B.Com Ist Year International Monetary Fund Short Question Answer Notes

B.Com Ist Year International Monetary Fund Short Question Answer Notes Study material notes sample papers free books online Study material unit wise chapter wise study notes in English examination papers on our site B.Com Ist Year 2004, 2005, 2012, 2013, 2014, Question Answers Short Study material notes.

Short Answer Questions

Q.1. What do you understand by Business Environment ? Discuss its characteristics.

Ans. Business environment refers to those aspects of the surroundings of business enterprise which affects its operation and determine its effectiveness. It is a mixture of complex, dynamic and uncontrollable external factors within which a business is to be operated. The business units have to formulate and alter, improve or modify their policies to suit to the changed environment.

Main characteristics of business environment are as follows: (i) Business environment is complex in nature.

(ii) Business environment is dynamic in nature.

(iii) Business environment has both short-term and long-term impacts.

(iv) External factors of business environment are uncontrollable.

(v) Environmental factors are interdependent.

Q.2. What is meant by internal business environment ?

Ans. Internal environment reflects the internal organisation of a business firm through which it operates its activities. Yet changes in the internal environment affects the working system of a business firm, though these are generally regarded as controllable factors. The company can alter or modify these factors according to its objectives. Main factors of internal environment are as follows:

(i) Mission and objectives of the firm;

(ii) Business and managerial policies of the firm; (iii) Production capacity, technology and effeciency of the productive apparatus;

(iv) Organisational and management structure;

(v) Management information system;

(vi) Labour management relations;

(vii) Availability of resources;

(viii) Prospect of business development.

Q.3. Distinguish between Micro and Macro environment.

Ans. Micro environment includes all those factors which have a direct bearing on the operation of the firm. These factors linked mtimately with the company. Each firm may have a different micro environment. Micro environment includes the suppliers, marketing intermediaries, competitors, customers and the publics.

Macro environment includes all those factors which affect the business firm indirectly. The firm has no control over these factors. This environment includes the economic environment, demographic environment, socio-cultural factors, natural factors, technological, political and International factors.

Q.4. How economic environment affects a business firm?

Ans. Scope and nature of the activities of a business firm largly depends upon the level of economic development of a country. In underdeveloped countries where the level of income is low, any commodity cannot be sold unless its price is low. A manufacturer producting high cost goods cannot get success in the market of underdeveloped country. Hence business strategy must take such economic factors into account. In the same way industrial policy, monetary and fiscal policy and other government policies have a great bearing on what a business enterprise can do to promote its interests. A business friendly government creats a congenial business environment.

Q.5. What do you understand by demographic environment?

Ans. Demographic environment is the study of features of population viz., its size, its growth rate, age composition, sex composition, income level, education level, family size, family structure, etc. All these demographic factors affect size of demand; tastes, fashion, liking, preferences of consumer etc. Demographic environment differs from country to country and from place to place within the same country. It may also change over time. Important demographic factors are:

Huge population size and growth rate indicate cheap labour and more demand in the economy. If population size is large then there will be more demand for goods and services. It will have favourable effect on business. Age composition and sex composition are also important elements of demographic environment and affect the policy making of different business units.

Q.6. Write the importance and need of the study of business environment.

Ans. Importance and need of the study of business environment can be explained as follows:

(ii) A It is important to get knowledge of opportunities, challanges and limitations to the firm.

(ii) Strategy and objectives of long-term planning can only be determined by studying the environmental factors.

(iii) The study of business environment helps the business firm to take effective decisions.

(iv) Study of business environment provides the knowledge about the changes in consumer’s habit, fashion, technology, availability of new product and quality of products etc.

Q.7. Explain SWOT. (Meerut 2004, 2005)

Ans. The term SWOT stands for strength (S), Weaknesses (W), Opportunities (O) and Threats (T). This analysis is undertaken by business firms to understand and analyse the internal and external environment. It is a technique for matching organisational strength and weaknesses with environmental opportunities and threats.

Q.8. Write a short note on Indian Business Environment.

Ans. Increasing world competition, globalisation, fast development of technology force the government to make drastic change in economic and industrial policy in 1991. In the new policy of 1991, licences were abolished over a large number of products, expansion of private sector by reducing the number of industries reserved for the public sector, liberal policy towards foreign investment and technology was introduced. Now there are no entry and growth restrictions on the private sector. These changes in the economic environment opened up new opportunities and threats for the management.

Q.9. Write a short note on International Environment.

Ans. The international environment is of great importance for the business which rely primarily on exports and imports. As a result of accelerating globalisation, interdependence among nations has also grown considerably. Openness to the rest of world exposes a country to great risk as well as creates opportunities for growth.

With the free flow of technology, foreign investment and increase in foreign trade, the significance of study of international environment has further increased. A recession in foreign market or protection policy by foreign nations may create difficulties for industries depending on exports.

Q.10. Explain the term National Income and its importance.

Ans. The national income data are of following importance:

(i) The economic development of a country is assessed by its nationalincome.

(ii) National income is used as an important tool for economic analysis and policy making.

(iii) It provides information about the distribution of income.

(iv) It provides data pertaining to a country’s output, expenditure, income, investment for economic planning.

Q.11. Explain four main causes of slow growth of national income. (Meerut, 2014)

Ans.(i) Low rate of savings and investment.

(ii) Rapid increase in population,

(iii) Inadequateindustrialdevelopment.

(iv) Unbalanced growth of different regions.

Q.12. Explain main features of national income in India

Ans. (i) A significant percentage of India’s national income is derived from agriculture,

(ii) In India distribution of nationalincome is unequal.

(iii) In compare to other nations, India records a much low growth rateof national income.

(iv) Tertiary and organised sector has recorded a continuous increase in its share in national income.

(v) Regional diaparity is one of the important feature of national income

Q.13. What are the main difficulties in the measurement of national income?

Ans. (i) Non-availability of complete and reliable data. (ii) Existence of non-monetized sector.

(iii) Illiteracy and lack of accounting habit.

(iv) Double counting is a difficulty associated with the output value method.

Q.14. Write the formula of Grons Saving Pa Saving Rate (Meerut, 2005)


2. 15. Define Investment.

Ans. Investment refers capital equipment. In other the building of new machin and other forms of produ the production and income

ant refers to real investment which adds to Tether words investment means, investment in machines, new factory buildings, roads, bridges oroductive capital stock. It leads to increase in the production and income.

Q.16. What do you understand by Net Capital Flow?

Ans. Difference between net domestic capital formation and net domestic savings is known as net capital flow.

Net Capital Flow = Net Domestic Capital Formation – Net

Domestic Savings

Q.17. Write the formula of finding the Net Domestic Capital Formation.

Ans. Rate of Net Domestic Capital Formation

Gross Domestic Capital Formation

B.Com Ist Year International Monetary Fund Short Question Answer Notes

Q.18. Discuss the main sources of savings in India.

Ans. There are three following sources of savings in India:

(i) House-hold Sector: This includes all house-holds : urban and rural, unincorporated business firms and non-profit making institutions;

(ii) Public Sector : This includes Central and State Governments, local self Governments and Corporations and all kinds of public enterprises; and

(iii) Private Corporate Sectors : This includes financial, public and non-financial limited companies and co-operatives.

The most important source of savings in India is household sector.

Q.19. Write the importance of capital formation.

Ans. (i) Increase in the rate of capital formation is a pre-condition for rapid economic development.

(ii) Increase in capital formation generate more and more employment opportunities.

(ii) Capital formation helps the growth of human capital i.e., health, education, social service and welfare etc.

(iv) Technical progress becomes possible only when there are sufficient capital resources.

Q.20. What are the main causes of low rate of capital formation (Savings and Investment) in India?

Ans. See page 24 and 25. 2.21. Suggest measures to raise savings and investment rate in India.

Ans.(i) Reduction in non-developmental expenditure.

(ii) Control on demonstration tendencies.

(iii) Expansion of banking facilities.

(iv) Increase in the profitability of public undertakings.

(v) Concessional loan for construction work and purchase of capital goods.

(vi) Government should pursue liberal monetary and fiscal policy.

Q. 22. Write the main problems of industries in India.

Ans. (i) Under utilisation of installed production capacity.

(ii) Capital investment in low priority sectors.

(iii) Poor research and development in Indian industries. (iv) Lack of basic infrastructure needed for industries.

(v) Regional imbalance also creates many problems before industries.

Q.23. Distinguish between Balance of payment and Balance of trade.

Ans. See Page 41 and 42.

Q.24. What do you understand by visible and invisibleitems of balance of payment?

Ans. Visible items of trade includes imports and exports of goods which are accounted on the ports. Invisible items include those items which are not recorded on the ports. It includes mainly payments and receipts for shipping, banking, insurance, technical services, tourism, interest, dividends etc.

Q.25. Define the main items of Current Account and Capital Account.

Ans. Current account includes both visible and invisible items of trade. It includes mainly imports-exports of goods, and services lile amount for shipping, banking, insurance, technical services and tourism etc.

Capital Account is related with the financial type transactions. It includes all type of international capital transfer, transactions of private payments, government loan, interest and subsidies etc. Capital Account has all long-term transactions both on government Capital Account has all long-term tra account and private account.

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