- February 11, 2022 at 11:57 am #648464
This sentence is Shown true in solution in the question of choosing True sentench :
“High prices in early stages of a product’s life might generate high initial cash OUTFLOWS. A firm with liquidity problems may prefer price skimming for this reason.”
If the product will generate High cash outflow initially as Few rich customers will buy it , Then how is it going to benefit a firm with liquidity problems ?February 11, 2022 at 3:59 pm #648483
Assuming that you have typed it all correctly, it would seem that there is an error. It should either say ‘inflows’ and not ‘outflows’, or alternatively it would be true if everything was as written but if the second work was ‘costs’ and not ‘prices’.
Where did you find this question?February 12, 2022 at 9:36 am #648518
Its The Text book Activity Questions, I was Revising the Opentuition notes for every chapter and then doing these 3-4 Activity questions from textbook for each chapter.
Btw, I had 9 Marks Question in exam about making Flexed budged, It given a figure 4 digit figure like 5500 sales and It was written , That It was Figured by Accountant or by some study, that It was compounded every quater (may be month ) and It asked to make Flexed budged for next 5 quarters.
Only this bit Of the. Question I couldn’t figure out, I Couldn’t remember the Compound Intrest formula from f2, It was a big 9 marks question , And I was totally stressed.
Can you show me how to do this bit both ways compounded quatarly and monthly and , It would be One in million chance that this Same or even similar question will come with huge marks but Still, It was like easy 9 marks and this was the first step to calculate the Sales. so, It got all wronged.February 12, 2022 at 2:14 pm #648525
If it compounded at (say 2%) each quarter, then the budget for the next quarter will be 5,000 x 1.02, for the following quarter it will be 5,000 x 1.02^2, for the following quarter 5,000 x (1.02^3), and so on.February 14, 2022 at 9:28 am #648590
So, basically we write the Amount x One plus Intrest rate in decimal ^ ( no. of times its compounded )
so, If it compounded monthly and asked for quaterly flexed budget then it will be :-
1st Quater = 5000 x 1.02 ^ 3 ( 1 x 3 )
2nd Quater = 5000 x 1.02 ^ 6 ( 2 x 6)
and so on
Similarly, If its compounded yearly, it will be.
1st Quater = 5000 x (1.+ 0.02 x 3 / 12 ) &
for 5th Quater = [ 5000 x (1.02) ] x ( 1 + 0.02 x 3 / 12 )
Right ? please correct me if i am wrong anywhere.February 14, 2022 at 2:51 pm #648617
That is all correct 🙂February 17, 2022 at 1:55 pm #648798
I remember it correcty now, It was asked to make budget quaterly on rolling basis and Given last 4 quater’s Sales figuers and told that it was compounded 2% (monthly) , and asked to make budget for next 5 quater.
lets assure the figures to be : Q1: 5000 , Q2 : 4500 , Q3 : 6000 , Q4 : 5500 (All in Usd)
So, The languate was bit complex. But basically it was the situation.
I confused which figure to use to for compounding , Is it Q1 or Q4. I know its unclear / incomplete question since its 3 months i given the exam But I remember it exactly i didn’t know which Quater figure to use for next quaters budget.
it was alot bigger question than that but only this bit was challenging for me.
Can you help me, how to calculate the next 4 quater budgets on rolling basis.
What i think is :-
This is a budget for current year and in rolling basis we update the 3 Quaters and make a new budget for upcoming quater – By Defination.
SO, I will take Q4 figures and compound it monthly-
so , Q5 = 5500 x 1.02 ^ 3 = 5836.64
Q6 = 5500 x 1.02 ^ 6 = 6193.89
Q7 = 5500 x 1.02 ^ 9 = 6573
Q8 = 5500 x 1.02 ^ 12 = 6975.33
Is it correct, And in Exam it was comming in decimals which scared me even more as nothing was in decimals in that question. It was 9 marks question and the regret of not doing the first bit , I still feel regret for that. But I solved the further part of the question on my figures.February 17, 2022 at 2:27 pm #648806
That all seems to be correct 🙂
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