PAPER-III
COMMERCE
Note : This paper contains seventy five (75) objective type questions of two (2) marks each.
All questions are compulsory.
1. The first macro-environmental force
that a business firm generally
monitors is
(A) Economic environment
(B) Demographic environment
(C) Technological environment
(D) International, Political environment
Answer:(B)
2. Which of the following statements is
true ?
(A) The highest growth rate in
India is in the Manufacturing
Sector.
(B) Agricultural Sector has the
highest share in the GDP in
India.
(C) The biggest source of Central
Government’s revenue is
Central Excise.
(D) None of the above.
Answer:(C)
3. Which of the following statements is
true ?
(A) The Competition Commission
of India is headed by a person
having Judicial background.
(B) The definition of the term
‘goods’ as given in the
Competition Act, 2002, is the
same as given in the Sale of
Goods Act, 1930.
(C) Both (A) and (B) are true.
(D) None of the above is true.
Answer:(D)
4. Which one of the following is not
included in the Consumer Rights as per
the Consumer Protection Act, 1986 ?
(A) Right to be protected against
marketing of hazardous goods
and services.
(B) Right to be heard.
(C) Right to a physical
environment that will protect
and enhance quality of life.
(D) Right to seek redressal of
legitimate complaints.
Answer:(C)
5. A consumer can file a complaint
under the Consumer Protection Act,
1986, on any of the following
grounds except :
(A) Sale of defective goods
(B) Provision of deficient service
(C) Charging very high price
(D) Unfair trade practice
Answer:(C)
6. Financial statements provide a true
and fair view if
(A) It is free from any material
error and bias.
(B) It is prepared using the
appropriate accounting policy
and applicable accounting
standards.
(C) It is prescribed in the format
prescribed by the regulator or,
in the absence of a prescribed
format, it is prepared in a
manner that facilitates analyses
of the financial position and the
performance of the reporting
enterprise.
(D) It conforms to all of the above
(A), (B) and (C).
Answer:(D)
7. Which of the formula is used to
calculate Absolute Liquid Ratio is ?
(A) Current Assets, Loans & Advances-Inventories/
Current Liabilities & Provisions-Bank Overdraft
(B) Current Assets, Loans & Advances/Current Liabilities & Provisions
(C) Absolute Liquid Assets/Current Liabilities
(D) Absolute Liquid Assets/Quick Liabilities
Answer:(C)
8. A company sells its product at Rs 15
per unit. In a period if it produces
and sells 8,000 units, it incurs a loss
of Rs 5 per unit. If the volume is raised
to 20,000 units it earns a profit of Rs 4.
Variable cost per unit will be
(A) Rs 9 per unit
(B) Rs 4.5 per unit
(C) Rs 5 per unit
(D) Rs 6 per unit
Answer:(C)
9. Which of the following is a sub-
variance of labour efficiency
variance ?
(A) Idle time variance
(B) Labour-mix variance
(C) Labour-yield variance
(D) All of the above
Answer:(D)
10. An investment centre is a
responsibility centre where the
manager has control over
(A) Costs
(B) Costs and profits
(C) Costs, profits and product
quality
(D) Costs, profits and assets
Answer:(C)
11. According to H.A. Simon, if a firm
fails to achieve its target initially, it
results in
(A) Search behaviour
(B) Sense of helplessness
(C) Appropriate revision of
aspiration level.
(D) Sacking of its managerial team
Answer:(A)
12. When the demand curve is relatively
highly elastic, the marginal revenue
is
(A) Zero (B) Unity
(C) Positive (D) Negative
Answer:(C)
13. In which one of the following market
situations the practice of price
rigidity is found ?
(A) Perfectly competitive market
(B) Monopolistic competitive
market
(C) Oligopoly market
(D) Discriminating monopoly
market
Answer:(C)
14. During short-run, the optimum level
of output corresponds to that level of
output where
(A) MC is the minimum
(B) AVC is the minimum
(C) AC is the minimum
(D) AFC stops declining
Answer:(C)
15. The opportunity cost is a term which
describes
(A) a bargain price for a factor of
production.
(B) production cost related at the
optimum level of production.
(C) average variable cost.
(D) the loss of the reward in the
next best use of that resource.
Answer:(D)
Choose the correct answer from the
following options :
(A) 2.67 (B) 2.77
(C) 3.33 (D) 4.33
Answer:(A)
17. A time series is a set of data collected
at
(A) Random intervals
(B) Regular intervals
(C) Convenient intervals
(D) All of the above
Answer:(B)
18. Given the following data calculate the
regression coefficient of X on Y.
Pearson’s correlation coefficient = + 0.8.
Regression coefficient of Y on X = 0.8
Choose the correct answer from the
following :
(A) 0.32 (B) 0.64
(C) 0.80 (D) 0.82
Answer:(C)
19. Which kind of test from the
following options is the right test to
use when the hypotheses for testing
are stated as :
20. The steps in data processing are
given below :
Choose the correct sequence of steps
in data processing from the following
options :
(i) Data Storage
(ii) Data Validation
(iii) Data Capture
(iv) Report Generation
(v) Data Manipulation
(A) (i), (ii), (iii), (iv), (v)
(B) (ii), (i), (iii), (iv), (v)
(C) (iii), (i), (ii), (iv), (v)
(D) (iii), (ii), (i), (v), (iv)
Answer:(D)
21. Which of the following steps are
essential in the staffing process ?
1. Hiring the right kind of people.
2. Firing the non-performing
employees.
3. Developing skills of the
employees through training.
4. Collective bargaining.
5. Maintaining the employees by
creating favourable conditions
of work.
Codes :
(A) 1, 3 and 5 (B) 1, 2 and 3
(C) 3, 4 and 5 (D) 2, 3 and 4
Answer:(A)
22. F.W Taylor
1. Viewed man as an adjunct of
man.
2. Completely neglected the
psychological aspects.
3. Emphasized only a limited
number of the psychological
variables.
4. Under-estimated the meaning
of human motivation.
Select the correct answer from the
following :
(A) 1, 2 and 3 (B) 3, 2 and 4
(C) 1, 2, 3 and 4 (D) 1 and 4
Answer:(C)
23. The authoritarian leadership style
goes with
(A) Theory X
(B) Theory Y
(C) Theory Z
(D) None of these
Answer:(A)
24. Select the four stages of group
development from the following :
1. Forming 2. Storming
3. Discussing 4. Norming
5. Warning 6. Performing
Codes :
(A) 1, 2, 3 and 5 (B) 2, 3, 4 and 6
(C) 3, 4, 5 and 6 (D) 1, 2, 4 and 6
Answer:(D)
25. Match the following :
List – I List – II
(a) To check the 1. Speed boss
quality of
work.
(b) To see that 2. Inspection
work is
completed in
time.
(c) To check 3. Instruction
absenteeism clerk
of workers.
(d) To issue 4. Shop discipline
instruction
regarding
method of
work
Codes :
(a) (b) (c) (d)
(A) 3 2 1 4
(B) 2 1 4 3
(C) 2 1 3 4
(D) 4 3 1 2
Answer:(B)
26. A company plans to create the largest
possible total sales volume. It should
use
(A) Concentrated marketing
(B) Differentiated marketing
(C) Homogeneous marketing
(D) Undifferentiated marketing
Answer:(B)
27. The third stage in the consumer-
buying decision process is
(A) Evaluation of alternatives
(B) Information search
(C) Purchase decision
(D) None of the above
Answer:(A)
28. Manufacturers of convenience goods
typically seek ______ distribution.
(A) Exclusive (B) Intensive
(C) Restrictive (D) Selective
Answer:(B)
29. Which promotional tool is most cost
effective when a product is in the
decline stage of its product life cycle ?
(A) Advertising
(B) Personal selling
(C) Public relations
(D) Sales promotion
Answer:(D)
30. Match the items of List-I with those
of List-II.
List – I List – II
(a) Product (i) Information Technology
support
service
Act 2000
(b) Interviewers’ (ii) Information Search
bias
(c) On-line (iii) Marketing Research
advertising
(d) Personal (iv) User’s Manual
sources
indicate the correct matching.
(a) (b) (c) (d)
(A) (iv) (iii) (ii) (i)
(B) (iv) (iii) (i) (ii)
(C) (i) (ii) (iii) (iv)
(D) (ii) (iii) (iv) (i)
Answer:(B)
31. Match the items of List-I with the
items of List-II.
List – I List – II
(a) A theory of I.Capital Asset Pricing
capital structure Model
in which the
weighted average
cost of capital
and the total
value of the firm
remains constant
as financial
leverage is
changed.
(b) The value of the II. Traditional
geared company Approach
will always be
greater than an
ungeared
company with
similar business
risk but only by
the amount of
debt associated
tax savings of the
geared company.
(c) Capital structure III. Net Operating
that minimizes Income Approach
the firm’s cost of
capital and
thereby
maximizes the
value of the firm.
(d) Share price is IV. Modigliani-Miller
independent of Theory and Corporate
the degree of Taxation
financial
leverage.
Codes :
I II III IV
(A) (c) (d) (b) (a)
(B) (d) (c) (a) (b)
(C) (a) (b) (c) (d)
(D) (b) (a) (d) (c)
Answer:(B)
32. Which one of the following
expression represents a correct
matching ?
(A) A decrease in the proportional
claim on earnings and assets of
a share of common stock due to
the issuance of additional
shares : Dilution.
(B) Anticipated annual dividend
divided by the total book value
of the firm : Dividend Yield.
(C) When a shareholder receives
lesser number of new shares in
exchange for a given number of
old shares : Stock split.
(D) The costs associated with
issuing securities, such as
underwriting, legal, listing and
printing fees : Transaction
Costs.
Answer:(A)
33. When the internal rate of return of a
project is more than the hurdle rate,
the Net Present Value would be :
(A) Zero (B) Positive
(C) Negative (D) Uncertain
Answer:(B)
34. Statement I : The presence of fixed
operating costs in the operating
cost structure of a firm
regardless of the volume
denotes the presence of
financial leverage.
Statement II : Super leverage is the
result of the multiplicative
combination of the degree of
operating leverage and
financial leverage.
Codes :
(A) Both statements are true.
(B) Both statements are false.
(C) Statement I is true, but
Statement II is false.
(D) Statement I is false, but
Statement II is true.
Answer:(D)
35. Which one of the following
expressions has incorrect matching ?
(A) A method of financing where
each asset would be offset with
a financing instrument of the
same approximate maturity :
Hedging Approach.
(B) A method of financing where
all long term funds are used to
finance the current assets :
Aggressive Approach.
(C) The amount of current assets
required to meet a firm’s long-term
minimum needs :
Permanent working capital.
(D) Trade credit and other payables
that arise in the firm’s day to
day operations : Spontaneous
Financing.
Answer:(B)
36. The Equal Remuneration Act, 1976
is primarily applicable to workers
working on
(A) Monthly wage basis
(B) Annual wage basis
(C) Daily wage basis
(D) Contractual wage basis
Answer:(B)
37. In comparing Maslow’s and
Hertzberg’s Theories of Motivation,
which motivators of Hertzberg are
similar to the need specified by
Maslow ?
(A) Affiliation needs
(B) Physiological needs
(C) Security needs
(D) Self-actualisation needs
Answer:(D)
38. The managerial function of staffing
is most closely related to
(A) Controlling (B) Leading
(C) Marketing (D) Organising
Answer:(D)
39. The ‘staffing function’ does not
include :
(A) Performance appraisal
(B) Placement
(C) Selection
(D) Span of control
Answer:(D)
40. On-the-job training does not include
(A) job rotation
(B) planned progression
(C) sensitivity training
(D) temporary promotion
Answer:(C)
41. Generally the following are the
important items appearing on the
assets side of the Balance Sheet of a
Commercial Bank.
(a) Cash in hand
(b) Bills discounted
(c) Money at call and short notice
(d) Loans and advances
(e) Investments
Which of the following sequence is
correct in the order of liquidity ?
(A) (a), (b), (d), (c) and (e)
(B) (a), (c), (b), (e) and (d)
(C) (b), (d), (c), (a) and (e)
(D) (c), (d), (b), (e) and (a)
Answer:(B)
42. Which one of the following is not a
correct method of calculating
profitability ratio in banking sector ?
(A) Burden Man power expenses ratio
ratio = + other establishment expenditure ratio
– non interest income ratio.
(B) Profit-ability = Spread ratio – burden ratio
ratio
(C) Spread
ratio = Interest earned ratio + Interest paid ratio
(D) Interest Interest earned/volume
earned ratio = of business
Answer:(C)
43. Capital adequacy norm is expressed
as a percentage of
(A) Standard Assets
(B) Risk adjusted Assets
(C) Sub-standard Assets
(D) Investments
Answer:(B)
44. The major sources of funds for IFCI
Ltd. (during the year 2011-12) are
given below :
(i) Reserves and Surpluses
(ii) Borrowings in Rupees
(iii) Share Capital
(iv) Borrowings in Foreign
Currency
Which of the following sequence is
correct ?
(A) (i), (iii), (iv) and (ii)
(B) (iii), (i), (ii) and (iv)
(C) (ii), (i), (iii) and (iv)
(D) (iv), (ii), (i) and (iii)
Answer:(C)
45. The Bonds and Debentures issued by
State Financial Corporations are
guaranteed by
(A) Reserve Bank of India
(B) IDBI
(C) Central Government
(D) State Government
Answer:(D)
46. Items given are related to
international trade theories. Match
the items in List-A with most suitable
options in List-B
List – A List – B
(a) ‘Zero-sum’ (i) Factor proportion
game theory
(b) Labour-capital (ii) Mercantalism theory
relationship
(c) Relative (iii) Theory of Absolute
efficiencies of advantage’
the producing
countries
(d) ‘Positive- (iv) Theory of Comparative
sum’ game advantage
Codes :
(a) (b) (c) (d)
(A) (iii) (iv) (i) (ii)
(B) (ii) (iii) (iv) (i)
(C) (ii) (i) (iv) (iii)
(D) (iv) (i) (ii) (iii)
Answer:(C)
47. The following are the stages in
international business entry process.
Arrange them in correct sequence.
(i) Direct experience
(ii) In-depth scrutiny
(iii) Country identification
(iv) Preliminary screening
(v) Final selection
Codes :
(A) (iv), (iii), (i), (ii), (v)
(B) (iii), (iv), (i), (ii), (v)
(C) (iii), (iv), (ii), (v), (i)
(D) (iii), (iv), (v), (ii), (i)
Answer:(C)
48. Which of the following intellectual
properties were covered under
Uruguay Round Agreement on
TRIPS ?
(i) Copy rights
(ii) Trade marks
(iii) Industrial designs
(iv) Undisclosed information,
including trade secrets
Codes :
(A) (i) and (ii) only
(B) (i), (ii) and (iii)
(C) (ii), (iii) and (iv)
(D) (i), (ii), (iii) and (iv)
Answer:(D)
49. Which of the following statements is
true ?
(A) If the absolute Purchasing
Power Parity (PPP) holds good,
then the relative PPP also holds
good.
(B) If the relative PPP holds good,
then the absolute PPP also
holds good.
(C) If the absolute PPP does not
hold good, then the relative
PPP also will not hold good.
(D) If the absolute PPP holds good,
then the relative PPP may or
may not hold good.
Answer:(A)
50. A company is planning to enter a
foreign market. Which of the
following entry strategies will give it
the maximum control ?
(A) Direct export
(B) Direct investment
(C) Financing
(D) Licensing
Answer:(B)
51. The opportunity cost approach in
Human Resources Accounting was
introduced by
(A) Hckimian and Jones
(B) Rensis Likert
(C) Eric. G. Flamholtz
(D) William C. Pyle
Answer:(A)
52. The GDRs and ADRs can be listed on
(A) Luxemburg Stock Exchange
(LSE)
(B) New York Stock Exchange
(NYSE)
(C) Over the Counter Exchange of
India (OTCEI)
(D) Any of the Overseas Stock
Exchanges
Answer:(D)
53. Match the following :
List – I List – II
(Name of the credit
rating agency)
(Ownership)
(a) CRISIL 1. IFCI
(b) ICRA 2. ICICI
(c) CARE 3. Duff &Phelps Corpn.
(d) Duff and Phelps 4. IDBI
Credit Rating of
India Ltd.
Codes :
(a) (b) (c) (d)
(A) 1 2 3 4
(B) 2 1 4 3
(C) 1 2 4 3
(D) 2 4 1 3
Answer:(D)
‘
54. Which of the following is responsible
for investigating cases referred to it
and deciding whether a proposed
merger is in the ‘public interest’ ?
(A) Director General of Fair
Trading (DGFT).
(B) Secretary of State for Trade
and Industry.
(C) Competition Commission of
India (CCI).
(D) Prime Minister Office.
Answer:(C)
55. Match the following :
List – I List – II
(a) A popular 1.Sage-Account Software
windows
accounting
package
providing general
ledger, accounts
receivables,
invoicing,
accounts payable,
inventory and
sales analysis
capabilities.
(b) A good, entry 2. M.Y.O.B.
level accounting
package.
(c) Simplest, yet 3. Best Books
most powerful
software to
handle financial
accounting,
inventory, sales
and purchase
orders, invoicing
and more.
(d) A complete range 4.Tally
of accounting
software
providing an
integrated
solution at the
heart of one’s
business.
Codes :
(a) (b) (c) (d)
(A) 4 3 2 1
(B) 1 2 4 3
(C) 2 4 1 3
(D) 2 3 4 1
Answer:(D)
56. In order to be useful, market
segments must have each of the
following characteristics except :
(A) accessibility
(B) adaptability
(C) measurability
(D) substantiality
Answer:(A)
57. Mass media has the maximum
impact at which stage of consumer
adoption process.
(A) Adoption (B) Awareness
(C) Evaluation (D) Trial
Answer:(B)
58. Pricing decisions are most complex
at which stage of the product life
cycle ?
(A) Decline stage
(B) Introductory stage
(C) Growth stage
(D) Maturity stage
Answer:(D)
59. Industrial buyers are likely to be
most responsive to ______ appeal.
(A) emotional (B) moral
(C) rational (D) cognitive
Answer:(C)
60. Indicate the true statement :
(A) Advertisement’s sales effect is
easier to measure than its
communication effect.
(B) As a tool of promotion, public
relations can be more cost-
effective than advertising.
(C) A successful salesperson is one
who can sell refrigerator to an
Eskimo.
(D) All the above are true.
Answer:(B)
61. Who observed in 54 of the cases
studied that high morale related to
high productivity in 11 of the cases
high morale was associated with low
productivity and in 35% of the cases
there was no relationship between
morale and productivity ?
(A) Michael J. Jucious
(B) Richard E Walton
(C) Frederick Herzberg
(D) None of the above
Answer:(C)
62. Who developed the goal-setting
theory of motivation ?
(A) Frederick Herzberg
(B) Edwin Locke
(C) Richard Hackman
(D) None of the above
Answer:(B)
63. Which of the following concepts,
involves setting objectives and
comparing performance against those
objectives ?
(A) Performance Appraisal
(B) Merit Rating
(C) Management by Objectives
(D) Formulation of objectives and
policies
Answer:(C)
64. The career development cycle
includes :
(A) Introductory stage → Growth
stage → Saturation stage →
Decline stage.
(B) Primary stage → Secondary
stage → Stage of self-actualisation.
(C) Pioneering stage → Growth
stage → Maturity stage →
Decline stage.
(D) Exploratory stage →
Establishment stage →
Maintenance stage → Stage of
Decline
Answer:(D)
65. It is a mental condition or attitudes of
individuals and groups which
determine their willingness to
cooperate.
(A) Job satisfaction
(B) Motivation
(C) Job Advancement
(D) Morale
Answer:(D)
66. Which of the following most
appropriately describes the meaning
of the term ‘option forward’ ?
(A) Forward contract entered into
along with buying a call option.
(B) Forward contract entered into
for buying or selling at a future
date.
(C) Forward contract entered into
for buying or selling over a
period of time.
(D) Forward contract entered into
with writing a put option.
Answer:(C)
67. ‘Dual adaptation strategy’, in the
context of international product
decisions, means :
(A) Modification of product and
packaging it to meet local
requirements.
(B) Changing product and price to
meet local requirements.
(C) Modification of product and
the marketing communication
to suit the foreign markets.
(D) None of the above.
Answer:(C)
68. The main promoter of international
trade liberalisation
(A) GATT - WTO (B) NAFTA
(C) CEPTA (D) CISA
Answer:(A)
69. The most common trade barrier faced
by a multinational company is the
(A) Embargo (B) Quota
(C) Sales tax (D) Tariff
Answer:(D)
70. Exchange Rate System where the
Central Bank intervenes to smoothen
out the exchange rate fluctuations is
termed as
(A) Free float
(B) Clean float
(C) Managed float
(D) Fixed rate system
Answer:(C)
71. Mr. X, after about 20 years’ stay in
India, returns to America on January
29, 2009. He came to India in June
2011. His residential status for the
Assessment year 2012-13 will be
(A) Ordinarily Resident
(B) Not Ordinarily Resident
(C) Non-Resident
(D) Resident or Non-Resident
Answer:(A)
72. Mr. X retired from a Pvt. Ltd.
Company on 31-3-2011. The
company paid Rs 80,000 in lieu of
commutation of 25 percent of
pension on 31-01-2012, but does not
pay any gratuity to its employees.
The amount taxable as commuted
pension for the Assessment Year
2012-13 is :
(A) Rs 80,000 (B) Rs 3,20,000
(C) Rs 1,60,000 (D) Nil
Answer:(D)
73. Consider the following :
The book profit of a firm of
Chartered Accountants, which
satisfies all the conditions of Section
184 and Section 40(b), for the year
ended 31-3-2012, is INR 72,190.
The actual remuneration paid to the
partners for the year is INR 1,56,000.
The amount of remuneration
permissible under Sec: 40(b) is :
(A) INR 1,56,000 (B) INR 72,190
(C) INR 64,971 (D) INR 1,50,000
Answer:(D)
74. ‘Winman’, software can be used for
(A) Preparation of Balance Sheet
(B) Computation of Income Tax
(C) Filing of e-Returns
(D) All of the above
Answer:(D)
75. Which of the following deductions
under Chapter VI A of Income Tax
Act, 1961, cannot be claimed by a
partnership firm ?
(i) Sec. 80-G (ii) Sec. 80-C
(iii) Sec. 80-D (iv) Sec. 80-IB
Codes :
(A) (ii), (iii) and (iv)
(B) (i) and (iii)
(C) (i), (ii) and (iii)
(D) (ii) and (iii
Answer:(D)