Category: Commerce Notes PPT

What is a Market Assessment?

The market assessment is an essential part of setting up any new business or endeavour or making a decision in an enterprise. Proper analysis of the market helps entrepreneurs know the demand for their ideas, the current market state and predict even a product’s future. The market assessment is defined as a thorough analysis of the market to check the needs and requirements of any new or existing idea, product or service before making strategies to start working on it and investing in it. This is the fundamental step in the development process of any product. Every business and entrepreneur should understand the demand for their products in the market or the importance of the products. Without proper market analysis of the new product’s idea, the product might not be relevant and incur heavy losses. 

Isolate the Problem and Focus on the Relevance

Before starting any work, a well-defined problem statement is essential for market analysis. This helps entrepreneurs in several ways. First, it makes them strategize how to function and what approach to take to deal with the problem. The next thing it does is give a rough idea to the involved personnel about the time and money required for the project or product.

Talk to the Experts

After defining the problem, comes the first round of analysis. This is where feedback or recommendations are taken from people who have been in the same field for a long time.

Communicating with experienced professionals is essential because they can enlighten the team about many real-world errors or manufacturing difficulties. The expert advice helps to streamline the concepts and reach conclusions for a better product. Also, this stage of the process helps develop ways in which a particular failure or crisis can be averted while the product is in development.

Collection of Data

Now, this is the second round of information gathering done directly from the customers. This is a great opportunity to find and develop the concept into a product that satisfies the customers’ needs. 

The data collection can be done via door to door interviews or other in-person methods. Online forms and quizzes are a good way of gathering huge amounts of data. The questions asked in these surveys must be properly tested. They must provide an insight into the product as well as the interviewee. 

Interpreting the Data

Collecting huge amounts of data is not the end of the survey. The goal is to analyze the data to get proper conclusions about different aspects of the idea or product. There are a few measures in which the data is interpreted:

Market need analysis

The results of the survey are judged to find out the needs of the customers. Products are then developed, keeping those needs in mind for better reception in the market.

Market Gap Analysis

With this interpretation, the gap between solutions to a particular problem or the preexisting products that already deal with that problem is analyzed. The data is searched for recurring problems that are pointed out by the customers.

Target Market Assessment

Products are sometimes specifically targeted to a particular section of the population. A proper survey helps the entrepreneurs to understand what changes the idea needs.

Solving the Errors

Numerous problems or faults in the product arise after testing it with the customers. Using the market assessment, developers can eliminate each of the problems sequentially. The data gathered from the survey should be the basis for design enhancement. All the different iterations of the product and concept should be a further step towards the ideal product. A successful market analysis is a situation that can be used to develop the customers’ ideal product. An assessment that does not give any insight into the product development process can be considered a failed market analysis.

Marketing of the Product

The process of solving all the problems makes the products robust and suitable for the market. This also gives the entrepreneurs a clear idea of how to start marketing the product to the customers. 

The data from the target population for the product is essential in creating a plan to make the products noticeable. With proper marketing, the popularity of the product or service can be increased and therefore, its reach among the customers can be increased. 

Successive Market Growth

All the market data and further data collection as the product is released in the market helps companies analyze the growth of the product in the market. Therefore this opens further opportunities to include variations in the initial products or develop newer products with a wider customer base.

Secondary market assessment done on previous information gathered by other sources gives the entrepreneurs an idea about how the product can be made successful.

Precis is a French word, and precis meaning in English is a summary or abstract of a speech or a written article. The importance of precis writing lies in the fact that it is like a miniature portrait of the main passage which retains the mood and tone of the original passage. The Precis meaning is to retain the essential parts of the message in its original form, without adding your subjective interpretation of the article. Precis must stick to the original author’s voice and opinions.

The importance of precis writing can also be seen as it helps in showing how good you are at critical thinking, analyzing, and highlighting the crucial points of an essay. By writing precis, you can also learn a lot of new skills in summarizing and the appropriate usage of English phrases and vocabulary.

The importance of precis writing holds for students as well. If you follow the principles of precis writing, you will be able to demonstrate your ability to express your thoughts intelligently to your professors by highlighting crucial points.

Characteristics of a Precis

• The sentences in precis must use linking devices like: therefore, so, because, and, etc.

Difference Between Summary and Precis

The main difference between precis and summary or a paraphrase is that precis is brief and concise. A summary is a different treatment of the original text, and it is longer and more detailed. To write a precis, one has to read the text and extract the main idea from it and then rewrite it in one’s own words. In general, a word count is given for precis where you need to fit in the essential parts of the written abstract. In summary, word limits may or may not be given. A summary’s function is not so much to interpret the meaning or idea of the original text but to relay information. 

What Precis is Not?

The true meaning of precis is understood if we also learn and keep in mind what does not come under precis writing or what a good academic precis is not supposed to be. They are given as follows.

• Precis should not convey your own opinions, remarks, or criticism. It is not your own interpretation of the main idea.

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Types of Precis

Precis can be of 4 types:

1. Precis of Speech.

2. Precis of Continuous Matter – Precis of continuous matter includes every type of matter except for correspondence. It includes questions and answers format like reports of evidence, parliamentary reports, etc. It must contain the date and time of the passage.

3. Precis of Correspondence – It can be of two types: Index precis and narrative precise. Index precis is also known as docket precis, abstract, or schedule. It is presented in the form of a table. 

4. Telegraphese – The language of this type of precis resembles a telegraph i.e. it is terse.

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Measures of central tendency refer to a single value that helps to correctly describe a set of data through the identification of the central position within a said data set. There are three valid central tendency measures, namely – mean, median and mode. As per the measures of central tendency definition, these are collectively classed as summary statistics.

While mean, median and mode are all valid measures for central tendency, some of them are more appropriate and accurate than others.

Following is an elaboration on the median, as one of the most significant among various measures of central tendency. 

 

Median – Definition and Calculation

Median is a middle score in a set of data arranged according to their magnitude. It is used to divide a collection of data into two parts, where one half includes values that are greater than or equal to the median; whereas the second half contains values that are lesser than or equal to the median value.

The median value, unlike other measures of central tendency formulas, is not influenced by skewed data or outliers.

Now, if the observations in a variable are ordered by value, then a median value is given by the value corresponding to the middle value in that said ordered list. That is, the median value corresponds to that of a cumulative percentage of 50%, and its position is given by – {(n+1)/2} Th value; where “n” is the number of values present in that dataset.

Following is an example of the Calculation of Median Value

 

The Data above has to be First Arranged as per their Magnitude (Lowest to Highest)

Here, the median value is 53, since it is the middle mark, and five values are lying before it and five values after it. However, this method for computing the median works if there is an odd number of data present in the set. What happens if the number of data present is even?

Take a look!

The Data is Arranged as per Magnitude (Lowest to Highest)

Here, we consider the fifth and sixth data from this sequence and their average is the median in this scenario. That is,

Median = (49+53)/2 = 51.

Properties of Median

Median is considered among the best measures of central tendency owing to its following properties – 

• Calculating a median does not depend on all the values of data present in a dataset.

• It is the value given by the middle point of the data set, such that half of this data is present above it and the other half is situated below it.

• Every array of data has a single median.

• The value for a median remains stable in a grouping procedure.

• Medians cannot be determined for interval, rational, and ordinal scales.

• The measure for the median is accurate over the mean when the distribution of data is skewed.

• Medians cannot be combined or weighed or in general, manipulated algebraically.

Merits and Demerits of Median

As far as merits and demerits of central tendency median are concerned, there are several of which to take note of. 

Following are a few merits of Median

• It is easily understandable and computable.

• It is well defined as an average.

• It is not influenced by extreme values in a data set and is also independent of the dispersion and range of data.

• Median can be utilised in the case of computing frequency distribution with open-ended classes.

• It can be plotted graphically with the help of an ogive curve.

• It can be used as a proper average for qualitative data for which items are scored, instead of being measured.

• In a few cases, a median is a better measure of average than a mean.

Following are some of the demerits of Median

• Since the computation of a median requires data to be arranged in ascending or descending order of value, it can be time-consuming when a data volume is large.

• It can be affected by fluctuations in sampling, more than that in the case of Arithmetic mean.

• It only gives a positional average and does not consider the magnitude of data.

• Since it does not consider all observations, it cannot be considered the ideal representation of the average.

• In case of considerable variation among data, the median will not be able to represent the data efficiently.

• Since it is a positional average, further algebraic treatment for the data is not possible. For instance, computing the combined median between two groups of data is not possible.

• It neglects considering the extreme values.

Here are a few of the merits and demerits of measures of central tendency for the median. 

To learn more about median merits and demerits, alongside its integration in the calculation of central tendency, you can refer to our online learning programs. We, at , have also introduced online live classes, which can assist you in learning about the advantages and disadvantages of the measures of central tendency and other such topics, from experts in the field. 

So, without further ado, install the app and start learning today!

Learning the Median

Median can be understood as when in a sorted list of numbers, the median is the value that is present in the middle. To get the median value in a set of data, the data has to be sorted in the value order ranging from highest to lowest or lowest to highest. The median can also be used to estimate an average or mean, but it should not be taken as the actual mean.

• If the amount of numbers is odd, then the median value is the number that is in the middle, with the same number of values above and below it.

• If the list comprises an even number of values, then we identify the middle pair and add them together, then it can be divided by the value two to return the median value.

When there are outliers present in the series that could somewhere affect the average of the numbers, sometimes the median is used instead of using the mean. Outliers or exceptions have less impact on the sequence median rather than on the mean.

The Mixed Economy is a system that combines capitalism and socialism. The Mixed Economy incorporates the benefits of capitalism and socialism while avoiding their drawbacks.

Under a Mixed Economy, the private and public sectors coexist. Economic activity is directed by the government toward particular socially significant sectors of the Economy, and the balance is determined by the operation of the pricing mechanism.

The public and private sectors collaborate to achieve social objectives within the framework of a common Economic plan.

The private sector is a significant component of the Mixed Economy and is regarded as a critical engine of Economic growth. India is widely recognised as the world’s best example of a Mixed Economy.

What are the features of a Mixed Economy?

In the Mixed Mixed Economy system, all three sectors exist together, that is the private sector, public sector and joint sector. The government and private companies together hold the responsibilities of the respective division. 51% of the total ownership belongs to the state itself. 

According to the Mixedmixed Economy definition, a cooperative sector exists in a Mixed Mixed Economy. The significance of this sector is vital. In Mixed Mixed Economy countries, the government provides necessary items and financial aids to the areas involved in cooperative societies like warehousing, dairy industry and more.

To be precise, in a Mixed Mixed Economy, we denote that the individuals have complete liberty to manufacture goods and items and choose property and occupation according to their choice. The regulating body maintains control to avoid all sorts of discrimination and monopolistic issues.

In a Mixedmixed Economy, the central planning authority exists. All the sectors of the firm follow this rule and plan to pursue their goals. The plan is solely observed with the motive to attain national Economic growth.

The significant look out of a Mixedmixed Economy is the social welfare of society. It focuses on eliminating the unemployment issues from the country. The Mixedmixed Economy definition further says it enhances social security and public education facilities.

Apart from the above features a Mixedmixed Economy might also inherit most of the downsides associated with the other types of economies. It all depends on which aspects of the Mixedmixed Economy are highlighted.

For example, if the Market has too much freedom, it may leave society’s less competitive members without government assistance. Government industries are likewise hampered by central planning.

The defence sector could become a monopoly or oligarchy system financed by the government. This could raise the country’s debt, stifling long-term Economic progress.

Successful companies can persuade the government for further tax cuts and subsidies. The government may overprotect the free Market to the point of underregulation.

Businesses that were too big to fail, for example, could be bailed out by the government if they went bankrupt.

Mixed Economy – Merits

The following are the significant advantages of a Mixed Economy:

1. In a Mixed Economy, there is competition between public and private sectors, which ultimately results in increased efficiency and productivity.

2. Profits from public sector firms accrue to the government, and as a result, income inequality decreases under a Mixed Economy.

3. Economic activities are systematically planned in a Mixed Economy. The government plans the entire Economic system in detail.

4. Since Economic activities are planned,  Economic stability prevails in a Mixed Economy.

5. In a Mixed Economy, goods are produced according to consumer preferences, which results in consumer sovereignty.

6. In a Mixed Economy, enterprise flexibility and profit incentive are critical. Due to these factors, initiative, innovation, and productivity always tend to grow.

7. A Mixed Economic system also prioritises social welfare. 

8. A Mixed Economy protects individual rights. 

9. The Mixedmixed Economy combines both the features of a socialist and capitalist Economy. Therefore, advantages from both sectors are present in a Mixedmixed Economy. For example, absolute individual liberty is there in a diverse Economy. Again, Economic freedom can be gained too in a Mixedmixed Economy.

10. An arguably Mixedmixed Economy is the method to establish socialism in a country following peaceful and democratic ways. For example, the Economy can move towards socialism through the progressive extension of the public sector.

11. In a Mixedmixed Economy, the private sector’s efficient management is combined with the public sector’s financial soundness. Resultantly, the country achieves a rapid rate of Economic growth.

12. The evils of the capitalist system, such as inflation, unemployment, etc., can be removed in the Mixedmixed Economic order. In the modern world, the objective of the government is to establish a welfare state. In the welfare state, the government aims at achieving maximum welfare for the maximum number of people. Arguably, maximum prosperity can be gained through the extension of the public sector. It is possible only in a Mixedmixed Economic system. This one is among the most significant advantages of a Mixed Mixed Economy.

Did you Know? 

Here are some of the fantastic facts about the features of Mixed Economy that you will be surprised to read. 

In a Mixedmixed Economy, though the private and public sectors exist side by side, the government puts certain restrictions on the working of the private sector. It is among the unique characteristics of a Mixedmixed Economy.

There are some acts passed by the government to regulate the dos and don’ts of the private sector. Consumer sovereignty stays intact in a Mixedmixed Economy. 

Solved Example on What is Mixed Economy

1. Which among the following Systems is followed in India?

1. Command 

2. Market 

3. Mixed 

4. None of the three 

Ans. The right answer is the third option Mixed. In India, a Mixedmixed Economy prevails. All the sectors, i.e., private, public and joint, exist side by side. Following the guidelines of Mixedmixed Economy definition, Central Economic planning authority exists in India, so does the price mechanism.

To simply understand what National Income is, it can be represented as – National Income defines a country’s wealth. This income depicts the value of goods and services which are produced by an economy. This gives effect to the net result of all the economic activities performed in the country.

Imagine how you would define a country’s wealth without any economic term? In that case, there would be no accountability and responsibility linked with the production in the country. The resources would go uncalculated and there would be a vague economic atmosphere. Thus, let us indulge in this study which talks about National Income. 

Understanding National Income

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National income is the sum total of the value of all the goods and services manufactured by the residents of the country, in a year., within its domestic boundaries or outside. It is the net amount of income of the citizens by production in a year. 

To be more precise, national income is the accumulated money value of all final goods and services produced in a country during one financial year. Computation of National Income is very vital as it indicates the overall health of our economy for that particular year.

The aggregate economic performance of a nation is calculated with the help of National income data. The basic purpose of national income is to throw light on aggregate output and income and provide a basis for the government to formulate its policy, programs, to maximize the national welfare of the people. Central Statistical Organization calculates the national income in India.

Definition of National Income

The definition of National Income if of two types-

Traditional Definition of National Income-

According to Marshall: “The labor and capital of a country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend.”

Modern Definition 

This definition has two subparts

Gross Domestic Product

Gross Domestic Product, abbreviated as GDP, is the aggregate value of goods and services produced in a country. GDP is calculated over regular time intervals, such as a quarter or a year. GDP as an economic indicator is used worldwide to measure the growth of countries economy.

 

Goods are valued at their market prices, so:

• All goods measured in the same units (e.g., dollars in the U.S.)

• Things without exact market value are excluded.

Constituents of GDP

• Wages and salaries

• Rent

• Interest

• Undistributed profits

• Mixed-income

• Direct taxes

• Dividend

• Depreciation

The Formula for Calculation of GDP

GDP = consumption + investment + government spending + exports – imports.

Gross National Product

Gross National Product (GNP) is an estimated value of all goods and services produced by a country’s residents and businesses. GNP does not include the services used to produce manufactured goods because its value is included in the price of the finished product. It also includes net income arising in a country from abroad.

Components of GNP

• Consumer goods and services

• Gross private domestic income

• Goods produced or services rendered

• Income arising from abroad.

Formula to Calculate GNP

GNP = GDP + NR (Net income from assets abroad or Net Income Receipts) – NP (Net payment outflow to foreign assets).

Importance of  National Income

Setting Economic Policy

National Income indicates the status of the economy and can give a clear picture of the country’s economic growth. National Income statistics can help economists in formulating economic policies for economic development.

Inflation and Deflationary Gaps

For timely anti-inflationary and deflationary policies, we need aggregate data of national income. If expenditure increases from the total output, it shows inflammatory gaps and vice versa.

Budget Preparation

The budget of the country is highly dependent on the net national income and its concepts. The Government formulates the yearly budget with the help of national income statistics in order to avoid any cynical policies.

Standard of Living

National income data assists the government in comparing the standard of living amongst countries and people living in the same country at different times.

Defense and Development

National income estimates help us to bifurcate the national product between defense and development purposes of the country. From such figures, we can easily know, how much can be set aside for the defense budget.

Sets of methods for measuring National Income

There are four methods of measuring national income. The type of method to be used depends on the availability of data in a country and the purpose which is attempted for.

Income Method

In this method, we add net income payments received by all citizens of a country in a particular year. Net incomes that result in all the factors of production like net rents, wages, interest, and profits are all added together, but income received in the form of transfer payments are omitted.

Product Method

According to this method, the aggregate value of final goods and services produced in a country during a financial year is computed at market prices. To find out GNP, the data of all the productive activities-agricultural products, Minerals, Industrial products, the contributions to production made by transport, insurance, communication, lawyers, doctors, teachers. Etc are accumulated and assessed.

Expenditure Method

The total expenditure by the society in a financial year is summed up together and includes personal consumption expenditure, net domestic investment, government expenditure on goods and services, and net foreign investment. This concept is backed by the assumption that national income is equal to national expenditure.

Value Added Method

The distinction between the value of material outputs and material inputs at every stage of production is Value added.

GDP Vs GNP

The Gross Domestic Product and the Gross National Product are the two most widely used measures in a country’s calculation of aggregate economic unit.

GDP is the measure of the value of goods and services that are being produced within a country’s borders, by the citizens and the non-citizens. While GNP determines the value of goods and services that are being produced by the country’s citizens in the domestic and abroad spectrum. GDP is popularly used by the global economies at large. While, the United States eliminated the use of GNP in the year 1991, thereby adopting GDP as the measure to compare their economy with other economies.

India’s Richness: National Income of India 2020-2021

In the year 2020-2021, India had a total NI of 135.13 lakh crore, well this is a provisional estimate only. However, in the round of the fourth quarter (in the month of January-March), the country had an economic growth of 1.6%, while the GDP was calculated at Rs. 38.96 lakh crore in the fourth quarter in the year 2020-21, this is count is slightly different to Rs 38.33 lakh crore in the fourth quarter of 2019-20.

In a special type of exchange, the transfer of assets and liabilities occurs with another entity this is called a non-monetary exchange. Real asset swap happens between two organizations that exchange assets of one fixed asset to another.  

The accounting for this non-monetary exchange takes place based on the fair values of the assets that are transferred.  The cost of the recorded non-monetary asset is to be determined which is thus recorded in the following preference: 

• At the fair value of the asset that is transferred in exchange for it. 

• At the fair value of the asset that is received, if the fair value of the asset is more evident than its fair value.

• At the recorded amount of the asset that is surrendered, if no fair values are to be determined.

Non-monetary Transactions Commercial Substance 

The commercial substance of a non-monetary exchange is dependent on the fluctuations of the future cash flows that are expected to be a significant result of the exchange. 

A business transaction that has a commercial substance is expected to have varied cash flows of a business which will change as a result of this transaction. A change in the cash flows is considered to be a significant change in any of the following cases:

• Risk – As like experiencing an increase in the risk which will inbound cash flows, that will occur else than a transaction. 

• Timing – The change in timing of cash inflows that are received as the result of a transaction.

• Amount – Change in the amount that is paid as the result of such a transaction. 

Non-Monetary Exchanges ASC section 845 

ASC 845-10 notes as following:

Generally, the business transactions involve the exchanges of cash or other monetary assets or other liabilities for goods or services. The amount of monetary assets or the liabilities which are exchanged provides an objective basis for measuring the cost of the non-monetary assets or the services that are received by an entity as well as for measuring the gain or loss on non-monetary assets that are transferred from an entity. These transactions involve either of the following:

• Exchange with another entity, also known as a reciprocal transfer which involves principally the non-monetary assets or liabilities.

• A transfer of the non-monetary assets for which no assets are received or are relinquished in exchange is a non-reciprocal transfer.

Both the exchanges and the non-reciprocal transfers which involve little or no monetary assets or liabilities are referred to as non-monetary transactions.

Non-Monetary Transactions 

Nonmonetary transactions are either reciprocal or non-reciprocal. Reciprocal, that is the two-way non-monetary transactions involve more than two or two parties who exchange non monetary goods, services, or assets. Non-reciprocal, which is the one-way non-monetary transactions involving the transfer of goods, services, or assets from one party to another, such as a business that donates the employees.

PIK is the use of a good or service where it is paid instead of cash. This also refers to a financial instrument that pays interest or dividends to the investors of bonds, notes, or the preferred stock. Payment-in-kind securities are attractive to those companies who are preferring not to make cash outlays.

In either case, in-kind transactions are the non-monetary type. For example, farmland that is given a free room and board instead of receiving the hourly wage in exchange for helping out on the farm’s work is an example of payment-in-kind.

 The Internal Revenue Service or the IRS refers to payment-in-kind as bartering of income. The IRS mandates the people who receive payment-in-kind income through bartering to report it on their income tax return. For example, if a plumber accepts a side of the beef loaf in exchange for services, he should report accordingly the fair market value of the beef loaf or his usual fee as income on his income tax return.

Non-Monetary Transactions Journal Entry

Company exchanged a small truck with a book value of Rs.45,000 (cost of Rs.70,000 and accumulated depreciation of Rs.25,000) for a delivery van. A dealer with experience in this market segment told the company that the fair value of the truck is Rs.50,000. The company will also pay Rs.8,000 cash as part of the exchange. This transaction has commercial substance.

The Cost of the Delivery Van is:

The Gain on the Exchange is:

The Journal Entry For Recording the Exchange Will Be: