MH SET Paper 2 Mock Test - 4 (Commerce) - MAHA TET MCQ

IFC encourage the growth and development of Public Sector Enterprises in member countries statements is false.

The International Finance Corporation (IFC) is an international financial institution that offers investment, advisory, and asset management services to encourage private-sector development in less developed countries. The IFC is a member of the World Bank Group and is headquartered in Washington, D.C. in the United States.

The Correct answer is ‘Industrial recession’.

 Key PointsRisk:

• Risk is the process of identifying, assessing, and controlling uncertainty in an entity's capital and earnings is known as risk management. These dangers arise from a variety of sources, including financial uncertainty, legal liabilities, technological issues, strategic management errors, accidents, and natural disasters.

 Important PointsCompany strike: This option is incorrect because Company strike is a type of risk that can be certain. it can be avoided by taking corrective actions.

Bankruptcy of a major supplier: This option is incorrect because Bankruptcy of a major supplier will not impact the Business.

Death of a key company officer: This option is incorrect because Death of a key company officer will not impact because usually company make Key Managerial insurance to protect such loss

Industrial recession: This option is correct because Industrial recession because it is specific risk factor which cannot be avoided by diversifying the company’s portfolio.

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

The correct answer is D, A, C, B

Important Points Formulation of hypothesis: A precise, testable, predictable assertion supported by theoretical guidance and/or past data is necessary when formulating a hypothesis. Numerous research designs can result in the formulation of a hypothesis.

Data Collection: Primary data collection needs to be preceded by a great level of preparation and pilot data collection may be required in case of questionnaires. Primary data collection is not a compulsory stage for all dissertations, and you will skip this stage if you are conducting desk-based research

Testing of hypothesis: The process of hypothesis testing involves putting an analyst's presumption about a population parameter to the test. The type of data used and the purpose of the study will determine the methodology the analyst uses. Using sample data, hypothesis testing is done to determine whether a claim is plausible.

Policy prescription: Lastly, if the theory seems to make sense and the econometric model was not refuted on the basis of the hypothesis test, we can go on to use the theory for policy prescription.

The “Theory of Absolute Cost Advantage” considers the following points:

• The theory of absolute cost advantage explains that a country having an absolute cost advantage in the production of a product on account of greater efficiency should specialize in its production and export.
• It is a two-country framework with two commodities.
• It is a positive-sum game, i.e. both countries are gaining.

The correct answer is (a), (b), and (c).

• The Asia-Pacific Economic Cooperation (APEC) is a regional economic forum founded in 1989 to capitalize on the Asia-Pacific region's growing interconnectedness. The 21 members of APEC want to increase regional prosperity by fostering balanced, inclusive, sustainable, creative, and secure growth and by speeding up regional economic integration.
• To achieve these objectives, APEC member economies devised a framework in 1995 in Osaka, Japan, that identifies trade and investment liberalization, business facilitation, and economic and technical cooperation as the three core areas of cooperation, also known as the "Three Pillars" of APEC.
• APEC facilitates the movement of products, services, investments, and people across borders. Members promote this trade by facilitating speedier border customs procedures, improving business climates behind the border, and unifying legislation and standards across the region.

Hence, three pillars of the Asia-Pacific Economic Cooperation (APEC) are trade and investment liberalization, business facilitation, and economic and technical cooperation.

Refer to: ‘The original IBC bill did not prevent promoters from making bids for resolution at the NCLT. Some justified the Ruia bid on the grounds that extraneous factors may have led to distress for no fault of the original promoters. But, if the Committee of Creditors (CoC) has taken the firm to the NCLT, it is clearly because they saw the incumbent management as incapable of resolving the crisis faced by the firm. And, if promoters regain control, much of the debt their company owes will be forgiven, with the losses being carried by the financial and operational creditors.’

All of the statements are correct.

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.

Surcharge is levied when the total income 1 Crore exceeds for domestic corporation.

A surcharge is an additional charge or tax to the tax being already levied. A surcharge of 10% on a tax rate of 30% effectively increases the combined tax rate to 33%. Marginal reliefs are also provided to individuals as sometimes an increase in tax liability after factoring surcharge becomes more than the increase in income above Rs 1 crore.

Activities in the process of accounting:

Recording the business transaction in the books of entry:

• The first step in the accounting cycle is identifying transactions and recording them in the books of entry i.e. journal entry.
• Companies will have many transactions throughout the year so recordkeeping is essential for recording all types of transactions.
• Journal entries for every transaction must be created.
• The choice between accrual and cash accounting will dictate when transactions are officially recorded.

Journalising the transaction in the ledger accounts:

• Once transactions are recorded in journal entries, they must be posted in the general ledger accounts.
• The general ledger helps in the breakdown of all accounting activities by accounts.
• It allows a bookkeeper to monitor financial positions by account.

Preparation of Annual Financial Statements:

• After the adjustments are recorded as journal entries wherever necessary, the company generates its financial statements.
• For most companies, this statement will include income statements, balance sheets, and cash flow statements. 
• Lastly, a company closes its books at the end of the day on a specified closing date.
• The closing statement provides a report of analysis of performance over the period. 

Deriving meaningful inferences for business decisions:

• With the help of financial statements and closing statements, business owners can derive a meaningful inference about their business activities.
• It helps to ensure accuracy, consistency, and efficient financial performance analysis.

In Section 10 of Income Tax Act, exempted incomes have been mentioned.

As per Section 10 of the Income Tax Act, 1961, there are certain types of income that will be exempt subject to income tax within a financial year, provided they meet certain conditions and guidelines. 

LIBOR is the London Interbank Offered Rate. It is the average rate of estimated rates by each leading bank in London.

It is the global reference rate for unsecured short-term borrowing in the interbank market. It acts as a benchmark for short-term interest rates. It is used for the pricing of interest rate swaps, currency rate swaps as well as mortgages.

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

 Key Points

• Replacement cost - based approach: This model is based on the cost of replacing an employee. It includes the costs of recruitment, selection, training, and development. This model was proposed by Giles and Robinson in 1967.
• Opportunity cost model: This model is based on the value of an employee in their alternative best use. It is the amount of money that the organization would lose if an employee left. This model was proposed by Hekimian and Jones in 1967.
• Human asset multiplier method: This model is based on the productivity of an employee. It multiplies the employee's salary by a factor that reflects their productivity. This model was proposed by Flamholtz in 1971.
• A model on valuation of human organisation: This model is a non-monetary model that measures the value of human resources in terms of their contribution to the organization's goals. This model was proposed by Likert in 1967.

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

Measures of Central Tendency:

• Often in statistics, we tend to represent a set of data by a representative value which would approximately define the entire collection.
• This representative value is called the measure of central tendency, and the name suggests that it is a value around which the data is centered.
• These central tendencies are mean, median, and mode.

Key Points

Median:

• Generally median represents the mid-value of the given set of data when arranged in a particular order.
• Median: Given that the data collection is arranged in ascending or descending order, the following method is applied:
• If the number of values or observations in the given data is odd, then the median is given by [(n+1)/2]th observation.
• If in the given data set, the number of values or observations is even, then the median is given by the average of (n/2)th and [(n/2) +1]th observation.
• Thus Assertion A is true.

Mode:

• In statistics, the mode is the value that is repeatedly occurring in a given set.
• We can also say that the value or number in a data set, which has a high frequency or appears more frequently, is called a mode or modal value.
• Mode is not affected by extreme values.
• Thus Reason R is also true.
• However, the Assertion and Reason are not related to one another and do not establish a relation between median and mode.

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

'Monopoly' is a market structure characterized by a single seller, selling a unique product in the market. In a monopoly market, the seller faces no competition, as he is the sole seller of goods with no close substitute. Characteristics associated with a monopoly market make the single seller the market controller as well as the price maker. He enjoys the power of setting the price for his goods. The term monopolistic competition represents the combination of monopoly and perfect competition. Monopolistic competition refers to a market situation in which there are a large number of buyers and sellers of products. However, the product of each seller is different in one aspect or the other. The perfect competition is characterized by the presence of many firms. They all sell identical products. The seller is a price taker, not a price maker. The term oligopoly has been derived from two Greek words, oligo means few and poly means control. Therefore, oligopoly refers to a market form in which there are few sellers dealing either in homogenous or differentiated products.

SLR is used to control the bank's leverage for credit expansion. The Central Bank controls the liquidity in the Banking system with CRR.

SIDBI was made responsible for administering the Small Industries Development Fund and National Equity Fund that was administered by IDBI before. SIDBI is the Primary Financial Institution for promoting, developing, and financing MSME (Micro, Small, and Medium Enterprise) sector.

CUTS' work is divided into five operational areas: Consumer Protection; International Trade and Development; Competition, Investment, and Economic Regulation; Human Development, and Consumer Safety

"Industrial Licensing Policy Inquiry Committee" was set up under the chairmanship of Mr. Subimal Dutt as a follow-up to the reports of the Monopolies Inquiry Commission and Hazari Committee. This committee’s mandate was to inquire into the working of the licensing system in India. The committee had submitted its report in July 1969.

The functions of RBI includes:

• ​Credit control: RBI controls the credit created by commercial banks in India, using quantitative and qualitative methods.
• Monetary Policy: Under the Reserve Bank of India, Act,1934 RBI is entrusted with the responsibility of conducting monetary policy.
• Issue of Currency Notes: The Reserve Bank is the nation's sole note issuing authority.

​Commercial banks perform the function of credit creation in an economy.  Therefore, the money that is created by commercial banks is known as credit money. This is achieved by the commercial banks in the form of purchasing securities and providing loans.

Thus, Creation of credit is not a function of Reserve Bank of India.

Assertion (A): The demand curve of FMCG products is usually relatively inelastic.

Reasoning (R): The FMCG companies do not follow skimming pricing as a strategy to fix the price, they follow penetration pricing.

Here (A) is correct and (R) is incorrect. Hence Option4 is the correct answer.

Key-Points

• Price elasticity of demand is an indicator of the impact on the demand for a product in relation to its price change.
• Some types of consumer goods show a higher price elasticity of demand than others.
• For example, non-essential goods have a high elasticity of demand, while essential goods or consumer staples have a low elasticity of demand.
• Factors that affect the price elasticity of demand include the availability of competitive substitutes and the brand recognition of products.
• Relatively inelastic demand is one when the percentage change produced in demand is less than the percentage change in the price of a product. 
• Price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and then lowers it over time.
• As the demand of the first customers is satisfied and competition enters the market, the firm lowers the price to attract another, a more price-sensitive segment of the population.
• This approach contrasts with the penetration pricing model, which focuses on releasing a lower-priced product to grab as much market share as possible.

The paired sample t-test, sometimes called the dependent sample t-test, is a statistical procedure used to determine whether the mean difference between two sets of observations is zero. In a paired sample t-test, each subject or entity is measured twice, resulting in pairs of observations.

The correct code is: (a) - iii, (b) - i, (c) - ii, (d) - iv

A Provident Fund is a government-sponsored retirement scheme. Both the employer and the employee are required to contribute to the provident fund account with an aim to create a retirement corpus for the employee.

Personal safety and security is a major concern for families living away from home. Luckily for most of our families, they feel as safe and secure in their new homes. For some this was not the case at all as they now endured a range of new threats to the safety and security of their families.Severance pay amounts to a week or two of pay for every year that the employee was with the company. Executives may receive a month's pay for each year of service and senior executives generally receive severance pay as outlined in the employment contract.While transport allowance is an allowance given to meet commuting expenses between place of residence and office or to meet personal expenditure of employee of transport business, conveyance allowance is an allowance granted to meet the expenditure on conveyance in performance of office duty.

Key Points

Marketing Communications:

• Enterprises must comprehend the operation of marketing communications in order to develop and implement the marketing strategy effectively.
• Electronic and non-electronic mediums or channels are used in marketing communications to deliver a message to a market, which might include consumers, prospects, stakeholders, and leads for a company. ​

Important PointsSteps involved in Effective Marketing Communication

1. Understand And Know Your Target Audience: The first step in establishing the best marketing communications system for your business is to know your target audience intimately. This step includes analyzing buyer personas, past sales, and marketing data (conversion rates, churn rates, etc.), along with analyzing benchmark data, and the overall scope of target lead/customer demographics.​
2. Establish a budget plan: Financial considerations must be taken into consideration at every stage of the process involved in developing a marketing strategy/marketing communication plan, at the end. To achieve this, the marketing communication plan must be in line with the company budget, which will include input from the CFO of the business.
3. Decide on Your Unique Selling Proposition: To stand out among other businesses, you must adopt and use strategic differentiators. A business can extend operations and reach a wider audience when it determines its unique selling proposition (USP). They can then attract more motivated customers, boost conversion rates, and boost the company's top line.
4. Establish Your Marketing Communication Techniques: Choosing the methods that will comprise the plan, such as platforms, style, etc., is one of the most crucial steps in developing and putting into practice a strong marketing communications strategy. However, the first step in this process is for a company to specify the precise marketing objectives/goals required to enhance its marketing system.
5. Keep a constant brand element: Even though it might not appear as crucial as the other elements involved in developing an efficient marketing strategy, how your business upholds its brand and brand voice is crucial. Throughout all stages of marketing communications and on all platforms, channels, and media, make sure your branding element is upheld. The fundamental identity of your business is your brand. In order to create a favourable perception of your business in the eyes of prospects, leads, clients, and customers, consistency is essential.
6. List the main performance metrics: A collection of success measures that can be tracked, examined, and used to develop future optimization plans are necessary for evaluating the effectiveness of your marketing communications endeavour. For instance, a variety of indicators can be used to assess the effectiveness of your communications system, letting you know what is and isn't working.
7. Implement, Test, and Repeat: Once your marketing strategy is complete, you can start implementing the tactics, achieving the success metrics, and making any necessary changes to the strategy. It is best to keep an open mind and employ flexible strategies that can be improved upon as you go. Plans for marketing communications should be flexible and allow for optimization rather than being rigid.

The correct answer is Both I and II.Key Points

• Both wealth tax and gift tax are referred to as paper taxes because they are not widely enforced and are often evaded by taxpayers.
• Wealth tax is considered a paper tax because it is difficult to assess the true value of an individual's assets and is often avoided through offshore accounts or other means of hiding wealth.
• Gift tax is considered a paper tax because it is relatively easy to avoid by transferring assets in a way that does not trigger the tax.

Additional Information

• Wealth tax is a tax on the net wealth of an individual or organization, including assets such as cash, bank deposits, real estate, and investments.
• Gift tax is a tax on the transfer of property by one individual to another, without receiving anything in return.

As per section 138 of the Companies Act, 2013, a certain class of companies are required to appoint an internal auditor for conducting an internal audit.

This Internal audit of the company's functions and activities shall be conducted by a chartered accountant, a cost accountant, or such other professional as the Board may determine.

• Direct marketing gives the opportunity of promoting goods and services directly to the customers who need them the most.
• Direct marketing helps in building relationships with new customers.
• All promotional information is relayed without intermediaries and any third parties.
• Emails, newspapers, outdoor advertising, SMS marketing, Tele-marketing, websites, catalog distribution, etc. are various types of direct marketing strategies.

Therefore, Tele-marketing is a part of Direct marketing.

The correct answer is International Development Association.

• The International Development Association (IDA) provides interest-free loans known as credits poorest countries.
• IDA also provides grants to governments of the poorest countries.
• IDA aims to reduce poverty by providing zero to low-interest loans (called “credits”) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions.
• IDA complements the World Bank’s original lending arm—the International Bank for Reconstruction and Development (IBRD).
• IBRD and IDA share the same staff and headquarters and evaluate projects with the same rigorous standards.
• IDA provides significant levels of debt relief through the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI).
• IDA's work covers primary education, basic health services, clean water and sanitation, agriculture, business climate improvements, infrastructure, and institutional reforms.

About the World Bank:

World Bank composed of 5 institutions:​​

• World Bank is headquartered at Washington.
• The president of the World Bank Group is David Malpass.
• There are 189 members of the world bank.

Capital gearing ratio is used to show the proportion of fixed interest-bearing capital to funds belonging to the shareholder. It is used to measure the long term solvency of the company. 

Fixed asset turnover is used to measure the efficiency with which the firm uses its fixed asset to generate revenue.

Return on equity measures the profitability of the funds invested in the company. In other words, it calculates the percentage of returns generated to equity shareholders.

Acid test or quick ratio is used to measure the short term solvency of the company.