APSET Paper 2 Mock Test - 4 (Commerce) - AP TET MCQ

 Proposal: 

• In the Indian Contract Act 1872, a proposal is defined as a suggestion or offer made by one person to another, with an intention to enter into a contract.
• It is also referred to as an offer.
• The proposal should be definite and certain, and should be communicated to the person to whom it is made.
• Once the proposal is accepted, it becomes a promise or an agreement, forming a binding contract between the parties.
• However, if the proposal is rejected, it comes to an end and cannot be revived.

Important Points Section 6 of Indian Contract Act 1872: 

Revocation how made —A proposal is revoked—

1. by the communication of notice of revocation by the proposer to the other party;
2. by the lapse of the time prescribed in such proposal for its acceptance, or, if no time is so prescribed, by the lapse of a reasonable time, without communication of the acceptance;
3. by the failure of the acceptor to fulfil a condition precedent to acceptance; or
4.  by the death or insanity of the proposer, if the fact of his death or insanity comes to the knowledge of the acceptor before acceptance. 

Hence the correct answer is A, B, C and D only.

The Mercantilist Theory holds that "exports were good and had to be encouraged but imports were bad and had to be discouraged". His policy was to export to the countries he controlled and not to import.

The correct answer is 'option 2'

• In 1944 at Bretton Woods, as a result of the collective conventional wisdom of the time, representatives from all the leading allied nations collectively favored a regulated system of fixed exchange rates, indirectly disciplined by a US dollar tied to gold.
• This was a system that relied on a regulated market economy with tight controls on the values of currencies.
• Flows of speculative international finance were curtailed by shunting them through and limiting them via central banks. This meant that international flows of investment went into foreign direct investment (FDI)—i.e., construction of factories overseas, rather than international currency manipulation or bond markets.

Therefore the correct answer is 'Gold Exchange Rate System'

Additional Information

• The Bretton Woods system of monetary management established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan after the 1944 Bretton Woods Agreement.
• The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent states.
• The chief features of the Bretton Woods system were an obligation for each country to adopt a monetary policy that maintained its external exchange rates within 1 percent by tying its currency to gold and the ability of the International Monetary Fund (IMF) to bridge temporary imbalances of payments.

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.

The correct answer is National Securities Depositories Limited ​.

 Important Points

• National Securities Depositories Limited (NSDL) is the first and largest depository presently operational in India.
• The enactment of the Depositories Act in August 1996 paved the way for the establishment of NSDL.
• It was established in August 1996 
• It was promoted as a joint venture of the IDBI, UTI, and the National Stock Exchange.
•  Its tag line −Technology, Trust and Reach.
• It is a state-of-the-art infrastructure that handles most of the securities held and settled in dematerialized form in the Indian capital market.
• The Central Depository Services Limited (CDSL) is the second depository to commence operations and was promoted by the Bombay Stock Exchange and the Bank of India.
• Both these national-level depositories operate through intermediaries who are electronically connected to the depository and serve as contact points with the investors and are called depository participants.
• Mr G. V. Nageswara Rao is Managing Director & CEO of National Securities Depository Limited

Chi-square test:

• A chi-square test, also written as χ2 test, is a statistical hypothesis test that is valid to perform when the test statistic is chi-square distributed under the null hypothesis, specifically Pearson's chi-square test and variants thereof.
• Pearson's chi-square test is used to determine whether there is a statistically significant difference between the expected frequencies and the observed frequencies in one or more categories of a contingency table.
• In the standard applications of this test, the observations are classified into mutually exclusive classes.
• If the null hypothesis (that in the population there is no difference between the classes) is true, the test statistic computed from the observations follows a χ2 frequency distribution.
• The purpose of the test is to evaluate how likely the observed frequencies would be assuming the null hypothesis is true.
• Test statistics that follow a χ2 distribution occur when the observations are independent and normally distributed, which assumptions are often justified under the central limit theorem.
• There are also χ2 tests for testing the null hypothesis of independence of a pair of random variables based on observations of the pairs.
• Chi-square tests often refer to tests for which the distribution of the test statistic approaches the χ2 distribution asymptotically, meaning that the sampling distribution (if the null hypothesis is true) of the test statistic approximates a χ2 distribution more and more closely as sample sizes increase

where:

Oi = an observed count for bin i

Ei = an expected count for bin i, asserted by the null hypothesis.

• Chi-square goodness of fit test determines if a sample data matches a population.

Important Points

Goodness of fit:

• The goodness of fit of a statistical model describes how well it fits a set of observations.
• Measures of goodness of fit typically summarize the discrepancy between observed values and the values expected under the model in question

Use of Chi-square test:

• The chi-squared distribution has many uses in statistics, including:
  • Confidence interval estimation for a population standard deviation of a normal distribution from a sample standard deviation.
  • Independence of two criteria of classification of qualitative variables.
  • Relationships between categorical variables (contingency tables).
  • Sample variance study when the underlying distribution is normal.
  • Tests of deviations of differences between expected and observed frequencies (one-way tables).
  • The chi-square test (goodness of fit test).

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.

Cost accounting provides information to facilitate management accounting. Cost accounting information is basically used to determine the cost of each product and service. Standards are fixed for each of the product or activity to find the variances against the actual. Cost accounting information is also used to have a fixation of budget. Inventory valuation is based on the cost parameters. 

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).

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.

The correct answer is a - 3, b - 4, c - 1, d - 2

Key Points F. Modigliani's Life Cycle Income Hypothesis:

Franco Modigliani proposed the Life-cycle Hypothesis in 1957.

According to the hypothesis, people try to spread their consumption out over their lives by borrowing during times of low income and saving during times of high income.

The graph shows individuals save from the age of 20 to 65.

• It is reasonable for a student to borrow money to pay for his or her education.
• After that, you pay off your student loans and start investing for retirement during your working life.
• This saving during your working years allows you to retain similar income levels after retirement.

It suggests wealth will build up in working age, but then fall in retirement.

J.M. Keynes' Absolute Income Hypothesis:

• John Maynard Keynes was the first to examine consumption expenditures from a macroeconomic standpoint, which was called Absolute Income Hypothesis .
• According to Keynes, consumption expenditures are the function of disposable income. So, there is a positive relationship between consumption expenditures and disposable income.
• Disposable income is explained by Keynes as follows:
  • Yd = Y+ TR - T 
• In the equation, Yd = disposable income, Y = income, TR = transfer expenditures, and T = taxes
• According to Keynes, as an increase occurs in disposable income, it creates an increase in consumption expenditures.
• The mathematical explanation of the phrase is C = C₀ + cY_d  c < 1

 Milton Friedman's Permanent Income Hypothesis:

• Milton Friedman, the Nobel Laureate economist, proposed the persistent income hypothesis in 1957.
• According to the hypothesis, changes in consumer behaviour are not predicted, because they are based on individual expectations.
• The permanent income hypothesis states that individuals will spend money at a level that is consistent with their expected long-term average income.
• According to the hypothesis, even if economic measures boost income, this does not always translate into higher consumer spending.

 James Duesenberry's Relative Income Hypothesis:

• The basic claim of Relative Income Hypothesis developed by James Duesenberry is that the expenditure on consumption is dependent not only on current income but also on the income of the environment in which the individuals are.
• The consumption expenditures of people are affected by the behaviours of people in their environment. 
• People observe their environment while creating their consumption expenditures. In that case, consumption expenditures will depend not only on income, bu also on the relative condition of the people around.

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.

Oligopolistic firms are interdependent in such a way that they all need one another to do well and ensure their own success. Firms are affected not only by their own production/profit decisions but by the same actions of other firms as well.

The Game theory model is the study of how people behave in strategic situations.

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.

Key Points

The following are the few labour laws that are related to working hours, conditions of service and employment.

• Factories Act 1948:
  • ​As per the Factories Act 1948, every adult (a person who has completed 18 years of age) cannot work for more than 48 hours a week and not more than 9 hours a day. According to Section 51 of the Act, the time spread over should not exceed 10-1/2 hours.
• Minimum Wages Act, 1948
  • The Minimum Wages Act, 1948 also specifies the working hours under the rules 20 to 25, that the number of work hours in a day should not exceed 9 hours for an adult.
• Mines Act, 1952
  • Under Sec. 28 to 30 of the Mines Act 1952, it is mentioned that no person employed in a mine shall be required or allowed to work in the mine for more than 10 hours in any day, inclusive of overtime.
• Bidi and Cigar Workers (Conditions of Employment) Act, 1966:
  • Under Sec. 17 & 18 of the Act relating to working hours, it is mentioned that the period of work, including overtime work, should not exceed 10 hours in a day and 54 hours in a week. Contract Labour (Regulation & Abolition) Act, 1970 As per Rule 79 of the Act, it is compulsory for every contractor to maintain a Register of Overtime in Form XXIII which will contain all details relating to overtime calculation, hours of extra work, name of the employee, etc.

Additional Information

Trade Unions Act, of 1926:

• The Trade Unions Act, of 1926 provides for the registration of trade unions with a view to render lawful organization of labour to enable collective bargaining. It also confers on a registered trade union certain protection and privileges.

Payment of Wages Act, 1936:

• The Payment of Wages Act, of 1936 regulates the payment of wages to employees (direct and indirect). The act is intended to be a remedy against unauthorised deductions made by employers and/or unjustified delays in payment of wages.
• Payment should be made before the 7th day of a month where the number of workers is less than 1000 and on the 10th day otherwise.

Therefore, the correct answers are C and D only.

The definition that many marketers learn as they start out in the industry is: Putting the right product in the right place, at the right price, at the right time.

Marketing Mix is one of the most fundamental concepts in marketing management. For attracting consumers and for sales promotion, every manufacturer has to concentrate on four basic elements/components. These are product, pricing, distributive channels (place), and sales promotion techniques. A fair combination of these marketing elements is called Marketing Mix.

4 aspects of business that affect the growth of a startup:

• Project management
• Knowledge management
• Sales management
• Customer support

Exchange Rate refers to the price of one currency in terms of another currency.

Key-Points

Arbitrageurs:

• Arbitrage is a process where investors/arbitrageurs are looking to make a riskless profit out of the difference between the interest rate and the forward discount and the forward premium.
• The participants/arbitrageurs take advantage of the different exchange rates in different markets by purchasing an asset from a low-price market and selling it in the higher price market.
• It leads to the equalization of prices of assets in all segments of the market.

Therefore, the participants who take advantage of different exchange rates in different markets are Arbitrageurs.

Additional Information

Speculators:

• Speculators are agents who speculate the market and then make a decision to purchase or sell the foreign exchange with the intention of making a profit by taking advantage of changes in exchange rates.
• They participate in forward exchange market by entering into forward exchange deal.

Hedgers:

• These are participants who enter into forward exchange market to protect themselves against the risk arising out of the fluctuations in the exchange rate.
• It is especially essential for those firms which have large amounts of receivables or commitments to pay in foreign currencies.

Investors:

• An investor is any person or entity that allocates capital with the expectation that in the future he will gain financial returns from it.
• Investors play a vital role in the growth of a company.

Key Points

Correlation:

• The intensity and direction of a relationship between two variables is indicated by a correlation coefficient, which is a number between -1 and 1.
• In other words, it shows how comparable two or more variables' measurements are across a dataset.

Important PointsCoefficient of Determination

The Coefficient of determination is obtained by squaring the correlation coefficient (r²).

• This is the percentage of variance that is shared by all the variables.
• Always falling between 0 and 1, the coefficient of determination is frequently given as a percentage.
• The coefficient of determination is used in regression models to measure how much of the variance of one variable is explained by the variance of the other variable.
• Coefficient of Determination = r²(square of correlation coefficient)
• A high r² indicates that a significant portion of one variable's variability is influenced by its relationship to the other variable.
• A low r² indicates that only a small percentage of the variability of one variable is explained by its link to the other variable.

Solution of the question:

• In the given question, correlation coefficient (r) is given = 0.8
• Coefficient of Determination = r²
• Hence, r² = (0.8)²
• r² = 0.64
• Percentage of variation is 0.64 x 100 = 64%

Hence, the percentage of variation in the dependent variable explained by the variation in the independent variable is 64%

The correct match is given below:

Important PointsWork-study

Work study looks at how people work and identifies the variables that influence productivity.

It is a combination of method study and work measurement It aims to:

• To make the best use of resources like people, machines, and materials
• To standardize the process for completing a task
• To reduce the production unit cost,
• To find the average time needed to complete a task
• To reduce the amount of material transportation

Plant layout

• The arrangement of equipment, workspaces and service areas within a factory is known as the plant layout
• It includes making a process flow chart to make a plan of operations to be carried out
• and involves the development of physical relationships among buildings, tools, and operations.

Planning Horizon

• The principal plan that is employed to gauge the production of completed items is referred to as Master Production Schedule
• An MPS shows the various numbers of final goods that businesses must generate for each phase of business.
• The 'Master Production Program' is the name given to the process of developing the MPS, and this process is referred to as the 'planning horizon' which is typically 3 to 18 months long.

Job evaluation

• A job evaluation is a methodical strategy to assess a job's value or worth in comparison to other positions within an organization.
• The ranking method is one of the analytical methods of job evaluation in which each job is compared to others as a whole, and this job-by-job comparison continues until all the jobs have been assessed and ranked.

The correct answer is Insurance Regulatory and Development Authority

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. 

The correct option is Co-promotes state-level venture funds.

Co-promotes state-level venture funds is not a feature of Indian capital Market
Important PointsFeatures of Indian Capital Market are as follows:

• Serves as link between Savers and Investment Opportunities: As money is transferred from savers to risk-taking borrowers on the capital market, it forms an essential link between the saving and investing processes.
• LongTerm Investment :The ability to put their hard-earned money into long-term investments is beneficial to investors.
• Helps in Capital Formation :The capital market provides chances for those investors who have extra funds and wish to store them in an investment, so they can benefit from compound interest.
• Helps Intermediaries: It requires the assistance of intermediaries, such as brokers, banks, etc., to transfer shares and money from one investor to another, aiding them in running their businesses.
• Rules and Regulations : The government regulates and controls how the capital markets operate, giving it a secure environment for trading.

Additional InformationCapital Market: A capital market is a location where funding instruments like shares, bonds, debentures, debt instruments, and E T Fs can be traded. It is a way to raise money for private citizens, businesses, and governments.

Types of Capital Market

Primary Market:

• New securities that are launched in the stock market for the first time are primarily dealt with in the primary market.
• As a result, the fresh issue market is another name for it.
• The primary market's principal purpose is to make it easier for corporations to transfer newly issued shares to the general public.
• Financial institutions, banks, H N I, and others are the key investors in this type of market.

Secondary Market:

• Also known as the stock market, this market serves as the actual venue for the trading of securities.
• Here, securities are bought and sold.
• Current investors sell the securities, while new investors acquire the securities.

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

The correct answer is Median.

Key PointsAn ogive graph is a type of statistical diagram that displays cumulative frequencies. It enables us to easily calculate the proportion of observations that are either less than or equal to a certain value.

Important Points

• The median of the given collection of data is determined using the Ogive graph or cumulative frequency graphs.
• We can quickly determine the median value if the cumulative frequency curves for less than and larger than are both plotted on the same graph.
• The median value is determined by the intersection of both curves at the x-axis.
• Ogives are employed in computing the percentiles of the data set values in addition to determining the medians.​​

Additional InformationArithmetic Mean: The ratio of the sum of all observations to the total number of observations is known as the Arithmetic Mean (AM) or average in statistics.

Mode: In statistics, the value that consistently appears in a particular set is referred to as the mode. Additionally, we can refer to the value or number in a data collection that occurs more frequently as the mode or modal value.

Median: In statistics, the median is the value that, when placed in order, falls in the middle of the supplied collection of data. Either ascending or descending order can be used to organise the data or observations.

The correct answer is Shop disciplinarian.

Key Points

Shop disciplinarian

• In a functional organization, the shop disciplinarian is responsible for handling cases of breach of discipline and absenteeism.
• This role is typically assigned to an individual who ensures that employees adhere to the organization's rules and regulations, maintains discipline in the workplace, and takes appropriate action in case of misconduct or absenteeism.
• The shop disciplinarian may investigate complaints, issue warnings or disciplinary actions, and work closely with supervisors and managers to maintain a harmonious and productive work environment.
• Their primary focus is to enforce discipline and address any behavioural or performance issues within the organization.
• A shop disciplinarian typically falls under the category of front-line or first-line management.
• Front-line managers are responsible for overseeing the day-to-day operations of a specific work unit or department within an organization. They directly supervise and manage the employees who carry out the operational tasks, ensuring that work is performed efficiently, productivity targets are met, and discipline is maintained.
  

Additional Information

Instruction card clerk:

• The instruction card clerk is responsible for maintaining and organizing the instruction cards or job orders in a functional organization.
• They ensure that the required instructions or procedures for different tasks are documented accurately and are readily available to the employees.

Time and Cost clerk:

• The time and cost clerk is responsible for tracking and recording the time spent by employees on various tasks or projects, as well as calculating the associated costs.
• They play a role in monitoring productivity and cost control.
• While they may be involved in gathering data related to attendance and working hours, their primary focus is on time and cost management rather than dealing with disciplinary issues.

Route Clerk:

• The route clerk is responsible for planning and organizing the routes for deliveries or transportation in a functional organization.
• They ensure that goods or services are efficiently routed to their intended destinations.

The stock exchange is an organization that interferes between company and investor to raise funds for the benefit of the company as well as an investor. India consists of 22 stock exchanges overall under government regulation. Most Prominent stock exchange is the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) as most of the trading is done in this exchange. BSE is the oldest stock exchange in Asia established in 1875 while NSE is established in the mid-1990s. The index is the benchmark of both stock exchanges for tracking market status or checking upward or downward movement of stock. It consists of a basket of stocks of companies that are listed under exchange under the regulation of SEBI. Sensex is an index for BSE which comprises 30 constituents while Nifty is an index for NSE which comprises 50 constituents.

AS - 6 was made mandatory from the accounting period beginning on or after 01 - 04 - 1995.

Accounting Standards are written policy documents issued by an expert accounting body or by the government or other regulatory body covering the aspects of recognition, measurement, treatment, presentation, and disclosure of accounting standards in financial statements.