which cash sales amounted to What is the correct amount of profit to be
reported in the books?
Rs.25,500. He showed trade receivables on 31-3-
2014 at Rs.25,500. Which concept is followed by a) Rs.1,47,000
him? b) Rs. 1,51,000
a) Going concern c) Rs.1,63,000
b) Cost d) Rs.1,41,000
c) Accrual ans.a
d) Money measurement Q6] The process of recording financial data upto
Ans. c trial balance is
Q3] In which of the following cases, accounting a) Book keeping

estimates are needed? b) Classifying
a) Employs benefit schemes c) Summarising
b) Impairment of losses d) Analyzing
c) Inventory obsolescence
d) All of the above ans. a

Ans.d Q7] Rohit carrying on real estate business sold a
Q4] Deewali advance given to an employee is piece of land for Rs.4,00,00,000 (cost
Rs.3,50,00,000) then the type of receipt is
a) Revenue Expenditure nature and profit on sale is
b) Capital Expenditure a) Capital & transferred to capital reserve
c) Deferred Revenue Expenditure b) Revenue & transferred to P & L a/c
d) Not an Expenditure c) Capital & transferred to P & L a/
ans.d d) Revenue & transferred to general reserve
Q5] A firm has reported a profit of Rs.1,47,000 for ans.b

the year ended 31-3-2014 after taking into
consideration the following items.
Q8]. Following are essential elements of a (d)Rent is a personal account, outstanding rent is
partnership firm except: (CPT; June 2012) nominal account
(A) At least two persons Ans.d
(B) There is an agreement between all partners Q 12] is root cause for financial accounting
(C) Equal share of profits and losses (a)Stewardship accounting
(D) Partnership agreement is for some business. (b)Social accounting
Ans.c (c)Management accounting
Q9] Interpretation means (d)Human resource accounting
(a)Explanation of meaning and significance of the Ans.a

data in Financial Statements.
(b)Concerned with preparation and presentation

of classified data
(c)Systematic analysis of recorded data
(d)Methodical classification of data given in

Financial Statements. Q 13]If nothing is given in the financial statements
about the three accounting assumptions then it is
Ans.a
to be treated as it
a)Is assumed that it is not followed

Q10] A trader purchases goods for Rs. 2500000, of
these 70% of goods were sold during the year. At b)Is assumed to be followed
the end of 31st December 2009, the market value c)Is assumed to be followed to some extent
of such goods were Rs. 500000. But the trader
recorded in his books for Rs. 750000. Which of d)None of the above
the following concept is violated.
Ans.b
(a)Money measurement
Q14] The proprietor of the business is treated as
(b)Conservatism creditor for the capital introduced by him due to
concept.
(c)Consistency
a) Money measurement
(d)None of these
b) Cost
Ans.b
c) Entity
Q11] Which of the following is wrong?
d) Dual aspect
(a)All real and personal accounts are transferred
to balance sheet ans.c
(b)Nominal accounts are transferred to P & L Q15] Fixed assets are held by business for
account
a) Converting into cash
(c)Each account is opened separately in ledger
b) Generating revenue
c) Resale d)Any accounting method can be followed as per
convenience
d) None of the above
Ans.c
ans.b
Q16] Which accounting concept specifies the

practice of crediting closing stock to the trading Q20] If one of the cars purchased by a car dealer
account? is used for business purpose, instead of resale,
then it should be recorded by
a) Cost
a) Dr Drawing A/c & Cr Purchases A/c
b) Realisation
b) Dr Office Expenses A/c & Cr Motor Car A/c
c) Going concern
c) Dr Motor Car A/c & Cr Purchases A/c
d) Matching
d) Dr Motor Car & Cr Sales A/c
ans.d
ans. c
Q17] Amount spent to increasing the earning
capacity is a expenditure Q21] If wages are paid for construction of
business premises A/c is credited and A/c is
a) Capital debited.
b) Revenue a) Wages, Cash
c) Deferred revenue b) Premises, Cash
d) Capital Loss
c) Cash, Wages
ans.a d) Cash, Premises
Q18] Change in the capital A/c of proprietor may
ans. d
occur due to
Q22] Human resources will not appear in the
a) Profit earned balance sheet according to
b) Loss incurred a) Accrual
c) Capital Introduced b) Going concern
d) All of the above c) Money measurement concept
ans. d d) None
Q19] Consistency with reference to application of ans. c
accounting procedures means
Q23] Provision for discount on debtors is
a)All companies in the same Industry should use calculated on the amount of debtors.
identical accounting procedures
a)Before deducting provision for doubtful debts.
b)Income & assets have not been overstated
b)After deducting provision for doubtful debts.
c)Accounting methods & procedures shall be
followed uniform basis year after year
UNIT-4 Business
Finance (commerce)
COMPLETE E-BOOK AS PER UPDATED
SYLLABUS
DIWAKAR RAJPUT
2019
NO.1 SUPPORTIVE INSTITUTE UGC-NET

Finance Function: Definition, Scope
and Classification
Definition of the Finance Function:

There are three ways of defining the finance function. Firstly, the finance function
can simply be taken as the task of providing funds needed by an enterprise on
favourable terms, keeping in view the objectives of the firm.
This means that the finance function is solely concerned with the acquisition (or
procurement) of short- term and long-term funds.
However, in recent years, the coverage of the term ‘finance function’ has been
widened to include the instruments, institutions and practices through which
funds are obtained. So, the finance function covers the legal and accounting
relationship between a company and its source and uses of funds.
For example, in financial management, we discuss debt-equity ratio (determined

by the government), as also various accounting and legal aspects of dividend
policy.
No doubt, the basic function of the finance manager is one of determining how
funds can best be raised (i.e., at the minimum possible cost). In other words, the
essence of finance function is keeping the business supplied with enough funds to
fulfil its objectives.
But such a definition is too narrow and is not of much practical use. No doubt, the
finance function is much broader than mere procurement of short-term and long-
term funds so that a firm’s working capital and fixed capital needs can be met.
Another extreme view is that finance is concerned with cash. This definition is
much too broad and thus is not really meaningful.
The third view — based on a compromise between the two — is more useful for
practical purposes. This definition treats the finance function as the procurement
of funds and their effective utilisation in business. The finance manager takes all
decisions that relate to funds which can be obtained as also the best way of
financing an investment such as the installation of a new machinery inside the
factory-or office building.
The cost of the machinery may be financed by making a public issue of 8%

cumulative preference shares. At the same time, he has to consider whether the
additional return (cash flow) expected from the new machinery is sufficient to
cover the cost of capital in terms of interest to be paid over a period of time.
In this case, the finance decision is based on an analysis of the alternative sources
and uses of funds. To start with the finance manager has to draw a plan outlining
the company’s need for funds. Such financial plan is based on forecasts of
financial needs of the company. Such forecasts are based on sales forecasts.
In the next step, the finance manager has to raise necessary funds to meet the
company’s need for fixed and working capital. Then, in the third step, he has to
put the acquired funds into effective uses.
The sequence of the three-step process is presented below:

1. Drawing a financial plan and forecasting financial needs
2. Raising necessary funds
3. Putting funds into proper use.
In a broad sense, the finance function covers the following six major
activities:
1. Financial planning;
2. Forecasting cash inflows and outflows;
3. Raising funds;
4. Allocation of funds;
5. Effective use of funds; and
6. Financial control (budgetary and non-budgetary).

The last function is very important. Through financial control the finance man-
ager tries to bring performance closer to the targets.
Scope of Finance Function:

No doubt, the scope of finance function is wide because this function affects
almost all the aspects of a firm’s operations. The finance function includes
judgments about whether a company should make more investment in fixed
assets or not.
It is largely concerned with the allocation of a firm’s capital expenditure over time
as also related decisions such as financing investment and dividend distribution.
Most of these decisions taken by the finance department affect the size and timing
of future cash flow or flow of funds.
Classification of Finance Function:

Finance function can be classified into two broad categories, viz.,
(i) Executive finance function and
(ii) Incidental finance function.
While the former requires administration skill in planning and execution, the
latter largely covers works of a routine nature, which are necessary to implement
financial decisions at the executive level.
(i) Six Executive Functions:

Six basic executive finance functions are the following:
1. Determining asset-management policies:
All finance functions are concerned with the control of both cash flows and non-
cash assets. The reason is easy to find out. The finance managers must know how
much cash will be ‘tied up’ in various kinds of non-cash (or non-liquid) assets.
Without the information, it is not possible to estimate and arrange for necessary
cash requirements. In fact, the formulation of sound and consistent asset
management policies is an indispensable pre-requisite to successful financial
management.
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2. Determining the allocation of net profits:
This relates to retained earnings (corporate savings) and dividend policy. Most
companies have to achieve balance between two alternatives, i.e., payment of
dividends and the retention of earnings for acquiring additional assets.
3. Estimating cash flow requirements and control of such flows:

An important responsibility of the finance manager is to ensure an adequate flow
of cash as and when it is needed. Otherwise, the smooth operation of a company
may not be possible. Since cash flow originates from sales and cash requirements
are closely related to sales volume, adequate cash can be provided at the proper
time only after forecasting cash needs.
4. Taking decision on needs and sources of new external finance:

On the basis of sales forecasts, the financial managers will have to draw a plan to
borrow funds from external sources. Such debt capital will add to the firm’s own
cash resources and thus improve its financial position. External capital may be
obtained by borrowing funds from commercial banks.
The finance manager must be competent enough to determine exactly when

additional funds from external sources will be needed. He (she) has also to judge
how long they will be needed, how economically they can be raised (i.e., at the
lowest possible cost) and from which sources will they be repaid.
5. Carrying on negotiations with outside financiers:

The finance manager has also to carry on negotiations with outsiders to be able to
arrange for necessary external financing in required amount and on time. For
obtaining working capital, a line of credit has to be established with commercial
banks. Again sufficient time has to be devoted for completing arrangements for
long-term financing. Long-term financing requires more skillful negotiations
than short-term financing.
6. Checking upon financial performance:

It is also necessary for the finance manager to evaluate the wisdom and efficiency
of financial planning. Such evaluation is to be based on past performance of the
company. This will enable the finance manager to improve the standards, tech-
niques and procedures of financial planning and control which are important
aspects of the finance function.
Interrelationship:
It may be noted that all the six functions are interrelated. This means that a
change in decision with respect to any one of the functions will call for a change in
decision relating to some or all other functions.
(ii) Incidental Function:

The incidental finance functions include supervision of cash inflows and outflows
and maintaining cash balances and record keeping.
Lease Financing: Types, Advantages

and Disadvantages
Lease financing is one of the important sources of medium- and long-term
financing where the owner of an asset gives another person, the right to use that
asset against periodical payments. The owner of the asset is known as lessor and
the user is called lessee.
The periodical payment made by the lessee to the lessor is known as lease rental.
Under lease financing, lessee is given the right to use the asset but the ownership
lies with the lessor and at the end of the lease contract, the asset is returned to the
lessor or an option is given to the lessee either to purchase the asset or to renew
the lease agreement.
Different Types of Lease:

Depending upon the transfer of risk and rewards to the lessee, the period of lease
and the number of parties to the transaction, lease financing can be classified into
two categories. Finance lease and operating lease.
i. Finance Lease:
It is the lease where the lessor transfers substantially all the risks and rewards of
ownership of assets to the lessee for lease rentals. In other words, it puts the
lessee in the same condition as he/she would have been if he/she had purchased
the asset. Finance lease has two phases: The first one is called primary period.
This is non-cancellable period and in this period, the lessor recovers his total
investment through lease rental. The primary period may last for indefinite
period of time. The lease rental for the secondary period is much smaller than
that of primary period.
ii. Features of Finance Lease:

From the above discussion, following features can be derived for
finance lease:
1. A finance lease is a device that gives the lessee a right to use an asset.
2. The lease rental charged by the lessor during the primary period of lease is
sufficient to recover his/her investment.
3. The lease rental for the secondary period is much smaller. This is often known
as peppercorn rental.
ADVERTISEMENTS:
4. Lessee is responsible for the maintenance of asset.
5. No asset-based risk and rewards is taken by lessor.
6. Such type of lease is non-cancellable; the lessor’s investment is assured.
iii. Operating Lease:

Lease other than finance lease is called operating lease. Here risks and rewards
incidental to the ownership of asset are not transferred by the lessor to the lessee.
The term of such lease is much less than the economic life of the asset and thus
the total investment of the lessor is not recovered through lease rental during the
primary period of lease. In case of operating lease, the lessor usually provides
advice to the lessee for repair, maintenance and technical knowhow of the leased
asset and that is why this type of lease is also known as service lease.
iv. Features of Operating Lease:

Operating lease has following features:
1. The lease term is much lower than the economic life of the asset.
2. The lessee has the right to terminate the lease by giving a short notice and no
penalty is charged for that.
3. The lessor provides the technical knowhow of the leased asset to the lessee.
4. Risks and rewards incidental to the ownership of asset are borne by the lessor.
5. Lessor has to depend on leasing of an asset to different lessee for recovery of

his/her investment.
Advantages and Disadvantages of Lease Financing:

At present leasing activity shows an increasing trend. Leasing appears to be a
cost-effective alternative for using an asset. However, it has certain advantages as
well as disadvantages.
i. Advantages:
Lease financing has following advantages
a. To Lessor:
The advantages of lease financing from the point of view of lessor are summarized
below
Assured Regular Income:

Lessor gets lease rental by leasing an asset during the period of lease which is an
assured and regular income.
Preservation of Ownership:
In case of finance lease, the lessor transfers all the risk and rewards incidental to
ownership to the lessee without the transfer of ownership of asset hence the
ownership lies with the lessor.
Benefit of Tax:
As ownership lies with the lessor, tax benefit is enjoyed by the lessor by way of
depreciation in respect of leased asset.
High Profitability:
1. Which of the Following Issue is NOT Covered By ‘Investment’ Area of Finance?
Best Mixture of Financial Investment
International Aspects of Corporate Finance
Associated Risks and Rewards
Pricing Financial Assets
4. Financial Policy is Evaluated By Which of the Following?
Profit Margin
Total Assets Turnover
Debt-Equity Ratio
None of the Above
5. Cash Flow From Assets Involves Which of the Following Component(s)?
Operating Cash Flow
Capital Spending
Change in Net Working Capital
All of the Above
6. Which of the Following Refers to the Cash Flows that Result From the Firm’s Day-Today Activities of Producing and Selling?
Operating Cash Flows
Investing Cash Flows
Financing Cash Flows
All of the Above
7. Finance is Vital for Which of the Following Business Activity (Activities)?
Marketing Research
Product Pricing
Design of Marketing and Distribution Channels
All of the Above
8. Which of the Following Costs are Reported On the Income Statement as the Cost of Goods Sold?
Product Cost
Period Cost
Both Product Cost and Period Cost
Neither Product Cost Nor Period Cost
9. Standard Company had Net Sales of Rs.750,000 Over the Past year. During that Time, Average Receivables were Rs.150,000.
Assuming a 365-Day year, What was the Average Collection Period?
5 Days
36 Days
48 Days
73 Days
10. Which of the Following Terms Refers to the Use of Debt Financing?
Operating Leverage
Financial Leverage
Manufacturing Leverage
None of the Above
11. In Which Type of Market, New Securities are Traded?
Primary Market
Secondary Market
Tertiary Market
None of the Above
12. Which of the Following Ratios is Particularly Interesting to Short-Term Creditors?
Liquidity Ratios
Long-Term Solvency Ratios
Profitability Ratios
Market value Ratios
13. Shows the Sources From Which Cash has Been Generated and How it has Been Spent During a Period of Time?
Income Statement
Balance Sheet
Cash Flow Statement
Owner’s Equity Statement
15. Quick Ratio is Also Known As:
Current Ratio
Acid-Test Ratio
Cash Ratio
16. Of the Following Statement Measures Performance Over a Specific Period of Time?
Income Statement
Balance Sheet
Cash Flow Statement
Retained Earnings Statement
17. A Portion of Profits, Which a Company Retains Itself for Further Expansion, is Known As:
Dividends
Retained Earnings
Capital Gain
None of the Above
19. Which of the Following Statement Shows Assets, Liabilities, and Net Worth as of a Specific Date?
Income Statement
Balance Sheet
Owner’s Equity Statement
Cash Flow Statement
21. Which One of the Following is NOT a Liquidity Ratio?
Current Ratio
Quick Ratio
Cash Coverage Ratio
Cash Ratio
22. Which of the Following Ratio Gives an Idea as to How Efficient Management is At Using Its Assets to Generate Earnings?
Profit Margin
Return On Assets
Return On Equity
Total Assets Turnover
23. Which of the Following is an Example of Capital Spending?
Purchase of Fixed Assets
Decrease in Net Working Capital
Increase in Net Working Capital
None of the Above
24. Which of the Following is Measured By Profit Margin?
Operating Efficiency
Asset Use Efficiency
Financial Policy
Dividend Policy
25. Which of the Following Make a Broader Use of Accounting Information?
Accountants
Financial Analysts
Auditors
Marketers
26. Which of the Following Set of Ratios is Used to Assess a Business's Ability to Generate Earnings as Compared to Its Expenses
and Other Relevant Costs Incurred During a Specific Period of Time?
Liquidity Ratios
Leverage Ratios
Market value Ratios
27. A Company Having a Current Ratio of 1 will have Net Working Capital.
Positive
Negative
Zero
None of the Above
28. Which of the Following is Not a Form of Business Organization?
Sole Proprietorship
Partnership
Joint Stock Company
Cooperative Society
29. Which of the Following Ratios are Intended to Address the Firm’s Financial Leverage?
Liquidity Ratios
Long-Term Solvency Ratios
Asset Management Ratios
30. The Accounting Definition of Income Is:
Income = Current Assets – Current Liabilities
Income = Fixed Assets – Current Assets
Income = Revenues – Current Liabilities
Income = Revenues – Expenses
31. Which of the Following Item(s) Is (are) Not Included While Calculating Operating Cash Flows?
Depreciation
Interest
Expenses Related to Firm’s Financing of Its Assets
All of the Above
35. In Which Type of Market, Used Securities are Traded?
Primary Market
Secondary Market
Tertiary Market
None of the Above
37. Which of the Following is (Are) a Non-Cash Item(s)?
Revenue
Expenses
Depreciation
All of the Above
38. What will Be the Coupon value of a Rs.1,000 Face-Value Bond with a 10% Coupon Rate?
Rs.100
Rs.510
Rs.1,000
Rs.1,100
39. Which of the Following Comes Under the Head of Discounted Cash Flow Criteria for Capital Budgeting Decisions?
Payback Period
Net Present Value
Average Accounting Return
None of the Above
40. Period Costs Include Which of the Following?
Selling Expense
Raw Material
Direct Labor
Manufacturing Overhead
41. The value of Net Working Capital will Be Greater Than Zero When:
Current Assets > Current Liabilities
Current Assets < Current Liabilities
Current Assets = Current Liabilities
None of the Above
42. According to Du Pont Identity, ROE is Affected By Which of the Following?
Operating Efficiency
Asset Use Efficiency
Financial Leverage
All of the Above
43. Balance Sheet for a Company Reports Current Assets of Rs.700,000 and Current Liabilities of Rs.460,000.What Would Be the
Quick Ratio for the Company If There is an Inventory Level of Rs.120,000?
1.01
1.26
1.39
1.52
44. Standard Corporation Sold Fully Depreciated Equipment for Rs.5,000. This Transaction will Be Reported On the Cash Flow
Statement as a(n):
Operating Activity
Investing Activity
Financing Activity
None of the Above
45. Balance Sheet for a Company Reports Current Assets of Rs.700,000 and Current Liabilities of Rs.460,000.What Would Be the
Current Ratio for the Company If There is an Inventory Level of Rs.120,000?
1.01
1.26
1.39
1.52
46. In Which Type of Business, All Owners Share in Gains and Losses and All have Unlimited Liability for All Business Debts?
Sole-Proprietorship
General Partnership
Limited Partnership
Corporation
47. A Firm Uses Cash to Purchase Inventory, Its Current Ratio Will:
Increase
Decrease
Remain Unaffected
Become Zero
49. Which of the Following is an Example of Positive Covenant?
Maintaining Any Collateral Or Security in Good Condition
Limiting the Amount of Dividend According to Some Formula
Restricting Pledging Assets to Other Lenders
Barring Merger with Another Firm
50. Which of the Following Refers to the Difference Between the Sale Price and Cost of Inventory?
Net Loss
Net Worth
Markup
Markdown
51. Which of the Following Allows a Company to Repurchase Part Or All of the Bond Issue At a Stated Price?
Repayment
Seniority
Call Provision
UNIT-5 Business Statistics and Research Methods (COMPLETE NOTES )
INSTRUCTION –
 THIS E-BOOK IS PREPEPERED TO BEING CONSIDER NEW UPDATED SYLLABUS OF UGC-NET

COMMERCE UNIT-5
 WE INCLUDED ALL TOPICS IN BREIF AND SIMPLE LANGUAGE
 WE SUGGEST YOU PRATICE MCQ AFTER GO THROUGH ENTIRE TOPICS
 WE PROVIDED 500 MCQ FOR PRACTICE WE TAKEN OUT FROM VARIOUS TOPIC BUT NOT
ENOUGH MUCH TO MAKE GRAP ON UNIT-5
 SO WE SUGGEST PRACTICE MCQ APART OF BEING PROVIDED
TOPICS –
. Measures of central tendency
. Measures of dispersion
. Measures of skewness
. Correlation and regression of two variables
. Probability: Approaches to probability; Bayes’ theorem
. Probability distributions: Binomial, poisson and normal distributions
. Research: Concept and types; Research designs
. Data: Collection and classification of data
. Sampling and estimation: Concepts; Methods of sampling - probability and non probability
methods; Sampling distribution; Central limit theorem; Standard error;
Statistical estimation
. Hypothesis testing: z-test; t-test; ANOVA; Chi–square test; Mann-Whitney test (Utest);
Kruskal-Wallis test (H-test); Rank correlation test
.Report writing
MEASURES OF CENTRAL TENDENCY
Introduction
A measure of central tendency is a single value that attempts to describe a

set of data by identifying the central position within that set of data. As
such, measures of central tendency are sometimes called measures of
central location. They are also classed as summary statistics. The mean
(often called the average) is most likely the measure of central tendency
that you are most familiar with, but there are others, such as the median
and the mode.
The mean, median and mode are all valid measures of central tendency,
but under different conditions, some measures of central tendency become
more appropriate to use than others. In the following sections, we will look
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at the mean, mode and median, and learn how to calculate them and under
what conditions they are most appropriate to be used.
Mean (Arithmetic)
The mean (or average) is the most popular and well known measure of
central tendency. It can be used with both discrete and continuous data,
although its use is most often with continuous data . The mean is equal to
the sum of all the values in the data set divided by the number of values in
the data set. So, if we have n values in a data set and they have values x 1,
x2, ..., xn, the sample mean, usually denoted by (pronounced x bar), is:
This formula is usually written in a slightly different manner using the Greek
capitol letter, , pronounced "sigma", which means "sum of...":
You may have noticed that the above formula refers to the sample mean.
So, why have we called it a sample mean? This is because, in statistics,
samples and populations have very different meanings and these
differences are very important, even if, in the case of the mean, they are
calculated in the same way. To acknowledge that we are calculating the
population mean and not the sample mean, we use the Greek lower case
letter "mu", denoted as µ:
An important property of the mean is that it includes every value in your data set as part of the
calculation. In addition, the mean is the only measure of central tendency where the sum of the
deviations of each value from the mean is always zero.
When not to use the mean
The mean has one main disadvantage: it is particularly susceptible to the

influence of outliers. These are values that are unusual compared to the
rest of the data set by being especially small or large in numerical value.
For example, consider the wages of staff at a factory below:

Staff 1 2 3 4 5 6 7 8 9 10
Salary 15k 18k 16k 14k 15k 15k 12k 17k 90k 95k
The mean salary for these ten staff is $30.7k. However, inspecting the raw
data suggests that this mean value might not be the best way to accurately
reflect the typical salary of a worker, as most workers have salaries in the
$12k to 18k range. The mean is being skewed by the two large salaries.
Therefore, in this situation, we would like to have a better measure of
central tendency. As we will find out later, taking the median would be a
better measure of central tendency in this situation.
Median
The median is the middle score for a set of data that has been arranged in
order of magnitude. The median is less affected by outliers and skewed
data. In order to calculate the median, suppose we have the data below:
65 55 89 56 35 14 56 55 87 45 92
We first need to rearrange that data into order of magnitude (smallest first):
14 35 45 55 55 56 56 65 87 89 92
Our median mark is the middle mark - in this case, 56 (highlighted in bold).
It is the middle mark because there are 5 scores before it and 5 scores
after it. This works fine when you have an odd number of scores, but what
happens when you have an even number of scores? What if you had only
10 scores? Well, you simply have to take the middle two scores and
average the result. So, if we look at the example below:
65 55 89 56 35 14 56 55 87 45
We again rearrange that data into order of magnitude (smallest first):
14 35 45 55 55 56 56 65 87 89
Only now we have to take the 5th and 6th score in our data set and
average them to get a median of 55.5.
Mode

The mode is the most frequent score in our data set. On a histogram it represents the highest bar in a
bar chart or histogram. You can, therefore, sometimes consider the mode as being the most popular
option. An example of a mode is presented below:
Normally, the mode is used for categorical data where we wish to know which is the most common
category, as illustrated below:

We can see above that the most common form of transport, in this particular data set, is the bus.
However, one of the problems with the mode is that it is not unique, so it leaves us with problems
when we have two or more values that share the highest frequency, such as below:

We are now stuck as to which mode best describes the central tendency of the data. This is
particularly problematic when we have continuous data because we are more likely not to have any
one value that is more frequent than the other. For example, consider measuring 30 peoples' weight
(to the nearest 0.1 kg). How likely is it that we will find two or more people with exactly the same
weight (e.g., 67.4 kg)? The answer, is probably very unlikely - many people might be close, but with
such a small sample (30 people) and a large range of possible weights, you are unlikely to find two
people with exactly the same weight; that is, to the nearest 0.1 kg. This is why the mode is very rarely
used with continuous data.
Another problem with the mode is that it will not provide us with a very good measure of central
tendency when the most common mark is far away from the rest of the data in the data set, as
depicted in the diagram below:

In the above diagram the mode has a value of 2. We can clearly see, however, that the mode is not
representative of the data, which is mostly concentrated around the 20 to 30 value range. To use the
mode to describe the central tendency of this data set would be misleading.
Measures of Dispersion
Suppose you are given a data series. Someone asks you to tell some interesting
facts about this data series. How can you do so? You can say you can find the
mean, the median or the mode of this data series and tell about its distribution. But
is it the only thing you can do? Are the central tendencies the only way by which
we can get to know about the concentration of the observation? In this section, we
will learn about another measure to know more about the data. Here, we are going
to know about the measure of dispersion. Let’s start.
Measures of Dispersion
As the name suggests, the measure of dispersion shows the scatterings of the data.
It tells the variation of the data from one another and gives a clear idea about the
distribution of the data. The measure of dispersion shows the homogeneity or the
heterogeneity of the distribution of the observations.

Suppose you have four datasets of the same size and the mean is also same, say,
m. In all the cases the sum of the observations will be the same. Here, the measure
of central tendency is not giving a clear and complete idea about the distribution
for the four given sets.
Can we get an idea about the distribution if we get to know about the dispersion of
the observations from one another within and between the datasets? The main idea
about the measure of dispersion is to get to know how the data are spread. It
shows how much the data vary from their average value.
Characteristics of Measures of Dispersion
 A measure of dispersion should be rigidly defined

 It must be easy to calculate and understand
 Not affected much by the fluctuations of observations
 Based on all observations
Classification of Measures of Dispersion
The measure of dispersion is categorized as:
(i) An absolute measure of dispersion:
 The measures which express the scattering of observation in terms of distances

i.e., range, quartile deviation.
 The measure which expresses the variations in terms of the average of deviations
of observations like mean deviation and standard deviation
 (ii) A relative measure of dispersion:
 We use a relative measure of dispersion for comparing distributions of two

or more data set and for unit free comparison. They are the coefficient of
range, the coefficient of mean deviation, the coefficient of quartile
deviation, the coefficient of variation, and the coefficient of standard
deviation.
Range
A range is the most common and easily understandable measure of dispersion. It
is the difference between two extreme observations of the data set. If X max and
X min are the two extreme observations then

Business Statistics and

Research Methods
600 MCQ AS PER UPDATED SYLLABUS
1/10/2020
We Almost Included All Topic MCQ And Try provide you Most oriented MCQ Do Not forget To
Read Topic We Suggest Understand Topics Thoroughly Then Start Practice MCQ
Business Statistics and Research Methods
Measures of central tendency Based MCQ –
Q.1) The value of the middle Correct Answer: The value in the
item in a set of observations data set that occurs most
which has been arranged in an Number occurs most frequently
ascending or descending order
Q.3) ______ is not capable of
of magnitude
algebraic treatment
A. Range
A. Both
B. Median
B. Median
C. Mode
C. Arithmetic mean
D. Mean
D. None
Correct Answer: Median
Correct Answer: Median
Q.2) MODE
Q.4) Following are the
A. Observations which has disadvantages of Mean except
been arranged in an
A. In grouped data with open-
B. The value in the data set ended class intervals, the
that occurs most Number mean cannot be computed
occurs most frequently
B. Easily affected by extreme
C. The value of the middle values
item in a set of
C. Cannot be computed if
D. Ascending or descending there are missing values
order of magnitude due to omission or non-
response.
D. Does not possess the Q.7) The ______ is the value you
desired algebraic property calculate when you want the
arithmetic average.
Correct Answer: Does not
possess the desired algebraic A. All of the above
property
B. Mean
Q.5) ______ divides the data
C. Median
into 4 equal parts
D. Mode
A. Median
Correct Answer: Mean
B. Quartiles
Q.8) Which of the Following
C. Mean
statement is false regarding
D. Range Mode
Correct Answer: Quartiles A. Affected by extreme values
Q.6) As a general rule, the B. Can be easily identified

_______ is the best measure of through ocular inspection
central tendency because it is
C. Does not possess the
more precise.
desired algebraic property
A. Median of the mean that allows
further manipulations
B. Range
D. Like the median,
C. Mode
observations from different
D. Mean data sets have to be
Correct Answer: Mean merged to obtain a new
mode, whether group or
ungrouped data are B. The value that occurs most

involved frequently
Correct Answer: Affected by C. The midpoint in a set of

extreme values scores
Q.9) Which of the following is D. The sum of all the values in

NOT a common measure of a group, divided by the
central tendency? number of values in that
group
A. Mode
Correct Answer: The sum of all
B. Range
the values in a group, divided by
C. Median the number of values in that
D. Mean group
Correct Answer: Range Q.12) Below mention formula is

used for calculating
Q.10) The median is ______. L1 + N2− c.ff × iL1 + N2− c.ff × i
A. The highest number A. Range
B. The average B. Median
C. Affected by extreme scores C. Mode
D. The middle point D. Mean
Correct Answer: The middle Correct Answer: Median
point
Q.13) There are three Quartiles
Q.11) The mean is
A. Q0, Q1, Q2Q0, Q1, Q2
A. The highest value
B. Q1, Q1, Q2Q1, Q1, Q2

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Unit 1: Business Environment & International Business

DIWAKAR EDUCATION HUB

Unit 1: Business Environment and International Business (NOTES)

Introduction to Business Environment

Definitions of Business Environment

 Business Environment has been defined by Bayard O. Wheeler as “the total

 According to Arthur M. Weimer, business environment encompasses the

 According to Glueck and Jauch, “The environment includes factors outside

 According to Barry M. Richman and Melvgn Copen “Environment consists

Concept of Business Environment

Features of Business Environment

 It covers factors and forces like customers, competitors, suppliers,

 The business environment is dynamic in nature, that means, it keeps on

 The changes in business environment are unpredictable. It is very difficult to

 Business Environment differs from place to place, region to region and

Importance of Business Environment

 Identifying Firm’s Strength and Weakness: Business environment helps to

 Determining Opportunities and Threats: The interaction between the

 Continuous Learning: Environmental analysis makes the task of managers

 Image Building: Environmental understanding helps the business

 Meeting Competition: It helps the firms to analyse the competitors’

Factors Affecting Business Environment

Demography is a study of human population with reference to its size, density,

• Competitive forces: The competitive tools are price cutting, advertisement,

• Price cutting: Price cutting or price reduction is a method which has to be

• Advertisement: Advertisements in modern days have become a very powerful

Geographical conditions, to a greater extent, influence the type of industries and

4. Social and Cultural Environment

5. Political and Legal Environment

(Financing facilities of IMF) (Their establishment years)

b. SFF II. 1974

c. EFF III. 1963

Answer Report Discuss

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B. To formulate principles and policies on international trade

D.All of the above.

Answer Report Discuss

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B. The Fund's surveillance of their exchange rate policies.

D.Directive principles of the IMF.

B. A multilateral credit mechanism institutionalised in the IMF

D.Both (A) and (B)

ALL COPYRIGHT RESERVIED - DIWAKAR EDUCATION HUB - 7310762592 Page 2

B. ± 7% of the par value

C.± 1 % of the par value

D.± 3% of the par value.

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A.To facilitate the implementation of Multilateral Trade Agreement

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ALL COPYRIGHT RESERVIED - DIWAKAR EDUCATION HUB - 7310762592 Page 3

C.To improve its trade

D.None of the above

C.Invisible exports and imports

D.All of the above

B. Official settlements account

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DIWAKAR RAJPUT,ANURIDDHA GUPTA,ROHANI PURI