MH SET Paper 2 Mock Test - 7 (Commerce) - MAHA TET MCQ

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 Gold Jewellery.

Key Points

• GST is known as the Goods and Services Tax.
• It is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc.
• The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017.
• Products that are exempted from GST are:
  • Alcohol
  • Petroleum products
  • Vegetables
  • Honey, etc

Additional Information

• GST was introduced by the 101^st Constitutional Amendment Act.
• GST was the 122^th Constitutional Bill.
• GST was introduced by then Finance Minister Arun Jaitley.
• The present Finance Minister of India is Nirmala Sitharaman.

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.

Therefore, the only statement I is correct.

Key Points The correct match is given below:

Important Points 

Assessment year:

• The Assessment Year is defined under Section 2(9) of the Income Tax Act as the period of 12 months starting from April 1 of every year and ending on March 31 of the following year.
• It is the year following the financial year in which the income is earned and assessed for taxation purposes.

Capital asset:

• Capital Asset is defined under Section 2(14) of the Income Tax Act as any kind of property held by a taxpayer, whether or not connected with their business or profession, but excludes certain assets such as stock-in-trade, personal effects, and agricultural land in rural areas.

Gross total income: 

• Gross Total Income is defined under Section 80B(5) of the Income Tax Act as the total income of a taxpayer before making deductions under Chapter VI-A of the Act.

Perquisite-

• Perquisite is defined under Section 17(2) of the Income Tax Act as any benefit or amenity granted to an employee by their employer, which is chargeable to tax as a part of the employee's income.
• Examples of perquisites include rent-free accommodation, use of a company car, and club memberships paid for by the employer.

Hence, A-II, B-IV, C-III, D-I is the correct answer. 

Interest paid on debenture is a liability and it is fixed in nature. In the case of dividends, it is not fixed in nature to pay. Dividends are the appropriation of profits earn by the company on the other hand debenture is a long term liability of a company and its interest is expense not appropriation of profits.

Outcome-based pricing

• Outcome-based pricing is a method when the price of a product is based according to its perceived value rather than its costs.
• The business later aligns the price of the product as per the value.
• This pricing method is suitable where the outcome of the business is linked with the goals of the business and the business outcome thus benefits the end customers.
• It is important for a business to maintain a balance so that the buyer can define the outcome of the product appropriately which is acceptable and measurable to the service provider.
• It encourages increased productivity and efficiency of the business.
• It is a win-win approach for both the service provider and the buyer.

Therefore, when pricing is done for the IT sector, increasing the profitability of the client will represent outcome-based pricing as the main aim of the business is to increase the profit of the client which is linked with the goals of the business.

Statement I: Most infrastructure services are provided by public monopolies which generally suffer from severe problems like lack of accountability, low productivity, poor financial performance, and over-employment.

Explanation:

1. Most infrastructure services are provided by public monopolies to retain control over its working so that they can be provided to the general public at an economical cost.
2. They do have certain limitations because the government considers infrastructure facilities as its social duty and thus makes them available at a very considerable price which in turn makes it difficult for the government to pay for its maintenance effectively.
3. However, the statement that most infrastructure services provided by the government face severe problems cannot be generalized as there are many infrastructure facilities that are profitable and are at par with international standards.

Thus, the statement is incorrect.

Statement II: There is a need now to induce more private sector investment and participation in sharing, accountability, monitoring, and management of the infrastructure sector.

Explanation:

1. The private sector has greater incentive and ability to manage infrastructure & deliver services cost-effectively.
2. The private sector brings attention to cost recovery, which may encourage faster construction and better-continued maintenance over the contract life of the assets.
3. Also, the involvement of the private sector in infrastructure services will help the government to focus on other important aspects of the country.

Thus, the statement is correct.

Thus, option 3 is the correct answer.

The World Bank Group consists of several important agencies. Let's match the agencies mentioned in the options:

(I) The International Financial Corporation (IFC) - This is part of the World Bank Group and focuses on supporting private sector development in developing countries.

(II) The International Bank for Reconstruction and Development (IBRD) - This is also known as the World Bank and provides loans and technical assistance to middle-income and creditworthy low-income countries.

(III) The International Development Association (IDA) - This is part of the World Bank Group and provides concessional loans and grants to the world's poorest countries.

(IV) Small Industries Development Bank of India (SIDBI) - This is not a part of the World Bank Group. SIDBI is an independent financial institution based in India.

Based on this, the correct answer is:

4. I, II and III

An indemnity is a comprehensive form of insurance compensation for damages or loss. 

Contract of Indemnity:

• An indemnity contract is a legal arrangement between two parties where one party agrees to pay the other for a loss or harm that meets a certain requirement unless other circumstances are specified.
• It is a form of contingent contract characterized by all the essential elements of a valid contract which includes lawful consideration and object.
• The two parties involved are the indemnifier and the indemnified.
• The indemnifier is the promisor who agrees to make up for the damage that could be caused to another group.
• The indemnified is the person who is assured of the compensation for the damage incurred.
• The contract of indemnity agreement involves consideration.
• The mode of compensation for the contract can be expressed or implied.

Therefore, the contract of indemnity must be lawful consideration and object.

The selling concept is based on the premise that the customers won’t buy goods/services of your brand unless you perform sales and promotional activities on a large scale.

• The selling concept essentially mirrors the thought that consumers will not purchase enough of the company’s products unless large-scale promotional and selling efforts are carried out by it.
• The selling concept is used for goods that customers don’t buy normally, unsought goods like insurance, etc. These goods are aggressively sold by tracking down the target segment and sold on the virtue of the product benefits.
• The final objective is to increase sales revenue and increase profits.
• The focus in the selling concept is more on selling the products of the company to consumers without comprehending the market needs and increasing sales transactions rather than building and enhancing relationships with customers.

Important Points

1. Production Concept:

• The basic proposition of the production concept is that customers will choose products and services that are widely available and are of low cost.
• So business is mainly concerned with making as many units as possible.
• By concentrating on producing maximum volumes, such a business aims to maximize profitability by exploiting economies of scale.

2. Product Concept:

• The product concept is on the assumption that the customers would choose the product if it has better quality, features, and performance.
• The reason the product concept is important is that it makes it necessary for you to meet the demands and wishes of customers by delivering the best product.
• Sales, marketing, and distribution are also important factors in the product concept.

3. Marketing Concept:

• The marketing concept is based on increasing a company’s ability to compete and achieve maximum profits by marketing the ways in which it offers better value to customers than its competitors.
• It’s all about knowing the target market, sensing its needs, and meeting them most effectively.
• Many refer to this as the “customer-first approach.”

The correct answer is "Marketing information management (MIM)".

Key Points

• A marketing information system is a tool used by managers and marketing teams to collect, store, and analyze data properly. In other words, if marketing information management is the “what," then a marketing information system is the “how,” and an efficient system can show you "why" marketing metrics are important. 
• Marketing information management is the process of gathering, organizing, and analyzing important market research data. This data often consists of :
  • ​Sales reports
  • Results from past campaigns
  • Expert insight from in-house teams
  • Additional analytics from marketing software tools
• ​Without a proper organization system, information can get lost which skews results, throws off forecasts, and leads to costly marketing spend. That’s why it’s essential to keep these invaluable data sets all in one searchable place. Having a system all employees can follow prevents vital details from slipping between the cracks. ​

Important Points 

• All marketing teams need marketing information management. Not only does it help prove ROI it also makes it easier to:
  • ​Accurately forecast growth and sales potential.
  • Justify budget allocations
  • Discover audience preferences.
  • Find new focus areas.
  • Predict seasonal or industry buying cycles.
  • Compare branding and products with competitors
  • Keep a finger on the pulse of global, national, and local industry trends.
  • Pivot your existing strategy to a new, more efficient one.
• ​The biggest challenges of marketing information management include:
  • Data storage and security
  • Lack of systems for labeling, capturing, and sorting data
  • Balancing information accessibility with privacy considerations
  • Data analytics in marketing
  • Finding an efficient yet compliant workflow
  • Holding employees accountable to following the agreed-upon management practices
  • Resolving redundancies and outdated information consistently​

Additional Information

• ​Channel management - It is defined as a process where the company develops various marketing techniques as well as sales strategies to reach the widest possible customer base. The channels are nothing but ways or outlets to market and sell products.
• Product management - The process of developing, improving, obtaining, and maintaining the products/services of the business to meet consumer demand.
• Market planning - Market planning is the process of organizing and defining the marketing aims of a company and gathering strategies and tactics to achieve them. 

Key Points

• On April 1, 2006, Section 80C of the Income Tax Act became effective.
• In general, it permits some expenses and investments to be tax-exempt.
• You can deduct up to Rs. 1.5 lakh from your investments if you plan them carefully and distribute them among other investments like PPF, NSC, etc. This will reduce your tax liability.

Important PointsSection 80C of Income Tax Act:
An individual and HUFs can claim deductions under Section 80C on payments made to the following:

• The premium for Life Insurance for self, spouse, or children.
• Deferred Annuities are payable by self and the Government.
• Contribution towards PPF(Public Provident Fund).
• Contribution towards PFs operated by the Central Government.
• Contribution towards a Recognized PF.
• Contribution towards a Superannuation Fund.
• Subscription for a Government Deposit or Security.
• Subscription for Saving Certificates.
• Subscription to ULIP, 1971.
• Contribution towards ULIP of LIC Mutual Fund.
• Insurance company’s Annuity Plans including LIC.
• Subscription to Notified units of Mutual Fund.
• Contribution to the Pension Fund of Notified units of Mutual Fund.
• National Housing Bank’s Pension Fund.
• Subscribing to the Deposit Scheme of a Public Sector companies allocating long-term financing for housing.
• Tuition fees for a maximum of 2 children studying in India.
• Repayment of housing loan taken for a residential property.
• Subscription to Mutual Funds units recommended by Central Board of Direct Taxes.
• An FD from a scheduled bank with a minimum tenure of 5 years.
• NABARD notified bonds.
• Contributions to Senior Citizens Saving Scheme.
• Tax Saving 5 Year FD.

Hence, it can be concluded that deduction for unrecognized provident fund is not allowed under section 80C in respect of employees' contributions every year.

The correct answer is Rs.500 crores.

Key PointsCorporate social responsibility (CSR): CSR is a self-policing corporate strategy that enables an organisation to be socially accountable to its customers, employees, and stakeholders. CSR helps in enhancing a number of societal facets as well as enhancing the reputation of businesses.

Important PointsCSR is in effect as of April 1, 2014. For the following businesses, Section 135(1) of the Company Act of 2013 mandates CSR expenditure and CSR Applicability: Each business with

• a net value of Rs.500 crore and
• a revenue of Rs.1000 crore or
• Rs.5.00 crore in net profit

When net profit does not include income from an overseas branch and is distributed to each firm, this section applies. Companies who previously met the aforementioned criterion for three consecutive years but no longer do so are exempt from the requirement to adhere to CSR provisions.

Thus, Under the Companies Act, 2013, companies with net worth of Rs.500 crores have to spend on CSR.

The Goods and Service Tax Act was passed in Parliament on 29th March 2017 and came into effect on 1st July 2017.

• GST was passed as the 101st Amendment Act.

Goods and Services Tax (GST) is an indirect tax that has replaced many indirect taxes in India such as excise duty, VAT, services tax, etc.

• It is based on the principle of destination-based consumption taxation.
• GST is applicable on ‘supply’ of goods or services as against the past concept on the manufacture of goods or on sale of goods or on provision of services.
• It is a dual GST with the Centre and the States simultaneously levying tax on a common base.
• GST to be levied by the Centre would be called Central GST(CGST) and that to be levied by the States would be called State GST (SGST).
• Import of goods or services would be treated as inter-state supplies and would be subject to IGST in addition to the applicable customs duties.

The given demand equation is CX = 20 - 10Px + 0.002I + 20Py

where,

• Px = $4
• I = $40,000
• Py = $5

If we substitute the given values in the demand equation, we get the monthly consumption of ice-cream

CX = 20 - 10Px + 0.002I + 20Py

= 20 – 10 (4) + 0.002 (40000) +20 (5)

= 20 – 40 + 80 + 100

= 160

Therefore, the family consumes 160 ounces of ice cream in a month.

The correct answer is Selfishness.

Key Points

• Human relationships require the investment of time, trust, transparency, care, and communication.
• “Relationship is a series of repeated interactions between dyadic parties over a time".
•  when a person goes to a particular seller/vendor regularly, because he likes the store’s environment, way of presentation of products, quality of products being sold, or the way he receives service there, then it can be considered as a relationship.

Important Point

• If a person, while on his way to his/her destination stops momentarily at a roadside food stall and buys a sandwich, it is merely a one-time transaction and not a relationship. 

The correct answer is Assertion is true, but Reasoning is false.

Key Points

• In the passage, "Variances in state-level policies, tax structures, and administrative efficiency create a complex web that businesses must adeptly navigate."
• The passage contradicts the reasoning by stating that there are variances in state-level policies, tax structures, and administrative efficiency.
• Therefore, while the assertion is true (political decisions do affect businesses at the state level), the reasoning is false, leading to option 3 as the correct answer.

Additional Information

• The other options (1. Both Assertion and Reasoning are true, and Reasoning is the correct explanation of Assertion, 2. Both Assertion and Reasoning are true, but Reasoning is not the correct explanation of Assertion, 4. Both Assertion and Reasoning are false) are ruled out based on the accurate alignment of the Assertion and Reasoning with the passage.
• The mention of a "complex web" emphasizes the intricate nature of navigating state-level policies for businesses.

The correct answer is Political stability can disrupt established business models.

• In the passage, "Political stability, or lack thereof, can significantly shape the trajectory of businesses in India.
• The passage suggests that political stability or its absence can shape the trajectory of businesses, indicating that political stability is not a guarantee of smooth business operations.
• The possibility of disruption is captured by option 2, "Political stability can disrupt established business models."

Additional Information

• The other options (1. Political stability has no impact on business operations, 3. Political instability enhances business strategies, 4. Political decisions do not influence business trajectories) do not accurately capture the nuanced relationship described in the passage.
• The phrase "shape the trajectory" implies that political stability can have both positive and negative impacts on business operations, requiring businesses to navigate accordingly.

The correct answer is They necessitate recalibration of financial structures.

Key Points

• In the passage, "Sudden policy changes, regulatory reforms, and shifts in government priorities have the potential to disrupt established business models and strategies.
• "The passage explicitly states that sudden policy changes have the potential to disrupt established business models.
• This disruption implies that businesses may need to recalibrate their financial structures to adapt to the new policies, aligning with option 2.
• The other options (1. They have no effect on established business models, 3. They enhance international collaborations, 4. They lead to increased regulatory reforms) do not accurately represent the impact described in the passage.

The correct answer is regain possession.

Key Points

• Stoppage in transit" refers to a situation in logistics and transportation where a shipment or goods are halted or detained while they are in transit from the point of origin to the final destination.
• This can happen for various reasons, and it has implications for both the sender (consignor) and the receiver (consignee) of the goods.

Important PointsConditions for Exercising the Right -

• For the right of stoppage in transit to be valid, certain conditions must be met. These conditions include:
• The seller must be unpaid and must have a lien on the goods (i.e., the right to retain possession until payment is made).
• The buyer must be insolvent or must have failed to make the payment.

Objective of 'Stoppage in Transit' -

• The primary objective of exercising the right of stoppage in transit is not to recover the price or damages, but rather to retain possession of the goods until payment is made.

Retaining Possession vs. Recovering Price or Damages -

• While the seller's ultimate goal is to receive the payment for the goods, the direct action taken under "stoppage in transit" is to regain or retain possession of the goods until the financial obligation is met by the buyer.

Effect on Legal Rights -

• When the seller exercises the right of stoppage in transit, they essentially suspend the buyer's right to take possession of the goods. This is a legal remedy available to the seller.

Confusion Points retain possession v/s regain possession

There may be a little bit of confusion between options retain possession v/s regain possession. But the correct answer is to regain possession. It is the primary objective because until/without regaining the possession it is not possible to retain possession.

The correct answer is It allows employees to share ideas and concerns

Key Points Open communication is crucial in the workplace for several reasons:

Improved Collaboration: Open communication encourages team members to share ideas, feedback, and insights. This leads to better collaboration, as employees can work together more effectively, leveraging diverse perspectives to solve problems and achieve common goals.

Enhanced Problem Solving: When communication channels are open, issues and challenges can be identified and addressed more quickly. Team members can openly discuss problems, brainstorm solutions, and collectively find effective ways to overcome obstacles.

Increased Transparency: Open communication fosters transparency within an organization. When employees are informed about company goals, strategies, and decisions, they feel more engaged and trusted, which can boost morale and job satisfaction.

Stronger Relationships: Open communication builds trust and rapport among team members. When people feel comfortable sharing their thoughts and concerns, relationships are strengthened, leading to a more positive and supportive work environment.

Effective Leadership: Leaders who practice open communication are perceived as approachable and responsive. Employees are more likely to follow leaders who are transparent and communicate their expectations clearly, leading to better alignment and a more motivated workforce.

The correct answer is Ease of instant interactions across vast distances

Key Points

• This option is not typically considered a drawback of relying heavily on digital communication.
• In fact, the ease of instant interactions across vast distances is often seen as a benefit of digital communication, as it allows people to connect quickly and easily regardless of physical location.
• The other options (1, 2, and 4) highlight potential drawbacks such as strained relationships due to misunderstandings and conflicts arising from miscommunication.

The correct answer is Both statements 1 and 2 are true.

Key Points

Statement 1: In the digital age, technology has revolutionized communication, allowing instant interactions across vast distances.

Explanation: The advancement of technology, especially the internet and mobile devices, has transformed the way people communicate. With the advent of emails, instant messaging, social media platforms, and video conferencing tools, individuals can now interact and exchange information instantaneously, regardless of their physical location. This revolution in communication has made it much easier to connect with others worldwide and has greatly accelerated the speed of information exchange.

Statement 2: Striking a balance between digital and face-to-face communication is crucial for maintaining healthy human connections.

Explanation: While digital communication offers convenience and efficiency, it cannot fully replace the value of face-to-face interactions. Human connections often thrive on emotional intimacy, empathy, and the ability to perceive non-verbal cues. Face-to-face communication provides a deeper understanding of each other's emotions, expressions, and body language, leading to more genuine and meaningful connections.

Maintaining a balance between digital and face-to-face communication is crucial because relying solely on digital interactions may lead to a sense of detachment and superficial relationships. On the other hand, neglecting digital communication entirely may limit opportunities for instant connections across long distances and hinder productivity in certain aspects of life, such as remote work and collaborations.

The correct pair is: A- 4, B- 1, C- 3, D- 2.

Competition Act, 2002

• Competition is the act of the sellers individually seeking to acquire the patronage of buyers in order to achieve profits or market share.
• The Competition Act, 2002 was enacted by the Parliament of India.

RTI Act, 2005

• It is an Act to provide for setting out the practical regime of right to information for citizens to secure access to information under the control of public authorities, in order to promote transparency and accountability in the working of every public authority, the constitution of a Central Information Commission and State Information Commissions and for matters connected therewith or incidental thereto.

The Indian Contract Act, 1872

• It prescribes the law relating to contracts in India and is the key act regulating Indian contract law.
• The objective of the Contract Act is to ensure that the rights and obligations arising out of a contract are honored and that legal remedies are made available to an aggrieved party against the party failing to honour his part of the agreement.

Sale of Goods Act 1930

• It was introduced with the objective of balancing the rights, duties, claims, and expectations arising in the process of transferring property from one person to another i.e of buyers and sellers.

Human Resource Accounting is an expected solution over the limitations of the Money measurement concept.

• The money measurement concept underlines the fact that in accounting and economics generally, every recorded event or transaction is measured in terms of money, the local currency monetary unit of measure.
• Using this principle, a fact or a happening or event which cannot be expressed in terms of money is not recorded in the accounting books.
• Thus, it is not acceptable to record such non-quantifiable items as employee skill levels or the quality of great customer service.
• Flamhoitz defines Human Resource Accounting as ‘accounting for people as an organizational resource. It involves mea­suring the costs incurred by organizations to recruit, select, hire, train, and develop human assets. It also involves measuring the economic value of people to the organization’.
• HRA is the measurement and quantification of human organiza­tional inputs such as recruiting, training, experience, and commitment.

Thus, Human Resource Accounting is an expected solution over the limitations of the Money Measurement Concept as it helps to quantify various elements of the workforce in monetary terms.