UGC NET Paper 2 Commerce Mock Test - 9 - UGC NET 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%

The correct answer is Building customer loyalty.

Key Points Holistic marketers achieve profitable growth by focusing on three key areas:

Expanding customer share: This means attracting new customers and increasing the amount of business that existing customers do with the company.

Building customer loyalty: This means creating a strong emotional connection with customers so that they keep coming back for more.

Capturing customer lifetime value: This means maximizing the amount of revenue that a company can generate from each customer over their lifetime.

By focusing on these three areas, holistic marketers can achieve profitable growth in the long term.

 Additional Information

Here are some specific strategies that holistic marketers can use to build customer loyalty:

Personalization: Holistic marketers use data to personalize the customer experience. This can include things like sending targeted emails, offering personalized discounts, and providing personalized customer service.

Community: Holistic marketers create a sense of community around their brand. This can be done by sponsoring events, creating online forums, or simply encouraging customers to interact with each other on social media.

Value: Holistic marketers provide customers with value beyond the product or service they are selling. This can include things like free shipping, loyalty programs, or educational content.

By building customer loyalty, holistic marketers can create a sustainable source of revenue that will help them achieve profitable growth in the long term.

The correct answer is July 2017.

Key Points

• Goods and Service tax
  • In 2016, the Indian Parliament passed a law, the Goods and Services Tax Act 2016, to simplify and introduce a unified indirect tax system in India.
  • This is expected to generate additional revenue for the government, reduce tax evasion and create ‘one nation, one tax, and one market’.
  • Another component of reform in this area is simplification. To encourage better compliance on the part of taxpayers, many procedures have been simplified and the rates have also been substantially lowered.
  • The GST is a value-added tax levied on most goods and services sold for domestic consumption.
  • The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services.
  • GST, which subsumed almost all domestic indirect taxes (petroleum, alcoholic beverages, and stamp duty are the major exceptions) under one head, is perhaps the biggest tax reform in the history of independent India.
  • It was launched into operation on the midnight of 1^st July 2017. Hence, Option 1 is correct.
  • GST is applicable on ‘supply of goods or services as against the old concept on the manufacture of goods or sale of goods or the provision of services.
  • GST is based on the principle of destination-based consumption taxation as against the principle of origin-based taxation.
  • It is a dual GST with the Centre and the States simultaneously levying tax on a common base.
  • The GST to be levied by the Centre is called Central GST (CGST) and that to be levied by the States is called State GST (SGST).
  • Import of goods or services would be treated as inter-state supplies and would be subject to Integrated Goods & Services Tax (IGST) in addition to the applicable customs duties.
  • GST rates to be mutually decided: CGST, SGST & IGST are levied at rates to be mutually agreed upon by the Centre and the States.
  • The rates are notified on the recommendation of the GST Council.
  • GST is levied at four rates viz. 5%, 12%, 18% and 28%. The schedule or list of items that would fall under these multiple slabs is worked out by the GST council.

An income earned which is not subject to income tax is called exempt income. As per Section 10 of the Income Tax Act, 1961, there are certain types of income that will be subjected to Income tax within a financial year, provided that they meet certain conditions and guidelines. 

Key Points

Income Exempt from Tax as per Section 10

Mentioned below is the list of a few incomes exempt from tax specific to Section 10:

1. Agriculture Income [Section 10(1)]
2. Amount received out of family income, Hindu Undivided Family (H.U.F.) [Section 10(2)]
3. Share of profit, [Section 10(2A)]
4. Interest paid to Non-Resident [Section 10(4)(i)]
5. Leave Travel Concession or Assistance [Section 10(5)]
6. Remuneration or Salary received by an individual who is not a citizen of India [Section 10(6)] a. Remuneration [U/s 10(6)(ii)] b. Remuneration received as an employee of foreign enterprise [U/s 10(6)(vi)] c. Employment on a foreign ship [U/s 10(6)(viii)] d. Remuneration received by an employee of foreign government [U/s 10(6)(xi)]
7. Tax paid by Government or Indian concern on Income of a Foreign Company [Section 10(6A), (6B), (6BB) and (6C)]
8. Perquisites/Allowances paid by Government to its Employees serving outside India [Section 10(7)]
9. Retirement Compensation from a Public Sector Company or any other Company [Section 10(10C)]
10. Amount received under a Life Insurance Policy [Section 10(10D)]
11. Statutory Provident Fund [Section 10(11)]
12. Recognized Provident Fund [Section 10(12)]
13. Superannuation Fund [Section 10(13)]
14. House Rent Allowance-HRA [Section 10(13A)]
15. Income of Scientific Research Association [Section 10(21)]
16. Income of a News Agency [Section 10(22B)]
17. Income of some Professional Institutions [Section 10(23A)]
18. Income of Mutual Fund [Section 10(23D)]
19. Exemption of income of a securitization trust [Section 10(23DA)j [w.e.f. A.Y. 2014-15]
20. Income of Investor Protection Fund [Section 10(23EA)]
21. Exemption of income of investor protection fund of depository [Section 10(23ED)] [w.e.f. A.Y. 2014-15]
22. Exemption for Certain Incomes of a Venture Capital Company or Venture Capital Fund from Certain Specified Business or Industries [Section 10 (23FB)]
23. Income of Registered Trade Unions [Section 10(24)]
24. Exemption of income to a shareholder on buyback of shares of unlisted company [Section 10 (34A) [w.e.f. A.Y. 2014-15]
25. Exemption of income from Units [Section 10(35)]
26. Exemption of income from Securitization Trust [Section 10(35A)] [w.e.f A.Y. 2014-15]
27. Long Capital gain (Below Rs. 1 Lakh)arising from sale of shares and units [Section 10(38)]

Important Point

1. According to the Income Tax Act, rental income of a property is taxed under Section 24 in the hands of the owner, under the head 'income from house property'.

2. LATEST NEWS Budget 2020

No Dividend Distribution Tax (DDT) to be paid by Companies from FY 2020-21. Hence the dividend income will become taxable in the hands of taxpayers irrespective of the amount received at applicable income tax slab rates.

Therefore, option 1 is the correct answer.

Complex Buying Behavior is spotted when there are significant differences between brands and also there is high involvement.

• Complex buying behavior occurs when the consumer is highly involved with the purchase and when there are significant differences between brands.
• This behavior can be associated with the purchase of a new home or a personal computer.
• Such tasks are complex because the risk is high (significant financial commitment), and the large differences between brands or products require gathering a substantial amount of information prior to purchase.
• This may include informing the consumer about the product category and its important attributes, providing detailed information about product benefits, and motivating sales personnel to influence final brand choice.

1. Variety Seeking Buying Behavior:

• Variety-seeking buyer behavior is the buying tendency of those consumers that do not have a high involvement with a product when there is a significant difference between brands.
• These types of consumers seek variety for no valid reasons at all and become bored quite easily with products.

2. Dissonance Reducing Buying Behavior:

• Dissonance-reducing buying behavior occurs when the consumer is highly involved but sees little difference between brands.
• This is likely to be the case with the purchase of a lawnmower or a diamond ring.
• After making a purchase under such circumstances, a consumer is likely to experience the dissonance that comes from noticing that other brands would have been just as good, if not slightly better, in some dimensions.
• A consumer in such a buying situation will seek information or ideas that justify the original purchase.

3. Habitual Buying Behavior:

• Habitual buying is that kind of buying behavior of customers where they don't think much before buying the product and involvement in the decision-making is very low.
• The product is perceived as a commodity and doesn't provide much difference from its rivals.

The correct answer is Option 1

Key Points

• The cartel is defined u/s 2(c) of the Competition Act, 2002. 
• Cartel is defined in section 2, clause (c) of the Act: “Cartel” includes an association of producers, sellers, distributors, traders or service providers who, by agreement. amongst themselves, limit, control or attempt to control the. production, distribution, sale or price of, or, trade in goods or.

Important Points

•  Section 2(f) in the Competition Act, 2002 defines 'Consumer'
• Section 2(h) in the Competition Act, 2002 defines 'Enterprise'
• Section 2(i) in the Competition Act, 2002 defines 'Person'

The correct answer is Internal Rate of Return

Key Points

The correct answer is 30%

Key Points

Standard deduction u/s 24(a)

Deduction available under section 24(a) of the Income Tax Act, 1961 is 30% of the Annual Value. This 30% deduction is allowed even if actual expenditure on the property is higher or lower. Therefore, this deduction is irrespective of the actual expenditure incurred on insurance, repairs, electricity, water supply, etc.Important Points

Additional Information Section 24 of the IT Act refers to the income accrued from house property. This section specifically relates to the exemptions you can get on the interest component of the home loan you are repaying. The section sheds light on the various kinds of deductions that are permitted from the income earned by an individual through his residential property.

The correct answer is 5 lakhs.

​Key Points

• To safeguard small investors from high-risk products, market regulator Sebi made a steep hike in the minimum investment size for any equity derivative product to Rs 5 lakh from Rs 2 lakh.
• It has been decided that the minimum lot size of an equity derivative contract could be increased to Rs 5 lakh.
• For stock derivatives, the lot size (in units of underlying) would be fixed as a multiple of 25, provided the lot size is not less than 50.

Additional Information

• SEBI stands for Securities and Exchange Board of India.
• The Securities and Exchange Board of India is the regulatory body for the securities and commodity market in India under the jurisdiction of the Ministry of Finance, Government of India.
• The headquarters of SEBI is in Mumbai.
• The Chairperson of SEBI is Ajay Tyagi., 

(a) - (iii), (b) - (i), (c) - (iv), (d) - (ii) is correct.

• Type I error: Type I error is also known as false positive and occurs when a researcher incorrectly rejects a true hypothesis.
• Large sample: The standard error is inversely proportional to sample size i.e. the larger the sample size, the smaller the standard error because the statistic will approach the actual value and vice-versa.
• Multiple regression: Multiple regression represents the relationship between multiple independent (predictor) variables and one dependent (criterion) variable.
• Chi-square test: The Chi-square test is a non-parametric tool designed to analyze group differences when the dependent variable is measured at a nominal level.

All of the above are the provisions of the Right to Information Act, 2005.

Right to Information (RTI),2005, is an act set up by the Parliament of India that frames the procedures and rules for the right to information to the citizen. RTI is replaced by the Freedom of information act, 2002. The following are the features of the RTI Act:

• It promotes accountability and transparency in every public authority.
• It promotes effective and timely dissemination of correct information by the public authority to any individual.
• It promotes the establishment of district, state, and central level information commission as an appellate body.

Modern marketing concepts emphasize customer relationships. If customers are satisfied with the producer's products, then the market image of the producer will be good. This will lead to more profits and growth. Modern marketing is about customer experience at every touchpoint, building relationships with customers, adapting continuously to the new digital landscapes, and marketing across multiple channels to reach different consumers.

In most countries with income taxation, corporate entities are subject to tax on their profits and, in addition, are taxed in the hands of shareholders is known as surcharges.

A surcharge is an additional charge or tax to the tax being already levied. The separate taxation of the incomes of corporations and their shareholders follows the legal principle that corporations and shareholders are distinct entities.

The financial break-even point is the level of EBIT where the EPS is zero for a particular given financial plan. Indifference point is the point where the EPS will be the same for the given financial plans irrespective of the debt-equity mix. If the expected level of EBIT exceeds the indifference point, then it would be beneficial to use the fixed charge source of funds to increase the EPS i.e. use of levered funds.

ratio
Contribution Sales Variable cost


BEP

Rs. 5000

The European Legislative Council is not associated with the EU organization.

The European Union adopts legislation through a variety of legislative procedures. The procedure used for a given legislative proposal depends on the policy area in question.

Most legislation needs to be proposed by the European Commission and approved by the Council of the European Union and European Parliament to become law. Therefore, there is no such body as the European legislative council.

Financial management is concerned with the procurement of funds and their effective utilisation so that unnecessary usage of funds can be avoided. Financial management optimises the output from the given input of funds and attempts to use the funds in the most productive manner.

The rate of consumer price inflation is 5.2% for the first half of the current fiscal year.

According to the passage, "It also raised its projection for consumer price inflation a bit to 5.2 percent for the first half of the current fiscal year."

The total outlay method is not a method of forecasting demand.

The total outlay method is the major method of measuring the price elasticity of demand. It is also generally known as the total expenditure method. In this method, elasticity is measured by comparing the total expenditure of the consumer during the change in the price of commodities.

Methods of forecasting demand are: 

• Survey of buyer's intentions
• Collective opinion
• Trend projection 
• Executive judgment method
• Controlled experiments
• Expert's opinions

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 C. K. Prahlad.

Key Points "The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits" has been written by C.K. Prahalad. The book, published in 2004, explores the idea that the world's poor can be considered as a lucrative market for businesses, and by addressing their needs and creating products and services tailored for them, both social and economic goals can be achieved. Prahalad suggests that businesses can play a crucial role in poverty alleviation while also generating profits by engaging with the large and untapped market represented by the world's poor.

Additional Information

"The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits" is a book written by C.K. Prahalad, an influential management thinker and professor of corporate strategy. The book, first published in 2004, introduces the concept of the "Bottom of the Pyramid" (BoP) as a significant yet underserved market segment comprising the world's poor.

Key points and details from the book include:

• Bottom of the Pyramid (BoP):

Prahalad argues that the traditional view of the world's poor as passive recipients of aid should be reconsidered. Instead, he sees them as an untapped market, constituting a potential source of innovation, growth, and profits for businesses.

• Market Potential:

Prahalad contends that there is a vast market opportunity at the bottom of the economic pyramid. Despite their low individual purchasing power, when aggregated, the purchasing power of the poor is substantial. He advocates for businesses to develop products and services that are affordable, accessible, and sustainable for this market.

• Role of Business in Poverty Alleviation:

The book challenges businesses to go beyond traditional corporate social responsibility (CSR) initiatives and philanthropy. Prahalad argues that by addressing the needs of the poor and integrating them into the market, businesses can contribute to poverty alleviation while simultaneously creating value for themselves.

• Innovative Business Models:

Prahalad highlights examples of companies that have successfully implemented innovative business models to serve the BoP market. These include products such as affordable healthcare, telecommunications, and financial services designed to meet the unique needs of low-income consumers.

• Co-Creation and Partnerships:

Prahalad emphasizes the importance of involving the poor as active participants in the design and development of products and services. Co-creation and collaboration with local communities are seen as key elements for success.

• Sustainability and Inclusivity:

The book argues that sustainable business practices and inclusive growth strategies are essential for long-term success. It promotes the idea that businesses can achieve economic prosperity while contributing to the well-being of society.

The correct answer is ​(A) - (IV), (B) - (II), (C) - (I), (D) - (III)

Key Points

Net Stable Funding Ratio

• The net stable funding ratio is a liquidity standard requiring banks to hold enough stable funding to cover the duration of their long-term assets.
• Banks must maintain a ratio of 100% to satisfy the requirement.
• The Net Stable Funding Ratio (NSFR) and Liquidity Coverage Ratio (LCR) are significant components of the Basel III reforms.

Innovative Perpetual Debt Instrument

• Tier I Capital consists mainly of share capital and disclosed reserves. Since this capital is fully available to cover the core losses, it is also called Core Capital. For this reason, this is considered the highest quality capital.
• IPDIs issued as Tier I cannot exceed 15 percent of total capital.
• This limitation is based on the Tier I capital amount as of March 31 of the previous year along with deductions of intangible assets before investment deductions.

Time Maturity Gap

• Assets Liabilities Management is the process whereby a bank’s total assets and liabilities are controlled and managed simultaneously in an integrated fashion. In the management of the overall balance sheet.
• A maturity gap is a term used to describe a strategy that is designed to assess the relationship between the risk of owning assets and liabilities that generate revenue due to interest rate accruals and the volatility of those holdings.

Risk-Weighted Assets

• Tier II Capital is also known as supplementary capital. It consists of certain reserves and certain types of subordinated debt.
• Any loan which is repayable after other debts have been paid is called subordinated debt. Tier 2 capital also has a ratio.
• This is the formula utilized to describe the capital being held versus what's known as total risk-weighted assets (RWAs).
• Risk-weighted assets are the assets held by the bank that is weighted by its credit risk.

Section 68 of Companies Act 2013: Power of company to purchase its own securities

A company may purchase its own shares or other specified securities (hereinafter referred to as buy-back) out of—

• its free reserves;
• the securities premium account; or
• the proceeds of the issue of any shares or other specified securities

Important Points

• The term "free reserves" refers to those reserves which are available for distribution as dividend to shareholders, i.e. reserves which are not required to be maintained as per law or by the terms of the issue of share capital.
• The securities premium account is the account where the amount received in excess of the face value of the shares is credited.

Net profits of the company cannot be utilized for the purpose of buy-back of shares.

Hence, as per Section 68 of the Companies Act 2013, companies may purchase their own shares out of its free reserves, the securities premium account, or the proceeds of the issue of any shares or other specified securities.

Gross Annual Value:

• Gross annual value (GAV) is a term used to describe the potential revenue from immovable property.
• Whether or not the property is rented out for business or residential uses, GAV will still apply.
• In Income Tax, the word immovable property comprises buildings such as residential houses, factories, commercial buildings, godowns and land on which bonded warehouses have been established.
• Net Annual Value: In accordance with the Income Tax Act, the municipality taxes are subtracted from the property's gross annual value to determine the Net Annual Value (NAV). NAV is the difference between GAV and the municipal tax that the owner has paid.

Important PointsCalculation of Net Annual Value

Note: Municipality Tax (due not paid) is not be deducted from GAV because it is not yet paid by the owner, so the GAV itself will be the value of NAV.

Hence, the correct answer is 6,00,000.

1 - beta = 1 - 0.10 = 0.90

1. Agency by estoppel:

• The concept of agency by estoppel arises where one person acts in such a way that the other believes that a third person is authorized to act on his behalf and enters into a transaction with the third person, the person whose act induced him to do so, is liable for that agreement as if the third person acting on his behalf.
• It is based on principles of natural justice and equity.

2. Agency by necessity

• It is a type of legal relationship in which one party can make essential decisions for another party.
• The courts recognize agency by necessity during an emergency or urgent situation under which the beneficiary is unable to provide explicit authorization.

3. Agency by Ratification:

• A confirmation by the principal of an act or contract performed or entered into on his or her behalf by another, who assumed, without authority, to act as his or her agent.

Every year, we have to pay a fixed portion of our income to the central government in the form of income tax. As per the rule of the central government for Income tax, a certain tax is applicable on the income of all people as per slab. Every business and person is supposed to pay the tax and the return is to be submitted every year. Total funds collected through tax are used by the government for services as well as to fulfill the requirements for the country's development.

It performs the following functions as per the Reserve Bank of India Act, 1934:

1. Banking functions:

• The Reserve Bank acts as the Banker, Agent, and Adviser to the Government of India and states. It performs all the banking functions of the State and Central Government and it also tenders useful advice to the government on matters related to economic and monetary policy. It also manages the public debt of the government.
• It performs the same functions for the other commercial banks as the other banks ordinarily perform for their customers. RBI lends money to all the commercial banks of the country.

2. Supervisory functions:

• It supervises other banks and governments into various economic conditions and guides them at the time of inflation or deflation in the economy.

3. Promotional functions:

• The central bank also performs promotional functions which include integrating with world economies and maintaining foreign reserves. They represent the country's economy internationally.

In 'job evaluation', the key jobs are designated as ones that are most important for the survival of the organization.

A job evaluation is a systematic way of determining the value/worth of a job in relation to other jobs in an organization. It tries to make a systematic comparison between jobs to assess their relative worth for the purpose of establishing a rational pay structure.

Budgets may be classified on the basis of:

(A) Functions

(B) Conditions

(C) Periods (time)