TS SET Paper 2 Mock Test - 1 (Commerce) - TS TET MCQ

The correct answer is Supply chain networks.

Key Points

As per the passage,  "One of the significant impacts was on the supply chain dynamics. Global supply chain networks experienced severe disruptions due to pandemic-induced restrictions."

The correct answer is Financial & regulatory measures. 

Key Points

As per the passage, "Governments introduced emergency financial and regulatory measures to support national economies, impacting international business operations."

The correct answer is to Prioritize robust digital infrastructure. 

Key Points

As per the passage, "This accelerated the digital transformation amongst MNCs, prompting them to prioritize a robust digital infrastructure and online customer engagement strategies."

The correct answer is Single-source suppliers.

Key Points

As per the passage, "Global supply chain networks experienced severe disruptions due to pandemic-induced restrictions, leading to a reevaluation of supply chain models heavily reliant on single-source suppliers, particularly from countries that suffered the most from the pandemic."

The correct answer is must also be positive.

Key PointsThe Correlation Coefficient:

• To measure how closely two variables are related to one another, correlation coefficients are used.
• The correlation coefficient value always lies between -1 to +1.
• If the correlation coefficient value is positive, then there is a similar and identical relationship between the two variables.

Linear Regression:

• A variable's value can be predicted using linear regression analysis based on the value of another variable.
• The dependent variable is the one for which the value is to be forecasted.
• The independent variable is the one which is used to make a prediction about the value of the other variable.

Important Points

• If the correlation coefficient has a positive value, then the slope of the regression line must also be positive.
• If the correlation coefficient has a negative value, then the slope of the regression line must also be negative.
• This observation should make it clear that there is a connection between the slope of the least squares line and the sign of the correlation coefficient.

Management skill - Executive needs have certain qualities or skills in order to carry out specific jobs in an organization, and these qualities or talents are referred to as management competencies.

Important PointsThe three fundamental categories of managerial talents, according to American social and organizational psychologist Robert Katz, are as follows: 

Technical Skills: 

• These abilities give the management the knowledge and capability to apply various approaches to accomplish their goals, as implied by the talents' names.
• Technical talents are not only relevant for machines, production tools, or other equipment; they are also necessary for boosting sales, designing various products and services, marketing the goods and services, and other tasks.

Perceptual\conceptual Skills: 

• Conceptual talents demonstrate a manager's understanding or capacity for more abstract thought.
• That implies that he can quickly diagnose various states and analyse the total through doing so.
• They are able to forecast the direction of the company or department as a whole in this way.
• For top managers, conceptual skills are essential. For mid-level managers, they are less important, and for first-level managers, they are not necessary.
• The significance of these talents will increase as we move up the administrative ladder.

Human Skills: 

• A manager's knowledge and interpersonal abilities are demonstrated through their human or interpersonal management skills.
• Working with people is one of the most important management responsibilities.
• There won't be a need for management or managers if there are no humans.

​Thus, Writing Skills is not a recognized key management skill.

Key-Points

SaaS:

• SaaS is an abbreviation of Software-as-a-Service.
• Software-as-a-Service (SaaS) is a software licensing model that allows access to the software on a subscription basis using external servers.
• It is accessed through a web browser with users logging in to the system using a username and password.
• SaaS has many business applications like file sharing, email, calendars, customer retention management, and human resources.
• As the software does not live on the licensing company’s servers, there is less demand for the company to invest in new hardware.
• It is easy to implement, easy to update, and debug, and can be less costly since users pay for SaaS as they go instead of purchasing multiple software licenses for multiple computers.
• Churn rate, also known as attrition rate, is the rate at which customers stop doing business with an entity; it is a measure of the number of individuals or items moving out of a collective group over a period of time. 
• In SaaS, the average churn rate is around 5%, and a good churn rate is considered 3% or less.
• This average rate varies across different industries and businesses, so in reality, there is no such universal average churn rate. 
• It has a number of applications:
  • ​Auditing functions
  • Email services
  • Automating sign-up for products and services
  • Shared company calendars which can be used for scheduling events
  • Managing documents including file sharing and document collaboration.
• Types of software that have migrated to a SaaS model are often focused on enterprise-level services, such as human resources.
• These types of tasks are often collaborative in nature, requiring employees from various departments to share, edit, and publish material while not necessarily in the same office.

Therefore, in SaaS, the average churn rate is around 5%.

Refer to:

‘’Essar Steel, one of the largest defaulters with around Rs 44,000 crore in questionable debt, when put up for sale, elicited expressions of interest from five bidders…. parties include the Ruias, who are the original promoters of Essar Steel.’

I is correct.

‘The acquisition of Bhushan Steel by Tata Steel and of Electro­steel by Vedanta. Bhushan Steel owed its financial creditors around Rs 56,000 crore, whereas the Tata Steel bid returned Rs 35,200 crore upfront to the financial creditors, besides giving them a 12.3% stake in the company in lieu of returning the remaining debt.’

II is incorrect.

‘Between April 2014 and December 2017, recovery rates varied from nil to just above 20%, and in the case of another three, the rate ranged between 23% and 29%. The average recovery rate for all 21 banks was a pathetic 10.8%.’

III is correct.

Refer to: ‘The context in which this new strategy was launched needs recalling. Unlike the period prior to the 1990s, the NPAs that accumulated in the books of banks in recent years were not equitably distributed across different categories of borrowers, big and small, priority and non-priority. Rather, because of a change in the lending strategy during the period of the credit boom after 2003, the NPAs are now concentrated in the hands of large borrowers, primarily corporate borrowers.’

I is opposite of what has been stated in the passage.

II is correct.

III has not been mentioned in the passage and is incorrect.

Brainstorming:

• Brainstorming is a group activity in which teams generate some creative ideas spontaneously to solve a specific problem.
• They come up with a vast collection of ideas without any fear of criticism and draw links between them to find out the potential solution.
• At first, even if the ideas seem a bit unrealistic, they are taken into consideration.
• In brainstorming sessions, the greater the number of ideas generated there is bigger the chance of producing radical and effective solutions. 

Therefore, ‘No ideas are ever criticized’ and ‘the more radical the ideas are the better’ – are the rules of the Brainstorming decision-making process.

Mutually exclusive projects are projects in which acceptance of one project excludes the others from consideration. In such a case, the best project is accepted. NPV and IRR conflict, which can sometimes arise in case of mutually exclusive projects, becomes critical. The conflict either arises due to the relative size of the project or due to the different cash flow distribution of the projects.

The correct answer is An employee compares his or her job's input-outcomes ratio with that of relevant others and then takes steps to correct any inequity.

Key Points Equity Theory:

• The equity theory proposes that employees compare their job's input-outcomes ratio with that of relevant others and then take steps to correct any perceived inequity.
• The equity theory is a motivation theory that seeks to explain how individuals are motivated to maintain a balance between the inputs they bring to a job (e.g. effort, skill, experience) and the outcomes they receive from that job (e.g. salary, recognition, benefits).
• According to the theory, individuals compare their input-output ratio with that of others who are seen as relevant and use this comparison to evaluate the fairness of their job situation.
• If an employee perceives that their input-output ratio is lower than that of others in similar positions, they may feel under-rewarded and become demotivated. In contrast, if an employee perceives that their input-output ratio is higher than that of others in similar positions, they may feel over-rewarded and become complacent.
• To restore equity, the employee may take steps such as adjusting their inputs (e.g. reducing effort), seeking a change in outcomes (e.g. requesting a raise), or changing the comparison level (e.g. comparing themselves to a different group of employees).
• The equity theory highlights the importance of perceived fairness in the workplace and suggests that employees are motivated not just by the absolute level of rewards, but also by the perceived fairness of those rewards relative to others in similar positions.

Walter's model is based on the following assumptions:

1. The firm finances all investment through retained earnings (debt or new equity is not issued).

2. The firm's internal rate of return (r) and its cost of capital (k) is constant.

3. All earnings are either distributed as dividend or reinvested internally immediately.

4. Initial earnings and dividends never change.

5. The firm has a very long or infinite life.

Customer touchpoints

• Customer touchpoints are any point of contact between a business and a customer, be it an email, call center, via a company website, etc.
• This doesn't have to be directly instigated by the business. For instance, advertisements or third-party review sites are a form of customer touchpoints.
• Customer touchpoints are where customers interact with your brand, product, service, etc.
• Developing an understanding of each touchpoint means that you can design better user and better customer experiences.
• This understanding can also be used to enhance user and customer journey mapping exercises.
• Five main touchpoints that reach consumers are the brand promise, brand story, innovation, purchase moment, and consumer experience.
• Regardless of the order, they reach the consumer; if the brand does not deliver a consistent message, the consumer will be confused and likely shut out that brand.

Therefore, refers to any direct or indirect interaction customers have with a brand, product, service, etc.

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

Key Points Assertion (A) is true and Reason (R) is also true, but Reason (R) does not explain Assertion (A).

• Assertion (A) states that the EXIM policy is liberal, market-oriented, and favours global trade. This is true because the EXIM policy has been gradually liberalized over the years to promote free trade and economic growth. The EXIM policy now allows for a wide range of imports and exports, with few restrictions.
• Reason (R) states that GATT has played a significant role in the liberalization of the economy. This is also true. GATT is a multilateral trade agreement that aims to reduce tariffs and other trade barriers. India is a member of GATT, and the EXIM policy has been aligned with GATT principles.

However, Reason (R) does not explain Assertion (A). The EXIM policy is not liberal, market-oriented, and favourable to global trade simply because of GATT. There are other factors that have contributed to the liberalization of the EXIM policy, such as the government's desire to promote economic growth and attract foreign investment.

In conclusion, Assertion (A) is true and Reason (R) is also true, but Reason (R) does not explain Assertion (A)

About Consumer Protection Act:

• The act aimed at protecting the consumer from exploitation in the hands of manufacturers.
• This act provides for the establishment of Consumer Protection Forums at the district level, Consumer dispute redressal Commission at the state level and National Consumer Dispute Redressal Commission at a national level.
• The pecuniary limit for the district level authority is less than Rs. 20 lakh, from Rs. 20 lakh to 1 crore for state-level that more than 1 crore for a national commission.
• The consumer can appeal against the decision of a lower redressal authority to a higher authority.
• In 2019 a new Consumer protection act was introduced that provided for the establishment of the Central Consumer Protection Authority, widened the definition of consumer, increased the pecuniary limits, etc.

Thus, the Consumer Protection Act was introduced in 24th December, 1986.

Merchandise exports Export merchandising is a method of offering retail goods, not services for sale in a foreign consumer market.

Merchandise imports are defined as goods that add to the stock of material resources in Australia as a result of their movement into the country.

Investment income is income that comes from interest payments, dividends, capital gains collected upon the sale of a security or other assets, and any other profit made through an investment vehicle of any kind. Generally, individuals earn most of their total net income each year through regular employment income.

A balance of payments deficit means the country imports more goods, services, and capital than they export. It must borrow from other countries to pay for its imports. In the long-term, the country becomes a net consumer, not a producer, of the world's economic output.

Customer Portfolio Management is a tool that aims to enhance the performance of an organization's business through various ways, such as promoting sales growth and increasing customer profitability.

• A customer portfolio is a segmented list of the various groups that do business with you.
• Think of it as a financial portfolio. An individual might have a grouping of all their financial assets, broken down into various categories such as stocks, bonds, student loans, mortgages, and car payments. This portfolio helps them to get the big picture about their financial situation.
• Similarly, a customer portfolio can help a business get the big picture about its customer base.
• For example, a dry cleaning business might have a customer portfolio with the following groups: Individuals and walk-in customers, Big corporations, Public schools, Restaurants, Hotels, etc.
• The Coca-Cola brand, for instance, details some of its customer portfolios on its website, referring to its partnerships with ''large international chains of retailers and restaurants and small independent businesses.'' By understanding who its customers are, Coca-Cola is able to do just about everything better: marketing, support services, improving sales, anticipating needs, and creating business solutions.
• Customer portfolio management helps businesses understand the behavior of their customer needs and demands and accordingly, are able to make categorizations. By segmenting customers into portfolios, a business can better understand the relative importance, each customer represents relative to the total sales and profits. Such an understanding assists businesses not only in retaining valuable customers but also in creating additional value with these customers through relationship development.

The correct answer is a - ii, b - iii, c - iv, d - i. 

Important Points 

Additional InformationLaw of Demand:

• The law of demand states that other factors being constant (cetris peribus), price and quantity demand of any good and service are inversely related to each other.
• When the price of a product increases, the demand for the same product will fall and vice-versa. 

Network externality:

• Network externality is an economics term that describes how the demand for a product is dependent on the demand of others buying that product.
• In other words, the buying patterns of consumers are influenced by others purchasing a product.

Hence, the correct answer is a - ii, b - iii, c - iv, d - i. 

The assertion is correct. International business has grown in more recent years at a faster pace than global production. The reason is given that growth through trade has increased, but growth through foreign direct investment has not is incorrect. The increasing inflow of FDI in recent years has also brought growth in the economy.

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.

Financial Institutions make money from buying in the market where the price is low and selling at a profit in markets where the price is higher - this activity is called arbitrage. Not all countries have their own currency e.g. members of the Eurozone and exchange rates are not fixed by the IMF. A collapse in the exchange rate of a currency can cause economic disruption e.g. a large increase in the rate of inflation, and a big increase in the value of debt held in foreign currency as occurred in Iceland in 2008. Such economic disruption does not guarantee benefits to financial institutions.

Key Points

• An import or export agent acts as a middle person for the purchase or sale of products between both domestic and overseas companies.
• Responsibilities for this career vary depending on the field and type of company for which the agent works.
• Duties may also be different depending on where the agent is in the supply chain.

Important PointsPrimary functions of Domestic-based export agents are as follows:

• The agent may travel abroad, do research, prepare an export plan, advise the exporter on how to adapt their marketing mix, make contact with potential buyers, negotiate deals with the buyers, take care of all promotional activities, handle the logistics and documentation, and much more.
• All of these tasks, the export will do on the exporter’s behalf.
• The exporter normally pays the agent for the expenses they have incurred marketing the firm’s products and handling the export administration, and will generally earn a commission on any sales generated.
• In essence, the export agent becomes the exporter’s export department. In some cases, the principal will want to keep tight control over the agent’s activities, while in other instances, the agent is given free rein.

Financial statement analysis refers to using financial data of a company to study its past performance and make recommendations about how it will perform in the future. It is done by the internal and external stakeholders to make informed decisions regarding investing.

Key Points

• The short-term analysis of financial statements is mainly concerned with working capital analysis so that a forecast could be made of the aspects to determine the liquidity and sufficiency of current assets as compared to current liabilities.
• The working capital analysis also helps to forecast the future earnings, ability to pay interest, debt maturities – both current and long term, and the probability of a sound dividend policy.

Therefore, the short-term analysis of financial statements is mainly concerned with the working capital analysis

Important Point

Types of short term and long-term analysis are differentiated below:

However, if the entire value of such gifts does not exceed Rs. 5,000/-, they are not taxed as perquisites.

Benefits received by the employee in the form of cash or kind above their regular salary are termed as perquisites.

• Perquisites are benefits provided to employee such as rent-free accommodation, company’s car, etc.
• Perquisites can be provided in cash or in kind.
• Perquisites may be fully or partially or non-taxable depending upon their nature.
• Perquisites do not include reimbursement of expenses which are incurred while working in the office.

The correct answer is C, D, B, A, E.

Key Points

C. State the null and alternative hypothesis:
Hypothesis testing begins with stating a null hypothesis (H0) and an alternative hypothesis (H1 or Ha). The null hypothesis typically represents the status quo or no effect, while the alternative hypothesis represents the claim or effect that is being tested.

D. State the level of significance (α):
The level of significance (α) is the probability of making a Type I error, which is rejecting the null hypothesis when it is actually true. Commonly used values for α are 0.05 (5%) or 0.01 (1%). It helps determine the critical region for decision-making.

B. Establish critical or rejection region:
The critical or rejection region is a range of values that corresponds to the extreme outcomes that would lead to rejecting the null hypothesis. It is determined based on the chosen level of significance (α) and the distribution of the test statistic. The critical region is usually located in the tails of the distribution.

A. Select a suitable test statistic:
The choice of a test statistic depends on the nature of the data and the hypothesis being tested. Different types of data and hypotheses require different test statistics, such as t-test, z-test, chi-squared test, etc. The test statistic is calculated from the sample data and is used to assess whether the observed results are consistent with the null hypothesis.

E. Formulate a decision rule to evaluate the null hypothesis:
The decision rule specifies under what conditions the null hypothesis will be rejected. It is based on comparing the calculated test statistic to the critical values from the distribution. If the calculated test statistic falls within the critical region, the null hypothesis is rejected in favor of the alternative hypothesis. If the test statistic does not fall within the critical region, the null hypothesis is not rejected.

The audit engagement letter, generally, should include a reference to each of the following except a description of the auditor’s method of sample selection.

Key Points An audit engagement letter is a written agreement used by auditors when signing a new client. This letter serves as a legal contract between both parties. It also defines their rights and responsibilities for their business relationship. The requirement for these letters comes from auditing and accounting standards. These require both the client and auditors to agree on the terms and conditions of an audit engagement.

Important Points

Auditors should only accept a new audit engagement or continue an existing audit engagement if the 'preconditions for an audit required by ISA 210 Agreeing to the terms of audit engagements are present.

ISA 210 requires the auditor to:

• Determine whether the financial reporting framework to be applied in the preparation of the financial statements is appropriate; and
• Obtain the agreement of management that it acknowledges and understands its responsibilities.

If the preconditions for an audit are not present, the auditor should discuss the matter with management, and should not accept the engagement unless required to do so by law or regulation.

Additional Information

What Are The Elements Of The Audit Engagement Letter?

1. The Objectives And Scopes Of The Audit Engagement
2. The Responsibilities Of The Auditor
3. The Responsibilities Of The Management
4. Identification Of The Applicable Financial Reporting Framework That The Entity Uses In Order To Prepare The Financial Statements
5. Reference To The Expected Form And Content Of Any Applicable Reports To Be Issued By The Auditors.
6. Others

The above sections are compulsory for any audit engagement letter. Apart from the above, this letter also includes other elements. These requirements come from ISA 210. The additional sections include the following.

• Reference to relevant professional standards, regulations as well as legislation that are applicable to the audit engagement.
• Limitations of an audit engagement
• Expectations that management will provide written representations
• The basis on which the fees are calculated
• Agreement of management to notify the auditor of subsequent events after the auditor’s report is signed
• Agreement of management indicating the provision of the draft financial statements in time to allow the audit to be completed by the deadline
• Form (and timing) of any other means of communication during the course of the audit
• The audit engagement letter may also cover other matters. These include the following.
• Any arrangements that concern the involvement of internal auditors and other staff of the entity
• Limitations to the auditor’s liability.

The industry refers to a group of firms/companies that does related primary activities for their business.

Key Points

1. Managerial Economics:

• It is a branch of economics that deals with the theories, tools, concepts, and methodologies to solve practical problems of business.
• These business decisions will not only affect the daily decisions in the future but also will affect the economic power of long-term decisions.

2. Economies of Concentration:

• When the number of firms in an area increases then those firms enjoy some of the benefits like availability of raw materials, transport, and communication, research and invention, etc. and they also receive financial assistance from banking and non-banking institutions.
• Here we can conclude that the concentration of all firms in the industry leads to economies of concentration.

3. Labour Economics:

• It involves the study of the factors which affect the efficiency of workers, the determination of their pay and also their deployment between different occupations and industries.
• It studies the labour force as an element in the process of production. Labour force comprises of all those working like an employee, employer, and also self-employed workers.

4. Marketing Economies:

• It is a system where the laws of supply and that of demand directs the supply of goods and services.
• Marketing economies of scale occur when the firm is able to lower the unit cost of promotion and advertising through accessing effective marketing mediums.

Therefore, Economies of Concentration accrue all the firm in an industry.

The correct answer is ​Buttle's Model.

Key Points

Buttle's Model:

• The Customer Relationship Management (CRM) value chain model is a model that shows firms how to build and implement CRM strategies.
• It was created in the year 2004 by Francis Buttle.
• This model's major goal is to connect an organization's internal and external processes in order to provide value for customers while making a profit. In addition, the concept can be used in both B2B (Business to Business) and B2C (Business to Customer) companies.

Additional Information

IDIC Model:

• The Peppers and Rogers Group created the IDIC model as a basic framework for adopting CRM in a range of settings.
• It was developed in the year 2004.
• IDIC stands for identify, differentiate, interact, and customize, which are the four steps of CRM deployment.

Payne's Model:

• The Five Forces CRM model was developed by Adrian Payne and Pennie Frow.
• Payne & Frow’s Five-Step Process Model ensures that the customer experience is consistent across all departments.