UGC NET Commerce October 2022 Question PaperPaper 2 with Answer Key

100 questions with the answer key and explanations.

1. Question 1

   Match List I with List II:

   List I (Type of Agreement)	List II (Explanation)
   a. NAMA	i. Liberation of International Investments
   b. GATTs	ii. Includes industrial goods, textile, jewellery, fish and fisheries products and manufacturing industries
   c. TRIMs	iii. Liberalisation of trade in goods and services
   d. TRIPs	iv. Provides monopoly power to owners of intellectual property

   1. A(a)-(ii), (b)-(i), (c)-(iv), (d)-(iii)
   2. B(a)-(iv), (b)-(ii), (c)-(iii), (d)-(i)
   3. C(a)-(ii), (b)-(iii), (c)-(i), (d)-(iv)
   4. D(a)-(iii), (b)-(ii), (c)-(iv), (d)-(i)

   Answer: (C) (a)-(ii), (b)-(iii), (c)-(i), (d)-(iv)

   Explanation

   WTO multilateral agreements define specific mandates for merchandise, investment, services, and intellectual property:

   (a)-(ii), (b)-(iii), (c)-(i), (d)-(iv)

   • a. NAMA (Non-Agricultural Market Access) matches ii. It governs market access negotiations for industrial products, manufactured goods, textiles, jewelry, and fish products.
   • b. GATTs matches iii. The General Agreement on Tariffs and Trade promotes liberalisation of international trade in goods and related cross-border services.
   • c. TRIMs (Trade-Related Investment Measures) matches i. It prohibits domestic investment regulations that distort trade, facilitating liberation of international investments.
   • d. TRIPs (Trade-Related Aspects of Intellectual Property Rights) matches iv. It establishes minimum standards that provide legal protection and monopoly power to owners of intellectual property.

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2. Question 2

   Banks are not required to deduct the TDS from depositors who have submitted declaration in which one of the following forms under the Income Tax Rule, 1962?

   1. AForm 16(A)
   2. BForm 16(H)
   3. CForm 15(G)
   4. DForm 15(A)

   Answer: (C) Form 15(G)

   Explanation

   Under Section 197A of the Income Tax Act, 1961 and the Income Tax Rules, 1962, a resident individual below 60 years whose estimated total income is below the basic exemption limit can submit Form 15G to banks for non-deduction of tax at source on interest from deposits.

   • A. Form 16(A) — incorrect. Form 16A is the TDS certificate issued by the deductor for non-salary payments, not a self-declaration form submitted by a depositor.
   • B. Form 16(H) — incorrect. Form 16H does not exist. Form 15H is the declaration for senior citizens aged 60 or above.
   • C. Form 15(G) — correct. It is the self-declaration form prescribed under Rule 29C for individuals below 60 years to avoid TDS on interest income.
   • D. Form 15(A) — incorrect. There is no Form 15A for bank interest tax exemption declarations.

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3. Question 3

   Match List I with List II:

   List I (PLC Stage)	List II (Communication Strategy)
   a. Introduction	i. Stress, brand differences and benefits and encourage brand switching
   b. Maturity	ii. Build awareness and interest in mass market
   c. Growth	iii. Reduce to minimal level needed to retain customers
   d. Decline	iv. Build product awareness and trial among dealers

   1. A(a)-(iv), (b)-(iii), (c)-(i), (d)-(ii)
   2. B(a)-(iv), (b)-(i), (c)-(ii), (d)-(iii)
   3. C(a)-(ii), (b)-(i), (c)-(iv), (d)-(iii)
   4. D(a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)

   Answer: (B) (a)-(iv), (b)-(i), (c)-(ii), (d)-(iii)

   Explanation

   Marketing communications shift emphasis across the stages of the Product Life Cycle (PLC):

   (a)-(iv), (b)-(i), (c)-(ii), (d)-(iii)

   • a. Introduction matches iv. The primary objective is to build initial product awareness and secure trial among dealers and early adopters.
   • b. Maturity matches i. Because many competitors crowd the market, the strategy stresses brand differentiation, unique benefits, and brand switching.
   • c. Growth matches ii. With expanding market potential, communication builds widespread awareness and interest in the mass market.
   • d. Decline matches iii. Promotion is scaled back to the minimal level required to retain hard-core loyal customers.

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4. Question 4

   Which of the following economic identities measure degree of monopoly in an industry?
   a. Stackelberg model
   b. Concentration ratio
   c. Diffusion index
   d. Herfindahl index
   e. Elasticity reciprocal

   Choose the most appropriate answer from the options given below:

   1. A(a), (b) and (c) only
   2. B(b), (c) and (d) only
   3. C(a), (c) and (e) only
   4. D(b), (d) and (e) only

   Answer: (D) (b), (d) and (e) only

   Explanation

   Market concentration and monopoly power are measured by specific quantitative indices:

   • b. Concentration ratio measures the proportion of market share held by the top four or eight firms in an industry.
   • d. Herfindahl index (HHI) sums the squared market shares of all firms in the industry, reflecting market dominance and variance in firm sizes.
   • e. Elasticity reciprocal refers to the Lerner Index, L = (P - MC) / P = 1 / |e|, where the degree of monopoly power is inversely proportional to price elasticity of demand.

   Item a (Stackelberg model) is an oligopoly leadership model, not a metric of monopoly. Item c (Diffusion index) is a macroeconomic indicator that measures the breadth of economic expansion across sectors.

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5. Question 5

   Match List I with List II:

   List I (Type of test)	List II (Testing situation)
   a. ANOVA Test	i. Testing whether a standard probability distribution fits well to a given frequency distribution
   b. Z —Test	ii. Parametric test to test hypothesis of differences in more than two sample means
   c. Chi-square Test	iii. Non-parametric test to test hypothesis of differences in more than two sample means
   d. Kruskal-Wallis Test	iv. Hypothesis testing for mean for large samples when μ is known or unknown

   1. A(a)-(iv), (b)-(ii), (c)-(i), (d)-(ii)
   2. B(a)-(i), (b)-(iv), (c)-(i), (d)-(iii)
   3. C(a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)
   4. D(a)-(iii), (b)-(ii), (c)-(iv), (d)-(i)

   Answer: (C) (a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)

   Explanation

   Statistical tests correspond to specific distributional assumptions and sample conditions:

   (a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)

   • a. ANOVA Test matches ii. It is a parametric F-test used to compare means across more than two independent samples.
   • b. Z-Test matches iv. It is a parametric test for hypothesis testing of a population mean with large samples (n >= 30).
   • c. Chi-square Test matches i. It is widely used as a test of goodness-of-fit to evaluate whether observed frequencies match an expected theoretical distribution.
   • d. Kruskal-Wallis Test matches iii. It is the non-parametric counterpart to one-way ANOVA, testing differences in medians across more than two independent groups.

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6. Question 6

   Through which one of the following influences of workers' participation in management regarding ‘safety and welfare and work-related’ issues are resolved?

   1. AInformation sharing
   2. BBargaining
   3. CConsultation
   4. DCo – determination

   Answer: (D) Co – determination

   Explanation

   Workers' participation in management ranges across ascending levels of influence:

   • A. Information sharing — management merely shares financial and operational facts with workers without giving them any voice.
   • B. Bargaining — involves negotiations over terms of employment and wages through collective bargaining rather than joint problem-solving.
   • C. Consultation — management seeks workers' advice on work-related matters, but retain unilateral executive power over the final outcome.
   • D. Co – determination — correct. In co-determination (joint decision-making), management and employee representatives hold equal decision power on joint committees to resolve work-related safety, health, and welfare matters.

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7. Question 7

   A project requires an initial investment of ₹56,125 and its estimated salvage value is ₹3,000. The annual estimated income after depreciation and tax for its entire life of 5 years are ₹3,375, ₹5,375, ₹7,375, ₹9,375 and ₹11,375 respectively. Which of the following is the average rate of return?

   1. A26.28%
   2. B124.74%
   3. C29.94%
   4. D60.88%

   Accepted answers: (A) 26.28%, (B) 124.74%, (C) 29.94%, (D) 60.88%

   Explanation

   Average annual accounting profit after depreciation and tax is calculated as:

   Average Profit = (3,375 + 5,375 + 7,375 + 9,375 + 11,375) / 5 = ₹7,375

   Under standard accounting principles, Average Investment is:

   Average Investment = (Initial Outlay + Salvage Value) / 2 = (56,125 + 3,000) / 2 = ₹29,562.50

   This yields an ARR of (7,375 / 29,562.50) * 100 = 24.95%. If computed on initial investment, ARR is 7,375 / 56,125 = 13.14%. If annual cash inflow before depreciation is used (7,375 + 10,625 = 18,000), the ratio yields 60.88%. Because standard accounting definitions conflict with the given options, the question was dropped by the examination authority, and full marks are awarded to all candidates.

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8. Question 8

   Which one among the following is not a privilege or right of a holder-in-due course under Negotiable Instruments Act?

   1. AEstoppel against denying signature or capacity of prior party
   2. BEstoppel against denying original validity of the instrument
   3. CEstoppel against denying capacity of the payee to endorse
   4. DEstoppel against denying the genuineness or validity of payee's endorsement

   Answer: (D) Estoppel against denying the genuineness or validity of payee's endorsement

   Explanation

   The Negotiable Instruments Act, 1881 provides specific statutory estoppels in favour of a holder in due course, but forged endorsements remain void:

   • A. Estoppel against denying signature or capacity of prior party — true privilege under Section 122. An endorser cannot deny the signature or capacity of any prior party.
   • B. Estoppel against denying original validity of the instrument — true privilege under Section 120. The drawer or maker cannot dispute the original validity of the instrument.
   • C. Estoppel against denying capacity of the payee to endorse — true privilege under Section 121. The maker or acceptor cannot deny the legal capacity of the payee to endorse.
   • D. Estoppel against denying the genuineness or validity of payee's endorsement — correct choice. There is no estoppel protecting against a forged payee endorsement. Forgery conveys no title, and even a holder in due course acquires no title through a forged endorsement.

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9. Question 9

   Which of the following statements are false in the context of perfect competition?
   a. Firm is a price taker
   b. In the long run AR = MR = LAC = LMC
   c. In the short run only AC = AR = MR = MC
   d. Firm shuts down when price falls below AC
   e. Firm fixes price when AR = MR

   Choose the most appropriate answer from the options given below:

   1. A(a), (b) and (c) only
   2. B(c), (d) and (e) only
   3. C(b), (c) and (d) only
   4. D(a) and (e) only

   Answer: (B) (c), (d) and (e) only

   Explanation

   Evaluating the statements regarding a perfectly competitive firm reveals three incorrect propositions:

   • c is false. In the short run, a competitive firm can earn supernormal profits, normal profits, or subnormal losses. The condition AC = AR = MR = MC is not the only outcome.
   • d is false. A firm does not shut down when price falls below Average Cost (AC). It continues operating in the short run as long as price covers Average Variable Cost (AVC), shutting down only when P < AVC.
   • e is false. A competitive firm has no price-setting power and must take the market-clearing equilibrium price as given.

   Statements a (price taker) and b (long-run zero economic profit where AR = MR = LAC = LMC) are true economic properties.

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10. Question 10

    Which one of the following tests measures the potential of a candidate to learn new skills?

    1. AAptitude test
    2. BInterest test
    3. CIntelligence test
    4. DPersonality test

    Answer: (A) Aptitude test

    Explanation

    Different psychological and employment selection tests evaluate distinct candidate attributes:

    • A. Aptitude test — correct. An aptitude test measures a candidate's latent capacity and learning potential to acquire new skills or specialized knowledge after training.
    • B. Interest test — incorrect. It inventories preferences and vocational likes or dislikes, indicating motivation rather than learning capacity.
    • C. Intelligence test — incorrect. It assesses general mental ability, memory, and cognitive capacity rather than task-specific learning potential.
    • D. Personality test — incorrect. It evaluates emotional stability, interpersonal tendencies, temperament, and character traits.

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11. Question 11

    Which one of the following is an example of horizontal integration in Integrated Marketing Communication?

    1. APackaging
    2. BCustomer Service
    3. CSales Promotion
    4. DDistribution

    Answer: (B) Customer Service

    Explanation

    In Integrated Marketing Communications (IMC), horizontal integration coordinates across distinct functional departments and customer touchpoints:

    • A. Packaging — product and design element within marketing mix execution.
    • B. Customer Service — correct. Customer service operates across departmental boundaries to align customer communication, complaints, and frontline service experiences with the core brand messaging.
    • C. Sales Promotion — specific promotional mix tool, not an organizational integration across departments.
    • D. Distribution — logistical place function managing channel intermediaries.

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12. Question 12

    Arrange the following steps of Net Present Value method in the correct sequence:
    a. Calculate present value of cash flows
    b. Identify the discount rate
    c. Forecasting cash flows
    d. Rank projects as per NPV
    e. Compute NPV

    Choose the correct answer from the options given below:

    1. A(b), (e), (a), (d), (c)
    2. B(a), (b), (c), (d), (e)
    3. C(c), (b), (a), (e), (d)
    4. D(d), (a), (c), (b), (e)

    Answer: (C) (c), (b), (a), (e), (d)

    Explanation

    The Net Present Value (NPV) capital budgeting technique follows a logical analytical progression:

    (c), (b), (a), (e), (d)

    • c. Forecasting cash flows — first, estimate the expected annual cash inflows and outflows over the economic life of the investment.
    • b. Identify the discount rate — next, determine the appropriate cost of capital or required hurdle rate.
    • a. Calculate present value of cash flows — discount the projected cash flows using the identified rate.
    • e. Compute NPV — subtract the initial cash outlay from the sum of the discounted cash inflows.
    • d. Rank projects as per NPV — finally, compare and rank investment options to select the most profitable proposals.

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13. Question 13

    Which category of consumers are risk averse, technology shy and price sensitive?

    1. AEarly adopters
    2. BEarly majority
    3. CLate majority
    4. DLaggards

    Answer: (C) Late majority

    Explanation

    Everett Rogers' Diffusion of Innovations framework classifies adopter categories by risk orientation and adoption speed:

    • A. Early adopters — opinion leaders who are visionaries and readily embrace new ideas.
    • B. Early majority — pragmatic adopters who accept innovations after seeing proven benefits, but are not technology shy.
    • C. Late majority — correct. The late majority comprises skeptical, risk-averse, and price-sensitive consumers who adopt innovations only when peer pressure or economic necessity forces them to do so.
    • D. Laggards — tradition-bound individuals who rely on past values and actively resist innovation, rather than evaluating features by price sensitivity.

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14. Question 14

    Arrange the following positions in increasing order of time spent in administration:
    a. Works Manager
    b. President
    c. Foreman
    d. Board
    e. General Manager

    Choose the correct answer from the options given below:

    1. A(c), (a), (e), (b), (d)
    2. B(d), (b), (e), (a), (c)
    3. C(d), (e), (b), (a), (c)
    4. D(e), (c), (a), (d), (b)

    Answer: (A) (c), (a), (e), (b), (d)

    Explanation

    According to classic management principles, administrative activity (policy making and strategic governance) increases from lower to higher levels of an organization:

    (c), (a), (e), (b), (d)

    • c. Foreman spends the least time in administration, focusing almost exclusively on direct shop-floor operational supervision.
    • a. Works Manager oversees plant operations and spends moderate time on administrative scheduling and department management.
    • e. General Manager manages cross-functional departments with substantial administrative coordination responsibilities.
    • b. President leads executive administration and policy execution across the whole enterprise.
    • d. Board sits at the top governing echelon, devoting practically all its time to pure administrative policy and governance.

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15. Question 15

    Which of the following are common difficulties in decision making?
    a. Non-actionable information
    b. Unsupporting environment
    c. Easy acceptance by subordinates
    d. Ineffective communication
    e. Incorrect timing

    Choose the most appropriate answer from the options given below:

    1. A(a) and (b) only
    2. B(c), (d) and (e) only
    3. C(a), (b), (d) and (e) only
    4. D(a), (b), (c) and (d) only

    Answer: (C) (a), (b), (d) and (e) only

    Explanation

    Decision making faces barriers from information, environmental, communication, and timing constraints:

    • a. Non-actionable information impedes sound analysis.
    • b. Unsupporting environment creates resistance and organizational friction.
    • d. Ineffective communication distorts decision implementation.
    • e. Incorrect timing leads to lost opportunities or premature execution.

    In contrast, item c (easy acceptance by subordinates) is an enabler that facilitates decision execution rather than a difficulty.

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16. Question 16

    Which of the following are subsidiaries of RBI?
    a. NHB
    b. NABARD
    c. EXIM
    d. DICGC
    e. BRBNMPL

    Choose the most appropriate answer from the options given below:

    1. A(a), (b), (c) and (d) only
    2. B(a), (b), (d) and (e) only
    3. C(b), (c), (d) and (e) only
    4. D(a), (c) and (e) only

    Accepted answers: (A) (a), (b), (c) and (d) only, (B) (a), (b), (d) and (e) only, (C) (b), (c), (d) and (e) only, (D) (a), (c) and (e) only

    Explanation

    Ownership structures of Indian financial institutions changed following the Narasimham Committee recommendations:

    • DICGC (Deposit Insurance and Credit Guarantee Corporation) and BRBNMPL (Bharatiya Reserve Bank Note Mudran Private Limited) are wholly owned subsidiaries of the Reserve Bank of India.
    • NHB was formerly an RBI subsidiary, but RBI divested its entire shareholding to the Government of India in 2019.
    • NABARD similarly had all RBI shares acquired by the Government of India in 2019.
    • EXIM Bank was established under the Export-Import Bank of India Act, 1981 as a Government of India undertaking, never an RBI subsidiary.

    Because no option accurately reflects the valid combination of current RBI subsidiaries, this question was dropped by the examination authority and full marks are awarded to all candidates.

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17. Question 17

    The demand curve for labour is derived from which one of the following?

    1. AOpportunity cost of labour
    2. BValue of marginal product of labour
    3. CIncome and substitution effects
    4. DValue of marginal product of capital

    Answer: (B) Value of marginal product of labour

    Explanation

    In marginal productivity theory, factor demand is a derived demand determined by the factor's contribution to revenue:

    • A. Opportunity cost of labour — shapes the worker's labor supply curve, not the employer's labor demand.
    • B. Value of marginal product of labour — correct. A profit-maximizing firm hires workers up to the point where the market wage equals the Value of Marginal Product of Labour (VMPL = P * MPL). The downward-sloping segment of this curve forms the firm's demand curve for labor.
    • C. Income and substitution effects — explain the backward-bending labor supply curve from the worker's perspective.
    • D. Value of marginal product of capital — determines the demand for capital equipment, not labor.

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18. Question 18

    A partnership firm earned a profit of ₹50,000. Shagun was entitled to a salary of ₹4,000 and interest at 10% on her capital of ₹1,00,000. Amir had capital of ₹89,000 and was entitled to interest at the same rate. The remaining profit was shared equally. What amount of profit was credited to Amir’s current account?

    1. A₹13,550
    2. B₹15,350
    3. C₹22,450
    4. D₹24,350

    Answer: (C) ₹22,450

    Explanation

    The profit and loss appropriation is calculated as follows:

    Total profit = ₹50,000

    Appropriations from profit:

    • Shagun's salary = ₹4,000
    • Shagun's interest on capital = 10% of ₹1,00,000 = ₹10,000
    • Amir's interest on capital = 10% of ₹89,000 = ₹8,900
      Total appropriations = 4,000 + 10,000 + 8,900 = ₹22,900

    Divisible remaining profit:
    Remaining profit = 50,000 - 22,900 = ₹27,100
    Amir's half share of divisible profit = 27,100 / 2 = ₹13,550

    Total amount credited to Amir's current account:
    Interest on capital (₹8,900) + Divisible profit share (₹13,550) = ₹22,450

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19. Question 19

    Match List I with List II:

    List I (Shape of revenue curve)	List II (Market structure)
    a. Kinked revenue curve	i. Monopolistic competition
    b. Infinitely elastic straight-line curve	ii. Perfect competition
    c. Relatively less elastic curve	iii. Oligopoly
    d. Relatively high elastic curve	iv. Monopoly

    1. A(a)-(iv), (b)-(iii), (c)-(ii), (d)-(i)
    2. B(a)-(iv), (b)-(iii), (c)-(ii), (d)-(i)
    3. C(a)-(i), (b)-(ii), (c)-(i), (d)-(iv)
    4. D(a)-(iii), (b)-(ii), (c)-(iv), (d)-(i)

    Accepted answers: (A) (a)-(iv), (b)-(iii), (c)-(ii), (d)-(i), (D) (a)-(iii), (b)-(ii), (c)-(iv), (d)-(i)

    Explanation

    Revenue and demand curves reflect the competitive structure of each market:

    • a. Kinked revenue curve characterizes Oligopoly (iii) under Sweezy's model of sticky prices.
    • b. Infinitely elastic straight-line curve characterizes Perfect Competition (ii) where the firm is a price taker.
    • c. Relatively less elastic curve characterizes Monopoly (iv) due to absence of close substitutes.
    • d. Relatively high elastic curve characterizes Monopolistic Competition (i) due to many close substitutes.

    Option D directly pairs (a)-(iii) and (b)-(ii), while the official source key credited Option A despite printing duplicate choices. Both options are accepted for scoring.

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20. Question 20

    Match List I with List II:

    List I (Accounting Standard)	List II (Description)
    a. Ind-AS:1	i. Investments in Associates and Joint ventures
    b. Ind-AS:8	ii. Presentation of Financial Statements
    c. Ind-AS:28	iii. Interim Financial Reporting
    d. Ind-AS:34	iv. Accounting policies, changes in Accounting Estimates and Errors

    1. A(a)-(ii), (b)-(iii), (c)-(i), (d)-(iv)
    2. B(a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)
    3. C(a)-(iii), (b)-(i), (c)-(iv), (d)-(ii)
    4. D(a)-(iii), (b)-(iv), (c)-(i), (d)-(ii)

    Answer: (B) (a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)

    Explanation

    Indian Accounting Standards (Ind AS) correspond to specific financial reporting areas:

    (a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)

    • a. Ind-AS 1 matches ii. Presentation of Financial Statements sets the overall requirements for financial reporting.
    • b. Ind-AS 8 matches iv. Accounting Policies, Changes in Accounting Estimates and Errors prescribes criteria for selecting and changing accounting policies.
    • c. Ind-AS 28 matches i. Investments in Associates and Joint Ventures governs the equity method of accounting for associates.
    • d. Ind-AS 34 matches iii. Interim Financial Reporting prescribes the minimum content of an interim financial report.

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21. Question 21

    Which one of the following products requires intensive modification in the international arena?

    1. ATennis racket
    2. BCosmetics
    3. CNotebook computer
    4. DCamera

    Answer: (B) Cosmetics

    Explanation

    In international product strategy, goods differ in their need for adaptation versus standardization:

    • A. Tennis racket — standardized technical specifications across global sporting bodies.
    • B. Cosmetics — correct. Cosmetics require substantial localization due to varying skin tones, cultural beauty preferences, climatic conditions, and country-specific chemical safety regulations.
    • C. Notebook computer — globally standardized electronics requiring minimal modification other than keyboard layout and power plug adaptations.
    • D. Camera — standardized high-technology optical hardware sold globally with identical features.

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22. Question 22

    Residential status of an assessee is determined for which one of the following?

    1. APrevious year
    2. BAssessment year
    3. CAccounting year
    4. DBoth previous and assessment year

    Answer: (A) Previous year

    Explanation

    Under Section 6 of the Income Tax Act, 1961, the residential status of a person is determined separately for each Previous Year:

    • A. Previous year — correct. Tax liability depends on the number of days the assessee resided in India during the relevant financial year in which income was earned.
    • B. Assessment year — incorrect. The assessment year is the succeeding year in which income earned during the previous year is taxed.
    • C. Accounting year — incorrect. Income tax laws specifically mandate the Previous Year as the basis for residency.
    • D. Both previous and assessment year — incorrect. Status during the assessment year has no bearing on taxability of previous year income.

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23. Question 23

    Which one of the following statements is correct under the Negotiable Instruments Act?

    1. AA cheque is always drawn on a banker
    2. BA cheque requires acceptance
    3. CA bill of exchange can be drawn payable to bearer on demand
    4. DA promissory note containing a conditional promise is valid

    Answer: (A) A cheque is always drawn on a banker

    Explanation

    Evaluating statutory provisions under the Negotiable Instruments Act, 1881:

    • A. A cheque is always drawn on a banker — correct. Section 6 defines a cheque as a bill of exchange drawn on a specified banker, payable only on demand.
    • B. A cheque requires acceptance — false. A cheque is payable on demand upon presentment and does not require acceptance.
    • C. A bill of exchange can be drawn payable to bearer on demand — false. Under Section 31 of the RBI Act, 1934, only the RBI or Central Government can issue bills of exchange payable to bearer on demand.
    • D. A promissory note containing a conditional promise is valid — false. Section 4 mandates that a promissory note must contain an unconditional undertaking to pay.

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24. Question 24

    Arrange the following pricing actions over a product life cycle in the correct sequence:
    a. Gradual rise in price
    b. Product improvement/market segmentation
    c. Gradual reduction to retain sales
    d. Skimming pricing
    e. Large price cuts

    Choose the correct answer from the options given below:

    1. A(d), (a), (b), (e), (c)
    2. B(e), (c), (a), (b), (d)
    3. C(b), (d), (c), (a), (e)
    4. D(d), (a), (b), (c), (e)

    Answer: (D) (d), (a), (b), (c), (e)

    Explanation

    Pricing strategies adjust sequentially as a product moves through its life cycle:

    (d), (a), (b), (c), (e)

    • d. Skimming pricing — launch phase sets high initial prices to recover development outlays from early adopters.
    • a. Gradual rise in price — early growth capitalizes on established initial demand.
    • b. Product improvement/market segmentation — growth phase adds variations to capture new market segments.
    • c. Gradual reduction to retain sales — maturity lowers prices moderately to defend against increasing competition.
    • e. Large price cuts — decline phase clears residual inventories and phases out the product.

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25. Question 25

    Which of the following are country risk rating agencies/indexes?
    a. BERI
    b. EIU
    c. NCTI
    d. ITPO
    e. PRS ICRG

    Choose the most appropriate answer from the options given below:

    1. A(a) and (c) only
    2. B(a), (b) and (e) only
    3. C(a), (d) and (e) only
    4. D(c), (d) and (e) only

    Answer: (B) (a), (b) and (e) only

    Explanation

    Country risk assessment involves specialized international evaluation indices:

    • a. BERI (Business Environment Risk Intelligence) assesses operations risk, political risk, and remittance risk across nations.
    • b. EIU (Economist Intelligence Unit) publishes country risk services evaluating sovereign, currency, and banking sector risks.
    • e. PRS ICRG (Political Risk Services - International Country Risk Guide) produces composite risk ratings covering political, financial, and economic indicators.

    In contrast, item c (NCTI - National Centre for Trade Information) and item d (ITPO - India Trade Promotion Organisation) are trade promotion bodies rather than risk rating agencies.

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26. Question 26

    Which of the following are properties of a normal distribution?
    a. It may be symmetrical or skewed
    b. It is uni-mode, bell-shaped and symmetrical
    c. It is asymptotic to the X-axis
    d. n and p are its parameters
    e. μ and σ are its parameters

    Choose the most appropriate answer from the options given below:

    1. A(b) and (d) only
    2. B(b), (c) and (e) only
    3. C(a) and (d) only
    4. D(a), (c) and (e) only

    Answer: (B) (b), (c) and (e) only

    Explanation

    A normal probability distribution exhibits well-defined mathematical properties:

    • b. It is unimodal, bell-shaped and perfectly symmetrical around its mean, with skewness equal to zero.
    • c. It is asymptotic to the horizontal axis, meaning its tails extend infinitely in both directions without ever touching the X-axis.
    • e. μ (mean) and σ (standard deviation) are its two defining parameters, which determine its location and spread.

    Statement a is false because a normal distribution cannot be skewed. Statement d is false because n and p are the parameters of a binomial distribution.

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27. Question 27

    Which of the following statements regarding short-term production and cost are true?
    a. Economic rent is the same as economic profit
    b. Imputed cost is rent of a hired building
    c. When AC = MC, AC is minimum
    d. When MC is rising, AC > MC
    e. Output is optimum when AC = MC

    Choose the most appropriate answer from the options given below:

    1. A(a), (d) and (e) only
    2. B(a), (c) and (e) only
    3. C(b), (c) and (d) only
    4. D(a), (b), (d) and (e) only

    Answer: (B) (a), (c) and (e) only

    Explanation

    Short-run cost and economic profit principles dictate the following:

    • c. When AC = MC, AC is minimum — correct. The marginal cost curve intersects the average cost curve at the latter's lowest point.
    • e. Output is optimum when AC = MC — correct. Plant capacity is utilized at its lowest unit cost when production takes place at minimum AC.
    • a. Economic rent is the same as economic profit — correct in classical economic theory, where rent represents a pure surplus earned above transfer earnings.

    Statement b is false because imputed cost refers to implicit costs of self-owned factors, whereas rent of a hired building is an explicit outlay. Statement d is false because when MC rises beyond the minimum AC point, MC exceeds AC.

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28. Question 28

    Which mode of foreign market entry involves the highest risk and profit potential?

    1. AIndirect exporting
    2. BJoint venture
    3. CDirect investment
    4. DDirect exporting

    Answer: (C) Direct investment

    Explanation

    International market entry strategies balance capital commitment, control, risk, and returns:

    • A. Indirect exporting — involves the lowest financial risk and minimal capital commitment, but yields minimal control and profit margins.
    • B. Joint venture — shares capital investment, operational risks, and profits with a local partner.
    • C. Direct investment — correct. Wholly owned foreign subsidiaries or greenfield ventures require the greatest capital commitment and expose the firm to maximum operational and political risk, while delivering 100% control and highest profit potential.
    • D. Direct exporting — involves direct customer contact abroad with moderate operational control and low investment risk.

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29. Question 29

    Which of the following measures inflation in the ecosystem?
    a. Phillips
    b. CPI
    c. Misery
    d. GDP deflator
    e. Fisher

    Choose the most appropriate answer from the options given below:

    1. A(a), (b) and (e) only
    2. B(b), (c) and (d) only
    3. C(b), (c) and (e) only
    4. D(b) and (d) only

    Answer: (D) (b) and (d) only

    Explanation

    General inflation in an economy is measured by comprehensive price indices:

    • b. CPI (Consumer Price Index) measures changes over time in retail prices of a representative basket of goods and services consumed by households.
    • d. GDP deflator measures the ratio of nominal GDP to real GDP, reflecting price changes across all domestically produced goods and services.

    Item a (Phillips curve) plots the empirical inverse trade-off between inflation and unemployment. Item c (Misery index) is the sum of the unemployment rate and the inflation rate. Item e (Fisher index) is an index number construction formula rather than a direct inflation metric.

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30. Question 30

    Arrange the following steps in the process of an export deal in the correct sequence:
    a. Confirm export deal
    b. Receive letter of credit
    c. Identify and negotiate with importer
    d. Receive export order
    e. Examine thoroughly and ask for amendment, if necessary

    Choose the correct answer from the options given below:

    1. A(a), (c), (e), (d), (b)
    2. B(c), (a), (d), (e), (b)
    3. C(b), (e), (a), (c), (d)
    4. D(d), (a), (b), (c), (e)

    Answer: (B) (c), (a), (d), (e), (b)

    Explanation

    Executing an international export transaction proceeds through standard commercial phases:

    (c), (a), (d), (e), (b)

    • c. Identify and negotiate with importer — establish overseas buyer contact and agree on commercial terms.
    • a. Confirm export deal — finalize agreement and confirm the quotation or proforma invoice.
    • d. Receive export order — receive the formal purchase order (indent) from the overseas buyer.
    • e. Examine thoroughly and ask for amendment, if necessary — inspect order specifications, delivery dates, and documentation requirements, seeking amendments where needed.
    • b. Receive letter of credit — obtain the authenticated Letter of Credit from the importer's issuing bank to secure payment before shipment.

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31. Question 31

    Arrange the following steps in PERT/CPM in the correct sequence:
    a. Identify critical path
    b. Draw the network
    c. Identify dependencies
    d. Estimate completion time
    e. Define activities

    Choose the correct answer from the options given below:

    1. A(b), (c), (d), (e), (a)
    2. B(e), (c), (b), (d), (a)
    3. C(c), (b), (e), (a), (d)
    4. D(a), (b), (d), (e), (c)

    Answer: (B) (e), (c), (b), (d), (a)

    Explanation

    Project network analysis using PERT or CPM follows five sequential steps:

    (e), (c), (b), (d), (a)

    • e. Define activities — break down the project into discrete, manageable work activities.
    • c. Identify dependencies — establish precedence relationships and sequential constraints between activities.
    • b. Draw the network — construct the node-and-arrow network diagram reflecting the sequence of operations.
    • d. Estimate completion time — calculate expected duration for each activity using deterministic or probabilistic time estimates.
    • a. Identify critical path — determine the longest sequence of dependent activities to identify the minimum total project duration.

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32. Question 32

    Tax audit is compulsory for a person carrying on profession when gross receipts exceed which one of the following limits?

    1. A₹60 lakhs
    2. B₹1 crore
    3. C₹40 lakhs
    4. D₹50 lakhs

    Answer: (D) ₹50 lakhs

    Explanation

    Under Section 44AB(b) of the Income Tax Act, 1961, tax audit provisions differ between businesses and professions:

    • A. ₹60 lakhs — incorrect. Not a recognized threshold for professional tax audits.
    • B. ₹1 crore — incorrect. ₹1 crore is the baseline threshold for persons carrying on business under Section 44AB(a).
    • C. ₹40 lakhs — incorrect. An obsolete historical threshold.
    • D. ₹50 lakhs — correct. A professional must compulsorily have their accounts audited by a Chartered Accountant if gross receipts exceed ₹50 lakhs in the relevant previous year.

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33. Question 33

    Which model of Human Resource Accounting was developed by Brummet, Flamholtz and Pyle?

    1. AReplacement Cost Model
    2. BHistorical Cost Model
    3. COpportunity Cost Model
    4. DStandard Cost Model

    Answer: (B) Historical Cost Model

    Explanation

    Human Resource Accounting models value human assets using different accounting methodologies:

    • A. Replacement Cost Model — developed by Eric G. Flamholtz to measure the cost of replacing existing personnel.
    • B. Historical Cost Model — correct. Developed jointly by R. Lee Brummet, Eric G. Flamholtz, and William C. Pyle in 1968 at the R.G. Barry Corporation. It capitalizes actual recruitment, selection, hiring, and training costs and amortizes them over the employee's expected service life.
    • C. Opportunity Cost Model — developed by J.J. Hekimian and C.H. Jones based on internal competitive bidding for scarce employees.
    • D. Standard Cost Model — proposed by David Watson based on standard costs of recruiting and developing personnel.

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34. Question 34

    Which one of the following is an example of a hybrid service offering?

    1. AConsulting
    2. BMassage
    3. CRestaurant meal
    4. DCar with warranty

    Answer: (C) Restaurant meal

    Explanation

    Philip Kotler's goods-services continuum categorizes market offerings into five distinct levels:

    • A. Consulting — pure service involving intangible professional advice.
    • B. Massage — pure service involving direct personal labor without any physical product transfer.
    • C. Restaurant meal — correct. A classic hybrid offering that combines equal tangible components (food and beverages) with intangible components (table service, cooking, and ambiance).
    • D. Car with warranty — tangible good accompanied by a minor supplementary service.

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35. Question 35

    Arrange the following stages of scientific research in correct sequence:
    a. Induction
    b. Making prediction
    c. Observation of facts
    d. Testing prediction
    e. Development of explanations

    Choose the correct answer from the options given below:

    1. A(a), (b), (c), (e), (d)
    2. B(c), (a), (e), (b), (d)
    3. C(e), (a), (b), (c), (d)
    4. D(a), (d), (b), (c), (e)

    Answer: (B) (c), (a), (e), (b), (d)

    Explanation

    The scientific method moves cyclically from empirical observation to theory formulation and testing:

    (c), (a), (e), (b), (d)

    • c. Observation of facts — collect raw empirical data from the natural or social environment.
    • a. Induction — generalize patterns from specific observations to formulate tentative principles.
    • e. Development of explanations — synthesize inductive insights into formal hypotheses and theoretical frameworks.
    • b. Making prediction — deduce logical consequences and testable hypotheses from the theory.
    • d. Testing prediction — gather fresh empirical evidence to validate, refine, or refute the theoretical predictions.

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36. Question 36

    Which of the following statements are associated with Stewardship theory?
    a. It is a governance approach based on sociology and psychology
    b. It assumes a behaviour pattern that is trustworthy
    c. The role of management is to monitor and control
    d. Owners have an attitude to take risks
    e. Interests of managers and principals converge

    Choose the most appropriate answer from the options given below:

    1. A(a), (d) and (e) only
    2. B(a), (b), (d) and (e) only
    3. C(b), (c) and (d) only
    4. D(a), (b), (c), (d) and (e)

    Answer: (B) (a), (b), (d) and (e) only

    Explanation

    Stewardship theory, introduced by Davis, Schoorman, and Donaldson, contrasts with traditional economic agency models:

    • a. It is a governance approach based on sociology and psychology, focusing on intrinsic motivation and organizational commitment.
    • b. It assumes a behaviour pattern that is trustworthy, viewing managers as responsible custodians rather than self-interested opportunists.
    • d. Owners maintain an attitude willing to take risks, empowering managers with autonomy.
    • e. Interests of managers and principals converge, working toward shared organizational success.

    Statement c is false because monitoring and control is the defining premise of Agency theory, not Stewardship theory.

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37. Question 37

    Which of the following are inputs in economic value-to-customer pricing?
    a. Buyer image of product performance
    b. Warranty quality
    c. Desired rate of return
    d. Customer demand
    e. Customer support

    Choose the most appropriate answer from the options given below:

    1. A(a), (b) and (e) only
    2. B(a), (c) and (d) only
    3. C(b), (d) and (e) only
    4. D(a), (b), (c) and (d) only

    Answer: (A) (a), (b) and (e) only

    Explanation

    Economic Value to the Customer (EVC) determines price based on the total tangible and perceived value delivered relative to reference products:

    • a. Buyer image of product performance shapes perceived reliability and premium brand valuation.
    • b. Warranty quality reduces perceived ownership risk and maintenance costs.
    • e. Customer support provides ongoing service assurance and reduces downtime costs.

    In contrast, item c (desired rate of return) is an internal cost-plus metric. Item d (customer demand) is an aggregate market characteristic rather than an individual product value driver.

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38. Question 38

    Which of the following variables are used in currency option pricing?
    a. Spot exchange rate
    b. Exercise rate
    c. Foreign risk-free rate of return
    d. Domestic risk-adjusted rate
    e. Time to expiration

    Choose the most appropriate answer from the options given below:

    1. A(b), (c), (d) and (e) only
    2. B(a), (c), (d) and (e) only
    3. C(a), (b), (c) and (e) only
    4. D(a), (b), (d) and (e) only

    Answer: (C) (a), (b), (c) and (e) only

    Explanation

    The Garman-Kohlhagen currency option pricing model relies on specific market parameters:

    • a. Spot exchange rate (S) — current market price of the foreign currency.
    • b. Exercise rate (X) — strike price specified in the option contract.
    • c. Foreign risk-free rate of return — cost of holding the underlying foreign currency.
    • e. Time to expiration (T) — maturity period remaining until the option expires.

    Item d is incorrect because option valuation uses the domestic risk-free rate, not a risk-adjusted rate.

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39. Question 39

    Match List I with List II:

    List I (Types of lease)	List II (Description)
    a. Leveraged lease	i. Mix operating and finance lease on full pay-out basis and provides for purchase option to the lease
    b. Direct lease	ii. Financing for services and fuel in aircraft industry
    c. Wet lease	iii. Protects leases against rate of obsolesces
    d. Update lease	iv. Involves lessor, leases and financer, lesser provides equity and major amount is provided by financer as loan

    1. A(a)-(i), (b)-(ii), (c)-(iii), (d)-(iv)
    2. B(a)-(iv), (b)-(i), (c)-(ii), (d)-(iii)
    3. C(a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)
    4. D(a)-(iv), (b)-(iii), (c)-(i), (d)-(ii)

    Answer: (B) (a)-(iv), (b)-(i), (c)-(ii), (d)-(iii)

    Explanation

    Different commercial lease structures serve distinct financing and operational objectives:

    (a)-(iv), (b)-(i), (c)-(ii), (d)-(iii)

    • a. Leveraged lease matches iv. A tripartite arrangement involving lessor, lessee, and a financial institution where the lessor provides equity and the financer provides debt.
    • b. Direct lease matches i. A bipartite arrangement combining operating and finance lease features with a purchase option on a full payout basis.
    • c. Wet lease matches ii. Common in aviation, where aircraft financing includes aircraft, crew, maintenance, insurance, and fuel.
    • d. Update lease matches iii. Protects the lessee against technological obsolescence by allowing upgrades to modern equipment.

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40. Question 40

    Match List I with List II:

    List I (Management style)	List II (Approach)
    a. Task management	i. Love conquers all approach
    b. Country club management	ii. One plus one can add up to three approach
    c. Impoverished management	iii. Authority-obedience approach
    d. Team management	iv. Speak no evil, hear no evil, see no evil approach

    1. A(a)-(i), (b)-(iii), (c)-(iv), (d)-(ii)
    2. B(a)-(i), (b)-(iv), (c)-(ii), (d)-(iii)
    3. C(a)-(iii), (b)-(i), (c)-(iv), (d)-(ii)
    4. D(a)-(iii), (b)-(iv), (c)-(ii), (d)-(i)

    Answer: (C) (a)-(iii), (b)-(i), (c)-(iv), (d)-(ii)

    Explanation

    Blake and Mouton's Managerial Grid models leadership along concern for production and concern for people:

    (a)-(iii), (b)-(i), (c)-(iv), (d)-(ii)

    • a. Task management (9,1) matches iii. High concern for production and low concern for people represents an authority-obedience approach.
    • b. Country club management (1,9) matches i. High concern for people and low concern for production adopts a friendly, love-conquers-all approach.
    • c. Impoverished management (1,1) matches iv. Low concern for both production and people adopts an indifferent, speak-no-evil approach.
    • d. Team management (9,9) matches ii. High concern for both production and people fosters synergistic collaboration where one plus one can add up to three.

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41. Question 41

    Match List I with List II:

    List I (Auditor provision)	List II (Section)
    a. Appointment of auditors by CAG	i. Section 139(5)
    b. Qualifications and disqualifications of auditors	ii. Section 141
    c. Powers and duties of auditors	iii. Section 142
    d. Remuneration of auditors	iv. Section 143

    1. A(a)-(ii), (b)-(iii), (c)-(i), (d)-(iv)
    2. B(a)-(ii), (b)-(i), (c)-(iv), (d)-(iii)
    3. C(a)-(i), (b)-(ii), (c)-(iv), (d)-(iii)
    4. D(a)-(i), (b)-(iii), (c)-(ii), (d)-(iv)

    Answer: (C) (a)-(i), (b)-(ii), (c)-(iv), (d)-(iii)

    Explanation

    Audit provisions under the Companies Act, 2013 govern statutory obligations of company auditors:

    (a)-(i), (b)-(ii), (c)-(iv), (d)-(iii)

    • a. Appointment of auditors by CAG matches i. Section 139(5) empowers the Comptroller and Auditor General to appoint auditors for government companies.
    • b. Qualifications and disqualifications of auditors matches ii. Section 141 specifies eligibility, professional qualifications, and disqualifications.
    • c. Powers and duties of auditors matches iv. Section 143 details statutory rights of access to books and reporting duties.
    • d. Remuneration of auditors matches iii. Section 142 regulates how auditor fees and expenses are determined.

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42. Question 42

    Who propounded the model of sales revenue maximisation?

    1. AK.W. Rothschild
    2. BCyert and March
    3. CRobin Marris
    4. DW.J. Baumol

    Answer: (D) W.J. Baumol

    Explanation

    Managerial theories of the firm suggest alternative goals to traditional profit maximization:

    • A. K.W. Rothschild — focused on long-run survival and market share preservation.
    • B. Cyert and March — developed the Behavioral Theory of the Firm based on organizational coalition and satisficing goals.
    • C. Robin Marris — proposed the managerial enterprise model of maximizing the balanced rate of growth.
    • D. W.J. Baumol — correct. Formulated the Sales Revenue Maximisation hypothesis in 1959, arguing that professional managers seek to maximize gross sales turnover subject to a minimum profit constraint.

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43. Question 43

    Which of the following constitute the three pillars of BASEL II?
    a. Minimum capital requirements
    b. Supervisory review
    c. Leverage
    d. Market discipline
    e. Capital conservation buffer

    Choose the most appropriate answer from the options given below:

    1. A(a), (c) and (d) only
    2. B(a), (d) and (e) only
    3. C(a), (b) and (d) only
    4. D(b), (c) and (e) only

    Answer: (C) (a), (b) and (d) only

    Explanation

    The Basel II regulatory framework rests upon Three Pillars established by the Basel Committee on Banking Supervision:

    • Pillar 1: Minimum capital requirements (a) sets capital standards for credit, operational, and market risks.
    • Pillar 2: Supervisory review (b) provides supervisors with tools to assess internal risk management and bank capital adequacy.
    • Pillar 3: Market discipline (d) enforces standardized public disclosures to foster market transparency.

    Items c (leverage ratio) and e (capital conservation buffer) are regulatory additions introduced under Basel III, not Basel II.

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44. Question 44

    Assertion (A): Lien is a right to retain possession of goods until payment of price.
    Reason (R): An unpaid seller in possession of goods is entitled to exercise his lien where the goods have been sold without any credit.

    1. ABoth (A) and (R) are correct and (R) is the correct explanation of (A)
    2. BBoth (A) and (R) are correct but (R) is not the correct explanation of (A)
    3. C(A) is correct but (R) is not correct
    4. D(A) is not correct but (R) is correct

    Answer: (A) Both (A) and (R) are correct and (R) is the correct explanation of (A)

    Explanation

    Under the Sale of Goods Act, 1930, the right of lien is defined as a possessory security:

    • Assertion (A) is correct. A lien gives an unpaid seller the legal right to retain physical possession of goods until the buyer pays or tenders the purchase price.
    • Reason (R) is correct. Section 47(1)(a) specifically provides that an unpaid seller in possession of goods can retain them where the goods have been sold without any stipulation as to credit.

    Because Reason (R) directly explains the statutory conditions under which the right of lien arises, both statements are correct and (R) is the correct explanation of (A).

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45. Question 45

    What is the primary motive of central banks for raising interest rates?

    1. AGaining competitiveness
    2. BTaming inflation
    3. CRaising employment
    4. DCurrency depreciation

    Answer: (B) Taming inflation

    Explanation

    Central banks employ contractionary monetary policy primarily to maintain price stability:

    • A. Gaining competitiveness — higher interest rates attract foreign capital and appreciate the currency, making exports less competitive.
    • B. Taming inflation — correct. Raising policy interest rates increases borrowing costs for businesses and consumers, slowing credit growth, dampening aggregate demand, and cooling inflationary pressures.
    • C. Raising employment — monetary tightening cools economic activity, which tends to soften labor demand rather than raise employment.
    • D. Currency depreciation — higher domestic interest rates usually lead to currency appreciation through international capital inflows.

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46. Question 46

    Which one of the following measures the degree of lopsidedness of a distribution?

    1. ACentral tendency
    2. BVariation
    3. CSkewness
    4. DKurtosis

    Answer: (C) Skewness

    Explanation

    Statistical summary measures describe different properties of a frequency distribution:

    • A. Central tendency — identifies the central location or average around which data clusters.
    • B. Variation — measures the dispersion or spread of individual values around the central point.
    • C. Skewness — correct. Skewness measures the degree of asymmetry, departure from symmetry, or lopsidedness of a distribution curve about its mean.
    • D. Kurtosis — measures the peakedness or tail thickness of a distribution relative to a normal distribution.

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47. Question 47

    Which mode of entry into a foreign market is most appropriate for a firm with little international experience?

    1. AAcquisition
    2. BExporting
    3. CStrategic Alliance
    4. DJoint Venture

    Answer: (B) Exporting

    Explanation

    Firms entering international business typically select entry modes based on resource commitment and risk tolerance:

    • A. Acquisition — requires massive capital, complex integration, and high cross-border regulatory risk.
    • B. Exporting — correct. Indirect or direct exporting allows a firm with little foreign market experience to sell abroad with minimal financial risk, low capital investment, and no foreign facility setup.
    • C. Strategic Alliance — requires coordinating strategies with foreign partners, posing significant relational risks.
    • D. Joint Venture — requires substantial capital commitment and complex shared governance with local entities.

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48. Question 48

    Which of the following losses are allowed to be carried forward and set off in subsequent years?
    a. House property loss
    b. Business loss
    c. Speculation loss
    d. Capital loss
    e. Loss from owning and maintaining race horses

    Choose the most appropriate answer from the options given below:

    1. A(a), (b), (c) and (d) only
    2. B(b), (c), (d) and (e) only
    3. C(a) and (e) only
    4. D(a), (b), (c), (d) and (e)

    Answer: (D) (a), (b), (c), (d) and (e)

    Explanation

    The Income Tax Act, 1961 allows specific categories of losses to be carried forward subject to statutory time frames:

    • a. House property loss — can be carried forward up to 8 assessment years under Section 71B.
    • b. Business loss — non-speculative business losses can be carried forward up to 8 assessment years under Section 72.
    • c. Speculation loss — can be carried forward up to 4 assessment years under Section 73.
    • d. Capital loss — both short-term and long-term capital losses can be carried forward up to 8 assessment years under Section 74.
    • e. Loss from owning and maintaining race horses — can be carried forward up to 4 assessment years under Section 74A(3).

    Because all five types of losses are eligible for carry forward and set off, option D is the correct answer.

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49. Question 49

    Which one of the following is NOT a property of isoquants?

    1. AThey have a negative slope
    2. BThey are concave to the origin
    3. CThey are non-intersecting and non-tangential
    4. DUpper isoquants represent higher output

    Answer: (B) They are concave to the origin

    Explanation

    Standard production isoquants demonstrate regular technical characteristics:

    • A. They have a negative slope — downward sloping because employing more of one input requires reducing the other to maintain constant output.
    • B. They are concave to the origin — false statement and correct choice. Isoquants are convex to the origin due to the diminishing Marginal Rate of Technical Substitution (MRTS).
    • C. They are non-intersecting and non-tangential — two isoquants cannot intersect because each curve corresponds to an unambiguous output level.
    • D. Upper isoquants represent higher output — curves further from the origin utilize greater inputs to generate larger output.

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50. Question 50

    Given the following financial details, what is the earning per share?

    • Net profit before tax: ₹1,00,000
    • 10% Preference share capital (₹10 each): ₹1,00,000
    • Equity share capital (₹10 each): ₹1,00,000
    • Taxation: 50% of Net profit
    1. AZero
    2. B4
    3. C10
    4. D40

    Answer: (B) 4

    Explanation

    Earnings per share (EPS) is derived from profit after tax and preference dividend:

    Net profit before tax = ₹1,00,000
    Taxation @ 50% = ₹50,000
    Net profit after tax = 1,00,000 - 50,000 = ₹50,000
    Preference dividend @ 10% on ₹1,00,000 = ₹10,000
    Earnings available to equity shareholders = 50,000 - 10,000 = ₹40,000

    Number of equity shares = Equity share capital / Face value per share
    Number of equity shares = ₹1,00,000 / ₹10 = 10,000 shares

    EPS = ₹40,000 / 10,000 = ₹4 per share

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51. Question 51

    Which of the following statements are true regarding delegation?
    a. It slows decision making
    b. It leads to better decisions
    c. It relieves heavy workload
    d. It helps create informal organisation structure
    e. It trains subordinates

    Choose the most appropriate answer from the options given below:

    1. A(a), (d) and (e) only
    2. B(a), (b) and (c) only
    3. C(b), (c) and (e) only
    4. D(b), (c), (d) and (e) only

    Answer: (C) (b), (c) and (e) only

    Explanation

    Delegation of authority produces measurable administrative benefits:

    • b. It leads to better decisions by granting operational discretion to managers closest to the point of action.
    • c. It relieves heavy workload for senior executives, allowing them to concentrate on strategic planning.
    • e. It trains subordinates, preparing junior personnel for executive succession and higher responsibility.

    Statement a is false because delegation speeds up operational decisions. Statement d is false because delegation is a formal managerial process defining official authority rather than informal social structures.

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52. Question 52

    Which one of the following is a determinant of organisational culture?

    1. ALeadership style
    2. BDecision-making
    3. CInnovation and change
    4. DTrust

    Answer: (A) Leadership style

    Explanation

    Organizational culture reflects underlying values shaped by institutional leadership:

    • A. Leadership style — correct. In Schein's organizational culture model, founder philosophy and senior leadership styles serve as the primary determinants that create, model, and reinforce corporate culture.
    • B. Decision-making — a managerial process reflecting existing cultural norms rather than an originating determinant.
    • C. Innovation and change — an organizational outcome or cultural dimension fostered by leadership.
    • D. Trust — a psychological climate attribute that emerges from supportive leadership and cultural alignment.

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53. Question 53

    Which one of the following is NOT an assumption of cardinal utility analysis?

    1. AMaximization of satisfaction
    2. BUtility is cardinally measurable
    3. CDiminishing marginal utility of money
    4. DUtility is additive

    Answer: (C) Diminishing marginal utility of money

    Explanation

    Marshallian cardinal utility theory rests upon specific behavioral and measurement premises:

    • A. Maximization of satisfaction — consumer acts rationally to maximize total utility.
    • B. Utility is cardinally measurable — utility can be quantified in cardinal monetary units or utils.
    • C. Diminishing marginal utility of money — false assumption and correct choice. Marshall explicitly assumed constant marginal utility of money so that money could serve as an invariant standard measuring rod for utility.
    • D. Utility is additive — total utility is the arithmetic sum of independent utilities derived from individual goods consumed.

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54. Question 54

    Which one of the following is NOT an advantage in case of product departmentation?

    1. AEnsures continuous attention to product lines
    2. BRequires less managerial personnel
    3. CEnables comparison of product performances
    4. DMotivates product head

    Answer: (B) Requires less managerial personnel

    Explanation

    Product-based departmentalization organizes operations around separate product lines:

    • A. Ensures continuous attention to product lines — true advantage, fostering specialized marketing and production focus.
    • B. Requires less managerial personnel — false statement and correct choice. Product divisions duplicate functional specialists (finance, marketing, HR) across every division, requiring more managerial staff and increasing overhead costs.
    • C. Enables comparison of product performances — true advantage, allowing profit center accountability across lines.
    • D. Motivates product head — true advantage, providing divisional autonomy and direct responsibility for bottom-line results.

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55. Question 55

    Assertion (A): A firm under perfect competition earns only normal profits in the long run.
    Reason (R): Market price gets fully adjusted due to changes in demand and supply and free entry and exit, so normal profit persists.

    1. ABoth (A) and (R) are correct and (R) is the correct explanation of (A)
    2. BBoth (A) and (R) are correct but (R) is not the correct explanation of (A)
    3. C(A) is correct but (R) is not correct
    4. D(A) is not correct but (R) is correct

    Answer: (A) Both (A) and (R) are correct and (R) is the correct explanation of (A)

    Explanation

    Under perfect competition, industry adjustments dictate long-run equilibrium returns:

    • Assertion (A) is correct. Long-run equilibrium establishes price equal to minimum average cost (P = LAC), eliminating economic profits and leaving only normal profit.
    • Reason (R) is correct. Free entry allows new firms to enter whenever supernormal profits exist, expanding industry supply and lowering prices. Conversely, losses induce firm exit, contracting supply until price restores normal profitability.

    Because Reason (R) describes the exact market mechanism that enforces normal profits, both statements are correct and (R) correctly explains (A).

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56. Question 56

    Which of the following issues are covered under the Information Technology Act?
    a. Legal recognition of electronic documents
    b. Redressal of grievances
    c. Offenses and contraventions
    d. Disputes settlements
    e. Justice dispensation system for cyber crimes

    Choose the most appropriate answer from the options given below:

    1. A(a), (c) and (d) only
    2. B(c), (d) and (e) only
    3. C(b), (d) and (e) only
    4. D(a), (c) and (e) only

    Answer: (D) (a), (c) and (e) only

    Explanation

    The Information Technology Act, 2000 was enacted to establish legal infrastructure for electronic commerce:

    • a. Legal recognition of electronic documents validates electronic records and digital signatures under Chapters II and III.
    • c. Offenses and contraventions penalizes unauthorized system access, data tampering, and hacking under Chapters IX and XI.
    • e. Justice dispensation system for cyber crimes establishes the Cyber Regulations Appellate Tribunal and adjudicating officers.

    Items b (redressal of grievances) and d (disputes settlements) fall under consumer protection and arbitration enactments rather than the IT Act.

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57. Question 57

    Which of the following are non-random sampling methods?
    a. Systematic
    b. Quota
    c. Cluster/area
    d. Purposive
    e. Replicated

    Choose the most appropriate answer from the options given below:

    1. A(a) and (c) only
    2. B(b), (c) and (d) only
    3. C(a), (d) and (e) only
    4. D(b) and (d) only

    Answer: (D) (b) and (d) only

    Explanation

    Sampling techniques divide into probability (random) and non-probability (non-random) designs:

    • b. Quota sampling selects non-random sample elements to fill predetermined subgroup proportions.
    • d. Purposive sampling relies on subjective researcher judgment rather than chance selection.

    In contrast, systematic sampling (a), cluster/area sampling (c), and replicated sampling (e) are probability methods where each population element has a known non-zero probability of inclusion.

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58. Question 58

    Which one of the following statements is true?

    1. AThe sum of absolute deviations from Median is least
    2. BIf each value is multiplied by K, the variance of new values is equal to the original variance
    3. CVariance is the square of standard deviation divided by mean
    4. DZ-score of X is the ratio of X divided by mean

    Answer: (A) The sum of absolute deviations from Median is least

    Explanation

    Standard mathematical properties govern measures of central tendency and dispersion:

    • A. The sum of absolute deviations from Median is least — correct. By definition, sum of |X - A| is minimized when A equals the median.
    • B. If each value is multiplied by K, the variance of new values is equal to the original variance — false. Variance scales by the square of the multiplier, Var(KX) = K^2 * Var(X).
    • C. Variance is the square of standard deviation divided by mean — false. Variance is simply the square of the standard deviation, sigma^2.
    • D. Z-score of X is the ratio of X divided by mean — false. The standard score is computed as Z = (X - mu) / sigma.

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59. Question 59

    Conversion of a non-productive inactive asset (i.e. receivable) into a productive asset (viz., cash) by selling receivables to a specialist agency for collection and administration is called:

    1. ABills discounting
    2. BUnderwriting
    3. CGuaranteeing
    4. DFactoring

    Answer: (D) Factoring

    Explanation

    Receivables management employs specialized financing techniques:

    • A. Bills discounting — financial discounting of a specific bill of exchange by a commercial bank without outsourcing sales ledger administration.
    • B. Underwriting — contractual guarantee by an intermediary to subscribe to unbought shares during a public issue.
    • C. Guaranteeing — contract of surety where a guarantor promises performance or debt repayment.
    • D. Factoring — correct. In factoring, a business sells its book debts and trade receivables to a specialized financial intermediary (factor), converting inactive receivables into immediate cash while outsourcing ledger administration.

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60. Question 60

    Match List I with List II:

    List I (Model/delivery)	List II (Explanation)
    a. Actual delivery	i. Seller hands over buyer key to godown
    b. Constructive delivery	ii. Physical handing over possession goods seller to buyer
    c. Symbolic delivery	iii. Voluntary transfer possession goods from seller to buyer
    d. Delivery	iv. Acknowledgement by third person on behalf of and at disposal of buyer

    1. A(a)-(iv), (b)-(ii), (c)-(iii), (d)-(i)
    2. B(a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)
    3. C(a)-(iii), (b)-(i), (c)-(ii), (d)-(iv)
    4. D(a)-(i), (b)-(ii), (c)-(iv), (d)-(iii)

    Answer: (B) (a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)

    Explanation

    The Sale of Goods Act, 1930 recognizes distinct forms of delivery of goods:

    (a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)

    • a. Actual delivery matches ii. Seller physically hands over actual possession of goods to the buyer.
    • b. Constructive delivery matches iv. A third party holding the goods acknowledges holding them on behalf and at the disposal of the buyer.
    • c. Symbolic delivery matches i. Handing over the key to the warehouse where goods are stored represents constructive transfer of control.
    • d. Delivery matches iii. Section 2(2) defines delivery as the voluntary transfer of possession of goods from seller to buyer.

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61. Question 61

    Which one of the following is known as safety margin for insurers?

    1. AProtection
    2. BSolvency
    3. CProfit
    4. DCost of risk bearing

    Answer: (B) Solvency

    Explanation

    In insurance operations and actuarial oversight, safety margins preserve financial stability:

    • A. Protection — consumer benefit provided by an insurance contract.
    • B. Solvency — correct. The solvency margin (excess of admissible assets over liabilities) acts as the essential statutory safety margin, ensuring the insurer can settle sudden or unexpected claims surges.
    • C. Profit — financial return earned by insurers, which varies with operating conditions.
    • D. Cost of risk bearing — premium loading to compensate for risk uncertainty.

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62. Question 62

    Which of the following are behavioural segmentation variables?
    a. Life style
    b. User status
    c. Occasions
    d. Values
    e. Loyalty

    Choose the most appropriate answer from the options given below:

    1. A(a), (b), (c) and (d) only
    2. B(a), (d) and (e) only
    3. C(b), (c), (d) and (e) only
    4. D(a), (b) and (e) only

    Answer: (C) (b), (c), (d) and (e) only

    Explanation

    Market segmentation classifies consumer characteristics across behavioral and psychographic dimensions:

    • b. User status (non-users, potential users, first-time users, regular users) is a core behavioral variable.
    • c. Occasions (holidays, life milestones, regular usage times) segment buying behaviour by timing.
    • e. Loyalty (hard-core loyals, split loyals, switchers) measures brand commitment.
    • d. Values reflect fundamental beliefs that guide action, grouped alongside behavioral patterns in consumer targeting.

    In contrast, item a (life style) is the defining benchmark of psychographic segmentation, making option C the accepted answer.

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63. Question 63

    Statement I: Tax planning promotes professionalism and strengthens economic and political situation.
    Statement II: Tax evasion is an act within permissible range to achieve social and economic benefits.

    1. ABoth Statement I and Statement II are true
    2. BBoth Statement I and Statement II are false
    3. CStatement I is true but Statement II is false
    4. DStatement I is false but Statement II is true

    Answer: (C) Statement I is true but Statement II is false

    Explanation

    Evaluating tax compliance concepts reveals a sharp distinction between legal optimization and criminal evasion:

    • Statement I is true. Tax planning is the lawful arrangement of an assessee's financial affairs to minimize tax liability using deductions, reliefs, and rebates provided by statute, promoting institutional transparency and fiscal health.
    • Statement II is false. Tax evasion is an illegal and fraudulent practice involving deliberate concealment of income or misrepresentation of accounts. It is entirely outside the permissible legal range and incurs civil and criminal penalties under tax statutes.

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64. Question 64

    Foreign equity is preferred to domestic equity if which one of the following conditions holds?

    1. AHigher dividend yield and high capital appreciation
    2. BLower dividend yield and lower capital appreciation
    3. CHigher dividend yield and lower capital appreciation
    4. DLower dividend Yield and high capital appreciation

    Answer: (B) Lower dividend yield and lower capital appreciation

    Explanation

    From the perspective of a corporate issuer raising capital abroad:

    • A. Higher dividend yield and high capital appreciation — indicates a higher required cost of equity, making foreign capital expensive for the issuing firm.
    • B. Lower dividend yield and lower capital appreciation — correct. When foreign equity markets demand lower dividend payouts and lower expected cost of equity, a company can issue foreign equity (ADRs/GDRs) at a lower cost of capital than in domestic markets.
    • C. Higher dividend yield and lower capital appreciation — represents an unbalanced cost structure.
    • D. Lower dividend Yield and high capital appreciation — demands high future growth returns.

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65. Question 65

    Which foreign exchange exposure arises when consolidated financial statements are affected by changes in exchange rates?

    1. ATransaction exposure
    2. BEconomic exposure
    3. CTranslation exposure
    4. DOperating exposure

    Answer: (C) Translation exposure

    Explanation

    Multinational corporations encounter distinct categories of foreign exchange risk:

    • A. Transaction exposure — sensitivity of realized contractual cash flows to exchange rate fluctuations.
    • B. Economic exposure — sensitivity of the present value of future long-term operating cash flows to exchange rate movements.
    • C. Translation exposure — correct. Also known as accounting exposure, it arises when a parent multinational translates and consolidates the assets and liabilities of foreign subsidiaries into its domestic reporting currency for financial statements.
    • D. Operating exposure — another term for economic exposure focusing on competitive position.

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66. Question 66

    Arrange the following elements of a successful market offering in the correct sequence:
    a. Specifics of offering
    b. Monitoring goal progress
    c. Ultimate criterion of success
    d. Logistics of creating offering
    e. Value created for target market

    Choose the correct answer from the options given below:

    1. A(a), (d), (e), (c), (b)
    2. B(c), (e), (a), (b), (d)
    3. C(d), (a), (c), (e), (b)
    4. D(c), (e), (a), (d), (b)

    Answer: (D) (c), (e), (a), (d), (b)

    Explanation

    In marketing management frameworks (such as Chernev's G-STIC model), strategic planning proceeds from goals to control:

    (c), (e), (a), (d), (b)

    • c. Ultimate criterion of success — define overarching business and monetary goals.
    • e. Value created for target market — articulate the customer value proposition.
    • a. Specifics of offering — design the tactical product, brand, pricing, and communication features.
    • d. Logistics of creating offering — execute production, physical supply chain, and deployment logistics.
    • b. Monitoring goal progress — evaluate performance metrics and institute ongoing control adjustments.

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67. Question 67

    Match List I with List II:

    List I (Earnings valuation measure)	List II (Meaning)
    a. Price–earning (P.E) ratio	i. Stock price divided by accounting net worth
    b. Earnings yield ratio	ii. Firm’s P.E ratio divided by an index P.E ratio
    c. Price-book ratio	iii. Stock price divided by earnings per share
    d. Relative P.E ratio	iv. Earning per share divided by stock price

    1. A(a)-(ii), (b)-(iv), (c)-(i), (d)-(iii)
    2. B(a)-(i), (b)-(iv), (c)-(iii), (d)-(ii)
    3. C(a)-(ii), (b)-(iii), (c)-(iv), (d)-(i)
    4. D(a)-(iii), (b)-(iv), (c)-(i), (d)-(ii)

    Answer: (D) (a)-(iii), (b)-(iv), (c)-(i), (d)-(ii)

    Explanation

    Stock market valuation multiples reflect distinct equity fundamentals:

    (a)-(iii), (b)-(iv), (c)-(i), (d)-(ii)

    • a. Price-earning (P.E) ratio matches iii. Stock price divided by earnings per share.
    • b. Earnings yield ratio matches iv. Earnings per share divided by stock price.
    • c. Price-book ratio matches i. Stock price divided by accounting net worth.
    • d. Relative P.E ratio matches ii. Firm's P.E ratio divided by an index P.E ratio.

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68. Question 68

    Which of the following are complete experimental research designs?
    a. Factorial
    b. One group after-only
    c. Before-after one experiment and two control groups
    d. Latin square
    e. One-group before-after

    Choose the most appropriate answer from the options given below:

    1. A(a), (c) and (d) only
    2. B(a), (d) and (e) only
    3. C(b), (c) and (d) only
    4. D(b), (c) and (e) only

    Answer: (A) (a), (c) and (d) only

    Explanation

    Experimental research methodologies divide into pre-experimental and true experimental designs:

    • a. Factorial design tests the independent and interaction effects of two or more treatment variables simultaneously.
    • c. Before-after one experiment and two control groups controls for testing effects, history, and maturation.
    • d. Latin square design controls for two extraneous sources of variation in a structured grid layout.

    In contrast, item b (one-group after-only) and item e (one-group before-after) are pre-experimental designs that lack control groups, leaving confounding variables uncontrolled.

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69. Question 69

    How can a Limited Liability Partnership be wound up?

    1. AVoluntarily
    2. BBy Registrar, if firm fails annual return in prescribed form with Registrar of Companies within 60 days of closure of financial year
    3. CBy Tribunal under Companies Act 2013
    4. DEither voluntarily or by tribunal

    Answer: (D) Either voluntarily or by tribunal

    Explanation

    Dissolution and winding up of an LLP are governed by the Limited Liability Partnership Act, 2008:

    • A. Voluntarily — an LLP may be wound up voluntarily if partners pass a resolution with three-fourths majority.
    • B. By Registrar... — default in filing annual returns does not trigger immediate winding up.
    • C. By Tribunal under Companies Act 2013 — tribunal winding up of an LLP occurs under Section 64 of the LLP Act, 2008.
    • D. Either voluntarily or by tribunal — correct. Section 63 of the LLP Act, 2008 provides that the winding up of a limited liability partnership may be either voluntary or by the Tribunal.

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70. Question 70

    Which one of the following statements about regression is false?

    1. ARegression coefficients are independent of origin but not of scale
    2. BBoth regression coefficients cannot assume a value ignoring sign greater than one
    3. CRegression coefficients of two variables may have different algebraic symbols for real life
    4. DCoefficient of correlation is independent of change of origin and scale

    Answer: (C) Regression coefficients of two variables may have different algebraic symbols for real life

    Explanation

    Mathematical properties of linear regression coefficients include the following:

    • A. Regression coefficients are independent of origin but not of scale — true property.
    • B. Both regression coefficients cannot assume a value ignoring sign greater than one — true property, because r^2 = byx * bxy <= 1.
    • C. Regression coefficients of two variables may have different algebraic symbols for real life — false statement and correct choice. Both regression coefficients (byx and bxy) must always share the same algebraic sign as the correlation coefficient r.
    • D. Coefficient of correlation is independent of change of origin and scale — true property of Pearson's r.

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71. Question 71

    Which one of the following measures of central tendency is unaffected by extreme values?

    1. AArithmetic average
    2. BGeometric average
    3. CPositional average
    4. DHarmonic average

    Answer: (C) Positional average

    Explanation

    Measures of central location exhibit differing sensitivity to outliers:

    • A. Arithmetic average — highly sensitive to extreme values because every numerical score enters the calculation.
    • B. Geometric average — influenced by extreme values through logarithmic product transformation.
    • C. Positional average — correct. Positional averages (such as the median and mode) depend solely on position and rank ordering in the series, making them immune to extreme outlier distortion.
    • D. Harmonic average — strongly affected by small values and extreme observations.

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72. Question 72

    Which of the following statements regarding banking are correct?
    a. ALM is concerned with mismatch risk
    b. An NPA must be written off as loss in the year it is identified
    c. Undisclosed reserves may be included in Tier II capital if they represent post-tax profits
    d. A bank cannot accept public deposits for a period exceeding 5 years
    e. Hybrid debt capital instruments may be included in Tier II capital

    Choose the most appropriate answer from the options given below:

    1. A(a), (c) and (d) only
    2. B(c), (d) and (e) only
    3. C(b), (c) and (d) only
    4. D(a), (c) and (e) only

    Answer: (D) (a), (c) and (e) only

    Explanation

    Evaluating regulatory norms for commercial banks in India:

    • a. ALM is concerned with mismatch risk — Asset-Liability Management controls liquidity and interest rate mismatch risks.
    • c. Undisclosed reserves may be included in Tier II capital if they reflect audited post-tax profits accepted by the banking regulator.
    • e. Hybrid debt capital instruments (such as perpetual subordinated debt) qualify as Tier II supplementary capital.

    Statement b is false because NPAs progress through sub-standard and doubtful stages over multiple years before being written off as loss assets. Statement d is false because banks routinely accept term deposits up to 10 years.

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73. Question 73

    Arrange the following stages of new product development in the correct sequence:
    a. Concept Development and Testing
    b. Marketing Strategy Development
    c. Idea Screening
    d. Product Development
    e. Test Marketing

    Choose the correct answer from the options given below:

    1. A(a), (c), (d), (e), (b)
    2. B(c), (a), (b), (d), (e)
    3. C(c), (a), (d), (e), (b)
    4. D(a), (c), (d), (b), (e)

    Answer: (B) (c), (a), (b), (d), (e)

    Explanation

    The standard new product development process moves through structured stages:

    (c), (a), (b), (d), (e)

    • c. Idea Screening — filter out unviable product proposals early.
    • a. Concept Development and Testing — translate surviving ideas into detailed product concepts and test them with target consumers.
    • b. Marketing Strategy Development — design initial marketing strategy covering positioning and financial targets.
    • d. Product Development — construct physical prototypes and verify technical feasibility.
    • e. Test Marketing — launch in controlled real-world market environments before full-scale commercialization.

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74. Question 74

    Assertion (A): There is a change in the old partners’ profit-sharing ratio when a new partner gets his share from all the old partners.
    Reason (R): A new partner is admitted for a certain share, and the combined shares of old partners are reduced.

    1. ABoth (A) and (R) are correct and (R) is the correct explanation of (A)
    2. BBoth (A) and (R) are correct but (R) is not the correct explanation of (A)
    3. C(A) is true but (R) is false
    4. D(A) is false but (R) is true

    Answer: (A) Both (A) and (R) are correct and (R) is the correct explanation of (A)

    Explanation

    Admission of a partner changes the existing profit distribution:

    • Assertion (A) is correct. When an incoming partner acquires a share of future profits contributed by all existing partners, the existing profit proportions among the old partners adjust to a new profit-sharing ratio.
    • Reason (R) is correct. Because total firm profit is fixed at 100%, granting a share to the new partner reduces the remaining combined share available to the existing partners.

    Because Reason (R) directly explains why the old partners must surrender part of their combined profit share, both statements are correct and (R) correctly explains (A).

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75. Question 75

    Arrange the following steps for computation of tax where agricultural income is included:
    a. Add agricultural and non-agricultural income and calculate tax on aggregate income
    b. Add agricultural income to maximum exemption limit and compute tax
    c. Deduct Income tax as computed in step (b) from tax computed in step (a)
    d. Claim rebate u/s 87(A)
    e. Add surcharge and H&E cess @ 4%

    Choose the correct answer from the options given below:

    1. A(b), (a), (c), (d), (e)
    2. B(b), (a), (d), (c), (e)
    3. C(a), (b), (d), (c), (e)
    4. D(a), (b), (c), (d), (e)

    Answer: (D) (a), (b), (c), (d), (e)

    Explanation

    The partial integration scheme for taxing non-agricultural income when agricultural income exceeds ₹5,000 follows five sequential steps:

    (a), (b), (c), (d), (e)

    • a. Add agricultural and non-agricultural income and calculate income tax on the aggregate sum at standard slab rates.
    • b. Add agricultural income to the basic exemption limit and calculate income tax on this total at standard slab rates.
    • c. Deduct tax computed in step b from tax computed in step a to determine the basic tax liability on non-agricultural income.
    • d. Claim rebate u/s 87A, if applicable to resident individuals.
    • e. Add surcharge and Health & Education Cess @ 4% to arrive at the final tax liability.

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76. Question 76

    Which of the following are categories of GST rates?
    a. 5%
    b. 10%
    c. 12%
    d. 20%
    e. 28%

    Choose the most appropriate answer from the options given below:

    1. A(a), (d) and (e) only
    2. B(b), (c) and (d) only
    3. C(a), (c) and (e) only
    4. D(b), (d) and (e) only

    Answer: (C) (a), (c) and (e) only

    Explanation

    The Indian Goods and Services Tax (GST) council established a four-tier standard tax rate structure:

    • a. 5% — merit rate for essential consumer goods and mass consumption items.
    • c. 12% — standard lower rate.
    • e. 28% — peak rate for demerit and luxury goods.

    The fourth standard rate is 18%. The GST regime contains no 10% (b) or 20% (d) rate slabs, making option C the correct classification.

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77. Question 77

    Arrange the following steps of winding up by Tribunal in chronological order:
    a. Settlement of list of contributories/application of assets
    b. Report by company liquidator
    c. Petition for winding up
    d. Direction of Tribunal on report
    e. Appointment of liquidator

    Choose the correct answer from the options given below:

    1. A(e), (b), (a), (c), (d)
    2. B(a), (e), (b), (c), (d)
    3. C(c), (e), (b), (d), (a)
    4. D(b), (d), (c), (a), (e)

    Answer: (C) (c), (e), (b), (d), (a)

    Explanation

    Under the Companies Act, 2013, winding up of a company by the National Company Law Tribunal follows a statutory procedural sequence:

    (c), (e), (b), (d), (a)

    • c. Petition for winding up — presented under Section 272 by the company, creditors, or Registrar.
    • e. Appointment of liquidator — Tribunal passes an order appointing an Official Liquidator under Section 275.
    • b. Report by company liquidator — Liquidator investigates company affairs and submits a statutory report under Section 281.
    • d. Direction of Tribunal on report — Tribunal reviews the report and issues directions under Section 282.
    • a. Settlement of list of contributories/application of assets — Liquidator settles contributories and distributes realisations to creditors under Section 285.

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78. Question 78

    Statement I: Distribution channels are sets of interdependent organizations participating in the process of making a product available for consumption.
    Statement II: All marketing channels have potential conflict and competition arising from goal incompatibility.

    1. ABoth Statement I and Statement II are true
    2. BBoth Statement I and Statement II are false
    3. CStatement I is true but Statement II is false
    4. DStatement I is false but Statement II is true

    Accepted answers: (A) Both Statement I and Statement II are true, (B) Both Statement I and Statement II are false

    Explanation

    Marketing distribution channel theory analyzes channel design and behavioral dynamics:

    • Statement I is true under standard marketing literature (Philip Kotler), which defines marketing channels as interdependent organizations involved in making a product or service available for use or consumption.
    • Statement II is true because marketing channels inherently generate channel conflict and competition due to goal divergence between manufacturers, wholesalers, and retailers.

    Option A represents the correct theoretical synthesis. Because the rendered source printed a typo marking Option B as the official key, both options are accepted for scoring.

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79. Question 79

    Which of the following are reasons for material usage variance?
    a. Negligence in use of material
    b. Changes in basic prices
    c. Poor/improper machine handling
    d. Wastage due to inefficient production
    e. Product design usage differs from standard

    Choose the most appropriate answer from the options given below:

    1. A(a), (b), (c) and (d) only
    2. B(b), (c), (d) and (e) only
    3. C(a), (c), (d) and (e) only
    4. D(a), (b), (d) and (e) only

    Answer: (C) (a), (c), (d) and (e) only

    Explanation

    In standard costing, Material Usage Variance evaluates physical efficiency in consumption, calculated as (Standard Quantity - Actual Quantity) * Standard Price:

    • a. Negligence in use of material increases scrap and physical loss.
    • c. Poor or improper machine handling causes spoilage and machine breakdowns.
    • d. Wastage due to inefficient production increases defective output.
    • e. Product design usage differences alter standard physical quantity requirements.

    In contrast, item b (changes in basic prices) causes Material Price Variance, not usage variance.

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80. Question 80

    Which of the following are methods of translation of foreign financial statements?
    a. Current/Non-Current
    b. Temporal
    c. Monetary/Non-monetary
    d. Current Rate
    e. Transaction/Non-transaction

    Choose the most appropriate answer from the options given below:

    1. A(a), (b), (d) and (e) only
    2. B(b), (c), (d) and (e) only
    3. C(a), (b), (c) and (d) only
    4. D(c), (d) and (e) only

    Answer: (C) (a), (b), (c) and (d) only

    Explanation

    International accounting standards recognize four classic methods for translating foreign affiliate financial statements into the parent reporting currency:

    • a. Current/Non-Current method translates current assets and liabilities at current rates, and non-current items at historical rates.
    • b. Temporal method translates monetary items at current rates and non-monetary items at rates reflecting their valuation basis.
    • c. Monetary/Non-monetary method translates all monetary items at closing rates and physical assets at historical rates.
    • d. Current Rate method translates all assets and liabilities at the closing balance sheet exchange rate.

    Item e (Transaction/Non-transaction) is not an accounting translation method.

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81. Question 81

    Examination of documentary evidence in support of transactions recorded in books of account is known as:

    1. AVerification
    2. BVouching
    3. CValuation
    4. DValidation

    Answer: (B) Vouching

    Explanation

    Auditing procedures involve distinct investigative stages:

    • A. Verification — proving the title, existence, ownership, and absence of lien on balance sheet assets and liabilities.
    • B. Vouching — correct. Often termed the backbone of auditing, vouching involves examining documentary evidence (vouchers, invoices, receipts, and agreements) to verify the authenticity and accuracy of entries recorded in the primary books of account.
    • C. Valuation — testing whether assets and liabilities are reported at fair and accurate financial values according to accounting standards.
    • D. Validation — checking procedural or software correctness.

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82. Question 82

    Which of the following are assumptions of Modigliani-Miller theory?
    a. Perfect capital markets
    b. Heterogenous risk class
    c. Absence of taxes
    d. Full dividend payout
    e. Same expectation of firm’s EBIT with which to evaluate value of firm

    Choose the most appropriate answer from the options given below:

    1. A(b), (c), (d) and (e) only
    2. B(a), (c), (d) and (e) only
    3. C(a), (b), (c) and (d) only
    4. D(a), (b), (d) and (e) only

    Answer: (B) (a), (c), (d) and (e) only

    Explanation

    The Modigliani-Miller capital structure irrelevance proposition (1958) rests upon strict behavioral and market assumptions:

    • a. Perfect capital markets where trading is frictionless and information is costless and symmetric.
    • c. Absence of corporate and personal income taxes in the initial proposition.
    • d. Full dividend payout or dividend irrelevance where investment policy is held constant.
    • e. Homogeneous investor expectations regarding a firm's future operating profits (EBIT).

    Item b is false because MM assumes firms belong to homogeneous risk classes, not heterogeneous ones.

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83. Question 83

    Which policy is used by a central bank to influence savings, investments and consumer spending?

    1. AFiscal policy
    2. BMonetary policy
    3. CIndustrial policy
    4. DForeign exchange policy

    Answer: (B) Monetary policy

    Explanation

    Macroeconomic stabilization policies are conducted by different institutional authorities:

    • A. Fiscal policy — taxation, public expenditure, and sovereign borrowing managed by the government Ministry of Finance.
    • B. Monetary policy — correct. Conducted by the central bank (e.g. Reserve Bank of India) using policy interest rates, reserve ratios, and liquidity adjustments to influence the cost and availability of credit, thereby shaping savings, capital investment, and consumer expenditure.
    • C. Industrial policy — government regulations governing manufacturing licenses, sectors, and subsidies.
    • D. Foreign exchange policy — interventions managing currency exchange rate regimes.

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84. Question 84

    Which one of the following is NOT an objective of Competition Act?

    1. AEncourage competition
    2. BPrevent abuse of dominant position
    3. CPrevent monopolistic rights arising out of intellectual property
    4. DRegulate mergers and acquisitions

    Answer: (C) Prevent monopolistic rights arising out of intellectual property

    Explanation

    The Competition Act, 2002 was established to foster competitive Indian markets:

    • A. Encourage competition — core statutory objective to sustain competitive market environments.
    • B. Prevent abuse of dominant position — prohibited under Section 4.
    • C. Prevent monopolistic rights arising out of intellectual property — correct choice and not an objective. Section 3(5) specifically protects the holder of patents, copyrights, and trademarks, recognizing the legal right of IPR owners to exercise their statutory monopoly and impose reasonable protective conditions.
    • D. Regulate mergers and acquisitions — regulated under Sections 5 and 6 through combination oversight.

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85. Question 85

    Which of the following relationships are associated with Heckscher-Ohlin theory?
    a. Production-Marketing
    b. Land—Labour
    c. Marketing—Capital
    d. Labour—Capital
    e. Technological complexities

    Choose the most appropriate answer from the options given below:

    1. A(a) and (b) only
    2. B(b) and (c) only
    3. C(b), (d) and (e) only
    4. D(a), (c) and (e) only

    Answer: (C) (b), (d) and (e) only

    Explanation

    The Heckscher-Ohlin trade model explains comparative advantage based on national factor endowments and relative factor intensities:

    • b. Land-Labour relationships model comparative advantage in agricultural versus manufacturing trade.
    • d. Labour-Capital relationships constitute the foundational two-factor production model.
    • e. Technological complexities represent factor-intensity reversals and production differences examined in empirical tests.

    Items a and c are irrelevant because internal firm marketing functions are not factors of production in trade theory.

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86. Question 86

    Provident fund set up under the Provident Fund Act, 1952 is called:

    1. AStatutory provident fund
    2. BRecognised provident fund
    3. CPublic provident fund
    4. DUnrecognised provident fund

    Answer: (B) Recognised provident fund

    Explanation

    Provident funds in India are governed by specific statutory regimes:

    • A. Statutory provident fund — established under the Provident Funds Act, 1925 for government, railway, and recognized university employees.
    • B. Recognised provident fund — correct. A provident fund established under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 or recognized by the Commissioner of Income Tax under the Fourth Schedule of the Income Tax Act, 1961.
    • C. Public provident fund — established under the Public Provident Fund Act, 1968 for all Indian residents.
    • D. Unrecognised provident fund — private provident fund not recognized by the Commissioner of Income Tax.

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87. Question 87

    Under FEMA, foreign exchange does not include which one of the following?

    1. ADeposit payable in foreign currency
    2. BBills of exchange drawn in Indian currency but payable in foreign currency
    3. CTravellers cheques drawn by institutions outside India but payable in Indian rupees
    4. DDraft drawn by banks outside India payable in foreign currency

    Answer: (D) Draft drawn by banks outside India payable in foreign currency

    Explanation

    Section 2(n) of the Foreign Exchange Management Act, 1999 (FEMA) explicitly defines foreign exchange to include:

    • Deposits, credits, and balances payable in foreign currency (A).
    • Drafts, travellers cheques, letters of credit, or bills of exchange drawn by entities in India but payable in foreign currency (B).
    • Drafts, travellers cheques, letters of credit, or bills of exchange drawn outside India but payable in Indian currency (C).

    A draft drawn by a bank outside India payable in foreign currency (D) remains an offshore transaction and is not included within the statutory definition of foreign exchange under Indian FEMA law.

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88. Question 88

    Which of the following are types of quota restrictions on exports/imports?
    a. Single stage
    b. Absolute
    c. Tariff quotas
    d. Value added
    e. Voluntary quotas

    Choose the most appropriate answer from the options given below:

    1. A(b), (c) and (e) only
    2. B(a), (b) and (c) only
    3. C(a), (d) and (e) only
    4. D(b), (c), (d) and (e) only

    Answer: (A) (b), (c) and (e) only

    Explanation

    Non-tariff trade barriers include specific categories of quantitative import quotas:

    • b. Absolute quota imposes a physical limit on the maximum volume of a good allowed into the country over a given timeframe.
    • c. Tariff quota combines quotas with tariffs, admitting a fixed quantity at low duty while taxing additional imports at higher rates.
    • e. Voluntary quotas (Voluntary Export Restraints) represent bilateral agreements where exporting nations restrict export quantities.

    In contrast, item a (single stage) and item d (value added) are indirect taxation models rather than trade quotas.

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89. Question 89

    Calculate the Net Annual Value of a house from the following details:

    • Municipal value: ₹3,60,000
    • Fair Rental value: ₹4,00,000
    • Standard Rent: ₹5,00,000
    • Actual Rent (Annual Rent): ₹4,80,000
    • Municipal Tax: ₹12,000 (due but not paid)
    1. A₹4,00,000
    2. B₹4,80,000
    3. C₹4,68,000
    4. D₹5,00,000

    Answer: (B) ₹4,80,000

    Explanation

    Net Annual Value (NAV) under Section 23 of the Income Tax Act, 1961 is computed as follows:

    Reasonable Expected Rent:

    • Higher of Municipal Value (₹3,60,000) and Fair Rental Value (₹4,00,000) = ₹4,00,000
    • Subject to Standard Rent (₹5,00,000) as upper limit: Expected Rent = ₹4,00,000

    Gross Annual Value (GAV):

    • Higher of Expected Rent (₹4,00,000) and Actual Rent Received (₹4,80,000) = ₹4,80,000

    Municipal Tax Deduction:

    • Municipal taxes can only be deducted if actually paid by the owner during the previous year. Because the tax of ₹12,000 is due but unpaid, the deductible amount is zero.

    NAV = GAV - Municipal Taxes Paid = ₹4,80,000 - 0 = ₹4,80,000

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90. Question 90

    Which one of the following relationships regarding price elasticity coefficient with change in price and change in total revenue is incorrect?

    Option	Elasticity coefficient	Change in price	Change in total revenue
    A	e = 0	Increase / Decrease	Increase / Decrease
    B	e > 1	Increase / Decrease	Increase / Decrease
    C	e = 1	Increase / Decrease	Increase / Decrease
    D	e < 1	Increase / Decrease	Increase / Decrease

    1. AOption A (e = 0)
    2. BOption B (e > 1)
    3. COption C (e = 1)
    4. DOption D (e < 1)

    Answer: (D) Option D (e < 1)

    Explanation

    Under Alfred Marshall's Total Outlay (Total Revenue) Method of Price Elasticity:

    • When demand is elastic (e > 1), price and total revenue move in opposite directions.
    • When demand is unitary elastic (e = 1), total revenue remains unchanged despite price movements.
    • When demand is inelastic (e < 1), price and total revenue move in the same direction.

    Option D represents an inconsistent directional relationship across changes in price and revenue, making it the incorrect proposition.

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91. Question 91

    Which one of the following is not a part of the value-chain mentioned in the passage?

    The Cabinet approval for seven integrated mega textile and apparel parks pan-India makes eminent sense. It would boost value addition on-site, reaping economies of scale and scope, reduce logistical and sourcing expenses, and generally step-up sector-specific competitive advantage across the board.

    The value chain in yarn, fabrics and ready-mades is scattered and quite fragmented nationwide. So, for instance, while cotton is grown in Gujarat and Maharashtra, spinning takes place in Tamil Nadu, processing gets done in Rajasthan and Gujarat, and garment-making happens mostly in the National Capital Region, Bengaluru and Kolkata. The proposed mega parks, spread over 1,000 acre and more, would provide facilities for weaving, dyeing, printing, fashion designing and garment-making in one location. They would have core infrastructure such as incubation centre, plug-and-play facility, and skill development units so as to keep abreast of the latest trends in textiles and apparel. The export potential in textiles is large. We need to build a conducive and innovative ecosystem with proactive policy.

    The Centre has recently announced ₹10,683 crore production-linked incentive scheme for textiles. The textiles parks scheme would have an outlay of ₹4,445 crore, and is slated to provide support for project development in the cluster mode. The recent move to provide export-oriented units rebate on state and central taxes and levies would also help. But the fact remains that the share of textiles in India's export basket has declined, and is now barely in the double digits. A recent Crisil study says that absent free trade agreements (FTAs) hurt our export performance. Decent work in the textile parks would gain custom, in today's world.

    1. AGarment making
    2. BYarn weaving
    3. CCotton production
    4. DYarn spinning

    Answer: (C) Cotton production

    Explanation

    Based on the passage, the textile manufacturing value chain includes specific processing activities:

    • The text states: "The value chain in yarn, fabrics and ready-mades is scattered and quite fragmented nationwide... spinning takes place in Tamil Nadu, processing gets done in Rajasthan and Gujarat, and garment-making happens mostly in the National Capital Region... weaving, dyeing, printing, fashion designing and garment-making in one location."

    In contrast, "cotton is grown in Gujarat and Maharashtra" describes primary agricultural cultivation rather than the manufacturing value chain described for the mega parks.

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92. Question 92

    Which one of the following is identified as the most critical factor affecting export performance?

    The Cabinet approval for seven integrated mega textile and apparel parks pan-India makes eminent sense. It would boost value addition on-site, reaping economies of scale and scope, reduce logistical and sourcing expenses, and generally step-up sector-specific competitive advantage across the board.

    The value chain in yarn, fabrics and ready-mades is scattered and quite fragmented nationwide. So, for instance, while cotton is grown in Gujarat and Maharashtra, spinning takes place in Tamil Nadu, processing gets done in Rajasthan and Gujarat, and garment-making happens mostly in the National Capital Region, Bengaluru and Kolkata. The proposed mega parks, spread over 1,000 acre and more, would provide facilities for weaving, dyeing, printing, fashion designing and garment-making in one location. They would have core infrastructure such as incubation centre, plug-and-play facility, and skill development units so as to keep abreast of the latest trends in textiles and apparel. The export potential in textiles is large. We need to build a conducive and innovative ecosystem with proactive policy.

    The Centre has recently announced ₹10,683 crore production-linked incentive scheme for textiles. The textiles parks scheme would have an outlay of ₹4,445 crore, and is slated to provide support for project development in the cluster mode. The recent move to provide export-oriented units rebate on state and central taxes and levies would also help. But the fact remains that the share of textiles in India's export basket has declined, and is now barely in the double digits. A recent Crisil study says that absent free trade agreements (FTAs) hurt our export performance. Decent work in the textile parks would gain custom, in today's world.

    1. AIntegrated textile parks
    2. BFree trade agreements (FTAs)
    3. CCentre’s production-linked incentive scheme
    4. DRebate on state and central taxes and levies

    Answer: (B) Free trade agreements (FTAs)

    Explanation

    The passage highlights external trade policy constraints on export growth:

    • The passage specifically identifies: "A recent Crisil study says that absent free trade agreements (FTAs) hurt our export performance."

    While incentive schemes and textile parks provide domestic infrastructure support, the lack of free trade agreements is singled out as directly harming export performance.

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93. Question 93

    Which one of the following states does not contribute to the Indian textile industry as described in the passage?

    The Cabinet approval for seven integrated mega textile and apparel parks pan-India makes eminent sense. It would boost value addition on-site, reaping economies of scale and scope, reduce logistical and sourcing expenses, and generally step-up sector-specific competitive advantage across the board.

    The value chain in yarn, fabrics and ready-mades is scattered and quite fragmented nationwide. So, for instance, while cotton is grown in Gujarat and Maharashtra, spinning takes place in Tamil Nadu, processing gets done in Rajasthan and Gujarat, and garment-making happens mostly in the National Capital Region, Bengaluru and Kolkata. The proposed mega parks, spread over 1,000 acre and more, would provide facilities for weaving, dyeing, printing, fashion designing and garment-making in one location. They would have core infrastructure such as incubation centre, plug-and-play facility, and skill development units so as to keep abreast of the latest trends in textiles and apparel. The export potential in textiles is large. We need to build a conducive and innovative ecosystem with proactive policy.

    The Centre has recently announced ₹10,683 crore production-linked incentive scheme for textiles. The textiles parks scheme would have an outlay of ₹4,445 crore, and is slated to provide support for project development in the cluster mode. The recent move to provide export-oriented units rebate on state and central taxes and levies would also help. But the fact remains that the share of textiles in India's export basket has declined, and is now barely in the double digits. A recent Crisil study says that absent free trade agreements (FTAs) hurt our export performance. Decent work in the textile parks would gain custom, in today's world.

    1. AWest Bengal
    2. BRajasthan
    3. CPunjab
    4. DTamil Nadu

    Answer: (C) Punjab

    Explanation

    The passage catalogs geographical hubs across the textile supply chain:

    • Tamil Nadu (spinning)
    • Rajasthan and Gujarat (processing)
    • Maharashtra and Gujarat (cotton growing)
    • National Capital Region, Bengaluru, and Kolkata in West Bengal (garment-making)

    Punjab is not mentioned anywhere in the passage.

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94. Question 94

    Assertion (A): Indian textiles can regain sheen with integrated mega parks.
    Reason (R): The value chain in yarn, fabrics and ready-mades is scattered nation-wide.

    The Cabinet approval for seven integrated mega textile and apparel parks pan-India makes eminent sense. It would boost value addition on-site, reaping economies of scale and scope, reduce logistical and sourcing expenses, and generally step-up sector-specific competitive advantage across the board.

    The value chain in yarn, fabrics and ready-mades is scattered and quite fragmented nationwide. So, for instance, while cotton is grown in Gujarat and Maharashtra, spinning takes place in Tamil Nadu, processing gets done in Rajasthan and Gujarat, and garment-making happens mostly in the National Capital Region, Bengaluru and Kolkata. The proposed mega parks, spread over 1,000 acre and more, would provide facilities for weaving, dyeing, printing, fashion designing and garment-making in one location. They would have core infrastructure such as incubation centre, plug-and-play facility, and skill development units so as to keep abreast of the latest trends in textiles and apparel. The export potential in textiles is large. We need to build a conducive and innovative ecosystem with proactive policy.

    The Centre has recently announced ₹10,683 crore production-linked incentive scheme for textiles. The textiles parks scheme would have an outlay of ₹4,445 crore, and is slated to provide support for project development in the cluster mode. The recent move to provide export-oriented units rebate on state and central taxes and levies would also help. But the fact remains that the share of textiles in India's export basket has declined, and is now barely in the double digits. A recent Crisil study says that absent free trade agreements (FTAs) hurt our export performance. Decent work in the textile parks would gain custom, in today's world.

    1. ABoth (A) and (R) are correct and (R) is the correct explanation of (A)
    2. BBoth (A) and (R) are correct but (R) is not the correct explanation of (A)
    3. C(A) is correct but (R) is not correct
    4. D(A) is not correct but (R) is correct

    Answer: (A) Both (A) and (R) are correct and (R) is the correct explanation of (A)

    Explanation

    Analyzing the passage structure:

    • Assertion (A) is correct. Integrated mega textile and apparel parks will boost on-site value addition, reap economies of scale, and strengthen competitive advantage.
    • Reason (R) is correct. The passage explains that because the textile value chain is fragmented across different states, logistical expenses are inflated.

    Consolidating the scattered value chain into unified parks directly explains how Indian textiles will regain competitive advantage. Thus, both statements are correct and (R) explains (A).

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95. Question 95

    Statement I: Both central and state governments want to promote units exporting textiles.
    Statement II: The performance of textiles in India’s export basket has improved.

    The Cabinet approval for seven integrated mega textile and apparel parks pan-India makes eminent sense. It would boost value addition on-site, reaping economies of scale and scope, reduce logistical and sourcing expenses, and generally step-up sector-specific competitive advantage across the board.

    The value chain in yarn, fabrics and ready-mades is scattered and quite fragmented nationwide. So, for instance, while cotton is grown in Gujarat and Maharashtra, spinning takes place in Tamil Nadu, processing gets done in Rajasthan and Gujarat, and garment-making happens mostly in the National Capital Region, Bengaluru and Kolkata. The proposed mega parks, spread over 1,000 acre and more, would provide facilities for weaving, dyeing, printing, fashion designing and garment-making in one location. They would have core infrastructure such as incubation centre, plug-and-play facility, and skill development units so as to keep abreast of the latest trends in textiles and apparel. The export potential in textiles is large. We need to build a conducive and innovative ecosystem with proactive policy.

    The Centre has recently announced ₹10,683 crore production-linked incentive scheme for textiles. The textiles parks scheme would have an outlay of ₹4,445 crore, and is slated to provide support for project development in the cluster mode. The recent move to provide export-oriented units rebate on state and central taxes and levies would also help. But the fact remains that the share of textiles in India's export basket has declined, and is now barely in the double digits. A recent Crisil study says that absent free trade agreements (FTAs) hurt our export performance. Decent work in the textile parks would gain custom, in today's world.

    1. ABoth Statement I and Statement II are true
    2. BBoth Statement I and Statement II are false
    3. CStatement I is true but Statement II is false
    4. DStatement I is false but Statement II is true

    Answer: (C) Statement I is true but Statement II is false

    Explanation

    Evaluating the statements against the passage content:

    • Statement I is true. The text notes "The recent move to provide export-oriented units rebate on state and central taxes and levies would also help", demonstrating policy alignment between both tiers of government.
    • Statement II is false. The passage explicitly observes: "But the fact remains that the share of textiles in India's export basket has declined, and is now barely in the double digits."

    Therefore, Statement I is true but Statement II is false.

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96. Question 96

    Assertion (A): A company having dormant status is subject to less compliance than an active company.
    Reason (R): There is save of compliances for an inactive company if it gets dormant status under Section 455 of Companies Act, 2013 as compared with Companies Act, 1956.

    Section 455 of Indian Companies Act, 2013 talks about a New Provision called "DORMANT COMPANY". This concept was not there in Companies Act, 1956.

    A Dormant Company offers excellent advantage to the promoters who want to hold an asset or intellectual property under the corporate shield for its usage at a later stage. For instance: if a promoter wants to buy lands now for its future project at a comparatively lesser price, he may do the same through dormant company so that he can use the land for its future project. Thus, dormant company status is a new phenomenon in the Companies Act 2013 and is an excellent tool for keeping assets in the company for its future usage. A dormant company may be either a public company or a private company or a one-person company.

    Certain companies, due to the nature of their business, may not be able to start any business, for a long time from the date of incorporation as for instance any business for creation of intellectual property or for a future project and has no significant accounting transaction. Such a company may be an "Inactive company". Construction Companies/Real Estate Companies/Incorporate New Companies to hold land/properties for future projects. This concept is beneficial for them. By this concept they can Incorporate Company and purchase property/land in that company and get status of Dormant Company. If a company gets status of dormant company, there are less compliance in dormant company in comparison of active company. It will help to save cost of compliances for inactive companies.

    1. ABoth (A) and (R) are correct and (R) is the correct explanation of (A)
    2. BBoth (A) and (R) are correct but (R) is not the correct explanation of (A)
    3. C(A) is correct but (R) is not correct
    4. D(A) is not correct but (R) is correct

    Answer: (A) Both (A) and (R) are correct and (R) is the correct explanation of (A)

    Explanation

    Evaluating the assertions against Section 455 of the Companies Act, 2013:

    • Assertion (A) is correct. A dormant company enjoys substantial regulatory exemptions, requiring fewer board meetings and simplified annual filings compared to an active operating company.
    • Reason (R) is correct. Section 455 was newly introduced in the Companies Act, 2013 without any counterpart under the 1956 Act, creating statutory relief and compliance savings for inactive companies.

    Because Reason (R) explains the statutory origin and compliance-saving rationale, both statements are correct and (R) explains (A).

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97. Question 97

    Assertion (A): There is a provision to obtain dormant status for an inactive company that does not trade.
    Reason (R): A Dormant company does not trade but has significant accounting transaction.

    Section 455 of Indian Companies Act, 2013 talks about a New Provision called "DORMANT COMPANY". This concept was not there in Companies Act, 1956.

    A Dormant Company offers excellent advantage to the promoters who want to hold an asset or intellectual property under the corporate shield for its usage at a later stage. For instance: if a promoter wants to buy lands now for its future project at a comparatively lesser price, he may do the same through dormant company so that he can use the land for its future project. Thus, dormant company status is a new phenomenon in the Companies Act 2013 and is an excellent tool for keeping assets in the company for its future usage. A dormant company may be either a public company or a private company or a one-person company.

    Certain companies, due to the nature of their business, may not be able to start any business, for a long time from the date of incorporation as for instance any business for creation of intellectual property or for a future project and has no significant accounting transaction. Such a company may be an "Inactive company". Construction Companies/Real Estate Companies/Incorporate New Companies to hold land/properties for future projects. This concept is beneficial for them. By this concept they can Incorporate Company and purchase property/land in that company and get status of Dormant Company. If a company gets status of dormant company, there are less compliance in dormant company in comparison of active company. It will help to save cost of compliances for inactive companies.

    1. ABoth (A) and (R) are correct and (R) is the correct explanation of (A)
    2. BBoth (A) and (R) are correct but (R) is not the correct explanation of (A)
    3. C(A) is correct but (R) is not correct
    4. D(A) is not correct but (R) is correct

    Answer: (C) (A) is correct but (R) is not correct

    Explanation

    Under Section 455 of the Companies Act, 2013:

    • Assertion (A) is correct. An inactive company formed for a future project or to hold an asset/intellectual property and having no significant accounting transactions can apply for dormant status.
    • Reason (R) is false. By statutory definition, a dormant company must not carry on any business and must have no significant accounting transactions. Conducting significant accounting transactions disqualifies a company from dormant status.

    Therefore, (A) is correct but (R) is not correct.

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98. Question 98

    Which of the following companies do not fall under a purview of Dormant company?
    a. Private company
    b. One person company
    c. Limited and unlimited Liability companies
    d. Public company
    e. Government company

    Choose the most appropriate answer:

    Section 455 of Indian Companies Act, 2013 talks about a New Provision called "DORMANT COMPANY". This concept was not there in Companies Act, 1956.

    A Dormant Company offers excellent advantage to the promoters who want to hold an asset or intellectual property under the corporate shield for its usage at a later stage. For instance: if a promoter wants to buy lands now for its future project at a comparatively lesser price, he may do the same through dormant company so that he can use the land for its future project. Thus, dormant company status is a new phenomenon in the Companies Act 2013 and is an excellent tool for keeping assets in the company for its future usage. A dormant company may be either a public company or a private company or a one-person company.

    Certain companies, due to the nature of their business, may not be able to start any business, for a long time from the date of incorporation as for instance any business for creation of intellectual property or for a future project and has no significant accounting transaction. Such a company may be an "Inactive company". Construction Companies/Real Estate Companies/Incorporate New Companies to hold land/properties for future projects. This concept is beneficial for them. By this concept they can Incorporate Company and purchase property/land in that company and get status of Dormant Company. If a company gets status of dormant company, there are less compliance in dormant company in comparison of active company. It will help to save cost of compliances for inactive companies.

    1. A(b), (d) and (e) only
    2. B(a), (c) and (d) only
    3. C(a), (b) and (d) only
    4. D(b), (c) and (e) only

    Accepted answers: (A) (b), (d) and (e) only, (B) (a), (c) and (d) only, (C) (a), (b) and (d) only, (D) (b), (c) and (e) only

    Explanation

    Section 455 of the Companies Act, 2013 permits a public company, private company, or one-person company to obtain dormant status:

    • The passage confirms: "A dormant company may be either a public company or a private company or a one-person company."
    • The question asks which companies do not fall under the purview of a dormant company. However, the provided options group together valid dormant entities (such as private, public, and OPC) inconsistently, leaving no logically sound option combination.

    Because of this structural flaw in the option choices, this question was dropped by the examination authority and full marks are awarded to all candidates.

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99. Question 99

    Which one of the following nature of business is suitable for Dormant Company?

    Section 455 of Indian Companies Act, 2013 talks about a New Provision called "DORMANT COMPANY". This concept was not there in Companies Act, 1956.

    A Dormant Company offers excellent advantage to the promoters who want to hold an asset or intellectual property under the corporate shield for its usage at a later stage. For instance: if a promoter wants to buy lands now for its future project at a comparatively lesser price, he may do the same through dormant company so that he can use the land for its future project. Thus, dormant company status is a new phenomenon in the Companies Act 2013 and is an excellent tool for keeping assets in the company for its future usage. A dormant company may be either a public company or a private company or a one-person company.

    Certain companies, due to the nature of their business, may not be able to start any business, for a long time from the date of incorporation as for instance any business for creation of intellectual property or for a future project and has no significant accounting transaction. Such a company may be an "Inactive company". Construction Companies/Real Estate Companies/Incorporate New Companies to hold land/properties for future projects. This concept is beneficial for them. By this concept they can Incorporate Company and purchase property/land in that company and get status of Dormant Company. If a company gets status of dormant company, there are less compliance in dormant company in comparison of active company. It will help to save cost of compliances for inactive companies.

    1. AShipping business
    2. BManufacturing business
    3. CReal Estate business
    4. DPharmaceutical business

    Answer: (C) Real Estate business

    Explanation

    The passage highlights specific industries suited for dormant corporate shields:

    • The passage explicitly states: "Construction Companies/Real Estate Companies/Incorporate New Companies to hold land/properties for future projects. This concept is beneficial for them. By this concept they can Incorporate Company and purchase property/land in that company and get status of Dormant Company."

    Operating businesses like shipping, manufacturing, and pharmaceuticals involve continuous trading transactions, making real estate holding companies the ideal application.

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100. Question 100

     Dormant company offers excellent advantage to which one of the following?

     Section 455 of Indian Companies Act, 2013 talks about a New Provision called "DORMANT COMPANY". This concept was not there in Companies Act, 1956.

     A Dormant Company offers excellent advantage to the promoters who want to hold an asset or intellectual property under the corporate shield for its usage at a later stage. For instance: if a promoter wants to buy lands now for its future project at a comparatively lesser price, he may do the same through dormant company so that he can use the land for its future project. Thus, dormant company status is a new phenomenon in the Companies Act 2013 and is an excellent tool for keeping assets in the company for its future usage. A dormant company may be either a public company or a private company or a one-person company.

     Certain companies, due to the nature of their business, may not be able to start any business, for a long time from the date of incorporation as for instance any business for creation of intellectual property or for a future project and has no significant accounting transaction. Such a company may be an "Inactive company". Construction Companies/Real Estate Companies/Incorporate New Companies to hold land/properties for future projects. This concept is beneficial for them. By this concept they can Incorporate Company and purchase property/land in that company and get status of Dormant Company. If a company gets status of dormant company, there are less compliance in dormant company in comparison of active company. It will help to save cost of compliances for inactive companies.

     1. ABankers
     2. BCreditors
     3. CShareholders
     4. DPromoters

     Answer: (D) Promoters

     Explanation

     The passage outlines the beneficiaries of dormant corporate status:

     • The passage directly explains: "A Dormant Company offers excellent advantage to the promoters who want to hold an asset or intellectual property under the corporate shield for its usage at a later stage."

     Promoters benefit by shielding long-term assets and intellectual property at minimal ongoing compliance cost.

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