UGC NET Paper 2 Commerce Mock Test - 6 - UGC NET MCQ

The correct answer is TATA Group.

Key Points

•  The philosophy of "Good Thoughts, Good Words, Good Deeds" is the motto of the Indian business house Tata Group. It is a Zoroastrian maxim that emphasizes the importance of positive thinking, speech, and action. The Tata Group has adopted this motto as a guiding principle for its business practices and its commitment to social responsibility.
• The Tata Group is one of the largest conglomerates in India. It was founded in 1868 by Jamsetji Tata, a Zoroastrian. Tata believed that businesses should not only make profits, but also contribute to society. He adopted the motto of "Good Thoughts, Good Words, Good Deeds" to reflect this belief.
• The Tata Group has a long history of social responsibility. It has donated billions of rupees to charitable causes, and it has set up several educational institutions and hospitals. The group has also been a pioneer in corporate social responsibility initiatives, such as the Tata Business Excellence Model (TBEM) and the Tata Sustainability Index (TSI).
• The Tata Group's commitment to "Good Thoughts, Good Words, Good Deeds" has made it a role model for other businesses in India. It is an example of how businesses can be profitable and socially responsible at the same time.

Hence, the correct answer is TATA Group

The correct answer is Both (A) and (R) are true, but (R) is not the correct explanation of (A).

Key Points

• Assertion (A): SEBI has the power to compel the listing of securities by public companies.
  • A company desirous of listing its securities on the exchange is required to file an application, in the prescribed format, with the exchange before issuing the prospectus by the company, where the securities are to be issued by way of a prospectus, or, before the issue of 'Offer for Sale', where the securities are to be issued by way of an offer for sale.
  • The company is responsible to follow all the requirements specified in the Companies Act, the listing norms issued by SEBI, and such other conditions and requirements that may be in force from time to time and included hereafter in the SEBI bye-laws and regulations to make the security eligible to be listed and for continuous listing on the exchange.
  • SEBI can compel a public company to get its securities listed on Stock Exchanges before making a public issue.

Thus, the assertion is correct.

• Reason (R): SEBI has the power to regulate insider trading or can regulate the functions of merchant bankers.
  • Insider trading refers to the act of buying or selling securities by the insiders of a company, which includes the directors, employees, and promoters.
  • As per the provisions of the Securities and Exchange Board of India Act 1992, no person shall directly or indirectly engage in insider trading.
  • To prevent the practice of insider trading, SEBI has barred the companies to purchase their own shares from the secondary market.

Thus, the reason is correct.

On the basis of the above information, it can be concluded that both the assertion and reason are correct, but, the reason is not the correct explanation of the assertion.

Key-Points

Tax planning:

• Tax planning is a legal activity that not only covers the various aspects of tax filling but also aims at the need of reducing one's tax liability.
• It is a process of analyzing one's financial situation in the most efficient manner.
• It includes planning one's income following the intent of the law, with the help of various exemptions and deductions.
• Tax planning is an art in which there is logical planning of one's financial affairs in such a manner that it benefits the assessee with all eligible provisions of the taxation law.
• It is an honest approach to applying the provisions that come within the framework of taxation law.
• The best ways of saving tax are saving in PPF account, National Savings Certificate, Fixed Deposit, Mutual Funds, and Provident Funds. 

Tax avoidance:

• Tax avoidance is an act of applying legal methods to reduce tax liability.
• It is an act of using a tax regime in a particular territory for an individual's personal benefits to decrease his tax liability.
• Even if tax avoidance is a legal method, it is not advisable as it could be used to one's own advantage to reduce tax liability.
• Tax avoidance looks to the loophole in the law to serve the purpose by finding new ways to avoid the payment that are within the limits of the law.
• It can be done by adjusting accounts in such a manner that there will be no violation of tax rules.
• Tax avoidance is a lawful activity but still, it could come in the category of crime.

Therefore, both statements (A) and (R) are correct.

Additional Information

Tax evasion:

• Tax evasion is an illegal method used to minimize tax liability through fraudulent activities like a deliberate understatement of taxable income or inflating expenses.
• It is done with the motive of showing fewer profits in order to avoid the tax burden.
• It is an unlawful attempt to reduce an assessee's tax burden and is considered a crime for which the assessee could be punished under the law.
• Tax evasion involves illegal practices such as making false statements, hiding relevant documents, not maintaining complete records of the transactions, overstatement of a tax credit, or presenting personal expenses as business expenses. 

The correct answer is Comparative advantage arises from differences in factor endowments such as labor and capital.

Key Points

•  The Heckscher-Ohlin Theory, developed by economists Eli Heckscher and Bertil Ohlin, states that comparative advantage arises from differences in factor endowments, such as labor, capital, and natural resources, among countries.
• According to this theory, countries will export goods that require the intensive use of the factors of production that are abundant and relatively cheap in their country. Conversely, they will import goods that require the intensive use of factors that are scarce and relatively expensive in their country. In other words, countries will specialize in and export goods that make the most efficient use of their abundant resources, leading to comparative advantage and trade between nations.
• The Heckscher-Ohlin Theory provides a different perspective on international trade compared to Ricardo's Comparative Advantage Theory, which is based solely on differences in technology or productivity. Instead, the Heckscher-Ohlin Theory emphasizes the role of factor endowments in determining comparative advantage and trade patterns between countries.

Key Points

• A stereotype is a fixed, overly generalised belief about a certain group or class of people that is used in social psychology.
• Stereotyping implies that an individual possesses a wide range of characteristics and abilities that we presume all members of that group share.
• For instance, a "hells angel" biker wears leather clothing.

Important Points

Stereotyping: 

• A stereotype is a preconceived idea that is fixed and overly generalised about a certain group or class of individuals.
• These presumptions rest on the false assumption that each member of the group shares a particular set of traits.
• Many stereotypes are a direct result of numerous political, social, or economic events and have a lengthy and occasionally contentious history.
• Making assumptions about a person or group of individuals based on criteria such as gender, race, religion, or physical characteristics is known as stereotyping.

Additional Information

1. Halo effect: A form of cognitive bias known as the "halo effect" occurs when our overall opinion of a person affects how we feel and think about their character. In essence, your assessment of a person's general impression ("He is kind!") affects your assessment of that person's specific characteristics ("He is also brilliant!"). People's perceptions of one quality can influence their perceptions of other characteristics. Our perception of celebrities as a whole is a terrific illustration of the halo effect in action. People prefer to view them as bright, kind, and amusing since they are viewed as attractive, successful, and frequently likeable.
2. Attribute: The word "pay tribute" and "attribute" have a similar meaning. In this way, a prize winner who honours a motivational lecturer is in a way crediting her success to the professor.
3. Assimilation: In anthropology and sociology, assimilation refers to the process through which people or groups with different ethnic ancestries are assimilated into the dominant culture of a society.

The correct answer is 2 and 3 only.

• In news:
  • Industrial output surged by 22.4% in March, lifted by the statistical impact of the year-earlier period’s Index of Industrial Production (IIP) being significantly lower on account of the national lockdown to contain COVID-19 imposed that month, data from the National Statistical Office showed on Wednesday.

Key-Points

• Industrial Production data (IIP):
  • Index of Industrial Production data or IIP as it is commonly called is an index that tracks manufacturing activity in different sectors of an economy.
  • The IIP number measures the industrial production for the period under review, it is compiled and published by NSO under the Ministry of Statistics and Programme Implementation (MoSPI) usually a month, as against the reference period. Hence, statement 1 is incorrect and statement 2 is correct.
  • There is a lag of six weeks in the publication of the IIP index data after the reference month ends.
  • IIP index is currently calculated using 2011-2012 as the base year.
  • Mining, manufacturing, and electricity are the three broad sectors in which IIP constituents fall.
  • The relative weights of these three sectors are 77.6% (manufacturing), 14.4% (mining), and 8% (electricity).
  • Electricity, crude oil, coal, cement, steel, refinery products, natural gas, and fertilizers are the eight core industries that comprise about 40 per cent of the weight of items included in the IIP. Hence, statement 3 is correct.

The correct answer is Amount spent on activities which only benefit the employees of the company

Key PointsActivities that doesn't qualify as CSR Expenditure:

• CSR projects or programs or activities that benefit only the employees of the company and their families
• One-off events such as marathons/ awards/ charitable contributions/advertisements/sponsorships of TV programs etc. 
• Expenses incurred by companies for the fulfilment of any Act/ Statute of regulations (such as Labour Laws, Land Acquisition Act, etc.)
• Contribution of any amount directly or indirectly to any political party
• Activities undertaken by the company in pursuance of its normal course of business.

The correct answer is Competitive Pricing

Key Points Competitive Pricing

• Competitive pricing or competition-based pricing is a pricing strategy where you take into account the prices of your competitors when setting your products’ prices.
• This pricing method is usually used for homogenous products in highly competitive markets and can be also referred to as market-oriented pricing.

Additional Information 1. Value-based Pricing

• Value-based pricing is a strategy of setting prices primarily based on a consumer's perceived value of the product or service in question.
• Value pricing is customer-focused pricing, meaning companies base their pricing on how much the customer believes a product is worth.
• Companies that offer unique or highly valuable products and features are better positioned to take advantage of the value pricing model than companies that chiefly sell commoditized items.

2. Product Pricing

• Product pricing is an essential element in determining the success of your product or service, yet eCommerce entrepreneurs and businesses often only consider pricing as an afterthought. They settle and use the first price that comes to mind, copy competitors, or (even worse) guess.
• Before setting a price for your product, you have to know the costs of running your business. If the price for your product or service doesn't cover costs, your cash flow will be cumulatively negative, you'll exhaust your financial resources, and your business will ultimately fail.

3. Premium Pricing

• Premium pricing is a strategy that involves tactically pricing your company’s product higher than your immediate competition.
• The purpose of pricing your product at a premium is to cultivate a sense in the market of your product being just that bit higher in quality than the rest.

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

Key Points Here is an explanation of each of the terms:

Balanced Scorecard: This is a performance measurement framework that helps organizations to set goals, measure their performance, and track their progress towards their goals. It was developed by Robert S. Kaplan and David p. Norton in the early 1990s.
Economic Value-added Analysis: This is a financial performance measure that measures the amount of value created by a company for its shareholders. It was developed by Stern Stewart & Company in the 1980s.
VRIO framework: This is a business analysis framework that helps organizations to identify their resources and capabilities and assess their value, rarity, imitability, and organization. It was developed by Jay Barney in the 1990s.
Business intelligence: This is a broad term that refers to the collection, analysis, and presentation of data to help organizations make better decisions. It can be used to track performance, identify trends, and make predictions.

Important Points

The first step in the Customer Experience Management Process is to develop ​customer experiences that lead to lasting relationships and referrals.

• Customer experience is defined as your customers’ perceptions – both conscious and subconscious – of their relationship with your brand resulting from all their interactions with your brand during the customer life cycle.
• Customer experience management is the practice of designing and reacting to customer interactions to meet or exceed customer expectations and, thus, increase customer satisfaction, loyalty, and advocacy.
• Customer experience management is about more than serving your customers.
• It’s about more than knowing where customers shop and what brand of dog food they buy.
• It's about knowing your customers so completely that you can create and deliver personalized experiences that will entice them to not only remain loyal to you but also to evangelize to others about you – and that’s the most valuable form of advertising there is.
• The crux of having a customer experience management process involved in business activity is to give customers such experiences that lead to lasting relationships and referrals.

The correct answer is (i), (ii) and (iii).

Key Points"Independent inspection of financial information of any entity, whether profit oriented or not, irrespective of its size or legal form when such an examination is performed with a view to offer an opinion thereon" is what is meant by an audit.

Important PointsAudit: "An audit is independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size or legal form, when such an examination is conducted with a view to expressing an opinion thereon.".

Features of Audit

• To ensure that the observation and opinion supplied by the auditors stay objective and provide a true view towards the practises and procedures implemented by the management, it is always undertaken by a qualified auditor or group of auditors who are independent of the entity.
• The audit entails verifying the entity's books of accounts to ensure that the accounts have been prepared in accordance with the entries made in the books of accounts.
• It has to do with the audit of the entity's financial statements by looking over all of its financial records and books.
• Basically, the auditors aim to gather enough and the right audit evidence to support his view for the financial statements. 
• This includes all of the entity's final accounts, including the Statement of Profit & Loss for the period and the Balance Sheet as of the period's closing date.

Hence, it can be concluded that an audit is an independent examination of the financial information of firms, as distinct from their Profit orientation, Size and Legal Form.

The correct answer is Rapid-penetration strategy.

 Key Points

Rapid-penetration Strategy:

• The term that best fits the definition provided is "penetration pricing". Penetration pricing is a pricing strategy in which a company sets a low price for a new product or service with the goal of attracting a large number of customers quickly and gaining a foothold in the market.
• Under a penetration pricing strategy, the company may initially sell the product at a loss or a low profit margin in order to gain market share and establish the product's reputation.
• The company may also spend heavily on advertising and promotions to create awareness and generate interest in the new product.
• The idea behind penetration pricing is that by setting a low price, the company can attract a large number of price-sensitive customers who are willing to try the product.
• Once the product has gained traction in the market, the company can gradually raise the price or introduce new features to increase profitability.

 Additional Information 

Slow penetration strategy: This is a pricing strategy in which a company sets a relatively low price for a new product or service in order to gradually gain market share over time. Unlike penetration pricing, which involves setting a very low price initially, slow penetration pricing involves setting a price that is competitive but still allows the company to earn a profit. Over time, the company may adjust the price as it gains more market share and establishes its brand.

Rapid skimming: This is a pricing strategy in which a company sets a high price for a new product or service in order to maximize profits in the early stages of the product's lifecycle. This strategy is often used for products or services that are innovative or unique, and for which there is limited competition. The goal is to attract customers who are willing to pay a premium for the product or service, and then gradually lower the price as competitors enter the market.

Slow skimming: This is a pricing strategy in which a company sets a high price for a new product or service but takes a slow approach to lowering the price over time. This strategy is often used for products or services that are not easily replicated by competitors, and for which the company has a strong competitive advantage. The goal is to maximize profits over the long-term by maintaining a premium price point and a loyal customer base.

Hence, the correct answer is Rapid-penetration Strategy.

Key-Points

Masala Bonds

• Masala Bonds are rupee-denominated bonds issued outside India by Indian entities. They are debt instruments that help to raise money in local currency from foreign investors.
• Masala bonds are bonds issued outside India but denominated in Indian Rupees, rather than the local currency. Masala is an Indian word and it means spices. The term was used by the International Finance Corporation to evoke the culture and cuisine of India. 
• It is a debt instrument issued by an Indian entity in foreign markets to raise money, in Indian currency, instead of dollars or local denomination. In 2019, Kerala became the first Indian state to issue Masala Bonds worth Rs. 2,150 crore on the London Stock Exchange.
• Masala bonds allow Indian companies to raise overseas debt in the Indian currency. The instrument shields the issuers from currency fluctuations mainly because interest payments and redemption are in rupees. At the same time, investors get interest rates that are higher than in their domestic markets. In the third statement, the most popular market for Masala bonds currently in London.

Therefore Option 3 is not a correct statement with respect to Masala Bonds.

The correct answer is Assertion is incorrect, but Reasoning is correct.

Key PointsAs per the passage, "Despite these advantages, there are challenges, particularly the restriction on individual countries' monetary policies as monetary policy is decided by the ECB, not individual countries."

The correct answer is the European Central Bank.

Key PointsAs per the passage, "Managed by the European Central Bank (ECB) and the Eurosystem which comprises the central banks of the Eurozone, it currently serves as the official currency for 19 of the 27 EU member states collectively known as the Eurozone."

Firstly, the aggrieved employee shall convey his grievance verbally in person to the officer designated by the management for this purpose. The officer has to answer within 48 hours of the presentation of the complaint.

Hence, the correct option (C).

The business entity concept states that the transactions associated with a business must be separately recorded from those of its owners or other businesses. Doing so requires the use of separate accounting records for the organization that completely exclude the assets and liabilities of any other entity or the owner.

The South Asian Association for Regional Cooperation (SAARC) is the regional intergovernmental organization and geopolitical union of nations in South Asia. Its member states include Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan, and Sri Lanka. SAARC comprises 3% of the world's area, 21% of the world's population, and 3.8% of the global economy, as of 2015. SAARC was founded in Dhaka on 8th December 1985. Its secretariat is based in Kathmandu, Nepal. The organization promotes the development of economic and regional integration. It launched the South Asian Free Trade Area in 2006. SAARC maintains permanent diplomatic relations at the United Nations as an observer and has developed links with multilateral entities, including the European Union.

Lineation function is a process in human resources management that is concerned with providing a conducive work environment to the employees and nurturing them to make them feel committed and attached to the organization.

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.

A leader who serves as the head of the family and treats his followers like his family members is paternalistic leader. Paternalistic leadership is a managerial approach that involves a dominant authority figure who acts as a patriarch or matriarch and treats employees and partners as though they are members of a large, extended family. In exchange, the leader expects loyalty and trust from employees, as well as obedience.

Managers are the customers of cost and management accounting because the information is used by managers in making decisions.

The stock market theory which states that stocks are in equilibrium and impossible for investors to beat the market is classified as an efficient market hypothesis. The efficient-market hypothesis is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information.

The dimension of the business environment discussed here is the social dimension.

Key Points Social Dimension:

• The social dimension of the business environment refers to the cultural and societal factors that affect business operations.
• It includes factors such as demographics, consumer attitudes and behaviours, social values, and lifestyle changes.
• In this case, the decision to ban slaughterhouses was influenced by social and cultural factors.

Important Points

• Vrindavan and Ayodhya are considered holy cities, and cow slaughter is considered a sensitive issue by many people in India.
• The decision to ban slaughterhouses in these cities was made to respect the religious and cultural sentiments of the people living there.
• The social and cultural factors played a crucial role in shaping the government's decision to impose the ban.
• Therefore, the ban on slaughterhouses in Vrindavan and Ayodhya is an example of how the social dimension of the business environment can influence business operations and decisions.

The Correct option is 1 i.e. Subscribed and Fully paid

Important Points

The shares on which the company has called the entire nominal value and also the shareholders paid the entire called up amount. Under these circumstances it is shown under subscribed capital as Subscribed and Fully paid up. Subscribed capital is the part of the issued capital which is subscribed by the public.

Employee training is defined as a planned set of activities for imparting knowledge to employees, such that it leads to a growth in job skills required for organizational growth.

Key Points

• Steps of employee training in the proper sequence

1. Explain why the employee is being trained:
   • Employee training programs help improve the knowledge and skills of employees to match the various changes in the industry. These improvements will positively affect the productivity of workers, which can increase the profits and efficiency of an organization. Some of the things employees may learn through training include work ethics, human relations and safety.
2. Create interest and find out what the employee already knows about the job:
   • Employee training programs help an organization test the efficiency and effectiveness of a new performance management system, which will help HR establish clearer performance expectations. ​For this its important to know his current levelof knowledge,
3. Explain the whole job and relate it to some other job that the employee already knows
4. Place the trainee/employee as close to the normal working position as possible
5. Familiarize the employee with equipment, materials, tools, and trade terms
6. Evaluate and provide re-training if needed.

Therefore the correct answer is C, B, E, D, A.

Auditor: An auditor is an authorized person who verifies and reviews the financial records and financial statements of a company and ensures that they are prepared in accordance with the norms. He also checks whether any tampering or manipulation has been done with the financial data with the aim of hiding any fraud or malpractice within the company.

Audit Programme: An audit programme is a plan or blueprint of what procedures would be followed by an auditor to validate a company's financial records. It states policies, regulations and guidelines according to which the auditing activities would be performed. An audit programme is also called an audit plan.