Kerala SET Paper 2 Mock Test - 2 (Commerce) - KTET MCQ

The correct answer is 18 per cent

Key Points Sustainable Growth Rate:

• The maximum rate of growth that a business or social enterprise may maintain without needing to raise more capital or take on more debt is known as the sustainable growth rate (SGR).
• It measures how quickly a business can expand using only internal revenue and without borrowing money from other sources.

Important Points

The sustainable growth rate of the company that enjoys return on equity = 30 percent and a dividend payout ratio of 40 percent is 18%

Key-Points

ECGC (Export Credit Guarantee Corporation):

• Export Credit Guarantee Corporation of India is administered by the Government of India through the Ministry of Commerce and Industry.
• It is fundamentally an export promotion organization with a motive to enhance the competitiveness of Indian exports by offering them credit insurance covers.
• ECGC was set up for ensuring the smooth functioning of Indian exporters by minimizing the risk associated with the payments emanating from other nations.
• ECGC insurance covers also assist the Indian exporters with better access to credit facilities from banks and other financial institutions.
• ECGC is the 5th largest credit insurance company dealing with the exports of any country.
• It also offers Overseas Investment Insurance to the Indian companies investing in Joint Ventures abroad in the form of loans or equity. 

Therefore, ECGC is concerned with insurance.

Additional Information

ECGC offers the following types of guarantees to the exporter:

• Export finance guarantee
• Packing credit guarantee
• Post-shipment export credit guarantee
• Export production finance guarantee
• Transport guarantee
• Export performance guarantee

The correct answer is "Brand mark".

Key Points

• A brand mark is a symbol, element, art design, or visual image that helps immediately recognize a certain company. It is essential for developing and maintaining a brand's image.
• Many factors influence the success of a specific brand, one of which is imagery. It's worth noting that using images can help you convey your message and emotions quickly. Keeping this fact in mind, companies worldwide use brand marks to identify their brands visually.
• A brand mark is a supportive element that helps customers identify a brand at once.
• When people see the brand mark, it should remind them of the unique characteristics of your company. It's all about emotional connection, something that will draw prospects to your brand and boost their engagement.​

Additional Information

• Brand - A brand is a name, term, sign, symbol, design or some combination of them, used to identify the products-goods or services of one seller or group of sellers and to differentiate them from those of the competitors.
• Brand name - Brand name is the verbal component of a brand.
• Trade mark - A brand or part of a brand that is given legal protection is called trademark.

The correct answer is Internal Rate of Return

Key Points

The Correct answer is Option 1.

Key Points

 Coefficient of Range:

• The range is the difference between the highest and the lowest value of frequency for a given frequency distribution.
• The coefficient of range on the other hand is the ratio of the difference between the highest and lowest value of frequency to the sum of the highest and lowest value of frequency.
• The coefficient of Range shows how much of the data is spread. It shows the relative measure of the dispersion of the range. 
• In order to calculate, the formula used is- (Highest Value of frequency - The lowest value of frequency)/ (Highest Value of frequency + Lowest value of frequency)

 Coefficient of Quartile Deviation (QD):

• Quartiles are the values that divide a group of observations into four equal parts. 
• The coefficient of quartile deviation is a measure of dispersion used to describe the spread or distribution of data.
• It is calculated as - Coefficient of quartile deviation = (Q3 – Q1) / (Q3 + Q1)

Coefficient of Mean Deviation (MAD):

• Mean deviation or average deviation is the average difference between the items in a series from the mean, median, or mode.
• The coefficient of mean deviation is calculated by dividing the mean deviation by the average. If deviations are taken from the mean, we divide it by the mean.
• It is calculated as Mean Deviation/ x or Me.

Coefficient of Variation (CV): 

• The coefficient of variation (CV) is the ratio of the standard deviation to the mean and shows the extent of variability in relation to the mean of the population. The higher the Coefficient of Variation, the greater the dispersion.
• It is calculated as - 

Hence, the correct answer is Option 1.

Agriculture Income earned by a taxpayer in India is exempt under Section 10(1) of the Income Tax Act, 1961. Agricultural income is defined under section 2(1A) of the Income-tax Act.

As per section 2(1A), agricultural income generally means 

1. Any rent or revenue derived from land which is situated in India and is used for agricultural purposes.
2. Any income derived from such land by agriculture operations including processing of agricultural produce so as to render it fit for the market or sale of such produce.
3. Any income attributable to a farmhouse subject to satisfaction of certain conditions specified in this regard in section 2(1A).
4. Any income derived from saplings or seedlings grown in a nursery shall be deemed to be agricultural income.

Assertion (A): “Price Discovery” is a function of the derivatives market.

Reason (R): ‘Price Discovery’ deals with the study of the influence of futures price on the spot price.

Here Both (A) and (R) are correct. Hence option4 is the correct answer.

Key Points

• Price discovery is the overall process, whether explicit or inferred, of setting the spot price or the proper price of an asset, security, commodity, or currency.
• The process of price discovery looks at a number of tangible and intangible factors, including supply and demand, investor risk attitudes, and the overall economic and geopolitical environment.
• Simply put, it is where a buyer and a seller agree on a price and a transaction occurs.
• The derivatives market serves as an important source of information about prices. Prices of derivative instruments such as futures and forwards can be used to determine what the market expects future spot prices to be.
• The information is accurate and reliable. Thus, the futures and forwards markets are especially helpful in the price discovery mechanism.

The correct answer is Work of the Auditor.

Internal Check is an integral function of the internal control system. It is an arrangement of duties of the staff members in such a way that the work performed by one person is automatically and independently checked by the other.

Auditing is the systematic and scientific examination of the books of accounts and records of a business so as to enable the auditor to satisfy himself that the Balance Sheet and the Profit and Loss Account are properly drawn up so as to exhibit a true and fair view of the financial state of affairs of the business and profit or loss for the financial period.

From the Auditors Point of View,

• The auditor may be relieved of undertaking detailed checking if there is an efficient system of internal checks.
• The system of internal checks facilitates the work of auditors to a great extent by enabling them to rely on test checking.
• He can plan to utilize the time saved thereby in auditing the other important areas.
• He should test the systems of internal checks for his satisfaction. In the event of his dissatisfaction or suspicion, he must probe the matter to the bottom.
• In the absence of any suspicious circumstances, he may rely upon the internal checks in force but is not totally relieved of his responsibility.
• He runs the risk of being held liable for negligence if errors and frauds are de­tected afterward.
• The internal check system is in­troduced not by the auditor but by the client or­ganisation. So, the auditor should appraise the sys­tem for reliability with reasonable skill and care.
• In short, the existence of an efficient internal check system may reduce the auditor’s work vol­ume but does not reduce his liability.

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.

The correct answer is Full disclosure of all material facts that can affect the financial statement.

Key Points

• The Full Disclosure Principle states that all relevant and necessary information for the understanding of a company’s financial statements must be included in public company filings.
• For example, financial analysts who read financial statements need to know what inventory valuation method has been used, if there have been any significant write-downs, how depreciation is being calculated, and other critical information for the understanding of the financial statements.

• The full disclosure principle is crucial to ensuring that there is limited information asymmetry between the company’s management and its current shareholders, debtors, or other third parties.

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.

The correct answer is It reduces transaction costs.

Key PointsAs per the passage, "For businesses, it provides pricing transparency and reduces transaction costs, aiding in the increase of cross-border trade within the Eurozone."

The correct answer is 2002.

Key Points As per the passage, "Introduced in 1999 as an electronic currency for banking and financial transactions and in tangible form in 2002, the Euro is the second most traded currency worldwide after the US Dollar."

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.

Statement II is also correct for the fact that the reviews posted on the websites of the e-commerce companies are not always true and there is no way to find out if they are true or fake or even the discounts are not always for real. Refer to, “There are no authentic ways to figure out if product reviews, ratings or even discounts are genuine.”

The correct answer is Both A and R are false.

Key Points

As per the passage:

• "Unlike tangible products, services involve intangible elements, thus the marketing strategies applied for services vastly differ."

  • This sentence directly contradicts with the assertion (A) and approves the reasoning (R) that services involve intangible aspects and therefore need different marketing approaches.

The correct answer is It has become more multifaceted.

Key Points

As per the passage:

• "Therefore, service marketing in India has transformed into a multifaceted domain that balances complex business, customer, and societal demands in its broad scope."

  • This sentence shows how the scope of service marketing in India has become more multifaceted.

Key Points

• The term "advance tax" refers to income tax that is paid throughout the financial year rather than at the conclusion.
• The days throughout the year when this must be paid are specified by the tax regulations.
• Since advance tax is paid in instalments throughout the financial year, it is also sometimes referred to as "pay as you earn" tax.

Important PointsWhen advance tax is payable

• Where the tax payable by a person exceeds Rs 10,000 after deducting the TDS advance tax comes into play.
• If advance tax is not paid within the due dates, interest is payable on the tax as per the provisions of the I-T Act.

Due dates

1. 15% of the advance tax should be paid on or before 15 June of the financial year.
2. 45% of the advance tax (less tax already paid) should be paid on or before 15 September.
3. 75% of the advance tax (less tax already paid) should be paid on or before 15 December.
4. 100% of the advance tax (less tax already paid) should be paid on or before 15 March.
5. In the case of taxpayers who have chosen the presumptive taxation scheme, 100% of advance tax needs to be paid on or before 15 March of the financial year.

Hence, it can be concluded that TDS Advance tax will not be paid if the tax payable after TDS is less than or equal to Rs. 10,000.

Statement I:

• Working capital is the difference between the current assets .e. accounts receivable, cash, inventories of raw material and fixed goods, and its current liabilities i.e. accounts payable, short-term debt, dividend, etc.
• It is that part of the capital which helps in financing the operating activities in order to achieve short-term goals.
• In other words, " Working Capital is the amount of funds necessary to cover the cost of operating the enterprise." 

Statement II:

• Circulating capital is also known as revolving capital as the money keeps on changing its form in a continuous manner.
• The money involved in circulating capital is used for core business operations and keeps on circulating from cash to current assets and back again to cash.
• It includes current assets like cash, operating expenses, finished goods inventory, raw materials, inventory in the process, and accounts receivable and one can be used to buy another. 
• In other words, "Circulating capital means current assets of a company that are changed in the ordinary course of business from one form to another."

Therefore, it is clear from the above explanation that both statements are correct.

Residential status's conditions: A person is in India for 182 days or more in that financial year or is in India for 60 days or more during that financial year and has been in India for 365 days or more during 4 previous years immediately preceding the relevant financial year. If an individual satisfies any one of the above conditions, he is treated as a resident of India.

The substitution effect states that when the price of a good decreases, consumers will substitute away from goods that are relatively more expensive to the cheaper good.

The law of demand is a fundamental principle of economics that states that at a higher price, consumers will demand a lower quantity of a good. Demand is derived from the law of diminishing marginal utility, the fact that consumers use economic goods to satisfy their most urgent needs first.

The correct answer is Product

Key Points

•  Marketing mix: Marketing mix involves set of actions and strategies that a company decides to follow as its marketing plan to carry out the function of marketing in a better way to persuade the customers to buy the products. It involves the key focus areas of the marketing plan.
• The key focus areas are classified into the following categories which are generally called as 4P's: 
  • ​Product
  • Price
  • Place 
  • Promotion

Important Points

•  Product: Product is the item or service that satisfies the consumer want. This aspect of marketing mix deals in making, innovating or designing the product effectively so that it provides the value to the customer and also satisfies his need better than the competitor product.

Additional Information

• Selling: Selling is the process of delivering the service or transferring the ownership of the goods in exchange for money or any other monetary benefit.
• Costing: Costing is a process of classifying, recording and allocating the different costs incurred by the company in the event of making a product or service to ascertain the correct price for the good or service.

Marginal Product Curve shows the relation between marginal product and the quantity of the variable input. This curve shows the incremental change in output at each level of a variable input. Its shape is in the form of a hump or an inverse U because of increasing marginal returns in the beginning followed by decreasing and then diminishing marginal returns.

The meaning of the acronym HRM is Human Resource Management. Human resource management (HRM) is the practice of recruiting, hiring, deploying and managing an organization's employees. HRM is really employee management with an emphasis on those employees as assets of the business.

The correct answer is Economic environment.

Key PointsEnvironment - Environment can be summarized as the effects of all the living and non-living things that have an impact on human life. Non-living or abiotic elements include water, land, sunshine, rocks, and air, whereas all live or biotic elements are animals, plants, forests, fisheries, and birds.

Important Points Economic environment -

• The business is directly and significantly impacted by the economic environment.
• An organization in the business world completely depends on its economic environment for its survival, expansion, and success.
• Economic conditions, economic policies, and economic systems make up the bulk of the economic environment. Infrastructure, income nationally, and fundamental economic principles.
• In addition to being major components of the overall economic environment, money supply, economic phases associated with saving, and trade cycles are all thought to be important.

Key PointsGrouped data is created by grouping each observation so that the groups provide a more insightful approach to analysing the data. The mean of grouped data can be determined using one of three methods.

• Direct Method
• Shortcut Method
• Step Deviation Method

Important PointsArithmetic Mean: The ratio of the sum of all observations to the total number of observations is known as the Arithmetic Mean (AM) or average in statistics.

Arithmetic Mean =  

Where,

• x₁, x₂, x₃, x_n are the observations
• n is the number of observations

Assumptions in order to determine the arithmetic mean:

• Intervals between classes must be closed.
• Each class interval should be the same width.
• Each class interval's mid-value must be the mean of all values inside that class.

Thus, the correct solutions are A, B and C only.

 is used to calculate the standard error of the coefficient of correlation between 25 paired observations of a sample.