Student Guidance Notes

Guide C04
September 2004

Guidance notes for students planning to sit

C04 Fundamentals of Business Economics of the
new 2006 CIMA Certificate in Business Accounting
syllabus

This guide outlines the issues relating to transition from C04 Economics for Business of the
2000 syllabus to C04 Fundamentals of Business Economics of the new 2006 CIMA
Certificate in Business Accounting syllabus.

The first section of this guide compares the two syllabuses, highlighting the differences
between them.

The second part of this guide focuses on the assessment strategy for the new C04
Fundamentals of Business Economics exam.

The third part of this guide lists additional (or changed) learning outcomes in the new
syllabus.

If you have any further queries relating to this guide, please contact the CIMA Contact
Centre:

Telephone+ 44 (0)20 8849 2251

Email: cima.contact@cimaglobal.com

1 February 2006
 Syllabus Comparison
New Syllabus Old Syllabus Comparison and Comments

C04 Fundamentals C04 Business

of Business Economics
Economics
A. The Goals and 4 (i) The Economy As the title of the new section suggests this
Decisions of and the growth of has a more specific orientation towards
Organisations 20% Economic Welfare understanding the role and nature of business
20% activity than seen before. It looks at the
objectives of business and not-for -profit
organisations and the conflicts in attempting
to satisfy stakeholders.
B. The Market System 4(ii) The Market This has seen a reduction from 40% to 30%
and the Competitive System and the with the cost behaviour of short and long run
Process 30% Competitive Process business costs moving to the new section A.
40% The remaining material is similar to the old
section.
C. The Financial 4(iv) The Open The new section contains a good deal of new
System 20% Economy 20% material covering sources of finance and the
workings of financial institutions and markets.
Some of this was previously seen in the
Finance paper in the old Intermediate syllabus.
Material related to balance of payments and
globalisation of business have been moved to
the new section D.
D. The Macro 4(iii) The Macro The new section is similar to the old one but it
economic Context of economic Framework more concerned with the context” of
Business 30% 30% macroeconomics for business. Material on the
finance and banking system has been moved
to section C with additions already described
above.

Aims
The major differences with the existing syllabus aims include the identification of the role of
financial institutions and markets in providing finance for a wide range of organisations.

The differing goals of organisations is seen in the context of how those goals affect decisions by
managers.

2 February 2006
 Assessment

There will be a computer-based assessment (CBA) of 2 hours duration, comprising 75

compulsory questions, each with one or more parts.

The current paper requires a CBA of 60 minutes duration with 40 questions with one or more
parts.

A variety of objective test question types and styles will be used within the assessment. As well
as the conventional multiple choice format other possible styles include:
• filling in the blank in a sentence
• listing items in rank order
• stating a definition (in not more than __ words)
• identifying a key issue, for example advantage/ disadvantage (in not more than __
words)
• calculating one specific figure, for example profit for a period.
• completing a blank or partially completed prescribed format using terms and/or
numbers, for example an overhead cost table
• identifying points on a graph or diagram, for example a break even point
• identifying a specific term describing action/valuation seen in a scenario, for example
the conditions for a recession
• matching items together or with a description, for example “are the following cash or
non-cash items”
• interpreting numerical or graphical data.

For further information about computer based assessment please visit the website at
www.cimaglobal.com/cba

3 February 2006
 Learning Outcomes
Additional (or changed) learning outcomes

The following learning outcomes were either not included in the corresponding “old” syllabus
or have experienced a change:

• distinguish the goals of profit seeking organisations, not-for-profit organisations and

governmental organisations;
• compute the point of profit maximisation for a single product firm in the short run;
• distinguish the likely behaviour of a firm’s unit costs in the short run and long run;
• illustrate the effects of long run cost behaviour on prices, the size of the organisation
and the number of competitors in the industry;
• illustrate shareholder wealth, the variables affecting shareholder wealth, and its
application in management decision making;
• identify stakeholders and their likely impact on the goals of not-for-profit organisations
and the decisions of the management of not-for-profit organisations;
• distinguish between the potential objectives of management and those of shareholders,
and the effects of this principal-agent problem on decisions concerning price, output
and growth of the firm.
• describe the main mechanisms to improve corporate governance in profit seeking
organisations.
• identify the equilibrium price in a product or factor markets likely to result from
specified changes in conditions of demand or supply;
• calculate the price elasticity of demand and the price elasticity of supply;
• identify the effects of price elasticity of demand on a firm’s revenues following a
change in prices;
• describe market concentration and the factors giving rise to differing levels of
concentration between markets;
• describe market failures, their effects on prices, efficiency of market operation and
economic welfare, and the likely responses of government to these;
• distinguish the nature of competition in different market structures;
• identify the impacts of the different forms of competition on prices and profitability.
• identify the factors leading to liquidity surpluses and deficits in the short, medium and
long run in households, firms and governments;
• explain the role of various financial assets, markets and institutions in assisting
organisations to manage their liquidity position and to provide an economic return to
holders of liquidity;
• identify the role of insurance markets in the facilitation of the economic transfer and
bearing of risk for households, firms and governments;
• identify the role of the foreign exchange market and the factors influencing it, in
setting exchange rates and in helping organisations finance international trade and
investment;
• explain the role of national and international governmental organisations in regulating
and influencing the financial system, and the likely impact of their policy instruments on
businesses.
• identify the factors leading to liquidity surpluses and deficits in the short, medium and
long run in households, firms and governments;
4 February 2006
 • explain the role of various financial assets, markets and institutions in assisting
organisations to manage their liquidity position and to provide an economic return to
holders of liquidity;
• identify the role of insurance markets in the facilitation of the economic transfer and
bearing of risk for households, firms and governments;
• identify the role of the foreign exchange market and the factors influencing it, in
setting exchange rates and in helping organisations finance international trade and
investment;
• explain the role of national and international governmental organisations in regulating
and influencing the financial system, and the likely impact of their policy instruments on
businesses.
• explain macroeconomic phenomena, including growth, inflation, unemployment,
demand management and supply-side policies;
• explain the main measures and indicators of a country’s economic performance and the
problems of using these to assess the wealth and commercial potential of a country;
• identify the stages of the trade cycle, its causes and consequences, and discuss the
business impacts of potential policy responses of government to each stage;
• explain the main principles of public finance (i.e. deficit financing, forms of taxation)
and macroeconomic policy;
• explain the concept of the balance of payments and its implications for business and for
government policy;
• identify the main elements of national policy with respect to trade, including
protectionism, trade agreements and trading blocks;
• identify the conditions and policies necessary for economic growth in traditional,
industrial and post-industrial societies, and the potential consequences of such growth;
• explain the concept and consequences of globalisation for businesses and national
economies;
• identify the major institutions promoting global trade and development, and their
respective roles.

Transition Arrangements

Exams based on the CIMA Certificate in Business Accounting 2006 Syllabus, will be available
at CIMA approved CBA centres from 2 October 2006.

Exams based on the CIMA Certificate in Business Accounting 2000 Syllabus, will be available
at CIMA approved CBA centres until the 1 March 2007.

Exams based on the 2000 and 2006 Syllabus will be available concurrently between the 2
October 2006 and the 1 March 2007.

5 February 2006
 Conclusion

This syllabus has undergone a number of changes with material being moved from one section
to another and the introduction of new topics.

There is a stronger “business feel” than before and also sees the inclusion of the section on
“the Financial System”.

The assessment has been greatly increased to 75 rather than 40 questions previously with the
time allowed rising from one hour to two hours.

6 February 2006