UGC NET Paper 2 Commerce Mock Test - 2 - UGC NET MCQ

The correct answer is Functional theory.

Key Points

• The Functional Theory
  • The Functional Theory is also called the Efficiency Theory of labor welfare. Hence option 1 is correct.
  • It states that welfare facilities are provided to make the workers more efficient.
  • The workers will work efficiently if they are treated kindly if they are provided with clean and safe working conditions, good canteens, etc.
  • Welfare work is a method of securing, preserving, and increasing the efficiency of labor.
• The Public Relations Theory
  • The Public Relations Theory is based on the fact that welfare activities are provided to the workers so as to create a good impression on their minds and the public and this can be done by providing clean and safe working conditions, a good canteen, creche and other measures.
  • Providing such measures helps to make a good impression on the workers, visitors and the public.
• The Philanthropic Theory
  • Philanthropy refers to affection for mankind. This theory of labor welfare refers to the provision of good working conditions, crèches, canteens, drinking water facilities, etc., to remove the disabilities of the workers.
  • Employers having concern for their workers may undertake such labor welfare measures for the benefit of workers.
• The Religion Theory
  • The Religion theory consists of two aspects, namely, Investment and Atonement.
  • The Investment aspect states that the fruits of today’s deeds will be reaped tomorrow. Therefore, any action, good or bad, is treated as an investment and inspired by this aspect (Investment), some employers plan and organize canteens and crèches.
  • The Atonement aspect of the religion theory states that the current disabilities of an individual are the outcome of the sins committed by him/her previously. Therefore, he/she should pledge to do good deeds now to atone or compensate for his/her sins.

The basic procedure of Income Tax return e-Filling in India is

1. Register: Visit the 'e-Filing' Portal www.incometaxindiaefiling.gov.in. and register yourself by providing basic details.
2. Once the registration process is complete login into your account by providing the credentials.
3. The next step is to download the utility and preparing returns
4. Next step enter your bank account details and proceed towards e-filing.
5. Once your return is filed e-Verify your income tax return.

Additional Information

E-filing is now mandatory for individuals and Hindu Undivided Families whose accounts have to be audited under Section 44AB of the Income Tax Act. For companies, e-filing with a digital signature is mandatory.

The correct option is Tax revenues.

Key Points As per the passage:

• "The revenue budget details the projections of revenue from various sectors and facets including taxation, fees, and fines."
• This shows that tax revenues are a primary source of income for the government, as outlined in the revenue budget.

The correct option is  Inflation.

Key Points As per the passage:

• Implied within "It aids in striking a balance between the government's income and expenditure...contributing to its stability and growth."

• If a government is consistently spending more than its income, it could lead to economic instability manifesting as inflation, among other consequences.

• Which of these is a primary source of income mentioned in the revenue budget?

The correct option is Promotion of equitable distribution of wealth and income.

Key Points As per the passage:

• "The government budget...aiding in the government's socio-economic objectives."
• Furthermore, "It aids in striking a balance between the government's income and expenditure, at the same time steering the course of a nation's economy and contributing to its stability and growth."
• This equates to the promotion of equitable distribution of wealth and income.

Key-Points

Therefore, customers who pick up products or brand just before the purchase is termed as impulse customers.

Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Construction of a new plant or a big investment in an outside venture are examples of projects that would require capital budgeting before they are approved or rejected.

Key-Points

1. As part of capital budgeting, a company might assess a prospective project's lifetime cash inflows and outflows to determine whether the potential returns that would be generated meet a sufficient target benchmark. The capital budgeting process is also known as investment appraisal.
2. The original decision to undertake an investment in a particular foreign country may be determined by a mix of strategic, behavioral, and economic decisions.'
3. The specific project, as well as reinvestment decisions – should be justified by traditional financial analysis.
4. Multinational capital budgeting, like traditional domestic capital budgeting, focuses on the cash inflows and outflows associated with prospective long-term investment projects.
5. Multinational capital budgeting is capital budgeting for a foreign project using the same theoretical framework as domestic capital budgeting.

Important Points

1. Political risk management comes in the ambit of Multinational capital budgeting.
2. For each project, political risk must be evaluated, because the cash flows can be severely affected by the changes in the political environment.
3. The changes in the government would change the political philosophy thereby leading to a new economic environment.
4. An extreme form of risk is the ‘risk of expropriation’ and repatriation. In the case of expropriation, the projects and the parent’s cash flows tend to change drastically because in this case the funds are blocked in the country of the project.
5. The political stability of a country directly impacts borrowing costs, taxes, and regulation for businesses.
6. Kickbacks and other forms of corruption have serious repercussions for MNCs. For example, Turkey has experienced a number of economic and political setbacks that raised the cost of borrowing for the national government. Corruption allegations, tight lending conditions, and financial volatility within the country made it more challenging for corporate entities to operate there effectively.

Thus, option 4 is the correct answer.

The correct match is (1) - (c), (2) - (a), (3) - (b), (4) - (d).

Important Points Imperial Bank of India:

• On January 27, 1921, the Imperial Bank of India was founded. After the country attained independence, it changed its name to State Bank of India.
• The Bank of Calcutta's founding in 1806 marks the beginning of modern banking in India.
• It was renamed as the Bank of Bengal in 1809.
• The Bank of Bombay and the Bank of Madras then emerged in the 1840s.

RBI (Reserve Bank of India):

• The central bank of the country is the Reserve Bank of India (RBI), commonly referred to as the banker's bank.
• RBI established under the provisions of the Reserve Bank of India Act; it started operating on April 1st, 1935.
• RBI was founded to promote financial stability in India by implementing monetary policies to ensure monetary stability.
• In addition to managing the country's monetary system, government debt, foreign exchange reserves, and financial regulation and supervision, it also serves as a banker to the country's banks and government.

State Bank of India (SBI): 

• On July 1st, the State Bank of India was constituted under the State Bank of India Act 1955 in order to take over the operations and business of the Imperial Bank of India.
• In accordance with the Imperial Bank of India Act of 1920, the Imperial Bank of India was established in 1921. The Bank engages in all types of general banking activity, including merchant banking, mutual funds, and foreign exchange.

Industrial Development Bank of India: 

• The primary financial institution for providing credit and other facilities for growing companies and supporting development institutions is the Industrial Development Bank of India (IDBI), which was founded under the Industrial Development Bank of India Act, 1964.
• Up until 1976, IDBI was a bank that belonged to the RBI. It was split off from the RBI in 1976, and the Indian government now owns it. In terms of development, IDBI is the tenth-largest bank in the world.

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.

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

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

• Assertion A states that a stereotyped and male-centered vision discourages some women from participating in business activities that could have a consequence on people who interact with women at the community level.
• This is because women may feel that they are not welcome in business or that they will not be successful because of their gender. They may also feel that they will be discriminated against or that they will not be taken seriously.
• Reason R states that attributions of the society and the different socialization processes relating to men and women may create obstacles for women due to unequal distribution of assets and services.
• This is because women may be socialized to believe that they are not as capable as men in business or that they should not be involved in business. They may also face discrimination in terms of access to resources, such as loans and training.

Additional Information

• However, Reason R is not the correct explanation of Assertion A. The reason is that Assertion A is talking about the discouragement of women from participating in business activities, while Reason R is talking about the obstacles that women face in business.
• A better explanation of Assertion A could be that the stereotyped and male-centered vision leads to the attribution of society that women are not as capable as men in business, which in turn creates obstacles for women in business, such as unequal distribution of assets and services.

The correct answer is Larry Ellison.

Key Points

• Oracle is an American multinational computer technology corporation headquartered in Austin, Texas. The company was formerly headquartered in Redwood Shores, California until December 2020 when it moved its headquarters to Texas.
• It was started by Larry Ellison, Bob Miner and Ted Oates on 16 June, 1977.
• Oracle offered first commercial SQL Relational Database Management System (RDBMS).

Additional Information

• Larry Page along with Sergey Brin founded Google on 4th September 1998. It is the most popular search engine in the world.
• Sean Parker is an American entrepreneur and philanthropist, most notable for co-founding the file-sharing computer service Napster, and serving as the first president of the social networking website Facebook.
• Bill Gates and Paul Allen started Microsoft on 4th April, 1975. It has since been an important part of the tech world as it has offered the widely used Windows UI, MS- Office and its CRM app known as Dynamics CRM.

The correct answer is Foreign Exchange Risk.

Key Points

• Foreign exchange risk arises when a company engages in financial transactions denominated in a currency other than the currency where that company is based.
• Any appreciation/depreciation of the base currency or the depreciation/appreciation of the denominated currency will affect the cash flows emanating from that transaction.
• Foreign exchange risk can also affect investors, who trade in international markets, and businesses engaged in the import/export of products or services to multiple countries.
• There are three types of foreign exchange risk:
  • Transaction risk
  • Translation risk
  • Economic Risk

Additional Information

There are three types of foreign exchange risk:

1. Transaction risk: This is the risk that a company faces when it's buying a product from a company located in another country. The price of the product will be denominated in the selling company's currency. If the selling company's currency were to appreciate versus the buying company's currency then the company doing the buying will have to make a larger payment in its base currency to meet the contracted price.
2. Translation risk: A parent company owning a subsidiary in another country could face losses when the subsidiary's financial statements, which will be denominated in that country's currency, have to be translated back to the parent company's currency.
3. Economic risk: Also called forecast risk, refers to when a company’s market value is continuously impacted by unavoidable exposure to currency fluctuations.

The correct answer is (B), (C), (D) (E)only.

Key Points The design of a questionnaire will depend on whether the researcher wishes to collect exploratory information (i.e. qualitative information for the purposes of better understanding or the generation of hypotheses on a subject) or quantitative information (to test specific hypotheses that have previously been generated).

•  A well-designed questionnaire should meet the research objectives. This may seem obvious, but many research surveys omit important aspects due to inadequate preparatory work, and do not adequately probe particular issues due to poor understanding.
• To a certain degree some of this is inevitable. Every survey is bound to leave some questions unanswered and provide a need for further research but the objective of good questionnaire design is to 'minimise' these problems.
•  It should obtain the most complete and accurate information possible. The questionnaire designer needs to ensure that respondents fully understand the questions and are not likely to refuse to answer, lie to the interviewer or try to conceal their attitudes.
• A good questionnaire is organised and worded to encourage respondents to provide accurate, unbiased and complete information.
• A well-designed questionnaire should make it easy for respondents to give the necessary information and for the interviewer to record the answer, and it should be arranged so that sound analysis and interpretation are possible.
• It would keep the interview brief and to the point and be so arranged that the respondent(s) remain interested throughout the interview.

Hence, the correct answer is (B), (C), (D). (E) only.

The correct answer is 283.

Important Points

• ITNS Challan Number 283 is used for payment of Fringe Benefits Tax.
• Fringe benefit tax (FBT) was a form of tax that companies paid in lieu of benefits they offered their employees in addition to the compensation paid to them. It was included by the Finance Act 2005 with effect from April 1, 2006.
• The Income Tax Department's Challan ITNS 284 is used to pay Income Tax on Corporations (Corporation Tax) and Income Tax on Other than Corporations.
• The Income Tax Department's Challan ITNS 283 is used to pay the Banking Cash Transaction Tax and Fringe Benefits Tax.
• To deposit gift tax, estate duty, spending tax, and other miscellaneous taxes use the ITNS 282 form. 

A) Fair Value = Rs. 1,80,000

B) Municipal Value = Rs. 1,50,000

C) Higher of A and B = Rs. 1,80,000

D) Standard Rent = Rs. 1,60,000

E) Expected Rent (Lower Of C and D) = Rs. 1,60,000

F) Actual Rent = Rs. 2,40,000 (20000 12 Months)

GROSS ANNUAL VALUE (Higher Of E and F) = Rs. 2,40,000

NET ANNUAL VALUE = Gross Annual Value (2,40,000) - Unrealised Rent (40,000) - Municipal Tax (30,000) = Rs. 1,70,000

Refer to, “True, there have been some benefits. For instance, the number of income tax returns filed has surged a little over the trend growth rate. But surely this could have been achieved by other policy measures. Cashless modes of payment have become more common, but financial savings in the form of currency have also risen, suggesting that people still value cash.”

Statement I is correct since people are now more into filing of income tax returns in order to be on the safe side and also to prevent any wrong impression of the income tax department towards them.

Statement II is correct since the citizens are now resorting to the cashless modes of transactions but they still value cash based transactions.

Statement III is not correct since there is no reference in the passage that the RBI has become proactive post demonetization regarding detection of money laundering activities in the country. This can be eliminated.

According to the passage, the move of the government regarding demonetization was a complete failure since the stated objective could not be met at the end of the day and actually most of the cash came back to the system. It was a total failure for the move intended to flush out black money from the country.

Among the given options, option (A) is not correct since it is not something that follows from the passage whereas the same can be said regarding options (B) and (C). Coming to option (D), it may sound true but there is no such reference in the passage that the author feels proper homework should be done by the government before launching any scheme of the magnitude of demonetization program.

Net working capital = Excess of current assets over current liabilities 

Net working capital emphasises the qualitative aspects of working capital management, which indicate the firm's ability to meet its operating expenses and short term liabilities.

When the expected level of EBIT exceeds the indifferent point for two alternative financial plans (Equity financing and Debt financing), then the use of debt financing (fixed cost source of the fund) would be advantageous to increase EPS and financial leverage would be favourable. The higher the degree of financial leverage, the more volatile the EPS. Since interest is a fixed expense, leverage magnifies returns and EPS.

The Consumer Protection Act was enacted in 1986.

Key Points

• It was officially enacted on December 24, 1986, and came into effect on July 1, 1987.
• This act aimed to protect the interests of consumers in India by establishing consumer protection councils and other authorities for dispute settlement and related matters.

Hence, the correct answer is 1986.

Assertion (A): There is no difference between futures and forwards excepting that the former requires a margin.

Reason (R): Futures are standardized, marked to market, and traded in organized exchanges. Forwards are tailor-made instruments and traded on the OTC market.

Here (A) is incorrect, but (R) is correct. Hence Option1 is the correct answer.

Key Points

A forward contract is a private and customizable agreement that settles at the end of the agreement and is traded over-the-counter.

A futures contract has standardized terms and is traded on an exchange, where prices are settled on a daily basis until the end of the contract.

Additional Information

Forward Contracts

1. The forward contract is an agreement between a buyer and seller to trade an asset at a future date. The price of the asset is set when the contract is drawn up. Forward contracts have one settlement date—they all settle at the end of the contract.
2. These contracts are private agreements between two parties, so they do not trade on an exchange. Because of the nature of the contract, they are not as rigid in their terms and conditions.
3. Many hedgers use forward contracts to cut down on the volatility of an asset's price. Since the terms of the agreement are set when the contract is executed, a forward contract is not subject to price fluctuations.
4. Because of the nature of these contracts, forwards are not readily available to retail investors. The market for forward contracts is often hard to predict. That's because the agreements and their details are generally kept between the buyer and seller, and are not made public. Because they are private agreements, there is high counterparty risk. This means there may be a chance that one party will default.

Futures Contracts

1. Futures contracts involve the agreement to buy and sell an asset at a specific price at a future date. The futures contract, however, has some differences from the forward contract.
2. First, futures contracts are marked-to-market daily, which means that daily changes are settled day by day until the end of the contract. Furthermore, a settlement for futures contracts can occur over a range of dates.
3. Because they are traded on an exchange, they have clearing houses that guarantee the transactions. This drastically lowers the probability of default to almost never. Contracts are available on stock exchange indexes, commodities, and currencies. The market for futures contracts is highly liquid, giving investors the ability to enter and exit whenever they choose to do so.
4. These contracts are frequently used by speculators, who bet on the direction in which an asset's price will move, they are usually closed out prior to maturity and delivery usually never happens. In this case, a cash settlement usually takes place.

Value analysis is defined as the process of objectively studying every item purchased or manufactured-standard or special, to eliminate every cost factor which does not contribute to usefulness or utility.
Key Points

Customer Value Analysis:

• Customer Value Analysis (CVA) is a research method used to identify how an organization is perceived by the competitors and by consumers.
• It is extremely significant because it allows an organization to gauge how they are judged in comparison to their industry rivals.
• Thus, managers conduct a Customer Value Analysis to know the company’s weaknesses and strengths relative to those of various peers.
• Studies have shown that product or service value perceived by customers is the single best predictor of a company's market share.
• The major benefit of CVA is that it helps a company to identify the specific attributes of its products and services that drive its customer's perception of value.
• This data will help the company proactively respond and grow its market share position.

Therefore, managers conduct a Customer Value Analysis to know the company’s weaknesses and strengths relative to those of various peers.

Money market consists of various financial institutions and dealers, who seek to borrow or loan securities. It is the best source to invest in liquid assets. The money market is an unregulated and informal market and not structured like the capital markets, where things are organised in a formal way.

Upward communication means the flow of information from the lower levels of the organization to higher levels of authority. Examples of upward communication are:

(i) Reports (ii) Meetings (iii) Interviews (iv) Conferences (v) Letters (vi) Complaints (vii) Suggestions (viii) Surveys (ix) Union publication and (x) Grapevine etc. Circulars are not the example of upward communication as it is an example of downward communication that flows from a superior to a subordinate.

In the balance of payment account, the transfer payments are included in current account.

The balance of payments of a country is the difference between all money flowing into the country in a particular period of time (e.g., a quarter or a year) and the outflow of money to the rest of the world. These financial transactions are made by individuals, firms, and government bodies to compare receipts and payments arising out of the trade of goods and services.

(a) Power function

(b) Constant returns to scale

(c) The elasticity of substitution as unity

Income Tax and Corporate Tax are direct taxes.

A direct tax is paid directly by an individual or organization to the imposing entity. A taxpayer pays direct taxes to the government for different purposes, including real property tax, personal property tax, income tax. A corporate tax is a direct tax imposed by a jurisdiction on the income or capital of corporations. Excise duty is a form of tax imposed on goods for their production, licensing, and sale. It is an indirect tax. Customs Duty is levied when goods are transported across borders between countries. It is an indirect tax.

• 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.

• 20% of basic salary
• Rs 5000
• Amount granted as entertainment allowance in the financial year

To determine the allowance, a taxpayer must ensure the following particulars are met:a

• ​Any other allowance, benefit from the employer, or perquisite received must be deducted from the salary. Essentially, the wage must be the gross amount earned before any extra benefits are taken into account.
• Never consider the actual amount spent out of the entertainment allowance received from the employer.

Entertainment Allowance for a Non Government Employee:

• Non-government employees are not eligible for the entertainment allowance deduction.
• The deduction is only available to employees of the federal or state governments. Furthermore, the deduction is not available to employees of municipal governments or statutory corporations.