CIMA certificate. BA1, Fundamentals of business economics. Course book : for new syllabus assessments from January 2017

Book Cover......Page 1 CIMA Success Site......Page 2 Title......Page 3 Copyright......Page 4 Contents......Page 5 The Objective Test exam......Page 6 Verb Hierarchy......Page 7 A. Macroeconomic and institutional context of business (25%)......Page 8 B. Microeconomic and Organisational Context of Business (30%)......Page 9 D. The financial context of business (25%)......Page 10 1 The Best Approach to the CBA......Page 12 2 The different Objective Test Question Types......Page 13 Key to icons......Page 14 Chapter 1 Organisations and stakeholders......Page 15 Chapter overview......Page 16 1.1 Public and private sector organisations......Page 17 1.2.1 Public sector and value for money......Page 18 1.2.3 Financial constraints in not-for-profit organisations......Page 19 2 Stakeholders......Page 20 2.2 Stakeholders and not–for–profit organisations......Page 22 3.3 Principal/agent problem in the public sector......Page 23 3.4 Resolving the principal/agent problem......Page 24 Chapter summary......Page 26 Keywords......Page 27 Activity 3: Idea generation......Page 28 Activity 5: Exam standard......Page 29 Test your learning......Page 30 Chapter 2 Measuring returns to shareholders......Page 31 Chapter overview......Page 32 1.1.1 Measuring capital employed......Page 33 1.3 Analysing short-term returns to shareholders......Page 35 1.3.1 Measuring the return expected by shareholders......Page 36 2 Long-run measures of return......Page 37 2.1.1 Discounting free cash flows to equity......Page 38 2.1.3 Discounting free cash flows to perpetuity......Page 39 2.1.4 Increasing shareholder wealth......Page 40 Chapter summary......Page 42 Keywords......Page 43 Activity 2: Exam standard......Page 44 Activity 5: Idea generation......Page 45 Test your learning......Page 46 Chapter 3 Demand, supply and price......Page 47 Chapter overview......Page 48 2 Demand......Page 49 2.2 Conditions of demand......Page 50 3 Supply......Page 51 3.2 Conditions of supply......Page 53 4 Equilibrium price......Page 54 4.1 Movement to equilibrium......Page 55 4.1.2 Removal of a surplus......Page 56 4.2 Functions of the price mechanism......Page 57 Chapter summary......Page 59 Keywords......Page 60 Activity 3: Preparation question......Page 61 Activity 4: Exam standard......Page 63 Test your learning......Page 65 Chapter 4 Price elasticity......Page 67 Chapter overview......Page 68 1.1.1 Simple point method......Page 69 1.1.2 Drawback of simple point method......Page 70 1.1.3 Average (midpoint) method......Page 71 2.1 Value greater than 1: elastic demand......Page 72 2.2 Value less than 1: inelastic demand......Page 74 2.3 Determinants of price elasticity of demand.......Page 77 2.4 Special values of price elasticity of demand......Page 78 3.2 Influences on price elasticity of supply......Page 79 Chapter summary......Page 80 Keywords......Page 81 Activity 4: Exam standard......Page 82 Activity 6: Exam standard......Page 83 Test your learning......Page 84 Chapter 5 Cost behaviour......Page 85 Chapter overview......Page 86 1.2 Long run......Page 87 2.1.1 Trading economies of scale (internal)......Page 88 2.1.3 Technical economies of scale (internal)......Page 89 2.1.4 Technical economies of scale (continued)......Page 90 2.2 External economies of scale......Page 91 3 Diseconomies of scale......Page 92 4.2 MES in different sectors......Page 93 4.4 Methods of growth......Page 94 4.4.1 Types of integration......Page 95 5.1.1 Outsourcing......Page 96 5.2.2 Flexible staffing......Page 97 Chapter summary......Page 98 Keywords......Page 99 Activity 2: Exam standard......Page 100 Activity 4: Idea generation......Page 101 Test your learning......Page 102 Chapter 6 Market failure......Page 103 Chapter overview......Page 104 2.2 Merit and demerit goods......Page 105 2.3 Dealing with externalities......Page 106 3.1.1 Failure to provide public goods......Page 107 4.1 Indirect tax......Page 108 4.1.1 Price elasticity and the impact of indirect taxes......Page 109 4.2 Subsidy......Page 110 5.1 Direct provision......Page 111 5.3 Minimum pricing policies......Page 112 5.3.2 Effects of a minimum wage......Page 113 5.4.1 Effects of maximum price (price ceiling)......Page 114 Chapter summary......Page 115 Keywords......Page 116 Activity 3: Idea generation......Page 117 Activity 6: Preparation question......Page 118 Test your learning......Page 119 Chapter 7 National income......Page 121 Chapter overview......Page 122 1.2 Different measures of economic activity......Page 123 2 Factors affecting national income......Page 124 2.1 Influences on national income......Page 125 3.1 Consumer spending......Page 126 3.2.1 Injections and withdrawals......Page 127 4.2.1 Investment (I)......Page 129 4.2.4 Multiplier effect......Page 130 4.2.5 The multiplier......Page 131 4.2.6 Implications of the multiplier effect......Page 133 Chapter summary......Page 134 Keywords......Page 135 Activity 1: Preparation question......Page 136 Activity 3: Exam standard......Page 137 Activity 5: Exam standard......Page 138 Test your learning......Page 139 Chapter 8 The trade cycle......Page 141 Chapter overview......Page 142 1.3 Low inflation......Page 143 2.3 Supply-side policy......Page 145 3.3 Depression......Page 146 4.1 Impact on business......Page 147 4.2 Government action......Page 148 5.1 Deflationary gap and cyclical unemployment......Page 149 5.3 Government action......Page 150 6.1 Inflationary gap......Page 151 6.3 Government action......Page 152 7 Balance of trade and the trade cycle......Page 153 Chapter summary......Page 154 Keywords......Page 155 Activity 3: Preparation question......Page 156 Activity 5: Exam standard......Page 157 Test your learning......Page 158 Chapter 9 Index numbers......Page 159 Chapter overview......Page 160 1.1 Fixed base and chain base methods......Page 161 2 Using price indices to calculate inflation......Page 162 2.1 Base weighted price indices......Page 163 2.1.1 Formula......Page 164 2.2 Current weighted indices......Page 165 2.2.1 Formula......Page 166 3.1 Adjusting time series data for inflation......Page 167 4 Calculating quantity indices......Page 168 4.1 Formula......Page 169 Chapter summary......Page 171 Keywords......Page 172 Activity 3: Exam standard......Page 173 Activity 4: Preparation question......Page 174 Test your learning......Page 175 Chapter 10 Government economic policy......Page 177 Chapter overview......Page 178 1.1 Types of government spending......Page 179 2.1.1 Direct taxation......Page 180 2.1.3 Balance of different types of tax......Page 181 3.3 Structural deficits......Page 182 4 Fiscal policy......Page 183 5.1 The money supply......Page 184 6.1 Advantages of fiscal policy vs monetary policy......Page 185 7 Supply-side policies......Page 186 7.2.1 Advantages of supply-side policies......Page 187 7.2.2 Disadvantages of supply-side policies......Page 188 Chapter summary......Page 189 Keywords......Page 190 Activity 3: Preparation question......Page 191 Test your learning......Page 192 Chapter 11 International economics......Page 193 Chapter overview......Page 194 1.2 Capital account......Page 195 1.4.1 Imbalance......Page 196 2.3 Impact of likely government policy responses......Page 198 3.1 Demand......Page 199 3.2 Supply......Page 200 3.4 Exchange rates and interest rates......Page 201 3.5 Exchange rates and inflation rates......Page 202 4.2 Fixed exchange rates......Page 203 Chapter summary......Page 205 Keywords......Page 206 Activity 3: Exam standard......Page 207 Test your learning......Page 208 Chapter 12 International trade......Page 209 Chapter overview......Page 210 1.3 Protectionism......Page 211 2.4 Economic union......Page 212 4 International Monetary Fund (IMF)......Page 213 6 Globalisation......Page 214 6.2 PESTEL......Page 215 Chapter summary......Page 217 Activity 2: Exam standard......Page 218 Test your learning......Page 219 Chapter 13 Functions of the financial system......Page 221 Chapter overview......Page 222 1.3 The matching concept......Page 223 2.1 Functions of financial intermediaries......Page 224 2.2 Financial intermediaries and short-term finance......Page 225 3.2 Financial markets and short-term finance......Page 226 3.3 Financial markets and long-term finance......Page 228 3.3.1 Other types of bonds......Page 229 Chapter summary......Page 230 Keywords......Page 231 Activity 4: Exam standard......Page 232 Test your learning......Page 233 Chapter 14 Commercial and Central banks......Page 235 Chapter overview......Page 236 1.1 Conflicting aims......Page 237 1.2 Credit creation......Page 238 1.3 The credit multiplier......Page 239 2 Role of central banks......Page 240 2.3 Maintaining financial stability......Page 241 3.1 Risk and return on financial assets......Page 242 3.3 The impact of the central bank on financial market yields......Page 243 Chapter summary......Page 244 Activity 2: Exam standard......Page 245 Test your learning......Page 246 Chapter 15 Financial mathematical techniques......Page 247 Chapter overview......Page 248 1.1 Simple interest......Page 249 1.2 Compound interest......Page 250 1.2.1 Formula......Page 251 2 Compounding – further issues......Page 252 2.2 Inflation......Page 253 2.3 Withdrawals......Page 254 2.4 Equivalent annual rates......Page 255 3.1 Net present value......Page 256 3.2 Discount factor formula......Page 257 3.3 Net present value and annuities......Page 258 3.4 Net present value and perpetuities......Page 259 3.5.1 Calculation of IRR......Page 260 3.5.2 Problem with IRR......Page 262 4 Loans and mortgages......Page 263 Chapter summary......Page 265 Activity 3: Exam standard......Page 266 Activity 8: Exam standard......Page 267 Activity 11: Exam standard......Page 268 Test your learning......Page 269 Chapter 16 Impact of interest & exchange rate changes on business performance......Page 271 Chapter overview......Page 272 1.1 Direct impact on business performance......Page 273 1.2 Indirect impact on business performance......Page 274 1.3 Impact of interest rate changes on exchange rates......Page 275 2.1 Impact on measures of economic performance (sales, costs, profits)......Page 276 2.2 Impact on assets and liabilities denominated in a foreign currency......Page 277 3.2.1 Differences between futures and forwards......Page 278 3.3.1 Drawback of options......Page 279 Chapter summary......Page 280 Activity 4: Exam standard......Page 281 Test your learning......Page 282 Chapter 17 Data and information......Page 283 Chapter overview......Page 284 1.1 Characteristics of good information 'ACCURATE'......Page 285 2.1 Simple bar chart......Page 286 2.3 Percentage component bar chart......Page 287 3.1 Frequency distributions......Page 288 3.2 Histograms......Page 289 3.3 Interpreting a histogram with unequal class intervals......Page 290 4.1 Cumulative frequency distributions......Page 292 4.2 Interpreting an ogive......Page 293 5 Scatter diagrams......Page 294 5.2 The trend line......Page 295 5.4 Using trend lines to make predictions......Page 296 6 Big data......Page 297 6.2 Criticisms of big data......Page 298 Chapter summary......Page 299 Keywords......Page 300 Activity 3: Exam standard......Page 301 Test your learning......Page 302 Chapter 18 Forecasting......Page 303 Chapter overview......Page 304 1.2 Methods of finding the trend......Page 305 1.2.1 Use of moving averages to find the trend......Page 306 1.2.2 Use of additive model to find the seasonal variation......Page 308 1.2.3 Multiplicative model and seasonal variation......Page 311 1.2.5 Seasonally-adjusted data......Page 313 1.3 Using trend & seasonal variation for forecasting......Page 314 2 Forecasting – using regression analysis......Page 317 3 Correlation......Page 319 3.2 The correlation coefficient......Page 320 3.4 Spearman's rank correlation coefficient......Page 323 4.2 The reliability of regression analysis forecasts......Page 325 Chapter summary......Page 326 Keywords......Page 327 Activity 4: Exam standard......Page 328 Activity 6: Exam standard......Page 329 Activity 7: Exam standard......Page 330 Test your learning......Page 331 Chapter 2......Page 333 Chapter 5......Page 334 Chapter 6......Page 335 Chapter 8......Page 336 Chapter 10......Page 337 Chapter 11......Page 338 Chapter 14......Page 339 Chapter 16......Page 340 Chapter 18......Page 341 Present value table......Page 343 Cumulative present value table......Page 345 Bibliography......Page 347 Index......Page 349 Notes......Page 353 Review Form......Page 361