Question No. 1B) IBO - 01 International Business Environment Mcom 1st Year

 

Solutions to Assignments 

IBO-01 International Business Environment

Solutions to Question No. 1 (B)

An international business environment refers to the surrounding in which international companies run their businesses. Therefore, it is mandatory for the people at the managerial level to work on the factors that comprise of International Business Environment.

• Economic Environment in International Business

The economic environment relates to all the factors that contribute to a country’s attractiveness for foreign businesses. The economic environment can be very different from one nation to another. Countries are often divided into three main categories: the more developed or industrialised, the less developed or third world, & the newly industrialising or emerging economies.

Within each category, there are major variations, but overall the more developed countries are the rich countries, the less developed the poor ones, & the newly industrialising (those moving from poorer to richer). These distinctions are generally made on the basis of the gross domestic product per capita (GDP/capita). Better education, infrastructure, & technology, healthcare, & so on are also often associated with higher levels of economic development.

Clearly, the level of economic activity combined with education, infrastructure, & so on, as well as the degree of government control of the economy, affect virtually all facets of doing business, & a firm needs to recognise this environment if it is to operate successfully internationally. While analysing the economic environment, the organisation intending to enter a particular business sector may consider the following aspects:

1. An Economic system to enter the business sector.
2. Stage of economic growth & the pace of growth.
3. Level of national & per capita income.
4. Incidents of taxes, both direct & indirect tax
5. Infrastructure facilities available & the difficulties thereof.
6. Availability of raw materials & components & the cost thereof.
7. Sources of financial resources & their costs.
8. Availability of manpower-managerial, technical & workers available & their salary & wage structures.

Question No. 1a) IBO - 01 International Business Environment Mcom 1st Year

Solutions to Assignments 

IBO-01 International Business Environment

Solutions to Question No. 1 (a)

A vibrant international trade environment benefits all participating parties. Countries with high levels of international trade have stronger economies, better standards of living and steadier growth.

1. International Trade Raises Living Standards

Exports boost the economic development of a country, reduce poverty and raise the standard of living. The world's strongest economies are heavily involved in international trade and have the highest living standards, according to the Operation for Economic Co-operation and Development (OECD).

Countries like Switzerland, Germany, Japan and the Scandinavian countries have high volumes of imports and exports relative to their gross domestic product and offer high standards of living. Nations with lower ratios of international trade, such as Greece, Italy, Spain and Portugal, face serious economic problems and challenges to their living standards. Even with low wages, less developed countries can use this advantage to create jobs related to exports that add currency to their economy and improve their living conditions.

2. Exports Increase Sales

Exporting opens new markets for a company to increase its sales. Economies rise and fall, and a company that has a good export market is in a better position to weather an economic downturn.

Furthermore, businesses that export are less likely to fail. It's not only the exporting companies that increase sales; the companies that supply materials to the exporters also see their revenues go up, leading to more jobs.

3. Exports Create Jobs 

A company that increases its exports needs to hire more people to handle the higher workload. Businesses that export have a job growth 2 to 4 percent higher than companies that don't; these export-related jobs pay about 16 percent more than jobs in companies with fewer exports. The workers in these export-related jobs spend their earnings in the local economy, leading to a demand for other products and creating more jobs.

4. Imports Benefit Consumers

Imported products result in lower prices and expand the number of product choices for consumers. Lower prices have a significant effect, particularly for modest and low-income households. Studies show that lower import prices save the average American family of four around $10,000 per year.

Besides lower prices, imports give consumers a wider choice of products with better quality. As a result, domestic manufacturers are forced to lower their prices and increase product lines to meet the competition from imports. Even further, domestic vendors may have to import more components of their products to stay price competitive.

5. Improved International Relations

International business removes rivalry between different countries and promotes international peace and harmony. Mutual trade creates a dependence on each other, improves confidence and fosters good faith.

A good example of co-dependency of nations is the relationship between the United States and China. Even though these countries have significant political differences, they try to get along because of the huge amount of trade between them.

IBO-01 International Business Environment Mcom 1st Year

SOLUTIONS TO ASSIGNMENTS

IBO - 01 - International Business Environment

Question 1 a) How can the study of the International Business Environment be useful for Managers? Give your arguments.                                             CLICK HERE

Question 1 b) Briefly explain the Economic and Financial Environment of International Business.                                              CLICK HERE

Question 2 a) How does disequilibrium occur in the balance of payments? Describe the methods of correcting the disequilibrium with examples.       CLICK HERE

Question 2 b) Illustrate the advantages and disadvantages of FDI. Discuss the role of FDI in the economic development of the host country.     CLICK HERE

Question 3 Distinguish between the following: 

(a) Micro and Macro Business Environment. 

(b) Flexible and Fixed Exchange Rate. 

(c) GATT and WTO. 

(d) Export Sales Contract and Domestic Sales Contract.           CLICK HERE

Question 4 Comment on the following statements: 

(a) Indian foreign trade policy does not facilitate the import of technology. 

(b) ICC has no role in arbitration and conciliation. 

(c) All contracts are agreements but all agreements are not contracts. 

(d) World Trade is not concentrated in a few countries and products.       CLICK HERE

Question 5 Write notes on the following: 

(a) Political Risks. 

(b) Alternative Dispute Resolution (ADR). 

(c) Wagering Agreement. 

(d) Code of Ethics for International Marketing.                     CLICK HERE 

Question No. 5 - MMPC-004 Accounting for Managers

Solutions to Assignments 

MMPC - 004 - Accounting for Managers

Solutions to Question No. 5

If you turn on the news today, you will likely see a story related to fraudulent activity. As criminals and scammers adapt to a world that revolves around the internet, committing fraud has become far easier. According to the Global Fraud and Identity Report, 33% of businesses experienced more fraud losses than they did in the prior year. Thankfully, people with excellent numerical skills are seeking employment as forensic accountants. Forensic accountants use their auditing abilities combined with investigative skills to determine what causes suspicious financial activity. Businesses use this information as credible evidence in trials and/or to recover losses from a scam.

Forensic accounting is the term used to describe the type of engagement. It is the whole process of carrying out a forensic investigation, including preparing an expert’s report or witness statement, and potentially acting as an expert witness in legal proceedings.

Forensic investigation is a part of a forensic accounting engagement. Forensic investigation is the process of gathering evidence so that the expert’s report or witness statement can be prepared. It includes forensic auditing, but incorporates a much broader range of investigative techniques, such as interviewing witnesses and suspects, imaging or recovering computer files including emails, physical searches of premises etc.

Forensic auditing is the application of traditional auditing procedures and techniques in order to gather evidence as part of the forensic investigation.

• Method of Fraud Detection in Forensic Audit

The major applications of forensic accounting include fraud investigations, negligence cases and insurance claims.

An insurance claim would require determination of how much the client should claim from the insurer. The first step would be a detailed review of the insurance policy to determine ‘coverage’, ie what is insured and any clauses that might restrict the amount that can be claimed or invalidate the claim.

The second step would be to gather evidence to quantify the loss, ie the amount to be claimed. Insurance claims might include claims following misappropriation of assets, ie theft of goods or money. In such cases, the forensic accountant will review inventory or cash records and details of sales and purchases to reconcile the amounts held and determine the value of the goods or cash stolen. They will also test the reliability of the information held by counting a sample of inventory or cash currently held in comparison with the client’s records. The forensic accountant will not assume that there has been a theft; they will consider other possibilities such as an error in the data held.

Insurance claims may however, be much more complicated than this, such as in the case of business interruptions arising as a result of fire or flood. In these types of engagements the forensic accountant will review prospective financial information in comparison with reported outturn to evaluate the loss of profit arising as a result of the business interruption. The forensic accountant will not assume that there has been any loss of profit due to the business interruption; they will consider other possibilities such as a straightforward loss of market share to a competitor.

Forensic engagements often require the forensic accountant to quantify a loss. One such engagement is in professional negligence claims, ie when another accountant has breached their duty of care to a client or third party resulting in a loss for that client. In these types of engagement, the forensic accountant would also provide an opinion on whether the duty of care owed has been breached, ie whether the audit or other accountancy service was performed in accordance with current standards in practice, legislation and techniques. In relation to an audit, this would require consideration of whether the International Standards on Auditing were followed.

The need for a forensic accountant may also arise because two parties cannot agree on the amount owed by one party to another, and the accountant is engaged to provide an expert valuation, of a business for example.

This might be the case in a matrimonial dispute, where a divorcing couple whose assets include shares in a company or partnership, engage a forensic accountant to value the company so that a settlement can be reached. A similar process might apply in partnerships, when one partner wishes to leave the partnership and is being bought out by the remaining partner(s). 

• Techniques in Forensic Audit

There are several techniques for conducting a forensic review of the business. The ones provided below are generic but effective. These are the forensic techniques that apply to almost all companies. These are:

1. Reviewing Public Documents and Conducting Background Checks

The documents made available to the public are scrutinized as they are the easiest to obtain. Also, thorough background checks of a particular company are done to see the past dealings of the business. Public Documents would include any information in the public database, the corporate records, and any legally available information on the internet.

2. Conducting Detailed Interviews

Conducting an interview is an essential technique that can transform an unwilling person into a source of valuable information. It helps in fully understanding all the facts. An interview should be conducted by accurately assessing the gravity of the situation and preparing the questions according to it. Discussions should take every detail into account and look at the greater picture to figure out the magnitude of the illegal activity and the culprit responsible.

3. Gathering Information from Trustworthy Sources

Information provided by a confidential and trustworthy source can be precious to any case. When a piece of information is gained from a confidential source or a confidential informant, all the necessary precautions should be taken to hide the identity of the so-called cause. A forensic accountant should try to have as many confidential sources as possible because such sources can virtually guarantee a correct result.

4. Analyzing Evidence Gathered

Proper analysis of the obtained evidence can point to the guilty party and assist in understanding the extent of the fraud committed in the business. Furthermore, this analysis would also help understand how secure the company is against financial scams and installing various austerity measures to prevent any such future situation.

5. Conducting Surveillance

This can be done physically or electronically and is one of the conventional measures to uncover any fraud. It can be done by monitoring and tracking all the official emails and messages.               

6. Going Undercover

This is an extreme measure and should be used only as a last resort. It is best left to the professionals as they know how and where to conduct the investigations. Even a small mistake while being undercover can signal the offender that something is wrong, and the person might vanish.

7. Analyzing the Financial Statements

This is a special tool for finding out the fraud committed. All the necessary details are summarised in the financial statement, and the analysis of these statements can help a forensic accountant figure out the scam.

Nowadays, the economic conditions are getting stricter, and each country’s government is now implementing tighter laws regarding the governance of the businesses. As the companies are increasing the level of sophistication, so is fraud. This has led to a higher sensitivity to fraud which can be interpreted as massive demand for the services of forensic accountants by all the businesses.

Question No. 3 - MMPC-004 Accounting for Managers

Solutions to Assignments 

MMPC - 004 - Accounting for Managers

Solutions to Question No. 3

Variance analysis can be summarized as an analysis of the difference between planned and actual numbers. The sum of all variances gives a picture of the overall over-performance or under-performance for a particular reporting period. For each item, companies assess their favorability by comparing actual costs to standard costs in the industry.

For example, if the actual cost is lower than the standard cost for raw materials, assuming the same volume of materials, it would lead to a favorable price variance (i.e., cost savings). However, if the standard quantity was 10,000 pieces of material and 15,000 pieces were required in production, this would be an unfavorable quantity variance because more materials were used than anticipated.

When standards are compared to actual performance numbers, the difference is what we call a “variance.” Variances are computed for both the price and quantity of materials, labor, and variable overhead, and are reported to management. However, not all variances are important.

Management should only pay attention to those that are unusual or particularly significant. Often, by analyzing these variances, companies are able to use the information to identify a problem so that it can be fixed or simply to improve overall company performance.

There are several types of variance analysis that companies can use. For example, companies can use sales or cost variances to examine specific areas of interest. Similarly, companies may further divide variances into those caused by prices and those caused by usage or efficiency. Some companies may also use variance analysis to investigate product mixes, yields, or for planning variances.

The variance analysis process starts with establishing standards or preparing forecasts. Once companies do so, they must monitor their actual performance closely and identify any inefficiencies. Sometimes, the process may not be as straightforward, though. Therefore, companies will have to wait until the end of their accounting periods to obtain actual performance results.

Need and Importance of Variance Control

Variance analysis plays a significant role in management and cost accounting. These are both areas in accounting that relate to controlling, monitoring and decision-making. Companies primarily use variance analysis to monitor actual costs and control them when needed. However, there is much more to that process apart from the basics.

Variance analysis can be of significant importance to companies for the following reasons.

1. Acts As A Monitoring And Control Tool

Technically, variance analysis isn’t a monitoring tool. Instead, forecasts and budgets provide a basis for analyzing costs. However, companies cannot actually monitor their costs if they don’t compare them with actual results. It is where variance analysis is helpful. Companies can use variance analysis to calculate any differences between budgets and actual results. Through this process, companies can actively identify any efficiencies and eliminate them on time. This way, companies can control any deviations from the set plans for performance. Similarly, companies can also accumulate all the information and perform variance analysis at the end of each period. Based on this process, they can make changes that can help avoid any inefficiencies in the future.

2. Focuses On Favourable And Adverse Variances

Unlike some other tools, variance analysis focuses on both favorable and adverse variances. Although favorable variances are beneficial for companies, they still need to the reason behind it. Sometimes, these variances may come from miscalculations or improper budgeting, which companies should investigate. If that is not the case, companies still need to understand how these variances generated so they can build on the favorable performance. Adverse variances, on the other hand, are harmful to the company. By analyzing these, companies can identify problem areas within their processes. By doing so, they can eliminate any problems which can be beneficial in the future. Some companies may only focus on adverse variances, though. However, variance analysis provides a tool to identify both favorable and adverse variances.

3. Considers Significant Variances

Variance analysis is a great tool to catch and rectify significant variances. Companies can suffer variances in actual performance due to several reasons. Sometimes, these reasons may be random or seasonal. However, variance analysis allows companies to adjust for these variances and allows a better performance analysis. Similarly, variance analysis allows companies to consider material variances only. During the process, companies can set a threshold for the difference that they want to investigate. If any variance does not meet this threshold, companies can ignore that. This way, the process is much straightforward.

4. Detects Inefficiencies In Planning Or Operations

Variance analysis takes a budget and compares actual performances with it. However, it doesn’t focus on operational inefficiencies only. It also allows companies to examine their budgets for any unrealistic expectations. This way, companies can identify any problems with their forecasts and rectify them for the future. Most of the time, however, variance analysis catches operational inefficiencies. It is one of the reasons why companies use it. Operational anomalies are common in every business environment. By identifying these, companies can uncover any problematic areas within their process and correct any errors.

5. Provides A Basis For Accountability

As mentioned, companies may focus on variance analysis toward specific areas. This way, variance analysis can allow companies to hold their managers accountable for their performance. Furthermore, companies can differentiate between controllable and uncontrollable variance. Through this process, they can further identify the departments or managers responsible for variances. Some companies may also use variance analysis as a part of their performance appraisal. Similarly, companies may also reward managers for favorable variances. This way, variance analysis can provide an accountability tool for companies. Likewise, if the expectations are reasonable, companies can use variance analysis as a motivation tool.