APSET Paper 2 Mock Test - 5 (Management) - AP TET MCQ

If the intrinsic value of the share is greater than market value, such shares are undervalued.
Undervalued stocks are those shares whose current price is trading at a discount to its intrinsic value.
For example: A stock whose current price is Rs. 80, and its estimated intrinsic value is say Rs. 100, such a stock is said to be trading @20% undervaluation.

Demand elasticity means how much quantity demanded will change if another factor changes.
If demand elasticity is unity, it means that elasticity (e) = 1 and when demand elasticity in imperfect competition is unity than marginal revenue (increase in revenue due to sell of one additional unit) will be equal to Zero.
Thus, correct answer is equal to Zero.

 'Doughnut Model' of development

• The Doughnut, or Doughnut economics, is a visual framework for sustainable development – shaped like a doughnut or lifebelt – combining the concept of planetary boundaries with the complementary concept of social boundaries.
• It envisions a world in which people and the planet can thrive in balance.
• The name derives from the shape of the diagram, i.e. a disc with a hole in the middle.
  • The center hole of the model depicts the proportion of people that lack access to life's essentials (healthcare, education, equity, and so on) while the crust represents the ecological ceilings (planetary boundaries) that life depends on and must not be overshot.

The firm's investment and financing decisions are unavoidable and continuous. In order to make them rational, the firm must have a goal. Two financial objectives predominate amongst many objectives.
These are:
1. Profit maximisation
2. Shareholders' Wealth Maximisation (SWM)
Shareholders' Wealth Maximisation (SWM) is an appropriate and operationally feasible financial management goal and not the profit maximisation.

In corporate finance, the agency problem usually refers to a conflict of interest between a company's management and the company's stockholders. The manager, acting as the agent for the shareholders, or principals, is supposed to make decisions that will maximise shareholders' wealth even though it is in the manager's best interest to maximise his own wealth.

For marketing electronic goods, a firm normally follows penetration pricing strategy. Penetration price is known as charging lowest price for the new product. This aims to foster sales, capture market share, utilise full capacity and economies of scale in productive process and keep the competitors away from the market.

Penetration price policy can be adopted in the following circumstances:

(i) There is very high price elasticity of demand.
(ii) There are substantial cost savings due to enhanced production process.
(iii) By nature, the product is acceptable to the mass of consumers.
(iv) There is no strong patent protection.

Statements I, III and IV are not correct.

Only Statement II is true . It is self-liquidating in nature and can be liquidated by purchasing/ discounting of bills.

New product development is the complete process of bringing a new product or service to market.

In the 8 step new product development process the Idea Screening is the step that follows Idea Generation step.

Idea screening object is to eliminate unsound concepts prior to devoting resources to them.

Idea screening stage involves finding those good and feasible ideas and discarding those which aren’t based upon company’s strength and weakness, customer needs ongoing trends etc.

The correct answer is All the above. 

• Cross culture is a concept that recognizes the differences among business people of different nations, backgrounds, and ethnicities, and the importance of bridging them.
• With globalization, cross-cultural education has become critically important to businesses.
• Business people working abroad need to learn subtle differences in style and substance in order to be effective.

Key Points

• Cross-culture extends to body language, physical contact, and perceptions of personal space.
• In cultures that adhere to strict religious standards, interactions between members of the opposite sex, even in the business sphere, may be complicated.
• Body language such as hand gestures may be frowned upon or, worse yet, may have meanings that were entirely unintended.
• In some cultures, casual touching is common, while in others it is viewed as rude, disrespectful, or worse.

Hence, Cross-culture extends to all the above(body language, physical contact and personal space. 

• According to the concept of moral intensity, a worker is most likely to behave ethically and legally when the moral intensity of the situation is high 
• Moral intensity referees to the degree  to which a situation or issue  demands ethical consideration and evokes strong moral judgment 
• When the moral intensity of a situation is high it means that the consequences of the decision or action have a significant impact on the strike holders such as customers, employees, or society as a whole.
• For example, if a worker is faced with a decision that could harm the environment, the moral intensity of the situation would be high because the consequences of their action could  have a far-reaching and long-lasting impact on the  environment and society 
• When moral intensity is high, individuals are more likely to perceive the situation as an ethical issue, which increases the likelihood of the  ethical behavior

Hence the correct answer is the consequences of the act are substantial

Vertical Phillips curve is a single-equation economic model, named after William Phillips, describing an inverse relationship between rates of unemployment and corresponding rates of rises in wages that result within an economy. Stated simply, decreased unemployment (i.e. increased levels of employment) in an economy will correlate with higher rates of wage rises.

Consumer buying process consists of sequential steps the consumer follows to arrive at the final buying decisions. Mostly, consumers follow a typical buying process. Marketer must know how consumers reach the final decision to buy the product.
According to Philip Kotler, the typical buying process involves five stages the consumer passes through described as under:

The major approaches utilized by managers to induce employees to accomplish the planned actions associated with implementation should normally include all of the given options except coercion.

Coercion is a party acting in an involuntary manner by use of threats or force. It involves a set of various types of forceful actions that violate the free will of an individual to induce the desired response. The purpose of coercion is to substitute one's aims to those of the victim. For this reason, many social philosophers have considered coercion as the polar opposite of freedom.

The information attribute which is prepared or presented to users often enough to be up-to-date is known as information frequency.

A procedure is a series of interrelated sequential steps that can be used to respond to a well-structured problem. (a) Rules are statements of actions that must be taken or not taken in a given situation. (b) A policy is defined as a general guideline for taking an action. (c) A budget is a statement that outlines the expected results of a given future period in numerical terms.

Strategic Choice Theory

• Key proponents: Kochan, Katz, and McKersie
• Frame of reference: Pluralist
• Focus: a general theory of industrial relations
• Reference to industrial relations: Explicit

Theory: emphasizes the strategic choice of actors in deciding industrial relations outcomes, as influenced by:

1. declining union membership
2. breakdown of collective bargaining frameworks
3. retreating government intervention
4. pro-active human resource management techniques
5. spread of organizational authority for industrial relations

Liquidation value is the likely price of an asset when it is allowed insufficient time to sell on the open market, thereby reducing its exposure to potential buyers. Liquidation value is typically lower than fair market value.
Liquidation value may be either the result of a forced liquidation or an orderly liquidation. Either value assumes that the sale is consummated by a seller who is compelled to sell and assumes an exposure period which is less than market normal.

(a) Outdoor media is a form of mass media which comprises billboards, signs, placards placed inside and outside commercial buildings/objects like shops/buses, etc. The media of communication is limited to audience selectivity; creative limitations.
(b) The yellow pages are all business listings, with the name, number and address of local businesses. The limitations of this media is high competition; long ad purchase lead time; creative limitations.
(c) A brochure is an informative paper document (often also used for advertising) that can be folded into a template, pamphlet or leaflet. Though it is a good communication medium, its over production can lead to runaway costs.
(d) Telephone is a good medium of mass communication, however relative high cost; increasing consumer resistance makes this medium obsolete.

• A Trade union is an organized association of workers in a trade, group of trades, or profession, formed to protect and further their rights and interests.
• The main object of trade union is to maintaining or improving the conditions of their employment. This may include the negotiation of wages, work rules, complaint procedures, rules governing hiring, firing and promotion of workers, benefits, workplace safety and policies.
• So, a trade union is on organisation of workers for their demand.

• The operant conditioning or learning approach to behavior is based on the law of effect. B. F. Skinner (1938) coined the term operant conditioning; Operant conditioning is a type of learning in which the strength of a behavior is modified by its consequences, such as reward or punishment
• According to the law, the behavior that has positive consequence tend to be repeated, while negative consequence behavior will not be repeated in any organization. Like behavior results in reward or promotion will be repeated and behavior results in punishment, demotion will not be repeated.

Main function of reserve bank of India is to regulate the issue of bank notes and to take care of monetary stability of country.
Industrial Development Bank of India (IDBI) mainly deals with planning, promotion and development of industry only whereas Small Industrial Development Bank of India (SIDBI) is exclusively for development of small scale industries.
The main objective of National Entrepreneurship Board is promotion of entrepreneurship for encouraging self-employment. It is apex body for formulating the policy in respect of entrepreneurship development.

Gross national product (GNP) is a broad measure of a nation's total economic activity. GNP is the value of all finished goods and services produced in a country in one year by its nationals. To calculate GNP following methods are used:
(a) Income method
(b) Value Added method
(c) Expenditure method

A macro-environment is the condition that exists in the economy as a whole, rather than in a particular sector or region. The factors that make up the macro-environment are economic factors, demographic forces, technological factors, natural and physical forces, political and legal forces, and social and cultural forces.

Market segmentation is the process of dividing prospective consumers into different groups depending on factors like demographics, behaviour and various characteristics. Market segmentation helps companies better understand and market to specific groups of consumers that have similar interests, needs and habits. Before a company decides to target a particular market segment, some important factors like market size, growth rate, structural attractiveness are to be examined against organisation's objectives and resources.

• On the basic of the per capita income the classification has been made.
• Those are low income economy, high income economy and middle income economies.
• Low income economies with per capita GNI of 1035$ or less is regarded as low income economics.
• Low income economies referred as third world.

• While introducing the product company has to keenly look up on the pricing strategies, penetration pricing is a strategy where the prices quoted are lower than the competitors prices.
• Once the company gets the customer base it started gradually increasing the prices so the prices of product is initially low and then started increasing opposite is the case of Skimming pricing strategy.
• In case of electronic product Penetration pricing strategy is used commonly the reason is company wants you to become used to its product and once they get the customer used to their product, they think that customer won’t go through the trouble to change to a different company even if there is increase in prices.

This study examined the innovation that leads to a competitive advantage in the frozen food business in the context of small-sized and medium-sized enterprises (SMEs). The research process consisted of three parts: 1) a literature study; 2) an empirical research study using questionnaires as a data collection tool; and 3) an analysis and conclusion of the research results using exploratory factor analysis (EFA), confirmatory factor analysis (CFA), and structural equation modelling (SEM). The findings showed that innovation enhanced the advantages in competition via external factors. These external factors were divided into two groups: micro-oriented factors and macro-oriented factors. The external factors at the micro level had more influence on the innovation development of the frozen food businesses than those at the macro level. The results showed that entrepreneurs, especially SME entrepreneurs, need to adapt and readily prepare themselves to face upcoming economic changes, which are about to occur not only at the global level but also at the regional and the country levels. In addition to the internal contexts within the organization, external factors are also important, especially those that will lead to the development of innovation. Innovation will become the strategic tool in this important competition for the improvement, creation, and enhancement of business to create competitive advantages equal to or better than those in foreign countries in order to realize sustainable development.

• As per the four stages of product life cycle product has a good demand till maturity stage but at a decline stage demand starts shrinking as product become too old and customer switches to another product which leads to decision whether to maintain, harvest or drop the product based on demand for the product and market competition.
• So, the company takes decision whether to maintain, harvest or drop the product at decline stage.

Performance Appraisal is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development.
Straight ranking method, man-to-man comparison method and check list method are the traditional method of performance appraisal.

Perfect Competition: 

• Perfect competition is a unique form of marketplace that allows multiple companies to sell the same product or service.
• None of these firms can set a price for the product or service they are selling without losing business to other competitors.
• There are no barriers to any firm that is looking to enter or exit the market.
• The final output from all sellers is so similar that consumers cannot differentiate the product or service of one company from its competitors.

Monopolistic competition:

• Monopolistic competition definition says that it stands for an industry in which many firms service similar products which are not a perfect substitute.
• There are very low barriers to entry or exit in monopolistic competition.
• In this competition, one firm decision doesn't affect the whole industry or another firm.
• Monopolistic competition is just related to the business strategy of brand variation.

Important Points

• Products in monopolistic competition are close substitutes; the products have distinct features, such as branding or quality.
• This is unlike both a monopolistic market, where there are no substitutes for products and perfect competition, where the products are identical.
• Thus Statement I is correct. 
• Under monopolistic competition, many sellers offer differentiated products—products that differ slightly but serve similar purposes.
• By making consumers aware of product differences, sellers exert some control over price.
• In an oligopoly, a few sellers supply a sizable portion of products in the market.
• Thus Statement II is also correct. 

Hence, Both Statement I and Statement II are correct. 

1. Pareto analysis

• It is a formal technique useful where many possible courses of action are competing for attention. In essence, the problem-solver estimates the benefit delivered by each action, then selects a number of the most effective actions that deliver a total benefit reasonably close to the maximal possible one.
• Pareto analysis is a creative way of looking at causes of problems because it helps stimulate thinking and organize thoughts. However, it can be limited by its exclusion of possibly important problems that may be small initially, but which grow with time. In terms of inventory management, the Pareto principle can be declared as 20% of inventory items by type account for 80% of annual consumption value.

2. The net income (NI) 

• This approach is also called the traditional approach.
• This is an approach in which both costs of debt and equity are independent of capital structure. The components which are involved in it are constant and don't depend on how much debt the firm is using. This theory was proposed by David Durand.

3. Net operating income

• It measures an income-producing property's profitability before adding in any costs from financing or taxes.
• The operating expenses used in the NOI metric can be manipulated if a property owner defers or accelerates certain income or expense items.
• The NOI metric does not include capital expenditures.

4. Miller – Orr Model

• It deals with cash inflows/outflows that change on a daily basis.
• The model works in terms of upper and lower control limits, and a target cash balance. As long as the cash balance remains within the control limits the firm will make no transaction.

Therefore, the correct match is:

Hence Option d is the correct answer.