MH SET Paper 2 Mock Test - 7 (Commerce) - MAHA TET MCQ

Therefore, the only statement I is correct.

The correct answer is Amazon.com

Key Points

• A market challenger is a firm striving to increase its market share and replace the market leader.
• Usually, they are the second-largest dominant company in the market.
• They have sufficient resources and capabilities to aggressively challenge market leaders and undermine their dominance.
• Amazon.com is an example of a market challenger trying to steal Ebay’s market share in the online retail business.
• And, in general, you can find examples of market challengers at the second-largest companies in the industry.
• They may also be a third or fourth company if the difference in dominance (market share) is small relative to the market leader.

Statement I: Intellectual Property (IP) is a category of property that includes intangible creations of the human intellect.

Explanation:

1. Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names, and images used in commerce.
2. Intellectual property is an umbrella term for a set of intangible assets or assets that are not physical in nature.
3. Intellectual property (IP) is a category of property that includes intangible creations of the human intellect.
4. There are many types of intellectual property, and some countries recognize more than others.
5. The most well-known types are copyrights, patents, trademarks, and trade secrets. Thus, the statement I is correct.

Statement II: IPR does not include trade secrets and moral rights.

Explanation:

Intellectual property can consist of many types of intangibles, and some of the most common are listed below:

1. Trademarks: Trademarks are the names, phrases, and symbols that differentiate your brand from others in your industry. They must be distinctive and used in commerce to sell or promote a product or service.
2. Copyrights: A copyright grants legal rights to anything you create that expresses or embodies an idea. It gives you exclusive rights to copy, distribute, reproduce, display, and license the work.
3. Patents: Patents are granted for new, useful inventions, and they will give you the right to prevent others from making, using, or selling your invention.
4. Trade Secrets: A trade secret is a piece of confidential business information whose secrecy gives you an advantage over your competitors.
5. Moral Rights: Moral rights are personal legal rights belonging to the creator of copyright works and not be transferred, assigned, or sold. Moral in other words-“Moral rights are the rights individual creators have in relation to copyright works or films they have created.
6. Franchise: A franchise is a license that a company, individual, or party–called the franchisee–purchases allowing them to use a company's–the franchisor–name, trademark, proprietary knowledge, and processes.

Thus, statement II is incorrect.

Option 3 is the correct answer.

Key Points The correct match is given below:

Important Points 

Assessment year:

• The Assessment Year is defined under Section 2(9) of the Income Tax Act as the period of 12 months starting from April 1 of every year and ending on March 31 of the following year.
• It is the year following the financial year in which the income is earned and assessed for taxation purposes.

Capital asset:

• Capital Asset is defined under Section 2(14) of the Income Tax Act as any kind of property held by a taxpayer, whether or not connected with their business or profession, but excludes certain assets such as stock-in-trade, personal effects, and agricultural land in rural areas.

Gross total income: 

• Gross Total Income is defined under Section 80B(5) of the Income Tax Act as the total income of a taxpayer before making deductions under Chapter VI-A of the Act.

Perquisite-

• Perquisite is defined under Section 17(2) of the Income Tax Act as any benefit or amenity granted to an employee by their employer, which is chargeable to tax as a part of the employee's income.
• Examples of perquisites include rent-free accommodation, use of a company car, and club memberships paid for by the employer.

Hence, A-II, B-IV, C-III, D-I is the correct answer. 

Interest paid on debenture is a liability and it is fixed in nature. In the case of dividends, it is not fixed in nature to pay. Dividends are the appropriation of profits earn by the company on the other hand debenture is a long term liability of a company and its interest is expense not appropriation of profits.

Investment in Equity shares is the most risky. The higher the volatility of a stock, or any asset, the higher its risk. Unit trusts that invest only in equities are higher risk than those that invest in other assets. Their prices move further and the chance of loss is higher.

Outcome-based pricing

• Outcome-based pricing is a method when the price of a product is based according to its perceived value rather than its costs.
• The business later aligns the price of the product as per the value.
• This pricing method is suitable where the outcome of the business is linked with the goals of the business and the business outcome thus benefits the end customers.
• It is important for a business to maintain a balance so that the buyer can define the outcome of the product appropriately which is acceptable and measurable to the service provider.
• It encourages increased productivity and efficiency of the business.
• It is a win-win approach for both the service provider and the buyer.

Therefore, when pricing is done for the IT sector, increasing the profitability of the client will represent outcome-based pricing as the main aim of the business is to increase the profit of the client which is linked with the goals of the business.

The correct answer is Form 16/16A.

Key Points

• According to Section 203 of the Income-Tax Act of 1961, Form 16 is a document or certificate that Indian salaried professionals' employers must provide.
• It is also known as a "salary certificate," because it contains all the information regarding the pay that employee received from their employer or organisation for a specific financial year, as well as the income tax that was deducted from that pay by the payer.

Important Points

• Form 16/16A: The certificate of tax deducted at source, or Form 16/ 16A, is given out when tax is deducted by the employer on behalf of the employees.
• These certificates offer TDS/TCS information for numerous transactions involving the deductor and the deductee. These certificates must be sent to taxpayers by law.

Difference between Form 16 and Form 16A:

Hence, it can be concluded that Form 16/16A is a certificate of tax deduction at source and is issued on behalf of the employees by their employer for deducting tax. These certificates provide TDS/TCS returns of various transactions between the deductor and the deductee. For taxpayers, it is mandatory to issue these certificates.

The correct answer is Option 3

Key Points Business Economics:

• Business economics is a branch of applied economics that looks into the financial, organisational, market-related, and environmental concerns that businesses confront.
• The concept of scarcity, product factors, distribution, and consumption are all covered in business economics.
• Managerial economics is a branch of business economics that is very important.

Important Points

Features of Business Economics

• Business Economics is related with the micro-economics. It is micro in nature. It is mainly related with the problems of individual unit. Hence, Statement (i) is correct
• Business Economics helps to formulate the economic policy, Taxation policy, credit policy. Import-Export policy etc. it is considered as Normative in nature. Normative Economics helps to solve the particular economic problems and formulation of economic policies. e. g. concept of elasticity of demand is used to determine the price of a product, as well as to impose the tax on a commodity. Hence, Statement (ii) is incorrect.
• Business Economics is both conceptual and metrical. It outlines, the conceptual framework to understand, analyse and solve the decision making problems of any business. It also makes the use of various quantitative techniques from various subjects to solve the problems of any business. Hence, Statement (iii) is correct.
• Business Economics primarily uses the theory of markets and private enterprises. It uses the theory of the firm and resource allocation in a private enterprise economy. Hence, Statement (iv) is correct.

The correct answer is interest rates are low and expected to remain low.

Key Points Call-Option value:

• The call-option value of a callable bond represents the additional value of the option to call (redeem) the bond before maturity.
• The value of the call option is determined by the difference between the market interest rate and the coupon rate of the bond, as well as the remaining time to maturity and the call price.
• The call-option value of a callable bond is likely to be high when interest rates are falling.
• The call-option value of a callable bond is likely to be high when interest rates are low. This is because when interest rates decrease, the issuer of the bond has the incentive to call (redeem) the bond and refinance it at a lower interest rate.
• When interest rates are low, the probability of the bond being called by the issuer increases, and this expectation of early redemption enhances the value of the call option embedded in the bond.
• This is because when interest rates fall, the value of the callable bond increases due to its higher coupon rate relative to prevailing market rates.
• As a result, the issuer is more likely to exercise the call option and redeem the bond before maturity to refinance at a lower cost of borrowing.

Hence, the correct answer is interest rates are low and expected to remain low.

RBI is the controller of money supply.

• RBI acts as a banker to the Government of India.
• RBI full form Reserve Bank of India is the Central bank of India.
• It is also known as the Banker’s Bank.
• It controls the monetary policy with respect to the national currency, the Indian Rupee.
• RBI is headquartered in Mumbai.
• Reserve Bank of India is entrusted with monetary stability, the management of currency, and the supervision of the financial as well as the payments system.
• Reserve Bank of India is the regulator of the Banking Industries in India.
• It supervises, guides, and regulates all the banks that are operating in our country.

An indemnity is a comprehensive form of insurance compensation for damages or loss. 

Contract of Indemnity:

• An indemnity contract is a legal arrangement between two parties where one party agrees to pay the other for a loss or harm that meets a certain requirement unless other circumstances are specified.
• It is a form of contingent contract characterized by all the essential elements of a valid contract which includes lawful consideration and object.
• The two parties involved are the indemnifier and the indemnified.
• The indemnifier is the promisor who agrees to make up for the damage that could be caused to another group.
• The indemnified is the person who is assured of the compensation for the damage incurred.
• The contract of indemnity agreement involves consideration.
• The mode of compensation for the contract can be expressed or implied.

Therefore, the contract of indemnity must be lawful consideration and object.

The Competition Act, 2002 was enacted by the Parliament of India and governs Indian competition law.

It replaced the archaic The Monopolies and Restrictive Trade Practices Act, 1969. Under this legislation, the Competition Commission of India was established to prevent the activities that have an adverse effect on competition in India. This act extends to whole of India.

The correct answer is "Marketing information management (MIM)".

Key Points

• A marketing information system is a tool used by managers and marketing teams to collect, store, and analyze data properly. In other words, if marketing information management is the “what," then a marketing information system is the “how,” and an efficient system can show you "why" marketing metrics are important. 
• Marketing information management is the process of gathering, organizing, and analyzing important market research data. This data often consists of :
  • ​Sales reports
  • Results from past campaigns
  • Expert insight from in-house teams
  • Additional analytics from marketing software tools
• ​Without a proper organization system, information can get lost which skews results, throws off forecasts, and leads to costly marketing spend. That’s why it’s essential to keep these invaluable data sets all in one searchable place. Having a system all employees can follow prevents vital details from slipping between the cracks. ​

Important Points 

• All marketing teams need marketing information management. Not only does it help prove ROI it also makes it easier to:
  • ​Accurately forecast growth and sales potential.
  • Justify budget allocations
  • Discover audience preferences.
  • Find new focus areas.
  • Predict seasonal or industry buying cycles.
  • Compare branding and products with competitors
  • Keep a finger on the pulse of global, national, and local industry trends.
  • Pivot your existing strategy to a new, more efficient one.
• ​The biggest challenges of marketing information management include:
  • Data storage and security
  • Lack of systems for labeling, capturing, and sorting data
  • Balancing information accessibility with privacy considerations
  • Data analytics in marketing
  • Finding an efficient yet compliant workflow
  • Holding employees accountable to following the agreed-upon management practices
  • Resolving redundancies and outdated information consistently​

Additional Information

• ​Channel management - It is defined as a process where the company develops various marketing techniques as well as sales strategies to reach the widest possible customer base. The channels are nothing but ways or outlets to market and sell products.
• Product management - The process of developing, improving, obtaining, and maintaining the products/services of the business to meet consumer demand.
• Market planning - Market planning is the process of organizing and defining the marketing aims of a company and gathering strategies and tactics to achieve them. 

The correct answer B, D and E only.

Key Points

• Bear extraordinary expenses: It's the bailor's responsibility to cover any exceptional expenses incurred in connection with the bailed goods.
• Indemnify the bailee: The bailor has the duty to safeguard the bailee from any losses that may arise due to the defects in the bailed goods that he/she was unaware of.
• Disclose known faults: If there are any known defects in the goods that could potentially cause harm, it's the bailor's duty to inform the bailee. Failure to do so means the bailor is responsible for damage caused to the bailee.
• Return accretion to the goods: Technically, this is not a responsibility of the bailor under traditional bailment concepts. Accretions or any kind of benefits or profits derived from the goods generally go to the bailee unless there's a different agreement in place.
• Take care of goods: This is generally the responsibility of the bailee who has temporary possession of the bailed goods, not the bailor.

Key Points

• On April 1, 2006, Section 80C of the Income Tax Act became effective.
• In general, it permits some expenses and investments to be tax-exempt.
• You can deduct up to Rs. 1.5 lakh from your investments if you plan them carefully and distribute them among other investments like PPF, NSC, etc. This will reduce your tax liability.

Important PointsSection 80C of Income Tax Act:
An individual and HUFs can claim deductions under Section 80C on payments made to the following:

• The premium for Life Insurance for self, spouse, or children.
• Deferred Annuities are payable by self and the Government.
• Contribution towards PPF(Public Provident Fund).
• Contribution towards PFs operated by the Central Government.
• Contribution towards a Recognized PF.
• Contribution towards a Superannuation Fund.
• Subscription for a Government Deposit or Security.
• Subscription for Saving Certificates.
• Subscription to ULIP, 1971.
• Contribution towards ULIP of LIC Mutual Fund.
• Insurance company’s Annuity Plans including LIC.
• Subscription to Notified units of Mutual Fund.
• Contribution to the Pension Fund of Notified units of Mutual Fund.
• National Housing Bank’s Pension Fund.
• Subscribing to the Deposit Scheme of a Public Sector companies allocating long-term financing for housing.
• Tuition fees for a maximum of 2 children studying in India.
• Repayment of housing loan taken for a residential property.
• Subscription to Mutual Funds units recommended by Central Board of Direct Taxes.
• An FD from a scheduled bank with a minimum tenure of 5 years.
• NABARD notified bonds.
• Contributions to Senior Citizens Saving Scheme.
• Tax Saving 5 Year FD.

Hence, it can be concluded that deduction for unrecognized provident fund is not allowed under section 80C in respect of employees' contributions every year.

When a business is purchased, any amount paid in excess of the total assets is called goodwill. The goodwill amounts to the excess of the "purchase consideration" (the money paid to purchase the asset or business) over the total value of the assets and liabilities. It is classified as an intangible asset on the balance sheet since it can neither be seen nor touched.

Key Points

• A Derivative is a contract between two or more parties that derives its value from an agreed-upon underlying financial asset like securities, or a set of assets like an index.
• The most commonly used derivatives are currencies, stocks, bonds, commodities, market securities, futures contracts, forward contracts, options, swaps.
• Derivatives can be used for hedging or speculation purposes.

Therefore, a Derivative is a Derived financial asset.

Additional Information

• Hedging undertaken by hedgers refers to an operation to protect themselves against the risk that will arise out of exchange rate changes.
• Speculation refers to the purchase and sale of foreign exchange with an intention of making a profit by taking advantage of exchange rate changes.

A corporate-level strategy is a multi-tiered company plan that leaders use to define, outline and achieve specific business goals.A plant generally consists of the physical capital, like the building and the equipment at a particular location that is used for the production of goods. A plant is also called a factory.

The correct answer is Both Assertion and Reasoning are true, but Reasoning is not the correct

Key Points

• In the passage, "While well-conceived policies can foster a conducive business environment, hasty or ill-considered decisions may engender uncertainty and hinder long-term planning."
• The passage supports both the assertion and the reasoning, as it acknowledges that well-conceived policies can foster a conducive business environment.
• However, the reasoning is not the correct explanation of the assertion, as it focuses on the potential negative impact of hasty or ill-considered decisions, which is not explicitly addressed in the assertion. Option 2 is the correct answer.

Additional Information

• The other options (1. Both Assertion and Reasoning are true, and Reasoning is the correct explanation of Assertion, 3. Assertion is true, but Reasoning is false, 4. Both Assertion and Reasoning are false) are ruled out based on the accurate alignment of the Assertion and Reasoning with the passage.
• The passage introduces the notion that economic policies can have both positive (fostering a conducive business environment) and negative (hinder long-term planning) aspects, adding complexity to the relationship between economic policies and business outcomes.

The correct answer is They foster uncertainty and hinder planning.

• In the passage, "Government interventions in areas such as trade, labor, and industrial practices can be both a boon and a bane for enterprises."
• The passage suggests that government interventions in trade and labor can be a "bane," implying a negative impact that includes fostering uncertainty and hindering planning.
• Option b, "They foster uncertainty and hinder planning," aligns with this negative impact.

• The other options (a. They have no effect on business environments, c. They always create a conducive business environment, d. They primarily focus on international collaborations) do not accurately represent the potential negative consequences mentioned in the passage.
• The use of the term "boon and a bane" underscores the dual nature of government interventions, emphasizing the potential challenges businesses may face.

The correct answer is 10%

Key PointsTDS is required to be deducted at the rate of –

• 2% in case of fees for technical services (not being professional services) or royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films; and
• 10% in other cases.

Additional InformationNo tax deduction is required if the amount of fees or the aggregate of the amounts of fees credited or paid or likely to be credited or paid during a
financial year does not exceed 30,000 in the case of fees for professional services, 30,000 in the case of fees for technical services, 30,000 in the
case of royalty and 30,000 in the case of non-compete fees. The limit of 30,000 under section 194J is applicable separately for fees for professional services, fees for technical services, royalty, and non-compete fees referred to in section 28(va).

The correct answer is Foreign Exchange Risk.

Key Points

• Foreign exchange risk arises when a company engages in financial transactions denominated in a currency other than the currency where that company is based.
• Any appreciation/depreciation of the base currency or the depreciation/appreciation of the denominated currency will affect the cash flows emanating from that transaction.
• Foreign exchange risk can also affect investors, who trade in international markets, and businesses engaged in the import/export of products or services to multiple countries.
• There are three types of foreign exchange risk:
  • Transaction risk
  • Translation risk
  • Economic Risk

Additional Information

There are three types of foreign exchange risk:

1. Transaction risk: This is the risk that a company faces when it's buying a product from a company located in another country. The price of the product will be denominated in the selling company's currency. If the selling company's currency were to appreciate versus the buying company's currency then the company doing the buying will have to make a larger payment in its base currency to meet the contracted price.
2. Translation risk: A parent company owning a subsidiary in another country could face losses when the subsidiary's financial statements, which will be denominated in that country's currency, have to be translated back to the parent company's currency.
3. Economic risk: Also called forecast risk, refers to when a company’s market value is continuously impacted by unavoidable exposure to currency fluctuations.

Value analysis is defined as the process of objectively studying every item purchased or manufactured-standard or special, to eliminate every cost factor which does not contribute to usefulness or utility.
Key Points

Customer Value Analysis:

• Customer Value Analysis (CVA) is a research method used to identify how an organization is perceived by the competitors and by consumers.
• It is extremely significant because it allows an organization to gauge how they are judged in comparison to their industry rivals.
• Thus, managers conduct a Customer Value Analysis to know the company’s weaknesses and strengths relative to those of various peers.
• Studies have shown that product or service value perceived by customers is the single best predictor of a company's market share.
• The major benefit of CVA is that it helps a company to identify the specific attributes of its products and services that drive its customer's perception of value.
• This data will help the company proactively respond and grow its market share position.

Therefore, managers conduct a Customer Value Analysis to know the company’s weaknesses and strengths relative to those of various peers.

The correct answer is "Packaging".

Key Points

• A company's packaging catches the attention of new buyers in a crowded marketplace and reinforces value to returning customers.
• The objective of packaging is to facilitate safety, increase product appeal, and communicate brand and product information.
• Here are some ways of packaging :
  • Design for differentiation - A good design helps people recognize your brand at a glance, and can also highlight particular features of your product.
  • Provide valuable information - Your packaging is the perfect place for product education or brand reinforcement. Include clear instructions, or an unexpected element to surprise and delight your customers.
  • Add more value - Exceed expectations for your customers and give them well-designed, branded extras they can use.​
• ​It protects the product from any physical harm and damage.
• It helps increasing sales as it adds to the aesthetic value of the product.
• It keeps the product hygiene by preventing adulteration and hampering.
• Some specialized packaging also prevents the products from going bad.

Additional Information

• ​Labeling - Labeling is the display of a label in a product. A label contains information about a product on its container, packaging, or the product itself. It also has warnings in it. The type and extent of information that must be imparted by a label are governed by the relevant safety and shipping laws.
• Branding - A brand is a name, term, design, symbol, or any other feature that identifies one seller’s goods or service as distinct from those of other sellers. A product can be easily copied by other players in a market, but a brand will always be unique.
• Process - Prioritize processes that overlap with the customer experience. The more specific and seamless your processes are, the more smoothly your staff can carry them out. If your staff isn't focused on navigating procedures, they have more attention available for customers—translating directly to personal and exceptional customer experiences.

The incorrect answer is Rebate under section 80TTA will be admissible even if the person has opted for the alternate taxation scheme under section 115BAC.

Key Points

Section 80TTA – Claim Tax Deduction on Savings Account Interest

• If you opt for new tax regime, you will not be able to claim any tax deductions under section 80.
• Deduction under section 80TTA can be availed of only in the old tax regime.

Important PointsStatement I: Donation to the National Children's Fund is 100% tax deductible under section 80G.

• This statement is correct because under section 80G, some of the donations eligible for 100% deduction without qualifying limit are:
• National Defence Fund set up by the Central Government
• Prime Minister’s National Relief Fund
• National Foundation for Communal Harmony
• An approved university/educational institution of National eminence
• National Illness Assistance Fund
• National Blood Transfusion Council or to any State Blood Transfusion Council
• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
• National Sports Fund
• National Cultural Fund
• Fund for Technology Development and Application
• National Children’s Fund
• Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
• The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996

Statement II: Medical insurance premium paid by any mode other than cash is eligible for deduction under section 80D.

• This statement is correct because the payment method of the medical insurance premium and medical expenses must be made using a method other than cash in order to qualify for a deduction under Section 80D.

Statement III: Rebate under section 80TTA will be admissible even if the person has opted for the alternate taxation scheme under section 115BAC

• This statement is incorrect because under section 80TTA, you cannot claim rebate if you opt for the new tax regime under Section 115BAC.

Statement IV: Section 80U deals with exemption in respect of person with disability.

• This statement is correct because the disabled person is eligible for a deduction under Section 80U of the income tax. This part offers a flat discount to the disabled individual based on the severity of their disability, regardless of the cost.

Hence, it can be concluded that only statement III is incorrect. 

The concept of MBO originally came from Peter F. Drucker in 1954. Management by Objectives is a personnel management technique where managers and employees work together to set, record and monitor goals for a specific period of time. Organisational goals and planning flow top-down through the organisation and are translated into personal goals for organisational members.

Therefore, from the above explanation, it is clear that option 2) is the correct answer.
Important Point

CAPM Formula:

Where,
E(Ri): Expected return of the asset, 
Rf: Risk-free rate of interest
βi: Asset’s sensitivity to market return, 
E(Rm): Expected return of the market.