Kerala SET Paper 2 Mock Test - 4 (Commerce) - KTET MCQ

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.

CA 2013 required all companies to file the following additional declarations with the Registrar of Companies prior to commencement of business or exercising any borrowing power: 

(i) declaration by a director that minimum paid-up share capital has been paid; and 

(ii) company has filed verification of registered office. The CA Amendment 2015 has removed the above requirements and deleted Section 11 of CA 2013. This reduces the filings to be made by companies in India.

The negative list for imports consists of:

• The list of canalized goods can be found in the ITC (HS). Goods in this category can be imported only through canalizing agencies. The main canalized items are currently petroleum products, bulk agricultural products, such as grains and vegetable oils, and some pharmaceutical products.
• Prohibited Goods/ banned items narcotic drugs and psychotropic substances. Pornographic and obscene material. Counterfeit and pirated goods and goods infringing any of the legally enforceable intellectual property rights. Antiquities.
• Restricted means that special licenses or permits are required from a federal agency before the item is allowed to enter the United States. Examples of restricted items include firearms, certain fruits and vegetables, animal products, animal by-products, and some animals.

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

Key Points

Important Points A - Realized Yield Method: This method is used to calculate the cost of equity capital. It takes into account the actual returns earned by investors who have invested in the company's shares, rather than using estimates or assumptions about future returns.

B - Taxation: Taxation is an important consideration in calculating the cost of debt capital. The after-tax cost of debt is used to determine the weighted average cost of capital (WACC) of a company, which takes into account the cost of both equity and debt capital.

C - Cost of total capital employed: The cost of total capital employed is the overall cost of financing a company's operations, which includes both debt and equity capital. This cost is used to determine the company's WACC.

D - Dividend Growth is a consideration: The growth rate of dividends is an important consideration in calculating the cost of equity capital. The cost of equity is the return required by investors to invest in the company's shares, and it is based on the expected future dividends and the growth rate of those dividends.

In summary, the matching is as follows:

A matches with 2 because the Realized Yield Method is used to calculate the cost of equity capital.
B matches with 3 because taxation is an important consideration in calculating the cost of debt capital.
C matches with 4 because the cost of total capital employed is used to determine the company's WACC.
D matches with 1 because the growth rate of dividends is an important consideration in calculating the cost of equity share capital.

The Gross Annual value would be 36000.

Key-Points

A) Fair Value = Rs. 36,000

B) Municipal Value = Rs. 36,000

C) Higher Of A and B = Rs. 36,000

D) Standard Rent = Rs. 40,000

E) Expected Rent (Lower Of C and D) = Rs. 36,000

F) Actual Rent = Rs. 32,000
GROSS ANNUAL VALUE (Higher Of E and F) = Rs. 36,000

The business entity concept states that the transactions associated with a business must be separately recorded from those of its owners or other businesses. Doing so requires the use of separate accounting records for the organization that completely exclude the assets and liabilities of any other entity or the owner.

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.

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.

The correct match is given below:

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

Key Points

Here's the explanation for each match:

A. Operating Profit:

Operating Profit is calculated by subtracting Total Variable Costs and Fixed Costs from Sales Revenue. Therefore, it matches (Sales × P/V ratio) - Fixed Cost.

B. Profit-Volume Ratio:

Profit-Volume Ratio is calculated by dividing Contribution Margin by Sales Revenue. This can be rewritten as (Unit sale price - Variable costs per unit)/Unit sale price. Therefore, it matches IV. (Unit sale price - Variable costs per unit)/Unit sale price.

C. Margin of safety:

Margin of safety is calculated by subtracting Breakeven Sales Volume from Actual Sales Volume. Therefore, it matches I. Actual sales volume - Breakeven sales volume.

D. Contribution margin:

Contribution Margin is calculated by subtracting Variable Costs from Sales Revenue. Therefore, it matches II. Sales Revenue - Total variable costs.

The New Industrial Policy of 1991 comes at the center of economic reforms that launched during the early 1990s. All the later reform measures were derived out of the new industrial policy. The Policy has brought comprehensive changes in economic regulation in the country. As the name suggests, these reform measures were made in different areas related to the industrial sector.

The major aims of the new policy were; to carry forward the gains already made in the industrial sector; Correct the existing market distortion from the industrial sector; provide gainful and productive employment; to attain global competitiveness.

Key-Points

The main objectives of the Industrial Policy of the Government in India are:

1. to maintain a sustained growth in productivity;
2. to enhance gainful employment;
3. to achieve optimal utilization of human resources;
4. to attain international competitiveness; and
5. to transform India into a major partner and player in the global arena.

Important Points

Thus, to achieve these aims and objectives, the government took decisions like offering VRS to shed the excess load of workers, abolishing industrial licensing, disinvestment of the public sector, encouraging foreign direct investment, removal of mandatory convertibility clause, abolishing phased manufacturing program, referring sick units to The Board for Industrial and Financial Reconstruction, etc.

Option 4 is the correct answer.

Key PointsConflicts:

• Conflicts are struggles that can occur when there is a direct difference of opinion or interest, so it's critical to know how to handle and settle them.
• Conflict between employees can arise in the workplace in a variety of situations, and when it happens, it is crucial to address the issue before it worsens.
• Conflict resolution techniques are necessary while responding professionally because conflict is frequently a result of human connection.
• Common conflict resolution strategies involve: Avoiding, Competing, Accommodating, Collaborating, Compromising.

Important Points Avoiding technique of conflict resolution:

• Avoiding conflict typically demonstrates a low concern for self and a low concern for others.
• Avoiding a conflict can show a great level of concern for others in some cultures that prioritise collective peace over individual goals.
• A general rule is that avoidance doesn't preclude communicating about the conflict.
• Avoiding is both unassertive and uncooperative. In this mode, you work to sidestep the conflict without attempting to satisfy either individual’s concerns.

Advantages of Avoiding:

• Reducing Stress: This mode allows you to avoid exacting or displeasing people and topics.
• Saving Time: Allows you to not waste time and energy on low-priority items.
• Steering Clear of Danger: Allows you to avoid inciting trouble.
• Setting Up More Favourable Conditions: Provides you with time to be more prepared and less distracted so that you may deal with the matter at hand.

Hence, when each party to a conflict has low concern for self as well as to other, they just ignore or withdraw from the conflict then it is known as Avoidance resolution technique.

The correct answer is Option 3

Key Points Business Economics:

• Business economics is a branch of applied economics that looks into the financial, organisational, market-related, and environmental concerns that businesses confront.
• The concept of scarcity, product factors, distribution, and consumption are all covered in business economics.
• Managerial economics is a branch of business economics that is very important.

Important Points

Features of Business Economics

• Business Economics is related with the micro-economics. It is micro in nature. It is mainly related with the problems of individual unit. Hence, Statement (i) is correct
• Business Economics helps to formulate the economic policy, Taxation policy, credit policy. Import-Export policy etc. it is considered as Normative in nature. Normative Economics helps to solve the particular economic problems and formulation of economic policies. e. g. concept of elasticity of demand is used to determine the price of a product, as well as to impose the tax on a commodity. Hence, Statement (ii) is incorrect.
• Business Economics is both conceptual and metrical. It outlines, the conceptual framework to understand, analyse and solve the decision making problems of any business. It also makes the use of various quantitative techniques from various subjects to solve the problems of any business. Hence, Statement (iii) is correct.
• Business Economics primarily uses the theory of markets and private enterprises. It uses the theory of the firm and resource allocation in a private enterprise economy. Hence, Statement (iv) is correct.

The correct answer is A relationship that appears to be true because each variable is related to a third one.

Key Points

• Spurious correlation :
  • In statistics, a spurious correlation (or spuriousness) refers to a connection between two variables that appears to be causal but is not. With spurious correlation, any observed dependencies between variables are merely due to chance or are both related to some unseen confounder.
  • Spurious regression is a statistical model that shows misleading statistical evidence of a linear relationship; in other words, a spurious correlation between independent non-stationary variables.
  • Spurious relationships will initially appear to show that one variable directly affects another, but that is not the case. This misleading correlation is often caused by a third factor that is not apparent at the time of examination, sometimes called a confounding factor.

Comparative Advantage theory states that each country should produce those goods in which it has a comparative/relative advantage because of the presence of opportunity costs which gives the country a relative advantage in the production of one good.

To be an Ordinarily resident in India, an individual must satisfy One Basic Condition and Both Additional Conditions.

Key-Points

Ordinarily resident: an individual must satisfy One Basic Condition and Both Additional Conditions.

Non-Ordinarily resident: an individual must satisfy One Basic Condition and any one or no Additional Conditions.

Non-resident: An individual does not satisfy any basic condition.

Additional Information

Basic Conditions:

1. Stay in India for a year is 182 days or more or
2. Stay in India for the immediate 4 preceding years is 365 days or more and 60 days or more in the relevant financial year.

Additional Conditions:

1. Has been a resident of India in at least 2 out of 10 years immediately previous years and
2. Has stayed in India for at least 730 days in 7 immediately preceding years.

The correct answer is Financial & regulatory measures. 

Key Points

As per the passage, "Governments introduced emergency financial and regulatory measures to support national economies, impacting international business operations."

The correct answer is Dog.

BCG Matrix: 

• The BCG matrix is a growth-share matrix developed by the Boston Consultancy Group.
• The matrix was developed in the 1970s by Bruce D. Henderson the founder of the Boston Consulting Group.
• The BCG matrix enables companies to analyze their business units and broad product portfolio.
• Thus, giving the company a clear picture of whether to invest, hold or divest a business unit.

Key Points

Based on the two dimensions – relative market share and market growth rate, the company can plot its business units into four categories: Cash Cows, Dogs, Stars, and Question Marks.  

Dogs:

• Dogs operate in a low-growth market and have a low market share.
• Dogs are known to put a strain on company resources.
• They are typically in the decline stage of the product lifecycle.
• The lack of demand coupled with a slow market creates a major hurdle for Dogs to increase their market share.
• For an SBU in this position, the firm should decide to curtail losses by divesting. 

Additional Information

Stars: 

• Stars operate in high-growth markets and have a high market share. As the name goes they are at the top of the game in their industry.
• Apart from a high market share, Stars enjoy customer loyalty, goodwill among stakeholders, high brand value, brand recall, etc.
• Managing a star requires ongoing investment to fend off competition in the high-growth market.

Cash Cows: 

• Cash Cows operate in low-growth markets but maintain a high market share.
• Cash Cows dominate the market they operate in and ensure steady cash flow for the company.
• They typically fall into the maturity stage of the product cycle.
• Cash Cows require less investment and are milked by the company for extra cash flow.

Questions Marks:

• Questions Marks also known as Problem Child operates in a high-growth market but has a low market share.
• The rationale is that the business unit has just started operations.
• Question Marks require steady investment so that they gain market share and turn into Stars.

Hence, According to the BCG matrix, for Dog positions of SBU, the firm should decide to curtail losses by divesting.

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 Merger.

Key Points

• Mergers
  • It is a way for companies to expand their reach, expand into new segments, or gain market share.
  • It is the combining of two or more companies into one organization. Hence, Option 3 is correct.
  • It is the voluntary fusion of two companies on broadly equal terms into one new legal entity.
  • The five major types of mergers are conglomerate, congeneric, market extension, horizontal, and vertical.

Additional Information

Key Points

• A hypothesis is a tentative assumption made in order to draw out and test its logical or empirical consequences.
• Hypothesis testing is used to assess the credibility of a hypothesis by using sample data.

Important Points
Writing a hypothesis is essentially making an educated assumption based on evidence and scientific prejudices that is then confirmed or refuted through the scientific method.

Types of Hypothesis:

1. Null Hypothesis: A null hypothesis states that there is no association between two variables. H0 indicates a negative statement, such as "Athletes' on-field performance is not affected by attending physiotherapy sessions," which asserts that there is no connection between physiotherapy sessions and on-field performances. Even then, it would just be a coincidence.
2. Alternative Hypothesis: A null hypothesis is designated as H0, whereas an alternative hypothesis is designated as H1 or Ha. It is stated clearly that the independent variable is influenced by the dependent variable. A good example of a competing hypothesis is that "athletes perform better on the field when they attend physiotherapy treatments."

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• From the above figure, it can be said that it is the null hypothesis which is being tested.
• Rejecting the null hypothesis, means accepting an alternative hypothesis, which means there is significant relationship between the variables.
• Accepting the null hypothesis means there is no significant relationship between the variables.

​Hence, it can be concluded that while testing a hypothesis, it is only the null hypothesis which is being tested for drawing the conclusion.

Management is a problem-solving process of effectively achieving the organizational goal through the efficient use of scarce resources in a changing environment.

Different authors define management in different ways: 

• Koontz defined management as "the process of defining and maintaining an environment in which individuals, working together in groups, efficiently accomplish selected aims".
• F.W.Taylor defined management as knowing exactly what you want men to do and then seeing that they do it in the best and cheapest way. 
• "To manage is to forecast, to plan, to organize, to command, to coordinate and control" is the definition given by Henry Fayol.
• Henri Fayol, a French industrialist is considered the father of the modern theory of general and industrial management. He divided the industrial management activities into six groups and contributed fourteen principles to management. 
• Fayol established the pattern upon which our modern concepts of management are built upon.

Key Points

• A Derivative is a contract between two or more parties that derives its value from an agreed-upon underlying financial asset like securities, or a set of assets like an index.
• The most commonly used derivatives are currencies, stocks, bonds, commodities, market securities, futures contracts, forward contracts, options, swaps.
• Derivatives can be used for hedging or speculation purposes.

Therefore, a Derivative is a Derived financial asset.

Additional Information

• Hedging undertaken by hedgers refers to an operation to protect themselves against the risk that will arise out of exchange rate changes.
• Speculation refers to the purchase and sale of foreign exchange with an intention of making a profit by taking advantage of exchange rate changes.

A is false that the demand for the product of a firm under an Oligopoly is at prices higher than the prevailing market prices. Demand can be above or below the prevailing price. The kink demand curve is formed at the prevailing price level.

The Demand curve above the prevailing price is highly elastic and below the prevailing price is less elastic. So, R is true that The Oligopolistic firm faces a kinked demand curve.