Test: Business Arithmetic - 1 - CUET Commerce MCQ

# Test: Business Arithmetic - 1 - CUET Commerce MCQ

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## 10 Questions MCQ Test Entrepreneurship Practice Tests: CUET Preparation - Test: Business Arithmetic - 1

Test: Business Arithmetic - 1 for CUET Commerce 2024 is part of Entrepreneurship Practice Tests: CUET Preparation preparation. The Test: Business Arithmetic - 1 questions and answers have been prepared according to the CUET Commerce exam syllabus.The Test: Business Arithmetic - 1 MCQs are made for CUET Commerce 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Business Arithmetic - 1 below.
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Test: Business Arithmetic - 1 - Question 1

### In inventory control theory, the order size that minimizes total inventory holding cost and ordering cost is known as

Detailed Solution for Test: Business Arithmetic - 1 - Question 1

Economic order quantity (EOQ) is the order size which minimizes total annual inventory holding cost and cost of ordering. EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered. There is also a cost for each unit held in storage, sometimes expressed as a percentage of the purchase cost of the item.

Test: Business Arithmetic - 1 - Question 2

### The technique which is not used for inventory control is:

Detailed Solution for Test: Business Arithmetic - 1 - Question 2

HIFO is not a technique used for inventory control. HIFO is a method of valuing cost price of inventory or stock. Under this method, the material received at the highest price is issued first. This method is good when it is desired to keep the inventory value of the materials at the lowest possible price.

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Test: Business Arithmetic - 1 - Question 3

### Which of the following defines the term MRP in case of inventory control?

Detailed Solution for Test: Business Arithmetic - 1 - Question 3

Material requirements planning (MRP) is a production planning, scheduling, and inventory control system used to manage manufacturing processes. Most MRP systems are software-based, but it is possible to conduct MRP by hand as well.

Test: Business Arithmetic - 1 - Question 4

If the EOQ for an item of inventory in a firm is 1000 units, the estimated demand for the term next year gets doubled, what shall be the revised EOQ next year, all other relevant costs remaining unchanged?

Detailed Solution for Test: Business Arithmetic - 1 - Question 4

The formula for EOQ = ;
where F = fixed cost per order; D = Units demand per year; C = Cost per unit per year;
Now suppose F = 1000
C = 20
D = 10000
Therefore as per the formula EOQ = 1000.
Now when the demand is estimated to be doubled in the next year with other things constant, it is calculated as, D = 20000.
Now as per the formula EOQ = 1414.

Test: Business Arithmetic - 1 - Question 5

Net Working Capital Ratio is measured by

Detailed Solution for Test: Business Arithmetic - 1 - Question 5

Net Working Capital Ratio is measured by the following formula:
Net Working Capital/Net Working Assets
This is the only tool to measure a company's liquidity position.

Test: Business Arithmetic - 1 - Question 6

Which among the following is considered under working capital?

Detailed Solution for Test: Business Arithmetic - 1 - Question 6

Working capital, also known as net working capital (NWC), is the difference between a company's current assets, such as cash, accounts receivable (customers' unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as accounts payable. So, tools, machines and building are fixed capital. Raw material is working capital.

Test: Business Arithmetic - 1 - Question 7

Return on investment (ROl) is equal to:

Detailed Solution for Test: Business Arithmetic - 1 - Question 7

Return on investment (ROl) is equal to Net Profit After Tax/Tangible Net Worth. ROI is a financial ratio intended to measure the benefit obtained from an investment.

Test: Business Arithmetic - 1 - Question 8

Mr. Kim made an investment in an automobile industry of Rs. 5,00,000 and the return on investment is increasing each year. In the 5th year and 13th year, his returns were of Rs. 16,000 and Rs. 28,000, respectively. Find the return on his investment in the first year.

Detailed Solution for Test: Business Arithmetic - 1 - Question 8

Let 'a' be the first year's return and 'd' be the common difference by how much returns are increasing.
According to question,
Return in the 5th year = Rs. 16,000
so, a + (n – 1)d = an
a + (5 – 1)d = 16,000
a + 4d = 16,000 --- (i)
Return in the 13th year = Rs. 28,000
So, a + (n – 1)d = an
a + (13 – 1)d = 28,000
a + 12d = 28,000 --- (ii)
Now, subtract equation (i) from equation (ii).
8d = 12,000
Therefore, d = 12000/8
d = 1,500
This means each year returns are increasing by Rs. 1,500.
Substitute the value of 'd' in equation (i).
a + 4(1,500) = 16,000
a + 6,000 = 16,000
a = 16,000 – 6,000
a = 10,000
So, the return in the first year was Rs. 10,000.

Test: Business Arithmetic - 1 - Question 9

Calculate the return on equity using the information given below.
Net profit before tax = Rs. 60,000
Tax rate = 20%
12% Preference shares = Rs. 1,00,000
Equity share capital = Rs. 2,00,000

Detailed Solution for Test: Business Arithmetic - 1 - Question 9

Return on equity measures the profitability of equity funds invested. It measures how profitably owners' funds have been utilised.
Net profit after tax = Net profit before tax - Tax
= 60,000 - (20% of 60,000) = Rs. 48,000
Preference dividend = 1,00,000 x 12% = Rs. 12,000
ROE = ((Net profit after tax - Preference dividend) x 100}/Shareholder's funds
ROE = {(48,000 - 12,000) x 100}/2,00,000
= {36,000 x 100}/2,00,000
= 18%

Test: Business Arithmetic - 1 - Question 10

With the help of the given information, calculate the rate of return on equity.
Share capital = Rs. 16,00,000
Net profit after tax = Rs. 8,00,000
Revenue reserve = Rs. 4,00,000

Detailed Solution for Test: Business Arithmetic - 1 - Question 10

Return on equity will be 40%. This is calculated as follows:Net profit after tax × 100/equityEquity = 16,00,000 + 4,00,000 = Rs. 20,00,000Thus, return on equity = 8,00,000 × 100/20,00,000 = 40%.

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