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CIMA Subject BA1 Fundamentals of Business Economics Study Text CIMA Certificate in Business Accounting
Published by: Kaplan Publishing UK
Unit 2 The Business Centre, Molly Millars Lane, Wokingham, Berkshire RG41 2QZ
Copyright © 2016 Kaplan Financial Limited. All rights reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher.
Acknowledgements
The CIMA Publishing trade mark is reproduced with kind permission of CIMA.
Notice
The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties. Please consult your appropriate professional adviser as necessary. Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library.
ISBN: 9781784157593
Printed and bound in Great Britain.
ii
Contents
Page
Chapter 1 Microeconomic and Organisational Context I: The Goals and Decisions of Organisations
1
Chapter 2 Microeconomic and Organisational Context II: The Market System
31
Chapter 3 Financial Context of Business I 81
Chapter 4 Macroeconomic and Institutional Context I: The Domestic Economy
125
Chapter 5 Macroeconomic and Institutional Context II: The International Economy
191
Chapter 6 Financial Context of Business II: International aspects
233
Chapter 7 Financial Context of Business III: Discounting and Investment Appraisal
249
Chapter 8 Informational Context of Business I: Summarising and Analysing Data
285
Chapter 9 Informational Context of Business II: Index Numbers
309
Chapter 10 Informational Context of Business III: Interrelationships between variables
333
Chapter 11 Informational Context of Business IV: Forecasting
359
Chapter 12 Mock Assessment 385
iii
iv
Introduction
v
chapterIntroduction
How to Use the Materials
These Kaplan Publishing learning materials have been carefully designed to make your learning experience as easy as possible and to give you the best chances of success in your CIMA Cert BA Objective Test Examination.
The product range contains a number of features to help you in the study process. They include:
This Study Text has been designed with the needs of homestudy and distancelearning candidates in mind. Such students require very full coverage of the syllabus topics, and also the facility to undertake extensive question practice. However, the Study Text is also ideal for fully taught courses.
The main body of the text is divided into a number of chapters, each of which is organised on the following pattern:
• a detailed explanation of all syllabus areas
• extensive ‘practical’ materials
• generous question practice, together with full solutions.
• Detailed learning outcomes. These describe the knowledge expected after your studies of the chapter are complete. You should assimilate these before beginning detailed work on the chapter, so that you can appreciate where your studies are leading.
• Stepbystep topic coverage. This is the heart of each chapter, containing detailed explanatory text supported where appropriate by worked examples and exercises. You should work carefully through this section, ensuring that you understand the material being explained and can tackle the examples and exercises successfully. Remember that in many cases knowledge is cumulative: if you fail to digest earlier material thoroughly, you may struggle to understand later chapters.
• Activities. Some chapters are illustrated by more practical elements, such as comments and questions designed to stimulate discussion.
• Question practice. The text contains examstyle objective test questions (OTQs).
• Solutions. Avoid the temptation merely to ‘audit’ the solutions provided. It is an illusion to think that this provides the same benefits as you would gain from a serious attempt of your own. However, if you are struggling to get started on a question you should read the introductory guidance provided at the beginning of the solution, where provided, and then make your own attempt before referring back to the full solution.
Introduction
vivi
If you work conscientiously through this Official CIMA Study Text according to the guidelines above you will be giving yourself an excellent chance of success in your Objective Text Examination. Good luck with your studies!
Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to [email protected] with full details, or follow the link to the feedback form in MyKaplan.
Our Quality Coordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions.
Icon Explanations
Definition – These sections explain important areas of knowledge which must be understood and reproduced in an assessment environment.
Key Point – Identifies topics which are key to success and are often examined.
Supplementary reading – These sections will help to provide a deeper understanding of core areas. The supplementary reading is NOT optional reading. It is vital to provide you with the breadth of knowledge you will need to address the wide range of topics within your syllabus that could feature in an assessment question. Reference to this text is vital when selfstudying.
Test your understanding – Following key points and definitions are exercises which give the opportunity to assess the understanding of these core areas.
Illustration – To help develop an understanding of particular topics. The illustrative examples are useful in preparing for the 'Test your understanding' exercises.
Exclamation Mark – This symbol signifies a topic which can be more difficult to understand. When reviewing these areas care should be taken.
Study technique
In this section we briefly outline some tips for effective study during the earlier stages of your approach to the Objective Test Examination. We also mention some techniques that you will find useful at the revision stage. Use of effective study and revision techniques can improve your chances of success in the CIMA Cert BA and CIMA Professional Qualification examinations.
vii
Planning
To begin with, formal planning is essential to get the best return from the time you spend studying. Estimate how much time in total you are going to need for each subject you are studying. Remember that you need to allow time for revision as well as for initial study of the material.
With your study material before you, decide which chapters you are going to study in each week, and which weeks you will devote to revision and final question practice.
Prepare a written schedule summarising the above and stick to it!
It is essential to know your syllabus. As your studies progress you will become more familiar with how long it takes to cover topics in sufficient depth. Your timetable may need to be adapted to allocate enough time for the whole syllabus.
Students are advised to refer to the notice of examinable legislation published regularly in CIMA’s magazine (Financial Management), the students enewsletter (Velocity) and on the CIMA website, to ensure they are uptodate.
Students are advised to consult the syllabus when allocating their study time. The percentage weighting shown against each syllabus topic is intended as a guide to the proportion of study time each topic requires.
Tips for effective studying
(1) Aim to find a quiet and undisturbed location for your study, and plan as far as possible to use the same period of time each day. Getting into a routine helps to avoid wasting time. Make sure that you have all the materials you need before you begin so as to minimise interruptions.
(2) Store all your materials in one place, so that you do not waste time searching for items every time you want to begin studying. If you have to pack everything away after each study period, keep your study materials in a box, or even a suitcase, which will not be disturbed until the next time.
(3) Limit distractions. To make the most effective use of your study periods you should be able to apply total concentration, so turn off all entertainment equipment, set your phones to message mode, and put up your ‘do not disturb’ sign.
Introduction
viii
Objective Test
Objective Test questions require you to choose or provide a response to a question whose correct answer is predetermined.
The most common types of Objective Test question you will see are:
(4) Your timetable will tell you which topic to study. However, before diving in and becoming engrossed in the finer points, make sure you have an overall picture of all the areas that need to be covered by the end of that session. After an hour, allow yourself a short break and move away from your Study Text. With experience, you will learn to assess the pace you need to work at. Each study session should focus on component learning outcomes the basis for all questions.
(5) Work carefully through a chapter, making notes as you go. When you have covered a suitable amount of material, vary the pattern by attempting a practice question. When you have finished your attempt, make notes of any mistakes you made, or any areas that you failed to cover or covered more briefly. Be aware that all component learning outcomes are examinable.
(6) Make notes as you study, and discover the techniques that work best for you. Your notes may be in the form of lists, bullet points, diagrams, summaries, ‘mind maps’ or the written word, but remember that you will need to refer back to them at a later date, so they must be intelligible. If you are on a taught course, make sure you highlight any issues you would like to follow up with your lecturer.
(7) Organise your notes. Make sure that all your notes, calculations etc can be effectively filed and easily retrieved later.
• multiple choice, where you have to choose the correct answer(s) from a list of possible answers this could either be numbers or text
• multiple response with more choices and answers, for example, choosing two correct answers from a list of five available answers this could be either numbers or text
• number entry, where you give your numeric answer to one or more parts of a question, for example, gross profit is $25,000 and the accrual for heat and light charges is $750.
• drag and drop, where you match one or more items with others from the list available, for example, matching several accounting terms with the appropriate definition
• drop down, where you choose the correct answer from those available in a drop down menu, for example, choosing the correct calculation of an accounting ratio, or stating whether an individual statement is true or false
• hot spot, where, for example, you use your computer cursor or mouse to identify the point of profit maximisation on a graph
ix
CIMA has provided the following guidance relating to the format of questions and their marking:
Throughout this Study Text we have introduced these types of questions, but obviously we have had to label answers A, B, C etc rather than using click boxes. For convenience we have retained quite a few questions where an initial scenario leads to a number of subquestions. There will be questions of this type in the Objective Test Examination but they will rarely have more than three subquestions.
Guidance re CIMA onscreen calculator
As part of the CIMA Objective Test software, candidates are provided with a calculator. This calculator is onscreen and is available for the duration of the assessment. The calculator is available in Objective Test Examinations for BA1, BA2 and BA3 (it is not required for BA4).
Guidance regarding calculator use in the Objective Test Examinations is available online at: https://connect.cimaglobal.com/
• other types could be matching text with graphs and labelling/indicating areas on graphs or diagrams.
• questions which require narrative responses to be typed will not be used
• for number entry questions, a small range of answers will be accepted. Clear guidance will usually be given about the format in which the answer is required e.g. "to the nearest $" or "to two decimal places".
• item set questions provide a scenario which then forms the basis of more than one question (usually 24 questions). These sets of questions would appear together in the test and are most likely to appear in BA2 and BA3
• all questions are independent so that, where questions are based on a common item set scenario, each question will be distinct and the answer to a later question will not be dependent upon answering an earlier question correctly
• all items are equally weighted and, where a question consists of more than one element, all elements must be answered correctly for the question to be marked correct.
Introduction
x
CIMA Cert BA Objective Tests
The Objective Tests are a twohour assessment comprising compulsory questions, each with one or more parts. There will be no choice and all questions should be attempted. The number of questions in each assessment are as follows:
BA1 Fundamentals of Business Economics – 60 questions BA2 Fundamentals of Management Accounting – 60 questions BA3 Fundamentals of Financial Accounting 0150 60 questions BA4 Fundamentals of Ethics, Corporate Governance and Business Law – 85 questions
All questions are equally weighted. All parts of a question must be answered correctly for the question to be marked correct. Where questions are based upon a common scenario, each question will be independent, and answers to later questions will not be dependent upon answering earlier questions correctly.
Structure of subjects and learning outcomes
Each subject within the syllabus is divided into a number of broad syllabus topics. The topics contain one or more lead learning outcomes, related component learning outcomes and indicative syllabus content.
A learning outcome has two main purposes:
The learning outcomes are part of a hierarchy of learning objectives. The verbs used at the beginning of each learning outcome relate to a specific learning objective e.g.
Calculate the breakeven point, profit target, margin of safety and profit/volume ratio for a single product or service.
The verb ‘calculate’ indicates a level three learning objective. The following table lists the learning objectives and the verbs that appear in the CIMA Cert BA syllabus learning outcomes.
(a) to define the skill or ability that a well prepared candidate should be able to exhibit in the examination
(b) to demonstrate the approach likely to be taken in examination questions.
xi
CIMA's hierarchy of learning objectives
CIMA place great importance on the definition of verbs in structuring Objective Test Examinations. It is therefore crucial that you understand the verbs in order to appreciate the depth and breadth of a topic and the level of skill required. The CIMA Cert BA syllabus learning outcomes and objective test questions will focus on levels one, two and three of the CIMA's hierarchy of learning objectives (knowledge, comprehension and application). However, as you progress to the Operational, Management and Strategic levels of the CIMA Professional Qualification, testing will include levels four and five of the hierarchy. As you complete your CIMA Professional Qualification, you can therefore expect to be tested on knowledge, comprehension, application, analysis and evaluation.
In CIMA Cert BA Objective Test Examinations you will meet verbs from only levels 1, 2, and 3 of the hierarchy which are as follows:
Level 1: KNOWLEDGE
What you are expected to know
For example you could be asked to define economic terms such as 'inflation' (BA1), or to define the term 'management accounting' (BA2) or to state the accounting entries required to record the revaluation surplus arising on revaluation of land and buildings (BA3).
VERBS USED
DEFINITION
List
State
Define
Make a list of.
Express, fully or clearly, the details of/facts of.
Give the exact meaning of.
Introduction
xii
Level 2: COMPREHENSION
What you are expected to understand
For example you could be asked to explain the components of the circular flow of funds (BA1), or distinguish between financial accounting and management accounting (BA3) or distinguish between express terms and implied terms of a contract of employment (BA4).
Level 3: APPLICATION
How you are expected to apply your knowledge
For example you could be asked to reconcile the differences between profits calculated using absorption costing and marginal costing (BA2), or to calculate the gain or loss on disposal of a noncurrent asset (BA3) or to apply relevant principles to determine the outcome of a lawbased or ethical problem (BA4).
VERBS USED
DEFINITION
Describe Communicate the key features of.
Distinguish Highlight the differences between.
Explain Make clear or intelligible/state the meaning or purpose of.
Identify Recognise, establish or select after consideration.
Illustrate Use an example to describe or explain something.
VERBS USED
DEFINITION
Apply
Calculate
Demonstrate
Put to practical use.
Ascertain or reckon mathematically.
Prove with certainty or exhibit by practical means.
Prepare
Reconcile
Solve
Tabulate
Make or get ready for use.
Make or prove consistent/compatible.
Find an answer to.
Arrange in a table.
xiii
For reference, levels 4 and 5 of the hierarchy require demonstration of analysis and evaluation skills respectively. Further detail on levels 4 and 5 of the hierarchy which are tested in the CIMA Professional Qualification can be obtained from the CIMA web site.
CIMA Cert BA resources
Access to CIMA Cert BA resources including syllabus information are available online at www.cimaglobal.com/
Additional resources
This Study Text is designed to be comprehensive and therefore sufficient to meet the needs of students studying this subject. However, CIMA recognises that many students also want to read around particular topic(s), either to extend their knowledge and understanding, or because it is particularly relevant to their work environment.
CIMA has therefore produced a related reading list for those students who wish to extend their knowledge and understanding, whether for personal interest or to help support work activities as follows:
BA1 – Fundamentals of Business EconomicsPrinciples of Economics 3rd ed. McDowell & Thom Applied Economics 12th ed. Griffiths & Wall Mathematics for Economists: An Introductory Textbook 4th ed.
Pemberton & Rau
BA2 – Fundamentals of Management AccountingManagement and Cost Accounting Colin DruryManagement Accounting Catherine Gowthorpe
BA3 – Fundamentals of Financial Accounting Financial Accounting – An Introduction Pauline WeetmanFrank Wood's Business Accounting 1 & 2 Frank Wood & Alan Sangster
Introduction
xiv
Information concerning formulae and tables will be provided via the CIMA website, www.cimaglobal.com, and your ENgage login.
BA4 – Fundamentals of Ethics, Corporate Governance and Business LawStudents can find out about the specific law and regulation in their jurisdiction by referring to appropriate texts and publications for their country.Managing Responsible Business CGMA Report 2015Global Management Accounting Principles CIMA 2015Embedded Ethical Values: A Guide for CIMA Partners
CIMA Report 2014
Business Ethics for SMEs: A Guide for CIMA Partners
CIMA Report 2014
Ethics: Ethical Checklist CIMA 2014Ethics Support Guide CIMA 2014 Acting under Pressure: How management accountants manage ethical issues
CIMA 2012
xv
xvi
BA1 FUNDAMENTALS OF BUSINESS ECONOMICS Syllabus overview This subject primarily covers the economic and operating context of business and how the factors of competition, the behaviour of financial markets and government economic policy can influence an organisation. It also deals with the information available to assist management in evaluating and forecasting the behaviour of consumers, markets and the economy in general. The focus of this syllabus is on providing candidates with an understanding of the areas of economic activity relevant to an organisation’s decisions and, within this context, the numerical techniques to support such decisions. Assessment strategy There will be a two hour computer based assessment, comprising 60 compulsory objective test questions. Syllabus structure The syllabus comprises the following topics and weightings:
Weight Syllabus topic
25% A. Macroeconomic and Institutional Context of Business
30% B. Macroeconomic and Organisational Context of Business
20% C. Informational Context of Business
25% D. Financial Context of Business
BA
1 –
A.
MA
CR
OE
CO
NO
MIC
AN
D I
NS
TIT
UT
ION
AL
CO
NT
EX
T O
F B
US
INE
SS
(25
%)
Lea
rnin
g o
utc
om
es
On
com
plet
ion
of th
eir
stud
ies,
stu
dent
s sh
ould
be
able
to:
In
dic
ativ
e sy
llab
us
con
ten
t
Lea
d
Co
mp
on
ent
Lev
el
1 ex
pla
in t
he
pri
nci
pal
fa
cto
rs t
hat
aff
ect
the
leve
l o
f a
cou
ntr
y’s
nat
ion
al in
com
e an
d t
he
imp
act
of
chan
gin
g
eco
no
mic
gro
wth
rat
es
and
pri
ces
on
bu
sin
ess.
(a)
exp
lain
det
erm
inat
ion
of m
acro
econ
omic
ph
enom
ena,
incl
udin
g e
qui
libriu
m n
atio
nal
inco
me,
gro
wth
in n
atio
nal i
ncom
e, p
rice
infla
tion,
une
mpl
oym
ent,
and
trad
e de
ficits
an
d su
rplu
ses
2 •
The
cau
ses
of c
hang
es t
o th
e eq
uilib
rium
leve
l of
nat
iona
l inc
ome
usin
g an
agg
reg
ate
dem
and
and
supp
ly a
naly
sis
and
the
elem
ents
in t
he
circ
ular
flo
w o
f in
com
e.
(b)
expl
ain
the
sta
ges
of
the
trad
e cy
cle
and
the
cons
eque
nces
of
each
sta
ge
for
the
polic
y ch
oice
s of
gov
ernm
ent
2 •
The
tra
de c
ycle
and
the
impl
icat
ions
for
unem
ploy
men
t, in
flatio
n an
d tr
ade
bala
nce
of
each
sta
ge
and
gov
ernm
ent
polic
y fo
r ea
ch
stag
e.
(c)
expl
ain
the
mai
n pr
inci
ples
of
publ
ic f
inan
ce
(i.e.
def
icit
finan
cing
, for
ms
of ta
xatio
n) a
nd
mac
roec
onom
ic p
olic
y
2 •
The
mai
n pr
inci
ples
of
publ
ic f
inan
ce: t
he
cent
ral g
over
nmen
t bu
dget
and
for
ms
of d
irect
an
d in
dire
ct t
axat
ion.
•
The
mai
n pr
inci
ples
of
publ
ic f
inan
ce: f
isca
l, m
onet
ary
and
supp
ly s
ide
polic
ies,
incl
udin
g re
lativ
e m
erits
of
each
.
(d)
desc
ribe
the
impa
cts
on b
usin
ess
of p
oten
tial
polic
y re
spon
ses
of g
over
nmen
t, t
o ea
ch
stag
e of
the
trad
e cy
cle
2 •
The
eff
ects
on
busi
ness
of
chan
ges
in th
e ec
onom
ic g
row
th r
ate,
inte
rest
rat
es,
gov
ernm
ent
expe
nditu
re a
nd t
axat
ion.
(e)
calc
ulat
e in
dice
s fo
r pr
ice
infla
tion
and
natio
nal i
ncom
e gr
owth
usi
ng e
ither
bas
e or
cu
rren
t w
eig
hts
and
use
indi
ces
to d
efla
te a
se
ries.
3 •
Inde
x nu
mbe
rs.
Lea
rnin
g o
utc
om
es
On
com
plet
ion
of th
eir
stud
ies,
stu
dent
s sh
ould
be
able
to:
In
dic
ativ
e sy
llab
us
con
ten
t
Lea
d
Co
mp
on
ent
Lev
el
2 ex
pla
in t
he
fact
ors
af
fect
ing
th
e tr
ade
of
a co
un
try
wit
h t
he
rest
of
the
Wo
rld
an
d it
s im
pac
t o
n b
usi
nes
s.
(a)
expl
ain
the
con
cept
of
the
bala
nce
of
paym
ents
and
its
impl
icat
ions
for
gov
ernm
ent
polic
y
2 •
The
cau
ses
and
effe
cts
of f
unda
men
tal
imba
lanc
es in
the
bala
nce
of p
aym
ents
.
(b)
iden
tify
the
mai
n el
emen
ts o
f na
tiona
l pol
icy
with
res
pect
to tr
ade
2 •
Pol
icie
s to
enc
oura
ge
free
trad
e an
d pr
otec
tioni
st in
stru
men
ts.
(c)
expl
ain
the
impa
cts
of e
xcha
nge
rate
pol
icie
s on
bus
ines
s.
2 •
The
eff
ect
of c
hang
ing
exch
ang
e ra
tes
on t
he
prof
its o
f bus
ines
s an
d in
tern
atio
nal
com
petit
iven
ess.
3 ex
pla
in t
he
infl
uen
ces
on
ec
on
om
ic d
evel
op
men
t o
f co
un
trie
s an
d t
he
effe
cts
of
glo
bal
isat
ion
o
n b
usi
nes
s.
(a)
expl
ain
the
con
cept
of g
loba
lisat
ion
and
the
cons
eque
nces
for
busi
ness
es a
nd n
atio
nal
econ
omie
s
2 •
Nat
ure
of g
loba
lisat
ion
and
fact
ors
driv
ing
it
(impr
oved
com
mun
icat
ions
, po
litic
al
real
ignm
ents
, gro
wth
of g
loba
l ind
ustr
ies
and
inst
itutio
ns,
cost
diff
eren
tials
).
• Im
pact
s of
glo
balis
atio
n on
bus
ines
s in
clud
ing
off-
shor
ing
, ind
ustr
ial r
eloc
atio
n, e
mer
gen
ce o
f g
row
th m
arke
ts,
and
enha
nced
com
petit
ion.
(b)
expl
ain
the
rol
e of
maj
or in
stitu
tions
pr
omot
ing
glo
bal t
rade
and
dev
elop
men
t 2
• M
ain
tra
de a
gree
men
ts a
nd t
radi
ng b
lock
s.
• P
rinci
pal i
nstit
utio
ns e
ncou
rag
ing
inte
rnat
iona
l tr
ade.
(c)
iden
tify
the
impa
cts
of e
cono
mic
and
in
stitu
tiona
l fac
tors
usi
ng t
he P
ES
TE
L fr
amew
ork.
2 •
The
PE
ST
EL
fram
ewor
k (P
oliti
cal,
Eco
nom
ic,
Soc
ial,
Tec
hnol
ogic
al, E
nviro
nmen
tal/
Eco
log
ical
, Le
gal
).
BA
1 –
B.
MIC
RO
EC
ON
OM
IC A
ND
OR
GA
NIS
AT
ION
AL
CO
NT
EX
T O
F B
US
INE
SS
(3
0%
)
Lea
rnin
g o
utc
om
es
On
com
plet
ion
of th
eir
stud
ies,
stu
dent
s sh
ould
be
able
to:
In
dic
ativ
e sy
llab
us
con
ten
t
Lea
d
Co
mp
on
ent
Lev
el
1 d
isti
ng
uis
h b
etw
een
th
e ec
on
om
ic g
oal
s o
f va
rio
us
stak
eho
lder
s an
d
org
anis
atio
ns.
(a)
dist
ing
uish
bet
wee
n th
e g
oals
of
prof
it se
ekin
g or
gan
isat
ions
, no
t-fo
r-pr
ofit
org
anis
atio
ns a
nd g
over
nmen
tal
org
anis
atio
ns
2 •
Typ
es o
f pu
blic
, priv
ate
and
mut
ually
ow
ned
org
anis
atio
ns a
nd t
heir
obje
ctiv
es.
• T
ypes
of
not-
for-
prof
it or
gan
isat
ions
and
thei
r ob
ject
ives
.
(b)
expl
ain
sha
reho
lder
wea
lth,
the
varia
bles
af
fect
ing
shar
ehol
der
wea
lth,
and
its
appl
icat
ion
in m
anag
emen
t de
cisi
on m
akin
g
2 •
Con
cept
s of
ret
urns
to
shar
ehol
der
inve
stm
ent
in t
he s
hort
run
and
long
run
(an
d th
e co
st o
f ca
pita
l).
(c)
dist
ing
uish
bet
wee
n th
e po
tent
ial o
bjec
tives
of
man
agem
ent,
sha
reho
lder
s, a
nd o
ther
st
akeh
olde
rs a
nd th
e ef
fect
s of
thes
e on
the
beha
viou
r of
the
firm
.
2 •
The
prin
cipa
l-ag
ent p
robl
em, i
ts im
pact
on
the
deci
sion
s of
org
anis
atio
ns.
2 d
emo
nst
rate
th
e d
eter
min
atio
n o
f p
rice
s b
y m
arke
t fo
rces
an
d t
he
imp
act
of
pri
ce c
han
ges
o
n r
even
ue
fro
m s
ales
.
(a)
iden
tify
the
equi
libriu
m p
rice
in p
rodu
ct o
r fa
ctor
mar
kets
2
• T
he p
rice
mec
hani
sm:
dete
rmin
ants
of
supp
ly
and
dem
and
and
thei
r in
tera
ctio
n to
form
and
ch
ang
e eq
uilib
rium
pric
e.
(b)
calc
ulat
e th
e pr
ice
elas
ticity
of
dem
and
and
the
pric
e el
astic
ity o
f su
pply
3
• T
he p
rice
elas
ticity
of
dem
and
and
supp
ly.
(c)
expl
ain
the
det
erm
inan
ts o
f th
e pr
ice
elas
ticiti
es o
f de
man
d an
d su
pply
2
• in
fluen
ces
on th
e pr
ice
elas
ticiti
es o
f de
man
d an
d su
pply
.
(d)
calc
ulat
e th
e ef
fect
s of
pric
e el
astic
ity o
f de
man
d on
a fi
rm’s
tot
al r
even
ue c
urve
. 3
• co
nseq
uenc
es o
f di
ffer
ent
pric
e el
astic
ities
of
dem
and
for
tota
l rev
enue
.
Lea
rnin
g o
utc
om
es
On
com
plet
ion
of th
eir
stud
ies,
stu
dent
s sh
ould
be
able
to:
In
dic
ativ
e sy
llab
us
con
ten
t
Lea
d
Co
mp
on
ent
Lev
el
3 ex
pla
in t
he
infl
uen
ce o
f ec
on
om
ic a
nd
so
cial
co
nsi
der
atio
ns
on
th
e st
ruct
ure
of
the
org
anis
atio
n a
nd
th
e re
gu
lati
on
of
mar
kets
.
(a)
iden
tify
the
influ
ence
of
cost
s on
the
siz
e an
d st
ruct
ure
of th
e or
gan
isat
ion
2 •
Sou
rces
of
inte
rnal
and
ext
erna
l eco
nom
ies
of
scal
e an
d th
eir
influ
ence
on
mar
ket
conc
entr
atio
n.
(b)
expl
ain
the
sou
rces
of
mar
ket f
ailu
res
and
the
polic
ies
avai
labl
e to
dea
l with
the
m.
2 •
Impa
cts
of c
hang
ing
tran
sact
ions
cos
ts o
n th
e de
cisi
on t
o ou
tsou
rce
aspe
cts
of a
bus
ines
s (in
clud
ing
net
wor
k or
gan
isat
ions
, sh
ared
se
rvic
e ce
ntre
s, a
nd f
lexi
ble
staf
fing
).
• P
ositi
ve a
nd n
egat
ive
exte
rnal
ities
in g
oods
m
arke
ts a
nd g
over
nmen
t res
pons
es to
them
in
clud
ing
indi
rect
tax
es, s
ubsi
dies
, po
llute
r pa
ys p
olic
ies,
reg
ulat
ion
and
dire
ct p
rovi
sion
. •
Impa
ct o
f min
imum
pric
e (m
inim
um w
ages
) an
d m
axim
um p
rice
polic
ies
in g
oods
and
fa
ctor
mar
kets
.
BA
1 –
C.
INF
OR
MA
TIO
NA
L C
ON
TE
XT
OF
BU
SIN
ES
S (
20
%)
Lea
rnin
g o
utc
om
es
On
com
plet
ion
of th
eir
stud
ies,
stu
dent
s sh
ould
be
able
to:
In
dic
ativ
e sy
llab
us
con
ten
t
Lea
d
Co
mp
on
ent
Lev
el
1 ap
ply
tec
hn
iqu
es t
o
com
mu
nic
ate
bu
sin
ess
dat
a as
in
form
atio
n t
o
bu
sin
ess
stak
eho
lder
s.
(a)
expl
ain
the
diff
eren
ce b
etw
een
data
and
in
form
atio
n an
d th
e ch
arac
teris
tics
of g
ood
info
rmat
ion
2 •
Dat
a an
d in
form
atio
n.
(b)
iden
tify
rele
vant
dat
a fr
om g
raph
s, c
hart
s an
d di
agra
ms.
2
• G
raph
s, c
hart
s an
d di
agra
ms:
sca
tter
di
agra
ms,
his
togr
ams,
bar
cha
rts
and
ogiv
es.
2 d
emo
nst
rate
th
e u
ses
of
big
dat
a an
d a
nal
ytic
s fo
r u
nd
erst
and
ing
th
e b
usi
nes
s co
nte
xt.
(a)
desc
ribe
the
prin
cipa
l bus
ines
s ap
plic
atio
ns o
f bi
g d
ata
and
anal
ytic
s 3
• U
se o
f bi
g da
ta a
nd a
naly
tics
to id
entif
y cu
stom
er v
alue
, cu
stom
er b
ehav
iour
, cos
t be
havi
our
and
to a
ssis
t with
log
istic
s de
cisi
ons.
(b)
dem
onst
rate
the
rel
atio
nshi
p be
twee
n da
ta
varia
bles
3
• C
ross
-sec
tiona
l and
tim
e-se
ries
anal
ysis
. •
The
cor
rela
tion
coef
ficie
nt a
nd t
he c
oeff
icie
nt
of d
eter
min
atio
n be
twee
n tw
o va
riabl
es.
• C
orre
latio
n co
effic
ient
: S
pear
man
’s r
ank
corr
elat
ion
coef
ficie
nt a
nd P
ears
on’s
co
rrel
atio
n co
effic
ient
.
(c)
dem
onst
rate
tre
nds
and
patt
erns
usi
ng a
n ap
prop
riate
tec
hniq
ue
3 •
Tim
e se
ries
anal
ysis
– g
raph
ical
ana
lysi
s.
• S
easo
nal f
acto
rs f
or b
oth
addi
tive
and
mul
tiplic
ativ
e m
odel
s.
• P
redi
cted
val
ues
giv
en a
tim
e se
ries
mod
el.
• S
easo
nal v
aria
tions
usi
ng b
oth
addi
tive
and
mul
tiplic
ativ
e m
odel
s.
(d)
prep
are
a tr
end
equa
tion
usin
g ei
ther
g
raph
ical
mea
ns o
r re
gres
sion
ana
lysi
s 3
• T
rend
s in
tim
e se
ries
– gr
aphs
, m
ovin
g av
erag
es a
nd li
near
reg
ress
ions
. •
The
reg
ress
ion
equa
tion
to p
redi
ct th
e de
pend
ent
varia
ble,
giv
en a
val
ue o
f th
e in
depe
nden
t va
riabl
e.
(e)
iden
tify
the
limita
tions
of f
orec
astin
g m
odel
s.
2 •
For
ecas
ting
and
its li
mita
tions
.
BA
1 –
D.
FIN
AN
CIA
L C
ON
TE
XT
OF
BU
SIN
ES
S (
25%
)
Lea
rnin
g o
utc
om
es
On
com
plet
ion
of th
eir
stud
ies,
stu
dent
s sh
ould
be
able
to:
In
dic
ativ
e sy
llab
us
con
ten
t
Lea
d
Co
mp
on
ent
Lev
el
1 ex
pla
in t
he
fun
ctio
ns
of
the
mai
n f
inan
cial
m
arke
ts a
nd
inst
itu
tio
ns
in f
acil
itat
ing
co
mm
erce
an
d d
evel
op
men
t.
(a)
expl
ain
the
rol
e of
var
ious
fin
anci
al a
sset
s,
mar
kets
and
inst
itutio
ns in
ass
istin
g
org
anis
atio
ns to
man
age
thei
r liq
uidi
ty
posi
tion
and
to p
rovi
de a
n ec
onom
ic r
etur
n to
pr
ovid
ers
of li
qui
dity
2 •
Rol
e an
d fu
nctio
ns o
f fin
anci
al in
term
edia
ries.
•
Rol
e of
fin
anci
al a
sset
s, m
arke
ts a
nd
inst
itutio
ns in
hel
ping
inst
itutio
ns r
egul
ate
thei
r liq
uidi
ty p
ositi
on.
(b)
expl
ain
the
rol
e of
com
mer
cial
ban
ks in
the
pr
oces
s of
cre
dit
crea
tion
and
in d
eter
min
ing
the
stru
ctur
e of
inte
rest
rat
es a
nd t
he r
oles
of
the
‘cen
tral
ban
k’ in
ens
urin
g liq
uidi
ty
2 •
Rol
e an
d in
fluen
ce o
f co
mm
erci
al b
anks
in
cred
it cr
eatio
n.
• R
ole
and
com
mon
fun
ctio
ns o
f ce
ntra
l ban
ks
incl
udin
g t
heir
influ
ence
on
yiel
d ra
tes
and
polic
ies
of q
uant
itativ
e ea
sing
(c)
expl
ain
the
rol
e of
the
for
eig
n ex
chan
ge
mar
ket
in f
acili
tatin
g tr
ade
and
in s
ettin
g ex
chan
ge
rate
s.
2 •
Rol
e of
fore
ign
exch
ang
e m
arke
ts in
faci
litat
ing
in
tern
atio
nal t
rade
and
in d
eter
min
ing
the
exch
ang
e ra
te.
• G
over
nmen
tal a
nd in
tern
atio
nal p
olic
ies
on
exch
ang
e ra
tes
(exc
hang
e ra
te m
anag
emen
t,
fixed
and
floa
ting
rat
e sy
stem
s, s
ing
le c
urre
ncy
zone
s).
2 ap
ply
fin
anci
al
mat
hem
atic
al t
ech
niq
ues
in
a b
usi
nes
s d
ecis
ion
-m
akin
g c
on
text
.
(a)
calc
ulat
e fu
ture
val
ues
of a
n in
vest
men
t us
ing
both
sim
ple
and
com
poun
d in
tere
st
3 •
Sim
ple
and
com
poun
d in
tere
st.
• C
alcu
late
an
annu
al p
erce
ntag
e ra
te o
f in
tere
st
giv
en a
mon
thly
or
quar
terly
rat
e.
(b)
calc
ulat
e th
e pr
esen
t va
lue
of a
futu
re c
ash
sum
, an
annu
ity a
nd a
per
petu
ity.
3 •
Ann
uitie
s an
d pe
rpet
uitie
s.
• D
isco
untin
g to
fin
d ne
t pr
esen
t va
lue
(NP
V)
and
inte
rnal
rat
e of
ret
urn
(IR
R).
Lea
rnin
g o
utc
om
es
On
com
plet
ion
of th
eir
stud
ies,
stu
dent
s sh
ould
be
able
to:
In
dic
ativ
e sy
llab
us
con
ten
t
Lea
d
Co
mp
on
ent
Lev
el
3 d
emo
nst
rate
th
e im
pac
t o
f ch
ang
es i
n i
nte
rest
an
d e
xch
ang
e ra
tes
on
co
ntr
oll
ing
an
d
mea
suri
ng
bu
sin
ess
per
form
ance
.
(a)
desc
ribe
the
impa
ct o
f in
tere
st r
ate
chan
ges
on m
arke
t de
man
d an
d th
e co
sts
of f
inan
ce
2 •
The
impa
ct o
f in
tere
st r
ates
on
disc
retio
nary
sp
endi
ng,
borr
owin
g, s
avin
g,
capi
tal
inve
stm
ent,
and
gov
ernm
ent
borr
owin
g a
nd
expe
nditu
re.
(b)
calc
ulat
e th
e im
pact
of
exch
ang
e ra
te
chan
ges
on
expo
rt a
nd im
port
pric
es a
nd t
he
valu
e of
the
asse
ts a
nd li
abili
ties
of t
he
busi
ness
3 •
The
impa
ct o
f a
chan
ge
in t
he e
xcha
nge
rate
on
ass
ets
and
liabi
litie
s de
nom
inat
ed in
a
fore
ign
curr
ency
. •
The
eff
ect
chan
gin
g e
xcha
nge
rate
s ha
s on
m
easu
res
of th
e ec
onom
ic p
erfo
rman
ce o
f the
bu
sine
ss (
cost
s, r
even
ues,
pro
fits
and
asse
t va
lues
).
(c)
expl
ain
the
rol
e of
hed
gin
g an
d de
rivat
ive
cont
ract
s in
man
agin
g th
e im
pact
of
chan
ges
in
inte
rest
and
exc
hang
e ra
tes.
2 •
For
war
d co
ntra
cts,
futu
res
and
optio
ns a
s w
ays
to
man
age
the
impa
ct o
f ch
ang
es.
