UGC NET Paper 2: Commerce 13th June 2023 Shift 2

The correct answer is Both A and R are correct and R is the correct explanation of A.

Key Points
Promise:- A promise is a declaration or assurance that one will do something or that a particular thing will happen. It is often a unilateral declaration made by one party.

Agreement:- An agreement is a mutual understanding or arrangement between two or more parties. It often involves a 'meeting of the minds' where all involved parties agree to certain terms.

Assertion A: "Promise is an agreement"

• A promise to do something between two parties, or not, is said to form a sort of mutual understanding in pursuance of individual interests.
• For example If A promises to pay B a sum of Rs. 1000 to sell him 5 litres of oil and B accepts for the same, then Rs. 1000 is the consideration for a promise for B and vice-versa.​

​Hence, Assertion A is correct.

Reason R: "An agreement is the sum total of offer and 'acceptance"

• The expression of the will of the person to another is called a proposal.  This expression of interests with an intention to enter into a valid accord enforceable by law is termed is agreement.
• Every promise and every set of promises, forming the consideration for each other, is an agreement.
• A very essential element of proposal and subsequent agreement is the consideration for whose sake the acceptor promises to do, or abstain from doing something, on the persuasion of the offeror.
• Without consideration, the promisor does not have any teeth to enter into a valid agreement.
• To sum up, we can represent the above information below: Agreement = Offer + Acceptance.
• Promises and commitments forming consideration for the parties to the same consent are known as an agreement. The agreement, which is legally enforceable, is known as a contract.

​Hence, Reason R is correct.

​Therefore we can say that Both A and R are correct and R is the correct explanation of A.

•  Maslow's hierarchy of needs
  • It is a motivational theory in psychology comprising a five-tier model of human needs
  • Needs lower down in the hierarchy must be satisfied before individuals can attend to needs higher up.
  • From the bottom of the hierarchy upwards, the needs are: physiological, safety, love and belonging, esteem and selfactualization.
  • 
  1. Physiological needs - These are biological requirements for Human survival, e.g. air, food, drink, shelter, clothing, warmth, sex, sleep. If these needs are not satisfied the human body cannot function optimally
  2. Safety needs - protection from elements, security, order, law, stability, freedom from fear.
  3. Love and belongingness needs - after physiological and safety needs have been fulfilled, the third level of human needs is social and involves feelings of belongingness. The need for interpersonal relationships motivates behavior
  4. Esteem needs - which Maslow classified into two categories: (i) esteem for oneself (dignity, achievement, mastery, independence) and (ii) the desire for reputation or respect from others (e.g., status, prestige).
  5. Self-actualization needs - realizing personal potential, selffulfillment, seeking personal growth and peak experiences. A desire “to become everything one is capable of becoming”

Therefore we can say that the correct answer is Physiological Needs, Safety needs. Acceptance needs, Need for Self-Actualisation  .

The correct answer is Interest on dividends received from investing activities.

Non-cash expenses are those expenses that are recorded in the income statement but do not involve an actual cash transaction.

Key Points

•  Some common noncash transactions include:
  • Depreciation:
    • Depreciation means fall in the value of assets.
    • The net result of an asset's depreciation is that sooner or later the asset will become useless. Depreciation does not result in outflow of cash and hence, it is a non-cash expenses.
  • Amortization:
    • Amortization is an accounting technique used to periodically lower the book value of a loan or an intangible asset over a set period of time. Concerning a loan, amortization focuses on spreading out loan payments over time.
  • Unrealized gain:
    • The term unrealized gain refers to an increase in the value of an asset, such as a stock position or a commodity like gold, that has yet to be sold for cash. As such, an unrealized gain is one that takes place on paper, as it has yet to be realized
  • Unrealized loss
  • Impairment expenses
  • Stock-based compensation:
    • Stock Based Compensation (also called Share-Based Compensation or Equity Compensation) is a way of paying employees, executives, and directors of a company with equity in the business.
    •  Under US GAAP, stock based compensation (SBC) is recognized as a non-cash expense on the income statement.
  • Provision for discount expenses
  • Deferred income taxes

The correct answer is Value Additivity Principle

Important Points

• Value Additivity Principle
  • ​The Value Additivity Principle in NPV states that the value of the total NPV of a bigger project is equal to the summation of all smaller NPVs of projects. In other words, the summation of all smaller NPVs provides the bigger NPV of an investment project. The NPV of a group of the independent projects will be equivalent to the NPV of all the independent projects.
  • If A and B are two smaller projects, then the total NPV of the bigger project (A+B) would be −
  • NPV (A+B) = NPV (A) + NPV (B)
  • The adjusted present value model used by MNCs to evaluate capital budgeting decision is based on  this method

Additional Information

• law of one price (LOOP) :
  •  The law of one price (LOOP) states that in the absence of trade frictions (such as transport costs and tariffs), and under conditions of free competition and price flexibility (where no individual sellers or buyers have power to manipulate prices and prices can freely adjust), identical goods sold in different locations must sell for the same price when prices are expressed in a common currency
• Gresham's law:
  • In economics, Gresham's law is a monetary principle stating that "bad money drives out good".
  • For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will gradually disappear from circulation
• Multilateral netting:
  • Netting is the process of consolidating payables against receivables between parties.
  • Multilateral netting involves pooling the funds from two or more parties so that a more simplified invoicing and payment process can be achieved.
  • It is a payment arrangement among multiple parties that transactions be summed, rather than settled individually. Multilateral netting can take place within a single organization or among two or more parties.

The correct answer is C, E, B only.

Key Points

Multicollinearity: Multicollinearity refers to a high degree of correlation between independent variables in a multiple regression model. If such a correlation is found, it makes it difficult to understand the effect of each individual variable. However, multicollinearity is generally a consideration in the model-building step, not in scale selection and construction. Scales are employed to structure responses and don't deal directly with the relationship between multiple predictors.

Data properties: The nature of the data you are working with can greatly influence the choice and construction of scale. Data properties may include characteristics such as distribution (normal or non-normal), type of data (nominal, ordinal, interval, or ratio), range of values, and the presence of outliers. For example, if you're working with ordinal data, certain scaling methods like Likert scales might be more appropriate.

Number of dimensions: The number of dimensions in your data, or in other words, the number of variables or characteristics you are analyzing, can affect your scaling choice. In some instances, a unidimensional scaling is used when measurements reflect a single construct. However, when measurements reflect multiple characteristics, multidimensional scaling techniques are employed. These types of scales help to visualize patterns and relations in multi-attribute data sets.

Level of Significance: The level of significance, often denoted by alpha (α), is a threshold set before the data collection for deciding whether to reject the null hypothesis. It determines the probability of rejecting the null hypothesis when it is true. Mostly used in hypothesis testing, it doesn't fundamentally impact the selection and construction of the scale. In scale selection and construction, the focus is on the properties of the data and research objectives, not testing hypotheses.

Research objectives: The goals of your research or analysis also play a crucial role in the choice of your scaling method. If your objective is to establish a hierarchy or ranking of data points, an ordinal scale would be suitable. On the other hand, if your goal is to establish distances or intervals between data points, an interval or ratio scale might be more appropriate.

A perceptual map is a chart used to illustrate where a product or brand and its competitors are positioned according to consumer perception.

Key Points

• Steps in developing a perceptual map to determine the position of a brand in the market place

1. Select attributes
   • ​​Attributes are the variables the customer factors into their decision to purchase a product or service.
   • Consider the most important aspects of a product and which aspects you'd like to study.
   • For example, key attributes for a food product can be its taste, texture, smell and quality, and attributes for a vehicle can be its price, performance and model year
2. Set Dimentions:
   • ​​After attributes, this is the most crucial step to perform.
   • Setting dimensions for map allows the customer’s perceptions to reflect clearly.
   • This process involves giving numerical values on each axis. More numerical values will cause better mapping
3. Identify competition
   • Identify the company's top competition, which can be several businesses or organizations that provide similar products and services.
   • This step can help in developing a perceptual map showing where the company and its competitors rank in the thoughts and perceptions of customers
4. Decide Products/Brands
   • To Map  and build a perceptual map for shoes, different shoes from different brands or varying styles need to be selected.
   • These brands can be competitors or a part of the product umbrella.
   • This step is crucial to increase the efficiency of map, as when choose the right products, customer perceptions from the map can lead to needed changes
5. Conduct A Survey
   • Perceptual maps thrive on data, and conducting surveys are the best way to do that.
   • The survey building process is as simple as it can get with SurveySparrow, which allows you to get to the analysis and actual mapping stage faster.
6. Plot the Results and Create The Map
7. Analyzing Map
   • Gaps in the grid could indicate new market opportunities, while heavily clustered quadrants could indicate that you need to work on communicating your product's USP.

Therefore we can say that the correct answer is D, A, E, B, C.

An interval scale is one where there is order and the difference between two values is meaningful. Examples of interval variables include: temperature (Farenheit), temperature (Celcius),

A ratio variable, has all the properties of an interval variable, and also has a clear definition of 0.0. When the variable equals 0.0, there is none of that variable. Examples of ratio variables include: enzyme activity, dose amount, reaction rate,

Important Points

•  Correlation ratio (eta)
  • A correlation ratio in statistics is a measure of the curvilinear relationship between the statistical variances within individual categories and the variances of the entire population or sample. Scales are defined as the ratio of two standard deviations representing these types of variation.
• Partial correlation
  • Partial correlation measures the strength of a relationship between two variables, while controlling for the effect of one or more other variables.
• Product moment correlation
  • Pearson's product moment correlation coefficient (sometimes known as PPMCC or PCC,) is a measure of the linear relationship between two variables that have been measured on interval or ratio scales. It can only be used to measure the relationship between two variables which are both normally distributed.

​ Additional Information

• Kendall’s Tau-b
  • It is a useful measure of correlation because it does not assume any particular distribution for the variables being analyzed.
  • Unlike Pearson’s correlation coefficient, Kendall’s Tau-b can be used with both continuous and ordinal variables. This makes it an ideal tool for researchers who are working with non-parametric data or data that does not meet the assumptions of other statistical tests.
  • Kendall’s Tau-b is also useful because it is less sensitive to outliers than other
• Spearman's rho
  • It is a non-parametric statistical test of correlation that allows a researcher to determine the significance of their investigation. It is used in studies that are looking for a relationship, where the data is at least ordinal

Therefore we can say that the correct answer is C, B, E only.

Disallowed Expenditure are those expenses which are not allowed/ cannot be deducted while computing the taxable income under the head “Profits and Gains from Business or Profession”. It means such expenses will be added to the income on which tax needs to be remitted.

Key Points

• Expenses expressly disallowed under profits from Business or Profession are
  • Payments/ Credits made to Non- Resident, not being a Company or to a foreign Company
    • If there is default in the TDS deduction or payment by the payer in respect of the payment/ credit of interest, Royalty, Fee for technical Services or any other sum chargeable under this Act (Other than Salary) to non-Resident, not being a Company or to a foreign Company, then 100% of such expenditure is disallowed in the hands of the payer.
  • Payment of Salary
    • Any Salary payable — Outside India or — To a Non- Resident in India shall be disallowed, if tax has not been deducted or paid on or before the due date prescribed for such deductions
  • Payment made to State Government
    • It includes Royalty, license fee, service fee, privilege fee, service charge or any other fee or charge
  • Disallowance of Income Tax, Wealth Tax, etc
    • Payment of Income tax like TDS, Self Assessment Tax and Wealth tax is not allowed as deduction while computing Profits and Gains from Business or Profession
  • - Payment to Provident Fund and other Funds 
    • Any payment to a provident or other fund established for the benefit of the employees shall be disallowed unless the employer has made effective arrangements to secure that tax shall be deducted at source from any payments made from the fund which are chargeable to tax under the head “Salaries

Therefore we conclude that the correct answer is A, B, E only.

Tax planning is the analysis of a financial situation or plan to ensure that all elements work together to allow us to pay the lowest taxes possible.

Key Points

•  Features of Tax Planning
  • Object:
    • The main object of tax planning is to reduce tax liability. This object is achieved by claiming deductions, reliefs and rebates allowed under the Act.
  •  Ethical:
    • Tax planning is ethical because it is an act within the four corners of the Act and it is not a colourable device to avoid the tax. It is based on the principle of disclosure
  • Basis:
    • The basis of tax planning is claiming the deductions, rebates and reliefs which have been provided in the Act to achieve certain social and economic goals. It has originated from the very existence of certain exemptions, deduction,s etc
  • Study and analysis:
    • Tax planning requires a thorough knowledge of the Act and analysis of its provisions so that tax liability may be reduced by fulfilling the conditions laid down in the Act.
  • Term:
    • Tax planning can be short-term tax planning or long-term tax planning. When it is resorted to for the current year, it is called short-term tax planning but when it is resorted to availing tax benefits year after year, it is known as long-term tax planning.
  •  It is legal and accepted by the judiciary:
    • The Supreme Court of India delivered the first landmark judgement on the distinction between 'tax planning' and 'tax evasion' in the case of CTO Vs McDowell and Co Ltd in 1985, holding that "Tax planning may be acceptable provided it is done within the framework of law.

Therefore we can say that the correct answer is B, D, E only.

Therefore we conclude that the correct answer is A - III, B - IV, C - I, D - II.

The correct answer is 10%

Key Points

•   Cost of equity
  • It is the return that a company requires for an investment or project, or the return that an individual requires for an equity investment.
  • The formula used to calculate the cost of equity is either the dividend capitalization model or the CAPM.
  • 
  • Here DPS=3 Rs
  • CMV=63 Rs
  • GRD=0.05
  • Putting values in above formula
  • =(3/63)=0.05
  • 0.0976 ~ 10%

The correct answer is Perfect competition .

​There are four types of competition in a free market system: perfect competition, monopolistic competition, oligopoly, and monopoly.

 Important Points

• Perfect competition
  • It occurs when all companies sell identical products, market share does not influence price, companies are able to enter or exit without barriers, buyers have perfect or full information, and companies cannot determine prices.
  • Following are the characteristics of perfect competition:
    • Large numbers of buyers and sellers in the market.
    • Free entry and exit of firms in the market.
    • Each firm should be selling a homogeneous product. Buyers and sellers should possess complete knowledge of the market.
    • No price control.
  • When technology allows many firms to operate efficiently in the markets, this market structure represents a better use of society's resources

Additional Information

•  Under monopolistic competition, many sellers offer differentiated products—products that differ slightly but serve similar purposes. By making consumers aware of product differences, sellers exert some control over price.
• In an oligopoly, a few sellers supply a sizable portion of products in the market. They exert some control over price, but because their products are similar, when one company lowers prices, the others follow.
• In a monopoly, there is only one seller in the market. The market could be a geographical area, such as a city or a regional area, and does not necessarily have to be an entire country. The single seller is able to control prices.

Modern selling combines new tools and modern sales techniques, such as digital selling and social selling, to find, engage, and connect with potential customers.

Key Points

• Characteristics of modern selling
  • Customer maintenance and deletion:
    • Many companies have discovered that 80 per cent of their sales come from 20 per cent of their customers. This means that it is very important to devote substantial resources to retaining existing high volume, high potential and highly profitable customers.
    • Key account management has turn out to be an important form of sales organization because a salesperson or sales team can focus their efforts on one or a few chief customers.
  • Database and knowledge management:
    • The modern sales force needs to be qualified in the Use and creation of customer databases, and how to use the internet to assist the sales task (e.g. finding customer and competitor information). In the past, sales people recorded customerinformation on cards and sent in the information through the post to head office.
  • Customer relationship management:
    • ​Customer relationship management requires that the sales force focuses on the long term and not just on closing the next sale. The emphasis should be on creating win–win situations with customers so that both parties to the dealings gain and want to carry on the relationship.
  • Satisfying needs and adding value:
    • Delivering added value for customers is all about understanding their circumstances, needs and preferences – at a specific moment in time. What customers perceive as a value add depends on who they are, what makes them tick and exactly what they need at a given moment.
  • Problem solving and system selling:
    • ​Much of modern selling, mainly in business to business situations, is based upon the salesperson performing as a consultant working with the customer to spot problems, find out needs and propose and implement effective solutions.

Therefore we can say that the correct answer is A, C, E only.

The correct answer is has less power when the number observations in each group is not identical 

Key Points

•  ANNOVA:
  • The one factorial analysis of variance tests whether there is a difference between the means of more than 2 groups. Thus, one-way ANOVA is the extension of the independent t-test to more than two groups or sample.
  • It is most often employed when there are at least three groups of data, otherwise a t-test would be a sufficient statistical analysis.
  • It has less power when the number observations in each group is not identical
  • 
  • For a one-factor ANOVA to be calculated, the following conditions must be met:
    • 1. Level of scale
      • The scale level of the dependent variable should be metric, that of the independent variable nominally scaled.
    • 2. Independence
      • The measurements should be independent, i.e. the measured value of one group should not be influenced by the measured value of another group.
    • 3. Homogeneity
      • The variances in each group should be approximately equal. This can be checked with the Levene test.
    • 4. Normal distribution
      • The data within the groups should be normally distributed.

• The Blake and Mouton Managerial Grid
  • It is a mental framework and graphic created by Robert Blake and Jane Mouton that can be used to help leaders identify their own leadership style and the style of their subordinates. The x-axis of the grid measures a leader's concern for production. The y-axis of the grid measures a leader's concern for people.
  • The five leadership styles identified in the Blake Mouton Managerial  resulting from a specific combination of a leader's concern for production and a leader's concern for people.
  • These styles are known as country club management, impoverished management, middle-of-the-road management, produce or perish management, and team management.
  • Impoverished Management – Low Results/Low People The Impoverished or "indifferent" manager is mostly ineffective. With a low regard for creating systems that get the job done, and with little interest in creating a satisfying or motivating team environment
  • Produce-or-Perish Management – High Results/Low People Also known as "authoritarian" or "authority-compliance" managers, people in this category believe that their team members are simply a means to an end. The team's needs are always secondary to its productivity. This type of manager is autocratic, has strict work rules, policies and procedures, and can view punishment as an effective way of motivating team members.
  • Middle-of-the-Road Management – Medium Results/Medium People
  • A Middle-of-the-Road or "status quo" manager tries to balance results and people, but this strategy is not as effective as it may sound. Through continual compromise, they fail to inspire high performance and also fail to meet people's needs fully.
  • Country Club Management – High People/Low Results The Country Club or "accommodating" style of manager is most concerned about their team members' needs and feelings.
  • Team Management – High Production/High People According to the Blake Mouton model, Team Management is the most effective leadership style. It reflects a leader who is passionate about their work and who does the best they can for the people they work with.
  • 

Therefore we can say that the correct answer is are concerned only with developing an efficient operation who have little or no concern for people .

•  Steps for verification and value of furniture and fixtures by an auditor.:
  • 1. The auditor has to see that a proper record showing quantitative details of furniture and fixtures owned by the client is maintained.It is to be Verifed with reference to the purchase invoice in case of the assets have been acquired during the current accounting period
  • 2. The auditor has to see that all expenses incidental to the purchase of furniture and fixtures is capitalised along with the purchase price paid for it.He must Check that a stock register is maintained containing the details of the various items purchased
  • 3. The auditor has to enquire whether the furniture and fixtures have been properly insured or not.
  • 4. The auditor has to see that adequate provision for depreciation on furniture and fixtures is made. Depreciation charged on different items is based on fair estimate of their working life
  • 5. The auditor if possible can go for physical verification of furniture on test check basis or he can rely on the management certificate to that effect.Check that repair to furniture if any, during the current year is debited to Profit and loss Account.
  • 6.See that payment made on account of purchases of any item of furniture and fixture through the invoices of the suppliers
  • 7. He has to further see that any damaged or unusable furniture, if existing, is fully written off in the books.

Therefore we can say that the correct sequence is C, E, A, B, D.

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

Important Points Inferior goods - 

• Inferior goods are a type of good for which demand tends to decrease as consumer incomes rise and increase as consumer incomes fall.
• This is reflected in the concept of negative income elasticity of demand (Elasticity of Income, EI < 0).
• The negative income elasticity indicates that as consumers' incomes increase, which are likely to shift their consumption towards higher-quality or more desirable goods, leading to a decrease in demand for the inferior good.

Substitute goods - 

• Substitute goods are products that can be used in place of each other, meaning that satisfy similar needs or desires.
• When the price of one substitute good increases, the demand for the other substitute tends to increase.
• This relationship is reflected in the concept of positive cross-price elasticity of demand (EXY > 0).
• Positive cross-price elasticity means that an increase in the price of one good leads to an increase in the quantity demanded of the other good.

Complementary goods -

• Complementary goods are products that are typically used together, so an increase in the price of one complementary good tends to lead to a decrease in the demand for the other, and vice versa.
• This is reflected in the concept of negative cross-price elasticity of demand (EXY < 0).

Luxury goods -

• Luxury goods typically have an income elasticity of demand (EI) greater than 1.
• This means that as consumer incomes rise, the demand for luxury goods increases at a proportionally higher rate.
• When people's incomes go up, they tend to spend a larger percentage of their income on luxury items.
• Conversely, if incomes fall, the demand for luxury goods tends to decrease at a higher rate.
•  For luxury goods, this sensitivity is high, hence the value of EI > 1.

The correct answer is ​A, D, E only.

Key Points

• The recruiting yield pyramid is a visual representation used by human resource professionals and recruiters to illustrate the various stages of the hiring process and the conversion rates at each stage.
• It helps in analyzing the effectiveness and efficiency of the recruitment process.

 Important PointsThe typical stages represented in a recruiting yield pyramid, along with their conversion rates -

• Total Applicants - This is the starting point of the recruitment process, where all potential candidates who apply for a job are considered.
• Screened Applicants - After initial application screening, some candidates may not meet the minimum qualifications and are screened out.
• Candidates Invited for Interview - From the screened applicants, a portion will be invited for an interview. This could be a phone interview, a video interview, or an in-person interview.
• Candidates Interviewed - This represents the number of candidates who actually go through the interview process.
• Offers Extended - After the interview process, some candidates will receive job offers.
• Offers Accepted - Out of the candidates who receive offers, some will accept and join the organization.
• As per question,
  • The ratio of official needs to actual hires is 2 to 1 - This means for every two positions that are officially needed, only one person is actually hired.
  • The ratio of candidates invited for interviews to candidates interviewed is about 4 to 3 - This means for every four candidates invited for an interview, three are actually interviewed.
  • The ratio of candidates interviewed to offers made is 3 to 2 - This means for every three candidates interviewed, two receive offers.

Thus, correct option 1 is A, D, and E only.

The correct answer is D, B, A, E, C.

Key Points

• Securitization is the process of pooling various types of financial assets, such as mortgages, auto loans, or credit card debt obligations, and Selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations (CDOs).

Important Points

• The process of securitization involves the originator creating a pool of assets, selling them to an SPV, which then raises funds by issuing securities.
• The SPV uses these funds to pay the originator, and subsequently collects and distributes cash flows from the assets to the investors holding the securities.
• The originator may continue to handle the collection process on behalf of the SPV.

The steps in the process of securitization, in the correct sequence are as follows -

Step D - Originator makes a pool of assets and sells it to the SPV

• The process begins with the originator (often a financial institution like a bank) creating a pool of assets.
• These assets are typically loans, like mortgages or auto loans.
• The originator then sells these assets to a Special Purpose Vehicle (SPV).

Step A- SPV issues tradable securities to fund the purchase of the pool of assets

• The SPV issues securities (often in the form of bonds) that are backed by the cash flows from the pool of assets it has acquired.
• These securities are then sold to investors to raise funds for the purchase of the assets from the originator.

Step E - SPV pays the funds to the originator for the pool of assets

• The funds raised from selling the securities are used by the SPV to pay the originator for the pool of assets.
• At this point, the originator no longer owns these assets, and the SPV is now responsible for managing and distributing the cash flows generated by the assets.

Step B - SPV subcontracts (outsources) the originator for collection of interest and principal payments on the pool of assets.

• The SPV often contracts the originator to continue collecting interest and principal payments from the borrowers whose loans are part of the pool.
• The originator acts as a servicer in this capacity.

Step C -SPV repays the funds to the investor as cash flows arise from the pool of assets.

• As the borrowers make their interest and principal payments, the SPV collects these funds and distributes them to the investors who hold the securities.
• This provides a return on investment to the securities' holders.

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

 Important PointsMM approach - Home made Leverage

• ​Modigliani-Miller theorem - Investors can create their own leverage by borrowing and investing in risk-free assets.
• Homemade leverage- Investors can replicate the effects of corporate leverage by borrowing and investing in a firm's debt and equity.

Implications -

• Firms' capital structure is irrelevant to investors.
• Firms should focus on maximizing expected future cash flows and reducing risk, regardless of how they finance their operations.

In other words, investors can achieve the same level of risk and return regardless of the firm's capital structure. This is because they can always borrow or lend money to adjust their own leverage.

Pecking order theory - No target capital structure

• The Pecking Order Theory suggests that firms prioritize financing methods in a specific order.
• This begin with internal funds, followed by debt issuance, and finally, equity issuance.
• Unlike the traditional notion of a target capital structure, this theory contends that firms do not have a predetermined mix of debt and equity in mind.
• Instead, they rely on available funds and prefer internal financing due to the asymmetry of information between management and external investors.
• This theory emphasizes the pragmatic approach firms take in their financing decisions.

Trade off theory - Costs of financial distress

• Trade-off theory in finance suggests that companies must strike a balance between the tax benefits of debt financing and the costs associated with financial distress.
• The costs of financial distress include legal and administrative expenses related to bankruptcy proceedings, the loss of customer and supplier relationships, and the decline in the firm's value due to the uncertainty surrounding its financial health.
• Additionally, financial distress can lead to a reduced ability to invest in profitable projects, ultimately impacting the company's long-term viability.

Signaling theory - Asymmetric information

• Signaling theory addresses situations where one party possesses more or better information than another.
• In financial contexts, it often refers to a firm's ability to convey its quality or prospects to investors.
• For example, a company may issue a dividend to signal confidence in its future earnings or undertake a stock buyback to indicate undervaluation.
• These actions are intended to bridge the information gap and convey positive signals to investors, potentially affecting the firm's stock price.

The correct answer is financial dualism.

Key Points

• The formal financial sector refers to regulated and organized institutions like banks, credit unions, and financial markets that operate under government supervision.
• On the other hand, the informal financial sector consists of unregulated and often community-based systems, like moneylenders, rotating savings and credit associations (ROSCAs), and microfinance groups.

 Important Points

• Financial dualism refers to the coexistence of a formal and informal financial sector in an economy.
• The formal financial sector is regulated by the government and includes banks, microfinance institutions, and other financial institutions that offer a variety of financial services, such as savings accounts, loans, and insurance.
• The informal financial sector is unregulated and includes a variety of traditional financial institutions, such as money lenders, rotating savings and credit associations (ROSCAs), and pawnbrokers.
• Financial dualism may exist because of cultural factors. Some people may prefer to use the informal financial sector because it is more familiar to them or because they do not trust the formal financial sector.
• There are a number of benefits to financial dualism.
• The informal financial sector can provide financial services to people who would not otherwise have access to them.
• This can help to promote economic growth and development. The informal financial sector can also help to reduce poverty by providing people with the financial resources they need to start or grow a business.

some examples of cooperation between the formal and informal financial sectors -

• Banks may offer mobile banking services to reach customers in rural areas.
• Insurance companies may offer micro-insurance products to low-income people.
• Governments may provide training and financial support to informal financial institutions.

The correct answer is B, E, D, A, C.

Key Points

• Leadership development process refers to a structured and intentional approach to nurturing and enhancing leadership skills and qualities in individuals.
• It involves activities, training, and experiences aimed at cultivating traits like communication, decision-making, and team building.

Important Points

• Anderson Consulting's leadership development process is based on the belief that leadership is a skill that can be learned and developed.
• The process is designed to help employees to develop the skills and knowledge they need to be effective leaders.
• Anderson Consulting uses a variety of methods to identify the employees who have the potential to become leaders in the future.

The correct sequence of the leadership development process as adopted by Anderson Consulting is as follows -

1. Identify the leadership talent pipeline - This involves identifying the employees who have the potential to become leaders in the future. Anderson Consulting uses a variety of methods to do this, including performance reviews, assessments, and feedback from managers.
2. Develop a leadership development plan for each employee - This plan should be tailored to the individual's needs and goals, and it should identify the specific training and development activities that the employee needs to undertake.
3. Provide leadership training and development opportunities - Anderson Consulting offers a variety of leadership training programs, including in-class training, online courses, and coaching.
4. Provide mentorship and support - Anderson Consulting encourages its leaders to mentor and support their employees. This can help employees to develop their leadership skills and to prepare for more senior roles.
5. Evaluate the effectiveness of the leadership development process - Anderson Consulting regularly evaluates the effectiveness of its leadership development process to ensure that it is meeting the needs of the organization and its employees.

The correct answer is Functional and project.Important Points

• A matrix structure is a combination of two or more organizational structures, such as functional and project management.
• In a matrix structure, employees report to both a functional manager and a project manager.
• The functional manager is responsible for the employee's day-to-day work, while the project manager is responsible for the employee's work on a specific project.

The two dimensions of authority in a matrix structure are -

1. Functional authority - Functional authority is the authority to make decisions about the work of a department or function. Functional managers have functional authority over their employees.
2. Project authority - Project authority is the authority to make decisions about the work of a specific project. Project managers have project authority over the employees assigned to their projects.

• The two-dimensional structure of a matrix structure is created by the intersection of functional authority and project authority.
• This can be visualized as a grid, with functional departments on one axis and projects on the other axis.
• Employees in a matrix structure are located at the intersection of their functional department and the project(s) they are assigned to.

The correct answer is At the expiry of the policy. the insured receives the sum of insurance policy.

Key Points

• An endowment policy is a type of life insurance contract that provides both a death benefit and a savings or investment component.
• It combines insurance coverage with a savings plan, allowing the policyholder to accumulate a lump sum amount over a specified period.
• If the policyholder survives the policy term, they receive the accumulated amount as a maturity benefit; in case of demise during the term, the beneficiary receives the death benefit.
• Additionally, endowment policies often offer bonuses or returns on investments, making them a popular choice for individuals seeking a combination of protection and savings.
• They are typically used for long-term financial goals like funding education or providing for retirement.

Important Points

• Advantages for the Issuer in Receiving Regular Payments and a Specific Amount at Policy Expiry: This describes a scenario where the insurance company (issuer) benefits from receiving the regular premium payments from the policyholder and a certain sum of money at the end of the policy term. While the issuer does indeed receive regular payments in the form of premiums with most insurance policies, the end of the policy term usually involves a payout to the policyholder or their beneficiaries, not the issuer.
• Sum of Insurance Paid to the Insured at Policy Expiry: This is a key characteristic of endowment policies. The policyholder, or "the insured," receives a lump sum payment at the end of the policy term if they are still alive. If the policyholder dies during the term, the death benefit is paid to the nominee.
• Whole Life Coverage with Sum Assured Plus Bonus to the Nominee after the Policyholder’s Death: This statement is more characteristic of a whole life insurance policy as they are designed to provide lifelong coverage. The policyholder's beneficiaries (or "nominee") receive an assured sum along with any bonuses or dividends upon the policyholder's death.
• High-Premium Cost, with the Insurance Amount Going to the Nominee upon the Insurer’s death: While it's true that insurance policies can have high premiums (such as whole life insurance), the receiving of the insurance amount by the nominee upon death of the insurer can be a characteristic of many life insurance policies, not just endowment policies. This statement describes life insurance in a broader sense, so it doesn't specifically pertain to endowment policies.

So, option 2 correctly pertains to the features and benefits of an Endowment Policy.

The correct answer is B, C, E only. 

Key Points

• A current account deficit indicates that a nation is importing more goods, services, and capital than it is exporting.
• This deficit must be financed through borrowing or by using reserves.
• A sustained current account deficit can lead to a nation's increased indebtedness or a decrease in its foreign exchange reserves, which can have implications for its overall economic stability and long-term growth.

Important Points The problem of persistent current account deficit can be avoided by pursuing the following policies -

• Controlling fiscal deficit -
  • A fiscal deficit is when a government spends more money than it collects in taxes.
  • This can lead to a current account deficit because the government needs to borrow money to finance its spending.
  • By controlling the fiscal deficit, the government can reduce its need to borrow money and improve the current account balance.
• Devaluation of the domestic currency -
  • Devaluation of the domestic currency makes exports cheaper and imports more expensive.
  • This can lead to an increase in exports and a decrease in imports, which can help to improve the current account balance.
• Reduced dependence in costly external commercial borrowings - 
  • External commercial borrowings are loans that a country takes from foreign banks and other financial institutions.
  • These loans can be expensive, and they can increase a country's debt burden.
  • By reducing its dependence on external commercial borrowings, a country can improve its current account balance.

The other options are not effective ways to reduce a persistent current account deficit -

• Encouraging Savings - Encouraging savings can help to reduce the demand for imports, but it will not necessarily lead to an increase in exports.
• Curtailing productivity - Curtailing productivity will lead to a decrease in both exports and imports. However, it will also lead to a decline in economic growth.

The correct answer is Market share has a positive effect on cash flow as profits are related to market share.

Key Points

• The Boston Consulting Group (BCG) Growth-Share Matrix is a portfolio planning tool that helps businesses make strategic decisions about their product portfolio.
• It plots businesses into four quadrants based on market growth and relative market share: stars, cash cows, question marks, and dogs.
• The BCG Growth-Share Matrix can be used to make a variety of strategic decisions, such as which businesses to invest in, divest, or price differently.

Important PointsThe correct answer is Market share has a positive effect on cash flow as profits are related to market share.

• The BCG Growth-Share Matrix is based on the assumption that market share has a positive effect on cash flow.
• This is because businesses with a higher market share are more likely to have economies of scale, which can lead to lower costs and higher profits.
• Additionally, businesses with a higher market share are more likely to be able to charge higher prices for their products or services.

The other options are not assumptions of the BCG Growth-Share Matrix -

• Cash flow can be equated with profitability - Cash flow and profitability are not the same thing. Cash flow is the movement of money in and out of a business, while profitability is the amount of money that a business makes after all expenses have been paid.
• Market share acts as a proxy to competitive strength - Market share is not a perfect proxy for competitive strength. There are other factors that can contribute to competitive strength, such as customer loyalty, brand recognition, and product differentiation.
• Market growth rate cannot be used as a proxy to market attractiveness - Market growth rate can be used as a proxy for market attractiveness. A market with a high growth rate is likely to be more attractive to businesses than a market with a low growth rate.

The correct answer is B, C only.

Key PointsLet's analyze each statement:

• Discount Rate
  • This option is incorrect because:
  • The internal rate of return (IRR) method itself doesn't directly focus on the discount rate; it determines the discount rate that makes the net present value (NPV) zero.
  • When comparing mutually exclusive projects, IRR doesn't directly address differences caused by varying discount rates.
• Timing
  • This option is correct because:
  • IRR may not accurately handle projects with different cash flow timings.
  • Projects with early returns versus those with later returns can yield misleading IRR results, leading to potentially poor decision-making.
• Scale
  • This option is correct because:
  • The IRR method doesn't consider the scale or size of projects.
  • Comparing projects of different scales using IRR can be misleading, as a higher IRR on a small project might be less desirable than a lower IRR on a larger project.
• Reversing Flow
  • This option is incorrect because:
  • Reversing flow (changes in the direction of cash flows) can complicate IRR calculations but isn't a fundamental problem in comparing mutually exclusive projects.
  • Multiple IRRs can exist if cash flows change direction, but this issue isn't specific to project scale or timing differences.
• Leverage
  • This option is incorrect because:
  • Leverage refers to the use of borrowed capital to finance a project, which isn't a direct concern when comparing the IRR of mutually exclusive projects.
  • IRR analysis typically assumes project financing is separate from evaluation.

Based on the evaluation above, the correct answer is option 3: B and C, as these statements correctly describe aspects of the limitations of the IRR method when evaluating mutually exclusive projects.

The correct answer is B and D only.

Key Points

• The long-run average cost (LRAC) curve is a graphical representation in economics that illustrates the lowest average cost per unit of output attainable when all factors of production, including capital, are variable.
• In other words, it shows the relationship between the scale of production and the average cost per unit in the long run.

Important PointsThe long-run average cost curve (LAC) is a curve that shows the relationship between the average cost of producing a good or service and the quantity of output produced in the long run.

U-shape -

• The LAC curve is typically U-shaped, meaning that the average cost of production decreases as output increases to a certain point, and then begins to increase again.
• The LAC curve is U-shaped for a number of reasons. At low levels of output, firms may experience economies of scale.
• This means that the average cost of production decreases as output increases because the firm is able to spread its fixed costs over a larger number of units.
• However, at high levels of output, firms may experience diseconomies of scale.
• This means that the average cost of production increases as output increases because the firm becomes less efficient.
• 

L-shape -

• The L-shaped LAC curve is a special case of the U-shaped LAC curve.
• It occurs when the firm reaches the minimum efficient scale of production.
• At this point, the average cost of production is the lowest possible and the LAC curve becomes horizontal.

The correct answer is Gravity model.

Key Points

• The Theory of Comparative Advantage, first formulated by economist David Ricardo, argues that countries should specialize in producing goods and services in which they have a lower opportunity cost and then trade with other countries to obtain goods and services that they cannot produce as efficiently.
• This theory emphasizes that even if one country is less efficient in producing all goods compared to another country, there are still gains from trade for both parties.

Important Points Gravity model 

• The gravity model of trade is a model that predicts the volume of trade between two countries based on their economic sizes and distance.
• The model is based on the analogy of Newton's law of gravity, which states that the force of gravity between two objects is proportional to their masses and inversely proportional to the square of the distance between them.
• In the gravity model of trade, the economic size of a country is typically measured by its GDP.
• The distance between two countries is typically measured by the geographical distance between their capitals.
• The gravity model is a positive relationship, meaning that the trade between two countries is expected to increase as their economic sizes increase and the distance between them decreases.

The other options are not related to the sign of the economics of two countries -

• Phillips Curve - The Phillips curve is a negative relationship between inflation and unemployment.
• Fisher effect - The Fisher effect is a positive relationship between nominal interest rates and expected inflation.
• Kuznets Curve - The Kuznets curve is a negative relationship between income inequality and economic development.

The correct answer is ​39,600.

Key Points

• Under Section 17(2)(iii) of the Income Tax Act, 1961, the amount that can be deducted by an employer from an employee's salary is the amount paid by the employer to the employee as a contribution to a pension fund or provident fund.
• The maximum amount that can be deducted is 10% of the employee's salary.

some examples of contributions to a pension fund or provident fund that can be deducted by the employer under Section 17(2)(iii):

• Contributions to the Employees' Provident Fund (EPF)
• Contributions to the Public Provident Fund (PPF)
• Contributions to a superannuation fund
• Contributions to a gratuity fund

Important Points

The value of the perquisite provided by the employer is calculated as follows -

• Value of car used for personal purposes: Rs. 1800 per month.
• Value of driver salary: Rs. 900 per month.
• Therefore, the total value of the perquisite is Rs. 2700 per month.
• The employer has recovered Rs. 1000 per month from the employee. Therefore, the net value of the perquisite is Rs. 1700 per month.
• The annual value of the perquisite is Rs. 1700 x 12 = Rs. 20,400.
• However, the employer has incurred actual expenses of Rs. 60,000.
• Therefore, the amount that should be reduced by the employer from the actual amount of expenditure is Rs. 60,000 - Rs. 20,400 = Rs. 39,600.
• The deduction of Rs. 39,600 will reduce the employee's taxable income. This will result in a lower tax liability for the employee.

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

Key PointsThese points are related to is "Performance Management". In the field of Human Resource Management, performance management includes activities that ensure goals are consistently met in an effective and efficient manner. It can focus on the performance of an organization, a department, an employee, or the processes in place to manage tasks. These activities involve performance assessment or review, training and development needs identification, administrative decision making based on performance data, and necessary documentation for legal and research purposes.

Here's an explanation for each point in the context of the matching points:

• Development Uses - Identification of individual needs, strengths, and performance feedback. This refers to the use of performance assessment as a tool to identify a person's professional development needs, their strengths, and areas for improvement. The output from such an assessment can be used to provide constructive feedback for the individual, facilitate their growth, and improve their performance in their role. This can include identifying training needs or setting up a coaching or mentoring relationship.
• Administrative Uses' Decisions - Identification for performance, recognition, individual performance, salary. promotion, termination. Here, performance assessment is used as a tool to make administrative decisions related to the employees. This includes decisions related to recognising their performance, adjusting their salary, considering them for promotions, or even employment termination in some cases. It ensures fair decision making in the organisation and helps to retain the best performers while letting go of poor performers.
• Organisational Maintained Objectives - HR planning, Determining organisation training needs. Performance assessments can be implicitly linked to organisational goals and objectives. The outcomes of performance assessments can be used in HR planning, helping the organisation align its HR policies and strategies with the overall business objectives. Additionally, performance assessments can help determine the overall training and development needs of the organisation, guiding decisions about what training programs need to be implemented to improve overall organisational performance.
• Documentation - Critics of validity research, Helping meet legal requirement. Documentation is a critical aspect of performance assessment. It serves as a record of an employee's performance over a certain period, which can be used for various purposes including legal requirements. It provides evidence of an employee's performance, abilities, and progress. The valid and supportive documentation can also help organizations respond to critics of validity research, showing that their assessments or tests are effective and unbiased.

The correct answer is MRP > MRC.

Key Points

• MRP (Marginal Revenue Product) is the additional amount of revenue that a firm earns as a result of hiring an additional unit of input (like labor).
• MRC (Marginal Resource Cost) is the additional cost incurred as a result of hiring that additional unit.
• When MRP is greater than MRC, this indicates that the extra revenue obtained from selling the product made by an additional unit of input is greater than the cost of hiring that extra unit.
• This is an ideal opportunity for firms to gain more profit, as the gains exceed the costs.
• As the firm increases its usage of a variable input, both MRP and MRC typically change.
• The MRP tends to decrease due to diminishing marginal productivity - extra inputs become less productive when used in combination with a fixed quantity of another resource.
• Meanwhile, MRC tends to increase due to increasing marginal cost - it becomes more expensive to hire extra inputs the more you already have.
• Ideally, the firm would continue to hire more inputs up until the point where MRP equals MRC, where any further hiring would not generate profits.
• Thus, when MRP > MRC, it still pays for the firm to expand the use of variable factor input.

•  Procedure for Depositing GST Payment
• The correct procedure to make payment using electronic cash ledger is as follows:

  Generate the challan in form GST PMT-6 from the portal and enter the details (D): This step involves creating a payment challan by providing the necessary details such as the tax amount, type of tax, and period for which the payment is being made.

  Generation of challan Identification number (CIN) and mandate form payment through NEFT or RTGS mode (C): After generating the challan, you receive a Challan Identification Number (CIN), and you can choose to make the payment using NEFT or RTGS mode by filling out the mandate form.

  Amount as per payment rule can be deposited by using internet banking, debit/credit card, etc. (E): Once you have the CIN and mandate form, you can proceed to deposit the required amount through various payment methods, such as internet banking, debit/credit card, etc.

  Form GST PMT-07 and correction in electronic cash ledger (B): In this step, you may use Form GST PMT-07 to make corrections in your electronic cash ledger, if necessary, or address any issues related to the ledger.

  Amount credited to electronic cash ledger (A): Finally, the amount is credited to your electronic cash ledger after a successful payment, and the transaction is recorded.

  So, the correct order is: D, C, E, B, A.

•  Step by Step Guide on How to E-file ITR on Income Tax Portal
  • Step 1: Login
    • Register and login on portal and select application return form
  • Step 2: Go to ‘File Income Tax Return’:
    • File details and computation of tax
  • Step 3: Select the right ‘Assessment Year’
  • Step 4: Select status
  • Step 5: Select ITR type
  • Step 6: Choose the reason for filing ITR
  • Step 7: Add Bank Account Details and Other Information
    • Making payment of balance tax and contain the data provided for
  • STEP 5. Fill form and upload
    • ​If you choose to fill the form offline, after you have downloaded the form and filled all the details, click on 'generate XML'. Then go to the website again and click on the 'upload XML' button. You will have to first log in to upload the XML file saved on desktop and click on submit.
    • Step 8: e-Verify ITR:​
      • On submitting ITR form, an acknowledgement number is generated. In case the return is submitted using digital signature, you just have to preserve this number. If the return is submitted without a digital signature, an ITR-V is generated and is sent to your registered email ID.The tax filing process is incomplete and ITR is invalid unless your ITR V is verified.

Therefore we conclude that the correct answer is C, A, E, B, D.

• Price elasticity of demand is the ratio of the percentage change in quantity demanded of a product to the percentage change in price.
• If price elasticity is greater than 1, the good is elastic; if less than 1, it is inelastic.
• If the price elasticity of demand is greater than 1, it is deemed elastic. That is, demand for the product is sensitive to an increase in price

Hence Statement I is correct.

Statement II: Normal goods (EI > O) for which EI > 1 are called luxuries while those normal goods for which EI is between zero and one are considered necessities

•  A normal good is a good that experiences an increase in demand due to an increase in a consumer's income. Normal goods have a positive correlation between income and demand. Examples of normal goods include food, clothing, and household appliances.
• A normal good has an Income Elasticity of Demand > 0. This means the demand for a normal good will increase as the consumer’s income increases.
• Luxury goods usually have Income Elasticity of Demand > 1, which means they are income elastic. This implies that consumer demand is more responsive to a change in income. For example, diamonds are a luxury good that is income elastic
• A Giffen good has a negative income elasticity of demand and a relatively small substitution effect, i.e. the good does not have any close substitutes so when its price rises people find it difficult to switch to cheaper alternatives.
• Income Elasticity of Demand = 0 means that the demand for the good isn’t affected by a change in income and those normal goods for which EI is between zero and one are considered necessities

Hence Statement II is correct.

Therefore we can say that Both Statement I and Statement II are correct

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

Key Points

The buyer-seller relationship is typically divided into several stages that describe the progression of the relationship over time. Here is a brief explanation of the four stages you've mentioned:

• Pre-relationship stage: This is the beginning stage where the seller is working on attracting the buyer's attention and the buyer is identifying their needs. The seller utilizes various marketing efforts to create awareness about their products or services. On the other hand, the buyer is recognizing their need for a product or service, and is conducting initial research, often by gathering information from multiple sources about potential sellers and solutions. This stage is pivotal for creating a strong, positive first impression that can lay the groundwork for a successful relationship.
• Early stage: Once the buyer's interest has been piqued, they may move on to a seller and start to develop a more in-depth understanding of how the seller's product or service can meet their needs. This stage often includes more focused information exchange, including sales presentations, product demonstrations, consultations, and the beginning of negotiations. Both parties will begin to explore the potential benefits of a relationship and assess whether or not it's a good fit.
• Development stage: In this stage, the buyer has already chosen the seller's product or service and the focus of the relationship shifts towards nurturing and development. The seller works to ensure that the product or service delivers on its promise and meets or exceeds the buyer's expectations. This can involve ongoing customer service, seeking out feedback, troubleshooting any issues that arise, and demonstrating consistent value. As trust and satisfaction build over time through repeated successful exchanges, the relationship strengthens and the buyer is likely to become a repeat customer.
• Long-term stage: This is the most mature stage of the buyer-seller relationship, where both parties have formed a strong and stable rapport. There is a high degree of mutual understanding, trust, and satisfaction. The seller considers the buyer to be a loyal customer and may make special efforts to maintain the relationship, such as providing special offers, anticipating future needs, or providing preferential treatment. The buyer, on the other hand, perceives the seller as a reliable supplier for their needs and often recommends the seller to others, hence becoming an advocate.

• Fundamental attribution error :
  • Fundamental attribution error — or “correspondence bias,” as it’s also called — essentially attributes a person’s behavior to their personality. It fails to consider any situational factors that may play a part.
  • It makes people to overemphasize personal characteristics and ignore situational factors in judging others' behavior.
  • It underestimates the influence of external factors and overestimate the influence of internal factors when making judgments about the behavior of others

Hence Statement I is incorrect.

Statement II: Self-seeing bias is the tendency for individual to attribute then own success to internal factors while pulling the blame for failures on external factors

• Self-serving attributions.
  • This bias gives all the credit of success to the individual, while all the failures are blamed on external circumstances.
  • It  refers to how we explain our behavior depending on whether the outcome of our behavior is positive or negative. For example, an athlete is more likely to attribute a good performance on their own ability, and a poor one on external causes like the event environment

Hence Statement II is correct.

Therefore we can say that Statement I is incorrect but Statement II is correct. 

To protect themselves against interest rate increases, banks go off road, engaging in activities that do not appear on their balance sheets.These activities will appear on revenue statements, cash flow analyses, etc.

Key Points

•  OffBalance Activities:
  • Letters of Credit
    • A letter of credit (LOC) is a document issued by a bank on behalf of its customer authorizing a third party to draw drafts on the bank up to a stipulated amount under specific terms and conditions. A letter of credit is a conditional commitment (except when prepaid by the account party) on the bank’s part to pay drafts drawn in accordance with the document’s terms
  • Loan Commitments
    • A loan commitment is a written agreement, signed by the borrower and bank, detailing the terms and conditions under which the bank will fund a loan. The commitment will specify a funding limit and have an expiration date. For agreeing to make the accommodation, the bank may require a fee and/or maintenance of a stipulated compensating deposit balance from the customer
  • Borrowing from RBI:
    • The commercial banks borrow money from the Reserve Bank of India by selling securities or bonds with an agreement to repurchase the securities on a certain date at a predetermined price.
  • Derivatives trading
    • It can be used to hedge or reduce interest rate risks but can also be used by risky bankers or rogue traders to increase risk to the point of endangering a bank’s capital cushion and hence its economic existence.

Therefore we can say that the correct answer is B, D, C only.

The correct answer is Can be carried forward and set off against profit gain of business and profession 

Key Points

•  Provisions for losses in IT Act:
  • Set off of losses
    • Set off of losses means adjusting the losses against the profit or income of that particular year.
    • Losses that are not set off against income in the same year can be carried forward to the subsequent years for set off against income of those years
  • Intra-head Set Off
    • The losses from one source of income can be set off against income from another source under the same head of income.
    • For eg: Loss from Business A can be set off against profit from Business B, where Business A is one source and Business B is another source and the common head of income is “Business”.
  • Inter-head Set Off
    • After the intra-head adjustments, the taxpayers can set off remaining losses against income from other heads.
    • Eg. Loss from house property can be set off against salary income.
  • Carry forward of losses
    • After making the appropriate and permissible intra-head and inter-head adjustments, there could still be unadjusted losses.
    • These unadjusted losses can be carried forward to future years for adjustments against income of these years.
    • E.g A business has been discontinued in the previous year 2021-22.
    • The business loss Can be carried forward and set off against profit gain of business and profession 

The correct answer is Provisions relating to conversion of a firm into limited Liability partnership 

Key Points

• The Limited Liability Partnership (LLP) Act in India includes four schedules that cover different aspects of the applicability, conversion, and structure of LLPs.
• Specifically, each of the schedules covers the following aspects:
  • The First Schedule includes provisions about the mutual rights and duties of partners and of the LLP and its partners in situations when there is no agreement on these matters.
  • The Second Schedule details provisions for the conversion of a traditional partnership firm into a Limited Liability Partnership.
  • The Third Schedule provides guidelines for the conversion of private companies into an LLP.
  • The Fourth Schedule prescribes rules for converting an unlisted public company into an LLP.
• So according to these definitions, the correct answer would be: The second schedule in the LLP Act covers provisions corresponding to the conversion of a partnership firm into a Limited Liability Partnership. Hence the correct option is 3) Provisions relating to conversion of a firm into Limited Liability partnership.

The correct answer is  Less than 10,000 

Key Points

• Advance tax:
  • As per section 208, every person whose estimated tax liability for the year is Rs. 10,000 or more, shall pay his tax in advance, in the form of “advance tax”
  • However, a resident senior citizen (i.e., an individual of the age of 60 years or above during the relevant financial year) not having any income from business or profession is not liable to pay advance tax
  • Advance tax is to be paid in different instalments. The due dates for payment of different instalments of advance tax are as follows:
  • 

Therefore we can say that the correct answer is A - III, B - I, C - II, D - IV.

• Before writing the research report (Pre-writing), a researcher usually considers
  • Research Purpose:
    • There always is a primary goal that the researcher is trying to achieve through a report. In the introduction section, he/she can cover answers related to this goal and establish a thesis which will be included to strive and answer it in detail.
  • Uses of report:
    • The purpose of a research report is to communicate the findings of research studies to a wider audience. The report should be clear, concise, and well-organised so that readers can easily understand the information presented.
  •  Readers of report:
    • The target audience is the specific group of people to whom researchers seek to generalize their findings. It is critical to select a sample that appropriately represents the target audiences in order to generate robust and applicable results.
  • Have a clear research objective: 
    • A researcher should read the entire proposal again, and make sure that the data they provide contributes to the objectives that were raised from the beginning. Remember that speculations are for conversations, not for research reports, if a researcher speculates, they directly question their own research.
  • Establish a working model:
    • Each study must have an internal logic, which will have to be established in the report and in the evidence. The researchers’ worst nightmare is to be required to write research reports and realize that key questions were not included.

Therefore we can say that the correct answer is E, B, A only.

The correct answer is A and B only.

Key Points 

• Challenge the cost route
  • This strategy involves a detailed understanding of the market's reaction to pricing.
  • The firm identifies the price point at which sales volumes significantly increase or decrease.
  • They aim to set the pricing at this 'inflection point' to maximize profitability and capture market share by attracting more customers.
• Offering lower/aggressive price points
  • This is a pricing strategy aimed at capturing a larger chunk of the market share quickly by offering prices significantly lower than the competitors.
  • By doing so, more consumers will be inclined to try the product or service, boosting sales volume rapidly.
• Penetration pricing
  • This is very similar to option B. Penetration pricing involves setting a lower initial price to attract customers, penetrate the market quickly, and stimulate word of mouth.
  • Once the consumer base is established, prices may rise as brand loyalty strengthens.
• 'What the traffic can bear' pricing
  • This approach involves setting prices at a level that consumers are willing to pay, rather than pricing based on the cost of production or services.
  • This strategy is more effective in markets where the firm's product or service is unique or when demand is incredibly high, and consumers are ready to pay more.
• Absorption cost pricing
  • This pricing strategy sets the product price to cover all variable and fixed costs, aiming to absorb all costs related to the product's production.
  • This is achieved by dividing the total cost associated with creating the product by the total quantity produced, allowing firms to ensure all costs are covered.
  • This can be a safer pricing strategy that ensures each unit sold contributes to the absorption of production costs.

• Cross-listing is the listing of a company's common shares on a different exchange than its primary and original stock exchange. Companies must meet the exchange's listing requirements in order to be cross-listed.
• Advantages to cross-listing include having shares trade in multiple time zones, boosting liquidity and providing access to fresh capital.
• The international exposure provides companies with more liquidity, meaning there's a healthy amount of buyers and sellers in the market. The added liquidity provides companies with a greater ability to raise capital or new money to invest in the future of the company.
• Hence Assertion A is correct.

Reason R: Cross listing facilitates wider stock ownership and expands invester base for a firm's stock

• Companies that list shares across the globe attract varied investors belonging to different countries. This means more capital. But it also facilitates diversification advantages. MNCs that list globally are insulated from economic fluctuation occurring in a part of the world.
• Having shares in multiple exchanges buys the firm goodwill and a reputation in the international market. In addition, it adds to the firm’s international presence.
• Hence Reason R is correct,

Therefore we can say that Both A and R are true and R is the correct explanation of A.

The correct answer is The investment policy is set ahead of time and not altered by change in dividend policy 

Key Points

•  Dividend irrelevance theory :
  • It proposes that a company’s dividend policy does not affect its overall value or stock price. It was introduced by Franco Modigliani and Merton Miller in 1961.
  • It suggests that investors can create their desired income stream by buying or selling company shares as needed. This is regardless of whether the company pays dividends or retains its earnings.
  • The theory aims to understand the relationship between dividends and a company’s value.
  • This theory states that dividend patterns have no effect on share values.
  • Broadly it suggests that if a dividend is cut now then the extra retained earnings reinvested will allow futures earnings and hence future dividends to grow.
  • The investment policy is set ahead of time and not altered by change in dividend policy
  • Dividend irrelevance theory holds that the markets perform efficiently so that any dividend payout will lead to a decline in the stock price by the amount of the dividend.
  • In other words, if the stock price was $10, and a few days later, the company paid a dividend of $1, the stock would fall to $9 per share.
  • As a result, holding the stock for the dividend achieves no gain since the stock price adjusts lower for the same amount of the payout

• Void ab initio agreement :
  •  A void ab initio agreement is Latin for "void from the beginning." This means that legally, a contract was void as soon as it was created.
  • The parties of the contract are not legally related based on what was written in the agreement because the agreement in question was never valid.
  • Example: A contract with a minor would be void ab initio, as a minor is an incompetent party to the contract
  • Where a Court declares an act to be void ab initio, the parties are returned to their respective places at the ab initio occasion, the agreement basically never occurred and therefore had no obligatory power over any parties to the contract.
  • Contracts are void when one or more vitiating factors are present.
  • Characteristics of this type of contract include:
    • One or more parties has the option to enforce.
    • This party must have been subject to undue influence, misrepresentation, coercion, or fraud.
    • A party can receive compensation if he or she rightfully revokes the contract.
    • The party whose consent is caused has the contract void option.
    • Mistake is caused by fraud or misreperatation
    • Mistake as to the identify of person contracted with
    • Mistake as to the nature and character of a written document

The correct answer is B, A, C only.

•  Foreign bank operations in India
  • Foreign banks are those banking companies which open a branch in a different nation than the headquarters.
  • They have their registered office in one country. These foreign banks open a branch in other countries. It is to provide better services and convenience to multinational customers.
  • In the 2002–03 budget, foreign banks in India have been given more flexibility in their Indian operations wherein they are allowed to operate as branches of their overseas parent or as subsidiaries in India.
  • The foreign banks are not allowed to operate in India if it they are not financially sound
  • They have to operate according to the banking regulations in India
  • Foreign banks do not require separate approval under FEMA, for opening branch office in India. Such banks are, however, required to obtain necessary approval under the provisions of the Banking Regulation Act, 1949, from Department of Banking Operations & Development, Reserve Bank.

​Therefore correct answer is B, D, E only.

The correct answer is 4. A, D, B, E, C.

Key PointsLet's analyze each option:

• Option 1: B, C, A, D, E
  • This statement is incorrect because "Credit rating agencies regulations" and "Credit rating regulations" consider different aspects and were enacted in different years.
  • The Mutual fund regulations (A) were enacted earlier than some credit agency regulations, making this sequence incorrect.
• Option 2: C, D, E, A, B
  • This statement is incorrect because "Credit rating regulations" (C) is not the earliest enacted regulation in the list.
  • Mutual fund regulations (A) should come before Sweat equity regulations (E).
• Option 3: A, B, C, D, E
  • This statement is incorrect because "Credit rating regulations" (C) and "SEBI intermediaries regulations" (D) should come before Sweat equity regulations (E).
  • Also, "Credit rating agencies regulations" (B) should be adjusted according to the correct historical enactment sequence.
• Option 4: A, D, B, E, C
  • This statement is correct because it lists the legislations in the correct ascending order of their enactment.
  • Mutual fund regulations (A) generally came before the other regulations on the list.
  • SEBI intermediaries regulations (D) followed, establishing guidelines for various market intermediaries.
  • Credit rating agencies regulations (B) were introduced to standardize ratings by various agencies.
  • Sweat equity regulations (E) addressed issues related to equity compensation for employees.
  • Credit rating regulations (C) were the final set of regulations to be enacted in this sequence.

The correct answer is Rs. 60,000, Rs. 20,000

Key Points

• Step 1: Calculate Average Profit
  • Sum of last three years' profits: Rs. 2,48,000 - Rs. 36,000 + Rs. 1,48,000 = Rs. 3,60,000
  • Average Profit = Rs. 3,60,000 / 3 = Rs. 1,20,000
• Step 2: Calculate Goodwill
  • Goodwill = Average Profit × 2 Years Purchase
  • Goodwill = Rs. 1,20,000 × 2 = Rs. 2,40,000
• Step 3: Determine Old Ratio and New Ratio
  • Old Ratio of P, R, and M: 3:2:1
  • New Ratio of P and M after R's retirement: P:M = 3:1
  • Therefore, P's new share = 3/4 and M's new share = 1/4
• Step 4: Calculate P and M's Share of Goodwill Adjustment
  • R's Goodwill Share = (Goodwill / Total Ratio) × R's Old Ratio
  • R's Goodwill Share = (Rs. 2,40,000 / 6) × 2 = Rs. 80,000
  • P and M will contribute to R's share of goodwill in their gaining ratio (which is same as their new ratio: 3:1)
  • P's Contribution = Rs. 80,000 × 3/4 = Rs. 60,000
  • M's Contribution = Rs. 80,000 × 1/4 = Rs. 20,000

Important Points Further Clarifications:

1. Goodwill Calculation: The process of calculating goodwill involves determining the average profit of the firm over a given period and multiplying it by a specific number of years purchase, as mentioned in the problem statement (2 years in this case).
2. Adjustment of Goodwill: While adjusting the retiring partner's share of goodwill, the remaining partners bear the cost according to their new profit-sharing ratio.
3. Old vs. New Ratio: Understanding the old ratio (3:2:1) and the new ratio (3:1) after the retirement is crucial for calculating individual contributions towards the retiring partner's share of the goodwill.
4. Goodwill Distribution: The share of the retiring partner in the goodwill is distributed among the remaining partners based on their gaining ratio, which is determined by their new profit-sharing ratio.
5. Equitable Distribution: This method ensures an equitable distribution of the retiring partner's share of goodwill, reflecting the increased stake and future profit rights of the remaining partners.

The correct answer is A, B and D only.

Key Points

• Price ceilings below the equilibrium price lead to shortages and black markets.
• This is because consumers want to buy more of the good or service at the price ceiling price than suppliers are willing to sell.
• Black markets arise when there is a shortage of a good or service, and people are willing to pay higher prices than the legal price ceiling in order to obtain it.

Important PointsPrice ceilings below the equilibrium price can have a number of negative consequences, including -

• Shortages -
  • Shortages can lead to higher prices for consumers, as well as decreased access to essential goods and services.
  • Shortages occur because consumers want to buy more of the good or service at the price ceiling price than suppliers are willing to sell.
  • This is because the price ceiling is below the equilibrium price, which is the price at which the quantity demanded and the quantity supplied are equal.
• Black markets -
  • Black markets can lead to crime, corruption, and a loss of tax revenue for the government.
  • Black markets arise when there is a shortage of a good or service, and people are willing to pay higher prices than the legal price ceiling in order to obtain it.
  • Black markets are illegal, but they can be very profitable for sellers.
• Hoarding -
  • Hoarding can reduce the quantity of goods or services that are available to other consumers, and it can also lead to higher prices.
  • Hoarding is the accumulation of goods or services in the anticipation of a shortage or price increase.
  • Hoarding can also contribute to shortages, as it reduces the quantity of goods or services that are available to other consumers.
• Decreased quality - Suppliers may have to cut corners in order to meet the price ceiling, which can lead to a decrease in the quality of goods and services.

The correct answer is Ward-Walfowitz one sample runs test .Key Points

• A parametric test is a statistical test that makes assumptions about the parameters of the population distribution from which the sample is drawn.
• A nonparametric test is a statistical test that does not make assumptions about the parameters of the population distribution from which the sample is drawn.

Important Points

• The Ward-Walfowitz one sample runs test is a non-parametric test that is used to test whether a sequence of observations is random.
• It does this by counting the number of runs in the sequence, where a run is defined as a consecutive sequence of observations that are all greater than or all less than the median value.
• The Ward-Walfowitz one sample runs test has no corresponding parametric test.
• This is because it is not possible to make assumptions about the distribution of the population data when using this test.

The other three options all have corresponding parametric tests -

• Spearman rank correlation test - Pearson correlation test
• Kruskal-Wallis test - One-way ANOVA
• Mann-Whitney test - Independent samples t-test

The Ward-Walfowitz one sample runs test is a non-parametric test that is used to test whether a sequence of observations is random. It has no corresponding parametric test.

Additional InformationSparman rank correlation test - 

• Spearman rank correlation coefficient is a nonparametric measure of the strength and direction of association between two ranked variables.
• It assesses how well the relationship between two variables can be described using a monotonic function.
• To calculate the Spearman rank correlation coefficient, the data is first ranked from lowest to highest for each variable.

Kruskal Wallir test -

• The Kruskal-Wallis test is a nonparametric test that is used to compare three or more independent groups on a continuous or ordinal variable.
• It is the nonparametric equivalent of the one-way ANOVA.
• The Kruskal-Wallis test works by ranking all of the data points in the sample, regardless of which group they belong to.
• The average rank is then calculated for each group.

Mann-Whitney test  - 

• The Mann-Whitney U test is a nonparametric test that is used to compare two independent groups on a continuous or ordinal variable.
• It is the nonparametric equivalent of the independent samples t-test.
• The Mann-Whitney U test works by ranking all of the data points in the sample, regardless of which group they belong to.

The correct answer is 44.7 percent.

Key PointsPoisson distribution- 

• The Poisson distribution is a discrete probability distribution that expresses the probability of a given number of events occurring in a fixed interval of time or space if these events occur with a known constant mean rate and independently of the time since the last event.
• It is named after French mathematician Siméon Denis Poisson.

Important Points

• The coefficient of variation (CV) is a measure of the relative variability of a distribution.
• It is calculated by dividing the standard deviation by the mean.
• For a Poisson distribution, the standard deviation is equal to the square root of the mean.
• So, the CV for a Poisson distribution is calculated as follows -
  • CV = 1/√λ
  • For a Poisson distribution with mean = 5, the CV is therefore:
  • CV = 1/√λ = 0.4472
  • This is equal to 44.72 percent, rounded to two decimal places.
  • In other words, the coefficient of variation tells us that the standard deviation is 44.72% of the mean.
• This means that the distribution is relatively spread out, with a significant number of values that are above and below the mean.
• The coefficient of variation is a useful measure of variability because it is independent of the scale of the distribution.
• This means that it can be used to compare the variability of distributions with different means.

The correct answer is Predatory dumping.

Key Points

• Dumping is an international trade practice in which a country or company exports a product to another country at a price lower than the cost of production or below the price in its domestic market.
• This can be done either to gain market share in the importing country or to eliminate competition by driving domestic producers out of business.

 Important Points

• Predatory dumping occurs when a foreign company intentionally sells its products in a foreign market at a price below its production cost or the market price in its home country.
• The goal of predatory dumping is to gain a competitive advantage, drive domestic producers out of business, and ultimately establish a monopoly or dominant market position.
• In response to predatory dumping, governments may impose trade restrictions such as tariffs or quotas to protect their domestic industries.
• These measures are implemented to counteract the unfair advantage gained by the foreign company engaging in predatory dumping.

Additional Information

• Persistent dumping - This term is not a standard concept in trade economics. It may be a misnomer or a less common term, as it does not refer to a widely recognized form of dumping.
• Sporadic dumping - This refers to occasional instances of dumping, which are not consistently practiced by a foreign company. It may not require the same level of intervention as predatory dumping.
• Reverse dumping - This term is not a standard concept in trade economics. It may be a less common term, or a specific context not covered in the provided information.

The correct answer is A feeling of uncertainty about making the right decision.

Important Points

• Cognitive dissonance is a psychological theory developed by Leon Festinger in 1957.
• It refers to the discomfort or tension that arises when a person holds two contradictory beliefs, attitudes, or values, or when their behavior conflicts with their beliefs or values.
• In the context of post-purchase behavior, cognitive dissonance occurs when a consumer experiences uncertainty or doubt about whether they made the right decision in purchasing a product or service.
• This can happen because consumers are often faced with multiple options and making a decision can be challenging.
• For example, after making a significant purchase, such as a car or a computer, a consumer might question whether they made the right choice, especially if there were other appealing options available.
• This uncertainty is a common psychological response.

Additional Information

• A feeling of happiness with the purchase -  This statement does not align with cognitive dissonance, as it implies a positive and satisfied emotional state, whereas cognitive dissonance is characterized by a state of discomfort or uncertainty.
• Getting angry with the firm - This does not relate directly to cognitive dissonance. Cognitive dissonance is an internal psychological phenomenon, not an external emotional reaction towards a firm.
• A state of extreme satisfaction - Again, this statement suggests a high level of satisfaction, which contradicts the concept of cognitive dissonance.

The correct answer is Increased interest rates. 

Important Points

• Increased interest rates can lead to financial stress in a number of ways, including -
  • Higher borrowing costs - 
    • When interest rates rise, it becomes more expensive for businesses and consumers to borrow money.
    • This can make it difficult for businesses to invest and grow, and for consumers to buy homes and cars.
    • It can also lead to higher debt payments for those who are already in debt, which can strain their finances.
  • Reduced lending -
    • Banks and other financial institutions may also reduce lending when interest rates rise.
    • This is because they are more likely to lose money on loans if borrowers default.
    • This can make it even more difficult for businesses and consumers to access the financing they need.
  • Volatile markets -
    • Rising interest rates can also lead to volatility in financial markets. This is because investors may sell off assets such as bonds and stocks in order to lock in higher yields.
    • This volatility can make it difficult for businesses to raise capital and for investors to protect their savings.

Additional Information

• Fiscal indiscipline -
  • This refers to a situation where a government is not adhering to sound fiscal policies, often characterized by excessive spending, large deficits, and growing public debt.
  • While fiscal indiscipline can contribute to economic instability, it is not the immediate consequence mentioned in the question.
• Rising price level (inflation) - 
  • While high inflation can have negative effects on an economy, such as reducing purchasing power and creating uncertainty,
  • it is not directly related to financial stress endangering economic stability.
• Over leverage -
  • This occurs when individuals, businesses, or governments take on too much debt relative to their income or assets.
  • Over leverage can indeed lead to financial stress, as debt obligations become harder to meet.
  • However, it is not the immediate consequence mentioned in the question.