UGC NET Paper 2: Commerce 26th June 2019 (Previous Year Paper)

Exporting is the most appropriate mode of entry in international business to an enterprise with little experience in international markets.

Explanation:

1. One of the critical decisions in international marketing is the mode of entering the foreign market.
2. At one extreme, a company may decide to produce the product domestically and export it to the foreign market.
3. In this case, the company need not make any investment overseas.
4. On the other extreme, the company may establish manufacturing facilities by mode of acquisition, strategic alliance, or joint venture in a foreign country to sell the product there.
5. This strategy requires direct foreign investment from the company.
6. Thus, exporting is the cheapest mode available among the rest and is preferable to a business enterprise with little experience of international markets.
7. Exporting to a foreign market is a quite common entry strategy many firms follow for at least some of their market.
8. Under this strategy, the company exports the product from its home base, without any marketing or production or organization overseas.

The BRI initiative was unveiled by Chinese paramount leader Xi Jinping in September and October 2013 during visits to Kazakhstan and Indonesia and was thereafter promoted by Premier Li Keqiang during state visits to Asia and Europe.

The stated objectives are "to construct a unified large market and make full use of both international and domestic markets, through cultural exchange and integration, to enhance mutual understanding and trust of member nations, ending up in an innovative pattern with capital inflows, talent pool, and technology database." 

The initiative defines five major priorities:

• policy coordination;
• infrastructure connectivity;
• unimpeded trade;
• financial integration;
• and connecting people

The objectives are stated to be achieved by strengthening logistics and supply chain, improving cost competitiveness, rebalancing trade imbalances, and many other strategies that will promote market integration. 

Protectionism is the economic policy of restricting imports from other countries through methods such as tariffs on imported goods, import quotas, and a variety of other government regulations. This strategy restricts market integration. Thus, BRI is not intended to promote Protectionism.

After the US dollar, Euro has the largest weightage in determining the value of SDR

Explanation:

1. The Special Drawing Right (SDR) is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.
2. The SDR was created as a supplementary international reserve asset in the context of the Bretton Woods fixed exchange rate system.
3. The SDR was initially defined as equivalent to 0.888671 grams of fine gold—which, at the time, was also equivalent to one U.S. dollar.
4. After the collapse of the Bretton Woods system, the SDR was redefined as a basket of currencies.
5. The value of an SDR is based on a basket of key international currencies reviewed by IMF every five years.
6. The weights assigned to each currency in the XDR basket are adjusted to take into account their current prominence in terms of international trade and national foreign exchange reserves.
7. In the review conducted in November 2015, the IMF decided to add the Renminbi (Chinese yuan) to the basket, effective 1 October 2016.
8. Since that date, the XDR basket has consisted of the following five currencies: U.S. dollar 41.73%, euro 30.93%, the renminbi (Chinese yuan) 10.92%, Japanese yen 8.33%, British pound 8.09%.

International Monetary Fund (IMF) is NOT a part of the World Bank group

Explanation:

1. The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries.
2. It is the largest and most well-known development bank in the world and is an observer at the United Nations Development Group.
3. The bank is headquartered in Washington, D.C. in the United States.
4. The World Bank Group has set two goals for the world to achieve by 2030:

• End extreme poverty by decreasing the percentage of people living on less than $1.25 a day to no more than 3%
• Promote shared prosperity by fostering the income growth of the bottom 40% for every country

Its five organizations are the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID). The first two are sometimes collectively referred to as the World Bank.$

MSS account liquidity can be used for normal government expenditure of capital nature is NOT true regarding the Market Stabilization Scheme (MSS).

Market Stabilization Scheme (MSS):

1. The MSS was launched by the RBI in April 2004.
2. There was a certain background due to which the MSS was introduced.
3. While intervening in the foreign exchange market, the RBI had been releasing rupees for buying dollars.
4. The rupees so released added to liquidity in the system raising inflationary pressures.
5. To mop up this excess liquidity, the RBI used its huge stock of government securities.
6. But over a period of time, this stock of securities held with RBI came down substantially.
7. It was in this context that the MSS was launched as an additional channel to reduce liquidity.
8. Under the MSS, the government issues T-Bills (treasury bills) in addition to its normal borrowing requirements.
9. The amounts raised under the MSS will be held in a separately identifiable cash account entitled Market Stabilization Scheme Account.
10. The MSS is thus basically a monetary management tool.
11. The MSS will curb short-term volatility in the forex market.
12. It is also expected to fine-tune the structural balance in the money market and enable the RBI to maintain a grip over the short-term interest rate.

Therefore, MSS account liquidity cannot be used for normal government expenditure of a capital nature.

International Business:

1. The business carried out across national boundaries.
2. Some important forms of international business are export and import of goods and services which include appointing foreign agents abroad, management of consulting and turn-key operations, licensing, franchising, joint ventures and collaborations, and wholly-owned subsidiaries.
3. Practically all nations impose some restrictions on the free flow of international trade.
4. Since these regulations or restrictions deal with a country’s trade and commerce they are called Trade Policies.

Instruments of Trade Policy:

1. Embargo: It is a specific type of quotas prohibiting trade. Usually, this is introduced for political reasons but has an impact on the economy of a nation.
2. Quotas:

• Quotas are quantitative restrictions on imports and exports of certain goods.
• An import quota is an NTB that places a direct restriction on the quantity of some goods that can be imported.
• An export quota is a restriction on the number of goods that can leave a country.
• But because quotas are not permitted under current international trade rules, many countries have gone to great lengths to establish different varieties of trade restrictions that are functionally identical to quotas.

3. Trade Restraint:

• Trade Restraint is an act, fact, or means of curbing the free flow of commerce or trade. It is an attempt or intent to eliminate or stifle competition, to effect a monopoly, to maintain prices artificially, or otherwise to hamper or obstruct the course of trade and commerce as it would be if left to the control of natural and economic forces.

4. Import Tariff: 

• A tariff is a tax on imports. Specific tariffs are levied as a fixed charge on each unit of goods imported.
• Ad-valorem tariffs are taxes that are levied as a fraction of the value of the imported goods.
• In either case, the effect of a tariff is to raise the cost of shipping goods to a country.
• For example, a specific tariff of $10 on imported bicycles means that customs officials collect the fixed sum of $10 on each imported bicycle regardless of its price. In contrast, a 10% ad valorem tariff on imported bicycles would result in the payment to customs officials of the sum of $10 on each $100 imported bicycle.

Therefore,  Quantitative import restrictions that limit the quantity of a product being imported is called Quota.

Foreign Exchange Management Act (FEMA) envisages that the Reserve Bank of India (RBI) will have a key role in the management of foreign exchange. The main functions of RBI under FEMA are as follows:

a) Controlling dealings in foreign exchange by giving general or special permission for dealing in foreign exchange, excluding those cases where specific provisions have been made in Act, Rules, or Regulations – Section 3.

b) RBI cannot impose any restrictions on current account transactions. These can be imposed only by the Central Government in consultation with RBI – Section 5. However, in certain cases, prior approval of RBI is required for current account transactions as provided in Foreign Exchange Management (Current Account Transactions) Rules, 2000.

c) Specifying conditions for payment in respect of capital account transaction – Section 6(2).

d) Regulate/prohibit/restrict the following, by issuing Regulations:

• Transfer or issue of foreign security to resident and Indian security to a non-resident;
• Borrowing and lending in foreign exchange or to a foreign person;
• Export/import of currency or currency notes;
• Transfer of immovable property outside India;
• Giving guarantee or surety where foreign exchange transaction is involved – Section 6(3)

e) Specify (by regulation) period and the manner in which foreign exchange due from the export of goods and services should be received – Section 8.

f) To grant exemption from realization and repatriation in cases specified under Section 9.

g) Granting authorization to ‘Authorised Person’ to deal in foreign exchange, to give directions to them, and to inspect the authorized person – Sections 10, 11 & 12.

Thus, the Reserve Bank of India is an important regulatory and administrative authority to execute FEMA provisions as it has the monetary authority and is the custodian of foreign exchange. Reserve bank of India enjoys the requisite expertise of FEMA administration.

Therefore, Both A) and R) are correct and R) is the right explanation of A).

Companies Act, 2013 does not prohibit subscription of shares at a premium but however, the premium received on the issue is governed by the provisions of the Act.

Share premium can be defined as the excess amount received by the company over and above the face value of its shares. All types of companies can issue their shares at a premium.

Shares at a premium

As per the provisions of Section 52 of the Companies Act, 2013 a company can issue shares at a premium, whether for cash or otherwise.

As per Section 52(2) of the Companies Act, 2013, Securities Premium Account may be used for the purpose mentioned therein like, issue of bonus shares, writing off preliminary expenses, buyback of shares, etc.

If the securities premium account is used for other than the aforesaid purpose, then it shall be treated as reduction of share capital and the provisions of capital reduction will apply.

It states the specific purposes for which this balance may be used. So the account can only be used for the following purposes and no other purpose:

• To issue fully paid-up bonus shares to its existing shareholders. However, you cannot exceed the limit of the unissued share capital of the company.
• For writing off any preliminary expenses of the company.
• To write off expenses of issue of shares and debentures, such as commission paid or discount given on the issue of shares.
• The balance can also be used to provide for the premium that is payable on the redemption of debentures or of preference shares of the company.
• And finally, it can be utilized by the company to buy back its own shares.

According to Amarjit Chopra, past president, Institute of Chartered Accountants of India, the provisions of the Banking Regulation Act allow the share premium account to be used for setting off losses, provided the due procedure is followed and approvals are given. 

Therefore, as per Section 52 of the companies Act, 2013, the balance in the Security Premium Account cannot be utilized for payment of dividends.

Direct Material Cost Variance:

1. It is the difference between the standard cost of specified for the output achieved, and the actual cost of direct materials consumed.
2. The standard cost of materials is computed by multiplying the standard price with the standard quantity for actual output.
3. The actual cost is computed by multiplying the actual price with the actual quantity used.

The Direct Material Variance may be calculated with help of the following formula:

Direct Material Cost Variance = Standard Cost for actual output - Actual Cost

Where Standard Cost = Standard Price per unit X Standard Quantity used for actual output

Actual Cost = Actual Price X Actual Quantity used.

Direct material cost variance arises due to a change in the price of materials or change in the quantity of material used or both. If the standard cost is more than the actual cost, the variance will be favorable and on the other hand, if the actual cost is more than the standard cost the variance will be unfavorable or adverse. 

 

Direct Material Cost Variance = (SP x SQ) - (AP x AQ)

                                               = (5 x 10)     -  (6 x 12)

                                               = 50 - 72

                                               = Rs. 22 Unfavorable/Adverse

Therefore, if Product A requires 10 kg of material at the rate of Rs. 5 per kg. The actual consumption of material for the manufacturing of product A comes to 12 kg of material at the rate of Rs. 6 per kg. Direct material cost variance is Rs. 22 Unfavorable/Adverse.

A statement of change in a financial position typically would NOT disclose the effect of dividends on share declared.

Explanation:

1. A statement of changes in financial position is a statement that outlines the causes of a change in the financial position of a company during an accounting period.
2. These causes are reflected in the movement of funds viz., inflows, and outflows of funds during the period. Therefore, it is called Funds Flow Statement in which the inflows are shown as sources of funds, and the outflows are shown as applications or uses of funds.
3. The difference between the two (inflows and outflows) indicates the net changes (increase or decrease) in the position of funds during the accounting period.
4. Accounting Standard (Revised) - 3 has made funds flow statement redundant and prescribed cash flow statement.
5. Funds flow statement provides some further insight into the Balance Sheet and particularly shows how the firm is able to get money to take up several activities. It is possible to know what is the kind of funds mix that the firm is using particularly a comparison of internal and external funds. For instance, Ranbaxy heavily uses internal funds and depend little on external funds. In contrast, Aurobindo Pharma Ltd. another major player in the pharmaceutical industry uses debt substantially for funding its activities.
6. Thus, a statement of change in financial position discloses information about items that affect balance sheet items of the company like the issue of share capital and its application and investments in financial instruments like treasury stock.
7. Also, cash dividends declared but not paid will appear on the liability side of the balance sheet.
8. Thus, its effect will be disclosed in the statement of change in financial position.

​

• The declared dividends are not paid in the same financial year.
• The amount of dividends is transferred from net profit or Retained earnings to Reserve.
• However, the statement of change in financial position won't disclose information about dividends on shares declared it involves a decrease (debit) to Retained Earnings (a stockholders' equity account) and an increase to Cash Dividends Payable (a liability account).
• This on one hand reduces the Net profit and increases the Dividend liability on the other, both being recorded on Liability side of Balance Sheet.
• This will nullify the overall effect.

Statutory Rights of an Auditor

The Companies Act confers extensive powers on the auditor. Since he is the agent of the shareholders, he is having all the Rights, which other business owners shall generally have. Specific provisions are made in the Act and so the auditor cannot be prevented by anybody in the universe from the enjoyment of these rights. 

1.Right to Access to Books of Accounts:

• The auditor has a right of access to books of account, vouchers, and relevant documents of the company at all times during his term of office.
• Therefore, the auditor can even pay a surprise visit and check the entries in the books of accounts.

2. Right to Obtain Information and Explanations

• The auditor has a right to obtain whatever information or explanation he requires in performing his duty.
• The person from whom the auditor requires such an explanation must provide the same.
• The person may be the Managing Director, Director, Manager, or any other officer or employee.

3. Right to make Suggestions to the Board

• The auditor is also having a right to suggest suitable modifications in the method of accounting followed by the management.
• The directors, if a suggestion is made, should comply with it. If not, the auditor should report the same to the members.
• But he has no right to make any alteration in the accounts of the company on his own accord.

4. Right to Visit Branches

• The auditor is also entitled to visit the branches of the company.
• However, if a qualified auditor audits the accounts of the branch, he can get copies of the accounts certified by the branch auditor, and always has access over such documents.
• The auditor has no statutory right to visit foreign branches.

5. Right to Receive Notice and Attend Meetings

• The auditor has a right to receive all notices and communications relating to all general meetings during his term.
• Even if the accounts audited by him are not discussed, the company should send a notice to the auditor.
• The auditor is also entitled to attend the meetings.
• He can also speak at the meeting if any clarification is needed from him.

6. Right to Sign the Audit Report

• Only the auditor can sign the Auditor’s Report. If a firm is appointed, any partner practicing in India can sign.
• The first auditor should sign and authenticate a particular part of the Statutory Report.
• Besides he has a right to sign and authenticate any other document, which the Act requires to furnish.

7. Right to Remuneration

• He has a right to receive the remuneration fixed by the appointing authority.
• In the event of winding up, he can also rank as a creditor for the amount due.
• However, he can claim the amount only after completing the work fully and entirely.

8. Right to be Indemnified

• The company under certain circumstances can take both civil and criminal proceedings against the auditor.
• If legal action is taken against him, he will generally defend himself against the proceedings.
• If the judgment goes in his favor or he is acquitted, the company should compensate for the loss incurred by him in defending the suit.

9. Right to take Legal and Technical Advice

• The auditor has a right to take advice or opinion of legal and technical experts if there is a need for it.

Therefore, the Attending Board of Directors' Meeting is not the right of a Statutory Auditor.

The Indian Accounting Standards (Ind AS), as notified under section 133 of the Companies Act 2013, have been formulated keeping the Indian economic & legal environment in view and with a view to converging with IFRS Standards, as issued by and copyright of which is held by the IFRS Foundation.

The following are the correct match:

Therefore, the correct option is a-iv, b-iii, c-ii, d-i

Litt in one of his articles commented, “Activity-based costing (ABC) is an accounting technique that utilizes cost attachment rather than cost allocation to determine the actual cost of products and services”.

1. The real beauty of an ABC model is that it forces organizations to adopt a cost management paradigm that focuses on understanding their processes.
2. Once an organization accepts this paradigm, they soon recognize that their products or services are produced through cross-functional business processes.
3. These processes contain a wide variety of activities that not only define the process but also, more importantly, reflect how effectively the process performs.
4. It is based on the fact that cost objects consume activities and activities consume resources. It is this consumption of resources that drives costs.

The ABC can be performed by:

1. Identifying activities
2. Determining the cost for each activity/ Collecting cost pools
3. Determining cost drivers (Cost drivers are the factors that affect the cost of an activity, e.g. poor quality)
4. Collecting activity data and computing activity rate using activity drivers
5. Calculating product cost by charging the cost to products

Thus, option 3 is the correct answer.

In Giffen goods, a consumer spends so much that the negative income effect overwhelms the positive substitution effect so as the underlying demand curve is positively sloped.

Explanation:

1. A Giffen good is a low income, a non-luxury product that defies standard economic and consumer demand theory.
2. Demand for Giffen goods rises when the price rises and falls when the price falls.
3. In econometrics, this results in an upward-sloping demand curve, contrary to the fundamental laws of demand which create a downward sloping demand curve.
4. In the case of Giffen goods, the income effect can be substantial while the substitution effect is also impactful.
5. With Giffen goods, the demand curve is upward sloping which shows more demand at higher prices.
6. Since there are few substitutes for Giffen goods, consumers continue to remain willing to buy a Giffen good when the price rises.
7. Giffen goods are usually essential items as well which then incorporates both the income effect and a higher price substitution effect.
8. Since Giffen goods are essential, consumers are willing to pay more for them but this also limits disposable income which makes buying slightly higher options even more out of reach.
9. Therefore, consumers buy even more of the Giffen good.
10. Overall, both the income and substitution effects are at work to create the unconventional supply and demand results.
11. Inferior and Normal goods: In economics, an inferior good is a good whose demand decreases when consumer income rises, unlike normal goods, for which the opposite is observed. Normal goods are those goods for which the demand rises as consumer income rises.
12. Superior Goods: Superior goods or luxury goods make up a larger proportion of consumption as income rises, and therefore are a type of normal goods in consumer theory. Such a good must possess two economic characteristics: it must be scarce, and, along with that, it must have a high price.

Formula:

Elasticity = Average Revenue / (Average Revenue - Marginal Revenue)

              2 = 10 / (10 - MR)

 20 - 2MR = 10

            10 = 2MR

Therefore, MR = Rs. 5

Price Discrimination

Price discrimination is when a seller sells a specific commodity or service to different buyers at different prices for reasons not concerning differences in costs. 

Examples:

• A local physician charges more to rich patients as compared to poor patients for the same service.
• Electricity companies sell electricity at a cheaper rate in rural areas as compared to urban areas.

Conditions for Price Discrimination:

Price discrimination is possible under the following conditions :

1. The seller must have some control over the supply of his product. Such monopoly power is necessary to discriminate the price.
2. The seller should be able to divide the market into at least two sub-markets (or more).
3. The price elasticity of the product must be different in different markets.
4. Therefore, the monopolist can set a high price for those buyers whose price-elasticity of demand for the product is less than 1.
5. In simple words, even if the seller increases the price, such buyers do not reduce the purchase volume.
6. Buyers from the low-priced market should not be able to sell the product to buyers from the high-priced market.

A product having multiple close substitutes and different uses is price sensitive, thus it is NOT the pre-requisite of price discrimination.

Excess capacity is NOT noticed in Perfect competition.

Explanation:

1. A perfectly competitive market is a hypothetical market where competition is at its greatest possible level. Neo-classical economists argued that perfect competition would produce the best possible outcomes for consumers and society.
2. When the firm is producing less than what it can produce, then it is said that the firm is having an excess capacity.
3. It means that the firm can produce more at a lower cost.
4. Whereas in the case of perfect competition the firm produces at the optimum level of output where cost is minimum and there is no excess capacity.

The below are the explanation of the correct answer:

1. This theory of Profit is associated with F. B. Hawley who has considered risk-taking as the important function of an entrepreneur.

2. The entrepreneur exposes his business to risk, and in turn, he receives a reward in the form of Profit because the task of risk-taking is irksome. | | Innovation theory of profit | Prof. Schumpeter’s Innovation Theory of Profit or “Profit is the Reward for Successful Innovation”:

3. Schumpeter deemed Profit as the reward to enterprise and innovation.

4. In his opinion, the entrepreneur initiates innovation in the business and when he succeeds, he earns Profit as his reward.

5. Now, the question is what is innovation? “Innovation means the commercial application of new scientific inventions and discoveries.” | | Rent theory of profit | The Rent Theory of Profit:

6. This theory was developed by an American Economist Francis L. Walker. Walker has said that Profit is the rent of ability.

7. He has made a comparative study between different grades of land and an entrepreneur’s different abilities. Entrepreneurs of superior ability to earn Profits just as superior land earns rent. | | The dynamic theory of profit | The Dynamic Theory of Profit:

8. Prof. J. B Clark propounded this theory in the year 1900. According to him—” Profit is the difference between the price and the cost of the production of the commodity”.

9. But Profit is the result of dynamic change. |

Skewness is the measure of the asymmetry of an ideally symmetric probability distribution and is given by the third standardized moment. In simple words, skewness is the measure of how much the probability distribution of a random variable deviates from the normal distribution.

Measures Of Skewness:

1. Karl Pearson's Coefficient of Skewness:

• This method is most frequently used for measuring skewness and is based on the first absolute measure.
• The formula for measuring skewness is as follows: J = (Mean - Mode) / Standard Deviation i.e., the first absolute measure of skewness is divided by the standard deviation. Thus, this value will be free of units of the data.
• The value of this coefficient would be zero in a symmetrical distribution. If the mean is greater than the mode, the coefficient of skewness would be positive otherwise negative. In practice, the value of this coefficient usually lies between ± 3.
• If the mode is ill-defined, then using the approximate relationship: Mode = 3 Median - 2 Mean, the above formula reduces to J = 3 (Mean - Median) / Standard Deviation.

2. Bowley's Coefficient of Skewness:

• This method is based on quartiles, i.e., the second absolute measure of skewness. The formula for calculating skewness is:  \(j = \frac {Q_3-Q_1-2M_e}{Q_3-Q_1}\).
• This method is particularly useful in the case of open-end distributions and where extreme values are present or when class-intervals are unequal.
• Skewness should be measured by Bowley's method when positional measures are called for.
• If the value of this coefficient is zero, it is a symmetrical distribution. For positive value, it is a positively skewed distribution and for a negative value, it is a negatively skewed distribution. The range of variation under this formula is ± 1.
• But the main drawback of this measure is that it is based on a central 50% of the data and it ignores the remaining 50% of the data i.e., 25% of the data below Q1 and 25% of the data above Q3.

3. Kelly's Coefficient Of Skewness: 

• Kelly’s Measure of Skewness is one of several ways to measure skewness in a data distribution.
• Bowley’s skewness is based on the middle 50 percent of the observations in a data set.
• It leaves 25 percent of the observations in each tail of the distribution.
• Kelly suggested that leaving out fifty percent of data to calculate skewness was too extreme.
• He created a measure to find skewness with more data. Kelly’s measure is based on P90 (the 90^th percentile) and P10 (the 10^th percentile).
• Only twenty percent of observations (ten percent in each tail) are excluded from the measure. The formula for measuring skewness is: \(j = \frac {P_{90} + P_{10} - 2P_{50}}{P_{90}-P_{10}}\).

Therefore, option 1 is the correct answer.

Possible Outcome:

(1,1) (1,2) (1,3) (1,4) (1,5) (1,6) (2,1) (2,2) (2,3) (2,4) (2,5) (2,6) (3,1) (3,2) (3,3) (3,4) (3,5) (3,6) (4,1) (4,2) (4,3) (4,4) (4,5) (4,6) (5,1) (5,2) (5,3) (5,4) (5,5) (5,6) (6,1) (6,2) (6,3) (6,4) (6,5) (6,6) are the total numbers we get when we throw a pair of dice that is 36. 

Expected Outcome:

The probability of getting a sum of 8:

(2,6) (3,5) (4,4) (5,3) (6,2) are the 5 pairs which upon adding we get 8.

Probability is the ratio of the number of expected outcomes to the number of all possible outcomes.

Therefore, 5/36 is the answer.

Therefore, option 1 is the correct answer.

The Coefficient Of Correlation Between X And Y = Covariance / (Standard Deviation Of X x Standard Deviation Of Y)

                                                                              = -17.8 / (6.6 x 4.2) 

                                                                              = - 0.642

Data Collection Methods:

1. In Statistics, data collection is a process of gathering information from all the relevant sources to find a solution to the research problem.
2. It helps to evaluate the outcome of the problem.
3. Depends on the type of data, the data collection method is divided into two categories namely,

• Primary Data Collection methods
• Secondary Data Collection methods

(A) Primary Data Collection Methods: Primary data or raw data is a type of information that is obtained directly from the first-hand source through experiments, surveys, or observations. The primary data collection method is further classified into two types. They are

1. Quantitative Data Collection Methods
2. Qualitative Data Collection Methods

Qualitative Data Collection Methods

It does not involve any mathematical calculations. This method is closely associated with elements that are not quantifiable. This qualitative data collection method includes interviews, questionnaires, observations, case studies, etc. There are several methods to collect this type of data. They are

1. Observation Method: The observation method is used when the study relates to behavioral science. This method is planned systematically. It subjects many controls and checks. The different types of observations are:

• Structured and unstructured observation
• Controlled and uncontrolled observation
• Participant, non-participant, and disguised observation

2. Interview Method: The method of collecting data in terms of oral or verbal responses. It is achieved in two ways, such as

• Personal Interview – In this method, a person known as an interviewer is required to ask questions face to face to the other person. The personal interview can be structured or unstructured, direct investigation, focused conversation, etc.
• Telephonic Interview – In this method, an interviewer obtains information by contacting people on the telephone to ask the questions or views orally.

3. Questionnaire Method: In this method, the set of questions are mailed to the respondent. They should read, reply, and subsequently return the questionnaire. The questions are printed in the definite order on the form. A good survey should have the following features:

• Short and simple
• Should follow a logical sequence
• Provide adequate space for answers
• Avoid technical terms.

4. Schedule: This method is similar to the questionnaire method with a slight difference. The enumerations are specially appointed for the purpose of filling the schedules. It explains the aims and objects of the investigation and may remove misunderstandings if any have come up. Enumerations should be trained to perform their job with hard work and patience.

(B) Secondary Data Collection Methods

Secondary data is data collected by someone other than the actual user. It means that the information is already available, and someone analyses it. The secondary data includes magazines, newspapers, books, journals, etc. It may be either published data or unpublished data.

Published data are available in various resources including

• Government publications
• Public records
• Historical and statistical documents
• Business documents
• Technical and trade journals

Unpublished data includes

• Diaries
• Letters
• Unpublished biographies etc.

Therefore, the correct option is 4.

**Formula: \(SE_\bar X\) = σ / **√n

Therefore, **√**n = σ / \(SE_\bar X\)

                  √n = 40 / 8

                  √n = 5

                   n = 25

Therefore, For a very large population the ratio between \(SE_\bar X\) and σ is 8 : 40. The sample size n will be 25

Statement I): t-test and F-test are based on identical assumptions.

Explanation:

1. The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality of data distribution, adequacy of sample size, and equality of variance in standard deviation.
2. The same assumptions are considered while doing an f-test.

Thus, the statement I is correct. 

Statement II): t-test is used for comparison between two groups whereas F-test is used for comparison between more than two groups.

Explanation:

1. A T-test used to compare the means of two populations. In contrast, F-test is used to compare two population variances.
2. ​While t-test is used for comparison between two groups, f-test is used to test the significance of multiple variables at once.

Thus, statement II is also correct.

Therefore, Both Statements I) and II) are correct.

Promoting team spirit, harmony, and unity within the organization is the principle of spirit de corps.

Explanation:

1. Esprit de corps It is the principle of management, according to which a manager should replace ‘I’ with ‘We’ in all his conversation with workers.
2. Literally speaking, the phrase ‘esprit de corps’ means the spirit of loyalty and devotion which unites the members of the group.
3. According to Fayol, management should promote a team spirit of unity and harmony among employees.
4. A manager should replace ‘I’ with ‘We’ in all his conversations with workers to foster team spirit.
5. This will give rise to a spirit of mutual trust and belongingness among team members.

The organizational structure that shows a unique combination of strategy, structure, and management process is known as a network organization.

Explanation:

• The network structure is a newer type of organizational structure viewed as less hierarchical (i.e., more “flat”), more decentralized, and more flexible than other structures.
• In a network structure, managers coordinate and control relationships that are both internal and external to the firm.
• The concept underlying the network structure is the social network—a social structure of interactions. Open communication and reliable partners (both internally and externally) are key components of social networks.
• Proponents argue that the network structure is more agile than other structures. Because it is decentralized, a network organization has fewer tiers, a wider span of control, and a bottom-up flow of decision making and ideas.
• It shows a unique combination of strategy, structure, and management process
• A disadvantage of the network structure is that this more fluid structure can lead to more complex relations in the organization.

The social environment of the job affects people and is also affected by them and not by management alone, is the main proposition of Neo-classical theory of organization.

Explanation:

1. The NeoClassical Theory is the extended version of the classical theory wherein the behavioral sciences gets included into the management.
2. According to this theory, the organization is the social system, and its performance does get affected by the human actions.
3. The classical theory laid emphasis on the physiological and mechanical variables and considered these as the prime factors in determining the efficiency of the organization.
4. But, when the efficiency of the organization was actually checked, it was found out that, despite the positive aspect of these variables the positive response in work behavior was not evoked.
5. Thus, the researchers tried to identify the reasons for human behavior at work.
6. This led to the formation of a NeoClassical theory which primarily focused on the human beings in the organization.
7. This approach is often referred to as “behavioral theory of organization” or “human relations” approach in organizations.
8. The NeoClassical theory asserts that an individual is diversely motivated and wants to fulfill certain needs.
9. The communication is an important yardstick to measure the efficiency of the information being transmitted from and to different levels of the organization.
10. The teamwork is the prerequisite for the sound functioning of the organization, and this can be achieved only through a behavioral approach, i.e. how individual interact and respond to each other.

Additional Information

• Contingency Theory of Organization: This theory asserts that there is no universally best way to manage an organization; instead, effective management depends on fitting the organization's design and management approach to the specific circumstances it faces. It emphasizes adaptability to the changing environment and internal conditions.
• System Theory of Organization: This theory views an organization as a complex system of interrelated parts, emphasizing the importance of understanding the interactions between these parts and the organization's external environment. It highlights the need for adaptability and responsiveness to maintain a balance and achieve goals.
• Classical Theory of Organization: This theory is rooted in the early 20^th century and focuses on establishing a structured and efficient approach to management and organization through a clear hierarchy, division of labor, and emphasis on maximizing productivity. It advocates for formalized structures and processes within organizations.

'Motivation-force or level of efforts is not equal to satisfaction and performance' is propounded by Porter-Lawler model.

Explanation:

1. Lyman Porter and Edward Lawler came up with a comprehensive theory of motivation, combining the various aspects. Porter and Lawler's model is a more complete model of motivation.
2. This model has been practically applied also in their study of managers. This is a multivariate model which explains the relationship that exists between job attitudes and job performance. This model is based on four basic assumptions about human behaviour :

• As mentioned above, it is a multivariate model. According to this model, individual behaviour is determined by a combination of factors in the individual and in the environment.
• Individuals are assumed to be rational human beings who make conscious decisions about their behaviour in organizations.
• Individuals have different needs, desires and goals.
• On the basis of their expectations, individuals decide between alternative behaviours and such decided behaviour will read to a desired outcome.

3. In fact, Porter and Lawler's theory is an improvement over Vroom's expectancy theory. They say that motivation does not equal satisfaction or performance. The model suggested by them encounters some of the simplistic traditional assumptions made about the positive relationship between satisfaction and performance. They proposed a multivariate model to explain the complex relationship that exists between satisfaction and performance.

Key Points

“Business Ethics is an art and science for maintaining harmonious relationship with society, its various groups, and institutions as well as recognizing the moral responsibility for the tightness and wrongness of business conduct” -Wheeler.

12 Ethical Principles To Be Followed In Business Are As Follows:

1. Honesty
2. Integrity
3. Trustworthiness
4. Loyalty
5. Fairness
6. Compassion / Empathy
7. Respect
8. Law-Abiding
9. Commitment to Excellence
10. Positive Leadership
11. Reputation and Morale
12. Accountability

Additional Information

1. Thus, a business must pay taxes and discharge other obligations promptly to follow the principle of Law-Abiding.
2. A business must refrain from secret kickbacks or pay-offs to customers, suppliers, administrators, etc. to follow the principles of Loyalty, Honesty, and Integrity.
3. And a business must ensure payment of fair wages and fair treatment of employees to follow the principle of Fairness and Respect.

Thus, option 2 is the correct answer.

Therefore, the correct option is a-iv, b-i, c-ii, d-iii.

Attitudes are simply expressions of much we like or dislike various things. Attitudes represent our evaluations, preferences, or rejections based on the information we receive.

3 components of attitude are;

1. Cognitive Component.
2. Affective Component.
3. Behavioral Component.

1. Cognitive Component

• The cognitive component of attitudes refers to the beliefs, thoughts, and attributes that we would associate with an object.
• It is the opinion or belief segment of an attitude.
• It refers to that part of attitude which is related to the general knowledge of a person.
• Typically these come to light in generalities or stereotypes, such as ‘all babies are cute’, ‘smoking is harmful to health’ etc.

2. Affective Component

• The affective component is the emotional or feeling segment of an attitude.
• It is related to the statement which affects another person.
• It deals with feelings or emotions that are brought to the surface about something, such as fear or hate.
• Using the above example, someone might have the attitude that they love all babies because they are cute or that they hate smoking because it is harmful to health.

3. Behavioral Component

• The behavior component of an attitude consists of a person’s tendencies to behave in a particular way toward an object.
• It refers to that part of attitude which reflects the intention of a person in the short-run or long run.
• Using the above example, the behavioral attitude maybe- ‘I cannot wait to kiss the baby’, or ‘we better keep those smokers out of the library, etc.

Therefore, from the above explanation, the attitude based on beliefs, opinion, knowledge or information about the particular event which the employees possess is cognitive attitude.

Key PointsORGANIZATIONAL CULTURE:

Organizational culture is defined as the underlying beliefs, assumptions, values and ways of interacting that contribute to the unique social and psychological environment of an organization.

At the deepest level, an organization's culture is based on values derived from basic assumptions about the following:

• Human nature. Are people inherently good or bad, mutable or immutable, proactive or reactive? These basic assumptions lead to beliefs about how employees, customers, and suppliers should interact and how they should be managed.
• The organization's relationship to its environment. How does the organization define its business and its constituencies?
• Appropriate emotions. Which emotions should people be encouraged to express, and which ones should be suppressed?
• Effectiveness. What metrics show whether the organization and its individual components are doing well? An organization will be effective only when the culture is supported by an appropriate business strategy and a structure that is appropriate for both the business and the desired culture.

The following are the events that come under Organization culture:

1. Customer orientation and employee policies
2. Quality orientation, directing, and motivating styles
3. Decision-making products and services and responsibilities to society
4. Reaction to competitors and gratitude towards nation

A trade union can play a role in creating and changing an organization's culture since they are in a position to provide the workforce with information designed to influence decisions about work practices, rules, preferred behaviors, and attitudes,s, etc. Management, as well as staff developers, need, therefore, to communicate frequently with trade union officers.

Therefore, option 4 is the correct answer.

Assertion A): The brainstorming technique demands the generation of a number of alternatives to a problem.

**Explanation:**​

1. Developed by Alex F. Osborn, brainstorming is the oldest and best-known technique for stimulating creative thinking.
2. It involves the use of a group whose members are presented with a problem and are asked to develop as many potential solutions as possible.
3. Members of the group may all be employees of the same firm or outside experts in a particular field.
4. Brainstorming is based on the premise that when people interact in a free and uninhibited atmosphere they will, generates creative ideas.
5. That is, as one person generates an idea it serves to stimulate' the thinking of others.
6. This interchange of ideas is supposedly contagious and creates an atmosphere of free discussion and spontaneous thinking.
7. The objective is to produce as many ideas as possible in keeping with the belief that the larger the number of ideas produced, the greater the probability of identifying an acceptable solution.

Therefore, Statement A is correct.

Reason R): Participants generate as many alternatives as possible without evaluating them in brainstorming sessions.

Explanation:

Brainstorming is governed by four important rules:

1. Criticism is prohibited. The judgment of ideas must be withheld until all ideas have been generated. It is believed that criticism inhibits the free flow of ideas and group creativity.
2. Freewheeling' is welcome. The wilder the idea the better. It is easier to tame down' than to think up' ideas.
3. Quantity is wanted. The greater the number of ideas, the greater the likelihood of an outstanding solution.
4. Combination and improvement are sought. In addition to contributing ideas of their own, group members suggest how ideas of others can be improved, or how two or more ideas can be combined into still another idea.

Thus, Statement R)  is the correct explanation of A.

Drucker was somewhat idealistic when he wrote about marketing eliminating the need for selling if the function was performed well.

In Management (1973), he wrote, "There will always, one can assume, be a need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself."

He expanded on this by saying, "Ideally, marketing should result in a customer who is ready to buy.

All that should be needed then is to make the product or service available, i.e., logistics rather than salesmanship, and statistical distribution rather than promotion".

Shopping Goods.

1. These are a class of consumer goods that are purchased only after the buyer has spent some time and effort comparing price, quality, style, color, etc. of alternating products in competing stores.

• The purchaser of shopping goods lacks complete information prior to the shopping trip and gathers information during it.
• For instance, a woman intending to buy a new dress may visit many stores, try on a number of dresses, and spend time making the final choice.
• She may go from store to store in surveying competing offerings and ultimately select the dress that appeals the most to her. In addition to women's apparel shopping goods include such durable items as jewelry, furniture, appliances, shoes, etc.

2. Shopping products require personal selling and advertising and are located in fewer outlets (compared to convenience products) and selectively distributed. Thus, an aggressive promotion strategy is not generally used.

• It is important to place the shopping goods in stores located near other stores carrying competing items, as it facilitates the customers to compare the product. Shopping goods are typically more expensive than convenience goods.

3. Shopping goods have a large unit cost, and as such, they usually involve a considerable outlay of money. Shopping goods are not usually bought frequently and regularly. Consumers purchase only when they have time to shop with care and they are often willing to take considerable trouble in order to make a satisfactory purchase.

• Some shopping goods, such as children's shoes, are considered homogeneous i.e., the consumer views them as essentially the same.
• Others such as furniture and clothing are considered heterogeneous i.e., essentially different.
• Price is an important factor in, the purchase of homogeneous shopping goods, while quality and style are relatively more important in the purchase of heterogeneous goods.

Therefore, Option 2 is the correct answer.

Customer value reflects the sum of perceived tangible and intangible benefits and costs to a customer.

Explanation:

Customer Value is the perception of what a product or service is worth to a Customer versus the possible alternatives. Worth means whether the Customer feels s/he or he got benefits and services over what s/he paid. In a simplistic equation form, Customer Value is Benefits-Cost (CV=B-C).

1. Customer Satisfaction: 

• Customer satisfaction (often abbreviated as CSAT) is a term frequently used in marketing.
• It is a measure of how products and services supplied by a company meet or surpass customer expectation.
• Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals."

Customer Delight: 

• Customer delight is surprising a customer by exceeding his or her expectations and thus creating a positive emotional reaction.
• This emotional reaction leads to word of mouth.
• Customer delight directly affects the sales and profitability of a company as it helps to distinguish the company and its products and services from the competition.

Customer Expectation: 

• By definition, customer expectations are any set of behaviors or actions that individuals anticipate when interacting with a company.
• Historically, customers have expected basics like quality service and fair pricing — but modern customers have much higher expectations, such as proactive service, personalized interactions, and connected experiences across channels.

Building long-term mutually satisfying relations with key customers, suppliers, distributors in order to earn and retain their long-term preference and business is known as relationship marketing.

Explanation:

1. Relationship marketing is a facet of customer relationship management (CRM) that focuses on customer loyalty and long-term customer engagement rather than shorter-term goals like customer acquisition and individual sales.
2. The goal of relationship marketing (or customer relationship marketing) is to create strong, even emotional, customer connections to a brand that can lead to ongoing business, free word-of-mouth promotion, and information from customers that can generate leads.

1. Social Marketing: 

• Social marketing seeks to develop and integrate marketing concepts with other approaches to social change.
• Social marketing aims to influence behaviors that benefit individuals and communities for the greater social good.
• The goal is to deliver competition-sensitive and segmented social change programs that are effective, efficient, equitable, and sustainable.

2. Niche Marketing: 

• Niche marketing is an advertising strategy that focuses on a unique target market.
• Instead of marketing to everyone who could benefit from a product or service, this strategy focuses exclusively on one group—a niche market—or demographic of potential customers who would most benefit from the offerings.

3. Service Marketing: 

• Services marketing typically refers to both business to consumer (B2C) and business-to-business (B2B) services, and includes marketing of services such as telecommunications services, financial services, all types of hospitality, tourism leisure and entertainment services, car rental services, health care services, and professional services and trade services.

The channel alternative is NOT to be assessed on the basis of accumulation criteria.

Explanation:

1. A firm must identify the types of channel members available to carry out its channel work in terms of types of intermediaries, number of intermediaries, and responsibility of each.
2. After identifying the channels, the company must evaluate them against economic, control, and adaptive criteria.
3. Using economic criteria, a company compares the likely sales, costs, and profitability of each alternative.
4. Control issues mean giving some control of the marketing of a product to the intermediary. The company must retain as much control as possible.
5. Channels often involve long-term commitment; hence companies must consider the ability of a channel to adapt to environmental changes.

When a company distributes its products through a channel structure that includes one or more resellers, this is known as Indirect marketing.

Explanation:

Indirect marketing is a way for a business to market their product, idea, or service without having to use the methods of direct advertising and marketing.

Indirect marketing is marketing focused on first gaining the trust of your potential customers. Its purpose is to grow your brand’s familiarity and nurture prospective customers to eventually buy from you.

Examples of indirect marketing include:

• Search engine optimization (SEO)
• Content marketing
• PR
• Social media
• Referrals

1. Direct marketing refers to marketing activities where you’re reaching out to someone with the explicit intent to get them to buy as soon as possible.
2. Integrated Marketing is an approach to creating a unified and seamless experience for consumers to interact with the brand/enterprise; it attempts to meld all aspects of marketing communication such as advertising, sales promotion, public relations, direct marketing, and social media, through their respective mix
3. Multilevel marketing (MLM) is a strategy that some direct sales companies use to encourage existing distributors to recruit new distributors. In MLM schemes, there can be hundreds or thousands of members worldwide, but relatively few earn meaningful incomes from their efforts, indicating a possible pyramid scheme.

Retail Supply Chain Management

All the processes that you utilize to ensure your products reach the customers, starting from obtaining the raw materials, managing inbound materials & production processes to last-mile delivery of those products at your customer’s doorstep, are together known as a retail supply chain.

Players in the supply chain

The primary members of the simple, basic supply chain as follows;

• Supplier
• Manufacturer
• Distributor
• Retailer
• Customer

Each of them manages its activities adding value to the creation of a product. The above figure unlocks a basic understanding of the supply chain.

Therefore, from the above explanation, The retail supply chain does NOT include regulators.

Consumer behaviour does NOT consist of Producing.

Explanation:

1. “Consumer behaviour may be defined as the behaviour that consumers display in searching for, purchasing, suing, evaluating and disposing of produces, services and ideas which they expect will satisfy their needs.” Schiffman and Kanuk.
2. Thus, the study of consumer behaviour is the study of how individuals make decisions to spend their available resources-money, time and effort-on consumption-related items.
3. However, it may be noted that consumer behaviour research today goes for beyond “what, why, how, when, where and how often” facets of consumer behaviour and also considers the uses which consumers make use of the goods they buy and evaluations of these goods after use.
4. Since consumers are not involved in the production of goods and services therefore, Consumer behaviour does NOT consist of the activity of Producing.

The explanation for the correct answer is:

Statement I): If the tax liability has been reduced within the legal framework, it is tax planning.

Explanation:

Tax Planning:

1. Tax planning is the process of analyzing one’s financial situation in the most efficient manner.
2. Through tax planning, one can reduce one’s tax liability.
3. It involves planning one’s income in a legal manner to avail various exemptions and deductions.
4. Under Section 80C, one can avail of a tax deduction if specific investments are made for a specific period up to a limit of Rs. 1,50,000.
5. The most popular ways of saving tax are investing in PPF accounts, National Saving Certificate, Fixed Deposit, Mutual Funds, and Provident Funds.
6. Tax planning involves applying various advantageous provisions which are legal and entitles the assessee to avail the benefit of deductions, credits, concessions, rebates, and exemptions.
7. Or we can say that Tax planning is an art in which there is logical planning of one’s financial affairs in such a manner that benefits the assessee with all the eligible provisions of the taxation law.
8. Tax planning is an honest approach to applying the provisions which come within the framework of taxation law.

Statement II): If tax liability has been reduced to get the benefit of deduction available under the income tax, it is called tax evasion.

Explanation:

Tax Evasion:

1. Tax Evasion is an illegal way to minimize tax liability through fraudulent techniques like the deliberate understatement of taxable income or inflating expenses.
2. It is an unlawful attempt to reduce one’s tax burden.
3. Tax Evasion is done with a motive of showing fewer profits in order to avoid tax burden.
4. It involves illegal practices such as making false statements, hiding relevant documents, not maintaining complete records of the transactions, concealment of income, overstatement of the tax credit, or presenting personal expenses as business expenses.
5. Tax evasion is a crime for which the assessee could be punished under the law.

Thus, Statement I is correct but statement II is incorrect.

Explanation:

Therefore, if  X is an individual of 55 years of age having gross total income Rs. 3,50,000 then the tax liability for the assessment year 2018-19 will be Rs. 2,575.

Deduction u/s 37(1) is allowed under tax laws for those expenditures which are revenue in nature.

Explanation:

According to section 37(1) of the Income Tax Act, 1961, any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “Profits and gains of business or profession.

1. Expenditure is not of nature as described in sections 30 to 36 of the Act;
2. Expenditure is of revenue in nature not of capital in nature;
3. Expenditure is not the personal expense of the assessee;
4. Expenditure has been laid down or expended wholly and exclusively for the purposes of business or profession of the assessee;
5. Expenditure has not been incurred for any purpose which is an offence or which is prohibited by law.

Return of income is submitted under Section 139 (1) of the Income-tax Act.

Explanation:

1. According to section 139(1) of the Income Tax Act, an assessee needs to file an Income Tax Return (ITR) on or before the due date of filing ITR when the total annual income exceeds the maximum amount, which is not chargeable to income tax.
2. Currently, the income limit beyond which filing ITR becomes mandatory is Rs 2.5 lakh in a Financial Year (FY) as the tax rate on income up to Rs 2.5 lakh is zero percent.
3. However, even if an individual doesn’t have taxable income, he/she may still have to file ITR in case the individual had received any income during the FY, on which tax was deducted at source (TDS).
4. Not only to claim the TDS amount back as an income tax refund but filing ITR is also necessary in such cases.

Foreign Trade Policy 2015-20

1. India aims to increase India’s export of merchandise and services from US $ 465 bn.** in 2013-14 to approximately **US$ 900 bn. by 2019-20 and to raise India’s share in the world export from 2% to 3.5%.
2. Commerce and Industry Minister Nirmala Sita Raman unveiled foreign trade policy (FTP) 2015 -20, which seeks to provide a higher incentive to the agriculture industry.
3. FTP also seeks to establish an institutional framework to work with state governments to boost India’s exports.

Salient features of Foreign Trade Policy 2015-20

1. Merchandise Export from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) launched.

• The 'Services Exports from India Scheme' (SEIS) is for increasing exports of notified services.
• These schemes (MEIS and SEIS) replace multiple schemes earlier in place, each with different conditions for eligibility and usage.
• Incentives (MEIS & SEIS) to be available for SEZs also. E-Commerce of handicrafts, handlooms, books, etc., eligible for benefits of MEIS.

2. Recently, the government has reduced the number of mandatory documents required for exports and imports to three, which is comparable to international benchmarks.  Now, a facility has been created to upload documents in the exporter/importer profile and the exporters will not be required to submit documents repeatedly.
3. The government has also simplified various Aayat Niryat Forms, bringing in clarity in different provisions, removing ambiguities, and enhancing electronic governance.

Therefore, Option 4 is the correct answer.

Dumping is a term used in the context of international trade. It's when a country or company exports a product at a price that is lower in the foreign importing market than the price in the exporter's domestic market.

Reverse dumping is an instance of non-conventional dumping.

Explanation:

1. Reverse dumping is followed in the overseas markets where the demand is less elastic.
2. Such markets tolerate a higher price.
3. Thus, dumping is done in the manufacturer’s home market by selling locally at a lower price.

Therefore, it is termed as non-conventional dumping.

1. Sporadic dumping:

• Manufactures practice sporadic dumping to get rid of excess merchandise.
• A manufacturer with unsold inventories avoids starting a price war in the home market to preserve his competitive position.
• Excess supplies are destroyed.
• For example, Asian farmers dumped small chickens into the sea.
• Another method is to have the excess supply dumped in a foreign market where the product is normally not sold.
• Thus, sporadic dumping is aimed at liquidating excess stocks that may arise occasionally.

2. Predatory dumping (Intermittent dumping):

• While sporadic dumping is occasional, predatory dumping is permanent.
• Predatory dumping is also known as intermittent dumping.
• It involves the sale of goods in overseas markets at a price lower than the home market price.
• This is selling at a loss to gain access to a market and eliminate competition.
• After the competition is eliminated, the company becomes a monopolist.
• A monopoly position is then used to increase the price.
• Anyway, there is a disadvantage that former competitors may rejoin the market because of high-profit margins.

3. Persistent dumping (Long-period dumping):

• Persistent dumping as the name itself implies is the most permanent type of dumping.
• It involves consistent selling at lower prices in one market than in the rest of the market.
• This practice is based on the fact that markets vary in terms of overhead costs and demand characteristics.
• In persistent dumping, the firm may use marginal cost pricing abroad while using full-cost pricing (covering fixed costs at home) in the domestic market.

Goodwill Classification

Explanation:

Goodwill is an intangible asset emerging throughout the acquisition of one business by another business. It is representative of the non-fiscal assets of an association. Goodwill is a type of unidentifiable asset.

The Classification of Goodwill

It is fascinating to think about the order of Goodwill dependent on customer conduct. This hypothesis was first instituted by P.D. Leake in 1921. He likewise characterizes goodwill as pursues: "the correct which becomes out of a wide range of past exertion in looking for benefit, an expansion of significant worth or different points of interest".

• DOG GOODWILL
• CAT GOODWILL
• RAT GOODWILL
• RABBIT GOODWILL

Cat Goodwill considered the best goodwill. In Cat Goodwill the customers are progressively loyal and to the brand or the organization. The board or authority groups don't concern them.

Therefore, Cat goodwill is considered to be the best.

1. Dog Goodwill: Dogs represent a loyal and faithful customer base who are more attached to the persons conducting the business rather than the place of the business.
2. Rat Goodwill: The other variety of customers has attachment neither to the person nor to the place, which, in other words, is known as fugitive goodwill. The rats are not attached to a person or place and are casual in their behavior.
3. Rabbit Goodwill: Rabbits are more concerned about the nearness of the place as it would be troublesome to go somewhere far away.

Assertion A): At times, a business may face a situation where it has to shut down its operations.

Explanation: 

1. The closure is the term used to refer to the actions necessary when it is no longer necessary or possible for a business or other organization to continue to operate.
2. Once the organization has paid any outstanding debts and completed any pending operations, the closure may simply mean that the organization ceases to exist.
3. Common reasons cited for business failure include poor location, lack of experience, poor management, insufficient capital, unexpected growth, personal use of funds, over investing in fixed assets, and poor credit arrangements. Yet, not all businesses close due to business failure.
4. At times, a business may face an unforeseen unexpected situation where it has to shut down its operations.

Therefore, Assertion (A) is the correct statement.

Reason R): If the revenue is less than its variable cost, the operation should be closed down.

Explanation:

1. The shutdown price is the minimum price a business needs to justify remaining in the market in the short run
2. A business needs to make at least a normal profit, in the long run, to justify remaining in an industry
3. But in the short run a firm will continue to produce as long as total revenue covers total variable costs (TR > TVC) or price per unit > or equal to average variable cost (AR = AVC). This is called the short-run shutdown price.

Therefore, Reason (R) is correct and R) is the right explanation of A).

The essence of the law of diminishing returns is negative marginal production.

Explanation:

1. Law Of Diminishing Returns states that as one variable input is increased, with all others remaining fixed, a point will be reached beyond which the marginal physical product of the variable factor will begin to decrease.
2. Still, if additional variable input is added, it will lead to negative marginal production.
3. For example, if a factory employs workers to manufacture its products, at some point, the company will operate at an optimal level; with all other production factors constant, adding additional workers beyond this optimal level will result in less efficient operations as the size of the factory and equipment will remain as it is but workers will increase resulting in the chaos which will reduce efficiency.

The following are the explanation of the correct answer

Economic order quantity (EOQ), refers to the optimum amount of an item that should be ordered at any given point in time, such that the total annual cost of carrying and ordering that item is minimized. EOQ is also sometimes known as the optimum lot size. 

EOQ = \(\sqrt{\dfrac{2DS}{H}}\)

Where,

D = Annual demand in units = 90000

S = Ordering cost per purchase order i.e., cost of placing and receiving 1 order = Rs. 300

H = Holding cost or Carrying Cost = [Inventory carrying cost(%)] * [Cost of material per unit] = 20% * Rs. 3 = Rs. 0.6

Now, substituting the given values in the EOQ formula, we get

EOQ = \(\sqrt{\dfrac{2* 90000 * 300}{0.6}}\)

⇒ EOQ = √[90000000]

⇒ EOQ = 9486.83 units ≈ 9487 units

Thus, the EOQ is 9487 units.

Currency Swap:

1. A currency swap is an agreement in which two parties exchange the principal amount of a loan and the interest in one currency for the principal and interest in another currency.
2. At the inception of the swap, the equivalent principal amounts are exchanged at the spot rate.
3. During the length of the swap, each party pays the interest on the swapped principal loan amount.
4. At the end of the swap, the principal amounts are swapped back at either the prevailing spot rate or at a pre-agreed rate such as the rate of the original exchange of principals. Using the original rate would remove transaction risk on the swap.
5. Currency swaps are used to obtain foreign currency loans at a better interest rate than a company could obtain by borrowing directly in a foreign market or as a method of hedging transaction risk on foreign currency loans which it has already taken out.

Therefore, a Currency swap is a method of hedging against foreign exchange risk.

CAPM Analysis is suitable for risk-return analysis in financial decisions.

Explanation:

Capital Asset Pricing Model (CAPM)

1. The Capital Asset Pricing Model (CAPM) describes the relationship between systematic risk and expected return for assets, particularly stocks.
2. CAPM is widely used throughout finance for pricing risky securities and generating expected returns for assets given the risk of those assets and the cost of capital.

CAPM is calculated according to the following formula:  Ra = Rrf + [Ba x ( Rm - Rrf )]

Where:

• Ra = Expected return on a security
• Rrf = Risk-free rate
• Ba = Beta of the security
• Rm = Expected return of the market

Note: “Risk Premium” = (Rm – Rrf)

Mean Of 10 Items = 50

∴ Total Of 10 Items =  50 x 10 = 500

If Each Number Is Increased By 5, Then Total Increase = 10 x 5 = 50

Then, Total Of 10 Numbers = 500 + 50 = 550

∴ New Arithmetic Mean = 550/10 = 55

Therefore, The arithmetic mean of 10 items is 50. If each item is increased by 5, then the new arithmetic mean would be 55.

Banks’ ‘Gyan Sangam’ was held to discuss digitization and consolidation at Public Sector Banks.

1. The push for digitization in the wake of demonetization and the proposal for public sector bank (PSB) consolidation was the top agenda for Gyan Sangam which was the retreat for PSBs, government-owned Financial Institutions (FI), and insurance companies, held in March' 2016.
2. Gyan Sangam's 2 important aspects were:

• Automation of middle management functions: Referring to the manpower shortage, especially in middle management in PSBs, the sources said the retreat would have discussions on automating/digitizing many of these functions to ensure productivity improvement. Strategies for strengthening the ‘banking correspondent’-network and increasing the usage of micro ATMs and Point of Sale machines
• Expediting banking reforms: The high-profile meeting will also deliberate upon the need for the autonomous Banks Board Bureau (BBB) to expedite banking reforms including PSB consolidation.

Thus, the new reforms in the Indian banking system include Digitisation of bank operations and Banking consolidation.

The Insurance act, 1938 is the predecessor of the IRDA Act,1999.

Explanation:

1. The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory body tasked with regulating and promoting the insurance and re-insurance industries in India.
2. It was constituted by the Insurance Regulatory and Development Authority Act, 1999, an Act of Parliament passed by the Government of India.
3. The agency's headquarters are in Hyderabad, Telangana, where it moved from Delhi in 2001.
4. In 1914, the government of India began publishing insurance-company returns. The Indian Life Assurance Companies Act, 1912 was the first statute regulating life insurance.
5. In 1928 the Indian Insurance Companies Act was enacted to enable the government to collect statistical information about life- and non-life-insurance business conducted in India by Indian and foreign insurers, including provident insurance societies.
6. In 1938 the legislation was consolidated and amended by the Insurance Act, 1938, with comprehensive provisions to control the activities of insurers.

The SIDBI (Small Industries Development Bank of India) is a wholly-owned subsidiary of IDBI (Industrial Development Bank of India), established under the special Act of the Parliament 1988 which became operative from April 2, 1990.

1. SIDBI was made responsible for administering the Small Industries Development Fund and National Equity Fund that was administered by IDBI before.
2. SIDBI is the Primary Financial Institution for promoting, developing, and financing MSME (Micro, Small, and Medium Enterprise) sector.
3. Besides focussing on the development of the Micro, Small, and Medium Enterprise sector, SIDBI also promotes cleaner production and energy efficiency.
4. SIDBI helps MSMEs in acquiring the funds they require to grow, market, develop, and commercialize their technologies and innovative products.
5. The bank provides several schemes and also offers financial services and products for meeting the individual’s requirements of various businesses.

Therefore, SIDBI was set up as a subsidiary of IDBI to take over the functions of small business financing of IDBI.

SWIFT is used for international money transfers.

Explanation:

1. Society for Worldwide Interbank Financial Telecommunications (SWIFT) is a vast messaging network used by banks and other financial institutions to quickly, accurately, and securely send and receive information, such as money transfer instructions.
2. This payment network allows individuals and businesses to take electronic or card payments even if the customer or vendor uses a different bank than the payee.
3. SWIFT works by assigning each member institution a unique ID code that identifies not only the bank name but country, city, and branch.
4. In 2019, more than 11,000 SWIFT member institutions sent approximately 33.6 million transactions per day through the network.

The creditworthiness score in India ranges from 300 to 900.

Explanation:

1. An individual's credit score plays an important role in determining his/her creditworthiness.
2. A lender, such as a bank or a non-banking finance company, will evaluate the credit score of a potential borrower to determine whether or not to lend to the individual. The credit score also impacts the amount of loan sanctioned and also the interest rate payable on the loan by the borrower.
3. What is more, if a borrower has a low credit score, the lender may reject the loan application.
4. A credit score is a 3-digit number that represents the creditworthiness of an individual. It typically ranges between 300 and 900, 900 being the highest score possible.
5. Banks and various regulated lending institutions check your credit score when you apply for a loan. This score is prepared by TransUnion CIBIL, one of the four credit bureaus functioning in India (other bureaus include Experian, CRIF High Mark, and Equifax).
6. According to credit information company, TransUnion CIBIL's website, the closer your score is to 900, the higher are the chances of your loan application getting approved. Generally, a credit score of 750 and above is considered to be a good score.

The correct answer is - Customer satisfaction

Key Points

• Customer satisfaction is NOT a main stage in the customer relationship life cycle.
• The customer relationship life cycle primarily consists of customer acquisition, customer development, and customer retention.
• While customer satisfaction is important, it is an outcome of the life cycle rather than a separate stage.
• The key stages focus on acquiring, nurturing, and retaining customers to ensure long-term business growth.

Additional Information

• Stages of the Customer Relationship Life Cycle
• Customer Acquisition: Involves attracting and converting new customers through marketing, advertising, and sales strategies.
• Customer Development: Focuses on increasing customer engagement, cross-selling, and upselling to enhance lifetime value.
• Customer Retention: Aims at maintaining long-term relationships by providing value and ensuring continued satisfaction.
• Why Customer Satisfaction is Not a Stage
• Customer satisfaction is a measure of success within each stage rather than a separate phase.
• It plays a role in improving retention but does not define a distinct stage in the cycle.
• Businesses use metrics like Net Promoter Score (NPS) and Customer Satisfaction Score (CSAT) to assess satisfaction.

Redressal mechanism for consumer disputes under Section 9 of the Consumer Protection Act envisages a three-tier system.

Explanation:

Section 9 in the Consumer Protection Act, 1986: Establishment of Consumer Disputes Redressal Agencies.

There shall be established for the purposes of this Act, the following agencies, namely:

• A District forum established by the State Government in each district of the State by its notification - Pecuniary Jurisdiction up to Rs. 1 Crore.
• A State Commission established by the State Government in each state by its notification - Pecuniary Jurisdiction: 1 Crore to 10 Crore.
• A National Commission established by Central Government by notification - Pecuniary Jurisdiction: Above 10 Crore.

Negotiable instruments

1. Negotiable instruments are freely transferable commercial documents, and each type of negotiable instrument has unique functions and features.
2. Negotiable instruments are is a commercial document that satisfies certain conditions and transferable either by the application of law as by the custom of bleed concerned.
3. This instrument can be transferred freely from hand to hand and has a legal life that can be transferred by more delivery or endorsement.

Most Common Types of Negotiable Instruments are;

• Promissory notes.
• Bill of exchange.
• Cheque
• Demand Draft
• Government promissory notes.
• Delivery orders.
• Customs Receipts.

Most negotiable instruments fall under the following two categories; the Negotiable instrument by statute and Negotiable instruments by custom or usages.

Non-negotiable securities and products are those that cannot be transferred from one party to the next. An example of a non-negotiable instrument also referred to as a non-marketable instrument, would be a Mutual Fund.

Introduction

1. A person wanted to shift his residence due to certain reasons, hence, he sold his old house, and from the sale proceeds, he purchased another house.
2. In this case, the objective of the seller was not to earn income by the sale of an old house but to acquire another suitable house.
3. If in this case, the seller was liable to pay income tax on capital gains arising from the sale of the old house, then it would be a hardship for him.
4. Section 54 gives relief from such a hardship.
5. Section 54 gives relief to a taxpayer who sells his residential house and from the sale proceeds, he acquires another residential house.
6. The detailed provisions in this regard are discussed in this part.

Basic conditions

Following conditions should be satisfied to claim the benefit of section 54.

1. The benefit of section 54 is available only to an individual or HUF.
2. The asset transferred should be a long-term capital asset, being a residential house property.
3. Within a period of one year before or two years after the date of transfer of the old house, the taxpayer should acquire another residential house or should construct a residential house within a period of three years from the date of transfer of the old house. In the case of compulsory acquisition, the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional).

Provided that if the amount deposited under this sub-section is not utilized wholly or partly for the purchase or construction of the new asset within the period specified above then the amount not so utilized shall be charged under section 45 as the income of the previous year in which the period of three years from the date of transfer of the original asset expires.

Therefore, the amount unutilized in the capital gain account scheme for which exemption claimed u/s 54 shall be treated as long-term capital gain if 3 years have expired from the date of transfer.

Net Present Value (NPV) Method: In this method, all cash flows attributable to a capital investment project are discounted by a chosen percentage e.g., the firms weighted average cost of capital to obtain the present value of the future cash flows. If the present value of the future cash flows is higher than the present value of the investments the proposal is accepted else rejected. In order to arrive at the net present value the present value of the future cash flows is deducted from the initial investment. 

Internal Rate of Return (IRR) Method: Internal rate of return is a percentage discount rate used in capital investment appraisals which makes the present value of the cost of the project equal to the future cash flows of the project. It is the rate of return that equates the present value of anticipated net cash flows with the initial outlay. The IRR is also defined as the rate at which the net present value is Zero. The test of profitability of a project is the relationship between the internal rate of return (%) of the project and the minimum acceptable rate of return.

Conflicts between NPV and IRR: When analyzing a single conventional project, both NPV and IRR will provide the same indicator about whether to accept the project or not. However, when comparing two projects, the NPV and IRR may provide conflicting results. Conflicting results arise because of the following reasons:

1. A significant difference in the size (amount) of cash outlays of various proposals under consideration.
2. The problem of difference in the cash flow patterns or timings of the various proposals, and
3. The difference in service life or unequal expected lives of the projects.

In such cases, while choosing among mutually exclusive projects, one should always select the project giving the largest positive net present value using the appropriate cost of capital or predetermined cut-off rate. The reason for the same lies in the fact that the objective of a firm is to maximize shareholder wealth and the project with the largest NPV has the most beneficial effect on share prices and shareholder’s wealth. Thus, the NPV method is more reliable as compared to the IRR method in ranking the mutually exclusive projects. In fact, NPV is the best operational criterion for ranking mutually exclusive investment proposals. 

Volume Disparity does not lead to conflict between NPV and IRR decisions. Thus, option 3 is the correct answer.

Cost Of Preference Share = Annual Dividend Of Preference Shares / Market Price Of The Preference Stock 

                                           = 100 * 10% / 95

                                           = 10 / 95 

                                           = 0.10526 = 10.53%

The required rate of return is the minimum return an investor will accept for owning a company's stock, as compensation for a given level of risk associated with holding the stock. The RRR is also used in corporate finance to analyze the profitability of potential investment projects.

Shareholder's Required Return = (D1/P0 * 100) + G

Where, D1 = Expected Dividend For Next Year

             P0 = Current Market Price Of Share

             G   = Growth Rate

Shareholder's Required Return = (4.5/90 * 100) + 8 = 5 + 8 = 13%

Therefore, if the current market price of a company's share is Rs. 90 and the expected dividend per share next year is Rs. 4.5. If the dividend is expected to grow at a constant rate of 8%, the shareholder's required rate of return will be 13%.

The geometric mean between the two regression coefficients is equal to the correlation coefficient.

R = √(byx*bxy) = √(-0.8 * -0.2) = √0.16 = - 0.40

The '+' or '-' sign is given to the correlation coefficient based on the signs of the two regression coefficients.

Therefore, If the two regression coefficients are -0.8 and -0.2, then the value of the coefficient of correlation is - 0.40.

Statement I): The arithmetic mean is an all-purpose average.

Explanation:

Mean:

• The Arithmetic Mean is commonly known as Mean.
• It is a measure of central tendency because other figures of the data congregate around it.
• The arithmetic mean is obtained by dividing the sum of the values of all observations in the given data set by the number of observations in that set. I
• t is the most commonly used statistical average in disciplines such as commerce, management, economics, finance, production, etc.
• Thus, it is considered an all-purpose average.
• The arithmetic mean is also called as Simple Arithmetic Mean.

Statement II): Median and mode are called positional averages.

Explanation:

1. Median:

• The Median is also a measure of central tendency.
• Unlike the arithmetic mean, this median is based on the position of a given observation in a series arranged in an ascending or descending order. Therefore, it is called a positional average. It has nothing to do with the magnitude of all the observations, as in the case of the arithmetic mean.

2. Mode: 

• The mode is also a measure of central tendency.
• The mode is the value of a variate which is repeated most often in the data set.
• The mode is often considered to be that value of the variate which occurs most frequently.
• But it is not exactly true for every frequency distribution.
• Rather it is that value of the variate around which the other items tend to concentrate most heavily. It shows the centre of concentration of the frequency in and around a given value.
• It is not the center of gravity like mean. It is a positional measure similar to the median.

Therefore, Both statements I) and II) are correct.

Mutual fund:

1. A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt.
2. The combined holdings of the mutual fund are known as its portfolio.
3. Mutual funds are regulated investment products offered to the public and available for daily trading. Mutual fund companies rely on economies of scale to generate profits.
4. Mutual fund fees generally fall into two big buckets:

• Annual fund operating expenses: Ongoing fees toward the cost of paying managers, accountants, legal fees, marketing, and the like.
• Shareholder fees: Sales commissions and other one-time costs when you buy or sell mutual fund shares.

Hedge Funds:

1. Hedge funds are private investments that are only available to accredited investors.
2. Hedge funds are known for using higher risk investing strategies with the goal of achieving higher returns for their investors.
3. Hedge funds are rarely accessible to the majority of investors; instead, hedge funds are geared toward accredited investors, as they need less SEC regulation than other funds.
4. An accredited investor is a person or a business entity who is allowed to deal in securities that may not be registered with financial authorities
5. . Hedge funds are also notoriously less regulated than mutual funds and other investment vehicles.

Therefore, option 2 is NOT a correct statement.

'Doctrine of Caveat Emptor' means the buyer should be beware of all aspects of buying.

Explanation:

1. The doctrine of Caveat Emptor is an integral part of the Sale of Goods Act.
2. It translates to “let the buyer beware”. This means it lays the responsibility of their choice on the buyer themselves.
3. It is specifically defined in Section 16 of the act “there is no implied warranty or condition as to the quality or the fitness for any particular purpose of goods supplied under such a contract of sale“

The following is the explanation of the correct answer.

The new Goods and Services Tax (GST) replaced most of the previous taxes in India. Now GST will be levied at all stages right from manufacture up to final consumption with credit of taxes paid at previous stages available as setoff.

Only value addition will be taxed and burden of tax is to be borne by the final consumer.

However, at present, following items are kept outside the purview of GST in India:

1. Alcohol for human consumption:

• Alcohol for human consumption has been kept outside the purview of GST in India at present.
• However, the taxes imposed to alcohol for human consumption will continue as per the structure before GST implementation.

2. Petroleum products:

• Petroleum Products such as petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel etc. are also kept outside the purview of GST in India.

Therefore, Petroleum products is kept outside the purview of GST.

SUGAM is also known as ITR-4.

Explanation:

1. Income Tax Return Form 4, which also called SUGAM, is filed by the taxpayers who have opted for presumptive taxation scheme under section 44AD, section 44Dand section 44AE of the Income Tax Act, 1961.
2. ITR 4 can be filed by individuals, HUF as well as a partnership firm. However, if the annual turnover of business registered under presumptive taxation scheme exceeds Rs. 2 crores, the taxpayer is required to file ITR-3.

A) Fair Value = Rs. 5,00,000

B) Municipal Value = Rs. 4,50,000

C) Higher Of A and B = Rs. 5,00,000

D) Standard Rent = Rs. 4,80,000

E) Expected Rent (Lower Of C and D) = Rs. 4,80,000

F) Actual Rent = Rs. 4,20,000 

GROSS ANNUAL VALUE (Higher Of E and F) = Rs. 4,80,000

The following are the explanation of the correct answer:

In tax laws, donation to approved and notified association for scientific research is allowed as 100% of the donation.

Explanation:

1. Section 80GGA allows deductions for donations made towards scientific research or rural development.
2. This deduction is allowed to all assessees except those who have an income (or loss) from a business and/or a profession.
3. Mode of payment: Donations can be made in the form of a cheque or by a draft or in cash; however cash donations in excess of Rs 10,000 are not allowed as deductions.
4. 100% of the amount that is donated or contributed is considered eligible for deductions.

In Skimming pricing policies, a firm charges a higher initial price for the product and reduces it over time as the demand at a higher price is satisfied.

Explanation:

1. Price skimming is a product pricing strategy by which a firm charges the highest initial price that customers will pay and then lowers it over time.
2. As the demand of the first customers is satisfied and competition enters the market, the firm lowers the price to attract another, a more price-sensitive segment of the population.
3. This approach contrasts with the penetration pricing model, which focuses on releasing a lower-priced product to grab as much market share as possible.
4. Peak load pricing: Peak Load Pricing = Charging a high price during demand peaks, and a lower price during off-peak time periods.
5. Incremental pricing: It is an approach in which the price of all additional units produced after the fixed costs of production have been met are based on variable cost rather than on total cost.
6. Penetration pricing: Penetration pricing is a pricing strategy where the price of a product is initially set low to rapidly reach a wide fraction of the market and initiate word of mouth. The strategy works on the expectation that customers will switch to the new brand because of the lower price.

Assertion A): U-shaped long-run average cost curve is based on the assumption that economies of scale prevail at small levels of production and diseconomies of scale prevails at larger levels of production.

Explanation:

1. The long-run cost curves are U-shaped due to economies of scale and diseconomies of scale.
2. If a firm has high fixed costs, the increasing output will lead to lower average costs.
3. This will result in economies of scale. However, after a certain output, a firm may experience diseconomies of scale.
4. This occurs where increased output leads to higher average costs.
5. For example, in a big firm, it is more difficult to communicate and coordinate workers. Thus, economies of scale prevail at small levels of production, and diseconomies of scale prevail at a larger level of production. In the long-run, three returns to scale operate i.e. Increasing Returns to Scale, Constant Returns to Scale, and Diminishing Returns to Scale which is also one of the reasons because of which the Long Run Average Curve is U-shaped.

Therefore, the Assertion (A) is correct.

Reason R): Decreasing returns to scale arises primarily because as the scale of operation increases, it becomes even more difficult to manage the firm effectively.

Explanation:

1. Diminishing returns to scale ensure that the size of the productive firms cannot be infinitely large.
2. Generally, after a limit when the quantity of the factors of the production is increased in such a way that the proportion of the factors remain unchanged, output increases in a smaller proportion as compared to increases in the amounts of the factors of production.
3. This might be because when the scale of operation increases, it becomes difficult to handle large units of labor and co-ordination is at stake which results in decreasing overall efficiency.

Therefore, Reason (R) is the correct statement but  R) is not the right explanation of A as the Long-Run Average Cost Curve is U-shaped not only because of Decreasing Returns but also because of Increasing and Constant Returns To Scale.

Net Income (NI) Theory:

According to this approach, capital structure decision is relevant to the valuation of the firm in as much as a change in the pattern of capitalization brings about a corresponding change in the overall cost of capital and the total value of the firm. This theory, also known as fixed 'ke' theory, was propounded by David Durand.

The critical assumptions of this theory are:

1. There are no corporate taxes.
2. The debt content does not change the risk perception of the investors.
3. The cost of debt is less than the cost of equity.

The theory works like this. “As the proposition of cheaper debt funds in the capital structure increases, the weighted average cost of capital decreases and approaches the cost of debt. This theory recommends 100% debt financing is optimal capital structure.

The following are the strengths of the NI approach:

1. it tries to explain the effects of borrowings on the overall cost of capital.
2. It explains and emphasizes favorable financial leverage.
3. However, the theory ignores risk consideration.

Thus, Both A) and R) are correct and R) is the right explanation of A.

Job Evaluation:

1. Job evaluation is the process of establishing the value of jobs in a job hierarchy.
2. Job values may be determined by negotiation or fixed on the basis of broad assumptions about market rates and internal relativities.
3. Job evaluation is a comparative process based on a whole series of tasks, responsibilities, and obligations, including the skills, knowledge, and mental agility required, qualities of initiative, reliability of the employee, and so on.
4. It aims at establishing pay structures that are fair and equitable in the sense of ensuring equal pay for jobs demanding what are considered to be broadly similar sacrifices and of rewarding appropriately the greater efforts and hardships involved in some jobs as compared with others.
5. In short, job evaluation concerns itself with pricing a job in relation to other jobs on the basis of consistent, fair, logical, and equitable criteria and not on the basis of arbitrary; variable judgments dictated by short-term expediency or arrived at through rule of thumb methods.

Performance Appraisal:

1. Performance Appraisal is the systematic evaluation of the performance of employees and to understand the abilities of a person for further growth and development.
2. According to Flippo, “Performance appraisal is the systematic, periodic and an impartial rating of an employee’s excellence in the matters pertaining to employee present job and potential for a better job.”
3. Thus, Performance appraisal is a systematic way of reviewing and assessing the performance of an employee during a given period of time and planning for his future.
4. Performance appraisal is generally done in systematic ways which are as follows:

• The supervisors measure the pay of employees and compare it with targets and plans.
• The supervisor analyses the factors behind the work performances of employees.
• The employers are in a position to guide the employees for better performance.

1. Job Evaluation and Performance Appraisal are closely related in the sense that they both help in the determination of salary/wages.
2. However, Job Evaluation undertakes characteristics of Job to decide the wage/salary structure and Performance Appraisal undertakes characteristics of labor/employees to decide the wage/salary structure. Thus, they both are not the same.

Thus, both statements are correct.

Basel Committee:

1. The Basel Committee - initially named the Committee on Banking Regulations and Supervisory Practices - was established by the central bank Governors of the Group of Ten countries at the end of 1974 in the aftermath of serious disturbances in international currency and banking markets (notably the failure of Bankhaus Herstatt in West Germany).
2. The Committee, headquartered at the Bank for International Settlements in Basel, was established to enhance financial stability by improving the quality of banking supervision worldwide and to serve as a forum for regular cooperation between its member countries on banking supervisory matters.
3. The Committee's first meeting took place in February 1975, and meetings have been held regularly three or four times a year since.
4. Since its inception, the Basel Committee has expanded its membership from the G10 to 45 institutions from 28 jurisdictions. Starting with the Basel Concordat, first issued in 1975 and revised several times since, the Committee has established a series of international standards for bank regulation, most notably its landmark publications of the accords on capital adequacy which are commonly known as Basel I, Basel II and, most recently, Basel III.

Therefore, option 2 is the right answer.

Sale and Leaseback Definition

1. The sale and leaseback definition is a transaction in which a company sells its property to another company and then leases that property.
2. The company that sells the asset becomes the lessee, and the company that purchases the asset becomes the lessor.
3. In this type of transaction, the lessor is typically an insurance company, a finance company, a leasing company, a limited partnership, or an institutional investor.
4. The property sale is done with the understanding that the seller will immediately leaseback the property from the buyer.
5. The details of the lease agreement are arranged for a specific period of time and a set payment rate.
6. Depending on the type of lease arrangement, whether it’s an operating lease or a capital lease, the lessee may or may not record the leased property on its balance sheet.

Who Uses Leasebacks and Why?

1. The most common users of sale-leasebacks are builders or companies with high-cost fixed assets and one having liquidity crises—like property, land, or large expensive equipment.
2. As such, leasebacks are common in the building and transportation industries, and the real estate and aerospace sectors.

Therefore, a 'sale and leaseback' arrangement is more suitable for a lessee having a liquidity crisis.

Capital Structure or Leverage Ratio

• Capital structure refers to the degree of long-term financing of a business concern as in the form of debentures, preference share capital, and equity share capital including reserves and surplus.
• There should be a proper mix between debt capital and equity capital. Capital structure is otherwise called leverage.

Formulae to Calculate Capital Structure or Leverage Ratios

Capital structure ratios are calculated to test the long term financial position of the business concern. The followings ratios are calculated to analyze the capital structure of the business concern.

1. Capital Gearing Ratio
2. Financial Leverage
3. Operating Leverage
4. Combined Leverage.
5. Debt Equity Ratio.
6. Total Investment to Long Term Liabilities
7. Ratio of Fixed Assets to Funded Debt.
8. Ratio of Current Liabilities to Proprietors’ Funds.
9. Ratio of Reserves to Equity Capital.

Therefore, Capital structure and leverage decisions come in the ambit of financing decisions.

Miller-Orr model is used in the management of Cash.

Explanation:

The Miller-Orr model of cash management is developed for businesses with uncertain cash inflows and outflows. This approach allows lower and upper limits of cash balance to be set and determine the return point (target cash balance). 

Assumptions

The Miller-Orr model of cash management can be used if the following assumptions are met:

1. The cash inflows and cash outflows are stochastic. In other words, each day a business may have both different cash payments and different cash receipts.
2. The daily cash balance is normally distributed, i.e., it occurs randomly.
3. There is a possibility to invest idle cash in marketable securities.
4. There is a transaction fee when marketable securities are bought or sold.
5. A business maintains the minimum acceptable cash balance, which is called the lower limit.

Relationship Marketing

1. Relationship marketing refers to those marketing activities that are aimed at developing and managing long-term relationships with the customers.
2. The details about the customer, his buying patterns, contacts, etc. are maintained in a sales database and an account executive is assigned to fulfill the needs of the customers and maintain the relationships successfully.

The following characteristics are related to relationship marketing:

1. Product benefit orientation:

• Relationship marketing focuses on Product benefit orientation as it creates products and services only after carefully studying and interacting with its target customers.
• It tries to increase sales by offering customers what they feel they need.
• They view satisfying the needs of consumers by creating products that meet their needs in a market-oriented approach.

2. Frequent consumer contact:

• Relationship marketing is attracting, maintaining, and enhancing customer relationships.
• Servicing and selling existing customers is viewed to be just as important to long-term marketing success as acquiring new customers.
• Good service is necessary to retain the relationship.
• Good selling is necessary to enhance it.
• The marketing mind­set is that the attraction of new customers is merely the first step in the marketing process cementing the relationship, transforming different customers into loyal ones, serving customers as clients —this is marketing too.

3. High concern for quality:

• Relationship marketing is defined as “a strategy that aims at developing and managing long-term relations with customers, suppliers, and distributors in order to earn and retain the business of the enterprise”.
• Marketers accomplish this by promising and delivering high-quality products and services at fair prices to the other parties involved in the distribution process.

Therefore, option 1 is the correct answer.

Statement I): Agreement without consideration is always valid.

Explanation:

Agreement: In legal parlance, the word ‘agreement’ is used to mean a promise/commitment or a series of reciprocal promises which constitutes consideration for the parties to contract. In an agreement, one person offers or proposes something to another person, who in turn accepts the same. In other words, offer plus acceptance amounts to the agreement, or we can say that an accepted proposal is an agreement.

Therefore, Agreement without consideration is always valid is incorrect.

Statement II): All contracts are agreements but all agreements are not contracts.

Explanation:

Contract Vs. Agreement: An agreement is any understanding or arrangement reached between two or more parties. A contract is a specific type of agreement that, by its terms and elements, is legally binding and enforceable in a court of law. Thus, all contracts are agreements but all agreements are not contracts. 

Thus, option 3 is the correct answer.